IMF Chief Christine Lagarde: Trade Has “Slowed Down Measurably”

IMF Chief Christine Lagarde: Trade Has “Slowed Down Measurably”
By Fox News Channel [Public domain], via Wikimedia Commons

International Monetary Fund (IMF) managing director Christine Lagarde spoke with FOX Business Network’s (FBN) Maria Bartiromo about trade and the global economy. When asked about trade, Lagarde said, “trade had slowed down measurably and has done so for the last few years” and that “the impact of free trade has been extremely positive on a global basis.” Lagarde also commented on the implication if Britain leaves the European Union saying, “it’s very likely to be a net negative and a big concern because it’s uncertainty.”

Christine Lagarde on whether trade has slowed down:

“Yes, trade had slowed down measurably and has done so for the last few years. Since the financial crisis trade has not come up to the levels where we had it before and, you know, it’s one of the two that can actually also reactivate growth.”

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Christine Lagarde on whether open free trade will impact jobs:

“You know, the impact of free trade has been extremely positive on a global basis.  I mean, without free trade we would not have seen the number of poor miserable people around the world reduced to the point where it has reduced. It has created hundreds of thousands of jobs all around the world.  Now, it’s clear that it is shifting the cards and it is moving specializations and it’s creating supply chains, but generally, it’s a net positive for the globe.”

Christine Lagarde on the implication if Britain leaves the European Union:

“It’s hard to say for me now, because we are currently completing the study of that particular project, but it’s very likely to be a net negative and a big concern because it’s uncertainty. It opens the door to, you know, what will be the next regime in place for trade between the U.K. and the rest of the European Union. What will happen to the financial center of London if it works in isolation relative to the content.  Those are unanswered questions which open big uncertainties.”

Christine Lagarde on the economic trends:

“Well, the trends are a little bit on the down side and what is most concerning is that we see risks likely to be high on the horizon and bigger and those risks are the Chinese slowdown in growth, the lower commodity prices for longer, and the financial tightening that we’re seeing as a result of monetary policies across the globe, producing this effect both on exchange rate and on the– on monetary policies.”

Christine Lagarde on raising minimum wage:

“It has more to do with structural reforms and we believe that, you know, having 50 million Americans living in poverty, 40 percent of whom actually have a job, is not particularly satisfactory.  And with growth being not low, but not particularly high in the U.S., you know, north of 2 percent is okay, but it’s not great, and with the job market where it is, we believe that it’s time to actually look at those, you know, minimum wage issues with a view to increasing growth, with a view to producing a demand effect in the short-term and hopefully, you know, supporting the economy.”

Christine Lagarde on originally cautioning not to raise interest rates so quickly:

“Yes, yes, we were.  Yes, we were, and you know, we are still saying today that monetary policy in the euro area, in Japan — I’ll come to the U.S. in a second — need to continue to be accommodating.  Those policies need to continue to support and encourage growth to facilitate borrowing by enterprises and to have an impact on inflation, which is, you know, at rock bottom lows at the moment… Not as early as December, let’s face it. But certainly gradually and that those increases be data dependent.  I’m really pleased to have seen the latest FOMC deliberations, which indicate a gradual slow pace of increase, which will be data dependent.  I think it’s very important.”

Christine Lagarde on whether they went too far in Japan with negative interest rates there:

“In Japan you have a combination of, you know, this three arrows by the Japanese authorities and what is quite surprising at the moment is that despite this monetary policy that aims at bringing inflation up and supporting the economy, which should have the effect of lowering the yen relative to other currencies, we’re not seeing much of that and we’re seeing the yen appreciating in a world and with policies that should produce exactly the opposite. So there are movements that we need to really understand a bit better…It’s the case in Japan. It’s also the case in Europe because we’ve seen the euro, you know, at least holding, if not, increasing a little bit despite the very strong policies adopted both by the Bank of Japan and the ECB.  But we contend that they have to just carry on, continue, be steady and get the support that’s critically important of fiscal policies and structural reforms — all together.”

Christine Lagarde on the economic impact of the migrants from Syria coming into Europe:

“Difficult to say because it’s a bit early on to actually measure the economic impacts of this — million-plus refugees coming into Europe, predominantly in Germany.  But our study shows that if there is good integration, meaning language training, skills, retraining eventually, housing support, facility to enter the job market, the benefits can be quite significant. We figured that it would be a plus .2 percent for the whole of the euro area, and .5 percent. So plus .5 percent for Germany alone. But of course, this is subject to proper integration, proper skill training for those people who are coming. It’s you know, first and foremost, a massive humanitarian challenge that the Europeans are facing at the moment and which needs to be addressed everywhere, locally in Syria with massive efforts to actually implement peace at last.  Support to Jordan and Lebanon, which are two countries that are hosting so many refugees and collective response by the Europeans because they cannot just let one, however big and strong that country is, host all the refugees of that area, which are not only, by the way, from Syria.”

Christine Lagarde on whether it could be negative for both sides:

“Absolutely, absolutely. And it is a difficult situation, but it’s very much in the psyche of British people to actually face adversity and to hang together rather than walk away.”

Christine Lagarde on her take on how women see what’s going on in terms of this election:

“I think the voices I heard from the women at the conference were — let’s talk seriously about those issues. None of that nonsense sort of tidbits that people eventually use to rally some against the others. And I think that they, you know, they represent a huge amount of opinions, votes, views, and I think they’re a little bit sick and tired of being, as you said for trade, a bit of that football between the various camps.  They are a significant part of society and they are too often ignored.”

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