This is the way the world ends
Not with a bang but a whimper.
T S Eliot, “The Hollow Men”, 1925.
Actually when it comes to globalisation, we are used to seeing things end with a bang. That’s what happened, almost literally, in 1914, with the start of the First World War. The onset of war made it impossible for central banks and governments to act as agents of international cooperation, and that suffocated the international flow of trade, finance and investment. And so the era of globalisation that had defined the pre-war world for decades came to a very abrupt end.
But can globalisation end with a whimper? Arguably that’s just what’s happening right now. Read more
The World Trade Organization’s Tenth Ministerial Conference gets under way today in Nairobi – the first time the meetings have been held in Africa.
Fourteen years ago, the WTO launched its Doha Round of multilateral trade negotiations. The 9/11 atrocities had occurred just two months before. Those events strengthened the resolve of WTO members to show that economies with varied priorities and interests could come together with a shared purpose. Read more
Brazil is undergoing its most severe recession in decades, with GDP expected to contract more than 3 per cent this year. Policy adjustments and the fallout from the Petrobras corruption scandal have eroded confidence and resulted in a collapse of investment, while the deterioration of fiscal accounts in the last few years has cost the country its investment grade rating. Not surprisingly, the Brazilian real has depreciated dramatically over the past year, losing about half of its value against the US dollar.
However, amid all the gloom, the depreciation of the real also provides a silver lining, as it is supporting the recovery of the trade balance and stimulating growth through increased net exports. Much of this positive effect has so far been overshadowed by weak commodity prices. However, when looking at quantities, an adjustment is clearly under way which should help Brazil restore its external balance. Read more
“Obama’s three day visit will mark a historic moment in Kenya’s 52 year history as it is the first time a sitting US President will be visiting the country… this is the perfect time to stock your cellars with Premium American wines and celebrate the madness…” – from the monthly online newsletter of The Wine Shop in Nairobi, Kenya.
If you’re at all interested in how the president’s trip to the homeland of his father will impact commerce between the two countries, or even, for that matter, Obama’s Africa legacy, this will be a fascinating few days indeed.
Once the “madness” and excitement accompanying the events subsides, the Obama visit will set the stage for the next phase of the belated US commercial engagement on the continent. Read more
That export performance of the Brics has been disappointing in recent years is well known. What hasn’t been appreciated is the extraordinary lengths the governments of Brazil, Russia, India, China and South Africa have gone to boost their exports. Indeed, once such initiatives are taken into account, recent export performance is cast in a worse light, raising the question—is the Brics competitiveness problem worse than previously thought?
At the end of May 2015, the OECD published data on the first quarter’s exports and imports of leading trading nations, including those for Brics. This data showed that in US dollar terms the total value of each Brics nation’s exports was falling. Worse, the exports of Brazil, India, Russia, and South Africa have essentially stagnated over the past four years or deteriorated significantly. China’s exports appear to have plateaued at the end of 2014 (see Figure 1). Read more
By Takashi Mitachi, Boston Consulting Group
The prize of a new World Trade Organisation (WTO) deal eluded negotiators in Bali at the end of 2013, collapsing over Indian concerns that the planned deal would endanger domestic grain subsidies that help feed India’s poor. In the meantime, there has been a surge of trade talks taking place across the world − some pan-regional, some regional, some bilateral.
Though these agreements may stimulate growth, they are likely to accelerate the multipolarisation of the world and even competition among regional blocs far beyond trade. Larger states are using trade as a geo-economic weapon to increase their dominance of their neighbours and promote their own national champions. And governments are rejecting the shared belief in a ‘win-win’ form of globalisation, where free trade and mutual interdependence bring peace and prosperity. Read more
By Chris Tucker of MBX Systems
“What do you know about shipping product into Brazil?” When I think of the conversations I have had with our appliance customers over the last several years, this question makes a regular appearance. Brazil’s rapidly growing IT market (estimated at $191bn) and developing infrastructure have been appealing to our small and large customers alike, in markets from broadcast media to security. It is easily apparent why this market is so interesting, but it can actually be more taxing than one may think due to multiple factors.
Read on if you are considering shipping product into Brazil and want to know the challenges of selling and deploying your technology there. Read more
Just over a month to go, and Mexican car exports to Argentina and Brazil (which Mexico has overtaken as No. 1 Latin American car maker) should be back on track after a three year system of quotas. That’s the plan, at least.
Or rather, that’s the deal the three countries signed: March 15, 2015 would spell a return to free auto trade. Read more
Vladimir Putin, Russia’s president, and Narendra Modi, India’s prime minister, met in New Delhi on Thursday for the 15th Annual India-Russia summit. Although normally a low-key event, this year’s meeting was important, coming as both countries rethink their foreign policies. Russia’s isolation from Europe has intensified in recent months. Meanwhile Modi has been working hard to strengthen India’s ties with the rest of the world.
The meeting resulted in renewed promises between the two nations to cooperate on energy sharing, defence deals and the diamond trade. For context, here are three significant facets of the India-Russia relationship. Read more
When the IMF announced this year that China’s economy had overtaken the US economy at purchasing power parity, there was some skepticism about the usefulness of PPP calculations and widespread amazement about the speed at which China had made this transformation.
Both themes carry over in a note on Friday from HSBC, which examines the data more closely to conclude that, even after switching variables, the size and importance of the Chinese economy cannot be denied. Read more
By Simon J Evenett of the University of St Gallen
Three reports on protectionism have recentyly been published in as many weeks: by the WTO , by the European Commission (EC), and by the independent Global Trade Alert, which I coordinate. What do these reports reveal about the sectors at greatest risk of 21st century protectionism? What do they mean for businesses operating internationally and for investors? Read more
Last week was a bad week for us sceptics of global governance, or so it seemed. The US and China struck a deal on reducing carbon emissions that some fairly serious people found not to be meaningless. (Others demurred.) The same two countries also agreed to update the Information Technology Agreement, a plurilateral trade deal that has not been reformulated since a decade before the release of the iPhone. Finally, the US and India made an apparent breakthrough in resolving a spat over food subsidies that had brought already desultory progress in the World Trade Organization to a halt.
But before the multilateral bunting is strung across the streets of Geneva in recognition of the US-India achievement, some caution is in order. For one, the “breakthrough” is a minor clarification over what a particular paragraph in an agreement means. Second, if the deal is used to lever open past WTO agreements on farm subsidies, it will turn out to be a very poor trade-off indeed. Read more
By Kavaljit Singh of Madhyam
After months of stalemate, India and the US have agreed to resolve their differences over food stock holdings, opening the way for future implementation of the Trade Facilitation Agreement at the World Trade Organization – the biggest trade deal in the WTO’s entire history.
The two countries have reportedly agreed that a “peace clause” – which protects member countries that breach farm subsidy caps under the Agreement on Agriculture from being challenged at the WTO – will continue indefinitely until a permanent solution is found. The US agreed to Indian demands to rewrite the peace clause to give adequate protection to such member countries. Read more
The World Trade Organisation released its latest forecasts for global trade on Tuesday and it is not a pretty picture. The WTO’s economists have lowered their forecasts sharply. They now expect global trade volumes to grow just 3.1 per cent this year, down from the 4.7 per cent they predicted in the spring. The main reasons for the gloom should be familiar by now: the slow recovery in those all-important developed economies and the return of geopolitical threats such as the Ukraine crisis.
This downgrade was pretty sharp from the WTO but I wouldn’t be surprised if there are more to come in the months ahead. Read more
Nations have negotiated trade agreements in one form or another for centuries. And for centuries economists have undoubtedly been facing the same question: Do trade agreements really matter?
The orthodox answer is obviously that they do. When you lower the barriers to trade goods flow more freely across borders and businesses, consumers and economies as a whole benefit as a result. But HSBC and the Economist Intelligence Unit are out with a new business survey that offers some interesting practical realities. Read more
South Korean carmakers are up in arms over Chile’s proposed bill to impose an environment tax on diesel vehicles, which is likely to hit Korea’s car exports to the Latin American country and cause diplomatic friction.
Chile is one of the key export markets for Korean automakers such as Hyundai Motor and its affilate Kia Motors, both making rapid inroads into emerging markets. Korean cars are the best-selling imported vehicles in Chile, with 30 per cent of the country’s fast-growing auto market. Read more
For years, the big-picture, long-term story in the global economy has been that of convergence. The dates and metrics vary but not the broad forecast: if current trends hold, then, around the middle of this century, per capita incomes in emerging economies will ‘converge’ with those in the rich world. The result: A ‘middle class’ world and vast fortunes for all those clever enough to position themselves to take advantage. But the OECD is out today with two bits of research/futurology that make clear the picture is a lot more complicated than that. And convergence may not happen as fast as many expect. The message of the first (the hefty annual “Perspectives on Development”) is that, bar China, the “BRIICS” (the Brics plus Indonesia) are likely to fall well short of seeing their per capita incomes reach the average of OECD countries by 2050. Read more
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. Read more
In India, summer, when the temperatures soar, is mango season. And no mango variety is as prized as the luscious Alphonso mango, often referred to as the king of fruits.
Alphonso mangoes usually sell at prices out of reach of the Indian common man, as most of the annual crop is exported to Europe, where deep-pocketed consumers are willing, and can afford, to pay more for rare tropical treats. Read more
By William R. Rhodes, William R Rhodes Global Advisors
Political and economic conditions are evolving in ways that could promote the onset of a new era of global protectionism. A revival of beggar-thy-neighbor policies cannot be discounted. The main cause is the continuing sluggishness of global economic growth, plus scant prospects for significant improvement.
The leading industrial economies today, five years after the financial crisis, continue to underperform. This year, GDP growth is likely to be around 1.3% in the Euro-zone, 1% in Japan, and 2.6% in the United States. Read more