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Can Multilateral Cooperation Coexist with Great-Power Rivalry?

Summary:
Recent US initiatives concerning new IMF special drawing rights, corporate taxation, and climate change highlight America’s renewed support for global cooperation. The big question now is whether multilateralism can work – and how China will respond to these proposals, given rising bilateral tensions. WASHINGTON, DC – Three important recent initiatives from US President Joe Biden’s administration illustrate America’s reengagement with the world and support for inclusive global multilateralism. The big question now, with the United States again seeking to play an international leadership role, is whether such cooperation can work – and how China will react to the US proposals, given rising bilateral tensions.

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Recent US initiatives concerning new IMF special drawing rights, corporate taxation, and climate change highlight America’s renewed support for global cooperation. The big question now is whether multilateralism can work – and how China will respond to these proposals, given rising bilateral tensions.

WASHINGTON, DC – Three important recent initiatives from US President Joe Biden’s administration illustrate America’s reengagement with the world and support for inclusive global multilateralism. The big question now, with the United States again seeking to play an international leadership role, is whether such cooperation can work – and how China will react to the US proposals, given rising bilateral tensions.

The first major initiative was US Treasury Secretary Janet Yellen’s call for a new $650 billion issuance of special drawing rights (SDRs, the International Monetary Fund’s reserve asset) – something that President Donald Trump’s administration had blocked.  

Details of the plan, which has been endorsed by the G20 finance ministers and central bank governors and the International Monetary and Financial Committee, are still to be worked out. It would not only involve a record new $650 billion SDR issuance to countries in proportion to their IMF quotas. It also calls on countries not needing these SDRs to reallocate them voluntarily to countries in need. For example, the US has suggested lending some of them to the IMF’s Poverty Reduction and Growth Trust to boost the Fund’s concessional lending capacity.

This is a big deal in at least two ways. A new $650 billion allocation would more than double the existing stock of SDRs, boosting global liquidity and freeing up resources for much-needed investment. And it could lead to large support from advanced economies to developing countries.

While any SDR reallocation would be voluntary, countries could go beyond a piecemeal approach to develop a more coordinated mechanism. For example, the US proposal could be extended...

Kemal Derviş
Kemal Derviş, former Minister of Economic Affairs of Turkey and former Administrator for the United Nations Development Program (UNDP), is a vice president of the Brookings Institution.

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