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I.M.F. Chief Lagarde Calls Trade Restrictions ‘Economic Malpractice’

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”To restrict trade, in our view, would be an economic malpractice,” Christine Lagarde, managing director of the I.M.F. told Sara Eisen of CNBC.CreditCredit...CNBC

The leader of the International Monetary Fund, Christine Lagarde, warned in a speech on Wednesday that an increase in protectionist trade measures could derail a fragile economic recovery in the United States and the rest of the world.

Ms. Lagarde spoke at Northwestern University, in what was billed as a kickoff for the fund’s annual fall meetings to be held in Washington next week.

“Restricting trade is a clear case of economic malpractice,” Ms. Lagarde said, making the case that workers and families would be worse off if global trade were restricted.

Ms. Lagarde’s comments come in the midst of a polarizing election in the United States, where the Republican and Democratic presidential candidates have both criticized trade deals as hurting, not helping, American workers.

The Republican presidential candidate, Donald J. Trump, has been most vocal in this regard, calling the North American Free Trade Agreement among the United States, Mexico and Canada the “single worst trade agreement” ever approved in the country.

Both Mr. Trump and the Democratic candidate, Hillary Clinton, have said they are against the Trans-Pacific Partnership, a 12-country deal involving the United States and 11 other Pacific Rim nations.

Since the end of World War II, when it was formed, the I.M.F. has been the most vocal global proponent of free trade policies in which countries around the world agree to trade with each other and keep impediments such as tariffs or quotas to a minimum.

This doctrine lies at the root of all the advice that it parcels out to its member countries, and liberal trade policies are one of its major conditions when the fund lends money to a country in crisis.

But in today’s global climate of weak growth and inward-looking politics, these textbook notions that freer trade benefits all are being questioned by many.

Recent research from the fund also shows that since the crisis, the growth in global trade has slowed sharply — barely keeping pace with global output. From 1985 to 2007, global trade expanded at twice the level of overall economic growth, according to fund economists.

One reason for the slowdown, the report concludes, has been a steady rise in protectionist rules and regulations over the last three years.

“If we were to turn our backs on trade now, we would be choking off a key driver of growth at a point when the global economy is still in need of every good piece of news it can get,” Ms. Lagarde warned.

While Ms. Lagarde was reappointed to a second term as the fund’s managing director earlier this year, her ability to make a difference on such broad, controversial issues is unclear.

During the Greek crisis, for example, European leaders did not heed her insistent counsel to reduce Greece’s debt burden, as a recent study from the fund’s watchdog lays out in detail.

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