The Great Debate UK

from The Great Debate:

Clashes with Russia point to globalization’s end

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As the European Union and the United States ramp up their sanctions on Russia, President Vladimir Putin’s plans for retaliation seem to include an attack on McDonald’s. There could not be a more powerful symbol that geopolitics is increasingly undoing the globalization of the world economy.

The burger chain was celebrated in the 1990s by the journalist Thomas Friedman’s “Golden Arches theory of conflict prevention,” which argued that the spread of McDonald’s around the world would bring an end to war. But almost 25 years after a McDonald’s restaurant opened in Moscow, it seems that deep interdependence has not ended conflict between great powers – it has merely provided a new battlefield for it.

As in any relationship that turns sour, many of the things that initially tie the parties together are now being used to drive them apart. For the past two decades we have heard that the world is becoming a global village because of the breadth and depth of its trading and investment links, its nascent global governance and the networks of the information age. But those forces for interdependence are degenerating into their opposite; we could call it the three faces of ‘splinterdependence’: From free trade to economic warfare

Economic interdependence was supposed to defuse geopolitical tensions over time – or at least allow the two to be compartmentalized. But today the West is using Russia’s participation in the global economy to punish it for its actions in eastern Ukraine. The EU has announced sanctions that will hit Russia in the banking, oil and defense industries. When China felt its interests were threatened, it was also willing to use economic sanctions in its territorial disputes with the Philippines and Japan. In May, Beijing found itself on the receiving end as Vietnam turned a blind eye to anti-Chinese riots targeting Chinese plants when China put an oil rig in the disputed Paracel Islands.

from The Great Debate:

Don’t miss the boat on trade facilitation

Trade ministers open their meeting in Bali Tuesday with the aim of creating a new multilateral trade reform package worth more than $100 billion to the global economy. The deal -- focusing on measures to cut red tape at borders -- would be a welcome shot in the arm for both global trade and for the World Trade Organization itself.

This may come as a surprise to some. Indeed, you could be forgiven for thinking that the Doha Round of multilateral trade negotiations had quietly died after a 10-year struggle. But in fact, work has continued in the World Trade Organization -- and in capitals around the world -- to capture some of the gains from what was once billed as the most ambitious trade round ever. The first multilateral trade agreement in almost 20 years now stands tantalizingly within reach.

from The Great Debate:

China’s commitment to growth will drive the global economy

From outside China, the Bo Xilai trial looks like the Chinese news event of the year, one of the preoccupations of Western media, along with corporate corruption and the clampdown on American and European companies. Yet these issues are no more than sideshows to the most important economic event of recent times, the unveiling and ratification of a major program for reforms for the next decade, which will occur at the Chinese government’s third plenum in November. The reforms promise to bring another great leap forward in China's dramatic ascent.

Chinese officials will reveal how long China will need to make the transition from an investment-led, middle-income country to an innovative, consumer-driven, high-income one -- and thus when it will become the world's largest economy. Can China circumvent what we know as "the middle-income trap" that has for decades denied high-income status for Latin America and Asian countries like Malaysia and Thailand?

from The Great Debate:

An agenda to boost Africa’s economy

A lot can happen in a year. This time last year, U.S. businesses and NGOs bemoaned the Obama administration's perceived indifference to Africa. Now, they’re trying to find out how to catch the wave of interest. Major new initiatives, including Power Africa and Trade Africa, unveiled during President Obama’s first true trip to Africa this summer, as well as a reinvigorated push to renew the African Growth and Opportunity Act fully two years before it's due to expire, have given U.S.-Africa watchers a lot to consider. But what -- and when -- is enough for U.S. policy in Africa? What more can be done in the year ahead? How do things really shake out for investors, civil society and Africans? Here are three additional areas the Administration should consider as it deepens its commitment to the continent:

1. Invest in Africa’s equity and commodity markets. ­Despite all the interest in Africa’s economic growth and investment potential, it’s still very hard to invest on the continent. Of its less than 30 stock markets, only a few exchanges really offer modern processes and back-end technology to facilitate daily transactions. As Todd Moss from the Center for Global Development notes in a recent paper, some African exchanges trade less in a whole year than New York does before “their first coffee break.” As a result, for institutional investors who need to take large positions or who have fiduciary requirements for daily liquidity, Africa remains almost entirely off-limits. In an era of algorithmic and high-speed trading, Africa’s antique market infrastructure is a major barrier to entry for much needed foreign direct investment.

from The Great Debate:

The G20 summit should commit to growth

By Gordon Brown
The views expressed are his own.

The build-up to the G20 summit has been dominated by the euro's failings. With Europe now the epicenter of the global crisis, its continued weakness will dominate the G20 discussions. Even now, uncertainties about Greece’s future -- and about the real strength of Europe’s commitment to its new stability fund -- has left little opportunity for a focus on the global economy as a whole.

But even if the state of the world economy has featured less than the euro in the preparatory work for the summit, the decisions world leaders will make on the global economy will dictate the mood of the coming two years. President Sarkozy has major global initiatives he will unveil to improve global food security, and may even force his plan for a global financial levy on the agenda. But there is a big choice the G20 must make. Either the world will come together and agree on a coordinated growth plan -- or we will retreat into a new, more acrimonious protectionism.

from MacroScope:

Building BRICs in Africa

Some eye-catching numbers from Standard Bank out today on the influence of BRICs countries -- Brazil, Russia, India and China -- on Africa.

First off, the bank says the global recession and its recovery have been nourishing these so-called South-South ties. But it is all now ready to take off. The bank estimates:

Is there a way out of the currency war?

CHINA-USA/CURRENCY-WARCompetitive devaluation is no longer a possible danger – it is already here. Many people are worried that, after global stock market crashes and a collapse of most of the world’s banking system, a war over exchange rates completes a sequence of events that looks awfully like a rerun of the 1930’s. There is however one crucial difference. The Chinese role certainly makes matters more complicated, though it is as yet unclear whether it makes the outlook better or worse.

The key point to understand about the belligerents is this. In the context of purely self-interested beggar-my-neighbour economic policy, devaluation makes good sense for the Eurozone countries as a whole, the British, the Japanese, Swiss, Koreans… for everyone except the Americans. Whether they are deficit countries, like Britain, or surplus countries, like Switzerland, Korea or Japan, devaluation will increase demand for their exports and make their imports more expensive, giving a boost to their output and employment. And if other countries retaliate by counter-devaluation, they can tell themselves that their situation would have been worse if they had not taken the initiative and got their retaliation in first.

from Breakingviews:

U.S. trade thaw may leave China out in cold

The retaliatory China currency bill passed in the U.S. House helps brand this Congress as one of the more protectionist in years. The next one might switch gears and embrace trade by passing several stalled pacts. But Beijing shouldn't expect that to translate into a friendlier Washington.

A companion bill in the Senate also meant to pressure China to allow a faster rise in the yuan is unlikely to succeed. And it would probably be vetoed by President Barack Obama if it did.

from Breakingviews:

China’s yuan: a guide for the perplexed

By John Foley and Wei Gu

China's plans to make its currency global could change the world -- if they get off the ground. More international use of the yuan might increase China's trade clout, unseat the mighty U.S. dollar and make a lot of financiers very rich in the process. But it can be hard to separate the facts from the fable. Here are some questions answered.

Why are people talking about an international yuan?

China is the world's second-biggest economy. But its currency doesn't nearly match its size. For most international dealings, China relies on the dollar, which leaves it beholden to the United States. Beijing wants more influence on the global stage, so it has been taking baby-steps to turn the yuan into an internationally used currency.

Sluggish U.S. economy may threaten UK business development

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- Paddy Earnshaw is the Director of Customer Relations at Travelex Global Business Payments. The opinions expressed are his own.-

British importers and exporters’ confidence in the economy leapt in July, as positive economic data fuelled hopes for a return to strong economic growth. According to the Travelex Confidence Index (TCI), which jumped 12 points in July to 116, from 104 in June, strong gains were driven by quarter 2′s GDP figure, as it showed the UK grew at its fastest pace in four years.

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