White House knows that global south has a point

    WORLD  24 April 2024 - 14:22

    Economic policy in many countries has entered a new era of supports and subsidies. But global financial markets have yet to catch up.

    Consider some of the headlines over the past week or so. At the IMF/World Bank meetings in Washington, the so-called Bretton Woods institutions came under siege as leaders from the global south decried the hypocrisy of rich-country creditors demanding austerity from borrowers while running up huge debt loads of their own, Financial Times reports.

    In Brussels, former European Central Bank president Mario Draghi gave a speech advocating EU-wide industrial policy. Across the Atlantic, the Biden administration tripled tariffs on China and took up labour unions’ petition for shipbuilding trade relief to counter Chinese state support for its own industry.

    Yet, at the same time, cross-border business continued as usual. German chancellor Olaf Scholz led a group of industrial leaders on a trip to Beijing with the aim of doing joint ventures in China. And US commerce secretary Gina Raimondo helped Microsoft, a would-be American “national champion,” ink a $1.5bn artificial intelligence investment in the United Arab Emirates.

    The best way to bridge the gap between these headlines is to understand that even as the fiscal policy of rich countries is changing to support the long-term process of re-industrialisation and climate transition at home, global financial markets are still decidedly focused on maximising short-term private sector profit. The tussle between the two will continue until a new equilibrium emerges.

    In Europe, the fiscal is pushing back against the financial. “We pursued a deliberate strategy of trying to lower wage costs relative to each other,” said Draghi, referring to Europe’s post-2008 strategy of belt-tightening in lieu of investment. “The net effect”, he went on, “was only to weaken our own domestic demand and undermine our social model.” Now, the EU is trying desperately to bridge the gap with a new capital markets union.

    Meanwhile, the White House has doubled down on the idea that free trade simply doesn’t account for the cost of negative externalities like climate change. Last week, John Podesta, President Joe Biden’s senior adviser on clean energy, said in a speech: “When you seriously account for the emissions embodied inside tradable goods . . . the emissions from the production processes that create the commodities and manufactured products that we buy and sell on the global market . . . then traded goods account for about 25 per cent of all global emissions.”

    By that accounting, free trade itself is the second largest carbon polluter after China. That’s because the current global trade and financial framework still incentivises what’s cheapest for companies and most profitable for shareholders, not what’s best for the planet.

    As Podesta noted, the US used to be the world’s largest aluminium producer. Now, half the world’s aluminium comes from China, but with 60 per cent more emissions. Indeed, the emissions that the Inflation Reduction Act hopes to cut by 2030 are equal only to what the US imported in heavy-carbon-load manufactured goods in 2019.

    In an attempt to square this circle, the White House has announced a new climate and trade task force that will build on US Trade Representative Katherine Tai’s idea for a “postcolonial” trade system that prices in carbon load and labour standards. Such a system might, for example, offer technology transfers to developing countries in exchange for key commodities.

    But global financial institutions will have to change too if there is to be a real shift to a better system. At an Oxfam panel in Washington last week, Adriana Abdenur, special economic adviser to Brazilian president Luiz Inácio Lula da Silva, called out the “mismatch” between “rich countries and regions now openly espousing and defending industrial policy” while “still pushing the international financial institutions to impose an outdated prescription of Washington Consensus”.

    The White House knows the global south has a point. Last week, US deputy national security adviser for international economics Daleep Singh called for more use of America’s sovereign loan guarantee authority to lower interest rates on developing countries.

    But he also floated several ideas aimed at boosting investment into the US that seemed right out of the pages of a developing country industrial strategy playbook. These included a “strategic resilience fund” to secure clean energy supply chains, and even a US sovereign wealth fund to make long-term investments in strategic technologies.

    All this tells us that we are at a major pivot point, and that no country has all the answers. Many stakeholders, though, want to cling to the past, even as the future is changing. I marvel, for example, at the wilful blindness of German automakers signing a joint declaration to work on connected vehicles with China, even though Europe is likely to place restrictions on Chinese EVs in Europe. Likewise, I worry that America’s push to counter Chinese AI will lead to a handful of US tech giants having even more market power than they do already.

    The shift to a new economic paradigm has begun. Where it will end is very much up for grabs.

    Caliber.Az

    Subscribe to our Telegram channel


Read also

French, German first ladies caught joking at Holocaust Memorial ceremony

28 May 2024 - 10:10

Several EU countries push to designate IRGC as terror organisation

28 May 2024 - 09:13

WHO chief “confident” that members to reach consensus on pandemic agreement

28 May 2024 - 09:05

Gaza Strip death toll from Israeli strikes tops 36,000

27 May 2024 - 18:15

Six NATO countries plan “drone wall” to defend borders with Russia

28 May 2024 - 05:26

Hungary not to support EU's 14th package of anti-Russian sanctions

27 May 2024 - 18:48
ADVERTS
Video
Latest news

    MFA congratulates people of Azerbaijan on Independence Day

    28 May 2024 - 10:28

    Türkiye's National Security Council to address Azerbaijan-Armenia peace process

    28 May 2024 - 10:11

    French, German first ladies caught joking at Holocaust Memorial ceremony

    28 May 2024 - 10:10

    Azerbaijan celebrates Independence Day

    28 May 2024 - 10:04

    US top diplomat congratulates Azerbaijan on Independence Day

    28 May 2024 - 09:58

    Minister: Azerbaijani Army strengthens positions in liberated territories

    28 May 2024 - 09:46

    Russia and Azerbaijan: A model of independent yet interconnected relations

    28 May 2024 - 09:34

    Azerbaijani president makes post on Independence Day

    PHOTO

    28 May 2024 - 09:19

    Several EU countries push to designate IRGC as terror organisation

    28 May 2024 - 09:13

    WHO chief “confident” that members to reach consensus on pandemic agreement

    28 May 2024 - 09:05

    Azerbaijan pledges strong support for small island developing states at upcoming COP29

    28 May 2024 - 08:07

    China confirms J-20 fighter jet’s role in Taiwan encirclement

    28 May 2024 - 07:32

    Six NATO countries plan “drone wall” to defend borders with Russia

    28 May 2024 - 05:26

    Insiders marvel at Russia’s military purge

    Putin’s patience snapped

    28 May 2024 - 03:17

    China, Russia in counterspace race to disrupt US’ military edge

    28 May 2024 - 01:11

    Powerful directional microwave downs six UASs in Nevada desert

    27 May 2024 - 23:06

    Russia ready to offer support & experience to Azerbaijani over interaction with PACE

    27 May 2024 - 20:58

    Supreme Leader urges new parliament to inspire hope and unity among Iranians

    27 May 2024 - 20:45

    Seminar on information services in OTS countries underway in Tashkent

    27 May 2024 - 20:37

    Uzbekistan & Russia aim to boost annual trade turnover to $30bn

    27 May 2024 - 20:29

    Azerbaijan, Russia forge new regional relations, defying stereotypes

    27 May 2024 - 20:19

    Graduation ceremony honors Azerbaijani Armed Forces' warrant officers & soldiers

    VIDEO

    27 May 2024 - 20:13

    Azerbaijan, Serbia hold expert meeting on civil-military cooperation

    27 May 2024 - 19:56

    Azerbaijani activists speak out against VIGINUM's targeting

    27 May 2024 - 19:40

    Kremlin says NATO directly involved in Ukraine conflict

    27 May 2024 - 19:38

    Russia considers removing Taliban from terrorist list

    FM cites "real power" in Afghanistan

    27 May 2024 - 19:20

    Shusha to bring together education ministers of Turkic Speaking States

    27 May 2024 - 19:04

    Russia seeks Azerbaijan's support for opening consulate general in Khankendi

    27 May 2024 - 18:55

    Hungary not to support EU's 14th package of anti-Russian sanctions

    27 May 2024 - 18:48

    Azerbaijani president, First Lady inaugurate Crescent Bay project and mall

    27 May 2024 - 18:38

    Media: US tries to prevent IAEA from adopting resolution condemning Iran

    27 May 2024 - 18:31

    Gaza Strip death toll from Israeli strikes tops 36,000

    27 May 2024 - 18:15

    At least 35 killed as Israel targets camp for displaced Palestinians, houses in Rafah

    27 May 2024 - 18:00

    "I wish the brotherly people of Azerbaijan happiness, tranquillity and success"

    Georgian PM's congratulatory letter to President Aliyev

    27 May 2024 - 17:51

    Russia to build several new nuclear power plants in Uzbekistan

    27 May 2024 - 17:44

    Macron's Indo-Pacific strategy faces crucial test amid New Caledonia unrest

    Wooing New Caledonians to stay under French rule

    27 May 2024 - 17:30

    Azerbaijan participating in global technology forum

    27 May 2024 - 17:30

    NATO to strengthen its presence in Black Sea region

    27 May 2024 - 17:16

    Azerbaijan continues clearing Karabakh of mines

    27 May 2024 - 17:03

    Russia’s Zakharova reacts to Estonia's plans to "bring Russia to its knees"

    27 May 2024 - 16:49

All news