Financial Diplomacy Key to Building Global Economy
By MacKenzie C. Babb
Washington - Cultivating common ground among financial leaders around the world will be critical to effectively facing 21st-century economic challenges, says Treasury Under Secretary for International Affairs Lael Brainard.
"Economic decisions made in one country have an outsized impact on jobs and growth here in the United States and around the world," Brainard said June 25 in remarks to the Women's Foreign Policy Group in Washington. The under secretary encouraged more women to become involved in financial diplomacy and said the field is growing in importance, thanks to globalization.
She said that in an increasingly interconnected world, a single country's domestic policies can affect the economies of countries around the globe as much as an international treaty.
"By determining whether currencies and stock markets plunge or stabilize, [financial diplomacy] can make the difference in whether families can afford to send their children to college, buy a home or retire comfortably," she said. "Convincing leaders of other countries to change their domestic economic policies can be challenging and intensely political, yet it is essential" when the policies have a significant impact on the international community, Brainard said.
"And while classic diplomacy moves through the synapses of foreign ministries, financial diplomacy navigates through finance ministries and central banks, directly connecting the decisionmakers that determine tax and fiscal operations, reserve management and debt issuance," she said. "Through frequent interactions and similar responsibilities, financial diplomats develop a common set of tools, analytics and language."
Brainard said developing and maintaining this common vision for diplomacy has been the key to effectively cooperating during tough economic times.
"More often than not, crisis is the crucible that forges the innovations with the most lasting impact," she said, referring to action taken by the Group of 20 advanced economies to change international financial resources and institutions in response to the global economic crisis in 2009.
She commended the steps taken that year by international leaders to mobilize $1 trillion through the World Bank and International Monetary Fund in order to boost global demand, enhance trade flows and build up international economic confidence.
Brainard said that at the G20 summit in Los Cabos, Mexico, earlier in June, leaders addressed the challenges facing Europe's economic recovery.
"The decisions that lie ahead for the leaders of euro area member states will have a profound impact not only on their economies but also on their political future," she said, adding that while the decisions are for European leaders to make, the outcomes "matter profoundly" to the rest of the world.
She said European leaders are committed to "take all necessary measures to safeguard the integrity and stability of the euro area, to improve the functioning of the financial markets and to break the feedback loop between banks and sovereigns."
Brainard said the United States and its partners are committed to supporting Europe as it navigates its recovery.
The G20 leaders said in a statement that the group "will work collectively to strengthen demand and restore confidence with a view to support growth and foster financial stability in order to create high-quality job opportunities for all our citizens." They announced a new, coordinated Los Cabos Growth and Jobs Action Plan to achieve those goals.
"Despite the challenges we all face domestically, we have agreed that multilateralism is of even greater importance in the current climate, and remains our best asset to resolve the global economy's difficulties," the June 19 statement said.
The G20 is scheduled to hold its 2013 summit in St. Petersburg under the chairmanship of Russia.
(This is a product of the Bureau of International Information Programs, U.S. Department of State.)