'We are bystanders': Poor countries brace for either US election outcome

Donald Trump’s aggressive protectionism could have dire consequences for world trade. But Kamala Harris has a similar goal: protect U.S. workers at all costs.

Harris is likely to embrace President Joe Biden's U.S.-centric approach, including industrial policy, which has reversed decades of practice by elevating the interests of Rust Belt states like Pennsylvania and Michigan.

It’s a point not lost on finance ministers, central bank governors and other senior officials gathered in Washington this week for the annual meetings of the International Monetary Fund and World Bank. And for many, it’s not a matter of there being two starkly different approaches — it’s which candidate’s policies are going to be the least harmful for developing countries.

“We are bystanders to this all-important election. There’s a reversal of globalization, of trade. There’s a move to protectionism in these countries,” Nigerian Finance Minister Adebayo Olawale Edun said at a press conference. “All these things tend to work against the developing world’s ability to benefit from expanding trade and thereby use that opportunity for investment, growth, job creation and poverty reduction.”

The inward turn of the U.S. and a more protectionist world are being accepted as a new reality among many countries regardless of who occupies the White House next year. Trump’s agenda is all but set to be an escalation of his first term — more tariffs and more strife with China. Harris has revealed few details on her economic policy agenda, but she will likely walk a thin line. That means balancing the Trump-era protectionism favored by her battleground state labor union base by avoiding new free trade deals with an international finance and investment agenda.

“Going forward, trade will not be the same engine of growth as before,” IMF Managing Director Kristalina Georgieva said in a speech. “It is the fracturing I warned of back in 2019 — but worse. It is like pouring cold water on an already-lukewarm world economy.”

At stake are not only managing the political demands on trade but also the U.S.’s standing as the largest donor country in the world and the most powerful shareholder in the post-war international finance system that it helped create. The next president will also have to work with Congress on a slew of development-related issues.

That list includes approving a U.S. contribution for an increase of World Bank funding for the poorest countries and other global funds; renewal of the U.S. International Development Finance Corp. established under the Trump administration; reauthorization of the U.S. Export-Import Bank, which helps American companies sell to many emerging and developing economies; and renewal of the African Growth and Opportunity Act, which underpins U.S. trade relations with the continent.

The records of both candidates paint a mixed picture of how they will deal with so-called multilateral organizations like the IMF and World Bank.

Despite his perceived hostility to international organizations, Trump oversaw a capital increase for the World Bank’s International Bank for Reconstruction and Development when he was in the White House. However, his appointed official to lead the bank, David Malpass, was criticized for slow-walking the institution’s climate efforts.

Harris was the first U.S. official to meet with the Biden administration’s pick to lead the World Bank, former Mastercard CEO Ajay Banga, in 2023. She made clear that countries should have access to the finance and tools needed for the clean energy transition and to deal with shocks, according to the White House. But if elected, she’ll have to reconcile with foreign governments her efforts to amplify the Biden administration’s trade and industrial policies aimed at boosting U.S. manufacturing but at the expense of giving poorer countries access to the lucrative U.S. market.

“If Harris comes in, she’s going to have to square that circle,” said Kevin Gallagher, the director of Boston University’s Global Development Policy Center. “The United States under President Biden has attempted to turn the economy, domestically, in the right direction but they have kicked away the ladder for the rest of the world, especially the poorer countries, and boy, the poor countries have noticed.”

Harris’ campaign advisers give no indication that her focus will shift away from prioritizing domestic workers.

"She will be doing things that she thinks are aggressively protecting American workers and the jobs of today but also the jobs of the future,” Gene Sperling, a former White House economic adviser now advising Harris, told reporters on Thursday.

For the World Trade Organization, another institution that has its roots in the post-World War II order conceived by the U.S., things haven’t fared as well. As president, Trump single-handedly shut down the WTO’s appeals process, rendering useless the organization’s most potent function of adjudicating trade disputes, which provides smaller, poorer countries a forum to push back against bigger economies. The Biden administration, similarly opposed to what it views as the WTO’s rogue rulings against U.S. interests, has maintained a blockade of new appointments to the appeals panel.

As the U.S. stance shifts in the institutions it helped create, international officials here are more direct about recognizing that national security concerns are a driving force behind American international economic policy rather than the relatively unfettered free market capitalism of the past.

“Not only is development assistance too small, but major players, driven by national security concerns, are increasingly resorting to industrial policy and protectionism, creating one trade restriction after another,” Georgieva said.

China, both in terms of its military might and industrial competition, has emerged as the primary tension point. The desire to reconfigure supply chains away from dependence on Beijing’s state-run economy has fueled policies in the U.S. and other countries that favor domestic producers and trade ties with allied nations. The number of trade-restrictive measures worldwide has jumped from just over 250 in 2010 to nearly 3,000 this year, according to Global Trade Alert.

Trump and Harris are likely to view the IMF and World Bank as a buffer against China’s economic practices, such as over-producing steel and other commodities to the detriment of U.S. companies and workers.

That’s been a key message of senior Treasury officials in the lead-up to the meetings this week. It’s better to have the institutions than not.

“We helped create them and we're the largest economy, we're the largest shareholder, and that gives us an avenue to have input into how things are transpiring around the world,” Treasury Undersecretary for International Affairs Jay Shambaugh said in an interview.

Leaders and officials are warning that a more self-interested economic approach in the United States and other advanced economies, whether it’s in trade policy or withholding money for development finance, could have a blowback effect.

“If you don’t listen to us about the need to shockproof vulnerable economies, middle-income countries will now become poor countries again,” Barbados Prime Minister Mia Mottley said during a speech where she warned that failing to help countries fight climate change will only lead to more problems for rich countries such as immigration and social unrest.

Barbados is among a larger group of countries asking the U.S. to inject more liquidity into the IMF so it can better stabilize economies under stress from climate change and other challenges.

“We need it,” Mottley said. “Whether there will be one or not, much will be determined in the next election here.”

Suzanne Lynch contributed to this report.