Why Doha Round matters to Asia and the Pacific
Peter Drysdale, 7 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.
Editor's Note: This column first appeared in last week's VoxEU eBook Why World Leaders Must Resist the False Promise of a Doha Delay.
So what's the problem? Does it matter if the WTO’s Doha Round is prematurely pronounced dead?
Topics: International trade
Tags: Asia, China, Doha Round, Pacifica
How the iPhone widens the US trade deficit with China
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.
At the centre of global imbalances is the bilateral trade imbalance between China and the US. Most attention to date has been focused on macro factors and China’s exchange-rate regime.
Topics: Exchange rates, International trade
Tags: China, exchange-rate policy, global imbalances, iPhone, US
Have Chinese innovators (and banks) finally grown-up?
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.
There is a wind of change in China. Chinese policymakers have become more ambitious. They are now aspiring for innovation leadership status (OECD 2008; World Bank Report 2009). For this to happen, Chinese firms and universities are encouraged to work harder at developing their own R&D capability and to wean themselves off imported technologies.
Topics: Productivity and Innovation
Tags: China, foreign direct investment, innovation
US monetary policy and the saving glut
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.
At the Paris G20 meeting on 18 February 2011, Federal Reserve Chairman Ben Bernanke squarely laid the blame for the financial crisis and ensuing economic crisis on global imbalances, or the so-called global saving glut (for a review of the arguments see Suominen 2010).
Topics: Global crisis, Monetary policy
Tags: China, global imbalances, monetary policy, US
Are the world’s megacities too big?
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.
The trend in urbanisation is continuing unabated across the globe. According to the UN, by 2025 close to 5 billion people will live in urbanised areas. Many cities, especially in the developing world, are set to explode in size.
Tags: China, megacities, urbanisation
Low-wage countries competition, intra-firm reallocation, and the quality content of French exports
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.
In February 2011, China entered the “year of the rabbit” with the new status of second-biggest economy in the world. This symbolises the prominent role in production and trade China and other low-wage countries have acquired during the last two decades. The economic consequence of this new deal is one of the most discussed phenomena in developed countries.
Topics: Competition policy, International trade, Labour markets
Tags: China, exchange-rate policy, exports, France
Stop obsessing about global imbalances
Uri Dadush, Vera Eidelman, 6 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.
The idea of “rebalancing” global demand – increasing demand in trade-surplus countries so as to lessen the world’s dependence on demand growth in the US and other trade-deficit countries – is once again in the spotlight.
Topics: Global economy, International trade, Macroeconomic policy
Tags: China, exchange-rate policy, Germany, global imbalances, US
Half a century of large currency appreciations: Did they reduce imbalances and output?
Helmut Reisen, Moritz Schularick, , Edouard Turkisch, 2 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.
Over the past decade, several emerging market economies – China in particular – have run substantial and persistent current-account surpluses.
Topics: Exchange rates, International trade, Monetary policy
Tags: China, Currency manipulation, exchange-rate policy, US
The international monetary system: If it ain’t broke, don’t fix it
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.
Reform of the international monetary system tops France’s agenda as G20 chair.
Topics: Global governance, International finance, Monetary policy
Tags: China, exchange-rate policy, International Monetary System, US
What the renminbi means for American inflation
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.
China’s recent inflation is turning heads (Raede and Volz 2011, Cavallo and Díaz 2011). At first thought, the recent rise of inflation in China seems to be reassuring news for US policymakers concerned with the trade deficit.
Topics: Exchange rates, International trade
Tags: China, exchange-rate policy, inflation, US