The heads of the International Monetary Fund and World Bank Wednesday briefed members of the U.S. Senate Foreign Relations Committee on global economic crisis and the just concluded meeting of world finance ministers that they attended in Britain.
Dominique Strauss-Kahn and his counterpart at the World Bank, Robert Zoellick, came to the Capitol to seek U.S. support for emergency lending to countries in distress. The U.S. administration and western European countries are seeking a doubling of IMF resources so that the global agency is able to meet any emergency needs of its over 185 member nations. IMF chief Strauss-Kahn said he supports not only the increase in resources but also more voting power within the IMF for emerging economies.
"I think it is not only unavoidable but certainly useful that in the coming months the governance of those institutions [IMF and World Bank] will be reformed," said Dominique Strauss-Kahn. "Because emerging countries and also low-income countries need more room, more voice, more representation."
Unlike most international organizations, IMF voting shares are apportioned according to economic strength, meaning that the United States, Japan, and Western Europe have the most say. The IMF says it will revise the voting shares by 2011.
World Bank president Zoellick expressed concern about trade protectionism and warned senators about the negative effects of countries restricting imports.
"The danger of protectionism, whether of a creeping or overt type, would really make a situation that is very bad much worse," said Robert Zoellick. "That's what you did see in the 1930s and that does trigger a whole series of beggar-thy-neighbor policies."
Some analysts worry that the United States itself may be turning protectionist. The Obama administration has moved to restrict access to the U.S. market by Mexican trucks involved in cross-border trade. Mexico says the move violates the U.S.-Canada-Mexico free trade agreement, NAFTA, and is considering retaliation. The world economy is currently experiencing its worst slump in forty years.
The ranking Democratic and Republican members of the foreign relations committee voiced support for both the IMF and World Bank and indicated they will support legislation to provide more money to them.