director of the imf christine lagarde highlighted in a recent speech that “ technology has been the major factor behind the relative decline of lower - and middle - skilled workers ’ incomes in recent years, with trade contributing to a much lesser extent. " 6erecting trade barriers will do nothing to recover jobs lost as a result of automation. while it is true that some manufacturing jobs have moved to emerging countries, all theory and evidence shows that international trade has been a net gain for europe, the united states, as well as for the rest of the world. we have to confront all those who distort the facts about the supposed benefits of protectionism, because following their advice would be a disaster for world trade and would not help those who feel left behind. the opposite would be the case, since protectionism would reduce the size of the total economic pie, leaving society worse off on the whole. at the same time, we must not fall into the trap of self - complacency. the “ washington 3 / 5 bis central bankers'speeches consensus ” has dominated the discourse on international economics from the 1990s until the early 21st century7. its proponents have welcomed the advance of free trade in the name of economic efficiency. while their argument is technically sound, they have not provided any answers for those who have seen their share of the pie stay the same size or even get smaller. we have to admit that, as part of this consensus, policies were recommended that generally reject any form of “ free trade plus compensation ". to be fair, such a balanced approach has not been rejected because of any lack of compassion, but because it was believed that a minimum of regulation would be beneficial for trade and economic development. indeed, almost 20 years ago harvard economist dani rodrik, one of the most distinguished scholars in the field of international economics and political economy, accurately noted that “ governments today actively compete with each other by pursuing policies that they believe will earn them market confidence and attract trade and capital inflows : tight money, small government, low taxes, flexible labor legislation, deregulation, privatization, and openness all around. " 8 i think his observation explains why not enough attention was given to mill ’ s advice about “ free trade plus compensation ". we are at risk of a backlash against international trade because leaders in some countries have not been able to give convincing answers to those who have seen their standard of living decline, either due to free trade or due to technology. in

effective lower bound for the conduct of monetary policy. one basic conclusion of the review is that it is essential to build a sufficient medium - term inflation buffer ( as captured by the symmetric two per cent inflation target ) to create the monetary policy space required to be effective in tackling negative shocks. a second basic conclusion is that, if the economy is close to the effective lower bound, it is vitally important to adopt especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched. in turn, this may also imply a transitory period in which inflation is moderately above target. in particular, the review identified forward guidance, asset purchases and longer - term refinancing operations as instruments in the monetary policy toolbox that can help to address the constraint of the effective lower bound on policy rates. at its 21 july monetary policy meeting, the governing council revised its forward guidance on policy rates in line with this new strategic orientation. in particular, the new forward guidance specified three conditions that need to be met before we would start raising our policy rates. the first condition is that the governing council “ sees inflation reaching two per cent well ahead of the end of its projection horizon. ” the second condition is that the two per cent target is reached 1 / 2 bis central bankers'speeches “ durably for the rest of the projection horizon. ” the third condition is that the governing council “ judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. ” let me highlight today two key features of this rate forward guidance. first, requiring that we see inflation reaching two per cent not only “ well ahead of the end of our projection horizon ” but also “ durably for the rest of the projection horizon ” ensures that interest rate policy will not react to inflation shocks that are expected to fade away before the end of our projection horizon. second, the condition that “ realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term ” serves an important purpose in our analysis of the incoming data : it sharply differentiates between the volatile components of headline inflation and the dynamics of underlying inflation, which is the persistent component that is the best guide to medium - term inflation dynamics. the inclusion of a condition that is based on realisations of underlying inflation takes into account the intrinsic uncertainty of economic forecasts, especially during periods of structural change that