Policy uncertainty threatens trade growth, says World Bank


February 22, 2017

Policy uncertainty threatens trade growth, says World Bank

Warning on protectionism and threats to trade agreements in Trump era

https://www.ft.com/content/9d49b092-f859-11e6-9516-2d969e0d3b65

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Political uncertainty is slowing trade growth, a World Bank report has concluded, indicating that the rise of Donald Trump may already be casting a shadow over the global economy.

Major international institutions such as the IMF, the OECD and World Bank have recently upgraded their forecasts of global economic growth largely due to expectations that tax cuts, rising infrastructure spending and a wave of deregulation will boost the US economy under the new president. But the report by World Bank economists, released on Tuesday, highlights the fragile state of one historically important engine of global growth — trade.

To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued. Michele Ruta, World Bank report co-author

The study avoids naming Mr Trump, but highlights rising protectionism and threats to unwind trade agreements — such as those made by the president. It also raises the prospect that attempts by the Trump administration to force companies to repatriate global supply chains to the US could undermine efforts to boost lagging productivity growth. To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued Michele Ruta, World Bank report co-author International trade has been growing below historic trends for the past five years. The 1.9 per cent growth recorded in 2016, according to the team at the bank, was the slowest since the 2009 collapse in commerce that followed the global financial crisis.

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Prime Minister Justin Trudeau meets with U.S. President Donald Trump in the Oval Office at the White House–The Future of NAFTA

The team found that some of the reasons for the anaemic trade growth, which affected both developed and developing economies, were broader trends such as slow economic growth around the world and a collapse in commodity prices. But in 2016 the principal change was a surge in uncertainty about economic policy. According to the World Bank’s calculations, such uncertainty was responsible for 0.6 percentage points of the 0.8 percentage-point fall in trade growth between 2015 and 2016. The team at the bank based their figure on a study of the relationship between trade and economic policy uncertainty in 18 countries over three decades. They added they expected the impact to continue in 2017. “To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued,” said Michele Ruta, one of the authors. The World Bank team also sought to quantify the impact of trade agreements on global trade growth. World trade grew at an annual rate of 6.53 per cent between 1995 and 2014, they calculated. Had no new members — including China — joined the World Trade Organisation or no new trade agreements been signed, international trade would have grown at just 4.76 per cent annually, they found.

One of the big consequences of the explosion in trade deals in recent decades has been the emergence of global supply chains. Such chains are widely seen by economists to have made businesses more efficient and boosted productivity. But Mr Trump and his administration have said they want to unwind those international supply chains and bring them home. “It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” Peter Navarro, one of the president’s top trade advisers, told the Financial Times last month.

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According to the World Bank team such a move, coupled with unwinding existing trade agreements that have encouraged the establishment of international supply chains, would hurt productivity growth. “Preserving and expanding the reach of trade agreements, rather than backtracking on existing commitments, would help to sustain the growth of productivity,” the bank’s economists wrote.

Malays are a complacent and self-aggrandising People


February 22, 2017

Malays are a complacent and self-aggrandising People

by Farouk A. Peru

http://www.themalaymailonline.com/opinion/farouk-a.-peru/article/americans-show-us-true-meaning-of-freedom-and-democracy

I believe in natural laws which determine the fates of individuals and nations. If we adhere to these laws, our destinies will shine and conversely, we are bound for a Dark Age if we refuse to do so.

One of these laws is that societies will rise if they constantly replenish themselves with fresh blood. This is the natural process of human movement.

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The Malay Leader –Najib Razak

Sedentary societies will not enjoy this social rejuvenation and the societies to which they emigrate will not enjoy a cultural replenishment.

The Malays are overwhelming a society of this latter description. After living 20 years in the UK, I do not meet as many Malays who have made a life here for themselves as I have people of other ethnic groups. There is no Malaysian town in London whereas there is a China town and even a Bangladeshi town!

The United States of America was born out of such an emigration. I am not forgetting the cost of human lives involved in that process nor forgiving the lack of moral rectitude which led to millions of native Americans perishing.

Rather, I am focusing on the hardiness of character of those immigrants. They had to endure long voyages and for those who were pushing the boundaries of the frontier, they had to endure austere and often tragic lives.

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The Role Model for Malay Women–Malaysia’s First Lady Rosmah Mansor

This is part of the natural law I mentioned above. I believe this is the reason the “civilisational momentum” was built and the proceeding chapters of American history were great. Shows like Little House on the Prairie were based on true narratives of such experiences.

However, “civilizational momentums”, like any physical body, does not last forever. Whilst in physics, momentum is lost when there is resistance, “civilisational momentums” are lost when societies become complacent and self-aggrandising.

In the case of the USA, the Baby Boomer generation was probably the time when they sustained the greatest measure of growth. However, by the time the 80s rolled around, that momentum was long gone.

Like our very own Bumiputera self-entitled generation, they had come to expect the world to lie down for them. When that did not last, naturally there were feelings of resentment and thus overcompensation.

America was a land which came to existence due to the desire for freedom, democracy and a better life. People have been doing that for centuries and the refugees are no different. To see Americans opposing their own President and acknowledging that shows me that all is not yet lost.

By the time 9/11 happened, the confluence of that tragedy with the sluggishness of the American economy resulted in the frustrations of the working class being directed at the Muslim world. I am not playing the victim card here. I do not believe the Muslim world is free from complicity in this matter.

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Rights, but what about responsibility, commitment and hard work?

Rather I am pointing to the sheer convenience of otherisation. Muslims generally don’t “look” American nor much follow certain American rites of passage. It was easy to alienate them and so the Islamophobia industry was born.

By the time the Donald emerged on the scene, the conservative American working class were ready to back him up all the way to the White House. He knew just what to say, after all, so why not?

The proposed Muslim ban back in 2015 was vehemently opposed by many sections of the American public be they government officials or civil rights groups. It was so profoundly unAmerican and unconstitutional, they said.

Trump never really backed down from that position but it did not affect his campaign. When you think about it, even the “grab’em by their …” statement, which should in theory, make half of the American population vote against him was not enough!

Americans were ready to return to the hard politics of conservatism. Overt conservatism, not the surreptitious kind peddled by Rodham-Clinton masked as a liberal.

Trump’s first days in office already showed the coming changes or perhaps, some testing of the waters to see what he could get away with. The ban on citizens from the seven “Muslim nations” could be either one, only time will tell.

What astounds me though, is the backlash from the American public themselves. They responded by protesting at the airports where the victims of the ban were held. Lawyers worked pro bono to get the detainees freed. Social media buzzed with support for the detainees.

Perhaps the biggest sign that America would not go down without a fight was the acting Attorney General, Sally Yates, losing her job for refusing to back down. This shows that the original American spirit is still alive.

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America was a land which came to existence due to the desire for freedom, democracy and a better life. People have been doing that for centuries and the refugees are no different. To see Americans opposing their own President and acknowledging that shows me that all is not yet lost.

Donald Trump–The Reluctant Multilateralist (?)


February 21, 2017

Donald Trump–The Reluctant Multilateralist (?)

by Barry Eichengreen

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Barry Eichengreen is Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is Hall of Mirrors:The Great Depression, the Great Recession, and the Uses – and Misuses – of History.–www.project-syndicate.org

FLORENCE – Donald Trump did not assume the US presidency as a committed multilateralist. On that, partisans of all political persuasions can agree. Among his most controversial campaign statements were some suggesting that NATO was obsolete, a position that bodes ill for his attitude to other multilateral organizations and alliances.

Last week, however, Trump stepped back, reassuring an audience at US Central Command in Tampa, Florida (the headquarters for US forces that operate in the Middle East). “We strongly support NATO,” he declared, explaining that his “issue” with the Alliance was one of full and proper financial contributions from all members, not fundamental security arrangements.

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This more nuanced view presumably reflects a new appreciation, whether born of security briefings or the sobering fact of actually occupying the Oval Office, that the world is a dangerous place. Even a president committed to putting “America first” now seems to recognize that a framework through which countries can pursue shared goals is not a bad thing.

The question now is whether what is true for NATO is also true for the International Monetary Fund, the World Bank, the World Trade Organization, and the Basel Committee on Banking Supervision. Trump’s record on the campaign trail and Twitter is not heartening. Back in 2012, he tweeted criticism of the World Bank for “tying poverty to ‘climate change’” (his quotation marks). “And we wonder why international organizations are ineffective,” he complained.

Likewise, last July, he mooted the possibility that the United States might withdraw from the WTO if it constrained his ability to impose tariffs. And he vowed repeatedly during the presidential campaign to withdraw from the Paris climate agreement. But the evolution of Trump’s position on NATO suggests that he may yet see merit to working through these organizations as he comes to recognize that the world economy, too, is a dangerous place.

Following the election, Trump acknowledged having an open mind on the Paris climate agreement. His position seemed less to deny the existence of global warming than to insist that policies mitigating climate change not impose an unreasonable burden on American companies.

The way to limit the competitive burden on US producers is, of course, by ensuring that other countries also require their companies to take steps to mitigate climate change, thereby keeping the playing field level. And this is precisely what the Paris agreement is about.

The real test of Trump’s stance on multilateralism will be how he approaches the WTO. Persuading the US Congress to agree on corporate and personal income-tax reform, a $1 trillion infrastructure initiative, and a replacement for Obama’s signature health-care reform won’t be easy, to say the least. Doing so will require patience, which is not Trump’s strong suit. This suggests that he will feel pressured to do what he can unilaterally.–Barry Eichengreen

The same can be said of the Basel Committee’s standards for capital adequacy. Holding more capital is not costless for US banks, as advisers like Gary Cohn, formerly of Goldman Sachs and now the head of Trump’s National Economic Council, presumably tell the president morning, noon, and night. Leveling the playing field in this area means requiring foreign banks also to hold more capital, which is precisely the point of the Basel process.

Trump may similarly come to appreciate the advantages of working through the IMF when a crisis erupts in Venezuela, or in Mexico as a result of his own policies. In 1995, the US Treasury extended financial assistance to Mexico through the Exchange Stabilization Fund. In 2008, the Federal Reserve provided Brazil with a $30 billion swap line to help it navigate the global financial crisis. But imagine the outrage with which Trump’s supporters would greet a “taxpayer bailout” of a foreign country or Mexican officials’ anger over having to secure assistance from the same Trump administration responsible for their country’s ills. Both sides would surely prefer working through the IMF.

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Jim Yong Kim–From Brown University to The World Bank

Trump can’t be pleased that the Obama administration rushed to push through the reappointment of its chosen World Bank president, Jim Yong Kim. But he clearly recognizes the benefits of development aid. While he has said that the US should “stop sending foreign aid to countries that hate us,” he has also observed that failure to help poor countries can foment instability.

This would appear to be an area where Trump will favor bilateral action, which would enable him to assuage his conservative critics by insisting that no US funds go toward family planning, while taking credit for any and all assistance. At the same time, minimizing the role of the US in the World Bank would create a vacuum to be filled by China, Trump’s bête noire, both in that institution and through the activities of the Chinese-led Asian Infrastructure Investment Bank.

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The real test of Trump’s stance on multilateralism will be how he approaches the WTO. Persuading the US Congress to agree on corporate and personal income-tax reform, a $1 trillion infrastructure initiative, and a replacement for Obama’s signature health-care reform won’t be easy, to say the least. Doing so will require patience, which is not Trump’s strong suit. This suggests that he will feel pressured to do what he can unilaterally.

One thing he can do unilaterally is slap duties on imports, potentially in violation of WTO rules. We’ll soon find out whether those rules will deter him.

https://www.project-syndicate.org/commentary/trump-nato-reluctant-mulitlateralist-by-barry-eichengreen-2017-02

East Asia: Trade Regime critical for Economic Stability and Political Security


East Asia: Trade Regime critical for Economic Stability and Political Security

by  EAF Editorial Group

What the Trump Administration will ultimately do to the shape of the global trade regime is difficult to foretell but there’s no question that it will change it forever, even if there is strong global push-back against Trump’s threat to unravel trade agreements and carry a protectionist stick.

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The trade regime, and the way in which it encourages open trade and international interdependence among those who sign on to its rules, is not simply an instrument of economic policy strategy that can be changed without political consequence. For most countries, and certainly those in East Asia which are so dependent on open trade to sustain their basic livelihood, the trade regime is a critical instrument of political security.

Trump has already signed executive orders to withdraw the United States from the Trans-Pacific Partnership (TPP) and renegotiate the North American Free Trade Agreement (NAFTA). What appeared noisy campaign rhetoric has been transformed into concrete action.

Trump’s withdrawal from the TPP is no big deal in itself: with the exception of what it promised in terms of liberalisation of the Japanese economy, the economic effects of the deal that was on the table were oversold. Even renegotiation of NAFTA may have more limited economic consequences than have been threatened. But these steps, together with the threat of punitive tariffs on imports from China and Mexico, plus a total retreat from multilateral or regional trade agreements, tears at the core principles upon which the US supported postwar economic order had been built.

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POTUS Donald J. Trump and China’s President Xi

Anyone who says that a switch of this magnitude and direction in the trade policy strategy of the world’s largest economy and second-largest international trader is of little consequence is seriously delusional. The old certainties that brought prosperity and a significant measure of stability to world affairs for nearly three-quarters of a century after the Second World War are under serious threat.

A world in which the defining characteristic is a lot of bilateral trade agreements rather than one in which multilateral and regional frameworks are predominant imposes costs on business and consumers alike because of the need for compliance with different rules of treatment across different trading partners. It also injects a different tone into international politics. These concerns are what motivates the argument for regional and global trade regimes that govern international flows of goods and services through unified rules and standards.

The broader the framework within which trade can take place, the greater will be the scope for division of labour and the higher the gains from international trade. Bilateral trade deals can’t replicate the gains from regional and multilateral agreement, and they will unhelpfully cut across global and regional value chains. As the largest centre of production networks, East Asia has much at stake in the push back against an open, global rules-based trading system and the regional arrangements that support it.

While the direct economic costs of Trump turning America’s back on the TPP and other measures might be relatively small, the systemic costs are much larger.

As Shiro Armstrong and Amy King write in this week’s lead essay, Trump’s executive order to withdraw the United States from the TPP agreement in the Asia Pacific ‘is a strategic turning point in the open economic order. It is a blow to furthering reform for some members, a lost opportunity for the United States to write the rules of international commerce, and more worryingly a sign of the United States turning its back on the global economic system it helped create and lead’.

How can East Asia, which includes China and Japan — the world’s largest and fourth-largest trading nations — stand against the corrosion of a global trading order that is so central to their common economic and political interests?

The economies of East Asia must, of course, stand quietly firm in global and regional forums and in all their bilateral representations to the United States against the undermining of the global trading system, giving strength to those forces in America that can help to shape much better outcomes than the present circumstances threaten. But, through their own commitment to collective liberalisation and reform, they can also help to lead the system back from the brink.

With major multilateral trade deals at the WTO now too difficult and bilaterals only able to make slow and incomplete progress towards freer markets, Armstrong and King observe, all eyes now turn to Asia’s Regional Comprehensive Economic Partnership (RCEP) agreement. It is the most important initiative on the global trade scene.

Image result for flags of asean member statesASEAN is the hub of RCEP Agreement

RCEP comprises the 10 Southeast Asian members of ASEAN as well as Australia, China, India, Japan, New Zealand and South Korea. Though, as Armstrong and King say, there are many misconceptions about the RCEP enterprise.

‘The first misconception is that RCEP is China-led. But China is a spoke and ASEAN is the hub of the arrangement. RCEP was built to consolidate ASEAN’s five separate free trade agreements with China, South Korea, Japan, India and Australia–New Zealand. And the RCEP idea and its guiding principles were crafted not in China, but in Indonesia. ASEAN centrality has ensured that RCEP has incorporated Asia’s other large power — Japan — and reflects Japanese preferences as much as those of China. Originally, China wanted to limit core membership of Asian cooperation to ASEAN plus China, Japan and South Korea. Japan wanted a larger membership, involving Australia, New Zealand and India, to help provide a counterweight to China’.

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In the end, ASEAN centrality and the interests of Australia and India in the region meant a broader and representative group ideally placed to take the lead collectively on global trade.

‘With the world trading system under threat’, as Armstrong and King conclude, ‘it is time for leaders in Asia to step up and push for opening markets and deepening reforms to enhance economic integration, not just with each other but with Europe, the United States and the rest of the world’.

*The EAF Editorial Group is composed of Peter Drysdale, Shiro Armstrong, Ben Ascione, Ryan Manuel, Amy King and Jillian Mowbray-Tsutsumi and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.

http://www.eastasiaforum.org/2017/02/20/east-asias-agreement-to-keep-the-world-economy-open/

Is Trump giving Americans “bread and circus”to keep them happy?


February 20, 2017

Dr.Fareed is back with his latest take on Trump

Is Trump giving Americans “bread and circus”to keep them happy?

by Dr Fareed Zakaria

https://www.washingtonpost.com/opinions/the-trump-circus/2017/02/16/d1bc4a86-f48c-11e6-8d72-263470bf0401_story.html?utm_term=.04404ea201e8

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Let’s say you are a Trump voter, the kind we often hear about — an honest, hard-working American who put up with Donald Trump’s unusual behavior because you wanted a president who would stop playing Washington’s political games, bring a businessman’s obsession with action and results, and focus on the economy. How is that working out for you?

The first few weeks of President Trump’s administration have been an illustration of writer Alfred Montapert’s adage, “Do not confuse motion and progress. A rocking horse keeps moving but does not make any progress.” We are witnessing a rocking-horse Presidency in which everyone is jerking back and forth furiously, yet there is no forward movement.

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Image result for Combative TrumpBoth Trump and Nixon: Taking on the Media

Since winning the election, Trump has dominated the news nearly every day. He has picked fights with the media, making a series of bizarre, mostly false claims — about the magnitude of his victory, the size of his inauguration crowd, the weather that day, the numbers of illegally cast ballots, among many others. He has had photo ops with everyone from Kanye West and Jack Ma to Shinzo Abe and Justin Trudeau. Now he is embroiled in a controversy about ties to Russia. But in the midst of it all, what has he actually done? Hardly anything.

 

President Donald Trump–Doing what he does Best


February 19, 2017

President Donald J. Trump–Doing what he does Best: Electioneering in stead of Governing

Listen to President of the United States at Melbourne, Florida and tell me what you think. His speech resonates with his supporters  no doubt, but it raises more concerns for the rest of us around the world. America, the Land of the Free and Home of the Brave, is not an Island onto itself. Under the 45th President, it is  also a fading City on a Hill.

As a  friend of America, I am disappointed at what is happening in America today. In less than a month in office, Mr Trump, you are not acting presidential, but more like a demagogue.

What America is in 2017 reminds me of 1968. To me, you are like the coming of another Richard Milhous Nixon. A divided, polarized, paranoiac, and inward looking America led by another toxic President is not good for a distracted America, and the world which depends on sanity and order in 1600 Pennsylvania Avenue, Washington DC.

Taking on the Press is not the solution. It is time for you, Mr. President, to tap the power of the  Press to support and promote your agenda for change. Antagonism towards the Media is, therefore, counterproductive.

So please get out of  your campaign mode, and start governing and making friends with the Media and the rest of the world. It has to be “I am Okay, You are Okay”(Eric Berne) paradigm for global peace and stability. You need, Mr. Trump, friends to keep America and the world safe from terrorism, racism and other forms of extremism, not just ISIS/Dash.–Din Merican.