Finance Minister Arun Jaitley warned yesterday against the dangers of protectionist tendencies in developed economies spreading to other parts of the world and hurting global growth.
Arun Jaitley’s comments came days after the International Monetary Fund urged policymakers to support global growth by resisting protectionist forces.
Growing frustration with persistently low growth rates, stagnant wages and diminishing job security has sparked a popular uprising in Europe and the United States against free trade and globalisation, which critics blame for worsening income and social inequities.
Addressing a gathering of finance officials of the BRICS group of emerging nations, Jaitley singled out Britain’s vote to leave the European Union, as well as aggressive criticism of trade deals in the US presidential election.
“Part of the developed world is moving towards protectionism,” Jaitley said. “If developing countries see a trend of protectionism, the spillover impact on the policies in other parts of the world would be adverse.”
After its June vote to leave the European Union, Britain last week signalled capping immigration. Free trade has also become a political taboo in the United States, with Republican presidential candidate Donald Trump championing an “America First” policy.
Protectionist rhetoric has already rattled financial markets, which some investors say could depress an already weak and fragile world economy.
Underscoring their concern, the World Trade Organisation last month slashed its global trade volume growth forecast to the slowest pace since 2007, saying it expected it to rise just 1.7% this year, down from the 2.8% it forecast in April.
Jaitley, however, expressed hope that economic needs would prevent countries such as the US from following through on pledges to renegotiate trade deals and enact punitive tariffs.
“The tenor of the debate is more protectionist during elections and much less when you get back to business as usual,” he said. “Therefore we have to keep our fingers crossed this time and hope for that the tenor of free trade returns back once the heat of the election is over.”