‘Financial diplomacy’, new channel for global deals
‘Traditional political diplomacy is the stuff of
legend and lore’:
US: An intense brand of “financial diplomacy” has taken root in
global politics as economic crises worsen, with the United States a key
player, the US Treasury's hard-nosed global envoy said Monday.
Lael Brainard, US Treasury under secretary for international affairs,
said a parallel world to the traditional political diplomacy has
developed with equally intense negotiations and tough market-driven
“Diplomacy is the stuff of legend and lore,” she told the Women's
Foreign Policy group in Washington.
“Not so much finance ministries. But three and a half years into my
tenure, I have come to think that the term financial diplomacy, while
obscure, is apt.” “Financial diplomacy is predominantly about shaping
the domestic economic policies of other countries when they matter to us
and to the world.” Brainard, the Treasury's key international
negotiator, has had a front seat in talks on global crises in Europe and
elsewhere over the past three years, helping to advise deals that have
broad impact around the world.
At 49, the mother of three has spent much of the past year on trips
to Europe, where she presses the US experience in its 2008 crisis as an
example of what Europe can do.
She said Monday that Europe's leaders are now close to taking major
decisions that can hold the eurozone together and cool the crisis.
“While classic diplomacy moves through the synapses of foreign
ministries, financial diplomacy navigates through finance ministries and
central banks.” “We work on financial and economic diplomacy because
some economic decisions made in one country have an outsized impact on
jobs and growth here in the United States and around the world. As
transmission channels proliferate, policies designed for domestic
circumstances can matter as much or more to other countries as any
international treaty.” Financial diplomacy isn't exactly new, said
Brainard: negotiations between economic and market specialists were
behind the formation of the International Monetary Fund and the World
Bank in 1944, albeit at a leisurely pace over months.
Now the pace is dictated by the how fast news hits markets -- “under
the glare of a global 24/7 business news cycle,” as Brainard put it. In
May 2010, officials from the eurozone and the G-7 leading countries had
only 50 hours -- between the close of New York markets on Friday and the
market opening in New Zealand on Monday -- to create Europe's crucial
rescue fund, the European Financial Stability Facility, she said.
She said Washington “plays an outsized role in this system,” because
the dollar is the world's key reserve currency and the United States has
the deepest financial markets. “When we engage in financial diplomacy,
our power is not primarily from our purse but from our ideas, our
intensity, and our initiative.
“We succeed when we bring smart ideas to the table; when we take
initiative; when we insist on policy solutions that will make a
difference in people's lives.” AFP