Of course, it all goes back to Peter the Great at the turn of the eighteenth century. On the one hand, the Russian Tsar worked in the Dutch shipyards incognito to import modern boatbuilding techniques to his empire. On the other, he systematically seized the estates of unhelpful nobles in a manner which suggested that western European notions of property rights had yet to sink in.

Russia’s traditional simultaneous fascination with and repulsion towards foreign ideas and institutions, the latter generally winning out at times of stress, is reflected in the difficulties the EU and US have encountered in trying to shift Moscow’s behaviour in Ukraine.

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Some things in life happen often enough that they take on a reassuring familiarity. Germany win the World Cup. Belgium struggles to form a government. And India throws stones at a deal at the World Trade Organisation.

Having already in effect pushed the demolition button on the Doha round of world trade talks in 2008, India is now being obstreperous over a tiny part of the deal that managed to crawl out of the wreckage – a “trade facilitation” agreement supposedly making it easier to do business across borders. It has threatened to block the agreement over a completely unrelated issue of particular interest to itself, a commitment to “food security” which will in effect hand Delhi yet another tool to enforce agricultural protectionism. Indeed, it was over a similar issue that hopes for Doha as a comprehensive deal died in 2008.

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If you’re an emerging market and there’s a geoeconomic grouping you’re looking for, you’ve got a few to choose from. In Asia there is Asean - ten countries in search of common ground. In Latin America there is Mercosur - five countries in search of common tariffs. And from the Atlantic west to the Black Sea there is Asia-Pacific Economic Co-operation – four adjectives in search of a noun.

But none of these has the distinction of having been a marketing campaign by Goldman Sachs got out of control. The Brics nations, apparently noticing a small clearing in the densely-thicketed field of international relations, seized on the designation to set up their own diplomatic process. The sixth leaders’ summit will take place next week in Fortaleza, Brazil, with the host nation hopefully performing better than at its other major international gathering.

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The nerdier parts of Washington DC have been riveted over the last week by a fight over one of the duller institutions in the city: the Exim Bank, the US’s export credit agency. The battle threatens the very existence, at least in its current form, of the agency that promotes US exports by insuring foreign buyers.

The battle is generally portrayed as a domestic ideological affair that pits true believers in unregulated markets (at least on this issue) against true believers in business. Yet the context inescapably includes other exporting economies, particularly in emerging markets. The stakes for the Exim Bank’s defenders have only been raised by the aggressive use of similar export credit agencies (ECAs) by emerging economies and most particularly China. It remains remarkable that the same US Congress that regularly inveighs against unfair Chinese export competition is also contemplating abolishing the agency that may help redress the balance.

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It has now been three weeks since the ECB moved, enough time at least to assess the effect on asset prices if not on the real economy. Will the bank’s actions benefit EMs, particularly those in central and eastern Europe (CEE) with strong financial links through which liquidity might be expected to flow? Will the ECB, as the Fed’s quantitative easing (QE) is widely acclaimed to have done, push investors grazing in the dry savannahs of developed country asset classes out into the fecund yet mysterious forests of the emerging markets in a hunt for yield?

The initial answer seems to be: not much. Neither eurozone nor emerging eastern Europe assets have exactly been set on fire by the ECB’s action. Three weeks later, the euro – which might have been expected to weaken rapidly after a big ECB easing – has largely reversed its initial moderate falls against the dollar and also against CEE currencies (of which more later). European equities first rose and then retreated. And while equities in emerging Europe had risen by about 5 per cent by mid-June, this largely seems to reflect a cooling of the Ukraine crisis, and they too have fallen back since. Continue reading »

As a coordinated entity, the BRICS grouping of emerging markets has produced little except inspiring the name of a widely-read blog.

Next month, the five governments – Brazil, Russia, India, China and South Africa – are planning to erect an actual edifice amid the swirling mists of rhetoric with the launch of a development bank dedicated to filling some of the gigantic hole in the financing of infrastructure and growth in fast-growing emerging economies.

The BRICS are seeking to avoid some of what they say are the faults of the World Bank and regional development banks – too much rich country dominance and too many conditions attached to lending. But that leaves the exact function and operation of the BRICS bank open to a great deal of political jockeying and uncertainties over how it is run.

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Ever eager to point out exemplars, the World Bank this week made a point of praising Mexico as one of the few countries where “ambitious and advanced reform agendas” were aiming to transform the economy.

Mexico has already passed some laws liberalising the labour market and improving education, but the centrepiece of President Enrique Peña Nieto’s reform effort is to introduce competition into public and private monopolies: the energy sector, dominated by the state-owned Pemex, and telecoms, where Telmex has been in a hugely powerful position ever since the system was privatised in 1990.

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Last week, Alexander Lukashenko, president of Belarus, bafflingly announced he would sign a decree that would return to the status quo in 1861 and reinstate serfdom. When it comes to backsliding on economic modernisation, Mr Lukashenko is clearly a world-beater.

Yet other emerging markets, while not actually going backwards, have shown little enthusiasm in recent years for bold policy moves to streamline regulation, tackle corruption, improve the legal environment and, most particularly, build the infrastructure needed for a modern economy. Continue reading »

It has been a reliable guideline for governments doing business with the EU that elections to the European Parliament can safely be ignored. Yet given that the parliament has been given powers of disruption over trade and investment, two of the areas in which the EU has some authority, blissful ignorance of the legislature may be a luxury that emerging market governments can no longer afford.

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Not everything in life is always completely and irredeemably bad, even if you happen to be running an emerging economy. In the case of currency devaluations handed to the big emerging markets over the past year, however, the silver lining has not made up for the cloud.

It was a year ago this week that the “taper tantrum” shook emerging markets, after comments from then Fed chairman Ben Bernanke raised fears of the US central bank tightening monetary policy. Exchange rates dropped sharply in the fragile fraternity of emerging markets with flexible currencies – Brazil, India, Indonesia, South Africa and Turkey. However, bad though the turbulence was – and the panic returned for a short while earlier this year – the currency movements should at least have had the benefit of handing those economies’ exports a competitive advantage through a lower exchange rate.

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To see how China is managing its growing clout over trade and investment around the world, it might help to take a look at how an economic hegemon evolved in the past – Britain’s colonists in eighteenth and nineteenth-century India.

In reality, China is still in the East India Company stage of global economic strategy – opportunistic and pragmatic rather than ideological and intellectually coherent. (It is something of an irony that the one-party autocracy of China is proving itself eclectic while the open-market democracy of the US has been doctrinaire.) And while there are some signs that China’s economic statecraft is moving towards the transparent and plurilateral, most of its policies towards other emerging markets are opaque and self-interested. Continue reading »

It’s a common trick to make yourself look bigger than you are to win a fight. Rather rarer is for one of the world’s largest and fastest-growing economies frantically and consistently to try to hide its size. China, the 500kg panda in the global economic room, is trying an increasingly unconvincing tactic of squeezing itself into a corner and hoping no-one notices it is there.

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Welcome to Ukraine. You’re running a rickety business, mainly cash-in-hand, that has a big gas bill and is losing money. Your shady Uncle Vlad says he will give you cheaper gas, lend you money on suspiciously favourable terms, and perhaps see his way to giving your workers an extra something in their pay packets. In return, all you have to do is back him up in family disputes in perpetuity. Meanwhile Christine, your steely-eyed bank manager, wants you to turn down the thermostat in your offices, lay off half your staff and stop fiddling the books.

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Latvian PM Valdis Dombrovskis was roundly praised this week at the Peterson Institute for International Economics in Washington. (If the global army of economic policymakers has an elite special forces unit, it is Peterson.) Leading a coalition government, Mr Dombrovskis has elected to plough on with implementing the cuts required under an IMF-EU programme to make a fiscal adjustment of more than 10 per cent of GDP.

The parallels with Greece are obvious, including the problem of inflicting huge damage by choosing the devaluation route. Latvia has a pegged currency rather than actually being in the euro, but such a large proportion of mortgages and other consumer loans are denominated in euros that Mr Dombrovskis says a devaluation wouldn’t help much anyway. Continue reading »

Always entertaining to see US Treasury secretary Tim Geithner in front of the Senate finance committee, like a beleaguered nephew being harangued by a posse of irascible uncles. And the occasional aunt.

Charles Schumer, number 3 Democrat in the Senate, is threatening to bring his currency bill against China in the next two weeks, which would allow US companies to include estimates of currency undervaluation in antidumping and countervailing duty calculations. (Yesterday he also put out a press release alleging that China was exporting honey by relabelling it as the product of other countries, a practice he immortally dubbed “honey laundering”). Continue reading »