World Bank President Urges Trade Liberalization in Developing Nations

WASHINGTON: Ajay Banga, the President of the World Bank, advocated on Wednesday for developing countries to ease trade restrictions. He pointed out that numerous developing nations maintain steeper tariffs compared to developed economies. Banga suggested that decreasing these tariffs could mitigate the potential adverse effects of reciprocal import taxes.

Banga told reporters that the prevailing global instability, stemming from recently imposed US tariffs and subsequent retaliatory actions declared by China and various other countries, is fostering a more cautious approach to business and economic activities.

He noted that the consequences would differ among countries, but overall global growth is anticipated to decelerate from prior forecasts.

Banga refrained from providing a specific projection.

The global financial institution had previously projected a consistent global economic growth rate of 2.7% for the years 2025 and 2026, mirroring the rate of 2024. They also cautioned that emerging economies are confronting their most precarious long-term growth prospects in the last quarter-century.

The institution had previously cautioned that the across-the-board US tariffs of 10% could diminish the already subdued global growth in 2025 by 0.3 percentage points, assuming that America’s trade partners respond with corresponding tariffs.

Former US President Donald Trump disrupted the established international trade framework by introducing a new standard 10% US tariff on commodities originating from all economies, along with elevated rates for specific nations, although these measures have been temporarily suspended for 90 days to facilitate discussions.

Banga advised nations to engage in negotiations and discussions regarding trade matters, highlighting the largely untapped opportunities for enhanced regional integration among developing countries.

“Nations must prioritize negotiation and open dialogue. This approach will be crucial during this period, and the sooner we adopt it, the more advantageous it will be,” he stated.

He further advised countries to collaborate with willing partners to sustain the circulation of regional and bilateral trade.

Banga acknowledged that current trade tensions are negatively impacting business investment inclinations, but he indicated uncertainty regarding the duration of the present stagnation.

“I cannot reliably predict the duration of this situation, as it is primarily caused by ongoing trade discussions. Achieving favorable outcomes via the negotiation process that I am encouraging… could lead to a relatively swift resolution.”

Banga further added that the World Bank has consistently asserted that elevated tariffs generate disruptions that diminish both transparency and economic growth. “This is an established point,” he concluded.