The managing director of the International Monetary Fund, has launched a thinly veiled attack on the anti-free-trade sentiments expressed by US presidential candidate Donald Trump in a speech calling for globalisation to be made to work for all.

Speaking in Canada, Christine Lagarde, admitted competition from low-cost emerging countries such as China had caused pain for workers in the west.

But she said the solution was for governments to provide direct financial support for those with low skills through higher minimum wages, more generous welfare states, investment in education and a crackdown on tax evasion.

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While not mentioning Trump by name, Lagarde made it clear she strongly opposed the Republican candidate’s policies, which include higher US tariffs and a barrier along the border with Mexico.

“For two decades before the 2000s, global trade regularly grew by 7%, or twice the rate of the world economy. Today, however, trade growth is below that of the global economy – at about 2%,” Lagarde said.

“There is a growing risk of politicians seeking office by promising to ‘get tough’ with foreign trade partners through punitive tariffs or other restrictions on trade. I am deeply concerned about this – not only because I was a minister of trade, but because trade has been at the heart of the IMF’s mandate for more than 70 years.”

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The IMF is concerned about what is sees as a growing backlash against globalisation, which has been manifested in support for Trump and Bernie Sanders in the US presidential primaries, by the vote for Brexit and by the rise of populist parties across Europe.

Lagarde said the ability of countries to ignore narrow self-interest had brought unprecedented progress since the second world war. “But progress has not come for everybody at the same pace. There is no doubt that the transformation of our economies has also brought dislocation and hardship,” she said.

Facebook Twitter Pinterest Donald Trump on the presidential campaign trail in Baltimore, Maryland. Photograph: Mike Segar/Reuters

“Structural change caused by globalisation and technological change has deeply affected some sectors and industries, while benefitting society as a whole.”

She added that throughout history there had been arguments about trade. “But history clearly tells us that closing borders or increasing protectionism is not the way to go. Many countries have tried this route, and just as many have failed. Instead, we need to pursue policies that extend the benefits of openness and integration while alleviating their side effects.”

Lagarde traced the origin of these side-effects back to the opening up of the global economy after the collapse of the Soviet Union in the early 1990s.

“The historic events of the early 1990s, when China, India, and the former communist countries entered into the global trading system, had far-reaching effects. The size of the global workforce effectively doubled, putting downward pressure on wages, especially for lower-skilled workers in advanced economies,” she said.



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“In the US, competition from low-wage countries has been one of the factors that have contributed to a decline in manufacturing employment, along with a wave of automation. And this has not been spread evenly across the whole economy, but has been concentrated in some local labor markets that have faced deep, long-lasting effects from overseas competition.”

The IMF was a cheerleader in the 1990s and early 2000s for free movement of capital but Lagarde acknowledged there were drawbacks to financial liberalisation.

“Between 1980 and 2007, global capital flows increased more than twenty-fivefold, compared with an eightfold expansion in global trade. This has underpinned investment, especially in emerging economies. But it has also opened the door to financial contagion and concerns about the stability of financial systems.”

Growing inequality in wealth, income, and opportunity in many countries had added to a groundswell of discontent, especially in the industrialised world, Lagarde said. There was a “growing sense among some citizens that they “lack control”, that the system is somehow against them.”