April 17, 2024

US, China, EU greatest culprits in world trade distortions through  subsidies – IMF

IMF downgrades Nigeria’s 2024 economic growth forecast to 3% 

By Emma Ujah, Washington, DC

The three largest economies of the world: America, China and European Union lead in subsidies that distort international trade.

That was the key finding of   new Analytical Report of the International Monetary Fund   (IMF) titled, “The Return of Industry   Policy,” presented by officials of the organisation, at the on-going Spring Meetings in Washington, yesterday.

The duo who presented the report were, Messrs Lorenzo Rotunno and Adam Jakubik   of the Strategy, Policy and Review Department of the Fund.

According to them their findings included the fact that advanced economies use grants   and other subsidies to advance their export positions in international trade.

At the same time, the advanced economies discriminate against foreign investors and put their domestic manufactures at positions of undue advantage against their competitors from other countries.  

In addition to the three biggest economies of the world, the study showed that G20 nations lead the world in providing subsidies to producers in their countries, a situation that left Emerging Markets and Developing Countries at their mercy.  

The research findings,  the IMF officials disclosed, indicated subsidised products accounted for the highest volume of goods exported from the countries above.

Subsidy applications,   the report showed were for both economic and non-economic objectives, “often employing tit- for -tat strategy.

It also indicated that after agreeing to open a competitive market, those governments usually come up with policies considered inimical to what they agreed.

“After agreeing to make competition the hallmark of Global trade, these governments come up again with policies against the decisions,” they disclosed.

They identified how to balance the equation as a major challenge for word trade   as smaller economies continue to battle the challenge of dumping, while their local manufacturing sectors continue to suffer, due to inability of their goods to compete with the imported subsidised goods.

The officials suggested that fiscal and monetary policies were needed to address the problem.  

Their findings, according to them, should stimulate more debate to continue on the challenge posed by Industrial Policy on international trade.  

“The report presents research data to continue the debate,” they said, adding, “we need international cooperation to deal with that.. the WTO should monitor these developments.”