Opening Remarks by First Deputy Managing Director Gita Gopinath at the IMF Conference on Geoeconomic Fragmentation
IMF News, May 25, 2023
Source details
- Canonical URL
- Opening Remarks by First Deputy Managing Director Gita Gopinath at the IMF Conference on Geoeconomic Fragmentation
Other formats
Bibliographic details
- Published: May 25, 2023
Context
- Momentum for traditional trade reforms stalled after the global financial crisis; trade restrictions and other distortive policy measures began to spread.
- Structural changes from technology and trade have negatively affected some workers and communities, prompting debate about the merits of globalization.
- The COVID-19 pandemic, Russia’s war in Ukraine, and intensifying geopolitical rivalry have heightened concerns about national security and supply chain resilience.
- These developments mark the beginning of a new paradigm that shifts away from decades of global economic integration toward inward- and alliance-oriented policies.
Early Signs of Fragmentation (findings and key statistics)
- Surge in trade and FDI restrictions, particularly in the high-tech sector; many measures are explicitly linked to national security.
- Key fact: The number of trade and FDI restrictions has increased three-fold since 2018.
- Policymakers are enacting measures to move production back home or to politically aligned countries, including:
- Discriminatory provisions such as local content requirements in subsidy schemes.
- More stringent rules of origin in regional trade agreements.
- Increased screening of inbound and outbound investments.
- Firms are shifting trade patterns and insulating supply chains in response to growing policy uncertainty.
- Key fact: FDI flows are increasingly concentrated among geopolitically aligned countries (2.5 times higher than expected), particularly in strategic sectors.
- Financial fragmentation signals: some countries are reducing holdings of USD assets.
- Key fact: China has reduced its holdings of U.S. Treasury Securities by 11 percent between February and September 2022.
Purpose of the Conference (objectives)
- Highlight the importance of carrying out rigorous research on geoeconomic fragmentation and its ramifications for the global economy in the years and decades ahead.
- Bring together work from the IMF and external scholars to:
- Identify which aspects of fragmentation need better understanding.
- Develop a clear, shared research agenda.
- Consider effective policy options to mitigate fragmentation and manage a more fragmented world.
Open Research Questions (enumerated)
- What are the data telling us about the extent of fragmentation?
- Are policy signals translating into observable effects on trade, capital flows, and investment?
- Are some regions more exposed than others?
- How are the channels of fragmentation interrelated?
- Do trade, investment, technological, and financial fragmentation reinforce each other?
- How can interlinkages be assessed?
- What steps can governments take to limit fragmentation and mitigate its effects?
- What safeguards can be put in place?
- How can third countries—the innocent bystanders of geoeconomic fragmentation—navigate a more uncertain policy environment?
- What should be the role of multilateral institutions such as the IMF and the WTO?
- What actions and reforms can enable a new form of “pragmatic multilateralism” to emerge?
Conclusion and next steps
- The conference aims to surface ideas that will advance a critical research agenda central to the Fund’s work in the coming months.
- Announcement: The upcoming issue of the magazine Finance and Development focuses on trade and is out June 1; it includes contributions from conference speakers (Caroline Freund, Ralph Ossa, Michele Ruta).
- Moderator transition: Gita Gopinath turned the session over to Ceyla to chair the first session.
Source: Opening Remarks by First Deputy Managing Director Gita Gopinath at the IMF Conference on Geoeconomic Fragmentation, Washington, D.C., May 25, 2023.