Coronavirus: Financial centres warn over protectionism risks

May 26, 2020

Representatives of the City and other international financial centres will warn this week that governments must avoid "the self-defeating lure of protectionism" and seek a coordinated response to aid the global economy's recovery from the coronavirus pandemic.

Sky News understands that the World Alliance of International Financial Centers (WAIFC), a Brussels-based not-for-profit group, will emphasise the need to back SMEs with public and private funding during the months ahead.

The WAIFC, whose members include financial services-focused bodies in Frankfurt, Moscow, Paris, Qatar, Tokyo and Toyota, will say that the COVID-19 pandemic will underline the importance of investment in digital infrastructure.

"During the phases of lockdowns, we have experienced the importance of digital services in finance and beyond," it will stress in a statement to be issued on Wednesday.

The organisation's intervention will come as fears deepen that the coronavirus pandemic will spark a new era of more aggressive protectionism, with trade tensions between the US and China already exacerbated by the crisis.

Large multinationals such as BMW, Nestle and HSBC have already warned of a rise in protectionist sentiment in Washington, the Financial Times reported this month.

The US is not part of the financial centres' global alliance.

Finance executives are concerned that the international economic response to COVID-19 has appeared much more fragmented than the comparable response during the financial crisis of 2008.

"This is going to undermine the possible impact of the various monetary and fiscal initiatives that have been put in place at national level," one senior figure said.

"This can't continue and international leadership is going to have to come from somewhere."

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In its statement, the WAIFC will argue that such a coordinated response to the pandemic is vital.

"Our authorities have started to address these issues nationally, but we firmly believe that international cooperation for a global economic response is critical.

"We need to support various initiatives, including fiscal and monetary stimulus.

"In this way, mitigation action will be much more effective."

It will add that the industries represented by the WAIFC must play a pivotal role in assisting the millions of people who have lost their jobs during the pandemic.

"Many people have lost their jobs due to the current crisis, and others are employed only part-time with lower wages.

"The financial industry needs to support them for keeping our societies together," the statement will say.

The body will also urge governments to "avoid the self-defeating lure of protectionism and work together to open trade and investment constructively and sustainably for our economies".

"And in the long run, it is essential that we reconsider our economic models and give a new priority to long-term perspectives, innovative business models, sustainable economies, and environmental and social considerations."

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