Trade Imbalances - Presentation
One feature of the world economy is the persistent and large scale of trade imbalances. Some countries have huge surpluses and others experience deficits every year. Trade imbalances are one factor behind the resurgence of ‘protectionist’ sentiment and they have consequences for growth, jobs and living standards. I have put together a collection of twenty of the trade data charts that I use regularly in teaching A2 and AS macro - I hope they might be useful for some colleagues when covering trade and balance of payments topics.
read more...»Alternative views of the economic crisis to evaluate
While politicians, business leaders and policymakers searched for solutions at this year’s World Economic Forum in Davos, different debates were taking place at the “alternative” World Social Forum in Belem, Brazil.
There, a mix of some 100,000 campaigners, thinkers, and working people came to starkly different conclusions about the causes of the downturn, and how best to address it. This BBC article takes the views of 4 of the participants:
David Evan Harris, Director, Global Lives Project
“The current economic model which privileges unbridled competition is not sustainable”
Walden Bello, Focus on Global South
“This crisis has roots in global overproduction”
Myriam Vander Stichele, Researcher on multinationals
“Calls for re-regulation require a dismantling of the architecture of international trade treaties”
Marcos Arruda, Economist
“At this point the capitalist emperor has no clothes”
Their views make interesting reading; while they all broadly agree that the existing model of the global economy has to change in the light of the economic crisis, they offer very different perspectives of the root causes and the solutions – worth reading and evaluating to assess which you think would work best, and why.
Green Shoots?
An article from today’s Telegraph suggets there may be ‘Glimmers of hope on the Horizon’ for the world economy.
read more...»Video Case Study: Is Chinas Export Boom Over?
China’s export-driven growth is slowing down with exports of manufactured goods showing a marked decline over the last six months. Despite this, the trade surplus continues to rise partly because of a large fall in imports of primary products such as mineral fuels and iron ore.
Download the case study question sheet
China_Export_Slowdown.pdf
Protectionism is the crack of economics
This is a somewhat arresting quotation from Dallas Federal Reserve president Richard Fisher - who is a former deputy US trade representative. He explains that, if the US recovery package does result in protectionism in US industry, it will give an immediate high that leads to economic death. He is referring to the US government’s $800bn (£567bn) bailout package which includes a policy called “Buy America” meaning that all of the projects financed by the bailout should favour American iron and steel, over imported materials. It could, perhaps, even allow American preference for all “manufactured goods”.
read more...»Risk of protectionism in recession policies
Concerns about protectionism ending free trade agreements, as countries take measures to get their own economies out of recession and back to growth are now taking centre stage – today the EU has expressed concern about Barack Obama’s recovery package because it includes a ‘Buy American’ clause, which seeks to ensure that only US iron, steel and manufactured goods are used in projects funded by the bill. The US Congress is surely likely to feel that the $800bn it is being asked to spend should all be for the benefit of the US economy. The EU Ambassador has expressed concern that, if passed, the measure could erode the US’s global leadership on free trade. Canada’s International Trade Minister Stockwell Day went further: “These protectionist measures, in a time of recession, only make things worse,” he told broadcaster CBC. “It can only trigger retaliatory action and we don’t want to go there.”
Should the US Senate see this as a threat?
Worst case scenario for the UK
Paul Mason, Newnight’s Economics correspondent is on fine form at the moment with a cluster of really good pieces for Newsnight. Here are two recent pieces available from the BBC web site.
In ‘worst case scenario’ Paul Mason looks at some of the systemic risks facing the UK http://news.bbc.co.uk/1/hi/programmes/newsnight/7851138.stm
and in this piece he considers the rising tide of protectionist sentiment - are we now moving into an age of de-globalisation?
For a more optimistic view here is another piece from Paul Mason on the best case scenario for the UK
Take a Bow Paul Krugman
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008
I am pleased that Paul Krugman has been awarded the Nobel Prize for Economics. And it will remind me to refresh my understanding of his contribution to new trade theory before I next teach this topic - along with his multi-faceted contributions to our understanding of globalisation. There will be much press coverage of the award - here is an article from the Financial Times. Paul Krugman is on good form in this address to the employees at Google dated December 2007.
China’s currency manipulation to soften the slowdown
Perhaps fearful of a steep slowdown in exports to a weakening global economy, the Chinese monetary authorities appear to be engaging in another bout of active manipulation of the Yuan in the foreign exchanges.
read more...»From supplier to buyer - China’s impact
Jack Ma (chairman of Alibaba Group) writing in the Financial Times reminds us of an important shift in trade flows between China and the rich advanced nations. Although growth in the Chinese economy is slowing down her export growth will continue to remain strong because of fundamental comparative advantages - but supporters of protectionism often fail to look at the other side of the ledger - the very fast growth of import demand into the Chinese economy - China is becoming a powerful global buyer and not just of mineral supplies from other developing nations.
“While there is a lot of competition from cheaper alternative markets, such as India, Bangladesh and Vietnam, nothing can beat China’s vast choice of products and suppliers. Over the years, Chinese suppliers have redefined themselves beyond pricing and sharpened their advantage in terms of quick turnround, good infrastructure, speed to market and compliance with international standards…..China’s role as top supplier, and now a leading buyer, is causing a new economic phenomenon that should be embraced rather than feared.”
Moscow coffee had better be good!
Over £5 for a standard cup of coffee would stagger most of us but it has become the norm for expats living in Moscow - officially the world’s most expensive city and a fact already well known to the thousands of Manchester United and Chelsea fans who travelled to the Champion’s League final last May.
read more...»High oil prices threaten Asian trade model
Ambrose Evans-Pritchard is on good form in the Telegraph today looking at how the spike in oil prices is theatening the very basis of the Asian trade model. In a world where distance now costs money - ever-rising freight charges are acting like an import tariff for countries whose export-led growth has been built on mass volume manufacturing and the ability to transport these products in huge bulk around the world’s shipping lanes at a relatively low cost.
“The manufacturing revolution of China and her satellites has been built on cheap transport over the past decade. At a stroke, the trade model looks obsolete. Asia’s intra-trade model is a Ricardian network where goods are shipped in a criss-cross pattern to exploit comparative advantage. Profit margins are wafer-thin. Products are sent to China for final assembly, then shipped again to Western markets. The snag is obvious. The cost of a 40ft container from Shanghai to Rotterdam has risen threefold since the price of oil exploded….........globalisation has passed its high-water mark. The pendulum will now swing back from China to America. The mercantilists will have to reinvent themselves.”
The rest of the article is here
Shipping freight and derived demand
Freight ships are one of the best examples I know of a service whose demand is derived from the simple need among exporters and importers to transport their products around the world. So when the global economy changes gear and the chill-winds created by record high oil prices and a slowdown in consumer spending start to bite, it is more or less inevitable that the major shipping businesses will feel the pinch.
The Telegraph carries a report on this today. Ships are leaving Asian ports not full to to capacity a sign perhaps that the increased costs of shipping products is starting to limit demand for freight services.
Apparently the index to watch out for is the Baltic Dry Bulk Index - a measure of commodity-shipping costs - and this bell-weather measure has fallen sharply in recent days hinting of a shift in the balance between supply capacity and demand for ships to move the major raw materials by sea.
Too much freight capacity in the industry? Or a really important lead indicator that 2009 will be a really tough year for the global economy?
Tariff taken to the cleaners
Tyler Cowen’s Marginal Revolution alerted me to this neat story about the unintended consequences and costs of import tariffs
read more...»Revision Focus: Export Performance
Explain the factors which may help to determine an economy’s export performance (20 marks)
A revision note on some of the factors that shape the growth of exports for an economy
read more...»
