News & Commentary:

May 2008 Archives


Commodity Boom: How Long Will It Last? Recommended!
Finance and Development Volume 45, Number 1 Mar/May 2008
This issue dissects the fears and apprehensions that small, poor countries have when it comes to engaging in the world trading system. With the Doha Development Round at a critical juncture, developing countries must decide whether to fight to keep their preferential trade access to a few key developed country markets or engage in multilateral liberalization. Other articles look at how the IMF must change to stay relevant in the 21st century; and how improving the investment climate is key to economic growth. In The Book Review Section, Nancy Birdsall and Moises Naim debate Sebastian Mallaby's controversial book about the World Bank and its president, James Wolfensohn. Finally, People in Economics tells the story of Bodil Nyboe Andersen, Denmark's central bank governor.

It’s all in the bonus
Ibrahim Warde (La Monde Diplomatique) May 2008
What was the motivation of Jerôme Kerviel, a lowly and unremarkable trader at Société Générale, to pull off the largest financial fraud in history? The media mostly discounted the money motive. In the words of French prosecutor Jean-Claude Marin, he wanted to “appear an exceptional trader, someone who could unerringly anticipate market fluctuations” and did not seek personal enrichment. Daniel Bouton, the bank’s head, called him a “swindler” and a “terrorist” but thought he “apparently did not personally benefit from this fraud”.

Speculate to accumulate
Serge Halimi (La Monde Diplomatique) May 2008
The International Monetary Fund and the World Trade Organisation promised that more trade would help to eradicate poverty and hunger. Foodcrops? Self-sufficiency in food? They had a better idea. Local farms would be closed down or encouraged to concentrate on exports. This would make the most, not of natural conditions which might be good for growing tomatoes in Mexico or pineapples in the Philippines, but of the fact that production costs are lower in Mexico and the Philippines than they are in Florida or California.

It's Not Just About the Money Recommended! Adobe Acrobat Required
Adam Posen (TIE) Mar/May 2008
The euro's ascent to at least comparable status with the dollar has a surface and popular plausibility. But recent financial turmoil obscures the reality that the euro is at a temporary peak of influence, and the dollar will continue to benefit from the geopolitical sources of its global role which the euro cannot yet or soon, if ever, match. Recent rebalancing behavior by official reserve holders keeping euro quantity shares in their reserves stable reflects this reality that underlies the observed inertia. US political leadership in security, commercial, and even cultural affairs globally has a critical impact on the usage of the dollar in the monetary realm, particularly in third countries' choices of exchange rate pegs. The euro has not and will not attract peggers beyond the European Union's neighboring potential members, and even some of its current members who value their foreign policy autonomy or security ties to the United States abjure euro adoption. Even absent a real rivalry from the euro, the dollar could still lose its dominant global role, but that would come as much through worsening foreign policy failures, not just through recent economic developments and policies.

A Call for an “Asian Plaza”
C. Fred Bergsten (TIE) Mar/May 2008
Introducing an action plan for a new “G5”—China, Saudi Arabia, Euroland, Japan, and the United States.

Reinventing Energy
Jeffrey D. Sachs (Project Syndicate) May 2008
The world economy is being battered by sharply higher energy prices. While a few energy-exporting countries in the Middle East and elsewhere reap huge profits, the rest of the world is suffering as the price of oil has topped $110 per barrel and that of coal has doubled.
The financial turmoil has been worsening as lagged adjustment processes play out. This column outlines economic dangers that may arise as they unwind, including a scenario in which the United States suffers extended stagflation.

Can Green Trade Tariffs Combat Climate Change?
Robert Collier (Project Syndicate) May 2008
In recent months, China has taken center stage in the international debate over global warming. It has surpassed the United States as the world’s largest source of greenhouse gases, and it became developing nations’ diplomatic champion at the recent United Nations climate negotiations in Bali. Now China may become the target of a full-fledged trade war that could destroy – or perhaps rescue – the chances of bringing rich and poor nations together to fight global warming.

Lemon Banking
Hans-Werner Sinn (Project Syndicate) May 2008
After the 1982 debt crisis, the Savings & Loan crisis in the United States in the late 1980’s, and the Asian financial crisis of 1997, the sub-prime mortgage crisis is the fourth major banking crisis since World War II, and by far the biggest. According to the IMF, the total loss in terms of balance sheet write-offs will be nearly $1 trillion worldwide, of which the lion’s share probably will be borne by US financial institutions. Given that the combined equity capital stock of all US financial institutions is roughly $1.2 trillion dollars, this is a breathtaking sum.

The End of Banks?
Xavier Vives (Project Syndicate) May 2008
Are banks doomed as a result of the current financial crisis? The securitization of mortgages originally was seen as a triumph, because it shifted risk to financial markets, while taking deposits and making and monitoring loans – the purview of traditional banks – was regarded as narrow and old-fashioned. By contrast, modern banks would seek finance mainly in the interbank market and securitize their loan portfolios.

The IMF’s Overlooked Revolution
Augustin Carstens (Project Syndicate) May 2008
As the turmoil swirling through global financial markets continues, there is a growing realization that global economic problems require global solutions and improved global governance. This March, amid the latest financial twists and turns, a significant achievement in this regard went largely unnoticed: an agreement by the executive board of the International Monetary Fund on a new quota formula and increases in quotas for under-represented members, particularly emerging-market and developing countries.

Does Military Intervention Work?
Paul Collier and Bjørn Lomborg (Project Syndicate) May 2008
Because peacekeeping initiatives in post-conflict countries are expensive and complex, and because the war in Iraq has undermined rich nations’ belief in their likely success, a dispassionate look at the use of military intervention is timely. A new study for the Copenhagen Consensus project that includes the first ever cost-benefit analysis of United Nations peacekeeping initiatives concludes that military might is an important tool for reducing bloodshed around the world.

The Silver Lining in High Commodity Prices
Kenneth Rogoff (Project Syndicate) May 2008
Today’s soaring commodity prices scream a fundamental truth of modern life that many politicians, particularly in the West, don’t want us to hear: the world’s natural resources are finite, and, as billions of people in Asia and elsewhere escape poverty, Western consumers will have to share them. Here is another truth: the price mechanism is a much better way to allocate natural resources than fighting wars, as the Western powers did in the last century.

The Failure of Inflation Targeting
Joseph E. Stiglitz (Project Syndicate) May 2008
The World’s central bankers are a close-knit club, given to fads and fashions. In the early 1980’s, they fell under the spell of monetarism, a simplistic economic theory promoted by Milton Friedman. After monetarism was discredited – at great cost to those countries that succumbed to it – the quest began for a new mantra.

Europe Should Dump Anti-Dumping
Henrik Isakson (Project Syndicate) May 2008
Defending Europe’s economy against unfair international trade practices has long been a key element of the European Union’s external policies. It is almost an instinct among some politicians and business leaders that if competition is deemed unfair, the European Commission should marshal new trade defenses. But what are Europeans defending against, and what are “unfair” trade practices anyway?

Getting Governance Right Recommended!
Dani Rodrik (Project Syndicate) May 2008
Economists used to tell governments to fix their policies. Now they tell them to fix their institutions. Their new reform agenda covers a long list of objectives, including reducing corruption, improving the rule of law, increasing the accountability and effectiveness of public institutions, and enhancing the access and voice of citizens. Real and sustainable change is supposedly possible only by transforming the “rules of the game” – the manner in which governments operate and relate to the private sector.

Surging Food Prices Mean Global Instability
Jeffrey D. Sachs (Scientific American) May 2008
Misguided policies favor biofuels over grain for hungry people.

How Does the Weak Dollar Affect Oil Prices?
A. F. Alhajji (Project Syndicate) May 2008
Around the world, there is anguished hand-wringing about the high price of oil. But if political leaders and policymakers want lower oil prices, they should be promoting policies that strengthen the dollar.

Why Do Economists Make Such Dismal Arguments About Trade?
Robert Driskill (Foreign Policy) May 2008
Economists are manning the barricades to defend free trade from a growing public backlash. But with globalization increasingly seen as a threat, their arguments are falling on deaf ears. Maybe it’s time to stop claiming they know what is best for everyone.
In recent months, China has taken center stage in the international debate over global warming. It has surpassed the United States as the world’s largest source of greenhouse gases, and it became developing nations’ diplomatic champion at the recent United Nations climate negotiations in Bali. Now China may become the target of a full-fledged trade war that could destroy – or perhaps rescue – the chances of bringing rich and poor nations together to fight global warming.

The inappropriateness of financial regulation
Avinash Persaud (VoxEU) May 1, 2008

Microfinance and the Food Crisis
David Apgar (Globalist) May 1, 2008
How will food price inflation affect the effectiveness of microfinance institutions?

In Search of the Global Customer
David Apgar (Globalist) May 1, 2008
How can microfinance help solve one of the thorniest development problems facing the world today?

International Working Group of Sovereign Wealth Funds is Established to Facilitate Work on Voluntary Principles
IMF May 1, 2008
From April 30-May 1, 2008, representatives of Sovereign Wealth Funds (SWFs) met at IMF Headquarters in Washington, D.C. The meeting facilitated a useful exchange of views among the SWFs, recipient countries, and representatives from the Organization for Economic Cooperation and Development (OECD) and the European Commission. Participants agreed that SWFs invest on the basis of economic and financial risk and return related considerations. An International Working Group of Sovereign Wealth Funds (IWG) was formally established by the meeting to present by October 2008 a set of SWF principles that properly reflects their investment practices and objectives.

Euro shows signs of end to bull run
FT May 1, 2008
Speculation that the single currency's seven-year run was coming to an end intensified as it fell to five-week lows against the dollar and the pound.

Clever conceits cannot hide the world's jagged edges
Philip Stephens (FT) May 1, 2008
You can always find some analogy or other from the past that can be said to illuminate the here and now. Yet upheavals in the global system since 1989 – the most profound for at least a century – are not susceptible to neatness.

Bush Seeks More Food Aid for Poor Countries
NYT May 2, 2008
President Bush on Thursday proposed an additional $770 million in emergency food assistance for poor countries, responding to rising food prices that have brought social unrest in several nations.

Dollar Reserve Status Is Tale of Fading Glory
Michael R. Sesit (Bloomberg) May 2, 2008
Reserve currency status is like your health: Abuse it, and you risk losing it.

Global: The Inflation Conundrum
Joachim Fels & Manoj Pradhan (MSDW) May 2, 2008
Everybody talks about inflation, but market-based measures of inflation expectations have remained remarkably stable. We find this discrepancy between what investors talk about and what they seem to do puzzling. We discuss two possible explanations for this conundrum.

A strategy to promote healthy globalisation
Lawrence Summers (FT) May 4, 2008
US international economic policy needs to focus on issues in which the largest number of Americans have the greatest stake.

Central bankers warn global economy faces inflation risk from food
IHT May 5, 2008
The surge in costs places priority on anchoring inflation, the ECB's chief, Jean-Claude Trichet, said.

Food vs. fuel a global myth
CheckBiotech May 6, 2008
In recent weeks, a flood of reports and statements has claimed that the world's biofuel programs—in particular the U.S. corn ethanol effort—is starving poor people around the globe.

Are We Running Out of Food? Recommended!
Kel Kelly (Mises Daily) May 6, 2008
Paul Krugman writes in the New York Times, April 7 that there is a world food shortage, accompanied by skyrocketing prices. Because of this, poor people in Africa and other places are starving. He suggests that this has come about mostly for these reasons: new food demand by China, the high price of oil, bad weather in important farming areas (particularly Australia), and the reduction of farmland available to grow foodstuff — in favor of growing biofuel crops, for the purposes of alternative, (reputedly) environmentally safe energy sources such as ethanol. Krugman's proposed solution to these problems is for us to give more of our money to government, so that it can solve the problem the market is apparently incapable of solving. And now, the real story.

Seven habits finance regulators must acquire
Martin Wolf (FT) May 6, 2008
Unless we are comfortable with a crisis every five years or so, financial regulation must be radically reconsidered. Tighter rules are desirable in the longer-run interests of the banking industry itself let alone the public's. What should such regulation look like.

Some Signs of an Upturn for the Dollar
NYT May 7, 2008
After six years of stumbling against the euro, the dollar may be showing signs of getting back on its feet.

Slovakia gets the go-ahead to adopt the euro
IHT May 7, 2008
The adoption of the common currency marks the country's fast and furious transformation from dictatorship to thriving market economy in less than a decade.

Hopes Fade for Doha Modalities Mini-Ministerial in May
BRIDGES Weekly Trade News Digest - Vol. 12, Number 16 May 7, 2008
WTO Members "have only a few weeks, not months" in which to conclude framework agreements on agriculture and industrial goods trade if they are to have any hope of concluding the Doha Round this year, the head of the global trade body said this week.

WHO Committee Makes Progress, But Falls Short Of Agreement on Health Innovation
BRIDGES Weekly Trade News Digest - Vol. 12, Number 16 May 7, 2008
Government negotiators in a World Health Organization committee last week fell short of finalising a potential plan to encourage pharmaceutical innovation that better responds to the needs of people in poor countries. Although they agreed on much of the content of a draft global strategy, they had to leave some of the most contentious issues on the links between intellectual property and innovation unresolved.

Europe and US unite on stronger dollar
FT May 8, 2008
The US and Europe now have a united desire to see the dollar strengthen against the euro, senior officials have told the Financial Times

End-of-the-World Trade Recommended!
Donald MacKenzie (LRB) May 8, 2008
Last November, I spent several days in the skyscrapers of Canary Wharf, in banks’ headquarters in the City and in the pale wood and glass of a hedge fund’s St James’s office trying to understand the credit crisis that had erupted over the previous four months. I became intrigued by an oddity that I came to think of as the end-of-the-world trade. The trade is the purchase of insurance against what would in effect be the failure of the modern capitalist system. Read more

Avoiding disorderly deleveraging: a reasonable, radical proposal
Luigi Spaventa (VoxEU) May 8, 2008
The global financial system may be caught in a downward spiral as market and funding illiquidity reinforce each other. The author of CEPR Policy Insight 22 presents a radical proposal that would break the feedback loop by not valuing illiquid assets at market prices under crisis conditions.

Global: Naturally Below Neutral
Joachim Fels (MSDW) May 8, 2008
Just as a restrictive Fed in 2006/07 eventually hammered growth, an expansionary Fed should bring about economic healing. Time lags suggest that this will not happen before 2009, however.

Blame the models
Jon Danielsson (VoxEU) May 8, 2008
In response to financial turmoil, supervisors are demanding more risk calculations. But model-driven mispricing produced the crisis, and risk models don’t perform during crisis conditions. The belief that a really complicated statistical model must be right is merely foolish sophistication.

Emerging Markets Weather Fallout from Financial Crisis
IMF Survey May 8, 2008
Despite the severe fallout from the subprime meltdown that is dampening world growth and depressing financial markets, emerging market countries are weathering the financial crisis relatively well, according to participants at a Global Bond Market Forum.

IMF warns on global inflation
FT May 8, 2008
Global inflation has re-emerged as a major threat to the world economy, the International Monetary Fund said in a stark warning that marked an abrupt change of tone from its emphasis on the risks to growth.

The financial crises of capitalism
FT May 8, 2008
The beginning of wisdom is to recognise that booms and busts have been a feature of capitalism from the start, writes Samuel Brittan

Free the Food
WP May 11, 2008
Export controls threaten the world's hungry.

The Dollar: Shrinkable but (So Far) Unsinkable
NYT May 11, 2008
If the United States were any other country, these would surely be days of panic and austerity in Washington. With debts spiraling higher, a trade deficit exceeding $700 billion a year, and its currency plunging for years, the government would be forced to cut spending and jack up interest rates in a frantic bid to attract investment.

The global euro needs a stronger apparatus
Wolfgang Münchau (FT) May 11, 2008
Institutions matter. They create their own agendas. Nobody knows this better than the Commission itself.

The Oil Nonbubble
Paul Krugman (NYT) May 12, 2008
“The Oil Bubble: Set to Burst?” That was the headline of an October 2004 article in National Review, which argued that oil prices, then $50 a barrel, would soon collapse.

Stephen Jen & Luca Bindelli (MSDW) May 12, 2008
Oil-based SWFs should have the biggest impact on the world’s risky assets, followed by goods-trade surplus SWFs. SWFs based on capital inflows should have minimal (possibly even negative) effects on the world’s aggregate risk-taking preference. The net effect depends on the relative size of these three types of SWFs.

How banks can put their houses in order
Charles Dallara (FT) May 12, 2008
There is an emerging consensus on the benefits of reinforcing market-based corrections with improved structures.

The crisis, information, and the market
Xavier Vives (VoxEU) May 13, 2008
Information is at the heart of the recent liquidity crisis – who bears risks, who has losses, who is insolvent? This column explains why solving the crisis requires closing such information gaps.

Global: Recoupling: More Likely Malign Than Benign
Richard Berner (MSDW) May 13, 2008
Any global slowdown may involve an unappetizing combination of slower growth and high inflation, which spells malaise for risky assets.

The market sets high oil prices to tell us what to do
Martin Wolf (FT) May 13, 2008
Oil is a finite resource; it drives global transport; and if emerging economies consumed it as Europeans do, world consumption would jump by 150 per cent. Don't blame the high price on speculators and big bad oil companies. The reality is different.

Is Larry Summers the canary in the mine?
Devesh Kapur, Pratap Mehta and Arvind Subramanian (FT) May 13, 2008
Is a liberal international economic order losing intellectual support? Should developing economies be worried? If Larry Summers is the canary in the intellectual mine, his two columns in the Financial Times (April 28 and May 5) suggest that the answers to both questions are yes.

Trade growth, global production, and environmental degradation
Judith M. Dean and Mary E. Lovely (VoxEU) May 14, 2008
Chinese trade and pollution have exploded over the last decade. But new evidence shows that trade isn’t to blame for the pollution. In fact, Chinese imports and exports are becoming cleaner over time.

The Financial Crisis: An Interview with George Soros
George Soros & Judy Woodruff (NYRB) May 15, 2008
The following is an edited and expanded version of an interview with George Soros, Chairman, Soros Fund Management, by Judy Woodruff on Bloomberg TV on April 4.

WTO Ag Chair Announces Revised Text Imminent
BRIDGES Weekly Trade News Digest - Vol. 12, Number 17 May 14, 2008
The chair of the WTO agriculture negotiations has told Members that he would circulate a revised blueprint deal by 16 May, or early the following week.

WIPO Members Choose Francis Gurry to be Next Director-General
BRIDGES Weekly Trade News Digest - Vol. 12, Number 17 May 14, 2008
Francis Gurry has been nominated to be the next director-general of the World Intellectual Property Organization.

Köhler attacks markets 'monster'
FT May 14, 2008
The German president, a former head of the International Monetary Fund, called for tougher regulations and the reconstruction of a 'continental European banking culture'.

Signs of an end to soaring food prices
FT May 14, 2008
The UN's Food and Agriculture Organisation price index, considered the best measure of global food inflation, saw its first decline in 15 months in April.

Keep hold of the basic rules of finance
Roger Altman (FT) May 14, 2008
No figure commands more respect within the world’s financial community than Paul Volcker, the former Fed chairman. That is why his recent declaration – “the bright new financial system had failed the test of the marketplace” – was such a profound rebuke. It implied that the behaviour of market participants, rating agencies and regulators during the recent credit bubble was unsound to the point that markets had now rejected it. Mr Volcker is right and most people know it.

Global: Three Questions for the ‘Last Four’ and the ‘Big Five’
Manoj Pradhan & Joachim Fels (MSDW) May 15, 2008
Examining the past four US recessions and five big bank-centred financial crises in other countries, we try to gauge the depth and duration of the recession in the US, the Fed’s policy response and implications for inflation. The Fed’s aggressive monetary easing will likely spill over into higher inflation, pulling bond yields higher.

Central bank communication
Alan S. Blinder, Jakob de Haan, Michael Ehrmann, Marcel Fratzscher & David-Jan Jansen (VoxEU) May 15, 2008
Central banking has undergone dramatic change in recent decades, and many banks now favour transparency in communicating their policies and forecasts. What does this mean? This column argues that our understanding of the role of central bank communication is still in its infancy and it remains unclear what constitutes an optimal communication strategy for central banks.

Banking's crisis: Paradise lost Recommended!
Economist May 15, 2008
Banks are bound to fail from time to time. But, asks Andrew Palmer (interviewed here), does the fallout have to be so painful?

Poor people, rich returns
Economist May 15, 2008
Is it acceptable to profit from the poor?

Change is in the air for financial superclass
David Rothkopf (FT) May 15, 2008
Of the world’s elites, none has flown higher than those who have led the financial community. The re-engineering of international finance has been one of the transformational trends of our times – in just a quarter-century, capital flows became massive, instantan­eous and controlled by a new breed of traders representing a handful of major financial institutions from a few countries. Their rewards have transcended any in history as shown by an estimate by Alpha Magazine that the top hedge fund manager last year made $3bn.

Eighteenth-century “proto-globalisation”
Paul Sharp (VoXEU) May 16, 2008
Economic globalisation is a political phenomenon. This column presents new evidence on the Anglo-American wheat trade in the eighteenth century and explains how politics, war, and natural disasters thwarted economic integration.

World's Poor Pay Price as Crop Research Is Cut
NYT May 18, 2008
Cuts in agricultural research continue even as the growth of the global food supply slows and the population increases.

Expected Currency Appreciation = Inflation
Stephen Jen (MSDW) May 19, 2008
We see expectations of future currency movements as a major driver of official reserve movements, and therefore inflation, in many EM economies. In our view, China’s decision to slow down USD/CNY’s decline makes sense. We also believe that ‘de-pegging’ bets around the world (except the RUB) should be unwound.

Currencies: DEFCON-3 on Some Emerging Market Currencies
Stephen Jen & Luca Bindelli (MSDW) May 19, 2008
Now that the AXJ currencies have begun to weaken against the dollar, we believe that some EM currencies in other parts of the world will also be vulnerable to a cyclical sell-off. We recommend heightened alertness to such a development.

Another China Trade Opportunity
Jeremy Haft (WSJ) May 19, 2008
U.S. exports could soon boom even more.

Should Europe really worry about its trade deficit with China?
Andreas Freytag (VoxEU) May 19, 2008
Europeans are now echoing American concerns about China’s trade surplus. This column argues that there is little reason to worry about Europe’s trade deficit with China nor evidence that China should be pressed to revalue the renminbi.

EU says global trade talks making progress
IHT May 19, 2008
Mediators at the World Trade Organization are expected to issue a compromise proposal this week that could pave the way for talks among senior officials and trade ministers within a month.

Scrutinising non-governmental aid
Axel Dreher, Dirk-Jan Koch, Peter Nunnenkamp & Rainer Thiele (VoxEU) May 20, 2008
How do NGOs spend their development assistance? This column discusses research showing that NGO aid is no better targeted to the neediest countries than state aid agencies either by choosing needier countries, or by entering un-chartered waters and trying to excel where state aid is most likely to fail.

Global Financial Strains Remain Concern, Says IMF
IMF Survey May 20, 2008
The IMF sees continued serious risks to global financial stability despite some signs of normalization in global credit markets and says policymakers should avoid complacency, taking additional steps to restore confidence.

Preserving the open economy at times of stress
Martin Wolf (FT) May 20, 2008
Everybody should remember, above all, that the opening of the world economy is the west's greatest economic policy achievement. It would be a tragedy if it were to turn its back on the world when the rest of humanity is at last turning towards it.

Closing the Gap: IMF Examines What Makes Growth Sustained
IMF Survey May 21, 2008
An IMF study examines the elements that contribute to sustained growth, an issue critical in helping poor countries close the income gap with rich countries.

The Rise of Sovereign Wealth Funds: Impacts on US Foreign Policy and Economic Interests Recommended! Adobe Acrobat Required
Edwin M. Truman (PIIE) May 21, 2008
The potential impacts of sovereign wealth funds on US foreign policy, national security, and economic interests may be disquieting, but they do not endanger the United States.

The politics of US trade negotiating authority
Paola Conconi, Giovanni Facchini & Maurizio Zanardi (VoxEU) May 21, 2008
The US Congress recently denied President Bush trade promotion authority and scuttled the US-Colombia trade agreement. This column discusses the importance of “fast track” negotiating authority in liberalising global trade and presents an explanation of the politics that led to its recent lapse.

WTO Ag Chair's Revised Text Charts Slow Progress on Sensitive Products
BRIDGES Weekly Trade News Digest - Vol. 12, Number 18 May 21, 2008
A long-awaited revised draft agriculture deal for the troubled WTO Doha Round was circulated on 19 May by the chair of the farm talks. While the text incorporates gradual progress in areas such as Members' 'sensitive' farm products, it leaves untouched most of the controversial 'headline numbers' such as the percentage cuts for overall trade-distorting subsidies, and in many other areas simply restructures or clarifies negotiating options.

New NAMA Text Would Grant Greater Flexibilities to Developing Countries
BRIDGES Weekly Trade News Digest - Vol. 12, Number 18 May 21, 2008
A new draft deal from the chair of the deadlocked WTO negotiations on manufacturing trade would allow developing countries to shield a higher share of industrial imports from the full force of tariff reduction if they agree to relatively steep overall duty cuts.

The persistence of sovereign defaults
Carmen M. Reinhart (VoxEU) May 22, 2008
Emerging economies are increasingly moving from external to domestic debt. Conventional wisdom says that this is an improvement that signals a lower risk of sovereign default. But this column presents evidence that history disagrees and argues that defaults are likely to persist.

Change You Can't Believe In
WSJ May 22, 2008
Welfare for rich farmers? Yes we can!

World Bank's Watchdog Criticizes The Lender's Efforts to Fight Corruption
WSJ May 22, 2008
The World Bank's in-house watchdog said the bank's effort to set up anticorruption commissions and ethics codes to combat graft in developing nations has been largely a flop.

Global house prices: Structural cracks
Economist May 22, 2008
Our indicator shows many of them going in the wrong direction.

Sovereign funds offer a wealth of benefits
Peter Weinberg (FT) May 22, 2008
SWF investing is good for the global markets and for our global community. Corporate leaders, market participants and politicians should resist the temptation to adopt a bunker mentality.

Oil Is Up Because the Dollar Is Down
David T. King (WSJ) May 23, 2008
Leave Exxon alone. Our currency is the problem.

Redesigning the EU trade strategy towards China
Patrick A. Messerlin & Jinghui Wang (VoxEU) May 24, 2008
EU-Chinese trade relations are disappointingly stagnant. This column proposes a new European strategy for China, suggesting a small, feasible bargain to jump-start economic engagement with the emerging giant.

The Free-Trade Paradox
James Surowiecki (New Yorker) May 26, 2008
All the acrimony in the primary race between Barack Obama and Hillary Clinton has disguised the fact that on most issues they’re not too far apart. That’s especially the case when it comes to free trade, which both Obama and Clinton have lambasted over the past few months. At times, the campaign has looked like a contest over who hates free trade more: Obama has argued that free-trade agreements like NAFTA are bought and paid for by special interests, while Clinton has emphasized the need to “stand up” to countries like China. Two weeks ago, both senators signed on as sponsors of a new bill that would effectively impose higher tariffs on China if it doesn’t revalue its currency. The candidates are trying to win the favor of unions and blue-collar voters in states like Ohio and West Virginia, of course, but their positions also reflect a widespread belief that free trade with developing countries, and with China in particular, is a kind of scam perpetrated by the wealthy, who reap the benefits while ordinary Americans bear the cost.

Emu's second 10 years may be tougher
Martin Wolf (FT) May 27, 2008
The eurozone is a triumph as a monetary union. Yet it is much less so as an economic union. Its creation has not caused the acceleration in dynamism that proponents hoped for – if anything, structural reforms have slowed.

Sizing Up Burma's Junta
WSJ May 27, 2008
Donor nations start to act responsibly.

Schooling costs: The link between tariff reform, poverty, and educational attainment
Eric Edmonds & Nina Pavcnik (VoxEU) May 28, 2008
India’s trade liberalisation in the 1990s produced large gains, but it imposed significant costs of adjustment on communities with industries that lost tariff protection. A new study shows that those communities’ educational attainment lags behind the rest of India due to the intersection of trade adjustment, poverty, and schooling costs.

The Rich Get Hungrier
Amartya Sen (NYT) May 28, 2008
Will the food crisis that is menacing the lives of millions ease up — or grow worse over time? The answer may be both. The recent rise in food prices has largely been caused by temporary problems like drought in Australia, Ukraine and elsewhere. Though the need for huge rescue operations is urgent, the present acute crisis will eventually end. But underlying it is a basic problem that will only intensify unless we recognize it and try to remedy it.

Change You'll Have to Pay For
WSJ May 28, 2008
Barack Obama worries that free trade would be too good a deal for Americans.

Trust the development experts – all 7bn
William Easterly (FT) May 28, 2008
Systems that give more liberty – both economic and political – to individuals are associated with much less poverty

Cautious Welcome, Some Criticism, For Revised WTO Ag Text
BRIDGES Weekly Trade News Digest - Vol. 12, Number 19 May 28, 2008
Many WTO Members extended a cautious welcome to the latest revision of a draft Doha Round agriculture deal circulated on 19 May by the chair of the farm talks. However, some also offered criticisms of parts of the draft that they felt were unbalanced, and called for a further revision of the text to be issued soon.

Longstanding Differences Resurface in Talks on NAMA Text
BRIDGES Weekly Trade News Digest - Vol. 12, Number 19 May 28, 2008
Last July, with WTO Member governments unable to agree on cuts to manufacturing tariffs under the Doha Round trade talks, the chair of the negotiations put forward a draft deal describing where he thought consensus might be found.

Alongside Ag, NAMA Push, Services Chair Issues Report
BRIDGES Weekly Trade News Digest - Vol. 12, Number 19 May 28, 2008
Following the release last week of draft Doha Round deals on agriculture and manufacturing trade, the chair of the services negotiations on 26 May issued a report of his own (TN/S/33), describing the state of play in the struggling talks and setting out some views on how to proceed.

Monetary policy and commodity prices
Jeffrey Frankel (VoxEU) May 29, 2008
Low inventory levels might seem to belie the theory that soaring commodity prices are attributable to low interests rates. In this column, Jeffrey Frankel defends his argument, pointing to production decisions and cross-country comparisons.

European economic integration: Undoing 1914-1945
Nikolaus Wolf (VoxEU) May 29, 2008
Prior to 1914, Europe was economically integrated across political borders. The “second Thirty Year War” (1914-1945) put up barriers that post-war European integration has been undoing since the 1950s, returning Europe to a familiar state of economic affairs.

The Rise of the New Mercantilism (Part I)
Robert D. Atkinson (Globalist) May 29, 2008
Is growing economic competition leading to unfair trade practices in the developing world?

The Oil Shock Debate: Recession, Inflation or Both?
Richard Berner (MSDW) May 29, 2008
Soaring oil prices are evoking unpleasant memories of the 1970s, when oil shocks triggered recessions, double-digit inflation, and a period of stagflation. But a global recession and significantly higher inflation are tail events and not part of our baseline view.

Uncomfortable truths for a new world of them and us
Philip Stephens (FT) May 29, 2008
The politics of globalisation lags ever further behind the economics. For all its tacit recognition that power has been flowing eastwards, the west still wants to imagine things as they used to be - when financial crises were something that happened somewhere else.

Britain is better off outside the euro
Martin Wolf (FT) May 29, 2008
If a country is to join the eurozone, its people must be willing to cope with the consequences forever.

Double, double, oil and trouble
Economist May 29, 2008
Is it “peak oil” or a speculative bubble? Neither, really.

The Doha dilemma
Economist May 29, 2008
Does freer farm trade help poor people?

The Rise of New Mercantilism (Part II)
Robert D. Atkinson (Globalist) May 30, 2008
What should the United States do to curb unfair trade practices in the developing world?

Perceptions and Realities of Globalization
Jacob Funk Kirkegaard (PIIE/YaleGlobal) May 30, 2008
Citizens armed with education and skills have less to fear from globalization.

Aid Beyond Borders
Sam Brownback (WSJ) May 30, 2008
'We must insist upon complete and total intrusive aid.'

Home | Economics | Business & Finance | Politics | Law | ICT | Development | News | Research