IMF: Wealthier countries need to assist workers affected by liberalization

Wealthier countries in the world should assist workers affected by trade liberalization, which is becoming increasingly unpopular after the global financial crisis, encouraging the rise of protectionism, according to a report by the International Monetary Fund (IMF).

The report, jointly prepared by the IMF and the World Trade Organization (WTO), calls for greater training and upskilling of workers, stronger social safety nets, and other measures that could mitigate the shocks arising from industrial relocation and increased competition, primarily in the U.S. and Europe.

Job losses in certain sectors or regions in developed economies are more a result of technological changes than trade, the IMF report published on Monday states. However, adjustments in trade can lead to negative consequences for people and the economy that are often concentrated, sometimes harsh, and too often last too long, they emphasized.

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The report further highlights that global trade grew on average by six percent annually from 1960 to 2007 – the onset of the global financial crisis – and that such a phenomenon led to an average annual economic growth rate of three percent during that same period.

However, since the beginning of the new millennium, the ‘brakes’ on trade growth, productivity, and income have been slower trade reform, the rise of protectionism in the post-crisis period, and the risk of further reversals, the report states, published ahead of the upcoming regular spring meetings of the IMF and the World Bank.

According to one study referenced in the report, trade with China resulted in the loss of one million jobs in the U.S. manufacturing sector from 1999 to 2011, along with 1.4 million non-manufacturing jobs.

Too many individuals and communities have been bypassed by trade, and there are legitimate reasons for dissatisfaction, the latest IMF report emphasizes, but it also notes that it is not easy to distinguish which pressures arose from adjustments in trade from those caused by technological advancement.

The report, however, insists that a more pronounced progress towards freer trade is crucial for reviving global growth.