James K. Jackson
Specialist in International Trade and Finance
The Organization for Economic Cooperation and
Development (OECD) celebrated its 50th anniversary in 2011, a time when
the global economy was struggling to recover from the financial crisis and
slow economic growth. The OECD is an intergovernmental economic organization in which
the 34 member countries discuss and develop key policy recommendations that
often serve as the basis for international standards and practices. In
addition, the OECD members analyze economic and social policy and share
expertise and exchanges with more than 70 developing and emerging
economies. The 34 member countries include Australia, Austria, Belgium, Canada,
Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg,
Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak
Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom,
and the United States. While all of the member countries are considered to
be economically advanced and collectively produce 60% of the world’s goods and
services, membership is limited only by a country’s commitment to a market
economy and a pluralistic democracy. The OECD also has extended an
invitation to the Russian Federation for membership, which includes
meeting rigorous best practices relative to anti-bribery and anti-corruption standards.
Furthermore, the OECD works with other potential partners such as Brazil,
China, India, Indonesia, and South Africa with a view toward possible
membership.
The member countries rely on the OECD Secretariat in Paris to collect data;
monitor trends; analyze and forecast economic developments; and research
social changes and patterns in trade, environment, agriculture, society,
innovation, corporate and public governance, taxation, sustainable
development, and other areas to inform their discussions and to assist them in pursuing
their efforts to develop common policies and practices. Following the financial
crisis, the OECD played a major role in providing cross-country analyses
of market reforms and programs to stimulate growth. The United States has
sparred periodically with other OECD member countries over various issues,
including U.S. antidumping laws and the size of the U.S. financial
contribution. Karen Kornbluh was appointed in 2009 by President Obama to serve
as the U.S. Ambassador to the OECD. She stepped down as Ambassador and
Daniel W. Yohannes was nominated to serve as the next U.S. Ambassador to
the OECD. Key issues for Congress include OECD work on coordinating
national approaches to curtailing bribery and the illicit use of tax havens.
Congress appropriated about $82.2 million to the OECD in FY2013; the budget
request for FY2014 was $83.2 million. .
Date of Report: October 30, 2013
Number of Pages: 128
Order Number: RS21128
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Rebecca M. Nelson
Analyst in International Trade and Finance
The multilateral development banks (MDBs) include the World Bank and four
smaller regional development banks: the African Development Bank (AfDB),
the Asian Development Bank (AsDB), the European Bank for Reconstruction
and Development (EBRD), and the Inter- American Development Bank (IDB).
The United States is a member of, and major donor to, each of the MDBs.
The MDBs provide financial assistance to developing countries in order to
promote economic and social development. They primarily fund large
infrastructure and other development projects and, increasingly, provide
loans tied to policy reforms by the government. The MDBs provide
nonconcessional financial assistance to middle-income countries and some
creditworthy low-income countries on market-based terms. They also provide
concessional assistance, including grants and loans at below-market rate
interest rates, to low-income countries.
Critics argue that the MDBs focus on “getting money out the door” (rather than
delivering results), are not transparent, and lack a clear division of
labor. They also argue that providing aid multilaterally relinquishes U.S.
control over where and how the money is spent. Proponents argue that
providing assistance to developing countries is the “right” thing to do and has
been successful in helping developing countries make strides in health and
education over the past four decades. They also argue that MDB assistance
is important for leveraging funds from bilateral donors, promoting policy
reforms, and enhancing U.S. leadership.
The Role of Congress in the MDBs
• Funding: Congressional legislation is required for the United States
to make financial contributions to the MDBs. Appropriations for the
concessional windows occur regularly, but appropriations are far more
infrequent for the nonconcessional windows. Unusually, all the MDBs are in
the process of increasing the size of their non-concessional lending
facilities. Congress authorized U.S. contributions to the “general capital
increases” of the non-concessional lending windows in FY2011 for the AsDB
and in FY2012 for the other MDBs. The appropriations for these increases
are expected to be spread out over a five- to eight-year period, depending
on the institution.
• Oversight: In addition to congressional hearings on the MDBs, Congress exercises
oversight over U.S. participation in the MDBs through legislative mandates.
These mandates direct the U.S. Executive Directors to the MDBs to advocate
certain policies and how to vote on various issues at the MDBs. Congress
also issues reporting requirements for the Treasury Department on issues
related to MDB activities. Congress can also withhold funding for the MDBs
unless certain institutional reforms are met (“power of the purse”).
• U.S. Commercial Interests: Billions of dollars in contracts are
awarded each year to complete projects financed by the MDBs. Some of these
contracts are awarded to U.S. companies. The World Bank has been
discussing major changes in how companies bid on World Bank projects, and
this could be an area that Congress may want to monitor.
Date of Report: November 8, 2013
Number of Pages: 24
Order Number: R41170
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Rebecca M. Nelson
Analyst in International Trade and Finance
Exchange rates are important in the international economy, because they
affect the price of every country’s imports and exports, as well as the
value of every overseas investment. Following the global financial crisis
of 2008-2009 and ensuing economic recession, disagreements among countries
over exchange rates have become more widespread. Some policy leaders and
analysts contend that there is a “currency war” now underway among certain
countries.
At the heart of current disagreements is whether or not countries are using
exchange rate policies to undermine free markets and intentionally push
down the value of their currency in order to gain a trade advantage at the
expense of other countries. A weak currency makes exports cheaper to
foreigners, which can lead to higher exports and job creation in the export
sector. However, if one country weakens its currency, there can be
implications for other countries. In general, exporters and firms
producing import-sensitive goods may find it harder to compete against countries
with weak currencies. However, consumers and businesses that rely on inputs
from abroad may benefit when other countries have weak currencies, because
imports may become cheaper.
The United States has found itself on both sides of the current debates over
exchange rates. On one hand, some Members of Congress and U.S. policy
experts argue that U.S. exports and U.S. jobs have been adversely affected
by the exchange rate policies adopted by China, Japan, and a number of
other countries. On the other hand, some emerging markets, including Brazil and Russia,
have argued that expansionary monetary policies in the United States and other
developed countries caused the currencies of developed countries to
depreciate, hurting the competitiveness of emerging markets. More
recently, however, emerging-market currencies have started to depreciate,
and now there are concerns about emerging-market currencies becoming too weak relative
to the currencies of some developed economies.
Through the International Monetary Fund (IMF), countries have committed to
avoid “currency manipulation.” There are also provisions in U.S. law to
address “currency manipulation” by other countries. In the context of
recent disagreements, neither the IMF nor the U.S. Treasury Department has
determined any country to be manipulating its exchange rate. There are
differing views on why. Some argue that countries have not engaged in
policies that violate international commitments on exchange rates or
triggered provisions in U.S. law relating to currency manipulation. Others
argue that currency manipulation has occurred, but that estimating a currency’s
“true” or “fundamental” value is complicated, and that the current
international financial architecture is not effective at responding to
exchange rate disputes.
Policy Options for Congress
Some Members of Congress may consider addressing exchange rate issues because
they are concerned about the impact of other countries’ exchange rate
policies on the competitiveness of U.S. products. Recently, concerns have
been raised about the impact of Japan’s economic policies on the value of
the yen, and the implications for the U.S. economy. However, there are a number of
potential consequences from taking action on exchange rates that Congress might
also want to consider. For example, U.S. imports from countries with weak
currencies may be less expensive than they would be otherwise; countries
may retaliate after being labeled a currency “manipulator”; and tensions
over exchange rates could dissipate as the global economy strengthens.
If Members did decide to take action, they have a number of options for
doing so. Options could include urging the Administration to address
currency disputes at the IMF and in trade agreements, or passing
legislation relating to countries determined to have undervalued exchange rates,
among others. Two bills have been introduced in the 113th Congress related to
exchange rate policies in other countries (H.R. 1276; S. 1114).
Representative Levin has also released a proposal for addressing currency
issues in the Trans-Pacific Partnership, a proposed free trade agreement
that the United States is negotiating with Japan and 10 other Asia-Pacific
countries.
Date of Report: November 12, 2013
Number of Pages: 32
Order Number: R43242
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