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Economics

多边合作能否与大国竞争共存？

Apr 21, 2021 Kemal Derviş and Sebastián Strauss

华盛顿—美国总统拜登政府最近采取的三项重要举措表明美国与世界正在重新接触，并支持包容性的全球多边主义。现在最大的问题是，随着美国再次寻求发挥国际领导作用，这种合作能否奏效，以及鉴于双边紧张局面的加剧，中国将如何回应美国的提议。

第一个主要举措是美国财政部长珍妮特·耶伦（Janet Yellen）呼吁发行6500亿美元的特别提款权（SDR，国际货币基金组织（IMF）的储备资产）——而特朗普总统政府阻止这样做。

该计划的细节仍有待 20国集团财长、央行行长及国际货币和金融委员会批准。该计划不仅涉及按IMF配额比例向各国发行创纪录的6500亿美元SDR。它还要求不需要这些SDR的国家自愿将其重新分配给有需要的国家。例如，美国建议将其中一部分贷款给IMF的减贫和增长信托基金，以提高IMF的优惠贷款能力。

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Kemal Derviş

Writing for PS since 2003
122 Commentaries

Kemal Derviş, a former minister of economic affairs of Turkey and administrator for the United Nations Development Programme, is a senior fellow at the Brookings Institution.

Sebastián Strauss

Writing for PS since 2019
10 Commentaries

Sebastián Strauss is a senior research analyst and a coordinator for strategic engagements at the Brookings Institution.

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j. von Hettlingen Apr 25, 2021

Kemal Derviş and Sebastián Strauss say the Biden administration has launched three important initiatives - new IMF special drawing rights, corporate taxation, and climate change - in an effort to “illustrate America’s reengagement with the world and support for inclusive global multilateralism.” The “big question is whether such cooperation can work,” now that the US is “again seeking to play an international leadership role.”
According to the authors, all eyes are on “how China will react to the US proposals, given rising bilateral tensions.” Although Beijing is anxious to reset ties after years of tension, there is a growing consensus among Chinese leaders that the US-China relations will remain rocky for the foreseeable future. They believe that time and momentum are on China’s side in its quest to take centre stage. Seeing the US as a spent force, it would no longer be able to push China hard.
Biden’s Treasury Secretary Janet Yellen has called for “a new $650 billion issuance of special drawing rights (SDRs, the International Monetary Fund’s reserve asset)” to help low-income countries - “something that…Trump’s administration had blocked.” An issuance is similar to when a central bank prints money as the new SDRs give each IMF member more reserves to draw on in proportion to their shareholding in the Fund. Yellen’s idea “has been endorsed by the G20 finance ministers and central bank governors and the International Monetary and Financial Committee, are still to be worked out.”
The authors say, “China supports the proposed new SDR allocation, but it remains to be seen whether it will agree with the US and other advanced economies on the implementation details and reallocate some of its own SDRs in a coordinated multilateral manner. It will also be interesting to see what role the Chinese-led Asian Infrastructure Investment Bank may play in such a scheme.” Yet critics fear that insolvent countries may use the cash to pay off Chinese creditors.
Biden’s plan for global corporate tax rate “would allow countries to tax the largest and most profitable multinational corporations (many of which are American) based on their sales in each country, regardless of physical presence, and would set a global minimum corporate-tax rate of 21%.” The US Treasury “floated the idea with the 135 countries involved in OECD/G20 discussions on so-called base erosion and profit shifting.” This will hit technology and pharmaceutical companies particularly hard, as they have been particularly deft at using provisions embedded in the tax code to reduce their taxes.
The “regulations would be binding for large companies in all sectors, depending on their level of revenue and profit margins. Reaching a global agreement will be difficult.” The authors believe “the OECD framework provides another opportunity for US-China multilateral cooperation on one of the most important and sensitive global economic policy issues.” It remains to be seen whether China would support Yellen’s push for the OECD minimum tax rate to create a “more level playing field.”
Biden’s tax plan would allow him “to raise US corporate tax rates to pay for planned infrastructure investments without being undercut internationally and end the race to the bottom that has characterized corporate taxation for decades.” However, business groups and Republicans have voiced their strong opposition against Biden’s proposal to raise taxes, saying the changes would hurt the ability of American companies to compete with foreign competitors.
The virtual climate summit that Biden held on April 22-23 Biden reaffirmed the US commitment to action, after Trump pulled the US out of the Paris climate agreement in 2017. The attendees made up leaders of some 40 nations, among them “17 major greenhouse-gas (GHG) emitters.” Sadly, the onus is on climate activists and ordinary citizens to demand doggedly that world leaders - who prioritise economic growth over a clean planet - step up their efforts and follow through on their plans to cut carbon emissions.
Last year, President Xi Jinping pledged that China would “become carbon neutral before 2060.” At the summit he reiterated China’s goal to hit peak pollution sometime before 2030. For the first time a specific timeline for the coal industry has been set. In China’s next five-year economic plan, from 2026 to 2030, it would “strictly limit” the increase in its consumption of coal. President Moon Jae-in of South Korea said his country would cut off all overseas financing of coal. Let us hope that they are not empty words.
Although “rich countries accept that most emerging economies, already hard-hit by the pandemic, need large capital inflows to help finance their green transitions,” it remains to be seen whether they really are committed to the cuase. The Covid-19 pandemic shows that a country can not close its borders to isolate itself from contagious viruses or natural disasters.
Despite geopolitical rivalry and the ensuing conflict, most world leaders realise that they need to find ways to cooperate as no country can tackle a global challenge on its own. Biden’s efforts to reach out to the global community have paid off - for now. Now it is time for actions.
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David Punabantu Apr 22, 2021

Multilateral cooperation under the current economic and financial structures will become in the long run increasingly difficult.
For starters the US has pumped in trillions of US dollars into their economy through stimulus packages coupled with increasing SDR allocations. The question is that will all this funding end up in China to make it an even greater economic power?
The current economic set up puts the US economically at a disadvantage. Take the IMF fixed cross rates. For example the IMF fixed cross rates on the 28th of May 2021 gave the exchange rate between the two trans-Atlantic nations as US$1 equal to £1.2284. When looking at the Euro the value of the US dollar and Sterling pound in Euro respectively is €0.91027 and €1.11826 giving a IMF fixed cross rate of 1.2284 which mimics the exchange rate of the two trans-Atlantic nations of the UK and USA.
The South African Rand shows a similar picture being ZAR17.4053 per US dollar, and ZAR21.3813 per British Sterling pound giving a cross rate when the two figures are divided of 1.2284. Similarly the North Korea Won with KPW165.848 per Sterling pound against KPW135 per US dollar gives a cross rate of 1.2284. South Korea gives a similar picture. KRW1,517.51 per Sterling pound against KRW1,235.32 per US dollar when divided together gives a cross rate of 1.2284. The Japanese Yen shows the same picture with JYP132.25 per Sterling pound and JYP107.65 per US dollar when divided together gives 1.2284. The Canadian dollar also shows the same image being CAD1.69181 per Sterling pound and CAD1.37721 per US dollar that gives a cross rate of 1.2284. The Indian Rupee at INR92.4590 per Sterling pound and INR75.2657 when divided gives 1.2284 which is the exchange rate between the US and UK.
Even the Chinese Renminbi at CNY8.9449 per Sterling pound against CNY7.15910 per US dollars gives a cross rate of 1.2284. Zambia with ZMK22.1715 per Sterling pound against ZMK17.925 per US dollar gives the same picture.
The question that arises from this is does North Korea have exactly in its money markets the same US dollar and Sterling liquidity to equal the cross rates as determined by the IMF? Does Zambia, Canada, Japan, South Korea, China, India to name a few countries have everyday day in and day out the same liquidity of Sterling pounds and US dollars in their money markets to justify the value given to the IMF fixed cross rates.
While the US and UK economies sit frozen in the IMF fixed cross rates straight jacket, China has dealt with this dilemma on the commodity side of the equation rather than the monetary side.
This is clearly seen in what former editor of the Financial Times Mr Geoffrey Crowther wrote in his book "An Out Line of Money". He noted “if a purchaser is someone who wants D-marks in order to pay for German exports, the fact that he can get his D-marks cheap is equivalent to a reduction in the price of exports; it will stimulate sales in exactly the same way as an ordinary depreciation of the exchange rate” (Crowther (1951) p.260).
While Western economic philosophy pursues its multilateral economic structures on a " depreciation of the exchange rate" to stimulate US dollar inflows, China has followed "a reduction in the price of exports" with her cheap Chinese products.
In other words China has created more value money hence attracting US dollars. This US dollar magnetic attraction will undermine the US economy as it faces the Triffin Dilemma.
The only way for the US to enhance her economic multilateral position is to compete with China effectively in the price domain by introducing free floating cross rates.
A glimpse of this was mentioned by the IMF managing director Mr. M. Gutt at Harvard University on the 13th February 1948, when he presented a paper titled The Practical Problem of Exchange Rates.

Mr Gutt noted that the official direct Sterling-US dollar rate ruling in Britain and the United States is one Sterling pound to US$4, but the Lira-Sterling and Lira-US dollar direct rates are such that the Sterling pound-US dollar cross-rate in Italy is one Sterling pound to US$2.6.
Americans found it cheaper to purchase goods from the UK via Italy until the IMF stepped in and imposed the IMF fixed cross-rate system in favour of the UK and not Italy nor the US. Even corporate Britain lost out on the increased consumer demand, as Americans demanded from the UK British products that appeared cheaper through the Italian money markets.
Corporate and ordinary Americans at the end of the day because of the IMF fixed cross-rate system, had to pay out more US dollars for the pound, while corporate Italy lost out on US dollar inflows because the market price of the US dollar to the Sterling pound was temporary in a pseudo-free floating Lira driven market system based on Lira liquidity.
The IMF ban contradicts Article VIII Section 3 of the Fund Agreement, in that no member shall engage in any discriminatory currency arrangements or multiple currency practices. (Tew Brain (1967) p.79).
As noted exchange rates bore little relation to countries competitiveness undoubtedly contributed to the distortion of the trading system. (Common Crisis (1983) p.42).
In the end the IMF fixed cross rates "selling rates… discriminate either to the categories of transactions for which payment is to be made (e.g. payments to the United States may be penalized by making the US
dollar dear). The latter type of discrimination inevitably corresponds very closely to disorderly cross-rates.” (Tew (1967) p.81). It, the IMF fixed cross rates act as a tariff on currencies and hence trade and it is here that this tariff be removed rather than imposing corporate taxes. Remember Richard Cobden who sought to the removal of corn tariffs placed on cheaper imported corn by the Corn Law as it raised the price of imported corn. . Eventually the Corn Law was removed and cheaper corn entered the England. Bread prices dropped and workers had more disposable income, and this income created a demand for manufactured goods, which in turn shifted workers from agriculture to manufacturing and set England on the industrial revolution. Gradually other nations in Europe started to remove or reduce their tariffs. (Global Challenge Foundation)
The issue of taxing corporations undermines the value of a national currency and thus undermine the social contract between a State and it's citizens.
As budgets a linked to a nation's GDP, excessive taxes eats away the value of the GDP causing a fall in the value of money markets by increased interest rates that shadow an increased float rate. When a Finance Minister announces a budget he or she sets the tone of what value is to be extracted from the economy. For example a Finance Minister may say that the national budget represents 40 percent of the Gross Domestic Product (GDP) over a set year. Assuming taxes are collected monthly, there are twelve months to a year meaning at 3.3 percent per month being taxed over 12 months the government will get it's 40 percent value of the GDP leaving 60 percent for its fellow citizens and firms to subsist on. This sets the social contract between the state and its citizens with regards to the anticipated resource value going to be generated within a year represented by the budget.
If taxes are at 8.3 percent per month is means that the government will consume 100 percent of the value of the GDP within a calender year leaving no value for its citizens despite earning an income it buys next to nothing as the value has been consumed by the government. This is reflected over a year by the falling purchasing power of money.
The reality is that taxes are above 8.3 percent. What this means is that government is able to collect the budget, recollect it, re-spend it, re-collect the budget again and re-spend it in a cyclical pattern. Consequently in a calender year a nation would go through for example 4 budgets. Thus every 90 days the budget is collected, spent and recollected and spent in a cyclical pattern. Much like Keynesian economics of physically printing money, money can also be printed by recycling the budget. Hence the notion of taxes to pay for nation debt is only valid if taxes are below the threshold of 8.3 percent. Therefore for ordinary citizens what had to be done in a calender year had to be done in 90 days hence an "economic year" was 90 days.
This coincided with company quarterly board meetings and was the main feature shadowed by a fixed exchange rate.
When exchange rates were floated the picture has seen an acceleration in the "economic years", this is exhibited in increased float rates that also marks high interest rates. The greater the money volume the deeper in value terms is the depreciation as each percentage unit carries more weight.
A government could have a 3 day economic year as taxes are high and by 60 days spent the entire value of the GDP. Citizens and firms experience increasing economic debt and hardship as the purchasing power of money dissolves and the main fact is that what had to be done in 365 days had to be done in 3 days. The end result debt and socio-economic choas, social unrest as it is an impossible task to do what is meant to be done in 365 days be done in 3 days. This consumption of value by the State undermines the social contract and society breaks down at trigger point events in which societies frustration with the system is expressed.As taxes are above the 8.3 percent threshold, the government will collect the budget, spend it, re collect it, spend it, recollect it, spend it in a cyclical pattern many times in a single budget year. In effect it will be like Keynesian economics and the printing of money except instead of printing physically, the printing is done by recycling it. Taxes thus become compounded. Government tax at 30 percent in the first cyclical would extract that value leaving 70 percent. Then in the next cycle extract another 30 percent leaving 40 percent. The next 30 percent extraction in real terms is facing 40 percent left of the economy and in real value terms is 70 plus percent. Once all the value is extracted of savings, investments of ordinary people the whole nation government borrows against a "fiscal and economic crisis" manifesting as debt and a US dollar value crisis.

Crowther Geoffrey. An Outline of Money. 2nd ed. New York: Thomas Nelson & Sons Ltd, 1951.

North-South: A Programme for Survival. The Report of the Independent Commission on International Development Issues under Chairmanship of Willy Brandt. London : Pan Books Ltd.. 1980

Tew Brian. International Monetary Co-operation 1945-67. 9th ed. London:
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多边合作能否与大国竞争共存？

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