Commodity Blog

The IMF has warned the US against pursuing protectionist policies such as a ”buy American” clause inserted into the US stimulus-package legislation, saying such approaches don’t work and would be harmful to the recovery.
Speaking at a briefing on the outlook for Asia, the IMF’s chief-executive, Dominique Strauss-Kahn, said that in crises, the idea of finding a domestic solution was always tempting.
“The problem is with globalisation, even more than previously, it won’t work. The idea is understandable, but really, no one can believe there is a solution in that direction, and we have to explain and explain again that beggar-thy-neighbour policies do not work,” he said.
The Obama Administration faces its first real test on free trade when it confronts moves by both the Senate and the House to insert “buy American” provisions in the stimulus bill.
Virtually every major trading partner of the US — including the EU, Australia, Canada, Japan and China — has warned that such a move could trigger a trade war and would be a breach of international obligations.
Mr Strauss-Kahn also said the idea that Asia had been decoupled from the rest of the world economy had clearly been demonstrated to be false and that it had held up only because of a delay in the way the downturn affected the region.
The IMF is now forecasting 6.8 per cent growth for China in 2009, down from 9 per cent forecast in November. Developing Asia is expected to growth by 5.5 per cent. But Mr Strauss-Kahn stressed there was “a lot of downside risk”.
He said a driver for recovery in Asia would be an upturn in demand in the US and Europe, which are expected to recover somewhat in late 2009 or early 2010. Asia could be expected to recover in 2010, he said.
Mr Strauss-Kahn stressed that there had been early measures by Asian nations to implement countercyclical responses that should help speed Asia’s recovery.