The Great Debate UK

from The Great Debate:

Global rebalancing to weaken dollar, quietly

-- Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own --forex

Twenty-four years ago, major nations called for depreciation of the dollar to rebalance the global economy. Now, as another effort at rebalancing looms, the dollar will again bear the brunt -- though officials will try to ensure its fall is less dramatic this time.

That's the implication of President Barack Obama's announcement this week that he will push world leaders for a new global "framework" in which the United States would cut its huge trade and budget deficits.

Agreeing on this framework would be politically difficult, since it would require policy changes by many countries -- China, for example, would probably have to rein in its explosive export-led growth.

from Commentaries:

Rethinking carbon diplomacy

Climate change was initially billed in a leading role at the G20 meeting in Pittsburgh. Now it looks set to make the briefest of cameo appearances.

Nonetheless, the gathering offers a crucial chance to recast the talks. The United Nations carbon process is in deep trouble and desperately needs help from the top. If the G20 heads of government want to avoid embarrassment at the Copenhagen Summit, they need to start to steer the talks in a new direction.

from The Great Debate:

Global imbalances: out with a bang?

jamessaft1.jpg(James Saft is a Reuters columnist. The opinions expressed are his own)

The simplest way to end the imbalances in the world's economy is also sadly perhaps the most likely: for the Chinese to stop buying U.S. debt.

This is not going to happen anytime soon, for one thing deleveraging in the U.S. will for a time make U.S. Treasuries look good value, but a buyer's strike is a heck of a lot more likely than the orchestrated rebalancing the U.S. will push at this week's G-20 meeting of leading nations.

from Commentaries:

Is Goldman’s Chinese convertible really a taxi?

BRITAIN/The number of London's trademark black taxis booked and waiting outside the European headquarters of Goldman Sachs -- meters running -- was once used by some as a barometer of the health of London's investment banking business.

When times were good, the queue was long and it was impossible for anyone else in the vicinity to hail a cab. But when the fees dried up, or markets turned, the cabbies who'd been at Goldman's beck and call suddenly had to find new customers.

from The Great Debate:

For Chinese exporters, grass is greener abroad

WeiGucrop.jpg- Wei Gu is a Reuters columnist. The opinions expressed are her own. -

The U.S.-China tire dispute threatens to spill into other sectors and squeeze Chinese exporters' already razor-thin margins further. It might seem mind-boggling to many that Chinese manufacturers are still hanging on to weak overseas markets even though the domestic economy looks much healthier and surely offers more potential.

But there are structural reasons why the grass is greener outside China. The risk of not getting paid, or getting paid late, is significantly lower when dealing with foreign buyers. The cost of international shipping has dropped so much that it can be cheaper to send goods over the Pacific Ocean than across the country.

from The Great Debate:

China’s coming magnificent bubble

jamessaft1.jpg--James Saft is a Reuters columnist. The opinions expressed are his own--

If and when China makes its currency convertible and opens its financial system the stage will be set for a bubble that should make the dotcom and housing booms look tame.

China has recently signaled its key aspirations: for a greater international role for the renminbi and for Shanghai to become a great financial capital. Neither is imminent, but both imply, if not require, a series of steps that, taken in combination with China's legitimately great potential for growth, could lead to a bubble of magnificent and dangerous proportions.

from The Great Debate:

Five overlooked global risks

Rafael Ramirez is James Martin Senior Research Fellow in Futures at Oxford University's Institute for Science, Innovation and Society. His latest book is "Business Planning for Turbulent Times: New Methods for Applying Scenarios" edited with John W. Selsky and Kees van der Heijden. -- Rafael Ramírez is the James Martin Senior Research Fellow in Futures at Oxford University and author of "Business Planning for Turbulent Times: New Methods for Applying Scenarios" edited with John W. Selsky and Kees van der Heijden. Ramírez attended a session at the World Economic Forum's gathering in Dalian, China, on managing global risks.

Reuters asked Ramírez to elaborate on five overlooked risks the world is confronting as it works its way through the current recession. His response is below. The views expressed are his own.

from Commentaries:

U.S.-China trade spat more about cars than tyres

Why are the U.S. and China trading blows about something as mundane as car tyres at a time when the world is trying to avoid slipping back into trade protectionism?
It's not purely about the $1 billion worth of tyres China sells to the U.S. every year. It has more to do with the $100 billion of automotive vehicles, parts and engines America buys from abroad. China is worried about the direction of U.S policy. Beijing fears that the administration may find ways to thwart China's future plans to ship vehicles to America.
China may not yet export cars to America, but it already exports a growing number of parts. Cars are in the pipeline. A recent spate of bids from Chinese companies such as Geely for failing U.S. and European auto brands have shown that it has the ambition to be the next Japan or Korea.
Auto sales are the only bright spot in U.S. consumer spending due to the Treasury-financed "cash for clunkers" program. Fears about stimulus dollars leaking abroad are one of the reasons the U.S. trade unions have been aggressively pushing for anti-dumping tariffs.
The worry is that the U.S. has imposed the tariffs under a law designed to protect domestic U.S. producers from being damaged by a sudden surge in imports from China. Determining whether this has occurred is a bureaucratic exercise in which experts determine whether such damage is occurring and propose remedies. But there is a political circuit breaker -- the president has discretion in whether to implement remedies.
At least four similar, so-called Section 421 petitions were filed during the presidency of George W. Bush, according to the international trade commentator, Scott Lincicome, but none were approved. In this case, Obama came down on the side of the union. This has raised fears in Beijing that there will be more cases in coming months.
The Chinese side seems to fear that Obama is bending too much to domestic constituencies such as union and producer interests. Washington needs to be careful about this. Since it wants to export its way out of recession, it should not agitate China, which is potentially a major purchaser of U.S. exports.
China does not want the Obama presidency to set a precedent by discriminating against Chinese goods at this time. Moreover, it is concerned that other countries might follow suit and start to target Chinese goods as well. Its reliance on exports is potentially the big weak link among China's recovery.
That's why Beijing, which has limited its protest mostly to words in recent years for fear of more retaliation, quickly spun into action this time. China's counterpunch is equally forceful. It is launching an anti-dumping investigation into imports of U.S. chicken products and vehicles.
The idea is presumably to raise the political cost for Obama of taking his pen out of his pocket every time a Section 421 case, which specifically targets China, is presented for his signature.
During the first half of this year, 89 percent of China's chicken imports came from America, representing a fifth of all U.S. chicken exports. In comparison, tyres account for just 0.4 percent of the value of goods what China sells to America each year and 0.07 percent of China's total exports.
While it is no secret that America subsidises its agriculture industry, China also spares no effort in helping exporters and putting up import barriers to protect domestic manufacturers. For example, China agreed in August to stop some discriminatory charges it imposed on imported U.S. auto parts after a World Trade Organization ruling from September 1.
After chicken, U.S. soybeans might be the next target. As much as 40 percent of China's soybean imports came from America last year. And this year, China's soybean imports increased by 28 percent.
The last time China took retaliatory measures was during the "garlic trade war" against Japan and South Korea in 2000-2001.
Washington and Beijing have vowed to cooperate in seeking to revive global economic growth, but the dispute over tyres has laid bare the two countries' continued friction over trade. This could spill into the G20 summit later this month and Obama's scheduled visit to China in November.
In previous meetings between the top leaders of the two countries, mostly the U.S. lectured and China listened. Now Beijing is more outspoken about expressing its own concerns and many at home are calling for more tit-for-tat policies.
It remains to be seen how the U.S. will react to a more assertive China.

from The Great Debate:

Collaboration is the key to economic growth

aron-cramer-- Aron Cramer is president and CEO of BSR, a global business network and consultancy focused on sustainability. The views expressed are his own. --

As the World Economic Forum’s “Summer Davos” meeting in Dalian, China, gets underway, it is a bit chilling to think back to how the financial crisis was unfolding in real time during last year’s event.

Re-entry dilemma for G20 ministers

Photo
-

copeland1- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

As the G20 ministers gather for their meeting this week, there should be no doubt about the item at the top of the agenda: the re-entry problem. At what point should the expansionary monetary and fiscal policy of the past year be reversed? And, if the answer is “not yet”, how soon does the re-entry plan need to be announced?

  •