Janet Yellen calls for reshaping supply chains that are ‘insecure’

WASHINGTON — Treasury Secretary Janet L. Yellen said Thursday that global supply chains have proven unstable amid the pandemic and Russia’s war in Ukraine and called for an overhaul of trade relations focused on “trusted partners”, even if this meant higher costs for businesses and consumers.

Ms Yellen’s comments came during a press conference at the World Bank and International Monetary Fund Spring Meetings, where policymakers around the world discussed how to revive economic growth and tackle inflation while maintaining pressure on Russia. The Treasury Secretary said protectionism, or increased taxation on imports, was not the answer, but the economic benefits of the vast global network of supply chains were not worth the risk of relying on adversaries .

“Our supply chains are not secure and they are not resilient,” Ms Yellen told the Treasury Department. “And I think that’s something, in terms of long-term risk to the United States and other countries, that’s a threat that needs to be dealt with.”

Ms Yellen added that trusted trading blocks should be large enough to avoid amplifying inflation while ensuring the security of supply chains.

“I don’t think that would mean permanently higher inflation, just a bit higher level of cost, a bit less efficient but more resilient system,” she said.

Global policymakers attending meetings this week have been grappling with how to deal with the supply chain disruptions that have led to soaring food prices around the world. Officials will release proposals in the coming weeks to boost food supplies, ensure small farmers can afford to buy fertilizers and improve social safety nets in places with food insecurity.

“There is a very real risk that soaring global food and fertilizer prices will lead to hunger among more people, further exacerbate inflation and adverse fiscal and external positions,” Ms Yellen said.

This week’s economic forecast highlighted the significant headwinds that the war in Ukraine and the sanctions against Russia were inflicting on the global economy. The Biden administration made clear this week that it intends to step up the pressure on Russia, rolling out new sanctions and announcing $1.3 billion in military and economic aid to Ukraine on Thursday. .

At the press conference, Ms Yellen said rebuilding Ukraine would be costly and suggested that Russia should bear some of that expense.

“It’s clear that the reconstruction costs, ultimately, in Ukraine are going to be huge,” Ms Yellen said. “And certainly I think we should be looking to Russia somehow to help provide some of what is needed to build Ukraine.”

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