|
Bigger IMF role for China (IHT) Updated: 2006-08-29 09:34
http://www.iht.com/articles/2006/08/28/business/trade.php
The United States is seeking to increase the power of China and other
countries within the International Monetary Fund to reflect their growing weight
on the world economic stage, an effort that is being resisted by some European
countries whose voices could be weakened within the organization.
The
Bush administration, arguing that the IMF has been "asleep" as the world economy
changed, is seeking a first step that would grant more voting power immediately
to four countries - China, South Korea, Turkey and Mexico - on the grounds that
their economic growth entitles them to more influence.
But because the
administration's proposal would mean less representation by some countries in
Europe, it has run into objections and questions, especially among European
countries that could lose power.
Resistance has come from Belgium, the
Netherlands and Scandinavian countries, which might lose voting share to Spain,
Ireland and other rapidly growing countries in Europe. In general, Europe would
lose voting share to Asia and the United States.
Poor countries in Africa
also fear a loss of power.
The proposals for changing the governance of
the fund, which has had a crucial role in easing financial crises since World
War II, are to be taken up at a meeting in late September in Singapore that is
to be attended by U.S. Treasury secretary, Henry Paulson Jr.
"Many
countries in the world are woefully underrepresented at the IMF," said Timothy
Adams, the U.S. under secretary of the Treasury for international affairs. He
added that the administration was pressing the fund to undertake "fundamental
reform" of its basic mission, as well as its governance.
Voting at the
IMF is determined in part by a quota system that defines how much a country must
contribute to the fund and how much it can borrow in emergencies.
The
United States has 30 percent of the world economy but only 17 percent share of
the quotas; Europe's share of 23 percent is roughly equal to its share of the
world economy.
The Bush administration says that Europe must recognize
that its share will go down, as the United States' share has.
China is a
particular focus of American interests and anxieties in the IMF jockeying,
American and European officials say. At present, its economy is double the size
of the Belgian and Dutch economies combined, yet these two countries have a
quota that is half again as big as China's.
Critics of the Bush
administration in Congress are calling on it to rebuff China's demand for more
influence at the IMF until the Beijing government revalues its currency in
relation to the dollar. These critics charge that China has kept its currency
artificially low to increase its exports at the cost of American
jobs.
Adams and other American officials say that they want to increase
Chinese influence at the IMF to make the fund a more aggressive monitor of
currency manipulation by member countries. American officials say that would put
the fund in a better position to put pressure on China to let its currency, the
yuan, rise in value and thereby curtail exports to the United States and
increase the market in China for American goods and services.
"I would
argue that by re-engineering the IMF and giving China a bigger voice, China will
have a greater sense of responsibility for the institution's mission," Adams
said.
An increase for China, South Korea, Turkey and Mexico in voting
weight and quotas is viewed by the United States as a "down payment" for future
changes that would increase the power of other countries in Latin America, Asia
and parts of Europe.
The smaller countries of Europe have gained sympathy
from Britain and its finance minister, Gordon Brown, various officials said.
"The U.S. position is an honest and decent proposal, and everybody in the
European community is prepared to step up to the plate," said a European
diplomat, speaking anonymously because the negotiations are still under way.
"But we need to have more flesh on the bones at the moment."
The IMF's
managing director, Rodrigo Rato, has called for an immediate increase in power
for some select countries to be approved at an annual meeting in Singapore as
part of a two- year restructuring. Earlier this month, Rato said, "It is time
now to recognize the rise in economic weight" of China and others.
The
IMF, along with the World Bank, was created in 1944 at Bretton Woods, New
Hampshire, as part of a postwar financial structure designed to avoid a
repetition of the economic crises of the 1930s that preceded World War II. The
fund has $28 billion in loans outstanding to 74 of its 184 member countries,
given out over the years to avert defaults, bankruptcies and other crises. In
the early 1990s, the fund was involved in bailing out Mexico.
Later in
the decade it helped rescue Thailand, South Korea and several other Asian
countries from insolvency. But since then the fund has had no major crises to
deal with, and many recipients of its previous efforts have paid off their
loans.
Some economists joke that with little to do, board members have
the luxury of squabbling among themselves for power over an organization with an
ill- defined mission.
Adams of the Treasury Department said that the
current slow period had induced complacency as global capital has flowed, and
the risks of future problems have increased. He said he wanted the fund to "get
back to basics" of monitoring these flows and the ways they affect the value of
currencies.
"The fund needs to rediscover its roots," said Adams,
asserting that it had been set up to avoid countries' using currency and trade
policies in a "beggar-thy-neighbor" approach that aggravated the Depression of
the 1930s.
He said the Bush administration had made headway in persuading
other countries to make the changes. "Conceptually we're pretty much there," he
said. "But once you start negotiating the actual specifics, it's going to take a
little time."
|
|
|
|
|
|
Hot Talks |
|
|
|
Most Commented/Read Stories in 48 Hours |
|
|
|