Unit 2 Macro: Exporting to the Booming Chinese Economy
Before you read this blog please have a look at another blog written by our good friend Mark Johnston from New Zealand. Students of China and the US economy will find it fascinating!
There are good grounds for no longer calling China an emerging economy - it has arrived! The multiple significance of the rapidly-growing Chinese economy is plain for all to see but for Britain, only a small percentage of our exports of goods and services go there and this must change if Britain is to fully engage with and benefit from the rising might of the Chinese consumer. This article from the Daily Mirror provides a non-technical but clear explanation of the growing purchasing power of newly wealth Chinese, thousands of whom are flocking to western shopping malls to buy premium brands. Chinese foreign exchange reserves are also being used to buy up real assets - last week we heard that a Chinese sovereign wealth fund is set to buy nearly 9% of Thames Water.
read more...»Unit 4 Macro: Russia Joins the WTO
I am using Russia’s entry to the World Trade Organisation in my teaching on international trade and development this term. It appear to be a significant moment for the global economy. Russia is the last member of the Group of 20 major economies to join, after China gained membership in 2001. Progress towards membership has been delayed by numerous geo-political issues not least the disputes with neighbouring Georgia.
Joining the WTO involves making a commitment to the rules of the international trade system - for Russia as with other new members, this will mean reduced import tariffs, the staged elimination of industrial domestic and export subsidies, and better greater access to foreign companies. Russia will also have to improve adherence to international accounting standards.
* Russia’s average bound tariff will be 7.3 percent for manufactured products (compared with 9.5 percent currently)
* Farm tariffs will be 10.8 percent (compared with 13.2 percent currently)
* Russia commits to zero export subsidies on agricultural products - to end by 2017
* Russia will privatise 100 pct of United Grain Company by 2012
* Russia will introduce duty-free and quota-free provisions for the least developed countries
* Russia will eliminate preferential tariffs for carmakers making large investments in Russian-based production by July 1, 2018
* Russia plans to introduce International Accounting Standards
How would you use a supply and demand diagram to show the impact of a fall in an import tariff?
Russian exports as a share of her GDP has actually been on a declining trend in recent years. Will movements towards trade and foreign investment liberalisation reverse this through trade creation and FDI effects? How can a stronger commitment to becoming an open economy supprot higher living standards over time? What are the risks for Russia of WTO accession?
read more...»Unit 2 Macro: Can Exports Drive a Recovery?
UK overseas trade is in the news today with the release of a batch of figures showing a record level of UK exports - see BBC news - UK trade deficit cut by higher exports
read more...»The Return of Protectionism?
The US senate has pushed through the bill which aims to punish China for allegedly undervaluing its currency. Is passed into law it would allow Washington to impose tariffs on imports in order to protect its domestic industries. The role and impacts of tariffs and other forms of protectionism form a big part of the ‘international trade’ section of most Economics courses and this article could be a good starting point for those discussions.
Unit 4 Macro: USA edges closer to naming China as a “Currency Manipulator”
The U.S came closer to finally calling the Chinese a currency manipulator and retaliating in the new round of protectionism fears. A good summary of the key issues here.
Government boost for UK trade
“The only way”, says William Hague, “to increase our national prosperity and secure our growth for our economy, is through trade, and our Embassies play a vital role in supporting British business.” Therefore the Foreign Office announced today that they are opening five new Embassies and many Consulates, from China and India to El Salvador and South Sudan. This two minute clip from the Foreign Secretary’s speech to the House of Commons today could make a good lesson starter for a revision session on trade, the capital account, comparative advantage, government intervention for competitive advantage, and so on.
5 Fresh Links: Videos to attract FDI
I am teaching European and Global context for A2 macro this term and one of the key topics is the economics of EU enlargement. The opportunities to attract inflows of direct investment is one of the major attractions for new EU countries as they enter the single market. Here is a selection of videos promoting FDI into a selection of European nations.
read more...»EU has to reduce its import barriers
The EU imposes tariffs on imports from China, Vietnam and Cuba, because it considers that they are not market economies. The World Trade Organisation allows importers to place extra duties on goods which are being ‘dumped’ on the world market - that is, being sold at a price which is below the price in the country of origin. These two issues came together at the beginning of 2009, when the EU decided to impose anti-dumping duties of up to 87 percent for the next five years on screws, nuts and bolts imported from China - but in mid-2009 China claimed to the WTO that the threshold price had been wrongly calculated, and that the tariff breaks international trade rules.
Over a year later, the WTO has finally reached a decision in China’s favour, saying that the tariffs must be removed - marking a victory for China in its first WTO dispute against the European Union. In a trade dispute between the two, China has imposed its own tariffs on imports from the EU. This story, reported by the BBC and China Daily amongst others, gives evidence for the economic theory that import tariffs tend to lead to retaliation and there is a net reduction in trade - and also for the practical economics which shows that, however sensible the theory may sound, in practice countries often make decisions which suit their own domestic purposes.
Excellent data for trading patterns
Macroeconomic Developments in the UK Economy - September 2010
Here is an updated version of the keynote tutor2u teacher presentation on key developments in the UK Economy…
read more...»UK Trade deficit widens
Thanks to Andrew Ellams for spotting this - a good article to use when discussing the effect of a weaker exchange rate, and links to Marshall-Lerner condition and the J-curve effect.
AS / A2 Revision - Where Next for the UK Economy?
Students wanting to demonstrate up-to-date understanding of the UK economy should find this streamed revision presentation really useful. It was delivered by Geoff at our AS & A2 Economics workshops in London & Manchester. It provides a comprehensive coverage of recent developments in the UK economy and highlights some potential downsides and upsides as the economy attempts to sustain a recovery during 2010 and 2011. Has the era of macro economic stability been replaced by a new phase of macro economic uncertainty, slower growth and a recovery constrained by debt? Or are there grounds for being more optimistic about the near-term future for the British economy?
Revision Presentation on the UK Economy
Wen turns the tables
Following on from last month’s article in EconoMAX that I wrote, China has insisted again today that the yuan is not undervalued - The Chinese premier turned the tables on the U.S and Europe today when it said that putting pressure on China to appreciate its currency was tantamount to protectionism!! Genius!
“What I don’t understand is depreciating one’s own currency, and attempting to pressure others to appreciate, for the purpose of increasing exports. In my view, that is protectionism,” Mr Wen said.
read more...»Trade as a stimulus for recovery
Pascal Lamy from the WTO has given a strong defence of the impact that trade can has as a stimulus for broader global economic recovery. World trade in goods and services has declined by 12% since the onset of the financial crisis but according to the WTO although there has been renewed claims of a return to protectionism, fears of a tsunami of import controls have - by and large - proved to be wide of the mark.
read more...»Fly in the ointment for export-led growth
David Smith’s weekly Economic Outlook in the Sunday Times focuses on the prospect that recovery from the recession will come from exports. He suggests that the conditions needed are in place – sterling is a significantly more competitive currency than was the case 18 months ago, there is strong recovery in world trade which is likely to last into 2011, and there is no wage inflation to spoil the competitiveness of UK export prices. The Ernst and Young Item club’s predictions for the economy over the next ten years, to be published today but much trailed through the media this weekend, will suggest that although the domestic economy will struggle to produce enough consumer demand to stimulate growth - debt-laden consumers have to recover from the shock of repaying some of their borrowing before they are prepared to spend so heavily again – growth in exports will be strong, with figures of 9%, 9.5% and 8% growth predicted for 2011 to 2014. If consumption is indeed sluggish at the same time, we can hope that imports will not be growing as fast, so that the figure for net exports improves, allowing Aggregate Demand to grow and some recovery of output to become established.
read more...»Tit-for-tat protectionism
More protectionism trade wars over the New Year, as the U.S slapped China with another trade penalty hitting Beijing with anti-dumping duties on $91m of steel grate imports. Most Chinese producers of steel grating will now face anti-dumping duties of 145 per cent, which they will have to pay as a cash deposit or bond upon arrival to the US. That rate represents how far below market value the US says China is selling its steel.
read more...»
