Divide shows at US talks
THE growing split between the United States and the rest of the world spilled into the annual meetings of the International Monetary Fund and World Bank in Washington last week. The US administration showed a diminished view of the BrettonWoods institutions that shaped a US-led order after World War II, rejecting efforts to expand their activities, and defending its attack on free trade pacts as part of President Donald Trump’s “America First” agenda.
And at the same time, the US continued to stymie China’s ambitions to elevate its global role via an expanded stake in both the IMF and World Bank.
The Trump administration spelled out its view by rejecting a capital increase that the World Bank wants to expand its global antipoverty mission.
“More capital is not the solution when existing capital is not allocated effectively,” Treasury Secretary Steven Mnuchin said in a statement on Friday, one day after Bank President Jim Yong-kim said he believed the Trump administration was now supportive of the move.
There was also no movement on the IMF’s long-planned boost in its lending resources that would come with a shakeup of its shareholder quotas. Last year, the Republican-controlled Congress effectively vetoed the move, and the Trump administration has not supported bringing it back to life.
Instead, Mnuchin took aim at the IMF and World Bank bureaucracies, calling them inefficient and suggesting their staffs are overpaid – a longstanding view among many US conservative critics of both.
“We see scope for further budget discipline, especially with respect to compensation and the Executive Board budget,” he said of the World Bank.
The new US stance on globalisation under the Trump administration also came through in the meeting of the G20 finance ministers and central bank chiefs that took place during the IMF-World Bank meetings.
In the past, the group regularly raised the alarm over protectionist and anti-freetrade sentiment.
But this week the Trump administration – which this year killed the Trans-Pacific Partnership with Asia-Pacific nations, stalled talks on a transatlantic free trade zone, and forced a renegotiation of the North American Free Trade Agreement – appeared to stifle such talk.
After presenting a tepid G20 statement with no mention of trade or protectionism, German Finance Minister Wolfgang Schaeuble quipped that the G20 lacks expertise in the matter. Because of that, he said, “at this time, global discussions are much more relaxed”.
The US push for both entitties to curb compensation met unenthusiastic reactions. In a closing statement, the Bank’s steering committee blandly pledged support for a compensation review.
But the IMF bristled. “The Fund is highly cost-conscious and in fact we have been operating under a flat budget in real terms for six years in a row,” a spokesperson said. “Salaries and benefits are reviewed on a regular basis by our Executive Board.”