Sell at home, not to US, Treasury chief tells exporters

U.S. Treasury Secretary Jack Lew. (Reuters/Joshua Roberts)

U.S. Treasury Secretary Jack Lew. (Reuters/Joshua Roberts)

The world’s leading exporters should boost domestic demand and inflation to stimulate growth, the US treasury secretary said, rather than look to US markets to absorb their products. He also called for flexible currency rates, especially in China.

Addressing the International Monetary and Financial Committee on
Friday, Treasury Secretary Jack Lew expressed concern that the global economy was
reverting to the pre-crisis pattern of heavy reliance on US
demand for growth
.”

Instead of stimulating demand at home and fighting deflationary
pressures, “many advanced economies appear stuck in a pattern
of low domestic demand growth and excessively low
inflation
,” Lew said.

He called on countries with “record rising current account
surpluses
” to “move expeditiously to pursue
domestic-demand boosting policies
,” specifically naming
Korea, Germany, China, and Japan.

While the US economy was performing well, with “a consensus
of private forecasters
” projecting 2.7 percent growth in
real GDP this year, Lew said that did not mean American consumers
could bail out overseas manufacturers. The way to boost global
growth, he said, was to adopt a mix of macroeconomic policies to
boost domestic demand, which would include free-floating currency
exchange rates and boosting inflation.

Read More: Russia officially joins $50bn China-led
infrastructure bank

Emerging markets, Lew said, would benefit from improvements in
the business climate, in order to bring in foreign and domestic
direct investments. “As we continue to underscore, increased
exchange rate flexibility could increase resilience to external
shocks
,” he added.

China should allow the market to play a greater role in
determining prices, particularly the exchange rate and interest
rates
,” said the Treasury chief.

READ MORE: Keep IMF and World Bank instruments of
US policy, Treasury chief urges Congress

Taking a dig at the newly established Asian Infrastructure
Investment Bank (AIIB), Lew praised the International Monetary
Fund as the “foremost international institution for promoting
global economic stability.
” He could not get around the fact
that Washington has been dragging its feet on approving the
reform packet proposed in 2010.

We continue to believe that Congress will soon pass
legislation to implement the 2010 reforms
,” he said, adding
that the US considered it “critical to US economic and
national security
.”

Meanwhile, the US, Canada, Japan and the European Union
“voiced concerns” at the World Trade Organization over
Russia’s policy of import substitution, a source told RIA
Novosti. After the US and its NATO allies imposed trade sanctions
against Russia last year, Moscow adopted a policy of favoring
domestically produced goods for government purchases, including
medical, industrial and agricultural equipment, textiles and
vehicles.

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