The Economist (2022-02-26) Riva

TheEconomistFebruary26th 2022 Finance&economics 69

whereas those trying to get around Ameri-
ca’s tariffs will only have become more
adept at doing so.
What are the tricks of the trade? One ap-
proach is to exploit what is known as the
“de minimis” rule. According to this, coun-
tries neither charge duties on nor collect
full data on imports below a certain value.
Most developed countries set the thresh-
old at around $200. In 2016, eager to focus
scarce customs resources on high-value
shipments, America lifted its bar to $800,
providing importers with ample scope to
avoid tariffs. Over the 12 months to Sep-
tember 2021, American customs officials
counted that 771.5m de minimispackages
entered the country—a fifth more than
during the previous period—with no esti-
mate of their actual value. Some logistics
companiesnow offer services to American
importers, letting them make bulk ship-
ments to Mexico or Canada and then break
them into smaller packages for tariff-free
entry into America.
Some firms may also be evading tariffs
by presenting false information to cus-
toms inspectors. In their paper, Mr Clark
and Ms Wong noted that American import-
ers could use “low-ball invoices supplied
by their Chinese suppliers”. There also ap-
pears to have been an increase in goods
produced in China but falsely labelled as
originating from other countries. Since
2016 the Customs and Border Protection, a
federal agency, has published a record of
its investigations into potential evasions
of anti-dumping duties. Over the past two
years it has launched 37 such investiga-
tions, up from 24 over the previous three
years. Virtually all have targeted products
from China. In January, for example, cus-
toms investigators determined that Simpli
Home, a furniture company, had imported
quartz products from China but incorrect-
ly claimed they were from Vietnam. In De-
cember they found that a&aPharmachem,
a supplier of drug ingredients, had trans-
shipped China-produced xanthan gum
through India to avoid tariffs.
With tighter rules and closer checks at

theborder,Americacouldstopsomeof

thistariffavoidance.EarlBlumenauer,a

DemocraticcongressmanfromOregon,in-

troducedabilllastmonth—aimedsquare-

lyatChina—thatwouldpreventcompa-

niesfromnon-marketeconomiesfromus-

ingthedeminimisloophole.Ifcustoms

agentsweretoopenmoreshippingcon-

tainersandsiftthroughthemcarefully,

theymightidentifymoreunderstatedin-

voicesandmoremislabelledcountriesof

origin.Butdoingsowouldrequireexper-

tiseandtime—allthemoredifficultwhen

portsaresufferingfrombacklogs.Officials

want tospeedshipmentsup, notslow

themdownwithyetmoreinspections.

Indeed,Americacanbeatleastsome-

whatgratefulforallofthetariffavoidance.

Dutiesattheborderultimatelyactasatax

onAmericanconsumers,pushinguppric-

esforimportedproducts.Atatimewhen

inflationisrunninghigh,tariff-dodging

helpstokeepcostsdown.

Hole in the wall

China, exports to the United States, $bn

By source of data

Sources:GACC;USCensus Bureau; The Economist

*USimportsassumingconstant historical

relationshipwithChinese data

700

600

500

400

300

200

2120181614122010

Adjusted*

China

UnitedStates

Taris implemented

TheIMF’swoes

Lost and fund

I

n the once-bustlingstreets around

the imf’sheadquarters in Washington,

dc, you can hardly spot a soul these days.

Soul-searching is also keeping officials bu-

sy inside the building. With government

debt ballooning everywhere, many contin-

ue to criss-cross the globe, talking with

countries that can still borrow and coaxing

creditors into granting relief to those who

cannot. But the world’s lender of last resort

is hampered by conflict between its mem-

bers—just as rising interest rates threaten

to cause a big bang of defaults.

Two years of pandemic-fighting and

on-off lockdowns have turbocharged glo-

bal debt, both public and private. In 2020

alone it soared by 28 percentage points, to

256% of gdp—the largest one-year rise in

borrowing since the second world war. In

recent months, as central banks have

raised interest rates to combat inflation,

the cost of servicing it has increased, rais-

ing demand for the fund’s assistance. In

most large emerging markets the pain is

manageable, for now. Soaring inflation and

sinking currencies have not yet pushed the

likes of Brazil or India towards crisis.

Instead a quieter crisis is breaking out

in smaller countries devoid of hard curren-

cy. Sri Lanka, Tunisia, Lebanon and Ghana

are all candidates for loan programmes

from the imf. On February 23rd the fund

said it would start talks with Ukraine over a

possible$700mdebttranche.Amongthe

world’s60-oddpoorestcountries,more

thanhalfcarrydebtloadswhichmayneed

toberestructured.Thatmaybeanunder-

estimate:arecentWorldBankreportfound

that40%oflow-incomecountrieshave

notpublishedanydataabouttheirsover-

eigndebtsince2020.

Theimfhasenoughfirepowertohelp

solventcountries.Itsresourceswerein-

creasedaftertheglobalfinancialcrisis,

boostingitslendingcapacityto$1trnto-

day,upfrom$400bnin2010.Ithasalsore-

spondedcreativelytomembers’difficul-

tiessincethestartofthepandemic.When

marketsmelteddowninearly2020,it

launchedashort-termliquidityfacility

through which countries facing cash

squeezescouldborrowcheaply.Italsolent

$170bnthroughrapidcreditfacilitiessimi-

lartoitsstandardloanprogrammes,but

withfewerstringsattached.

LastAugustitalsodoledout$650bn-

worth of new special drawing rights

(sdrs),aquasi-currencyusedtoaugment

countries’ foreign-exchangereserves,to

allitsmembers.Becausesdrsareallocated

basedonwhateachmembercontributesto

thefund,mostoftheissuancewentto

well-offcountries.Just$21bnwasallotted

tothosethatreallyneededit.Butthefund

isworkingtocreateatrustthroughwhich

someofthesdrsallocatedtorichermem-

bersmightbeavailableforlong-termlend-

ingtopoorerones.Thoughtheg 20 prom-

isedlastyeartoponyup$100bnforthe

trust,only$60bnhasbeenpledgedsofar.

Suchprogrammeshavehelpedtotide

overmanysolventcountrieswhenmar-

ketshavedriedup.Butlending,nomatter

howeasyorcheap,isoflittlehelptocoun-

triesthatarenearlybankrupt.Atleasta

dozencountriestodayowemorethanthey

canhopetorepay.Giventhefragileoutlook

forgrowth—cloudedbytightermonetary

policy,aweakChineseeconomyandgeo-

politicaltensions—moremayjointheir

ranks.Withoutdebtrelief,manywillonly

use imfloanstorepayothercreditors,

WASHINGTON, DC

Despite bulging debt across the planet,

the imfis struggling to be helpful

Gaining leverage

Public external debt of low-income countries, $bn

By creditor origin

Source:WorldBank

200

150

100

50

0

201816141210082006

Other

bilateral

China

Paris Club