Geography and offshoring to China
Alyson C 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.
Anecdotal evidence is rife with tales of multinational firms that have offshored their production to China, stoking fears that it is leading to a hollowing-out of manufacturing around the world. Many private sector analysts and policymakers attribute this offshoring wave to Chinese home-grown factors such as its low labour costs, stable political system, aggressive export promotion policies, and undervalued exchange rate.
Why are reserves so big?
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.
Foreign-exchange reserves play a crucial role in macroeconomic management. They provide a safety net during times of economic turmoil and, for most developing countries, a means to peg the nominal exchange rate. They also provide a means to manage windfalls from commodity exports or from sudden surges of capital.
US, global imbalances, China, Japan, exchange-rate policy
What to do about Doha
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.
In an ideal world, the Doha Round would have been completed by now.
Since it has not been, the best outcome now would be to have a strong agreement that could quickly be negotiated, especially enhancing the agreements on the liberalisation of services and agriculture.
US, China, Doha Round, India, global governance, Brazil
Asia Pacific and the Doha Round
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.
Of many benefits of the Doha Round for the Asia Pacific economies, one is fostering their reform process and taking advantage of new market access.
Asia Pacific economies (many of them classified as emerging economies) have an enormous stake in the Doha Round.
The trade interests of the Asia Pacific region, mapped back into the Doha Round, show that the region has much to gain from fully and effectively participating in multilateral negotiations.
China, Doha Round, Asia, Indonesia, Pacific
Doha Round: Or else what?
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.
The state of the current round of global trade talks is indisputably dire. It is never a good sign when analysts are quibbling over whether Doha is dead or simply comatose. Despite plaintive, increasingly desperate cries from Geneva, leaders of the G20 countries have shown little inclination to follow through on their repeated commitments to conclude the talks.
The absence of US leadership is critical
There is plenty of blame to go around, but the absence of American leadership has been particularly striking.
US, China, Doha Round, India, G20, Brazil
Why Doha Round matters to Asia and the Pacific
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.
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?
For Asia and the Pacific, it matters, seriously.
China, Doha Round, Asia, 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. Little attention, however, has been paid to the structural factors of economies and global production networks that have reversed conventional trade patterns, transformed the implications of trade statistics and weakened the effectiveness of exchange rates on trade balances.
Exchange rates International trade
US, global imbalances, China, exchange-rate policy, iPhone
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. However, opinion is mixed about whether these ambitions for China’s research capability, i.e.
Productivity and Innovation
China, innovation, foreign direct investment
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). What the Chairman failed to mention is that the Fed’s easy monetary policy in the early 2000s played a crucial role in bringing about the global saving glut.
Global crisis Monetary policy
US, monetary policy, global imbalances, China
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.
China, urbanisation, megacities