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  • Author: Cullen S. Hendrix
  • Publication Date: 03-2020
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: The Trump administration’s Africa strategy is rooted in three misconceptions about China’s African footprint—and a fourth about US-Africa economic relations—that are either factually incorrect or overstated in terms of the broader strategic challenges they pose to US interests: (1) Chinese engagement in Africa crowds out opportunities for trade and investment with and from the United States; (2) Chinese engagement in Africa is resource-seeking—to the detriment of US interests; (3) Chinese engagement in Africa is designed to foster debt-based coercive diplomacy; and (4) US-Africa economic linkages are all one-way and concessionary (i.e., aid-based). Hendrix finds little evidence to suggest Chinese trade and investment ties crowd out US trade and investment opportunities. China’s resource-seeking bent is evident in investment patterns, but it is more a function of Africa’s having comparatively large, undercapitalized resource endowments than China’s attempt to corner commodity markets. Chinese infrastructural development—particularly large projects associated with the Belt and Road Initiative—may result in increased African indebtedness to the Chinese, but there is little reason to think debt per se will vastly expand Chinese military capacity in the region. And finally, US-Africa economic relations are much less one-sided and concessionary (i.e., aid-based) than conventional wisdom suggests.
  • Topic: Bilateral Relations, Infrastructure, Economy, Trade, Donald Trump
  • Political Geography: Africa, China, North America, United States of America
  • Author: Julia Coronado, Simon Potter
  • Publication Date: 03-2020
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: The US monetary system faces significant challenges from advances in technology and changes in the macroeconomy that, left unaddressed, will threaten the stability of the US economy and financial system. At the same time, low interest rates mean that central banks will not have the policy ammunition they had in the past during the next recession. The Federal Reserve needs new tools to meet its mandates of price stability and maximum employment. It also needs to preserve the safety and soundness of the financial system in a rapidly digitizing world. The authors propose a Fed-backed digital currency to solve both problems. Their proposal creates a regulated system of digital currency accounts for consumers managed by digital payment providers and fully backed by reserves at the Fed. The system would be limited in size, to preserve the functions and stability of the existing banking system. Fed backing would mean low capital requirements, which would in turn facilitate competition. Low fees and no minimum balance requirements in the new system would also help financial institutions reach the roughly 25 percent of the US population that is currently either unbanked or underbanked. Digital accounts for consumers could also provide a powerful new stabilization tool for both monetary and fiscal policies. For fiscal policy, it could facilitate new automatic stabilizers while also allowing the Fed to provide quantitative easing directly to consumers. This tool could be used in a timely manner with broad reach to all Americans.
  • Topic: Economics, Government, Monetary Policy, Banks, Macroeconomics
  • Political Geography: North America, United States of America
  • Author: Julia Coronado, Simon Potter
  • Publication Date: 04-2020
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: In the second part of their Policy Brief, Coronado and Potter discuss how the system of digital payment providers (DPPs) proposed in their first Policy Brief on this topic adds a new weapon to the monetary toolkit that could be implemented in a timely, effective, and inclusive manner. They describe how a digital currency backed by the Federal Reserve could augment automatic fiscal stabilizers and—more importantly—harness the power of “helicopter” money or quantitative easing directly to consumers in a disciplined manner. To implement QE directly to consumers, Coronado and Potter propose the creation of recession insurance bonds (RIBs)—zero-coupon bonds authorized by Congress and calibrated as a percentage of GDP sufficient to provide meaningful support in a downturn. Congress would create these contingent securities; Treasury would credit households’ digital accounts with them. The Fed could purchase them from households in a downturn after its policy rate hits zero. The Fed’s balance sheet would grow by the value of RIBs purchased; the initial matching liability would be deposits into the DPP system. The mechanism is easy for consumers to understand and could boost inflation expectations more than a debt-financed fiscal stimulus could.
  • Topic: Economics, Government, Monetary Policy, Insurance
  • Political Geography: North America, United States of America
  • Author: Olivier Blanchard, Thomas Philippon, Jean Pisani-Ferry
  • Publication Date: 06-2020
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: The measures that most governments took in response to the sudden collapse in economic activity during the COVID-19 lockdowns nearly exclusively focused on protecting vulnerable workers and firms. These measures included unemployment benefits, grants, transfers, loans at low rates, and tax deferrals. As lockdowns are lifted, governments must shift policies toward supporting the recovery and design measures that will limit the pain of adjustment while preserving productive jobs and firms. This Policy Brief explores how such measures can be designed, with particular emphasis on Europe and the United States. The authors propose a combination of unemployment benefits to help workers, wage subsidies and partially guaranteed loans to help firms, and debt restructuring procedures for small and medium-sized companies handicapped by excessive legacy debt from the crisis.
  • Topic: Debt, Economics, Government, Labor Issues, Unemployment, Coronavirus
  • Political Geography: Europe, North America, United States of America
  • Author: Ana González, Euijin Jung
  • Publication Date: 01-2020
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: By refusing to fill vacancies in the World Trade Organization’s (WTO) Appellate Body—the top body that hears appeals and rules on trade disputes—the Trump administration has paralyzed the key component of the dispute settlement system. No nation or group of nations has more at stake in salvaging this system than the world’s big emerging-market economies: Brazil, China, India, Indonesia, Korea, Mexico, and Thailand, among others. These countries have actively and successfully used the dispute settlement system to defend their commercial interests abroad and resolve inevitable trade conflicts. The authors suggest that even though the developing countries did not create the Appellate Body crisis, they may hold a key to unlock it. The Trump administration has also focused its ire on a longstanding WTO practice of giving these economies latitude to seek “special and differential treatment” in trade negotiations because of their developing-country status. The largest developing economies, which have a significant stake in preserving a two-step, rules-based mechanism for resolving trade disputes, could play a role in driving a potential bargain to save the appeals mechanism. They could unite to give up that special status in return for a US commitment to end its boycott of the nomination of Appellate Body members.
  • Topic: Development, Government, World Trade Organization, Developing World, Donald Trump
  • Political Geography: China, Indonesia, India, South Korea, Brazil, North America, Mexico, Thailand, United States of America
  • Author: David Makovksy
  • Publication Date: 03-2020
  • Content Type: Policy Brief
  • Institution: The Washington Institute for Near East Policy
  • Abstract: Although Benny Gantz’s party lost the head-to-head battle, Avigdor Liberman’s favorable influence on the coalition math has left the general in a stronger position—and taken some diplomatic weight off the Trump administration’s shoulders. Israel’s third round of elections last week seemed inconclusive at first, but the deadlock may now be broken. Prime Minister Binyamin Netanyahu did better this time than in September’s round two, but his gains were insufficient to form a new government. Potential kingmaker Avigdor Liberman jettisoned his previous idea of getting the two top parties to join forces; instead, personal antipathy and policy differences have led him to definitely state that he will not join any government Netanyahu leads. Thus, while centrist Blue and White Party leader Benny Gantz may have options to shape a new government, Netanyahu has no pathway on his own. In theory, the center-left bloc has the requisite number of seats for a bare majority in the 120-member Knesset, since anti-Netanyahu forces won 62 seats. In reality, the situation is more complex.
  • Topic: Foreign Policy, Government, Politics, Elections
  • Political Geography: Middle East, Israel, North America, United States of America
  • Author: David Makovsky
  • Publication Date: 02-2020
  • Content Type: Policy Brief
  • Institution: The Washington Institute for Near East Policy
  • Abstract: If the latest U.S. effort winds up backing the Palestinians into a territorial corner from the outset, then Washington may not be able to move the process any closer to direct negotiations. The newly released U.S. peace plan marks a very significant shift in favor of the current Israeli government’s view, especially when compared to three past U.S. initiatives: (1) the Clinton Parameters of December 2000, (2) Secretary of State Condoleezza Rice’s “Annapolis Process” of 2007-2008, and (3) Secretary of State John Kerry’s 2013-2014 initiative. The message is clear: the Trump administration will no longer keep sweetening the deal with every Palestinian refusal, a criticism some have aimed at previous U.S. efforts. Yet the new plan raises worrisome questions of its own. Will its provisions prove so disadvantageous to the proposed Palestinian state that they cannot serve as the basis for further negotiations? And would such overreach enable Palestinian Authority president Mahmoud Abbas to sway Arab states who have signaled that they want to give the proposal a chance, convincing them to oppose it instead? If so, the plan may wind up perpetuating the current diplomatic impasse and setting the stage for a one-state reality that runs counter to Israel’s identity as a Jewish, democratic state. This two-part PolicyWatch will address these questions by examining how the Trump plan compares to past U.S. initiatives when it comes to the conflict’s five core final-status issues. Part 1 focuses on two of these issues: borders and Jerusalem. Part 2 examines security, refugees, and narrative issues.
  • Topic: Foreign Policy, Diplomacy, Territorial Disputes, Borders, Negotiation
  • Political Geography: Middle East, Israel, Palestine, North America, United States of America
  • Author: Ghaith al-Omari
  • Publication Date: 02-2020
  • Content Type: Policy Brief
  • Institution: The Washington Institute for Near East Policy
  • Abstract: By granting Israel much more say over the sovereignty of a future Palestinian state and its ability to absorb refugees, the document may undermine the administration’s ability to build an international coalition behind its policies. President Trump’s “Peace to Prosperity” plan was presented as a departure from previous approaches—a notion that invited praise from its supporters (who saw it as a recognition of reality) and criticism from its opponents (who saw it as an abandonment of valued principles). The plan does in fact diverge from past efforts in fundamental respects, yet there are also some areas of continuity, and ultimately, the extent to which it gains traction will be subject to many different political and diplomatic variables. Even so, the initial substance of the plan document itself will play a large part in determining how it is viewed by various stakeholders, especially those passages that veer away from the traditional path on core issues. Part 1 of this PolicyWatch assessed what the plan says about two such issues: borders and Jerusalem. This second installment discusses security, refugee, and narrative issues.
  • Topic: Security, Foreign Policy, Refugees, Peace
  • Political Geography: Middle East, Israel, Palestine, North America, United States of America
  • Author: Mehdi Khalaji
  • Publication Date: 02-2020
  • Content Type: Policy Brief
  • Institution: The Washington Institute for Near East Policy
  • Abstract: A week after Donald Trump was elected president in November 2016, Iran’s Supreme Leader Ali Khamenei played coy, remarking, “I have no judgment on the American election...[Both parties have been] naughty toward us.” Of course, his true reaction was far more complex. On one hand, he saw in the president-elect—who had spoken much of disentangling U.S. forces from the Middle East—a prospect of decreased military pressure on his country. On the other, he heard Trump’s raw vitriol directed at Iran’s leadership and the nuclear deal crafted by President Obama. The eventual U.S. withdrawal from the JCPOA demonstrated that the new president could back up his talk with punishing action. In this close analysis of statements by Khamenei and other Iranian leaders, former seminarian Mehdi Khalaji lays out the regime’s current views on President Trump and the United States. He shows that even after the American assassination of Qods Force chief Qasem Soleimani, Iranian leaders could be open to negotiating with Washington if they believe the regime’s existence depends on it.
  • Topic: Foreign Policy, Politics, Elections, Donald Trump
  • Political Geography: Iran, Middle East, North America, United States of America
  • Author: Michael Knights
  • Publication Date: 01-2020
  • Content Type: Policy Brief
  • Institution: The Washington Institute for Near East Policy
  • Abstract: To ensure that new protests, new sanctions, and new political leadership wind up helping rather than hindering Iraqi sovereignty, Washington must handle upcoming developments with great care. In the coming weeks, Iraq’s parliament may appoint a replacement for Prime Minister Adil Abdulmahdi. This is a very positive development, since the country’s sundry Iranian-backed militias would like nothing better than to keep the discredited leader under their thumb as an open-ended caretaker premier following his November resignation. In contrast, a new leader with a new mandate could get the government moving again, pass a budget, bring the criminals responsible for killing protestors to justice, and assuage angry protestors by making visible preparations for early, free, and fair elections—thereby remedying the results of the widely disparaged 2018 vote. Such is the political space that has opened up since the deaths of Iranian Qods Force commander Qasem Soleimani and Iraqi militia chief Abu Mahdi al-Muhandis earlier this month. For the United States, the challenge is how to support these changes without disrupting positive local dynamics.
  • Topic: Foreign Policy, Politics, Sovereignty, Sanctions
  • Political Geography: Iraq, Middle East, North America, United States of America