The United States and Europe should avoid enacting trade restrictions to keep out cheap Chinese textiles, International Monetary Fund (IMF) chief Rodrigo Rato said in an interview published today.
Trying to correct imbalances with restrictive trade measures seems like a grave mistake to us," the IMF's managing director told Expansionfinancial daily in Niger yesterday.
Lawmakers in the United States have threatened sanctions on Chinese textile exports unless China abandons its peg to the dollar, and European Commission President Jose Manuel Durao Barroso said on Wednesday the EU executive was ready to take more steps if needed to tackle a surge in textile exports from China.
Mr Rato also said the European Central Bank should start thinking about an interest rate cut in case signs of "greater weakness" occur.
"The alternative to US growth has not materialised," Mr Rato said in reference to euro zone growth that was running about two percentage points behind forecasts for US growth this year.
He blamed sluggishness on the lack of structural reforms, not on monetary policy. "Where there can be some criticism is that Europe still has not made labour reforms that work. It continues to put too excessive restrictions on mobility and the initiative to look for or find work," Mr Rato said.
He said the IMF maintains its forecast for world economic growth of 4.3 per cent this year. "We don't see a slowdown," Mr Rato said.