My thanks to Fred and the Atlantic Council for
hosting me today.
The course of the global economy over the past two years has been shaped by
COVID-19 and our efforts to fight the pandemic. It’s now evident though that the
war between Russia and Ukraine has redrawn the contours of the world economic
Vladimir Putin’s unprovoked attack on Ukraine and its people is taking a
devastating human toll—with lives tragically lost, families internally displaced
or becoming refugees, and communities and cities destroyed. The atrocities in
Bucha are the latest grim reminder of the brutality of Putin’s war of choice.
Its impacts are reverberating to neighboring countries and beyond. The Biden
Administration stands firmly with the people of Ukraine as they defend their
lives, their homes, and their country. We are resolute in our commitment to hold
Russia’s horrific conduct has violated international law, including core tenets
of the UN Charter—challenging countries to demonstrate where they stand with
respect to the international order that has been built since World War II.
Therefore, when I speak about a changed global outlook, I’m not just talking
about growth forecasts. I’m also referring to our conception of international
cooperation going forward.
I will focus my remarks today on the significance of international cooperation
in this current environment and for our future. The power of working together
with our partners has been essential in confronting Russia; we need to take that
lesson on board as we tackle the most pressing global issues we face today.
We have seen that swift and sweeping sanctions can have enormous force. The
United States, along with over 30 countries, representing well over half the
world’s economy, has imposed an unprecedented suite of financial sanctions and
export controls on Russia.
The multilateral approach that President Biden has taken has enabled us to
impose significant costs on Russia, degrading its ability to prosecute this war
and to project power in the years ahead. We were able to do this, for example,
because the G7 plus the European Union account for about half of Russia’s
international trade, and our financial institutions have facilitated most of
Russia’s trade and investment finance. We, the sanctioning countries, are saying
to Russia that, having flaunted the rules, norms, and values that underpin the
international economy, we will no longer extend to you the privilege of trading
or investing with us.
By joining together, we demonstrate that these sanctions are not motivated by
any one country’s foreign policy objectives. Rather, we are acting in support of
our principles—our opposition to aggression, to widespread violence against
civilians, and in alignment with our commitment to a rules-based global order
that protects peace and prosperity.
Moreover, we are carving new paths in our technical work to target, monitor, and
enforce sanctions. The work of our team of experts at Treasury is now reinforced
by other experts around the world. With Attorney General Garland, I convened a
novel taskforce of law enforcement and finance ministry leaders from G7 and
partner countries to advance our efforts. Together, we are learning how to be
more effective. We are creating new habits of cooperation, trust, and goodwill
that create positive spillovers across the entirety of our relationship.
Rest assured, until Putin ends his heinous war of choice, the Biden
Administration will work with our partners to push Russia further towards
economic, financial, and strategic isolation. The Kremlin will be forced to
choose between propping up its economy and funding the continuation of Putin’s
At the same time, we are marshalling the power of international cooperation to
mitigate the economic impacts of Russia’s war. Russia’s invasion will have
direct impacts on the global economy due to the contraction of Ukrainian and
Russian exports—particularly energy, food, fertilizer, and other commodities.
When Russia made the decision to invade Ukraine, it predestined an exit from the
global financial system. Russian leaders knew that we would impose severe
sanctions, even if they underestimated the breadth, depth, and coordination of
the actions that the United States and its allies would take. We are now seeing
higher commodity prices that have added to global inflationary pressures and are
posing threats to energy and food security, trade flows, and external balances
across many countries.
Much of our work next week during the IMF and World Bank Spring Meetings will be
centered on how we can better support developing countries as they weather these
shocks, particularly as they are still recovering from COVID-19. With over 275
million people facing acute food insecurity, I am deeply concerned about the
impact of Russia’s war on food prices and supply, particularly on poor
populations who spend a larger share of their income on food. The multilateral
development banks are already providing financing to strengthen domestic food
production, bolster social safety nets, and unlock trade finance. They must also
couple their near-term responses with longer-term investments to address the
underlying vulnerabilities in food systems. I will be convening leaders in this
field next week to discuss further potential solutions.
The ultimate outcome for the global economy of course depends on the path of the
war. Russia could end this unnecessary war and the near-term impact could be
While many countries have taken a unified stand against Russia’s actions and
many companies have quickly and voluntarily severed business relationships with
Russia, some countries and companies have not. Let me now say a few words to
those countries who are currently sitting on the fence, perhaps seeing an
opportunity to gain by preserving their relationship with Russia and backfilling
the void left by others. Such motivations are short-sighted. The future of our
international order, both for peaceful security and economic prosperity, is at
stake. This is an order that benefits us all. And let’s be clear, the unified
coalition of sanctioning countries will not be indifferent to actions that
undermine the sanctions we’ve put in place.
The war in Ukraine and sanctions against Russia highlight the pivotal role of
China. China has long claimed to hold sacrosanct key international
principles—including those enshrined in the UN Charter with respect to
sovereignty and territorial integrity. Whatever China’s geopolitical aims and
strategies, we see no benign interpretation of Russia’s invasion, nor of its
consequences for the international order. China cannot expect the global
community to respect its appeals to the principles of sovereignty and
territorial integrity in the future if does not respect these principles now
when it counts.
China has recently affirmed a special relationship with Russia. I fervently hope
that China will make something positive of this relationship and help to end
this war. Going forward, it will be increasingly difficult to separate economic
issues from broader considerations of national interest, including national
security. The world’s attitude towards China and its willingness to embrace
further economic integration may well be affected by China’s reaction to our
call for resolute action on Russia.
The Russian invasion of Ukraine has dramatically demonstrated the need for us to
stand together to defend our international order and protect the peace and
prosperity that it has conferred on advanced and developing countries alike. As
we do so, it is worth considering the breadth of unmet global challenges that
would benefit from greater cooperation of the kind we have mustered in
On some issues, like trade and competitiveness, this will involve bringing
together partners that are committed to a set of core values and principles. We
will also need to modernize our existing institutions—the IMF and the
multilateral development banks—so that they are fit for the 21st century, where
challenges and risks are increasingly global. And finally, we need to build
trust and cooperation to improve our ability to provide the global public goods
that are needed to address these challenges.
I will now present a set of propositions on how to turn some of our problems
into opportunities to move forward.
First, we need to modernize the multilateral approach we have used to build
trade integration. Our objective should be to achieve free but secure trade. We
cannot allow countries to use their market position in key raw materials,
technologies, or products to have the power to disrupt our economy or exercise
unwanted geopolitical leverage. Let’s build on and deepen economic integration
and the efficiencies it brings—on terms that work better for American workers.
And let’s do it with the countries we know we can count on. Favoring the
“friend-shoring” of supply chains to a large number of trusted countries, so we
can continue to securely extend market access, will lower the risks to our
economy, as well as to our trusted trade partners. We should also consider
building a network of plurilateral trade arrangements to incorporate elements of
the modern economy that are growing in economic importance, especially digital
services. We should harmonize our approaches to protecting the privacy of data.
And a modernized trade system will also require the ability to effectively
enforce trade policies and practices, both multilateral and bilateral.
Second, we should implement last year’s global tax deal. Some 137
countries—representing nearly 95 percent of the world’s GDP—have agreed to
rewrite the international tax rules to impose a global minimum tax on corporate
foreign earnings and to partially reallocate taxing rights from countries where
companies are headquartered to those where they sell goods and services. This
tax deal is necessary to end the race to the bottom in corporate taxes and to
reform profit reallocation rules that, by demanding a physical nexus to a taxing
jurisdiction, no longer reflect modern economic realities. By ensuring that
profitable corporations pay their fair share and operate on a level playing
field, the deal will provide governments around the world the resources they
need to invest in their people and economies.
Third, we must ensure the IMF has the tools to fulfill its role of financial
firefighter in the face of modern, potentially more frequent, global crises. The
IMF evolved to assist countries needing domestic policy adjustment to overcome
balance of payments difficulties. It was not designed to deal with the novelty
and breadth of the last two global crises. As a consequence, the economic and
financial response to the global financial crisis in 2008-2009 was too timid and
short-lived. With inadequate global liquidity, the crisis caused lasting damage.
In response to the pandemic, the IMF acted creatively to support poorer
countries. Still, those countries with the resources to do so responded
forcefully, protecting incomes and profits, preventing debilitating bankruptcy,
and rapidly reversing the decline in GDP. We were less successful in supporting
poorer countries, which led to a divergence in global prospects. We will also
need to consider the governance of the institution, to ensure that it reflects
both the current global economy and also members’ commitments to the IMF’s
underlying principles and objectives.
Fourth, let’s revisit our strategies, policies, and institutions to better
mobilize capital in support of people in developing countries. We have made
great efforts to provide funding to support human development, the creation of
needed infrastructure, and more recently the attainment of climate objectives.
Multilateral development banks, bilateral official donors and creditors, and
growing private sector involvement deserve credit for important achievements.
That said, the response to date is not to the scale needed. Experts put the
funding needs in the trillions, and we have so far been working in billions. The
irony of the situation is that while the world has been awash in savings—so much
so that real interest rates have been falling for several decades—we have not
been able to find the capital needed for investments in education, healthcare,
and infrastructure. There is little doubt that there are huge potential returns,
both human and eventually financial, in equipping billions of people in
developing countries with what they will need to succeed. Going forward, we need
to evolve the development finance system, including the World Bank and the
regional development banks, to our changing world, in particular to better
mobilize private capital and fund global public goods. However, the multilateral
development banks alone will never meet the scale of financing needed—so we also
need to revisit our strategies for making capital markets work for people in
Fifth, we must expedite the global transition to a more secure and cleaner
energy future, with more energy access for all. We know we have not yet done
enough in terms of mitigation, adaptation, green technology innovation and
adoption, and funding for those efforts. The recent IPCC reports confirm that
our window of opportunity to leave our planet worthy of our children and
grandchildren is even closer to being permanently shut. We must redouble our
efforts to decarbonize our economies, recognizing that countries will use a
range of tools—including carbon pricing, regulation, and subsidies—to achieve
needed emissions reductions. Because those approaches will have quite different
consequences for the costs of production, we will see differing impacts on trade
competitiveness. We will need to work together to avoid trade tensions and in
time to coordinate and harmonize our approaches.
And finally, sixth, we need to complete work on strengthening the global health
architecture to boost pandemic preparedness and response. History teaches us
that pandemic risks rise with the interconnectedness of the world. And recent
history shows us the incredibly high cost of inadequate preparation. G20
countries are now working through a Joint Health and Finance Task Force to
leverage broad country and expert participation to address the current gaps in
the international health architecture for pandemic prevention, detection,
information sharing, and crisis response. We have also proposed a Financial
Intermediary Fund as a vehicle to help fill in the gaps in health system
investments at the country, regional, and global level so that we are
collectively better able to prepare for and prevent future crises.
As we gather for the IMF and World Bank Spring Meetings next week, I look
forward to working with my partners to address these big issues. At the top of
everyone’s minds will be the direct impact and broader spillovers of Russia’s
invasion of Ukraine. We will also advance efforts to mobilize vaccine donations
and delivery support, further discussions on tackling the climate crisis, and
continue to expand our efforts to support low-income countries.
Some may say that now is not the right time to think big. Indeed, we are in the
middle of Russia’s war in Ukraine, alongside the lingering fight against a
global pandemic and a long list of other initiatives underway. Yet, I see this
as the right the time to work to address the gaps in our international financial
system that we are witnessing in real time.
Treasury officials began crafting proposals for the IMF, the World Bank, and the
post-war international financial architecture in 1941, as World War II raged in
Europe. Three years later, in the opening to the Bretton Woods
Conference—occurring as the Allied invasion of Normandy was still
underway—President Roosevelt said: “It is fitting that even while the war for
liberation is at its peak, [we] should gather to take counsel with one another
respecting the shape of the future which we are to win.”
As then, we ought not wait for a new normal. We should begin to shape a better