Tag Archives: countries

What the ash cloud meant for Kenya

$US12 mil­lion in lost fruit, veg­eta­bles and flow­ers exports to Europe as of 20 Tues­day 20 April.

It is bad. We have lost Sh228 mil­lion ($3 mil­lion) a night, so that is a total of about Sh912 mil­lion ($12 mil­lion) as of last night,’ Stephen Mbithi, the head of the Fresh Pro­duc­ers Exporters Asso­ci­a­tion of Kenya (FPEAK) told Reuters by phone. Mbithi said the coun­try flies out 1,000 tones of fruit and veg­eta­bles every night at this time of the year, and only about 100 tonnes left on Mon­day morn­ing, des­tined for Spain.” Extract from The [Kenyan] Stan­dard

There were oth­er loss­es, too, that cas­cade from the loss of export sales: espe­cial­ly job loss­es. There’s not much of a mar­ket in Kenya buys the flow­ers and fruit that are not shipped.

EU launches debate on farm subsidies

Expenditure on the CAP

Fol­low­ing sev­er­al weeks of con­sul­ta­tions, the Euro­pean Com­mis­sion is expect­ed to draw up a report on poten­tial changes to the CAP in mid-sum­mer. ” Extract from ICTSD • EU Farm Com­mis­sion­er Launch­es Debate on Sub­si­dies

I bet there are no sur­pris­es.

The over­all strat­e­gy for the Com­mon Agri­cul­tur­al Pol­i­cy beyond the next bud­get hori­zon (2013) is already evi­dent in the chart. It shows that nom­i­nal expen­di­ture in €bil­lions is being held near­ly steady—or ris­ing just slight­ly— despite the enlarge­ment of the Union. But the val­ue is falling in real terms (and as a pro­por­tion of GDP). This strat­e­gy plays to the cash illu­sion of farm­ers (assum­ing they still have such illu­sions) while keep­ing the lid on their incen­tive to expand pro­duc­tion, which only adds to pub­lic stock woes and diverts the bud­get into dis­pos­al expens­es (export sub­si­dies).

But At 0.4% of GDP, the CAP still rep­re­sents six­ty per­cent of all expen­di­ture by the Union. So six­ty-years on from its launch, the mad­ness of this giant re-dis­tri­b­u­tion machine con­tin­ues.

The more ‘vari­gat­ed’ dis­tri­b­u­tion of the funds diplayed in the chart—illustrating ‘CAP reform’—is a bit of fur­phy. The ‘cou­pled’ and ‘de-cou­pled’ pay­ments direct to farms and the ‘rur­al devel­op­ment’ expen­di­ture are near­ly fun­gi­ble sources of income for farm­ers. They all pay to keep farm­ers in a busi­ness where world mar­ket prices tell them they should not be (or would tell them were it not for the import bar­ri­ers).

It’s iron­ic that the Com­mis­sion has enti­tled this pub­lic con­sul­ta­tion as “2013, Your Ideas Mat­ter…”. Because ideas have long been junk where the CAP is con­cerned; only inter­ests have any force.

The cost of Renminbi adjustment

Yang Yao, Edi­tor of the Chi­na Eco­nom­ic Quar­ter­ly, points out that Obama’s health bud­get cal­cu­la­tions may depend on Chi­nese sav­ings

Stop­ping the sale of Trea­sury bonds to Chi­na would ben­e­fit the US. First, it would pre­vent Chi­nese sav­ings depress­ing demand for Amer­i­can goods. Sec­ond, it would dis­cour­age the US gov­ern­ment from deficit spend­ing and pre­vent sky­rock­et­ing gov­ern­ment debts. Third, it would avoid a trade war, which would ben­e­fit no one. The incon­ve­nient truth, how­ev­er, is that the Trea­sury needs cheap Chi­nese sav­ings to finance many more urgent spend­ing needs, includ­ing the new health­care plan.” Extract from FT.com

The limits of WTO litigation

Good sense from a for­mer Chair of the WTO Appel­late Body.

It is in the best inter­est of both coun­tries to con­tin­ue nego­ti­at­ing on the cur­ren­cy issue rather than resort­ing to lit­i­ga­tion at the WTO. On this issue espe­cial­ly, lit­i­ga­tion should be the last resort.” Extract from James Bac­chus in the WSJ

Alhougth I’m sure a lot of trade law geeks like me would like to see Arti­cle XV lit­i­gat­ed, nev­er­the­less … just to see what it means.

Rotten ideas about the renminbi

The prospect of a U.S.-China clash over cur­ren­cy con­trols next month when the U.S. Trea­sury Sec­re­tary is sup­posed to pro­nounce on China’s ‘cur­ren­cy manip­u­la­tion’ has prompt­ed hyper­bol­ic fears (Mar­tin Wolf, in the FT says he “won­ders whether the open glob­al econ­o­my is going to sur­vive…”!) and at least two fee­ble plans.

One is from the IMF, which wants a new mandate—although it admits that’s not real­ly necessary—to under­take explic­it mul­ti­lat­er­al sur­veil­lance of Sys­temic Sta­bil­i­ty (i.e. imbal­ances in exter­nal accounts). But the Fund does a bad job of jus­ti­fy­ing its claim for a new role. The Con­clu­sions (on page 12) of the cur­rent pro­pos­al from the Fund man­age­ment offer no bet­ter rea­son that that it wants to feel impor­tant as the man­ag­er of a new ‘peer review’ process. Ho hum!

A much worse idea comes from Arvind Sub­ra­ma­ni­am in today’s Finan­cial Times. He wants the WTO not only to engage in sur­veil­lance but also to enforce the ‘right’ val­ue for cur­ren­cies.

The World Trade Organ­i­sa­tion is a nat­ur­al forum for devel­op­ing new mul­ti­lat­er­al rules. First, under­val­ued exchange rates are de fac­to pro­tec­tion­ist trade poli­cies because they are a com­bi­na­tion of export sub­si­dies and import tar­iffs…:”

Even if we accept that there is an equiv­a­lence between cur­ren­cy man­age­ment and trade mea­sures, we have to ask so what? You’d imag­ine, wouldn’t you, that a trade econ­o­mist would recall that, in WTO, nei­ther of these trade instru­ments is nec­es­sar­i­ly “pro­tec­tion­ist” and that nei­ther is ille­gal (or even dep­re­cat­ed)! This is not much of an argu­ment for WTO inter­ven­tion.

Sec­ond, the WTO has a bet­ter record on enforce­ment of rules. Its dis­pute set­tle­ment sys­tem, although not per­fect, has been rea­son­ably effec­tive in allow­ing mem­bers to ini­ti­ate and set­tle disputes…What is need­ed is a new rule in the WTO pro­scrib­ing under­val­ued exchange rates.

Uh-huh. But does Prof. Sub­ra­ma­ni­am recall what is need­ed to add a ‘rule’ to the WTO? If not ‘con­sen­sus’ (or ‘explic­it con­sen­sus’ in the Doha nego­ti­at­ing man­date), then a very strong qual­i­fied major­i­ty (⅔ of Mem­bers accord­ing to Arti­cle X of the Marakesh Agree­ment). Fur­ther­more, a new rule adopt­ed by a major­i­ty vote applies only to Mem­bers that accept it; unless a fur­ther anoth­er strong major­i­ty (¾ of Mem­bers) decides to expel any Mem­ber that does not accept the new rule.

Now think for a sec­ond or two what sort of mess a pro­pos­al to penal­ize per­sis­tent trade sur­plus­es would cre­ate in WTO. Remem­ber, we’re talk­ing about an Orga­ni­za­tion that—for the present at least—can’t decide which way is up (in the Doha round), let alone what con­sti­tutes an “under­val­ued exchange rate”

Imag­ine, too, that hor­ri­ble wran­gle end­ing up in a major­i­ty vote on the new rule, which will inevitably be aimed at Chi­na and pos­si­bly Ger­many. But will also poten­tial­ly hit a lot of oth­ers; Thai­land and Viet­nam, for exam­ple. What we have here is a recipe for a hecatomb of the WTO.

The IMF would con­tin­ue to be the sole forum for broad exchange rate sur­veil­lance. But in those rare instances of sub­stan­tial and per­sis­tent under­val­u­a­tion, we envis­age a more effec­tive delin­eation of respon­si­bil­i­ty, with the IMF con­tin­u­ing to play a tech­ni­cal role in assess­ing when a country’s exchange rate was under­val­ued, and the WTO assum­ing the enforce­ment role.” Extract from FT.com / Com­ment / Opin­ion — The weak ren­min­bi is not just America’s prob­lem

Fat chance! Even if the IMF could actu­al­ly dis­cov­er the ‘cor­rect’ inter­na­tion­al price of a cur­ren­cy, the WTO would break if tasked with enforc­ing it.

Chinese savings rate & the gender balance

Fas­ci­nat­ing. A strong, explana­to­ry cor­re­la­tion appears between very high house­hold sav­ings rates and the male-gen­der imbal­ance.

…[E]conomists and pol­i­cy­mak­ers have looked with con­cern to the large Chi­nese cur­rent account sur­plus and large US cur­rent account deficit, or glob­al imbal­ances, much of their dis­cus­sion has focused on chang­ing exchange rate pol­i­cy. None of the dis­cus­sion about glob­al imbal­ances has brought fam­i­ly-plan­ning pol­i­cy or women’s rights to the table, because many do not see these issues as relat­ed to eco­nom­ic pol­i­cy. Our research sug­gests that this is a seri­ous omis­sion.” Extract from The mys­tery of Chi­nese sav­ings: Shang-Jin Wei
Shang-Jin’s hypoth­e­sis? Sav­ings reflect com­pe­ti­tion in a mar­riage mar­ket with a sig­nif­i­cant deficit of females. I’m impa­tient to see the pub­lished paper.

Are the BRICS ready to lead?

BRICS graphic from the FT

Reflect­ing on the greater influ­ence of the BRICS, recent­ly, in glob­al forums, the always-inter­est­ing Alan Beat­tie asks:

Is this a piv­ot point such as the sec­ond world war, where the con­fi­dent, inno­v­a­tive US mus­cled aside the weak­ened, debt-laden economies of Europe and remade the glob­al finan­cial archi­tec­ture? ” Extract from FT.com

His guess? “No, not yet”. He points out the BRICS are dom­i­nat­ed by one coun­try, Chi­na, that is still depen­dent on for­eign demand for its eco­nom­ic strength rather than on its domes­tic resources.

A decade of rapid growth is not enough for the Brics to seize the baton of glob­al eco­nom­ic lead­er­ship from the US and west­ern Europe. The group­ing, or some of them, may have aston­ished the world with their progress over the past 10 years. But it will require a qual­i­ta­tive improve­ment as well as more growth to con­sol­i­date that shift of pow­er.”

In an accom­pa­ny­ing arti­cle he argues:

…Aside from the long-run­ning debate about giv­ing devel­op­ing coun­tries more votes in the IMF, it has proved hard to ham­mer out a sub­stan­tive set of sub­jects on which the dis­parate Bric coun­tries have the same inter­ests.” Extract from FT.com

Beat­tie points out that for all their capac­i­ty joint­ly to wield influ­ence in glob­al forums, the BRICS do not have much in com­mon in their domes­tic pol­i­cy approach­es and few com­mon exter­nal inter­ests. This has been evi­dent in the Doha nego­ti­a­tions where India and Brazil, espe­cial­ly, have oppos­ing inter­ests in mat­ters such as agri­cul­tur­al trade lib­er­al­iza­tion, and at Copen­hagen where China’s inter­ests were not appar­ent­ly those of many devel­op­ing coun­tries; effec­tiv­el­ly sui gener­is. Beat­tie con­cludes that:

In diplo­ma­cy, as in eco­nom­ics, the pow­er wield­ed by the Bric coun­tries may end up being dis­tinct­ly weight­ed towards the wish­es of Bei­jing.”

I think all this is pret­ty sound. But…in my view we are wit­ness­ing, nonethe­less, a sec­u­lar change in glob­al gov­er­nance, to be marked by con­fu­sion, delay and irrel­e­vance for glob­al insti­tu­tions such as WTO that cling to a mode of “explic­it con­sen­sus” (as the Doha Dec­la­ra­tion puts it) in deci­sion-mak­ing. Such pre­sump­tive una­nim­i­ty or com­pli­ance is no longer like­ly except where the deci­sions con­cerned are inescapable—like those on the glob­al ‘stim­u­lus’ (or oth­er­wise triv­ial in a pol­i­cy sense, such as human­i­tar­i­an aid). The future seems, for now, to belong rather to pluri­lat­er­al deci­sion-mak­ing and insti­tu­tions in dif­fer­ent forms.