talkssebastian gorka about the robert mueller investigation and the trump administration national security policy. we will take your calls and you can join the conversation on facebook and twitter. "washington journal" live at -- on c-span. a senate foreign relations subcommittee look at the workings of economic institutions like the world bank and international monetary fund. the hearing man just over two hours.

today's hearing represent the subcommittee's 8 hearing during the 115th congress. i'm grateful for continued partnership on this and other issues. the title for today's hearing is multilateral economic institutions and us foreign policy. we will divide today's hearing into two separate panels. our first panel will consist of two administration witnesses. the honorable david mallpass, undersecretary for international affairs at the us department of treasury and the honorable roland marsalis, acting deputy assistant secretary for international finance and development at the us department of state. i want to welcome both of you. our second panel will consist of five testing which experts and former officials from previous now, given this important topic

and our excellent witnesses here today, of course we want to hear from each of you, but for we do, allow me to in this conversation somewhat. -- 19y 1940 or, delegates work on delegates met in bretton woods new hampshire to establish new rules and institutions for the post world war ii international economics is. these nations, led by the united dates and formed by lessons regarding the causes of world war ii, sought to create institutions that would catalyze economic roads, reduce property, expand trade, and promote financial stability. the primary result of these negotiations were the international monetary fund and the international bank reconstruction and development. which is now part of the world bank. at the risk of ruining the surprise, allow me to say the up front. the u.s. is not and should not be neutral and comes to the continued access of these in addition. helped create these

multilateral institutions for good reasons, and americans have been among the leading beneficiaries. while the imf world bank and regional development banks are not perfect, and they require reform and balance, they have -- promoted as a state of the international economic order that has facilitated decades of extraordinary economic growth for both -- and people around the world. good, creating international customers and promoting peace, stability, and prosperity. the u.s.hy believe should continue to support these institutions, continuing to fill their import purposes and in woman reforms with where necessary. if we fail to lead and remain engaged in these multilateral forums, other nations will step up and replace us, mainly china.

in a vacuum created by the u.s.es of leadership, beijing would twist these to their uses and state capitalist model. absent u.s. leadership and engagement, china would institute alternatives to the institutions that have does a much good and served americans around the world. one prosperous nations would have little choice but to reluctantly bandwagon with beijing. that would represent a regular outcome -- negative outcome for americans and pretty much anyone other than the chinese communist party. a course of economic -- of corsetit in her -- a economic international order will look deeply. in particular, some, including those in agent, do not want to choose between the united states and china. find one way or another

to address those needs, but however, developing countries do want choices. the u.s. should ensure developing countries have an alternative to the chinese model , which often involves poor transparency, unsustainable debts, and the creation of dependence, which is frequently exploited later for china's strategic advantage. we should use our voice and our vote in these international financial institutions to demand greater transparency from china and to ensure beijing is not saddling developing countries with unsustainable debt burdens. simultaneously, we should lead with our strength -- the private sector. we should ensure that u.s. federal policies, laws, and u.s.tutions, as well as development assistance focus on catalyzing private investment, making clear the united dates want prosperous and independent trading partners, not dependent debtors to extort in order to

gain access to a port. i look forward with discussing with our witnesses how these financial institutions have benefited americans, how they are performing, and what reforms may be necessary. i am interested in discussing how the u.s. is or should be using our voice in our vote in these international financial institutions to address the lack of transparency from china we have seen in the developing world, and some of the resulting debt burdens inflicted on developing countries. i would also like to hear from our witnesses on the upcoming he0 summit and what objectives the administration is or should be pursuing there. with those thoughts in mind, i would like to call on ranking member merkley for his opening remarks. senator merkley? you, senator young, in organizing this hearing and for your partnership in the past few years. i think this subcommittee has examined a number of important issues and done so with a real

policy framework, intentional effort to get to the bottom of the story. well done. hear from ourll state and treasury department witnesses about the value of u.s. contributions to the imf and the world bank, the values aat they have in supporting transparent development agenda that seeks to assist countries, expand their economies. these efforts are relevant and world where so many seek china, whosem repayment terms are grounded in mystery. i look forward to hearing from witnesses, and the administration's current efforts in this area. china's financing does not just ifect the developing world, hope to hear about how beijing has -- when we supported its membership in the world trade organization. another multilateral economic institution that affect foreign

policy workers here at home. violations occlude the theft of intellectual property, enforcing u.s. and foreign companies to transfer technology, and weak environmental standards. chinese government provides subsidized loans, export credits , and -- for state-owned enterprises. these firms use these unfair damages to shrink market share for u.s. firms. i want to note that when i was reading the material for this hearing, it really emphasized is debt trap that china using as an instrument of foreign policy, and it reminded me of a book i read in college called "the debt trap." but this book was about the imf policy 45 years ago, and about how we had many loans that went

to the elite in developing countries. fundse elite banked most overseas and that subsequent governments were left in this poor countries to repay the debt, leaving them an extraordinary vulnerable situation in terms of policies that would benefit their citizens versus benefit foreign investors. it has been many, many decades in which the imf practices are very different, but now we have china adopting a debt trap model. adopting a model in which they are setting up a system where they can exercise leverage in a fashion that is not beneficial citizenslfare of the of many countries, and i think it merits a full investigation, and i certainly appreciate you scheduling this hearing. >> again, i want to welcome our witnesses. i know your full written statements will be included in the record, and i thank you for

the thoughtfulness of the statements. i would ask each of you to summarize your written statement within five minutes, so that we can engage in a more extended question and answer period. let's go in the order that i announced you undersecretary malpass. -- announced you under secretary malpass. >> thank you very much, senator young, and thank you, senator merkley. thanks for holding the hearing. while there's been substantial economic progress in the united states, growth abroad has softened materially, causing challenges for international economic policy. our goal is to achieve faster u.s. and global growth in ways that improve after-tax wages for american workers. i'd like to describe some of our major 2018 international policies in order to create the context for our work in the international financial institutions.

we have engaged repeatedly with china on our trade and investment concerns, and the problems caused by their one belt, one road initiative. it often leaves country with -- countries with excessive debt and poor quality projects. if countries default on these debts, china often gains influence over the host governments and may take ownership of the underlying assets. we have influence over the host -- i'm sorry, we have built a common awareness of these concerns in the g7 and the g20. in lending, china often fails to it here -- to adhere to international standards in areas such as anticorruption, export credits and finding courtney and that coordinated and sustainable -- coordinated and sustainable solutions to payment difficulties, such as those in the paris club. in addition to the work on china we built a common awareness as i mentioned in the concerns in the g7 and g20. that's important.

secretary mnuchin has pushed forward and initiative on debt transparency that will increase public disclosure and brought in the existing definition of the international debt eons traditional bonds and loans. we will be working with the imf and the world bank in this initiative. it should reduce the frequency and severity of developing crises and push back on china's over lending. as congress's support, we have also enhanced the americans , which hascurity strengthened and modernize the committee on foreign investment in the united date, sify is -- is.i -- and critical technologies and 27 specific industries. multilaterally to

form a new currency consensus in the g20 to recognize the growth and investment benefits of currency stability. agreementexico-canada , to be signed later this week, includes the first currency chapter in a trade agreement. we also reached an understanding with south korea on current see stability and transparency at the time of the update, of course. argentina's new imf program includes a nominal monetary importantd an commitment to leaving currency intervention unsterilized. those policies quickly stopped 18gentina's mid-20 currency crisis, and they are dramatically reducing the rate of inflation by reducing the growth of the monetary base, a policy that the united dates strongly supported. the central bank was able to arrest the precipitous decline in the exchange rate. treasury also this year launched the america initiative to promote growth in the western hemisphere.

in 2018, we signed energy framework agreements with panama and chilly. -- and chile. we hope to sign one with jamaica tomorrow, and hope to conclude one with argentina in the near future. we refocused the financial stability board on systemic risk mandate, including the adoption of an activity-based approach on insurance activities and wind down of work streams unrelated to stability issues and the evaluation of the effectiveness of existing policies before developing new policies. i served on the nominations committee for fsb leadership, and was pleased with yesterday's announcement of fed vice chairman randy quarles as the fsb next chairman, the first american to serve in that role. looking into 2019, we will continue our work on debt the comedy implementation of firrma,

the energy initiatives and china's unfair trade practices and lack of reciprocity in market access. we maintain active economic dialogues with other countries to assess systemic vulnerabilities and to support democratic principles and institutions. in latin america notably, in the western hemisphere, we have emphasized the risks and challenges posed by tyranny, namely venezuela, cuba and nicaragua. as brexit approaches, treasury is analyzing risk to the international financial system. we are working toward improved trade arrangements with the eu. the administration has notified congress on october 16 of its intent to start trade negotiations with the u.k. once it leaves the eu of march -- in march 2019, and we continue to work to streamline the g20. i am going to stop at this point

and leave discussion of the issues to my state department colleague secretary de marcellus. thank you. >> thank you, secretary malpass. ellus?ary de marc >> thank you. chairman young, ranking member merkley, thank you so much for holding this hearing. it's an honor to be a today at a desk to be here today, and a -- to be here today, and a particular honor to testify with secretary malpass. senator, as you noted in your opening statement, the united states was the leading force establishing the world bank and imf. though treasury has lead and oversight of the national financial institutions, state department has been working closely with treasury from the beginning to make sure these institutions advance our interests. increated them and we remain them to advance our nafta security interests, our foreign-policy interests, as well as promoting the well-being

of people globally. the question is sometimes asked, which is better? multilateral or bilateral assistance? to me it's like asking when you build a house which to is -- which tool is better, and nail gun or a power drill? depends on the task at hand at that very moment. we might use the nail gun, or bilateral more often. we do not want to be at the job site without the power drill. that said, tools can always be approved and reformed, and under the written statement, it goes into excellent detail on the performance we are looking for, and we are very supportive of those. that i would like to offer is the leveraging of resources. exceed our own because of other donors as well as access to capital market. in addition, we can leverage the skills of a very talented staff to provide buys to developing countries around the world on issues like procurement, fiscal policy, anticorruption, or

others. i'd like to focus on three areas where the ifis advance our interests. one, providing stability, specifically to strategically important areas like the middle east. two, by dancing our economic interest, and three, offering a best practice alternative to the chinese lending model. in terms of the middle east, when our vital ally, jordan, was threatened with massive refugee throws -- massive refugee flows from syria, it threatened to destabilize the country so we turned to the world bank to help. they set up the tcff to help pool funds to help countries facing refugee flows, initially jordan. the united states put into far $35 million in the fund. we were a founding donor. other countries followed our another put in, so far,

$240 million by the middle of this year. what happened, the world bank and european banks then extended loans -- they were low interest thanks to these contributions, to help the syrian refugees and the jordanian host communities with clean water, education, health, job opportunities. wentus, some $35 million into 1.5 billion dollars with key regional allies, like jordan. point to our economic interests. as you noted and the secretary noted, the imf and the bank have been working to advance prosperity around the world. this creates better conditions for expanding the u.s. and global economies to give us larger markets for exports and more american jobs. fastest growing

export markets are now in developing countries. are also helping to promote the transparent business climate and raise global government standards, fight corruption, and on -- unleash investment. we promote andy, provide transparent financing terms, offering, as you noted, borrowers a better alternative for their people to the opaque terms and financing offered by china in their lending practices area is already led to unsustainable debt levels in several cases. the imf was working alongside the world bank to bring transparency to countries riddled with debt, helping to shed light on these predatory lending practices. in addition, as senator merkley policy the line with american laws and american values to safeguard environment

and people. lenders with little to no regard for these standards, the banks require borrowing governments to address the environmental and social impacts promoted with the projects. these support sustainable development and lasting results. in closing, i would like to reemphasize the state department's commitment to working with treasury to understand -- to ensure that the event is our interest and economic policy globally. over seven decades, this is benefited exporters and taxpayers and promoted american austerity and security. we hope to continue support on these issues. thank you again for holding this hearing, and i look forward to your questions. thank you. for thatyou both helpful summary. in fact, you have preempted some of my foundational questions. i would like to begin with a bit of history here, as you did,

secretary demar seles -- lus, that themarcel world bank and imf were created through u.s. leadership in large the united1944, and states was compelled, because of that unique moment in history in which it found itself, as we are nearing the end of a world war, we had suffered through a great epression, do the lessons or dangers felt in 1944 still have some relevance today as we think about the appropriate role that the imf and world bank are playing? or are they serving different felt back in 60,

70 years ago? >> thank you. i will invite secretary malpass to emphasize on this, because he has good insights on this question. i would say many of the issues remains the same. maintaining economic prosperity to advance the global economy of american interests. .ut the world has changed the focus of the time of creation was on reconstructing europe, and our allies in europe. pooreris really more on developing countries who need more work on governance and more foundational help in their health systems, the foundations that the world bank does to prevent health frets -- health frets from hitting the shores in the u.s. country would not have applied so much before. newthen we have something

in that china is an emerging donor, but a large one, which is a new development we have not seen. and as has time, been noted, it is a significant factor in the national system. therefore, the imf world bank and the development bank have a new role, as noted, to provide an alternative but also helping countries, borrowers understand what is really the offer from china, helping them understand and analyze the terms. there are many new ways -- and it tells us other ways -- that the development banks and imf have adjusted to time, over several decades. >> secretary, in addition to stability with the example of the middle east, more specifically the jordan example, very powerful, global prosperity, 40% of our export dekets, as secretary

marcell is indicated are in developing countries, and then lastly, the opaque chinese model . are there other rationales for these institutions that we should be thinking about? >> in the world bank, we have advocated a shift, a graduation of countries from being borrowers to not borrowing, and that way leaving more resources for poorer countries. one of the things going on now is the conflict state problem, or the fragile state problem where both the imf and multilateral development banks have some expertise in helping those situations. one of the goals is to get the organization towards those meteor countries are weaker governments. -- or weaker governments. >> very good. malpass, how do you

believe the imf and world bank are doing and filling their missions? you have itemized a lot of reforms that the administration already has well on its way, it's very deeply involved in, and the executive level. maybe you could identify deleting couple of reforms that you believe need to occur, how the united states should be using its voice and its vote to dance those reforms, and then, if you have an opportunity to reflect in how congress might provide additional authorities or assistance on any of these fronts, please volunteer that to us. >> thank you, senator. i will make three areas of comment. one is how different the world financial environment is today from when the and additions were founded. so there is much more availability of private capital

and countries have been able to build local currency financing structures, which simply did not to -- really, prior to 1990. in the a seismic shift way the institutions operate. so the reforms that we have encouraged our this graduation concept, such as stop lending to countries that do not really lead -- need the money, to have differential pricing in the loans to that better off countries pay more in interest for the loans that they are doing. to have an increased focus on the quality of the loans and the transparency of those loans, and then i would also say in the capital increase that has agreed on by the

there was upies, substantial focus on creating a sustainable lending concept. so with that means is the world bank would not suddenly lend a lot at the beginning of a capital cycle and then need more money as it goes along. that this will create a sustainable platform where they won't have to keep having capital increases. imf,the standpoint of the i will mention three reforms we have been working on there. one is with regard to fiscal policy, making it more growth oriented. in some decades, the tendency was to think of it as a repayment mechanism from countries that had gotten over indebted. one of the shifts we are looking for is to have it be more

integrally involved in creating a higher median income for the country that it is working in. second is the type of privatizations being done. sometimes in the past, there would be a tendency and emphasis on selling assets from the government for the highest price rather than thinking of it as the greatest benefit to the nations growth. more benefit get by stopping a monopoly rather than selling a monopoly for the highest price to the high bidder . the third that i will mention is we are no longer on the gold standard. that was one of the formative purposes of the imf. so in that regard, there needs to be -- the imf is still under article one, seeking stability of exchange rates rather than competitive devaluations. i mentioned in my opening it is part of our

administration policy. as far as what congress can do, holding this hearing is very good, and being engaged in thinking about these policies. this is truly a seismic shift in a globalnance towards situation where capital is available where countries are implementing the policies. canhat regard, congress both be aware, be knowledgeable, and be engaged in encouraging that effort. i would like to see quite a few more countries, five or 10 more countries growing really fast as we going to 2019 and 2020. >> thank you, that is helpful. intenseenator merkley to stay engaged on these issues

and if there are some concrete things we can do to be of assistance to help you as you walk your way through these reforms, please let us know. >> and if i may interrupt, one thing i forgot to mention, we are bound by a great number of congress,rom legislative mandates. there are nearly 100. while we share many of the goals of many of the mandates, the cost of managing those is actually since angela. , thear a lot of treasuries state department bears of substantial cost to managing those mandates, which tend not to expire, so these may be things that made sense 20 years ago that don't need to be on the books now. taking a look at that would help us a lot. >> we will require your expertise and assistance and that of your team, but i would suggest that you identify the 100, 100 plus mandates and indicate how precisely they impede your ability to advance

reforms, and open markets, enhanced stability, and presents an alternative to china in the case of the world bank. let us know how we can be helpful. we would like to take a look at that and work together on a bipartisan basis. before i turn it over to senator merkley -- i will give you do time to ask all that is on your mind -- jeff, i would just like for my own benefit and for the benefit of all those who are watching, secretary, you milliond leveraging $35 in the case of jordan. 35 u.s. dollars, as i understood billion through use of ifi's. can you walk me through exactly how that works? >> thank you, senator, i will be very happy to.

so jordan, this is a higher income country that does not qualify for lower interest loans from the world bank. therefore, when they took on all of these refugees, we end they did not think it was fair for them to take market-based loans for people -- from people from other countries, and it would be harder to sell to the people. they really needed lower interest loans. made this did was fund where donors, our $35 billion versus 244 million our $35 million versus 200 44 million others, we turned what would be a normal loan to the world bank into a low discount, low interest loan that is more appropriate to the need and recognition of jordan's contributions in managing this horrible hereditary and situation. , by it does is basically paying off the interest, you can

leverage that larger amounts, which is how you get from $35 million all the way up to almost $300 million in total donors, and take the entire loan amount down to this rate. this is how you get to 105 point billion dollar -- this is how you get to $100.5 billion. >> thank you both very much. i wanted to start with a letter that a group of senators sent on august 16 that asked this question about whether imf funds are essentially being used to repay chinese debt, and to give you an example of this, pakistan is a good example of a country that has a significant amount of chinese investment. i think the number i have a $62 billion. a lot of money back to

chinese banks, and they are seeking an imf bailout -- i think it is a $12 billion and they have asked the u.s. to make sure that we don't block this. is that imf money essentially going to help pakistan repay chinese banks? why is that a good economic development strategy? >> senator, i do not think that would be a good development strategy. team just came back from pakistan. i had people in pakistan two weeks ago. one of the things we are pushing hard for his full transparency of the dead. you mentioned chinese debt, but one of the challenges is they have not disclosed to the terms,

in many cases, they have not disclosed the terms of that debt. that means the interest rate, maturity, and when it would have to be repaid. terms, we think that the maturity of the chinese debt comes after the imf would have been repaid. imfrom the standpoint of money being used to pay chinese it challenges say to find a program that will cause substantial economic reform in pakistan and that will allow it to be funded, that , havean be funded and be an ability to survive in financial terms going forward. i will take this moment to say with china in general, this

problem is not unique to pakistan. china is lending in many countries where the terms of the loans are simply not given. that gives china a lot of leverage within his program, and it is something that we are pushing back on very hard in the thes club, in the oced, in g20 and the g7. >> when you say the terms are not given, do you mean not given to the borrower, or not given to the international community? some cases, both. they are not made public or made available to the international committee, but sometimes they are not even available to certain parts inside the government is health. that is an issue because china may make a loan, but not really want the terms of the loan to be disclosed, even within the government it is lending to. >> senator young and i both referred to this chinese debt

trap strategy, and i will re-say this simply and see if you all concur if this is their strategy, or if perhaps we are mischaracterizing the situation. but china often lends to that mayg countries have an interest in a particular -- building a port, building a highway, building a prestige project of some sort that involves a significant amount of debt. they often use their own workers, chinese workers to build the project. it is often very opaque in terms of the terms. it often involves -- not gifts, but they are chinese loans, so therefore repayment is necessary. the government is also reluctant to disclose the terms without transparency, so perhaps the country is getting a very poor deal.

hasresult is now china to applynt leverage for other national interests that china has. is that a fair characterization of the chinese debt trap model? ? >> i share many of those concerns, yes sir. i will give you an example of where china does not work with the international community on some of these -- there is a group called the international working group on export credits, where there is an effort to have disclosure of the export credits that are going to countries, such as countries in africa or to pakistan. asidesimply has stood from that group. they attend meetings, but then do not engage to describe which of their institutions are making those loans. the second is the paris club itself, where china is now, for

many countries in the world, china is the biggest creditor, and yet it does not participate in the paris club, which is an organization of creditor countries that try to have rationality within the restructuring process when a country basically can't repay. so i am describing constructive ways that china could be better involved in -- and simply it has chosen not to be. >> please, go ahead. yes. add to that, one of the most common examples of what you described is in sri lanka, where after sri lanka could not pay the debt, china converted the port to their own ownership for a 99 year lease, as well as 15,000 acres of land.

when that happened, that was noticed around the world. we hear about it all over the world. as we have seen that become a campaign issue in many elections around the world, where opposition groups are criticizing the volume of chinese lending and the terms, and the other drawbacks you already elaborated. malaysia, we saw the prime minister canceling billion dollars -- billions of dollars of chinese contracts. they are now opening up the chinese books. in fact, they said they discovered some of the chinese ran massively up in cost overreach, like triple the price for a hospital. in africa, sierra leone, a new government criticized for lending it to cancel the airport that was$300 million

not fully utilized during verbal scaled-back import from $7.3 billion -- utilize. from scaled-back import $7.3 billion to $1.3 million. billion. i do not want to overstate it, but we think the governments are getting more sophisticated when they do it. going to your earlier statement, the imf over lent in many cases and built up debt burdens in part of the world. we did debt forgiveness. by the same token, if china makes the same kind of mistake that we might have made 45 years ago, good luck to them to some sort of forgiveness to these countries so they are not saddled with debt forever, crippling them. that is something the entire world would like to see.

thank you for raising that issue. >> one of the reasons it was such a problem was corruption. there would be an imf loan to a where the elite would basically funnel off massive amounts of the loan, and the remaining amount of the money could not possibly generate enough economic development to pay the loan back. it was a bad investment. in the terms of the imf it was to essentially pay back the loan, you had to engage in austerity. you had an elite that had been by this deald because of the corruption and the population that was now suffering the austerity necessary to find some have to pay it back, which was not a good deal for the people of the country.

we wrestled with it, we had transparency around it, academic and institutional debates -- i am not sure if those mechanisms -- in fact, i am quite sure those mechanisms are not present in the chinese consideration of the impact of their debt trap. it seems to me this is a case where it is a deliberate strategy to create leverage rather than a strategy gone awry , if you will. if it is a deliberate strategy, you do not have any plan or desire to remedy it. in three longe, for 99 years, they have a massive ort -- sri lanka, for 99 years, they have a massive port that might also become a military base outpost for china. i'm wondering, as we push to draw attention to the strategy, are there other things we consider doing?

for example, should we push for a policy in the imf and world bank where no loan, no grand project does not go to a country that does not have transparency for international borrowing? senator, those are very good points. within the debt transparency initiative that i mentioned in my remarks, we are working in the imf and the world bank to include terms in loans -- when they do make a loan to a country, the country is expected to make transparent all of the lending that it gets. lenderse, giving the into a situation where someone has better terms than you do. within that framework, we are also trying to make sure we are

talking about debt in a broadly construed context. one of the things that happens -- financial markets are very innovative. loopholes you find one you are closing, there is an ability to find another. one of the things going on is that the promise of collateral or payments in kind, in future years -- so china will make a loan to a country in dollars or and commitcy today, that country, someone in the country will commit to ship them oil for the next 16 years. that takes money from the people of the country and puts it in the pockets of the elite in the near term. secretary mnuchin's initiative on that, which we discussed in the g20, g7, and have made substantial progress on is a ackley in line with that.

i think congress can be insistent as countries kind of look for alternatives, they often come to congress and say, can't you finance this? we are in trouble. combatlook, at a minimum -- at a minimum, there has to be full transparency of the debt you are taking on. >> thank you. marcellus, you wrote about the transparent financing terms promoted by bilateral development banks and contrasted opiateth opiate terms -- terms with bilateral lending, particularly with china, that we see around the world. in turn has led to sovereign debt, which creates global financial fertility bit -- fragile the and instability.

discussed actions in sri lanka , and this often comes to strings attached and leads to staggering debt. the imf managing director also expressed a problematic increase in debt, particularly spending is debt service rises and additional payment challenges. mr. undersecretary, how is the u.s. specifically using its voice, boats, and leverage in international financial and divisions to encourage more trip -- financial institutions to encourage more transparency from china and the developing world, as well imposition of unsustainable debt arrangements on developing countries?

and mr. malpass, if you prefer to chime in, please take the liberty. if you would like to privately confer for a moment or collectively, that is also ok. [laughter] as the vice president said, some areas the chinese loans are linked to resource extraction, some of your to jeopardize country sovereignty, some burden them with unsustainable debt, some have adverse environmental assets, many are enforced by chinese labor, and many are not commercially viable and almost none are transparent. we have to address all of those. on the transparency, as the secretary described, working through the g20 and through the imf and world bank we are a framework for low income countries so that they

have to have a full picture. hasging director lagarde recognized this and been -- on transparency going in. we western donors, it is not like the resource extraction. im information shared with f, and getting to the point earlier about the noncommercially viable projects, if there is anything new in the world it is the private sector. the best option is the private sector building is project. when they do it, they make sure it is commercially viable so you do not get that problem. briefly,ing up on that how can the u.s. better, more effectively catalyze private investment in the development world? has helpedcongress us to a great degree with the build act -- thank you for your

action on that. it will give us new tools to try and fill the gap. it should not and will not replace the private sector, but if there are gaps to get the private sector off the sidelines at the g20, we are working at available and asset classes institutional investors to get the large institutional money off the sidelines to build infrastructure. within the end of specific -- the end of pacific strategy -- are pacific strategy, we trying to work with our private sector and again have our whole government work with them to try and fill the gaps. if there is a regulation, it has to be fixed. if there is some other element that needs to be addressed, we can help the private sector get sort of wraparound services, as it were. >> yes.

secretary malpass? [inaudible] >> i will add to those -- i wanted to give a concrete example. indebted,ry gets over it has typically gone to the paris club. as i mentioned earlier, china has not accepted the invitation .o be in the paris club so it is the biggest creditor -- i will mention one specific ,ountry -- congo brazzaville that has in recent years borrowed way too much money. much of it was borrowed from china. is, other countries --not been land or even make the private sector certainly doesn't want to invest in the congo brazzaville while there is this overhang of chinese debt. but china will not say how much it thinks it is owed, and the

country itself also does not know the terms and is not able to say how much it is owed. further, china does not have a process to reschedule or forgive as secretary to marcella's -- as the secretary was saying, that developed countries have a technique for when a country really has failed to forgive that debt and let the country start to rebuild. that as thejected process. >> this is instructive. ms. siegelnd panel, noted china's reluctance to prepare -- two be involved in international arrangements, the paris club in particular. in the paris club, china is

listed as an ad hoc participant, not a permanent member. for those that might not be familiar with it, what is the paris club, why does it matter, explains the chinese reluctance to become an official member of the paris club? -- is, and i will use myself have not been to the paris club, so i know some about it from my previous stint at treasury, and it is under my purview -- it is a group of creditors that meets in paris, official creditors. so that would be the export-import kinds of banks around the world. the military lending that goes on, and other forms of official credit. they sit down when a country has failed -- it is like a bankruptcy process, where a country is unable to pay, then the creditors get together and think about what to do, and

oftentimes that means extending were actuallyoans organizing the forgiveness of debt. as an ad hoc member, china was invited -- and this has been going on for several years, predates the current administration. the same room with other creditors, they listen to the disclosure stated, and it is almost like you could go and sit in a bankruptcy proceeding and tear everybody else's debt, but you don't tell the group what you are owed by that company. than works with the creditors. china here is the information. what has been done in recent meetings, they meet monthly. in recent meetings, the rest of the world has asked china to step out of the room when certain debts are discussed,

because china, by not participating, needs to be excluded from the group. where now at the point we, the u.s., have suggested to the other participants in the paris club that china not be invited to future meetings if it is not going to participate in a given discussion. is a disclosure issue, where they could be playing a constructive role in the world, and the biggest creditor in many countries, and they should be doing this but have declined. >> very briefly, this subcommittee hearing is a multilateral economic institution in u.s. foreign-policy once again. so many of the challenges and concerns that so many of us vocalize with respect to china and its predatory economic our g7es are shared by

partners, g20 member countries. i would like the thoughts -- give us a letter grade or your qualitative assessment of how the united states is doing on a multilateral basis and working with other countries to address these concerns and these predatory practices. >> i will give us a be plus or + or a-nus -- give us a b . trumping is, they administration and the u.s. government as a whole is a leader in almost all of the international organizations that are going on, leading in a freedom, of more higher per capita incomes, better economic growth, and the way to do that does not mean that we want the organizations to spend more money. in fact, one of the things i have tried to get us to do is

have these multilateral bodies have a lot fewer meetings and less talk, and more action within them, and somewhat theessfully, in the g20, in framework and other frameworks in scaling back their work streams. i mentioned the financial stability board early in my remarks. >> thank you. close let senator merkley of this panel. thank you, gentlemen. that the worldg bank had some $60 billion worth of projects in china. i was thinking about that is -- as i have seen china of all from the first trip there -- china evolve from i first trip there, an economy based on

bicycles, to a system choked with cars, to yet another trip where eyewitness a massive new -- where i witnessed a new metro system and 200 mile per hour train system. should we still be sending development loans to china? >> in my view, no. in the world bank reforms that have been put on the table -- the the world bank management has committed to them this year -- they will be winding down, graduating china from idrd lending, the part of the world bank that is currently still lending to china. however, the asian development and plans lends to continue lending, and could substantially scale back and discontinue that lending.

not to defend, but i would say these -- to senator young's very how is the u.s. we can havehese -- state reform is really push hard casesem, but in a lot of we do not have control over the organizations and they do not want to go in a direction we are indicating. in regards to china, my final point is the world community is pretty much in line now, recognizing that china has been taking advantage of the system. so there is actually good support within the g7 and even g20, and even the bigger bodies that china has to change and stop taking these loans to wind down its borrowing from the institutions. >> last friday, the trump

released itsn national climate assessment that got a lot of attention, despite being released the day after thanksgiving, because it laid out the already massive damage that is happening in the u.s. due to climate chaos and how those impacts will accelerated over-- will accelerate the years to come. should our international it -- international institutions of lending adopt a strategy of only financing or primarily financing a renewable energy strategy, non-carbon burning strategies, given the grave consequences that we are facing from carbon pollution? in most cases, the organizations try to have high quality projects that an -- and thet, and

projects are aimed at having the people of the country get forward in terms of the availability of energy, the availability of even heating in certain countries. i would say the policy structure, as i mentioned before -- we have nearly 100 congressional mandates, many of which might be, mainly the majority, are aimed at environment of within the multilateral development banks. i do not know if additional -- i do not think additional legislation is needed in this regard. so i don't know that additional, i don't think additional legislation is needed in this regard. monitored, and

there is substantial evaluation done on environmental impacts now. thank you. a lengthy answer avoiding the core point of the question, but thank you. i thank you gentlemen, for your time, testimony and service. i plan to keep the record open for 48 hours. i appreciate you submitting timely responses to any questions submitted in my absence, when i had to step out. youour schedules permit to stay for the second panel, i would appreciate that but i understand if your schedules demand that you depart. a few minuteske to transition and permit the participants to take

their positions. [captions copyright national cable satellite corp. 2017] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]

: our second panel consists of five members of former administration, expert witnesses. the honorable clay lowry, a visiting fellow from the center for global development to also .erved as assistant secretary scott morris, senior fellow and director of the u.s. policy development program. as deputy assistant secretary for development finance and debt at the u.s. treasury from 2009 through 2012. illm,an,===r h illman, i welcome

each of you. thank you for being here. your written statements will be included in the record. i ask each of you to summarize or written statements so we can a,aged in a extended q and and conclude the hearing about 45 minutes from now. ery.low thank you for the opportunity to testify. i'm going to skip the part about multilevel economic institutions. when thinking about these institutions in terms of foreign policy, the committee asked about u.s. relations with china. i begin with the trump administration' national

security strategy that refers to china as a strategic competitor. the administration has accused china of being an unfair competitor, and this analysis seems fair and accurate. but to compete, the u.s. should not criticize -- should not just criticize, it should have an affirmative strategy. our strengths in my opinion start with our model of the private sector, not government ourort leading the way, and deep and long-standing relationship with our allies around the world who share our values, not just having transactional arrangements. china may have spent $1 trillion on its belt and road initiative over the past five years, it is more important that in the indo pacific region alone the u.s. has $1.4 trillion in trade annually and invested more

than $900 billion in the region as of 2017. these are u.s. strengths. we should use official tools to highlight and leverage such strengths. that is why the trump administration and congress deserve strength for rethinking -- andd strengthen it strengthening it through the build act. work and risk your countries, the ifc is probably going to need to issue more capital. recently ifc shareholders reached agreement that will allow it to increase and invest -- increase its investments.

walking away from the transpacific partnership was reckless and a gift to china. higher of establishing standards, we are stuck trying to cobble together i lateral deals that appeared to rely on a model of managed trade. takenministration has not advantage of building a coalition to confront china, but has threatened to impose tariffs on our closest allies on the laughable justification that importing automobiles threatens our national security. rather than making china an outlier because of its behavior, the administration's unpredictability on trade could cost us allies. this leads me to my last point, what can congress do?

congress should work with the administration of the multilateral economic institutions. bank as anrld example. i see three areas of action for congress. first, approve the capital increase for idr be. second, authorize the capital increase for ifc, which will not cost money for appropriations, and third, work with the administration on the 2019 ida replenishment. the committee may want to assert its role on u.s. trade policy as it concerns china. i encourage the committee to press the administration to share its end goal for the current trade war, or at least a that wouldgreement address legitimate concerns about china's trade practices. thank you. chairman young: thank you. line.oing to go down the

miss hellman. missss hillman thir hillman. ms. hillman: the united states is headed down a potentially dangerous isolated road. whether it is the struggle for good jobs that pay a living wage, i'm a change, the wealth gap, extremism, these are not problems that can be isolated or solved the united states alone.

these are complex problems that will require global solutions, and yet these problems are rising at a time when our international economic institutions are under siege. they are responding to a backlash from globalization. they are being attacked from outdated mandates that do not address 21st-century problems. and they are being questioned in terms of their effectiveness, effectiveness, relevance and legitimacy. it is most acute in the world trade organization. why the crisis at the wto? there are a number of sources -- sources ofat's frustration. i will mention two.

there is a lack of balance with the week negotiating arm of the onlywith members reaching one agreement on trade facilitation since 1995, compared to the strong dispute settlement arm of the wto, while the executive part is viewed as highly competent but lacking at the authority to drive change. this lack of balance that appears to be the primary driver for the united states' any process tock reappoint members of the wto's appellate body. so we are now just down to the bare minimum of three members on that appellate body, and any even discussion about how to put new members on the appellate body has been blocked by the united states. secondly, i will mention a recent willingness led by the united states to impose tariffs basiciolate the wto's

rules, which leads many to question, what is the point of having a rules-based organization of major members regularly flout those rules? it is critical that the wto be fixed immediately. the united states need to take the wto path if it is going to fix problems we have with china. that is what ought to happen. ought to be bringing a big and bold case based on a coalition of countries working to rather to take on china. why? it represents the best opportunity to bring enough leverage together by the trading interests of the coalition, to put sufficient pressure on china to make it clear fundamental reform is needed. a comprehensive wto case would restore confidence in the wto in the rules of the trade -- wto and the rules of the trading

system. third, a broad coalition-based case would lessen the likelihood china coder would effectively retaliate against all the trading partners in this coalition. burdens ofdentiary bringing a case against china because of its lack of transparency would be formidable. but a coalition case what a lie you to pull evidence that is being collected against china from the united states, the european union, japan, kennedy and others. and finally, wto cases have already been tried, but with limited success. few have been limited to a chinese measures or particular industry or set of producers. no panel has yet been requested to rule on the chinese system is a whole, and that is what i would recommend it, -- that is what i would recommend, that

there be a wto case to hold china to the specific commitments it made when it avoid the wto, as well as abroad, arching, non-violation case that says china, you promised you would become a market-oriented economy and you have not done so, if anything you have gone the other way. bring a case at the wto that says, you are violating that basic, overarching notion of being a market economy, and you are violating 12 very specific commitments that you made that you are now violating. egg,u bring this kind of bold coalition -- this kind of bold coalition case against china, that would address structural reforms within china, and we ought to use the multilateral institution of the wto and use the leverage and

power it creates with its binding dispute settlement mechanism, to be the best tool we can and gauge to take on china. you, ms.young: thank hillman. ms. lee. hearing today's provides an opportunity to review the importance of using international institutions strategically and balancing u.s. engagement with international twos and domestic policies. past u.s. trade policy has failed workers and many domestic producers. congress and the executive branch should implement the new approach to global economic integration that prioritizes good jobs and supports democratic decision-making.

strategy is most likely to succeed if implemented with key allies and multi-lateral economic institutions. multilateral rules but the wto has struggled in recent years to achieve consensus on new rules and enforce existing rules. american workers, the wto has often appeared to be an obstacle to a reformed trade policy. towardes are lopsided corporate interests over workers, consumers and the environment. investor rights are prominently protected while protection for workers are almost completely absent. failed to address currency manipulation and permissive tax laws to attract investment.

these are key areas were multilateral trade rules ought to be enforceable. the government has not used its clout at the wto to press for deeper forms. it would only succeed if a were able to build a coalition with other industrialized countries and key emerging nations. perhaps the current stalemate could be an opportunity to build such a coalition. with respect to enforcement, the u.s. has not been able to manage its trade relationship with china since china's acceptance in the wto. the growth of the trade deficit with china is responsible for the loss of 3.4 million u.s. jobs in all 50 states and in every congressional district. jobsy three fourths of the lost work in manufacturing.

that is one reason why getting trade policy is important. by flawedisplaced trade policy were for the most part manufacturing jobs that provide excellent wages and benefits compared to jobs in the service sector area it has hit all workers without college degrees across the country, not just those in manufacturing. widespread wage impacts are more significant than concentrated losses in trade-impacted sectors. the key elements of trade reform include the following, address currency misalignment. must abandon strong dollar dogma. year's tax bill contributed to a higher value dollar, one reason why our trade deficit is growing. the wto and imf have not

provided guidance for addressing currency misalignment, despite the fact that each has some jurisdiction. government should seek to strengthen and clarify currency tools at the wto and imf. be to bringuld countries to negotiate a new accord, as last one in 1985. this is the most effective way to rebalance global trade flows. we should make access to the u.s. market contingent on respect and enforcement of labor rights. the wto must recognize violation is ase workers' rights much an unfair trade policy as the violation of patents or copyrights. and finally, we need to develop a concrete economic plan focusing on skills, workforce quality,nt, job

infrastructure, clean energy and expanding a strong safety net. we need a tax system that supports this plant, but our current plan rewards outsourcing over domestic production. it remains riddled with loopholes and after last years legislation, fails to adequate late address revenues. -- fails to adequately address revenues. senator: mr. morris. morris: i agree with the case that has been made with multilateral development banks. i do want to say on these institutions, u.s. leadership depends on our willingness to provide financial support. the administration support for the capital increase at the world bank is a positive step,

and while it does not benefit the poorest countries, it will support many countries where the u.s. has important interests. at the same time the administration as scaled-back mdb efforts in poor countries. believe the capital increase merits your support, it should not happen on the backs of other critical mdb commitments. you raise the question about china borrowing from the mdb. this has been something this administration, and frankly the obama administration was critical of. it is misguided to push too hard on this issue, when there is a better alternative. the capital increase agreement requires china and other wealthy borrowers to pay higher interest loans.n their world bank

higher interest charges will raise bank revenues and create better incentives for the bank's are ours. but it is important to recognize how world bank lending to china can and a fit us. bank's projects in china, significant share of which is aimed at reducing carbon emissions. the damaging effects of climate change are not contained within positive action taken in another country benefits others including our own. in some respects, china's lending is somewhat like that of which is sorely needed to spur economic growth. lendings clear china's is pushing other countries into over debt fitness. debtedness.

within the belton road, they are --ming countries including that including pakistan, mongolia, and laos. china intoould bring norms and disciplines of other creditor countries. we can also offer developing countries more options. that should start with the mdb. bringild act will also more u.s. led development finance globally. the new development finance corporation should be in addition, and not a substitute for traditional assistance. u.s. leadership for long-standing programs is doing vital work measured in lives saved, and they deserve support

. the development finance corporation will develop more financing, but it is the standards that will distinguish the institution. the build act lays markers on effectiveness and social and environmental safeguards, things like insuring local communities are compensated if they are displaced by a road project. it will take diligence to sustain these things over time. let me close by highlighting the risk of going too far competing with china. there is a difference between offering choices to developing countries and forcing them to choose. it would be a costly mistake to in a cold warorld fashion between clients of the usn clients of china. chinese finance is a reality and where it is developing value to developing countries, we will

not convince them otherwise. china is sensitive on the debt issue and now is the time to a changehat i seeking in practice, not by developing battle lines in the developing world that are unlikely to hold, but working with chinese officials in settings that matter to them, the world bank, the imf and the g20. s missegal. ms. segal: thank you for the opportunity to contribute to today's .iscussion the imf was created to stabilize the international monetary system and it does this in three ways. it monitors members through imf surveillance. membersdes loans to imf

, and it enhances the technical competence of members through capacity development. the global economy has changed considerably since the imf founding. it now includes human capital flows. we are also witnessing the emergence of china as a global power and challenger to u.s. economic supremacy. this context makes the activities the imf, that is surveillance, lending and capacity building, more important than ever. in terms of surveillance, the imf most recent surveillance of the chinese economy to place in july, and the fund report china can be accessed by anyone with an unrestricted internet connection. because of imf surveillance, chinese authorities and the rest of the world receive an assessment of the chinese economy from highly trained economists. having a fact-based discussion

on a common set of indicators, something required by the fund's articles of agreement, is valuable in itself. that is the good news. where imf lending is concerned, china and its belt and road initiative, or bri, is playing a less constructed role. according to a review commission, the bri is a concept for regional and global connectivity. comes from chinese banks, state-owned banks, the silk road fund, beige and the new development tank. develop --ts will will deliver benefits recipient countries hope for, but the report suggests other projects will not live up to expectations. chinese lending to angola pakistan and zambia have

to theated issues due maturity and costs of chinese loans. missing terms and liabilities left out of officials statistics would compromise the debt sustainability analysis. managing director is correct to call for absolute transparency in order to determine the debt sustainability of any country seeking imf assistance. separate but related to comprehensive data reporting is china's reluctance to join the paris club. given china's role as the largest creditor to low income countries, it's all your to join other creditor nations in seeking cooperative approaches to data collection and debt relief undermines recipient countries, fellow creditors and the integrity of this system.

issue on data and capacity development is particularly relevant. the imf should boost china in tracking credit and credit like instruments and making this information public. development should also be prioritized by recipient countries, so they can assess financing terms. expanding the envelope of date of member countries are obligated to provide in the context of imf surveillance is also worth exploring. advance oures national interests by boosting transparency, promoting global stability and enhancing technical capacity around the world. maintaining u.s. support to the the context of resource reviews represents a responsible use of our own scarce national resources.

in addition to support for the imf and others, the u.s. can help countries that have limited options to finance needed investments. passage of the build act and the indo pacific transparency initiative allowed the u.s. to offer a positive agenda for infrastructure development. i think the subcommittee for the chance to offer my thoughts. young: i thank each of you for your testimony. there is a lot for us to deal within a short amount of time. why don't i begin with our first three panelists. the needou spoke to for a more coherent and comprehensive strategy with respect to some of the issues we are dealing with. lowery, you indicated

congress needs to assert our role with respect to trade policy and perhaps pressure, you didn't say this, but perhaps pressure this and future administrations to clarify our economic security strategy. i will give you an opportunity to respond. illman, you focused on the wto, indicating a need to fix the binding dispute settlement system, and he suggested this could be done by assembling a suggested-- and you this could be done by assembling a coalition. i'm not sure that is been studied in great detail by the previous or current administration. you indicated the congress working with our executive branch should that woulda strategy

most likely affect positive change that we all want with respect to jobs and incomes and economic stability, if that change were pursued multilaterally. so i think there is a means towards our getting there. i drafted legislation i think get us there. -2757, the national security act of 2018. it would create a statutory periodicnt for the production and submission to congress of a national economic security strategy. what do you think about this idea? we have a written document that can be critiqued the academic community, that will signal to our friends and adversaries exactly what our strategy is.

in as we dobuy with the national security so we are working together for the benefit of the united states. is it a good idea to have a written strategy? i had the honor of serving on the national security council staff in 2001 and 2002. i find the national security strategy to be a very useful document. i have read your legislation. i think it would be a helpful thing. having international economics should be part of any just like on the

national security strategy, there is a national defense strategy that relies on it to be more specific about how the defense department envisions this document. so i think this makes a lot of sense. it creates priorities, and communicates with the administration is trying to do, whether this administration, the next administration are following administrations. itirman young: and much of would be classified in nature and the rest of it would be open source. i think it would be serving a great need by helping to drop a line between economic security and national security, because one of the threats to the wto is the fact the united states has imposed tariffs on steel and aluminum in the name rightional security, and now those tariffs are being challenged at the wto by many of

our trading partners. and the response of the united states has been that somehow we are allowed to violate all of our commitments, because the challenges coming to say you can't put tariffs on steel of 25%, because we agreed to bound our tariffs on steel at 0% duties. so by charging this 25% tariff, we are violating the wto rules. we said clearly we would not impose tariffs, other than equally on all members of the wto, and yet we are putting the tariffs on some but not on others. so what the u.s. is saying in that litigation, we are allowed to do this because we say is it it is in the name of national security. that wto iswith that if they agree with the united states, that you can do anything if you claim it is in the name of national security, every other country can do this to every other product, and say

they can put these restraints on if they simply say it is in the name of national security. hand, thethe other wto says no, united states, you can't do this in the name of national security, the concern is the trump administration will withdraw from the wto under the theory of, who are you, of yu-gi-oh, to tell us what is in our interests in the name of national security? you, wto, goodell is what is in our interests in the name of national security -- to in our interests in the name of national security? it would be very helpful if there could be line drawing. and you asked about whether there is some strategy document that would speak to these china issues i was talking about in terms of wto cases.

the u.s. china economic review security commission recently released its annual report to the congress, and included in their section on trade is this bigger,bringing a coalition case to challenge the straight issues. : i look forward to reviewing your document. it sounds like a useful direction very i believe there is a value in putting on paper and bringing together different agencies to have a coherent strategy. that is often missing in terms of u.s. economic policy. there arerecognize connections between economic security and our foreign policy and sometimes those are legitimate concerns that aren't taken into account.

other governments, particularly china, have a very concerted economic strategy, a long-term economic strategy, and if the united states is passive or not coordinated, we will inevitably lose out. chairman young: it is a bit ironic. i can go to the internet and access china's strategy. in a sense, i have more coherence and clarity about what their strategy is on a going -- thenbasis, then a do i do as a member of the senate foreign relations committee. and i find that not just ironic, but troubling, and a number of y colleagues find it troubling as well.

ms. hillman, with respect to bringing it this one, broad case before the wto against china, the grounds would be the china has violated the expectations of a market economy, a violation of the spirit of the wto agreement, and the expectations you have when invited into the wto. within the 12 specific commitments you indicate the charges should include, that one commits to when you enter the why hasn't the case like this been brought? ms. hillman: there is a number of reasons. to bring ais, trying case as a coalition is difficult because you have to get everybody on the same age, in terms of what kind of claims we want to bring.

in the past there has been a reluctance because china retaliates quickly and immediately against countries that do take action against china. very quicklyliate in this trade sphere, even for fairly and knock u.s. action -- fairly and knock u.s. actions. when the nobel peace prize is given to a chinese dissident, they cut off salmon because they don't want to reward a country where the u.s. -- where the nobel peace prize is given. when a filipino dissident, china bans mangoes. are fearful that china will retaliate in a meaningful way.

if you put together a large coalition of countries, it creates a shield against this ability for china to immediately retaliate. part of it is evidence. it is hard to get enough of this evidence because china is so nontransparent. he simply can't get your hands on the documents you need to prove these cases. simply can't get your hands on the documents you need to prove these cases. most major say the claim against china relates to subsidies. china creates massive overcapacity in steals and aluminum and all these products on the backs of subsidies. and the concern is whether how we get at subsidies in the wto are adequate. right now, you go to roads.

one is that you can show subsidized products are coming into the u.s. market, and you can try to put a countervailing duty on those goods to offset the subsidy. that may work to protect the u.s. economy, but it pushes that subsidized steel out into the rest of the world. so it didn't solve the problem. you bringer hand, if an adverse effects case, the problem is that the remedies pro spector only and only were -- the remedy is prospective only. if that steel plant is already up and running, it doesn't do you much good to say prospectively that you are supposed to get rid of the adverse effects of the subsidy. so the reason why cases have not been brought is that some rules in the wto are not sufficient.

chairman young: i want to give senator merkley time to ask what might be on his mind. us, yes orncourage no, to contact the administration and encourage them to assemble a coalition and bring a case with respect to some of the wto provisions? absolutely, yes. if the case winds, you have leverage over china. if it loses, it will make it clear where the holes are in wto rules that need to be fixed. : you noted that we are helping china reduce

carbon pollution and that is a positive thing. viewpoint frome the administration report last friday that carbon pollution is a significant world problem and we need to act quickly to address it? point was made last month in a report described as a fire alarm that says wake up and act fast on carbon. morris: absolutely i do. the capital increase at the world bank makes new commitment to climate finance that are part of what garner my support for that agreement. i think it is critical going forward. i share that view.

the imf focuses on macroeconomic issues as opposed to development, but the imf has also thought about climate as a and we seemic issue, real macro economic impacts from climate change. mislead: yes, absolutely. i also think the wto could play a more constructive role with respect to climate change, to allow countries that go first to reduce carbon are not put at a competitive disadvantage through trade, so allowing border adjustable methods to adjust at the border for the difference in prices between countries moving quickly and countries moving more slowly. ms. hillman: i totally agree. i would agree with mislead there is more the wto can do to reduce tariffs on anything that would contribute in terms of renewable energy types of goods.

there has been a long fight over what products should be on that list. that fight needs to be over today so that you can go to zero duties and zero restraints of trade inon the renewable energy materials, in order to make the contribution. wto is also working at disciplines on fossil fuel subsidies, which is the other way in which the trading system could contribute to helping, but the answer is unequivocally yes. : i'm not going to say yes or no because i have not read the report and don't have enough knowledge in the area, but i would say listen to the scientists. merkley: i couldn't help

but recall an article about how china is the major financier of new coal plants around the world. i asked my team to get some facts here. china is the largest investor in projects,oal investing $15 billion in the last two years. they have another $13 billion of proposed projects. they are planning 700 new coal plants at home and abroad. and from a new york times article, at the end of 2016, china was immersed in 240 overseas coal power projects. run into a number of these in different parts of the world. and the same articles note that the building of these plants that are on the drawing board completely overwhelms paris. and paris itself is not a

significant ceiling. we will break the barriers that have been set by international scientists for two degrees, under paris. some of you have already mentioned strategies we could in the international, multilateral institutions to take this on. but i hear this fire alarm ringing saying, wake up world. it is very hard because we have deeply-infested ownership of fossil fuel assets around the world, and the owners want to work hard to keep extracting so that burning them, is an enormous challenge. but the international institutions you study or aboutent, charlotte more

-- share a little bit more about. how can multilateral us take ons help this enormous and immediate catastrophic challenge? mislead: the idea had to do with competitive differences when countries move at different speeds to reduce carbon emissions. were to say the u.s. put on a carbon tax and raise the price of producing certain manufactured goods, and other countries, developing countries might move more slowly. fromoduction were to move the u.s. to those places that have not yet reduced carbon emissions, you are actually increasing emissions globally. the could you are moving relatively clean production to a

relatively dirty place. one way to deter that is allowing a border-adjustable tax that would allow for the difference in carbon strategies, and that would prevent competitive gaming of that. penalize countries that do the right thing and move more quickly. and i believe it is correct that wealthy industrialized countries should move more quickly than don'tountries, but you want to hand up with this terrible outcome. we recently had that came back as two kilowatt hour for wind, three cents for solar, and both those were below the power from an already depreciated coal plant. our with the point where the dropping costs of solar and wind

are going to dramatically change the calculations? because even folks who may not share a concern about the health of our planet may want the cheapest energy? mislead: yes, and that is a when thatevelopment energy ends up being cheaper. that is a huge advantage. at this goes back to the long-term planning. like china and germany might have subsidized wind or solar panel production at an earlier stage, when it wasn't so obvious that there was an economic advantage. of thing i kind would like to see the united states thinking ahead, so we are not bringing up the rear. mr. morris: you raised a good point that has not received enough attention. as china goes greener at home they are pushing out dirtier abroad.

the challenge here is that we want to bring china into multilateral norms of discipline, and in this area we need to make sure they exist, things like standards for export credit agencies when it comes to energy finance, development finance abroad. is going build act, it to be important that it has standards in this area that gives us some standing to enforce the massive volume of financing coming out of china and supporting these projects. merkley: i want to turn back to your concept about this strategy for a multilateral challenge. wto process as and that may be on the

complementary side, and deeply dysfunctional maybe a more accurate way to describe it. and fundamentally, we struck a a geostrategic maneuver aimed significantly at separating china from russia, keeping the communist bloc separated. and we said we will give you access to our markets, let you produce goods at different labor standards, and environmental standards, enforcement standards, and at very low wages that mean you will be able to undercut our products, a sweet deal for you. and it was a sweet deal, and it remains a sweet deal, and essentially, every manufacturer in america said, can't we make more money going to the cheapest place in the world and making it in then selling it back, and we lost a major amount of manufacturing. it time to rethink this

sweet deal for china? they are buying up strategic resources around the world. nationalll part of a economic security strategy, road security strategy. my colleague has said, america needs a strategy, and our strategies mired going back to our cold war battle keeping separated.china and we have paid a massive economic price for it. is it time to rethink the whole thing? i think it may be time and part of why i am proposing this idea is part of a resetting of the table these of with china. and the question is under what table setting we have the best

leverage with respect to china. many countries around the world share many of the united state'' substantive concerns about china, all the concerns you just all the china has gotten away with. because it is not just the united states feeling the brunt of chinese exports made with the low labor in the conditions that described. so we have many allies that agree with us, where they disagree is the u.s. unilateral tactic in approaching it. and i don't think we have enough leverage alone to create a kind of change we are talking about in china. the only way you are going to get exactly at the issues you have described is to try to put together a coalition, a large coalition that agrees china must be dealt with.

then, what dos you get at the end of the day, whether it is enough change, enough resetting of that relationship. i don't disagree that when china joined the wto, the expectations were different from the reality and over the first couple of years it appeared china was moving in the right direction, it was opening its economy, it was moving in a more market-oriented direction, it was starting to shut down some of the most environmentally damaging. no about 2004, there is question china took a major, 180 degree turn in the wrong aspect.n, from every it became more state owned, more communist-party controlled, more abusive on a whole series of labor and environmental rights, so i don't disagree with you. i think you are right that we need a very dramatic response to

china, and i think it needs to be a multilateral response and not just unilateral. merkley: our time is expired. i'm going to turn the spec to the chairman. german young: thank you -- : thank you,ng senator merkley. so many more questions i would like to ask, but we have run out of time. a couple of administrative items. i would like to draw attention to a report of which scott morris was one of the co-authors. for those who have an interest of examining debt implications on the belt and road initiative. the report indicates the world bank and imdb should work toward

a more detailed agreement with china when it comes to lending standards that will apply to any bri project, no matter the lender. i would like to enter this report into the record. and as the last order of business, mr. lowery, i will submit a question to you for the record, because you called walking away from the tpp reckless and a gift to china. i would be interested in your thoughts about where we should go from here with respect to multilateral trade agreements. all, for your research and expertise. the record will remain open until the close of business on thursday. senator merkley: i would like to submit a table from the

innovation, technology foundation. isis a summary of what referred to as china's broken wto commitments, a dozen commitments where they have failed to live up to their promises. young: without objection. the record will remain open until thursday, to submit questions for the record eerie -- for the record. >> a live look at the capitol, where the flag is being flown at half staff today in honor of

late president george h w bush. president trump has ordered american flags to be flown at half staff for 30 days in bush's memory. and he has designated this wednesday as a national day of mourning. the white house has announced the president and first lady will attend the funeral of former president bush this week .t the national cathedral >> next week congress faces its december 7 deadline to fund the government and avoid a partial shutdown. awaitspending bills congressional action, which include security, agriculture and transportation. president has requested $5 billion. you can watch live coverage of the u.s. house on c-span and the senate on c-span two.