Downsides and Upsides of Free Trade, Global Economy, and China Spillover

October 15th, 2016 Posted in Canada|Global Economy

OECD Cuts Global Economy Outlook

OECD Cuts Global Economy Outlook

The International Monetary Fund, or IMF, recently mentioned in a report that spillovers from China could hamper the global economy. China should consider taking various steps, including a liberal approach on the Yuan and revamping weak firms.

A freer floating exchange rate and transparent policy change mechanism are a must for China to improve its economy and stop global spillovers. Also, the IMF cautions against China’s protectionist policies. Protectionist measures will likely depress global trade and economy in the short term and also in the long run.

Author/Copyright: Ahmed Dawn

Harvard Economics professor Kenneth Rogoff recently told the BBC that China is the biggest threat to the global economy and that the economy is slowing down more than official figures. After triple-digit growth for years, the IMF predicts the expected economic growth rate to be only 6.6 percent this year.

OECD Downgrades Canada Economy

The Organization for Economic Co-operation and Development, or OECD, also downgrades the global and Canadian economy. The growth rate was lowered to 1.2 percent from 1.7 percent for Canada. The prediction for 2017 Canadian economy is down to 3.2 percent from a previous 3.3 percent, which is not that bad.

The world economy is expected to grow 2.9 percent in 2016. The earlier forecast for 2016 was 3.1 percent. The OECD believes a slowdown in international trade generating from Asia is the main reason for the global economic slowdown.

Downsides and Upsides of Free Trade

Also, the rise of anti-free trade movements in Western countries, such as recently seen in the Brexit vote in Britain and in the Trump movement in the U.S., do not paint a pretty picture for global growth. The downsides of freer global trade, such as losing jobs to China, are easy to see and the upsides, such as lower prices, more choices, etc., are harder to see.

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