RIGA (Reuters) - Protectionist trade measures risk undermining confidence in the world economy and the institutional frameworks that have helped sustain growth for decades, European Central Bank President Mario Draghi said on Thursday.
“It’s more urgent than ever that these discussions ... are being run within the existing multilateral framework,” Draghi told a news conference after the ECB’s regular policy meeting.
“That is as important as the nature of the measures that are being discussed, because if we undermine the multilateral framework that has accompanied our existence since the Second World War, and has accompanied the very long prosperity the world enjoyed since then, then we are going to create a very serious damage.
“And we’ve gone through this — not we, but our ancestors have gone through this already, so no need to repeat the experience,” the ECB chief added. “We’ve seen where this has driven all of us.”
As fading business sentiment and moderating export demand drag on growth, the ECB has repeatedly warned that the threat of protectionism risks derailing the world economy.
Draghi said the ECB’s new growth and inflation projections, released on Thursday, included trade measures that have already been implemented — direct effects of which had so far been limited — and did not anticipate future moves.
But he said any escalation in the trade spat would affect confidence in the world economy.
The United Stated imposed tariffs on steel and aluminum products earlier this month and European leaders have already said they will retaliate.
While the tariffs impact a relatively narrow group of products, tit-for-tat responses could spiral into a fully-fledged trade war, which would slow growth and make currency moves unpredictable.
The European Union, Canada and Mexico have all responded to the U.S. move, announcing counter-measures and legal challenges at the World Trade Organization.
Reporting by Balazs Koranyi and Catherine Evans; editing by John Stonestreet