Remarks by Secretary of the Treasury Janet L. Yellen at the Council on Foreign Relations

As Prepared for Delivery

Thank you. Before our discussion, I'd like to speak to the Biden-Harris Administration's international economic policy, which we'll continue to move forward next week at the IMF and World Bank Annual Meetings. Our international economic policy has many objectives, including addressing critical challenges facing the entire globe. But I'd like to especially focus today on how it complements our domestic economic agenda to benefit American businesses and families.

At home, our Administration has driven a historic economic recovery. U.S. GDP growth is strong, our unemployment rate is near historic lows, and inflation has declined significantly. We're now doing everything we can to lower costs for American families and pursuing a strategy I've called modern supply-side economics, which aims to expand our economy's capacity to produce while reducing inequality. We've seen record small business growth and a historic boom in factory construction led by facilities producing semiconductors and electric vehicle batteries. Productivity growth has been strong. More prime-age Americans are participating in our labor force than at any point over the past two decades. And we're reaching people and places that historically had not benefited from enough investment, supporting well-paying jobs for Americans without college degrees. America's strong economic performance is helping power the global economy, which remains resilient though progress across economies has been uneven.

And it's not just our actions at home that are supporting the global economy. But from the start of this Administration, President Biden and Vice President Harris have also charted a new course for America's international economic policy. We've focused on stabilizing and strengthening relationships and working multilaterally, including because we believe that America's economic well-being depends on a global economy that's growing and secure. American businesses and families have a tremendous amount to gain from our connections to the global economy and from U.S. global economic leadership. We need to promote policies, investments, and institutions that support global growth, protect financial stability, and avoid economic instability. This includes tackling challenges like climate change, pandemics, and conflict and fragility that threaten to hold back global growth and that will be high on the agenda at next week's meetings.

Calls for walling America off with high tariffs on friends and competitors alike or by treating even our closest allies as transactional partners are deeply misguided. Sweeping, untargeted tariffs would raise prices for American families and make our businesses less competitive. And we cannot even hope to advance our economic and security interests-such as opposing Russia's illegal invasion of Ukraine-if we go it alone. But the issues we face today, from broken supply chains, to climate change and global pandemic preparedness, to China's industrial overcapacity, also mean we cannot simply draw from an old playbook.

Let me explain how our approach is delivering the benefits of global growth to Americans, tackling global challenges, and countering threats to our competitiveness and national security.

I. Delivering the Benefits of Global Growth to Americans

Let me start with how our work helps Americans realize the benefits of global growth, including through trade and investment. Trade expands the market for our exports, from services to goods like transportation equipment and electronics; helps our producers efficiently source key inputs; and enables American consumers to access more goods at lower prices. The U.S. Chamber of Commerce estimates that more than 41 million American jobs depend on trade. American businesses also grow from investing abroad. And recent research finds that over 10 percent of U.S. employment could be directly or indirectly attributable to foreign direct investment in the United States.

Trade and investment also offer crucial pathways to greater economic security. During the COVID-19 pandemic, we saw American consumers and businesses pay the price of broken or overconcentrated supply chains: When the chips shortage forced temporary plant closures, companies lost revenue, workers lost wages, and families faced higher prices.

Our work to reinvigorate American manufacturing, including through the CHIPS and Science Act, is necessary. But it's not sufficient to realize the promise of trade and investment and to confront supply chain challenges. This requires strategic global engagement.

So, we led efforts to put in place a global minimum tax that will prevent a race to the bottom. It will also level the playing field for American businesses, providing us with more resources to invest at home.

We're strengthening our supply chains through an approach I've called friendshoring, which aims to bolster ties with a wide range of trusted allies and partners.

We and partners launched the Minerals Security Partnership to accelerate the development of critical minerals supply chains. We negotiated a critical minerals agreement with Japan and a supply chain agreement with Indo-Pacific Economic Framework for Prosperity partner countries. We're supporting the Partnership for Resilient and Inclusive Supply-chain Enhancement and working with the Inter-American Development Bank to find opportunities to enhance competitiveness and support key supply chains in Americas Partnership for Economic Prosperity countries. We're leveraging the CHIPS and Science Act to pursue partnerships to diversify the global semiconductor ecosystem. And last May, we took another step forward by launching the Nairobi-Washington Vision to accelerate investments toward clean and resilient economies and supply chains.

I've seen the fruits of our engagement in my travels as Treasury Secretary, from an American company processing lithium in Chile to a U.S.-funded job training facility in South Africa, among many other examples. Through our global engagements, we're strengthening economies around the world. And we're growing American businesses and creating American jobs, supporting American consumers, and increasing our country's economic security.

II. Tackling Global Challenges

America's economic future, however, also depends on tackling challenges that cross borders to affect people and economies around the world, including the American people and the U.S. economy.

I'll start with pandemics. No matter what we do at home, without addressing critical gaps in the global health infrastructure to strengthen global preparedness, preparation, and response, a future pandemic could negatively impact many economies, with significant spillovers to ours.

So, in the aftermath of the COVID-19 pandemic, I worked with fellow finance and health ministers to take actions like launching the Pandemic Fund. It was set up and scaled in record time and is now allocating desperately needed resources in response to its second call for proposals to support countries across the globe, in turn making Americans safer and more secure.

Climate change is another powerful example. The destruction we've seen this hurricane season in the United States is the latest reminder of the need for bold action. At home, our actions include fueling the transition to clean energy through the Inflation Reduction Act, developing Principles for Net-Zero Financing and Investment to affirm the importance of credible net-zero commitments, and addressing the risks climate change poses to U.S. financial stability. But emissions everywhere around the globe contribute to climate change. And we're impacted by increasingly severe and frequent climate-related events, wherever they occur. Damage to infrastructure abroad affects the availability and prices of energy and agricultural goods like coffee and cacao. We suffer from smoke from wildfires in Canada and from precarious shared water resources with Mexico. And the potential risks climate change poses to global financial stability are increasingly widely recognized as well. This means that helping countries around the world mitigate and adapt and financial institutions globally pursue transition finance is crucial, including to protect American businesses and families.

So, we've made a massive push as part our multilateral development bank evolution agenda to better equip the MDBs to help countries address climate change, including through increasing climate financing. We've worked with partners to launch Just Energy Transition Partnerships to help countries accelerate their transitions and strengthen their economies. We've pursued bilateral efforts like the partnership we launched with Brazil's Fazenda in July and are working multilaterally, such as through the G20 Sustainable Finance Working Group. And we've been focused on harnessing the private sector, including through the Partnership for Global Infrastructure and Investment and the Global Agriculture and Food Security Program.

Alongside pandemics and climate change, conflict and fragility abroad also pose risks, to countries around the world and to America's economy and national security, so we're engaging on these challenges as well, including through the MDB evolution agenda.

Nor do risks to financial stability respect national borders, making the work of the Financial Stability Board and other global collaboration critical to ensuring a safe, stable, effective financial system and protecting the global and U.S. economy.

Put simply, in engaging to support countries around the world in tackling today's greatest challenges, we also lower the likelihood of negative spillovers to the U.S. economy like weakened markets for our exports and increased instability. The scale and nature of these challenges mean there is no alternative but to engage.

III. Countering Threats to our Competitiveness and National Security

Let me end by emphasizing a third way in which our global engagement supports Americans: bolstering our competitiveness and national security, including through our approach to China.

Trade and investment with China can bring significant gains to American firms and workers and must be maintained. But we must also have a healthy economic relationship based on a level playing field. China's barriers to market access and unfair trade practices currently cause challenges for American firms and workers and for other foreign businesses looking to operate in China. China's policies are also leading to industrial overcapacity in critical industries, threatening the viability of American and other firms and increasing the risk of overconcentrated supply chains that undermine global economic resilience.

No matter how much we invest to strengthen our manufacturing at home, we cannot support American businesses and families without also engaging to address these challenges. The United States announced strategic and targeted steps in key sectors as a result of the Section 301 review to respond to unfair trade practices by the PRC. The European Union and emerging market countries have also taken or are exploring actions. I've raised concerns about overcapacity frequently and directly with my Chinese counterparts, including on multiple trips to China, and with America's allies and partners, who share these concerns and are also responding. This growing international consensus is a powerful indication to China that it must shift its practices.

Russia's war on Ukraine has also revealed the necessity of strategic global engagement. Russia's invasion caused immediate economic shocks, like record gas prices in June of 2022. At home, releasing barrels from the Strategic Petroleum Reserve and record domestic oil and natural gas production helped address our short-term needs. But this would not have been enough to keep global energy markets well-supplied, nor to oppose the threat Putin's actions pose to the rules-based international order that underlies the strength of the global economy and the international financial system.

So, we formed a strong coalition and put in place a novel price cap, helping keep prices lower for American and global consumers than many economists forecast following the invasion. We've continued to strengthen sanctions that constrict Russia's ability to wage war. We're working towards unlocking the value of Russian sovereign assets to support Ukraine. This sustained, global action allows us to accomplish what we could not alone, delivering immediate results and sending the clear message that dictators like Putin do not operate with impunity. Failing to engage or not engaging strategically would have disastrous effects, enabling Putin to destabilize Europe and undermining our collective security and the global economy.

In the coming months, we will continue to be focused on these and other priorities, including using all the tools at our disposal in response to the ongoing conflict in the Middle East. We've imposed sanctions on terrorist actors including Hamas, the Houthis, and Hezbollah. And we're also working to increase stability in the region by ensuring that legitimate aid flows reach Gaza and pressing for measures to support the West Bank economy.

IV. Conclusion

Over the past four years, the world has been through a lot: from a once-in-a-century pandemic, to the largest land war in Europe since World War II, to increasingly frequent and severe climate disasters. This has only underlined that we are all in it together. America's economic well-being depends on the world's, and America's economic leadership is key to global prosperity and security. American isolationism and retrenchment will leave all of us worse off.

I am convinced that there is simply no other path forward than the one we will continue pursuing next week and in the months ahead: strategic international economic policy that delivers for American families and businesses and others around the world.

I now very much look forward to our discussion.

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