The Asian Development Bank (ADB) today said the emerging orientation in the US and Europe for protectionism on trade is “worrisome” but not realistic enough to break the global economy. A day before finance ministers and central bank governors meet for the ADB’s 50th annual meeting, the multilateral agency’s Chief Economist Yasuyuki Sawada said it was “difficult” to say if protectionism was “good or bad” and he did not want to make any judgement.
“I think ADB’s position is, more open trade and more open investment climate will be beneficial for all the countries and economies. In that respect, I think we should support more open trade regime,” he told a media briefing here.
Citing the example of China which is shifting itself from export driven economic model to more internal demand driven model, he said that in his opinion there was a trend in Asia that “domestic consumption and investment play a much more important role than external demand”. This trend, however, does not deny the importance of trade, Sawada said.
Asked why there have been no strong statement from ADB about protectionist measures, he said, “We don’t think it is a realistic scenario to consider that the global economy, because of the policy changes in the US and Europe, will return back to the broken economy.”
ADB, he said, emphasises on more open trade and more free movement of capital to all countries and it should play an important role to push open trade and investment regime.
“This emerging orientation of the US and Europe is little bit worrisome situation but what I am saying is, it is unrealistic that global economy will move towards a broken economy that was happening during intra-war period and I don’t see that scenario as happening,” Sawada added.
Last month, a communique from the IMF’s steering committee in Washington dropped pledge to resist protectionism on trade. Omitting its October statement to “resist all forms of protectionism”, IMF merely stated that officials are “working to strengthen the contribution of trade to our economies”.
In March, the finance ministers of G20 nations in their communique dropped the pledge to resist protectionism to suit the demand of the United States. There are fears that increasing protectionism in the US like tightening of visa regime and insistence on using American products may adversely impact global trade and investments.
The ADB chief economist, however, said: “People seem to be worried about this protectionist sentiment, but I think this is unlikely (that) the global economy will become like a broken economy before World War-II. I don’t think that is happening. That will never happen… that is an unrealistic scenario”.
Last month, Finance Minister Arun Jaitley, who is scheduled to attend the ADB meeting here later in the week, had sounded a note of caution on protectionism, saying the world should debate whether it would make the global economy more efficient or sluggish.
Reserve Bank of India (RBI) Governor Urjit Patel too had in his comments on the world economy stated that data pointed to a broad-based upswing in global growth, though risks remain, such as protectionism and geopolitics.
There is an international push-back against trade talk emanating from the US, Patel had stated last month, defending the benefits of an open trading system.