Pierre-Olivier Gourinchas, Chief Economist at the International Monetary Fund (IMF), has expressed concern over the gradual dismantling of the multilateral trading system.
He highlighted that more countries are increasingly imposing unilateral tariffs or industrial policy measures that often do not comply with World Trade Organization (WTO) rules.
“Our imperfect trading system could be improved, but this surge in unilateral measures isn’t likely to deliver lasting and shared global prosperity,” Gourinchas said.
He warned that such actions will distort trade and resource allocation, spur retaliation, weaken growth, lower living standards, and complicate the coordination of policies addressing global challenges like climate transition.
Gourinchas emphasized the need to focus on sustainably improving medium-term growth prospects through efficient resource allocation, better education opportunities, equitable chances, faster and greener innovation, and stronger policy frameworks.
He explained that macroeconomic forces, such as desired national savings, domestic investment, and global rates of return on capital, are the primary determinants of external balances.
Trade restrictions, he argued, would be costly and ineffective in addressing underlying macroeconomic causes if these imbalances are excessive. Trade instruments should be used sparingly, within a multilateral framework, and only to correct well-identified distortions.
“Unfortunately, we find ourselves increasingly removed from these basic principles,” Gourinchas noted during the presentation of the latest global economic projections at the release of the July 2024 World Economic Outlook Update on Tuesday, July 16.
