Tuesday, November 15, 2016

How Will Trump Win Impact US Relations With the IMF? IMF Responds to the Question

It looks like we are not the only ones wondering how the election of Donald Trump as President might impact US relations with the IMF going forward. IMF spokesman Gerry Rice was hit with a barrage of questions along these lines by the media. Here is the link to the press conference where he mostly answers: "It's too early to speculate." Below are some excerpts and then some comments.


QUESTIONER: "I had a question about the election of -- actually I have two questions. So, do you feel that that opens a period of uncertainty for the U.S. economy and the global economy? And do you see the election as a rebuke of the policies that the IMF has been advocating for many years? And so do you think it should push the IMF to rethink its action and its policies? Thank you."

QUESTIONER: "Yeah. I'm with Reuters. Do you have concerns about the level of the U.S. commitment to the international institutions going forward given Mr. Trump's America-first policies, and a general sort of rejection of decades of trade liberalization policy?"

MR. RICE (IMF): Okay. Let me -- let me try and take these, and then we can move on to other things. We issued a statement yesterday. Let me repeat that for you. The IMF looks forward to working with the next U.S. administration, to help the challenges facing the U.S. economy and the global economy.
You know, beyond that, clearly in terms of, you know, specific questions about policy directions, and it's really just -- it's too early to speculate. We need to see how the new U.S. administration defines its policy priorities and related actions once it takes office before we would make any assessment of specific issues.
That said, let me try and respond to a couple of the issues that you’ve raised. On the financials and the markets, there was some volatility yesterday, but markets this morning seem relatively calm from what we can see there. I think there was a question about, does this signify a repudiation of IMF policies or, you know, does it entail a rethink on how we are approaching things. Again, I think it's too early to speculate on any specific policies, but we have been saying now for quite some time, including at the most recent Annual Meetings, that there needs to be, of course, a focus on increased growth. But we've also been emphasizing equally the need for inclusive growth.
There was this phrase at the Annual Meetings that growth has been too low for too long for too few. So, we've been doing, I think as you know, those who watch us, we've been doing a lot of work, in fact, over the last number of years on issues such as inequality, for example, and how to make growth more inclusive. So, that’s something to which we are committed and in that respect, if you will, a rethink has already been well underway, as I say, for several years.
In fact, the annual economics conferences that we've been running have often been titled Rethinking Macroeconomic. So we are committed to helping our membership promote more inclusive growth. You know, I think the same applies on the whole issue of globalization, and some of the policies related to that, you know, openness, trade and so on.
Again this was a big discussion point during the Annual Meetings again recently, that for many countries around the world and for many people, especially poor people around the world, those policies have delivered many benefits. A lot of people have been lifted out of poverty over the last generation. But we have added and emphasized that clearly the negative side effects of some of these globalization policies need to be taken into account more. And again, that’s something we've been emphasizing now for some time. So, it's not just the -- it's making globalization work better and work for everyone. Again, that was a big discussion point during the Annual Meetings.
On the other questions, some of your other questions, do we anticipate difficulties to emerge with other countries? Again, no, at this point no, I do not see that. But again, I think we have to wait and let the new administration take office and see what the specific policies might be. There was a question about the U.S. level of commitment to the IMF and, you know, there are just a -- the U.S. was a founding member of the IMF. The U.S. is the leading shareholder in the IMF. We have an excellent relationship with the U.S. authorities, and we would expect that to continue into the future.
On certainty and uncertainty, again, I think it's the early days -- too early to speculate. Clearly, as a general principle, certainty is a good thing. Policy certainty is a good thing. But again, we need to wait and see. Remember we are barely 24 hours away from the election decision.

QUESTIONER: "Yes, please. If I may follow up regarding the trade agreements and the international trade agreements like NAFTA, which is already in a certain place, and also TTIP, and TPP. The Fund has been -- if I'm not mistaken -- promoting those agreements in the process of opening up and reducing barriers to trade. But the current, the president elect seems to be saying that he wants to stop them or change them significantly. So can you, please, comment on that? I mean, have you -- I'd like some clarification on your point. Thank you."
MR. RICE (IMF): So, again, I think it's just too early to speculate. I think we need to let the new administration take office. Let the new administration establish its policy priorities and the actions related to that, and then we can make an assessment. Separate from that on trade, we have said that we believe that trade has been an engine of growth for the global economy and holds great potential in the future in terms of growth for the global economy.
So, I'm not referring to specific agreements here. I'm not getting into that level of detail, but as a general principle, the Fund takes that view. We have also said though, and again this was another major part of that discussion during the Annual Meetings, that clearly the more negative side effects of trade need to be taken more into account for those who feel left out or left behind. We need to have more policies that help to mitigate the negative effects and help address the concerns of those who feel left behind. So that's an important part of the narrative on the overall, you know, view that trade helps the engine of growth.
My added comments: Clearly the IMF prefers to avoid conflict with the incoming new Adminstration. The tenor of these comments sounds like the IMF will likely do what Jim Rickards suggested in his article we featured here. That being, to "keep their heads down, make friends, and not pick fights" as Jim put it.
So, how will this eventually play out? There are two main schools of thought on Trump that I see out there. 
One is that he really does intend to disrupt the present system and remake it along the lines of his "America First" campaign talk. Those who take this view will probably point to his selection of Steve Bannon to his White House staff. 
The other view is that Trump is much more pragmatic than he came across during his campaign and will look to compromise quite a bit to move forward with the main goals of his overall agenda (use "the art of the deal"). Those who take this view would probably point to his selection of Reince Priebus to his White House staff.
Are there hints Trump has given us about which path he may take? Perhaps. It should be noted that all along Trump has called for a massive infrastructure spending program to give a quick jump start for jobs. This is actually in line with what the IMF has called for as well (see fiscal policy paragraph). Also, Trump has already softened his tone and talked about areas he could compromise on such as keeping portions of Obamacare and that it may not be necessary to have a full scale wall along the US southern border (he says a fence might be OK for some areas). He has dropped his call to deport all 11 million immigrants living in the US illegally and now says he will focus on those who have criminal records.
On trade, Trump actually does not talk about being against trade. He talks about using negotiations to get what he calls "fair trade deals" (note the statement above by Gerry Rice that the IMF thinks trade policy should "address the concerns of those who feel left behind"). 
But how will the Trump Administration view global institutions like the IMF? Are they interested in giving the IMF more resources? How do they feel about the IMF stepping in as a global lender of last resort if a major global crisis were underway? In the words of IMF spokesman Gerry Rice, "it's too early to speculate"; and that is all we could do right now since this question has never been raised to Donald Trump as far as I know.

Added note: Brietbart.com (formerly run by Trump adviser Steve Bannon) ran this article about the IMF in October. The article provides no clue as to what Donald Trump thinks about the IMF, but does attempt to say some recent IMF statements actually support Trump's views even though the IMF was actually warning against "protectionist policy approaches." 

The article says the IMF low growth projections agree with Trump's view and that at least the IMF talks about the need to take into account those who feel left out by the globalization process. But again, it's too early to speculate how Trump and the IMF will get along with each other.

No comments:

Post a Comment