In prepared remarks Monday to the Chicago Council on Global Affairs ahead of meetings this week of international finance officials, Yellen called on richer countries to step up both economic and public health assistance to poorer nations reeling from covid. She noted as many as 150 million people across the world risk falling into extreme poverty as a result of the crisis.
“This would be a profound economic tragedy for those countries, one we should care about. But, that’s obvious. What’s less obvious — but equally true — is that this divergence would also be a problem for America," Yellen said. “Our first task must clearly be stopping the virus by ensuring that vaccinations, testing and therapeutics are available as widely as possible."
Still, Yellen’s calls for a forceful global effort face significant head winds. The Biden administration has so far resisted pressure to change intellectual property rules in a way that would allow more countries to produce coronavirus vaccines. Democratic members of Congress and some global health experts have warned that refusing to do so could make it harder to vaccinate billions of people in poorer parts of the world such as in Africa and parts of South America and Asia.
Meanwhile, Republican opposition has intensified in recent weeks to several of Yellen’s global initiatives. GOP lawmakers have in particular criticized Yellen’s push for a global minimum tax on multinational corporations, as well as her support for foreign emergency aid through the International Monetary Fund.
Yellen’s remarks come at a pivotal juncture for her ambitious international agenda. In a reversal from the decision of the Trump administration, the Treasury Department under Yellen will this month authorize a new allocation of an emergency form of aid to developing nations known as “Special Drawing Rights.”
This form of international aid, which does not need congressional approval, would allocate a special currency reserve through the IMF to dozens of countries across the globe. That special currency could then be traded to the United States in exchange for dollars, which would help distressed foreign countries shore up their financial reserves.
The move has sparked a backlash on Capitol Hill, where Sens. Patrick J. Toomey (R-Pa.) and John Kennedy (R-La.) criticized the measure as “inappropriate, ineffective, and a wasteful use of taxpayer dollars” that would benefit countries that do not need help, as well as foreign adversaries such as China and Iran. The Treasury Department responded that it would retain the right not to purchase SDRs from foreign countries, such as those being sanctioned by the United States. The department also said there would be no budget cost to the United States from the initial allocation of SDRs.
On top of these efforts, Yellen is pushing for an agreement through the Organization for Economic Co-operation and Development on a new global minimum tax. That effort aims to put a floor on taxes internationally to stop corporations from playing nations off each other. Treasury officials have eyed an agreement on international taxes as early as this summer. The Biden administration has cited the effort as central to its proposed international tax hikes, which form a key element of how the White House plans to pay for its $2 trillion infrastructure proposal.
The Biden administration’s global tax push has also been extensively criticized by Republicans, who say they worry the United States will allow European countries to tax profitable American tech companies with no significant domestic benefit. “My big concern is that — as part of their desire to be on a ‘let’s be friends’ parade — the Biden administration will give away too much," Douglas Holtz-Eakin, president of the center-right American Action Forum and a former director of the Congressional Budget Office, previously said.
Yellen cited the need for international action on an additional range of issues, including climate change, a digital divide that has exacerbated global inequality, and the danger posed by cybersecurity attacks.
Biden’s treasury secretary compared the daunting task to the 1944 Bretton Woods conference, which established the IMF and the basic framework of the global financial system following the devastation of World War II.
“Though it was a different time, I empathize with the enormous weight they faced; the pressure to come together after a global catastrophe in building an enduring and interconnected system aimed at promoting peace and prosperity throughout the world,” Yellen said. “Our current juncture is no less significant.”