A former top Obama advisor says the United States can apply pressure on China by tapping its international allies.
Jason Furman, who headed the White House Council of Economic Advisors from 2013 to 2017, told Yahoo Finance this week that the international community’s approach to Huawei serves as an example. In the face of security concerns that the Chinese tech giant was using its equipment to spy, Australia, New Zealand, and the United Kingdom were among the countries that joined the U.S. in banning Huawei from their 5G networks.
Furman argues that the same could be done as the Biden administration applies pressure on China for its policies regarding human rights and territorial aggression.
“What can you do together with, effectively, a coalition of the willing?” Furman said at Yahoo Finance’s US-China Forum. He added that the U.S. “accomplished its goals by getting a lot of other countries on board.”
Furman, a professor of economics at Harvard University, said this would not require the U.S. to rejoin the Trans-Pacific Partnership. The TPP aspired to create a trade pact among 12 Pacific Rim countries, including the United States. The Obama administration sought to be a part of the deal, but former President Donald Trump withdrew from the TPP in his first days in office as a first step to his bilateral trade approach.
The Biden administration’s approach to the TPP is unclear. Furman said it does not appear that Biden is eager to rejoin the pact.
“I don't think it's the world's most important thing economically but it definitely would be a plus,” said Furman, referring to the U.S. rejoining the TPP.
A global minimum corporate tax
The U.S. is already moving to build international momentum on global corporate taxes.
U.S. Treasury Secretary Janet Yellen recently called on the 20 largest economies to “stop the race to the bottom” by setting a new minimum that would allow governments more stability in collecting tax revenue.
The Biden administration is targeting a 21% global minimum tax for U.S. multinational corporations, which Yellen said would reduce tax evasion by large global companies.
Furman said the U.S. could succeed even if only a few of the advanced nations follow Yellen’s call. Any “holdout” country taxing at less than 21% would be losing out on revenue, Furman said.
“There has never been a better time to negotiate something like this globally,” Furman told Yahoo Finance. “There are a lot of challenges, but a lot of countries interested.”
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.