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.
Jim O’Neill believes, not for the first time, that economists and policy makers have got it wrong. They underestimate how much the growth of China and other emerging markets has transformed the world economy, and the implications for Europe.
“If we carry on with global trade patterns as they are, the legitimacy of European monetary union is increasingly in doubt,” he said during the Ambrosetti forum in Cernobbio, Italy, held last weekend.
There's another side
Beyondbrics readers will be well aware of the threat that a tighter US monetary policy poses to emerging markets. Mere hints of higher rates and a tapering of bond-buying caused EM currencies to drop earlier in the year.
But there is another side to the coin, not often noted. Rates will only rise when the US economy recovers (that is, when unemployment dips below 7 per cent under the Fed’s current plans).
A sturdier US economy will help some EMs that export great volumes to the US, as well as hurt them – from higher rates.
China’s exports hit a positive note just ahead of the big party meeting, aka the plenum. As the FT reported, the 5.6 per cent year-on-year increase in exports in October was higher than market expectations of a 3.2 per cent rise.
But the numbers are actually better than the top line. Here’s why.
Another data point out today is undoubtedly going to encourage those hoping to see evidence that the green shoots of China’s economic recovery have sturdy roots.
This month, the HSBC/Markit China flash purchasing managers’ index, a private survey of the health of the manufacturing sector, hit its highest point in two years, as Chinese manufacturers accelerated production and began some restocking.