While the U.S. economy continues to shrink slowly, several prominent countries are considering lessening their dependence on the U.S. dollar. Of course, this does not bode well for US economic interests.
Several of the world’s leading countries are forming a coalition designed to relieve much of their reliance on the West. Brazil, Russia, India, China, and South Africa (BRICS) are the five leading countries that have united to form a reserve banking system that will lessen their reliance on the US Dollar and create “a more multi–polar world.”
Recently, leaders from each of the BRICS countries convened in Brazil to agree on the development of the $100 billion BRICS Development Bank. According to Alonso Soto, “The money would be invested in infrastructure projects within BRICS countries, including the construction of roads, bridges, and airports.” Many expect the fund to be operational by the time the BRICS summit meets next year in Russia.
In the United States, however, economic policy continues to lack much-needed reform as the national debt continues to accumulate. Molly Elgin-Cossart analyzes the BRICS summit in Brazil and offers advice on what the U.S. stance should be in addressing this rising economic partnership. Elgin-Cossart writes that the US should seriously consider restructuring its policies concerning the NSA and intelligence gathering in addition to pursuing economic reforms.
Some countries have vocalized their disapproval of the encroaching spying by the U.S. In an effort to stabilize growing tensions between foreign countries, the U.S. should retrace some of its stances on what are acceptable intelligence gathering techniques in order to prevent possible strain in foreign trade. For example, several prominent U.S. technology firms, such as IBM Corp, have reported weaker sales in China as a result of U.S. cyber spying.
While some may disapprove of the BRICS reserve fund, monetary prosperity throughout the world will grow once the U.S. takes economic and trade reforms seriously.
First, the U.S. needs to revise the corporate tax rate. It is critical for the U.S. to rethink its corporate tax laws which disincentivize many U.S. and foreign companies from placing their headquarters, research and development centers, and jobs within the United States. Michael J. Graetz describes how the U.K., Ireland, and Canada have become favored countries for major corporations due to their low business income tax rates. According to Graetz, the U.S. “has the highest statutory corporate rate in the Organization for Economic Cooperation and Development,” which is currently 35%. With improved corporate tax reforms, the U.S. will likely grow its revenue, which, in return, will provide more opportunities for the United States to trade and contribute more in aiding foreign countries in need.
Second, the United States needs to address its ever growing trade deficit, which is currently calculated at around -$10.347 trillion. Michele Nash-Hoff claims that “our 20-year total trade deficit with China since 1994 is a staggering -$3.287 trillion.” According to Robert E. Scott, America’s trade deficit with China between 2001 and 2011 resulted in a loss of 2.7 million U.S. jobs. It is critical that the U. S. government addresses this issue and come together to formulate trade reforms that will benefit the American people. With a growing trade deficit, the United States continues to weaken its economy and lessen its effectiveness in spreading monetary prosperity throughout the world.
Given the present political atmosphere in Washington, one may not place too much faith in the U.S. remaining the world’s leading economic powerhouse with the strongest currency. Concerning BRICS, it will be interesting to see how this upcoming reserve fund affects US fiscal policies in the years to come.
 “BRICS establish $100bn bank and currency reserves to cut out Western dominance,” RT, July 15, 2014, accessed July 15, 2014, http://rt.com/business/173008-brics-bank-currency-pool/.
 Alonso Soto, “BRICS investment fund likely to have $10bln initial capital-source,” Reuters, July 15, 2014, accessed July 15, 2014, http://in.reuters.com/article/2014/07/15/brics-summit-investment-fund-idINKBN0FK1SV20140715.
 Molly Elgin-Cossart, “What to watch at the BRICS summit in Brazil,” Center for American Progress, July 14, 2014, accessed July 15, 2014, http://www.americanprogress.org/issues/security/news/2014/07/14/93801/what-to-watch-at-the-brics-summit-in-brazil/.
 Michael Martina and Matthew Miller, “U.S. firms brace for China backlash over cyber spying charges,” Reuters, May 20, 2014, accessed July 19, 2014, http://www.reuters.com/article/2014/05/20/cybercrime-usa-china-business-idUSL3N0O62NU20140520.
 Michael J. Graetz, “Inverted Thinking on Corporate Taxes: Instead of trying to bar U.S. companies from going overseas, why not make America more hospitable?” Trade Reform, July 16, 2014, accessed July 18, 2014, http://www.tradereform.org/2014/07/inverted-thinking-corporate-taxes-instead-trying-bar-u-s-companies-going-overseas-make-america-hospitable/.
 Michele Nash-Hoff, “Trade Deficit Would Shrink with Stroke of a Pen,” Trade Reform, July 16, 2014, accessed July 19, 2014, http://www.tradereform.org/2014/07/trade-deficit-shrink-stroke-pen/.
 Robert E. Scott, “Trading away the manufacturing advantage: China trade drives down U.S. wages and benefits and eliminates good jobs for U.S. workers,” Economic Policy Institute, September 30, 2013, accessed July 19, 2014, http://www.epi.org/publication/trading-manufacturing-advantage-china-trade/.