US-world divide spills out at IMF-World Bank meetings
WASHINGTON (AFP) — 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 this week.
The U.S. administration showed a diminished view of the Bretton Woods institutions that shaped a U.S.-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 U.S. 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 anti-poverty mission.
“More capital is not the solution when existing capital is not allocated effectively,” Treasury Secretary Steven Mnuchin said in a statement 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.
US questions IMF, Bank pay
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 U.S. 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 U.S. stance on globalization 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-free-trade 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.”
Schaeuble challenges US
The U.S. differences with its allies were not evident on the surface, and the nearly week-long meetings of the two giant multilateral institutions went off smoothly. The World Bank’s Kim and IMF chief Christine Lagarde kept the focus on the need for countries to reform for the long term while global growth is strong, and to address growing inequality, especially in the most developed nations.
But in statements to the steering committees of the two institutions, many countries made clear their differences with the United States.
Most said they backed a capital hike for the World Bank. Schaeuble called it “urgent.”
He also was tough on the trade issue. “We should all be concerned about slow global trade growth and increased anti-free-trade rhetoric. Both are a threat to our common economic prosperity,” Schaeuble said. “Protectionist measures will only harm growth and harm those they claim to protect,” he added.
In its formal statement, China called the lack of progress on increasing World Bank capital “regrettable.”
US rejects French proposal on taxing tech companies
The United States does not support a French proposal to tax the gross revenues of international tech corporations like Google and Amazon, Treasury Secretary Steven Mnuchin said Saturday.
The remarks come as European officials say Washington has softened in recent days on a point that has caused sharp transatlantic tensions in recent years.
European authorities have targeted multinational companies that avoid taxation by seeking out cosy arrangements in low- and no-tax jurisdictions.
The Obama administration in 2016 reacted angrily to European authorities’ decision to collect more than $14 billion from Apple, which had negotiated highly favorable tax arrangements with Ireland.
Washington had until recently shown little interest in discussing a joint solution, according to European officials.
In September of this year, French authorities proposed that the European Union impose taxes on gross corporate revenues because they say they have been unable to tax corporate profits directly.
Mnuchin said Saturday he did not support this.
“I think the concept of a gross revenue tax does not make sense and I don’t think that’s the right direction,” Mnuchin told reporters on the sidelines of the annual meetings of the World Bank and International Monetary Fund. However, Mnuchin said talks were continuing.
“We look forward to this discussion on international tax issues,” he said.
“I think there’s a general view from us and our allies. What we don’t want is for the international companies to be going into tax havens to avoid taxes, no matter where they’re our companies our other countries.”
Speaking a separate news conference, French Finance Minister Bruno Le Maire said Saturday he was pleased that the United States was open to discussing the matter.
“I return satisfied with the progress we’ve had from Washington on this subject,” Le Maire said, noting that Washington and Paris had created a bilateral working group on the matter.
“It’s the first time that France and the United States have agreed to advance the ways and means of taxing digital giants.”
Le Maire said France’s proposal might not be perfect but could be put in place quickly.
“It is not an ideal proposal but it is a proposal that can be enforced in short order,” he said.