Offshoring, Import Competition, and the Jobless Recovery
Charles Schultze (Brookings) Jul 2004
Until the end of 2003, the United States had been experiencing a "jobless" recovery, with employment stagnating at levels well below those in 2000. A widespread perception has arisen that a major culprit behind the dearth of jobs was the growing practice of U.S. firms to relocate part of their domestic operations to lower-wage countries abroad. "Offshoring" presumably caused a reduction in U.S. output and a corresponding loss of jobs. In fact, after the 2001 recession, U.S. domestic production rose substantially, but output per worker—productivity—jumped so sharply that instead of rising, employment declined. That is the real cause of the jobless recovery. Had GDP growth been accompanied by a continuation of earlier rates of productivity growth, there would have been about 2.5 million more private sector jobs than there were at the end of 2003. When firms send work overseas, those goods or services come back in the form of imports. But a careful look at U.S. import data—especially for service imports, where most offshoring growth occurred—indicates that while the total number of jobs affected by offshoring had increased, that number was still small relative to the millions of jobs affected by the productivity surprise.
Building nations: Voting does not democracy make
Mark Malloch Brown (IHT) Jul 1, 2004
Watching the recent replays of Ronald Reagan in Berlin telling Mikhail Gorbachev to "tear down this wall" reminded us not only of how far the world has come in recent years, but also how yesterday's certainties have become today's questions.
The Years After Tomorrow
Stuart E. Eizenstat & David B. Sandalow (NYT) Jul 5, 2004
It is essential that we go beyond the Kyoto Protocol and shape a new strategy on global warming.
Disillusioned Europe: No leaders are spared
IHT Jul 6, 2004
Whatever their position on the spectrum, the governing parties of many European countries are experiencing similar troubles.
Environmentalists push a new lever: globalization
IHT Jul 6, 2004
American environmental and public health advocates are taking their issues to the EU, hoping to use regulations there as a lever for regulations in the US.
Global: Growth Risks
Stephen Roach (MSDW) Jul 6, 2004
It had to happen at some point. After a stunning revival in the global economy over the past year, the numbers have turned a bit soggy. In response — or possibly in anticipation— bonds have rallied, cyclical stocks have slipped, and commodity prices have tailed off. Is this just a momentary pause, or is a more sinister force at work?
Nice Suit, Senator
WSJ Jul 7, 2004
Kerry and colleagues use terrorism as an excuse for protectionism.
U.S. levies duties on Asia shrimp
IHT Jul 7, 2004
Ruling cites low-priced shipments from Vietnam and China.
WTO: Negotiators Gear Up For End-July Deadline
BRIDGES Weekly Trade News Digest - Vol. 8, Number 24 Jul 7, 2004
WTO delegates in Geneva are involved in intense negotiations on all trade issues on the table, with a particular focus on agriculture, the centrepiece of the Doha Round. The trade delegates are meeting regularly in small groups, bilateral and heads of delegation (HOD) sessions, and convened in the Trade Negotiations Committee (TNC) on 30 June in advance of a self-imposed deadline for developing frameworks for negotiations by the end of July. As a next step in the process, WTO Director-General Supachai Panitchpakdi and General Council Chair Shotaro Oshima (Japan) are expected to circulate a draft of the July framework next week.
Agriculture: Critics Voice Concern Over Negotiating Process
BRIDGES Weekly Trade News Digest - Vol. 8, Number 24 Jul 7, 2004
Meeting in Geneva on 5 July, the G-10 -- comprising net food-importing, mainly developed countries, including Switzerland and Japan -- released a position paper expressing dismay at being excluded from consultations among the Five Interested Parties (FIPs: Australia, Brazil, the EC, India and the US). In related developments, civil society groups called for a stronger pro-poor focus in the agriculture negotiations.
Fighting World Poverty: Count the U.S. Out
Barbara Crossette (Atlantic Monthly) Jul 7, 2004
"What is going on when the United States, home to a lot of the freest, most powerful women on earth, is represented by people who quail at words like 'reproductive health' and want to excise language that gives a woman control of her own body?"
In Russia, a crisis of confidence in banks
IHT Jul 9, 2004
A crisis of confidence spread through the Russian banking industry this week after several smaller financial institutions effectively shut their doors and depositors at some of the country's largest banks lined up to withdraw their money.
U.S.-EU trade: Dismantling barriers across the Atlantic
Niall Fitzgerald (IHT) Jul 9, 2004
It is not unusual for me to return from a visit to my native Ireland with a sense of greater well-being. Two weeks ago, however, I returned with a particularly buoyant spring in my step after attending part of the U.S.-European Union summit.
Why Capitalism is Inevitable
Joseph Stromberg and Jeffrey Tucker (Mises Daily) Jul 9, 2004
For all the talk about the triumph of capitalism, it seems that the free market—the real thing and not someone's imagined conception of it—has very few friends in politics or the world of ideas. Thus do the writings Murray Rothbard, the leading defender of the market economy of his generation, still have the power to shock and clarify the essential ideological and political battles of our time. This essay in particular constitutes on commentary on his powerful piece from 1973: "A Future of Peace and Capitalism."
Emerging markets, emerging risks
Economist Jul 9, 2004
Investors are once again buying emerging-market debt. A perilous punt, if ever there was one
For Europe, a one-digit victory in bar-code battle
IHT Jul 12, 2004
The globalization of the bar code represents a small erosion of American industrial hegemony.
World Leaders Are Scarce as AIDS Conference Opens in Bangkok
Lawrence K. Altman (NYT) Jul 12, 2004
The 15th International AIDS Conference began on a disturbing note with the cancellation of a summit meeting of world leaders invited to discuss AIDS.
Ahluwalia reflects on IEO's start-up
IMF Survey Jul 12, 2004
Plus: Executive Board pays tribute to Ahluwalia; Best practices in statistical revisions; Boost in HIV/AIDS assistance brings challenges; Krueger on free trade; Spain in the "new Europe"; ABCDE conference; China's reforms
Global: Payback Time
Stephen Roach (MSDW) Jul 12, 2004
World financial markets have only just begun to raise questions about the sustainability of the current global upturn. Forward earnings expectations imbedded in global equities have been ratcheted down slightly in recent weeks and global bonds have rallied back to levels prevailing at the start of the year. In the first half of 2004, a vigorous global upturn was taken for granted — as were the earnings vigor, inflation risks, and central bank tightening that such an outcome would spawn. Now some doubt is starting to creep in on all counts — and with good reason, in my view.
Global: Global: Imbalances, Take 2
Rebecca McCaughrin (MSDW) Jul 12, 2004
In contrast to a country’s financial account, which is a flow concept representing the change in assets owned and liabilities owed, the international net debt position is a stock concept, representing the cumulative financial account balances, adjusted for movements in exchange rates and asset prices. For this reason, a country’s net international investment position (IIP) is a more accurate mark-to-market gauge of indebtedness. It is also one of the indicators used in our FX team’s fair value models, and so any changes in the underlying position can be important from an FX standpoint. In addition, this metric is used to determine a country’s debt-servicing burden. Since US gross liabilities are not only larger than gross assets, but are also more heavily concentrated in debt securities (37% instead of 7% for assets), this will be a key issue for the US as global interest rates continue to rise.
Global: Global Trade Watch
Rebecca McCaughrin (MSDW) Jul 12, 2004
We recently revised up our estimates for global trade growth for this year from 7.3% to 8.3% on the back of resilient import demand in Japan, China and the rest of Asia, and Germany. Our outlook envisions slowing momentum during the second half of this year, in marked contrast to the tremendous surge in trade growth during the first half. For next year, we expect a moderation to trend of 6.1%. (For complete details, see Eric Chaney and Rebecca McCaughrin, “Global Trade: Mind the Slowdown,” June 16, 2004.)
Blixful Amnesia
Charles Krauthammer (AWSJ) Jul 13, 2004
The threat of terrorism is more immediate than hunger or global warming.
Kerry and Edwards Need to Think Again on Trade and Taxes
Clive Crook (Atlantic Monthly) Jul 13, 2004
For both John Kerry and John Edwards, anxiety about globalization and the foreign threat to American employment are central. But their fears are misguided.
Outsourcing backlash may be easing in India
IHT Jul 14, 2004
Infosys Technologies, the second-largest software and services outsourcing company in India, said Tuesday that its net profit jumped 39.2 percent in its first quarter from a year earlier, helped by an economic recovery in its prime market, the United States.
Meanwhile: The critical news stories you never read
IHT Jul 14, 2004
While in Addis Ababa last week for the African Union summit meeting, UN Secretary General Kofi Annan had dozens of conversations and meetings with the region's leaders. He observed a strange thing: "Iraq didn't come up, terrorism didn't come up, weapons of mass destruction didn't come up." There were subjects on people's minds other than the ones dominating the media's attention.
AIDS Agonistes
WSJ Jul 14, 2004
Playing global politics with a terrible disease.
Move Aside Citigroup, Here Come the Japanese
William Pesek Jr. (Bloomberg) Jul 14, 2004
This may be remembered as the day Japan's banking system finally turned the corner. There's reason for optimism, even though the emphasis here remains on ``may.''
Doha Round: Draft July Deal Expected In Next Few Days
BRIDGES Weekly Trade News Digest - Vol. 8, Number 25 14 July, 2004 Jul 14, 2004
At the time of publication of BRIDGES Weekly, WTO negotiators were awaiting a draft agriculture framework text. The formal Committee on Agriculture (CoA) special (negotiating) session was postponed late last week, with a new date yet to be set. A critical end-July deadline for agreeing on an overall framework for WTO negotiations is rapidly approaching. Trade sources indicate that Members have yet to reach agreement on key issues, and the final July text is likely to remain at a very general level rather than set out specific details.
Exploding the Myths of Offshoring
McKinsey Quarterly Jul 14, 2004
Far from damaging the economy of the United States, offshoring should enable its companies to direct resources to next-generation technologies and ideas -- if public policy doesn't get in the way.
Default Is Way of Life in Argentina
David DeRosa (Bloomberg) Jul 15, 2004
Argentina isn't through defaulting on its debts. The latest de facto default occurred on debt of Argentina's Mendoza province.
The UN’s Human Development Report: Diversity and development
Economist Jul 15, 2004
This year’s Human Development Report, from the United Nations Development Programme, focuses on cultural diversity. Respect for it is crucial to development, but diversity also presents unique challenges for a country seeking to get richer.
Who's Down With Trade
WSJ Jul 16, 2004
The Australia trade deal goes through.
How to Stop Nuclear Terror
WP Jul 17, 2004
The collapse of Soviet communism was the greatest advance for the cause of freedom in the late 20th century, but it left behind a legacy that could complicate the 21st century struggle to overcome terrorism. While the United States and Russia work to dismantle nuclear arsenals, terrorists and rogue states are seeking to obtain materials -- from former Cold War armaments and other sources -- to make nuclear weapons and "dirty bombs."
Living With China
WP Jul 18, 2004
For much of the past year, the United States has seemed to be heading toward a trade confrontation with China. Lobbies ranging from the AFL-CIO to the National Association of Manufacturers have attacked the Chinese, in the labor federation's case for abusive treatment of workers, in the manufacturers' case for a currency peg that keeps the Chinese yuan low against the dollar, boosting Chinese competitiveness. The Bush administration has sometimes wanted to keep step with the anti-Chinese mood: Last September it demanded that the Chinese abandon their currency peg, and this year it brought a complaint about China's tax treatment of semiconductors to the World Trade Organiza- tion. Democrats, for their part, have sounded eager to replay the trade battles that the United States waged against Japan in its heyday. Sen. John Kerry, the Democratic standard bearer, has called for "tougher enforcement" of trade rules, charging that the Bush ad- ministration has done too little to combat Chinese violations.
Bubba Gump Protectionism
WSJ Jul 19, 2004
Why you may soon be paying more for shrimp cocktail.
Global: The World's Biggest Hedge Fund
Stephen Roach (MSDW) Jul 19, 2004
The title belongs to America's Federal Reserve. Not only is the Fed the unquestioned leader in world central banking circles, but the US monetary authority has led the way in setting up the biggest macro trades of modern times. Highlights include Carry Trade I of 1993, the equity bubble of the late 1990s, and now Carry Trade II -- all direct outgrowths of trading strategies implicitly recommended by Greenspan & Co. So far, the world is no worse for the wear. But it's a world that now lives from trade to trade. And with that precarious existence comes the ever-present risk of breakage -- the aftershocks that follow the unwinding of every trade. We have the Federal Reserve to thank for that.
Global: Rising Risk of US Debt Costs
Rebecca McCaughrin (MSDW) Jul 19, 2004
While investors are closely monitoring the trade deficit for clues on unsustainable US imbalances, net investment income is an additional pressure point that bears closer scrutiny. When a foreign investor buys a bond, the transaction appears as a capital inflow in the financial account. On the flip side, when a US borrower pays the foreign holder of the bond interest, the transaction shows up as a deficit in the current account (c/a). Over time, the expanding stock of net external liabilities adds up to greater debt servicing costs. By ‘debt’, we are using the broadest sense of the word -- interest and dividends owed on securities, FDI, and bank and claims. Larger debt costs, in turn, exacerbate the general deterioration in the c/a deficit and are among the factors our US chief economist Dick Berner highlights as a downside risk to the c/a (see “When Will the Current Account Peak?” June 25, 2004). In this note, we flesh out the mechanics underpinning larger debt costs. In our view, the confluence of rising US rates relative to the rest of the world, a stronger dollar, and converging rates of return on portfolio investment will likely exacerbate US imbalances, providing additional fodder for dollar bears.
Currencies: Pressures on the Dollar to Be Temporary and Modest
Stephen L Jen (MSDW) Jul 19, 2004
I remain constructive on the USD medium term. Since the turn in the US activity data two weeks ago, the USD has come under downward pressure. However, I remain constructive on the USD index over the next year and a half. Though the USD may continue to experience downward pressures in the weeks ahead, I believe the greenback will reassert itself by Q4. The downward pressures on the USD are likely to be temporary in duration and modest in magnitude.
Asia's Twin Revolution
Yuwa Hedrick-Wong (AWSJ) Jul 20, 2004
Much of Asia's transformation is being driven by the domestic consumption and outsourcing revolutions.
Farm subsidies and Africa: Cotton's not king
William G. Moseley (IHT) Jul 20, 2004
It is increasingly asserted that American and European agricultural subsidies inhibit prosperity in the developing world, particularly in Africa. Critics argue that rich nations have aggressively dismantled trade barriers on industrial goods, yet shamelessly refused to do so for agriculture, where many African nations would have a comparative advantage.
India's Current Account Surplus Limits Growth
Andy Mukherjee (Bloomberg) Jul 20, 2004
India is complicating its growth agenda by parking money in U.S. Treasuries even when its savings aren't enough to meet investment needs. If that's counter- intuitive, then why's the country pursuing such a strategy?
Currencies: EUR/GBP - The Productivity Story
Melanie Baker (MSDW) Jul 20, 2004
UK productivity lags; but not all bad news. Relative productivity levels are an important element of currency valuation and are used in several of our valuation models. It is widely perceived that UK productivity lags that of its major competitors, which implies that productivity should be a major drag on sterling. However, it’s not all bad news, and better relative productivity (and a better backdrop for sterling) may lie ahead.
Shrimp and Mischief
NYT Jul 21, 2004
An antidumping case against Vietnam and China shows how easy it is for protectionism to undermine our nation's commitment to free trade.
Doha Round: Last-ditch Effort To Find Agreement On Package Deal Underway
BRIDGES Weekly Trade News Digest - Vol. 8, Number 26 Jul 21, 2004
On 16 July, WTO Director-General Supachai Panitchpakdi and General Council Chair Shotaro Oshima circulated a first draft Framework Text on the Doha Round trade negotiations, which Members are expected to adopt by the end of July. Following the release of the text, Members met in a number of formats, including a heads of delegation meeting called by Supachai on 19-20 July, informal meetings on agriculture and industrial market access on 20 July, and a video conference among the Five Interested Parties' (FIPs) group -- the US, EC, Australia, Brazil and India. The G-20 group of developing countries comprising, inter alia, Brazil, India, China and South Africa also met on 20 July. Negotiations continue on all issues and in different configurations.
Agriculture: Developing Countries Criticise Groser Draft For Developed-Country Bias
BRIDGES Weekly Trade News Digest - Vol. 8, Number 26 Jul 21, 2004
On 20 July, a group of around 30 key WTO Members came together to review the framework for agriculture modalities drafted by the Chair of the WTO Committee on Agriculture (CoA) special (negotiating) session, Ambassador Tim Groser. The framework draft was attached as Annex A to the draft General Council (GC) decision circulated by GC Chair Shotaro Oshima and WTO Director-General Supachai Panitchpakdi on 16 July (see related story, this issue). As expected, the seven-page Annex A did not provide a high level of specificity, due to the wide gaps still remaining between countries' positions. Groser did not, for example, come up with a specific tariff reduction formula, nor did he make concrete proposals on the treatment of special products (SPs) or the provision of duty- and quota-free access for imports from least-developed countries (LDCs). Developing countries in particular criticised Annex A for what they saw as significant imbalances in the level of specificity on issues important to developed countries, on the one hand, and those crucial to developing country Members, on the other. Several sources also questioned whether the vague language in Annex A could really help move the negotiations forward.
A debate about more than trade
Brett D. Schaefer & Anthony B. Kim (WT) Jul 21, 2004
It would be easy to dismiss the hesitation we see in Congress over the Bush administration's proposed free trade agreement (FTA) with Morocco as just another chapter in the ongoing debate between free traders and protectionists. After all, the usual suspects raise the typical arguments about labor and environmental standards and how the agreement would affect U.S. jobs.
What people really think of free trade
John Audley (IHT) Jul 22, 2004
The United States and Europe have long claimed that free-trade and poverty reduction are among their highest political priorities. But their recent record is hardly illustrious.
Peeling the Rhetoric Over Shrimp Tariffs
Greg Rushford (AWSJ) Jul 22, 2004
Antidumping tariffs won't help the American shrimp industry.
IMF and World Bank: Is reform underway?
BBC Jul 22, 2004
"How can poor people afford to buy water if they cannot afford to buy food?" The question was raised by Kenyan member of parliament, Dr Oburu Odinga. During a parliamentary finance committee seminar last summer he questioned why the World Bank should demand that water supply be privatised.
Global: The Job-Quality Debate
Stephen S. Roach (MSDW) Jul 22, 2004
Not surprisingly, the jobs debate is heating up in the United States as we move into the heart of the political season. My interest in this issue bears more on the economic and financial market implications of underlying trends in the US labor market. A jobless recovery puts pressure on consumer purchasing power and challenges the sustainability of an economic upturn. It also forces income-short consumers to rely on riskier sources of support—namely, outsize tax cuts, which blow up the budget deficit, and equity extraction from homes, which pushes debt loads into uncharted territory. By contrast, in a hiring-led recovery, the economy draws support from internal, or organic, growth—thereby avoiding the imbalances and other stresses and strains that have long concerned me.
Attack North Korea's Kim With Global Markets
William Pesek Jr. (Bloomberg) Jul 23, 2004
Summit meetings, those highfalutin affairs that are normally more about photo opportunities than substance, rarely matter to markets. That is, unless you're talking about the leaders of South Korea and Japan.
The Chinese Boom Can't Last
Nicolas Bouzou (Mises Daily) Jul 23, 2004
The Chinese economy has undergone extremely substantial growth rates over the past few years. According to official data, real GDP has increased at annual rates constantly in excess of 7% since 1996. Of course, no one is totally obliged to believe these statistics which are rendered unreliable due to a lack of means and political pressure [1]. However, the inspection of corporate accounts and investor sentiment seem to show that, since 2003, official growth rates have been underestimated to avoid pressure exerted by the American administration in favor of a revaluation of the renminbi, the Chinese currency.
Global: Taming the Dragon
Stephen Roach (MSDW) Jul 23, 2004
The China slowdown has barely begun. Yet the latest spin is that a soft landing may now be close at hand. Nothing could be further from the truth. Chinese economic activity is still expanding at a torrid and unsustainable pace. The nation’s authorities cannot afford to ease off on their campaign of policy restraint. If they do, an overheated Chinese economy runs the serious risk of a destabilizing hard landing.
'Bestshoring' Beats Outsourcing
Hillary Rodham Clinton (WSJ) Jul 26, 2004
Cheap labor isn't enough to attract the jobs of the future.
Global: Oil Prices - Once Again, Marking to Market
Richard Berner and Eric Chaney (MSDW) Jul 26, 2004
The message from crude oil markets is loud and clear. A combination of extremely tight supply/demand conditions and rising risks of supply disruption in Iraq and Saudi Arabia has driven prices higher than we had expected. On the demand side, the global economy is still roaring, burning 80 million barrels of crude per day with ferocious appetite. Chinese imports of oil and products have not slowed down, still up almost 50% from one year ago on the most recent data. In the West, higher gasoline prices have not daunted motorists. And the energy-intensive part of the manufacturing sector is turning a deaf ear to higher prices, perhaps because companies are now able to pass on higher costs to customers. Therefore, we are raising again our crude oil price assumptions for the next 18 months, as shown in the next table.
Currencies: GBP/AUD: Drawing Out the Differences
Melanie Baker & Rebecca McCaughrin (MSDW) Jul 26, 2004
There has been a lot of focus on Australia’s and the UK’s domestic economies. However, their external accounts may be equally important for GBP/AUD. Australia’s larger current account (C/A) deficit, stock of foreign debt and vulnerability to Asian demand versus the UK’s investment income surplus and balanced net external liabilities, likely favour a higher GBP/AUD medium term.
Hayek, Once China's Poison, Is Now Its Prophet
Andy Mukherjee (Bloomberg) Jul 27, 2004
If economist Friedrich Hayek were alive today, he would scoff at Beijing's awkward -- and failing -- attempts to check runaway economic growth as yet more evidence that all central planning was ultimately a ``pretense to knowledge.''
Disturbing colors of anti-globalization
Esam Sohail (AT) Jul 27, 2004
The anti-globalization movement likes to portray its opponents as protectors of power and privilege. Yet the same could be said about those who seek to preserve the jobs of ill-educated and overpaid workers in the developed world, especially the US.
Grease Trade
Peter Eigen (WSJE) Jul 28, 2004
The WTO must take up the fight against corruption.
Shoppers Putting the Tiger Back Into Asia
William Pesek Jr. (Bloomberg) Jul 28, 2004
On a recent morning in Sendai, Japan, Yuka Fujii struggled out of a Louis Vuitton store, two huge shopping bags in hand.
WTO meeting in Geneva: From Cancún to Geneva
Economist Jul 28, 2004
After the collapse of world trade talks in Cancún last September, can a WTO meeting in Geneva now put the Doha round back on track?
Stalled Doha talks must find way forward
ST Jul 29, 2004
Repeated breakdowns in negotiations have punctuated the progress of the international trading system since its inception shortly after the end of World War II. The system's ability to rise, like a phoenix, from the ashes is a witness to its underlying vitality. But that capacity must not be taken for granted. Failure to agree on how to take forward the Doha round of negotiations in Geneva this week would be potentially calamitous.
The rich gang up on the poor at trade talks
Kevin Watkins (IHT) Jul 29, 2004
There is a Swahili proverb that says, "When elephants fight, the grass gets crushed. When elephants make love, the grass gets crushed." Watching Europe and America trample like rogue elephants over the interests of developing countries at the crucial World Trade Organization talks now under way in Geneva confirms the proverb's enduring wisdom.
Trade Jitters
Bimal Ghosh (WSJE) Jul 29, 2004
If WTO talks stall again, bid farewell to the Doha round.
The oil market: Russian roulette
Economist Jul 30, 2004
The oil price has hit a 21-year high thanks to a bout of nerves about supply from Yukos, Russia’s biggest oil producer. While much of the recent price rise has been due to strong demand, supply is so stretched that it would take little disruption to send the price higher still.
U.S. bends on farmers, advancing WTO talks
IHT Jul 30, 2004
The U.S., the EU and three other key nations reached an undisclosed accord on agriculture aid Thursday.
The IMF's New Boss Stands Up to Argentina on Loan
David DeRosa (Bloomberg) Jul 30, 2004
The credibility of the International Monetary Fund -- and its new managing director -- is resting on how it deals with Argentina over a delayed $728 million loan payment.
World trade deal 'within reach'
BBC Jul 31, 2004
Marathon talks continue in Geneva on liberalising world trade, amid signs that they may be making some progress.
WTO Deals Offers Hope for Farmers, World Economy
Reuters Jul 31, 2004
A deal reached on Saturday to salvage world trade talks holds out the hope of fairer farm trade while boosting confidence in the global economy, trade experts said.
Round-the-clock meetings produce ‘historic’ breakthrough
WTO Jul 31, 2004
The WTO’s 147 member governments approved on 31 July 2004 a package of framework and other agreements, which Director-General Supachai Panitchpakdi said will greatly enhance members’ chances for successfully completing the important Doha negotiations.