Insights@Meridian with Treasury Under-Secretary Jay Shambaugh

 

July 26, 2023

Following the U.S. Treasury’s trip to China and his testimony during a hearing of the Senate Foreign Relations Committee, The Honorable Jay Shambaugh, Under Secretary for International Affairs of the U.S. Department of the Treasury, offered an off-the-record chat for high-level foreign government officials and private sector leaders.

Dr. Shambaugh sat down with Kimberly Adams, Senior Washington Correspondent at Marketplace, to discuss the nuances of international global governance, with a focus on international climate policies, international financial regulation, and financing energy transitions.

Here are some top takeaways from the program:

U.S.-China Economic Engagement

The discussion Treasury had with a new group of top economic policymakers in Beijing earlier this month was productive in establishing personal relationships with Chinese counterparts and uncovering areas for cooperation. The United States views collaboration as essential on global challenges such as climate change and sovereign debt distress. Food security can also be another avenue for future collaboration. This past April at our Diplomacy Forum, Meridian highlighted climate as an area for partnership between the countries at the city and state level. You can view that conversation here: here.

Countering Economic Coercion
Economic coercion is usually most successful when countries have no other options to which they can turn to. In these situations, the best aid may be to provide alternative options, whether it be for financing or for supply chains. This is what the U.S. aims to do. Economic coercion often stems from political objectives rather than economic policy. For example, China established market access restrictions for exporters from Lithuania, apparently because of the country’s withdrawal from the 17+1 initiative and in response to its relationship with Taiwan. In response, the U.S., through the Export-Import Bank (EXIM), was able to provide aid to Lithuania through a 600 million USD export credit agreement.

Addressing Climate Change Internationally
Terminology describing the efforts to support developing countries in their energy transitions towards environmentally friendly alternatives can be sensitive. Words have power in the diplomatic sphere, and contributing partners and actors may be hesitant to sign on to an initiative if it is described in a certain way. To focus on actions, not just words, the Just Energy Transition Partnership was highlighted as the focal initiative being taken in the transition of developing countries away from fossil fuels to cleaner energy. The U.S. wants to ensure that the transition is fair and will positively contribute to economic growth for developing countries, while also combating the burgeoning climate crisis.

Why GDP Per Capita Can Offer More Insight Than GDP
China’s gross domestic product (GDP) growth is declining. Its population decline is an important contributing factor of this change. Aging populations have been a concern for many advanced economies across the globe for years, but the resulting loss in GDP for some and not others has been puzzling. If GDP per capita is considered instead of GDP, the answer for the U.S.’s steadier level of GDP can be explained by the impact of migration. Immigration is key in offsetting the U.S. population decline which as a result, keeps GDP from slipping.

Debt Crisis in Developing Economies
Recent worries about the potential of a looming systemic debt crisis in across many emerging markets and developing economies because of tightening Western credit markets may be misleading. Instead, cases of debt distress as countries exit from pandemic stimulus are compounded by specific country issues such as climate change and political instability in at-risk countries. Nonetheless, the U.S. is open to working with nations on an individual basis to restructure their debt issues. Secretary of the Treasury, Janet L. Yellen, put out a statement in June of this year regarding the budding partnership, which was lauded as vital for Africa’s dynamic economic future.