Can South Asia Do Better Than East Asia?

♠ Posted by Emmanuel in , at 5/29/2009 02:39:00 PM
The UNDP's Ajay Chhibber (cool name that) makes a lot of sense in claiming that South Asia will likely outdo East Asia in terms of economic growth in 2009. Although slow to reform and lacking in social safety nets, two things go in their favor: First, their export wares are largely basic goods whose demand is presumably not as quickly hit as big-ticket items such as electronics. Second, their reliance on exports as a percentage of GDP is altogether smaller. This is, of course, on top of the more recent news that India's Q1 2009 growth came in higher than expected at 5.8%.It's nice to hear some good news, eh? From the Financial Times:Ajay Chhibber, the head of the UNDP in Asia Pacific and a former World Bank senior economist, said that growth in the east Asia region would be dragged down by the poor performance of countries like Thailand, Singapore and Malaysia. He warned that many of the so-called group of Asian Tiger economies could no longer pursue the export-led growth strategies...
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EU to Russia: Join WTO, Then We Talk Trade

♠ Posted by Emmanuel in , at 5/28/2009 09:43:00 AM
I've had this looooong running series of posts [1, 2, 3, 4, 5, 6] about Russian negotiations to join the WTO. My intuition of Russia being a long shot contender is based on the Ukraine and Georgia joining well ahead of it. After cutting off the former's gas supplies and engaging in a border conflict with the latter--both matters with trade interests, of course--Russia will have an almighty difficult time of getting these two countries' assent as it must do with all WTO members.Now comes word that the EU Trade Commissioner Baroness Ashton is prodding Mother Russia to join the WTO prior to engaging in negotiations concerning EU-Russia trade. While there is an existing deal, both parties want to update it to account for changes since then. Moreover, with Russia engaging in all sorts of protectionist policies, those don't bode well either for its membership prospects. Here are excerpts from a recent article by Reuters:The European Union's trade commissioner ruled out on Friday finalising...
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WTO Lite: November Ministerial But No Doha

♠ Posted by Emmanuel in , at 5/28/2009 08:51:00 AM
For all the talk about waiting for Godot with the new Obama administration getting its trade negotiators in place, preliminary results are now in and are quite disappointing. In theory, the organization is mandated to hold ministerial-level gatherings every two years. Given the disappointment that was Hong Kong 2005 which failed to make much headway towards completing the Doha Round, no ministerial meetings have been held since then.News out of Geneva is that there will be a ministerial meeting in November 2009. But, get this--global trade talks (i.e., Doha) are off the agenda. Hence, key issues concerning LDC access to agricultural sectors of industrialized countries and industrialized countries' access to manufacturing sectors of LDCs will be by and large glossed over. From Bloomberg:The World Trade Organization scheduled its first ministerial meeting in four years in November, though global trade talks won’t be on the agenda. Under the Geneva-based WTO’s rules, ministerial...
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Don't Believe the Hype on Dambisa Moyo

♠ Posted by Emmanuel in ,, at 5/26/2009 09:58:00 AM
Being sympathetic to the aid skeptic argument, I may surprise some readers in being skeptical about today's highest profile aid skeptic, Dambisa Moyo. The basics of the story behind Moyo are well-known: Aid skeptics have typically been dowdy white guys from industrialized countries. Then, all of a sudden, this attractive Zambian woman--formerly of Goldman Sachs--releases a book on Dead Aid as a spin on Live Aid and receives a boatload of attention in the process. In response, the aid fundamentalists are all over her case. It's a sad reflection of our times when celebrity seems to be mistaken for genuine intellectual achievement,...
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A More Positive Spin on Concluding WTO Doha

♠ Posted by Emmanuel in at 5/24/2009 03:39:00 PM
I've made a previous post taking note of the cool reception given to the new US Trade Representative Ron Kirk during his first visit to WTO headquarters in Geneva. In the interest of fairness, however, I should add a couple of qualifiers and present more sanguine opinions. (Also, I have to erase bookmarks stacking up in my bookmarking account.) First up, Reuters notes that despite its lessened stature in international politics, the rest of the world is still "Waiting for Godot" (the US) like in the famous play by Samuel Beckett. Has Washington's attention gone to presumably heftier matters like keeping America afloat?The diplomats...
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I Really Want to be Wrong on US Not Losing AAA...

♠ Posted by Emmanuel in , at 5/22/2009 09:39:00 AM
FX commentators, like other market commentators, are held hostage by the news cycle in constantly having to provide an explanation for market movements no matter how far-fetched. The latest one making the rounds in the FX world is that a threat to downgrade Britain's sovereign debt from AAA given a negative outlook is causing dollar weakness. (As I write, the euro is flirting with the $1.40 handle.) Since the structural flaws of the American economy are similar to Britain's, the story goes, then Treasuries be in imminent danger of downgrading. Take this write-up from Reuters (please):The dollar fell to a 2009 low on Friday as fears intensified that the United States could lose its triple-A rating, while renewed caution about the world economy and banks prompted Asian and European stocks to slip.The dollar's latest decline started when ratings agency Standard & Poor's cut its ratings outlook on Britain to negative from stable, stoking fears other AAA-rated countries which...
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Will the Real Michael Pettis Please Stand Up?

♠ Posted by Emmanuel in at 5/22/2009 08:42:00 AM
I honestly don't know what's whose when it comes to discussing global economic imbalances: being fundamentally incorrect about its nature but pushing the same story line anyway despite all evidence to the contrary (Bretton Woods II) or pulling a 180 degree turn without explanation like Michael Pettis now does. In the past, I have pointed out that he hasn't really come across a "deficits don't matter"-style story he didn't like [1, 2]. Let us have a look at Michael Pettis circa 2005 from the op-ed pages of the Wall Street Journal commenting on "Deficit Attention Disorder":Seen in this light, concerns about whether the world can continue to finance the U.S. current-account deficit are overstated. Not only can the world continue to finance the U.S. deficit into the foreseeable future, but the deficit may arise precisely because a large part of the world must continue to accumulate financial assets in the U.S. to help badly needed future adjustments. Instead of bewailing the current...
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Will UAE Tantrum Sink Mideast Common Currency?

♠ Posted by Emmanuel in , at 5/22/2009 07:23:00 AM
News out of the Middle East now hints at the reason why the UAE has pulled out of plans to establish a pan-regional currency union (somewhat) resembling the EMU. The UAE is said to be throwing a tantrum over where the central bank for this new grouping will be. In this version of the story, the UAE wants to secure Abu Dhabi's as a regional financial hub, while the Saudi's also envision this role for Riyadh. There may also be jealousy over Saudi Arabia being in the G20. From Emirates Business 24/7:The UAE's surprise decision to pull out of a EU-style monetary union planned by regional oil producers is being seen as an expression of the country's unhappiness at not being chosen to host the Central Bank of the six-nation Gulf Co-operation Council (GCC), analysts said yesterday."A hint of the UAE's unhappiness at the decision to locate the headquarters of the GCC Central Bank in Riyadh was conveyed the very same day the announcement was made when the UAE expressed its 'reservation'...
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Spoils of Victory: India's Duty Slapping Frenzy

♠ Posted by Emmanuel in , at 5/20/2009 09:59:00 AM
The Nehru-Gandhi dynasty lives on with the resounding victory of the Congress Party in the recently held nationwide elections in India. The financial section of India Times, the Economic Times, heralds this victory as a potentially important occasion for Indian trade and industry. For, the number of seats won by the Congress Party means it can avoid currying favor with coalition partners possessing quirky (read: anti-business) agendas like its erstwhile Communist allies. Indeed, many commentators are now banking on this victory to secure forward momentum in the long-running soap opera that is the Doha Round of trade negotiations.Or is this really so? In recent months, India has stealthily applied import restrictions--without much explanation, I should add-- to toys coming from China [1, 2, 3] and steel coming from South Korea. Hot on the heels of the Congress Party's victory comes word of India informing the WTO that it will invoke safeguard clauses to protect segments it says...
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Even Worse Math: "Bretton Woods II" Must Die

♠ Posted by Emmanuel in , at 5/19/2009 11:39:00 AM
The "Bretton Woods II" theory was one of the first to come out of the woodwork while America's current account deficit was exploding to dramatic effect. That is, it added a veneer of respectability to Dick Cheney's famous economic insight that "deficits don't matter." According to the Bretton Woods II authors, deficits don't matter because countries developed by using the United States as a major export market. Insofar as these countries were willing to provide vendor finance on the capital account side by buying American assets and accumulating reserves to keep down the value of the dollar, what existed was, in their words,...
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IIE's Bergsten, Bad Math, & PRC Yuan Intervention

♠ Posted by Emmanuel in , at 5/16/2009 12:42:00 PM
I was very puzzled after reading this statement in a letter to the Economist from Fred Bergsten, director of the Peterson Institute of International Economics. In response to a recent article on China's currency practices, he had this to say: The punchline to your article on China’s foreign-exchange reserves is that “China cannot sour on the dollar without letting its own currency rise” (Economics focus, April 25th). This is not correct. China can continue to hold down the yuan’s exchange rate by buying dollars but then convert those dollars into euros or other hard currencies. The exchange rate between the dollar and the euro would change but the yuan would remain substantially undervalued. Sorry, Mr. Bergsten, but it is you who are incorrect. Let's go back to Foreign Exchange 101. All the world's exchange rates are expressed with reference to the US dollar, also known as the "buck" or the "greenback." Now, there are only two possible ways of expressing these exchange rates....
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The Economist's Love Affair w/ Anglo-Saxonomics

♠ Posted by Emmanuel in at 5/15/2009 09:30:00 AM
Like the Wall Street Journal, the Economist is a fine publication if broad and detailed news coverage--particularly financial news, of course--is what you're after. However, the opinions expressed in both news outlets are decidedly slanted. In the former case, an outdated neoconservative opinion still predominates as if these were still the Reagan years and the subprime debacle didn't really happen. In the latter case, we have seemingly undying fealty to the tenets of Thatcher(ism) despite Britain's debacles which are highly reminiscent of America's. The trouble with the Economist, as any casual reader should know, is that...
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More China-Bashing Currency Proposals from US

♠ Posted by Emmanuel in , at 5/14/2009 05:50:00 PM
There is another bill being contemplated in the US Congress targeting trade evildoers who undervalue their currencies (read: China). We've been here before with Schumer-Graham, Baucus-Grassley-Schumer-Graham, Ryan-Hunter...I'm sure that I've missed some as these proposals pop up more often that Michael Jackson at kiddie parties. There isn't much for me to add other than that representation from virtually every sunset industry in America appears to have signed on, going by the list on the "Fair Currency" website. And, quite frankly, I doubt whether appreciating others' currencies will solve the basic problem of many American manufacturers selling stuff buyers don't want. Chrysler and GM, anyone? In the final analysis, US manufacturing's wounds are largely self-inflicted. You couldn't give away many of their hulking gas guzzlers if you tried. Apparently, Debbie Stabenow (D-Michigan) is still of the opinion that Japanese is unfairly manipulating its currency despite the yen being...
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An Inauspicious WTO Debut for USTR (Cap'n) Kirk

♠ Posted by Emmanuel in , at 5/14/2009 05:10:00 PM
The Doha Development Agenda is nearing eight years in purgatory (hell?). The Americans in particular have tried all sorts of things to get it moving: Swiss formulas, sectoral deals, etc. have done little to convince LDCs that they'd be better off completing Doha than staying away from it. New US Trade Representative Ron "Cap'n" Kirk has made baffling suggestions in his first visit to WTO headquarters in Geneva that appear to make matters worse. That is, the new terms he proposes appear even more lopsided to American interests.Basically, he is calling for LDCs to stop pushing for special safeguard mechanisms in case these countries become inundated with exports after implementing tariff reductions. (India has been keen on these to help protect subsistence farmers, though Americans clearly have different ideas.) Worse yet, Kirk has made suggestions that the lack of movement on a plutilateral basis should prompt more bilateral arrangements--something that would again favor wealthy...
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Shanghaied? MNC Banks in China (Again)

♠ Posted by Emmanuel in , at 5/14/2009 08:10:00 AM
The list of barriers to multinational financial services providers operating in China are plentiful. In this new Wall Street Journal article, highlighted are well-known restrictions on trading shares of common stock among non-Chinese, currency convertibility, and restrictions on inward and outward capital mobility. In this day and age where the "Washington Consensus" triad of liberalization, privatization, and deregulation has become much derided, you can probably argue that this is a good thing and find agreement. However, the issue is also one of trade in fair market access among MNC banks wishing to tap into the China market....
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And Now for Iraqi WTO Accession

♠ Posted by Emmanuel in , at 5/05/2009 03:09:00 PM
I am a bit strapped for time, but here is a thought-provoking if often quizzical article for your consideration. A partner at the powerhouse law firm DLA Piper argues for Iraqi inclusion in the WTO. The piece was occasioned by a high-level delegation sent from Iraq to the UK last week drumming up business. It appears this chap is a true believer in the civilizing qualities of trade as reiterated by figures as diverse as Adam Smith and (gulp) Thomas Friedman. From the Daily Telegraph:Last week's visit provided a reminder of the trade and investment opportunities in Iraq, a country currently achieving GDP growth rates of 7.8pc - rates to which many countries can only aspire. As part of Iraq's continued reintegration into the global economy, the UK must consider what more it can do to support Iraq's World Trade Organisation (WTO) accession process.World leaders should cooperate to encourage Iraq into the WTO, not just as a major benefit to Iraq but also to the rest of the world....
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Japan, China Contest Asian Power via Loans

♠ Posted by Emmanuel in ,, at 5/04/2009 12:22:00 PM
Call it the Larry Summers chronicles. Given a choice, most Asian countries experiencing balance-of-payments shortfalls do not want to resort to the IMF. This aversion is directly attributable to what many in the region and beyond regard as the IMF's botched handling of the Asian financial crisis of over a decade ago when "Washington Consensus"-style policies of liberalization, privatization, and deregulation were forced down the throats of borrower countries. Even then, Japan tried to set up an alternative Asian Monetary Fund (AMF) to counter the perceived harshness of IMF policies. Then-US Treasury Secretary Larry Summers...
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Asia Retooled; ADB on Export-Led Growth's Demise

♠ Posted by Emmanuel in ,,, at 5/04/2009 10:16:00 AM
If you are convinced that Anglo-Saxon forms of economic governance observed in the US and UK emphasizing financialization and consumption are now history, then you should also believe that export-led growth which counterbalanced debt-fueled consumption binges in the former countries are similarly endangered.It seems that our colleagues over at the Asian Development Bank are coming to a similar judgment. For once, I am glad that a major international meeting is being held in a tony resort area. You see, the Asian Development Bank (ADB) is currently holding its annual meetings in Bali, Indonesia. Especially now when tourism in the region is sagging, it is good that these lenders are putting their money where there mouth is at by creating demand within Asia. That's a good example from Haruhiko Kuroda, the ADB president. Here is the part of his opening address where he discusses a "new development paradigm" in which unwinding global imbalances makes more balanced growth conditioned...
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Kids, Here's Why Pay-Per-View is a Fool's Bargain

♠ Posted by Emmanuel in at 5/03/2009 06:50:00 AM
A few days ago, I compared the upcoming LDC (India/Brazil) vs. EU fight over pharmaceuticals being transhipped and confiscated in Amsterdam to Pacquiao vs. Hatton. Suitably enough, they're both North vs. South quarrels. Given my peculiar proclivities, you ought not be surprised that I didn't fork any money to watch the latter boxing match, preferring to observe the trade clash as it unfolds.And it was a good thing I didn't pay anything since the match lasted a mere two rounds as England's pride Ricky Hatton was, like the British "economy" (or whatever passes for it nowadays) caught in rather subprime condition. Is Manny Pacquiao...
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Four More Years for Pascal Lamy as WTO Chief

♠ Posted by Emmanuel in , at 5/01/2009 07:04:00 AM
Well this was a mere formality really as Pascal Lamy ran unopposed for a second term as WTO Director-General, the first time that's happened in the organization's history. And so it's four more years for him without much comment from elsewhere. Were other potential candidates--especially those from LDCs--intimidated by Lamy running again or has this job become passe due to deadlock in the Doha Round and the more recent drop-off in world trade? I have two previous posts exploring some of these issues [1, 2].In any event, here is part of his 29 April speech a day before the decision was made where he set out his plans for the next four years. It's well worth reading. Here he inveighs against all sorts of regional trade agreements as detracting from the multilateral cause:On RTAs, it is difficult to see why such deep concessions and commitments are undertaken today in the context of preferential agreements, without any consequences in the multilateral context. We all know this is...
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