The Korea Times | 송경진 (사)혁신경제 사무총장, 파이낸셜뉴스 글로벌이슈센터장, 전 세계경제연구원 원장
Unilateralism tends to create more problems than solutions. The U.S. Inflation Reduction Act (IRA) is a good case in point. Enacted on Aug. 16, the IRA is meant to deal with challenges the U.S. economy is faced with ― to fight high inflation, combat climate change and create a 15 percent minimum corporate tax rate.
The causes are noble; however, it is centered on investments and jobs in the U.S. at the expense of its trading partners and friends. Unilateralism imbued in the Act with little concerns for its global impact is hurting carmakers and workers of its friends and partners in global supply chains and the U.S.' global leadership.
While there are differing views and estimates, with regards to its possible effect on inflation and confidence of its friends and partners, the U.S. global leadership is undoubtedly likely to weaken further as it stands. The estimated impact does not look big enough to offset the damaged confidence of friends and partners. The Penn Wharton Budget Model at the University of Pennsylvania estimated a low impact on inflation. The U.S. Congressional Budget Office is also skeptical of the IRA's effect on reducing inflation at least until 2023.
The U.S.' global leadership was instrumental to the world's peace and prosperity in the post-World War II era characterized by democracy, free trade, globalization, and multilateralism. Deepened economic interdependence and economic successes such as Korea and China are the products of the U.S.-led world order that is now almost in tatters due to increasingly permeating nationalism, protectionism and unilateralism.
With just 55 days left as of Sept.14 until the midterm elections U.S. politicians are a distinct group of people more positive about the IRA's impact on inflation, clean energy transition, and employment.