Will Trump sober up about IMF and WTO too?
BY Barry Eichengreen
Donald Trump did not assume the US presidency as a committed multilateralist. On that, partisans of all political persuasions can agree. Among his most controversial campaign statements were some suggesting that Nato was obsolete, a position that bodes ill for his attitude to other multilateral organizations and alliances. Last week, however, Trump stepped back, reassuring an audience at US Central Command in Tampa, Florida (the headquarters for US forces that operate in the Middle East).
"We strongly support Nato," he declared, explaining that his "issue" with the Alliance was one of full and proper financial contributions from all members, not fundamental security arrangements. This more nuanced view presumably reflects a new appreciation, whether because of security briefings or the sobering fact of actually occupying the Oval Office, that the world is a dangerous place. Even a president committed to putting "America first" now seems to recognize that a framework through which countries can pursue shared goals is not a bad thing.
The question now is whether what is true for Nato is also true for the International Monetary Fund, the World Bank, the World Trade Organization, and the Basel committee on banking supervision. Trump's record on the campaign trail and Twitter is not heartening. Back in 2012, he tweeted criticism of the World Bank for "tying poverty to 'climate change'" (his quotation marks).
"And we wonder why international organizations are ineffective," he complained.
Likewise, last July, he mooted the possibility that the United States might withdraw from the WTO if it constrained his ability to impose tariffs. And he vowed repeatedly during the presidential campaign to withdraw from the Paris climate agreement. But the evolution of Trump's position on Nato suggests that he may yet see merit to working through these organizations as he comes to recognize that the world economy, too, is a dangerous place.
Following the election, Trump acknowledged having an open mind on the Paris climate agreement. His position seemed less to deny the existence of global warming than to insist that policies mitigating climate change should not impose an unreasonable burden on American companies.
The way to limit the competitive burden on US producers is, of course, by ensuring that other countries also require their companies to take steps to mitigate climate change, thereby keeping the playing field level. And this is precisely what the Paris agreement is about.
The same can be said of the Basel committee's standards for capital adequacy. Holding more capital is not costless for US banks, as advisers like Gary Cohn, formerly of Goldman Sachs and now the head of Trump's National Economic Council, presumably tell the president morning, noon, and night. Levelling the playing field in this area means requiring foreign banks also to hold more capital, which is precisely the point of the Basel process.
Trump may similarly come to appreciate the advantages of working through the IMF when a crisis erupts in Venezuela, or in Mexico as a result of his own policies. In 1995, the US Treasury extended financial assistance to Mexico through the Exchange Stabilisation Fund. In 2008, the Federal Reserve provided Brazil with a $30bn swap line to help it navigate the global financial crisis. But imagine the outrage with which Trump's supporters would greet a "taxpayer bailout" of a foreign country or Mexican officials' anger over having to secure assistance from the same Trump administration responsible for their country's ills. Both sides would surely prefer working through the IMF.
Trump can't be pleased that the Obama administration rushed to push through the reappointment of its chosen World Bank president, Jim Yong Kim. But he clearly recognizes the benefits of development aid. While he has said that the US should "stop sending foreign aid to countries that hate us," he has also observed that failure to help poor countries can foment instability.
This would appear to be an area where Trump will favour bilateral action, which would enable him to assuage his conservative critics by insisting that no US funds go towards family planning, while taking credit for any and all assistance. At the same time, minimising the role of the US in the World Bank would create a vacuum to be filled by China, Trump's bête noire, both in that institution and through the activities of the Chinese-led Asian Infrastructure Investment Bank.
The real test of Trump's stance on multilateralism will be how he approaches the WTO. Persuading the US Congress to agree on corporate and personal income-tax reform, a $1tn infrastructure initiative, and a replacement for Obama's signature health-care reform won't be easy, to say the least. Doing so will require patience, which is not Trump's strong suit. This suggests that he will feel pressured to do what he can unilaterally.
One thing he can do unilaterally is slap duties on imports, potentially in violation of WTO rules. We'll soon find out whether those rules will deter him.
Barry Eichengreen is Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is Hall of Mirrors: The Great Depression, the Great Recession, and the Uses – and Misuses – of History.
- NUJ 109th Birth anniversary 2687
- Mangala to urge 24-month extension 2689
- Namal slaps CBK with defamation 3389
- Pakistan still eyeing JF-17 Thunder Fighter sale to Sri Lanka 3145
- CID grills govt Printer, Director, others 3184
- LRC seeks Police protection 3137
- MR to meet Tamil and Muslim leaders 3190
- Leprosy hits western province 3144
- skipper of ill-fated boat remanded 3131
- Raggers will be promptly expelled 3154
- Double-speak from SB on Wimal 3157
- VX nerve agent killed Kim Jong-nam 3137
- More snags foul up Constitution making 3283
- NFPWHR warns of massive protest 3134
- Mangala meets US HDP delegation 3141
- SL Police deny ‘hunting’ refugees in HK 3130
- 1500 students denied Uni education 3208
- SLFP CMs to boycott meeting 3129
- Wimal not a party leader – Dayasiri 3132
- New Zealand-bound boat people held 3122
- February – a celebratory month 3112
- Political mayhem 3127
- Significance of Sri Lanka’s legal profession 3118
- A house divided 3103
- Building castles in the air 3108
- Upholding children’s rights 5649
- Now or never for Havies 1610
- Bad light saves day for Isipathana 1610
- Golfer Arumugam no more 1609
- Royal resist late Joes’ onslaught 1610
- Sadeera's 177 n.o. guides SL 'A' 1609
- Sadeera pushes for Test spot 1613
- Wimal gets short shrift 2395
- BASL in the dock 2393
- Ragging: The ugly truth 2392
- Govt gambling with our lives – KPP protesters 2390
- Keppetipola mansion in bad shape 2390
- Diesel Mafia raises its head again... 2390
- SAITM students will not be accepted by any country– Prof. Hiran Amerasekera 3144
- I have no issues with the Minister– Anoma Gamage 3503
- LG elections should be under new system 3334
- Dr. Sivamohan reiterates preference for foreign intervention 2896
- RICE SHORTAGE AND HIGH PRICES BIG MILL OWNERS TO BLAME SAYS ACPF 3045
- I believe in cooperative politics – Karuna 2010
- Google's self-driving firm sues Uber 1812
- Colombo Fashion Week dates for Summer season, 13 – 18 March 1813
- International Thunder Cat Power Boat Racing in Bentota- a thrilling experience 1813
- BPPL Holdings Limited announces Rs. 368 Mn IPO 1814
- Durdans Lab Service adds ‘Predictive Tests’ for disease prevention 1813
- INSEE Cement wins Green Platinum Award at HarithaSihinaya 2017 1813
- CIC to elevate education in rural Agri-Communities 1812
- NTB rewards 50 lucky American Express Cardmembers with latest iPhone 7 1812
- HNB offers new benefit package through agreement with Indra Traders 1815
- Crescent Global sponsors Insurance Awards 1813
- Valencia stun Real Madrid 2729
- GSP+ To sustain economy or to Mutate society? 3045
- Fully fledged Media Commission by June – DGI 3078
- A musical evening-Hindi film songs 2025
- Sitar recital 2023
- Alston Koch to sing at the ‘OSCARS’ after party 2024
- Luang Prabang – A Journey into Sublimity 2025
- Blue all the way 2025
- Footpaths Towards Deconstruction - Part 10 2026
- Employees rewarded 1273
- Training in excellence 1272
- Human – elephant conflict rears up again 1275
- Nature in its wild pristine beauty 1275
- A touch of Yalpanam 1275
- Blood facts 1273
- SS501 1331
- An immersive and inclusive learning experiences 1332
- Emerging future trailblazers 1331
- An educational celebration 1331
- A campaign to target8.4 million Lankans 1333
- An epic battle 1331