Persistent global imbalances are raising concerns about the sustainability of the global recovery and economic growth in general. This column argues that a proper appreciation of the influence of exchange rates and demand on global imbalances requires taking into account an important feature of Asia’s trade – cross-border supply chains or “vertical integration”.
Olaf Unteroberdoerster, Jade Vichyanond, Adil Mohommad, 12 June 2011
Aaditya Mattoo, Francis Ng, Arvind Subramanian, 21 May 2011
With the Doha Round on the brink of failure, the blame game is moving into high gear. This column argues that the political perception of China’s export competitiveness and its exchange-rate policy are a real problem. In effect, the whole basis for exchanging trade policy concessions is being undermined because a de facto trade policy instrument – the exchange rate – is seen as nullifying these concessions while remaining beyond the scope of multilateral negotiations and discipline.
Alyson Ma, Ari Van Assche, 18 May 2011
Why do firms offshore manufacturing to China? This column uses data from China’s processing trade regime to argue that a hidden driver is the country’s geographic proximity to its East Asian neighbours.
Uri Dadush, Bennett Stancil, 09 May 2011
Between 2000 and 2009, developing countries added almost $5 trillion to their foreign-exchange reserves – a number deemed too high by many, prompting accusations of protectionism. But this column argues that developed countries are equally to blame – as well as failures in international coordination. It concludes that remedies therefore require action by both groups.
Anne Krueger, 28 April 2011
The Doha Round is in peril. This essay argues that if the impasse is intractable, world leaders face three choices: to quickly finish the low-ambition package on the table, to explicitly terminate the Doha Round, or to let it die a slow death. It says the last option would be by far the worst – even if it is the most likely.
Muhammad Chatib Basri, 28 April 2011
The Doha Round of trade negotiations began nearly ten years ago with a focus on lowering trade barriers, particularly for the sake of developing countries. Today, the Doha Round is stuck in limbo. This column argues that both developed countries as well as developing countries stand to gain from moving the discussions forward – particularly those in the Asia Pacific region.
Philip Levy, 28 April 2011
The Obama Administration seems to view Doha delay as a minor issue since they view the export gains from the current package as small. This column argues that this calculation is based on a false premise that the status quo would continue even if the Round dragged on for years. Nations respect the WTO’s Dispute Settlement Mechanism verdicts in order to remain as members in good standing; this allows them to reap the benefits of the WTO as a negotiating forum. If the WTO collapses as a negotiating forum, nations may move towards a crass calculus that assesses verdicts only on the basis of the threats that back them. This would be a deeply regrettable move away from a rules-based global trading regime.
Peter Drysdale, 07 May 2011
Discussions on breaking the impasse between the US and China are continuing following last month’s landmark meeting of WTO members. This column – written by the intellectual father of APEC – argues that allowing Doha to languish for years is deeply dangerous. Part of an eBook posted in April, the column asserts that failure to conclude Doha this year would put a dagger at the heart of the multilateral system. With the rise of China, the decline of US trade leadership, turmoil in the Middle East, and a damaged and imbalanced global economy, the world needs multilateralism more than ever.
Yuqing Xing, 10 April 2011
What can the iPhone tell us about the trade imbalance between China and the US? This column argues that current trade statistics greatly inflate the value of China’s iPhone exports to the US, since China's value added accounts for only a very small portion of the Apple product's price. Given this, the renminbi’s appreciation would have little impact on the global demand for products assembled in China.
Aoife Hanley, Wan-Hsin Liu, Andrea Vaona, 24 March 2011
A decade ago economic theory might have suggested that Chinese innovation would be “piggybacking” on the West, taking advantage of the widely available machines and equipment imported from those economies. But using data for 2001 to 2008, this column finds that while foreign investment may once have fuelled technological advancement, it has lost ground to domestic financing channelled within a stronger and ever-improving Chinese financial system.
Heleen Mees, 24 March 2011
Is US easy monetary policy in the early 2000s to blame for the global saving glut? This column argues that the Federal Reserve’s policy triggered the refinancing boom and ensuing spending spree, which spurred economic growth and savings in China. The prolonged decline in long-term interest rates in the mid-2000s is largely to blame for the housing boom in the US.
Klaus Desmet, Esteban Rossi-Hansberg, 12 March 2011
Are the world’s megacities becoming a sprawling, overfed, and uncontrollable mass that needs to be restrained for the good of society and the environment? This column suggests that policies aimed at reducing the dispersion in city sizes will hardly improve the wellbeing of the people who live there. If anything, in some developing countries, such as China, large cities may actually be too small.
Julien Martin, Isabelle Méjean, 11 March 2011
With exports from low-wage countries like China on the rise, the question of what this means for trade and jobs in developed countries is a furious war of words. This column, using firm-level data for France between 1995 and 2005, shows that competition from low-wage markets actually boosts the sales of high-quality goods – but it concedes the benefits are not universal.
Uri Dadush, Vera Eidelman, 06 March 2011
Global imbalances and their effects on the global economy are much discussed. This column says that discussing global imbalances is popular because it is the easy way out. It says that policymakers should target the illness rather than the symptoms by reforming their domestic economies and focusing on sustainable growth.
Helmut Reisen, Moritz Schularick, Marcus Kappler, Edouard Turkisch, 02 March 2011
If China only allowed its currency to appreciate, the global economy would rebalance and stabilise – or so the argument goes. This column studies the historical record of large exchange-rate revaluations. It supports the idea that currency appreciations have an impact on the current account but argues that this can come at a cost – the reduction in exports risks putting the brakes on global growth.
Uri Dadush, Vera Eidelman, 26 February 2011
Reform of the international monetary system tops France’s agenda as G20 chair. But what is it about the international monetary system that needs to change? This column says that the exchange-rate system is in relatively good shape.
Raphael Auer, 21 February 2011
This column says that low US inflation over the last 15 years is partly attributable to cheap Chinese imports. It argues that if the US trade deficit is reduced – via either Chinese inflation or a nominal appreciation of the renminbi – this disinflationary effect will be reduced. It says that the resulting inflationary impulse could be severe.
James Reade, Ulrich Volz, 18 February 2011
China is grappling with rising inflation. This column argues that the Chinese government, instead of focusing on micro-managing the economy, should grant its central bank room for further reform of its monetary policy. To make more efficient use of the interest-rate instrument, China's policymakers will need to further loosen the dollar peg.
Domingo Cavallo, Fernando Díaz, 17 February 2011
With growing inflation in China, policymakers are facing tough decisions. This column argues that if the government is to curb inflation without allowing for the deflation of the tradables, it should do so though sector focused policies. Monetary policy is already committed to the objective of preventing deflation of the tradables and to dampen the credit cycle that is behind asset bubbles.
Avinash Persaud, 16 February 2011
Criticism of China’s exchange-rate policy continues throughout the US. This column argues that the US is in fact the exchange rate manipulator, due to its ongoing quantitative easing. What the US needs to do for a sustainable turnaround is to learn from other successful economies like China and Germany – not de-rail them.