international economics
Fast track? Ecuador goes bananas Pego the peso
Strong dollar Brussels sprouts El
Salvadollars
Pick Apec Euro yoyo WHO is WTO? Sock it to me Whine about wine
A comparison of outputs & exports
across countries, regions, & states
Fast track ?
New York Times, David Stout, 7 May 2001
Renewing his quest for wider trade-negotiating authority from Congress,
President Bush said today that open trade was not just an avenue for greater
prosperity but was "a moral imperative" for the United States. Mr. Bush plans to formally ask Congress to give
him the authority to negotiate trade deals that could be voted up or down by
lawmakers without changes. Chief executives from Gerald Ford to Bill Clinton
had such "fast-track" authority, but it lapsed during the Clinton
administration. Mr. Bush bemoaned what
he called "a new form of protectionism" that has crept into American
political thinking. "When we promote open trade, we're promoting political
freedom," he said.
Commentary. Free trade opens a country to the outside
world because of the increased communication.
Bush does not want Congress to nit pick free trade agreements because
each Representative wants to protect their own import competing industry.
Ecuador goes
bananas
The Economist.com
online news, 3 May 2001
Ecuador
dropped its opposition to the agreement reached between America and the
European Commission to end their long-running banana dispute. The commission
agreed to grant substantial preferences to imports of Ecuador’s bananas during
the EU’s transition to a quota-free market.
Commentary.
Europe has a history of promoting its own investments through trade
restrictions. Europe has investments in
African banana plantations and has kept out bananas from Central America. As part of the GATT and the WTO agreements,
Europe is slowly eliminating its quotas that keep out Central American
bananas. Ideally consumers would be able
to choose the bananas they like best.
African bananas cannot compete effectively in North America because of
the distance, with Europe located about equidistant from Central America and
Africa.
Pego the
peso
The Economist.com
online news, 19 April 2001
Domingo
Cavallo, Argentina’s economy minister, said he would like to see the peso, at
present pegged at par to the dollar, linked instead to a currency basket, made
up half of dollars and half of euros—once the euro has reached par with the
dollar. Investors looked baffled, but then seemed to accept that this was not a
covert devaluation.
Commentary.
If the euro reaches par with the dollar, then $/euro = 1. Pegging to the 50/50 basket would peg the
peso at 0.5 (peso/$) + 0.5 (peso/euro).
If the dollar and euro stay at par then pegging to either or both would
make no difference. If the euro
depreciates, however, the peso is devalued compared to a dollar peg. Investors generally expect the euro to
depreciate relative to the dollar at least long term. Devaluing the peso allows the Argentine
government to run budget deficits, increasing peso supply and inflating the
currency. The best peg for a currency is
the largest trading partner’s currency and Argentina is increasing its trade
with Europe. The peg has to be supported
by central bank transactions and there may be increasing central bank balances
of euros in reserve. Baffled investors
had better be cautious if the Argentine government does not have fiscal and
monetary discipline.
Strong dollar ?
The Economist, 18 January
2001
Paul
O’Neill, George Bush’s Treasury secretary-designate, said that he favored a strong
dollar, no doubt hoping to scotch suggestions that he was a friend of exporting
manufacturers. On cue, the yen fell to its lowest level against the dollar for
17 months, breaking through ¥119 in intraday trading. The euro also fell back
against the dollar, reversing recent trends.
Commentary.
Exporters like a weak dollar because US exports are cheaper in foreign
currency. Of course, importers like a
strong dollar and foreign traders have opposite preferences. As for O’Neill, watch what he does not what
he says. The Treasury does some trading
in the foreign exchange market and may have some independent influence on bond
markets. Perhaps more importantly,
O’Neill will be part of the Bush economic team.
Lots of sports analogies but nobody knows what game they are playing.
The Economist, 18 January
2001
EU plans to liberalize trade with the world’s poorest countries are down if not
out. Following complaints from farm
lobbies, Pascal Lamy, Europe’s trade commissioner, pushed back a proposed
transition period for his “everything but arms” market-opening to 2006-08. The original plan was to eliminate tariffs on
most goods by 2004.
Commentary. 2008 is more likely, and by then
maybe people will forget the plan. The
farm lobbies are powerful in Europe and the US.
Farmers in the developed countries do not want to have to compete with
imports from poor countries. The poorest
countries lose out on the chance to sell in the markets with the highest prices
for their products.
AP, 30 November 2000
SAN
SALVADOR, El Salvador — El Salvador on Thursday became the
third Latin American country to adopt the U.S. dollar as an official currency. Amid
protests, 49 of 84 legislators approved the measure proposed by President
Francisco Flores last week. The currency will go into effect next year.
"This law strengthens our monetary system, the productive sector, and will
allow people to refinance their debts," said Congressman Gerardo Suvillaga
of the ruling Nationalist Republican Alliance, or ARENA. The move met fierce
opposition from legislators from a party of former leftist rebels of the
Farabundo Marti National Liberation Front, or FMLN, who argued that the people
should have the right to vote on it. But many people said if given the option,
they would do the same.
Commentary. Governments
enjoy the seignorage of spending the money they print. Latin American
governments have enjoyed it too much and the historical result has been high
and erratic inflation. Zero inflation should be the main if not only goal of
government economic policy. Expect El Salvador to enter an era of sustained
economic growth.
CNN, 16 Nov 2000
BANDAR
SERI BEGAWAN, Brunei (CNN) -- Leaders of the 21-member Asia Pacific
Economic Cooperation (APEC) forum on Thursday reached a compromise on a new
round of global trade talks that would include the interests of developing
nations. Led by U.S. President Bill Clinton, developed nations had entered the
annual summit hoping to urge the World Trade Organization (WTO) to begin new
talks by 2001. Less-developed nations, led by Malaysia, feared new trade talks
would require provisions on environmental protection and workers' rights -- rules
they said would suffocate their economic development. In a compromise, APEC
leaders agreed that an agenda addressing the interests of developing nations
should be drawn up before trade talks begin. APEC is a loose grouping, but its
leaders have been pushing for fair and free trade on both sides of the Pacific
Rim -- by 2010 for developed nations and by 2020 for developing countries.
Formed in 1989, the grouping represents two-thirds of the world's population,
nearly two-thirds of its wealth and almost half its trade. APEC members are:
Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia,
Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia,
Singapore, South Korea, Taiwan, Thailand, the United States and Vietnam.
Commentary. After
all the fuss over the WTO summit in Seattle, why won't this global trade thing
just go away? The answer is that there is too much to gain from free trade.
Among the list of APEC members are countries that only 20 years ago were closed
to trade and the "evils of capitalism."
Euro yoyo
USA Today,
16 Oct 2000
NEW
YORK — The euro fell to the lowest level in three weeks against the dollar after
European Central Bank President Wim Duisenberg indicated the bank may not buy
euros soon to prop up the currency. The euro fell to 85.31 U.S. cents, from
85.69 cents in London Friday. Against the yen, it fell for an eighth day to as
low as 91.82 from 92.31. The dollar rose to 108.12 yen from 107.71 late Friday.
Commentary. Why would a
central bank have to "prop" up its currency? The European central
bank prints the euro. After all, it is cheaper to print currency than to buy it
in the foreign exchange market. Foreign exchange purchases by central banks are
another form of hidden tax. The price of the euro on the foreign exchange
market will ultimately be determined by its purchasing power, regardless of
periodic buying and selling by central banks.
The
General Agreement on Tariffs and Trade (GATT) is an international treaty that
has the goal of lowering trade barriers around the world. The World Trade Organization
(WTO) is the arm of GATT organized to settle disputes, similar to a court. Why
is are the GATT and WTO necessary?
The
political economy of protection makes it difficult for countries to move to
free trade by themselves. Industries pay politicians quite a bit for protection
with tariffs and quotas. Lawmakers pass tariffs and quotas in exchange for cash
and votes. If the country is committed to lowering protection through an
international treaty like GATT or NAFTA, imposing protection becomes more
difficult.
Some
people dislike the WTO because they see it as an evil arm of powerful
multinational firms stealing national jobs. Others dislike it because they see
it as an international government diluting national power. Still others see WTO
as promoting environmental disaster. Others favor free trade but believe WTO is
not necessary if countries would simply eliminate wasteful trade barriers on
their own.
WTO
seems unlikely to go away soon because there is so much to gain from
international commerce. Anti-protectionism is the political movement favoring
free trade pushed by commercial interests that gain from trade. Nevertheless,
the protests against the WTO will continue for all the various reasons. From
the viewpoint of improving international commerce, the WTO will become the
international court to settle civil disagreements such as bankruptcy and
ownership claims.
internatioanal economics links
a nice glossary
online courses
Suranovic’s online international economics
Choi’s musical international economics
analysis and information
international economic data
university of michigan international
data
food & agriculture organization
international economics network
journals
webec list of economics journals