News & Commentary:

March 2004 Archives


Women in the Global Economy
Trade Forum Vol. 4/2003 Dec 2003/Mar 2004
It’s a charged topic: many Forum readers will come to it with a firm opinion, based on their own life experiences. Some of us believe that no differences exist between men and women in international business, some champion ‘empowerment’ at every opportunity, while others espouse the many shades of grey between these two positions.

Following the Heard
Pierre Lemieux (Regulation Vol. 26 No. 4) Dec 2003/Mar 2004
There is nothing more powerful than an idea whose time has come, Victor Hugo once said. Hugo's maxim is both true and interesting, but it doesn't attempt to explain how an idea gets its power. For that, economists have developed "cascade theory," a new field that describes the mechanics of herd behavior -- from political revolutions, to bank runs, to the latest environmental scare. Clearly, the "power" of an idea does not rest on its validity, because even false ideas have taken the world by storm. Rather, what is crucial is that information-gathering can be costly and time-consuming, so individuals often look to others' behavior or statements to aid in forming their own opinions -- a simple notion but one described with rigorous precision in the models used by cascade theorists. If herd behavior can be hard to understand, it can be even harder when politicians and bureaucrats try to base public policy on it. Because elections are infrequent and highly imperfect, policymakers read the equally imperfect tea leaves of public opinion -- radio talk-show chatter, constituent letters to their offices, newspaper editorials -- and draw inferences, true and false, about what voters really want. The result is that government policy is highly vulnerable to the influence of false inferences.At worst, the state will turn cascades with no objective or scientific basis into bad public policies. In part this is because special-interest groups often set the terms of public debate by starting a "cascade." There is evidence, for example, that the anti-smoking campaign has something to do with support from nicotine patch manufacturers, just as Prohibition owed something to the financial support of soft-drink manufactures.

Dr. Supachai says US must lead in Doha talks
WTO Focus No. 59 Mar 2004
Plus: General Council agrees on slate of 2004 chairs of WTO bodies; DSB adopts reports on softwood lumber dispute; Trade policy reviews; Dr. Supachai says Saudi accession an “imminent reality”; and WTO hosts its annual public symposium: “Multilateralism at a crossroads”.

Hong Kong SAR poised for a rebound Adobe Acrobat Required
IMF Survey Mar 1, 2004
Plus: Adopting the euro; AFRITAC East's work plan for 2004; Exchange rates: pick your poison; In defense of globalization.

Global Tax War Wall Street Journal Subscription Required
WSJ Mar 1, 2004
European sanctions are an opening for U.S. tax reform.

Outsourcing -- the Myths and the Facts Wall Street Journal Subscription Required
Salil Tripathi (WSJE) Mar 1, 2004
Any task that can be simplified, subdivided and subcontracted can be outsourced.

A New Consensus on Free Trade
WP Mar 1, 2004
The growing skepticism on trade coming from Democratic candidates as well as the Bush administration has bred nostalgia among free traders for President Bill Clinton's willingness to take political heat to push for open markets.

Global: Rebalancing Interrupted
Stephen Roach (MSDW) Mar 1, 2004
The dollar has reversed course and now looks like it wants to go higher. So much for the relative price change that a lopsided world needs more than ever. The pain of currency adjustment appears to be too much for the Europeans and the Japanese, and a poor and rapidly reforming Chinese economy is unlikely to lead the next phase of the dollar’s realignment. At the same time, the pain of a real interest-rate adjustment doesn’t fly in the United States. At least that’s the verdict of the markets and the America’s central bank. And so the heavy lifting of global rebalancing has been put on hold — at least for now. The key question is for how long?

Currencies: EUR/JPY -- Sticking to a Lonely Call
Karin Kimbrough (MSDW) Mar 1, 2004
For some time, our team has made the call that EUR/JPY would shift down towards 120 over 2004 and 2005. However, EUR/JPY has traded mainly between 130 and 140 over the past 12 months. And yet, call it stubborn conviction if you will, we are sticking with this lonely call. In our view, the fair valuation for EUR/JPY is closer to 120 and we see it heading there in coming months as EUR/USD loses its head of steam.

EU starts countermeasures on US products
EU DGT Mar 1, 2004
The EU countermeasures on a list of US products in the long-standing WTO dispute on the US Foreign Sales Corporations enter into force today 1 March 2004. Countermeasures on the selected products consist of an additional customs duty of 5% to be enforced as from today, followed by automatic, monthly increases by 1% up to a ceiling of 17% to be reached on 1 March 2005, if compliance has not happened in-between.

Chinese Outsourcing Wall Street Journal Subscription Required
WSJE Mar 2, 2004
How a Chinese company helped return jobs to Minnesota.

India readies its case
Sultan Shahin (AT) Mar 2, 2004
A recent poll suggests that 68 percent of Americans believe that American jobs and foreign competition will be a major factor in the November presidential elections. As such, suggest analysts (mostly American), India should lie low and ride out the outsourcing storm being whipped up in the US. In India, a more aggressive response is being formulated.

US and UK beg to differ
Siddharth Srivastava (AT) Mar 2, 2004
Politicians in the US are wading into the outsourcing debate with gusto, recognizing a good nationalistic issue when they see one. Across the Atlantic, the British are rather more sanguine about jobs going to India, with economics scoring over politics.

China: Productivity, Inflation and Exchange Rates
Andy Xie (MSDW) Mar 2, 2004
Productivity is a wonderful thing - it improves living standards using the same amount of capital and labor; but it does not necessarily mean more profits or stronger currencies. When NASDAQ was approaching 5,000, Mr. Greenspan volunteered a plausible explanation that it was a lottery in a high productivity revolution - the winners would reap such high rewards that it would justify the failure of the majority. The underlying logic was that productivity would lead to profits.

Earth to Argentina Wall Street Journal Subscription Required
WSJ Mar 3, 2004
Forcing a global deadbeat to face up to its debts.

Sumo Economics Wall Street Journal Subscription Required
John H. Makin (WSJ) Mar 3, 2004
Japan should grapple with deflation -- not the dollar.

The Buttonwood column: Things you can drop on your foot
Economist Mar 3, 2004
China needs them in spades, as it were, which is good news for Japan

The British Pound's Party Won't Last Much Longer
Matthew Lynn (Bloomberg) Mar 3, 2004
In the past few weeks, British newspapers have run stories about the bargains to be scooped up by anyone heading to New York for a weekend's shopping.

George Bush and the Labor Market: Like Father, Like Son?
Clive Crook (Atlantic Monthly) Mar 3, 2004
If the flight of jobs overseas is not the cause of the current labor-market malaise, what is? And at what point will job growth start to match the economy's growth in output?

Doha Round: Midyear Meeting To Establish Negotiating Frameworks?
BRIDGES Weekly Trade News Digest - Vol. 8, Number 8 Mar 4, 2004
WTO Director-General Supachai Panitchpakdi, US Trade Representative Robert Zoellick and EC Trade Commissioner Pascal Lamy have all recently commented on the desirability of establishing negotiating frameworks by midyear at the latest for bringing the Doha round to a conclusion. Following public speeches at different venues around the world, the political pressure to get on with negotiations will soon be put to the test in Geneva, where various negotiating groups are scheduled for March and April.

DSU Review: May 2004 Deadlines Slipping Out Of Reach
BRIDGES Weekly Trade News Digest - Vol. 8, Number 8 Mar 4, 2004
When the special (negotiating) session of the WTO Dispute Settlement Body (DSB) met on 1 March to continue the review of the Dispute Settlement Understanding (DSU), the meeting focused on organisational issues. Mirroring the last session held on 26 January this year, the meeting had originally been scheduled for two days from 24-25 February, but lasted just over an hour. Despite an invitation by former Chair Péter Balás to Members at the 26 January meeting to submit specific proposals to bridge positions and inject momentum into the negotiations, no such proposals were forthcoming at this meeting. Rather, the agenda focused on the election of a new Chair and organisation of the DSB special session's work. The new Chair, Ambassador David Spencer (Australia), has held off any discussions on substantive issues until he has met with delegates either on an individual basis or as a group to discuss 'any matter' relating to the work of the special session, including any thoughts on the best way to move the process forward. The Chair has made himself available for these discussions on 5 March.

Asia keeps New Europe on edge
IHT Mar 4, 2004
Asia looms as Eastern Europe's stiffest competition; but some opportunities are opening up.

Bond Market Discounts Venezuela's Crisis
David DeRosa (Bloomberg) Mar 4, 2004
The market for Venezuelan bonds is remarkably complacent about a political crisis that's brewing over whether President Hugo Chavez will face a recall election.

Global Tax War Wall Street Journal Subscription Required
AWSJ Mar 4, 2004
European sanctions are an opening for U.S. tax reform.

Inflation Leads to Protectionism
Stefan Karlsson (Mises Daily) Mar 4, 2004
The main argument for protectionism one hears today cites America's huge current account surplus, which is cited as evidence for the need for trade barriers.

The Marrakech Express Wall Street Journal Subscription Required
WSJ Mar 5, 2004
The U.S. signs a bilateral free-trade agreement with Morocco.

The Future of the Welfare State Recommended!
WP Mar 5, 2004
One great project of the late 20th century was the construction of vast welfare states in wealthy nations to protect people against the insecurities of unfettered capitalism. One great question of the early 21st century is whether these welfare states, facing massive commitments to aging populations, will themselves create new insecurities and injustices. Comes now economic historian Peter Lindert, who has thoroughly probed the welfare state, with a surprising message: Relax.

American Fantasy: Instant democracy
Amitai Etzioni (IHT) Mar 5, 2004
The Bush administration plans to put before the next Group of Eight meeting an ambitious program to democratize the ‘‘greater Middle East.’’ Increasingly, the administration has claimed that its reason for invading Iraq was to free the Iraqi people from tyranny and to establish a democratic regime. The frequency with which this rationale has been cited has increased in direct proportion to the waning of the reasons first given for invasion — weapons of mass destruction and links to Al Qaeda. Charles Krauthammer, a columnist and leading neocon ideologue, recently told a Hilton ballroom packed with Bush officials and loyalists, including Vice President Cheney, that the United States needs a vision; that real politics, which builds on raw power, will not do. However, he warned that ‘‘global democratization’’ was too ambitious; the United States should install democracy only ‘‘where it counts’’ – in the Middle East. Yet study upon study has shown how false is the promise to democratize countries with little preparation for democracy, especially if it is done on the run. A study conducted by the Carnegie Endowment for International Peace found that out of the 18 forced regime changes to which U.S. ground troops were committed, only five resulted in sustained democratic rule. These include Germany, Japan and Italy, in which conditions prevailed that are lacking in large parts of the world; Panama and Grenada, listed as democratized, actually have yet to earn this title.

Why America need not fear outsourcing
Michael Heise (IHT) Mar 5, 2004
Globalization is biting at the heels of the United States. For years an aggressive advocate of greater openness to trade and investment flows, the United States today is faced with a situation where it must respond to new international challenges.

The good ship US Economy... and why it won't sink
Marc Erikson (AT) Mar 5, 2004
In what the Democrats hope will be a repeat of the "it's the economy, stupid" campaign that ousted the first George Bush from the White House in 1992, they are harping on the issue of unemployment during the 2004 campaign. It will almost certainly prove a miscalculation: the US economy remains and will continue to be the envy of the world.

Wanted: firefighting figurehead Recommended!
Economist Mar 5, 2004
At a delicate moment in its negotiations with Argentina, the IMF’s boss has left his post to take on the presidency of Germany. His new position will be largely ceremonial. Was his last?

Global, Japan: Reinventing Central Banking
Robert Alan Feldman (MSDW) Mar 4, 2004
With the apparent revival of financial bubbles (e.g. the US bond market), the debate on monetary policy has boiled over again. Has bubble-blowing taken the place of serious monetary policy? My colleague Steve Roach has taken a strong stance on this issue, and says that “modern day central banking is on the brink of systemic failure.” While I agree with many of Steve’s points, I think that this approach ignores some crucial linkages of monetary policy to other policies. Thus, in designing correct monetary policies, we must take these linkages into account. Analysis of the Japanese case makes these points more concrete.

Global: A Time for Courage
Stephen Roach (MSDW) Mar 5, 2004
In its most practical sense, macro is best at identifying risks. And in my view, the balance of risks in the US economy has shifted. It was just about a year-and-a-half ago when I first sounded the alarm on deflation (see my 14 August 2002 dispatch, “A Deflationary Mosaic”). Today, I am more worried about inflation. But it’s inflation with an important twist — not the CPI-based inflation of product markets but the asset inflation of financial markets. I fear that America’s post-bubble recovery is in serious danger of spawning a new round of asset bubbles that could well pose the most deflationary risks of all.

It's Not Asia's Bubbles, It's the Politics
William Pesek Jr. (Bloomberg) Mar 8, 2004
"What about the nukes?" It's a question James Rooney finds himself addressing more than he'd like these days. His Seoul-based company advises foreigners doing business here in South Korea.

Global: Stymied
Stephen Roach (MSDW) Mar 8, 2004
America’s monetary policy conundrum is as excruciating as I can ever remember it. On the one hand, vigor from the standpoint of GDP growth begs for a normalization of short-term interest rates. Yet, at the same time, the lingering fragility of a jobless recovery argues for ongoing monetary accommodation. The Fed, in effect, is stymied -- caught in the cross-fire between the forces of inflation and deflation. For ever-frothy financial markets, that’s as good as it gets -- an opportunity to exploit a central bank that is frozen at the switch. Is there a way out?

Global: Trade Follies Recommended!
Rebecca McCaughrin (MSDW) Mar 8, 2004
It’s an election year and protectionism is in the air. Sluggish job growth and rising concerns over outsourcing are conspiring to inflame trade tensions. This month, the US began to incur sanctions for not repealing the FSC/ETI (Foreign Sales Corporation-Extraterritorial Income) legislation, which grants export subsidies to US multinationals. At the same time, eight countries are threatening to retaliate against the US if the Byrd Amendment, which authorizes US companies to receive payment from anti-dumping duties, is not repealed. The US is not alone. In Europe, a number of EU member countries have already threatened to impose restrictions on imports from incoming members. Meanwhile, new WTO disputes are stacking up. While these recent flare-ups are raising concerns about protectionism, they are not likely to cause a significant disruption to global trade patterns, in our view. Here’s why.

China and Its Yuan Feel Wal-Mart's Impact
William Pesek Jr. (Bloomberg) Mar 10, 2004
Investors betting on when China will let its currency rise are looking for hints from the annual National People's Congress meeting in Beijing.

The Road Less Traveled Wall Street Journal Subscription Required
John Blundell (WSJE) Mar 10, 2004
F.A. Hayek's "The Road to Serfdom" is still rippling around the world.

Herb lore from the Sage of Omaha
Economist Mar 10, 2004
In a perhaps vain attempt to make his garden less like the scruffy yard that it is, Buttonwood recently took his mother and two daughters to Syon Park, a gardening centre in west London. His girls enthused about anything pink, his mother waxed lyrical in Latin, and your columnist himself was a little surprised by the price of some of the climbing roses and other flora on offer. Warren Buffett, you may be surprised to hear, appears to share these concerns. “Yesterday’s weeds”, he opined in his latest letter to shareholders, “are today being priced as flowers.” The Sage of Omaha has not, as far as we know, turned his attentions from investing to gardening. No, he was merely using an appropriate horticultural metaphor for a market about which this column has had some harsh words in recent months: the market for junk bonds.

TRIPS Council Discusses Biodiversity, Health In Informal Mode
BRIDGES Weekly Trade News Digest - Vol. 8, Number 9 Mar 10, 2004
At the 8 March meeting of the WTO Council for Trade-related Aspects of Intellectual Property Rights (TRIPs), the outgoing Chair -- Ambassador Vanu Gopala Menon of Singapore -- reported on the outcomes of informal consultations on how to convert the 30 August 2003 Decision on paragraph 6 of the Doha Declaration (on access to generic medicines) into an amendment of the TRIPs Agreement. Members remained divided over the content and legal form of the amendment and the timing of its finalisation. The Council also discussed a new submission by a group of developing countries, represented by India, proposing a checklist for how to move forward on biodiversity-related discussions.

The IMF Blinks Wall Street Journal Subscription Required
WSJ Mar 11, 2004
Argentina gives bondholders the bum's rush.

The IMF and Argentina
WP Mar 11, 2004
Until Tuesday morning, the International Monetary Fund seemed set to suffer its biggest default ever. Argentina's bankrupt government was threatening to withhold payment of $3.1 billion, a snub which, had it been sustained, would have torn a large hole in the IMF's balance sheet. At the eleventh hour, the Argentines relented. The worry is that the IMF, to save its skin, is abdicating the role it ought to play in sorting out Argentina's mess -- and that the Bush administration is encouraging this abdication.

Argentina Tries to Show the IMF Who's Boss
David DeRosa (Bloomberg) Mar 11, 2004
The world got a reminder this week that Argentina doesn't mind looking like the No. 1 deadbeat debtor nation when it humiliated the International Monetary Fund over a cash payment of $3.1 billion.

Global: Why We Ought To Be Thanking the Chinese Recommended!
Stephen Roach (MSDW) Mar 12, 2004
A fickle world has changed its mind about China again. A year ago, the miracle of Chinese growth was widely seen as a bonanza for an otherwise sluggish global economy. Today China is being cast as a threat - in effect, it has become a scapegoat for many of the more intractable problems that a dysfunctional world has been unable to solve.

Origin of Species
Thomas L. Friedman (NYT) Mar 14, 2004
There are two basic responses to globalization: Infosys and Al Qaeda.

IMF Managing Director resigns Adobe Acrobat Required
IMF Survey Mar 15, 2004
Plus: Belgium's reform efforts; Updating national accounts manual; Coping with volatility; Parliamentary network; Reforming global financial systems; Nigeria's resource curse.

Dr. Supachai says small countries too have a responsibility to strengthen the tradign system
WTO Mar 15, 2004
Director-General Supachai Panitchpakdi, in a speech during Mauritius' National Day celebration in Port Louis on 11 March 2004, stressed that “only multilateral negotiations can ensure that poor and vulnerable countries are not left out in the cold”. He said Mauritius' economic miracle has shown the world that a small developing country “can compete and compete very effectively”.

Another Quarter of Favorable Currency Gains
Rebecca McCaughrin and Richard Berner (MSDW) Mar 15, 2004
The weaker dollar continued to boost US earnings in Q4, with the effects extending to a larger subset of companies, according to a special survey of Morgan Stanley analysts concerning companies in their coverage. Roughly half of Morgan Stanley analysts responded to our survey, representing most industry groups in the S&P 500. Among the analysts responding to our survey, 40% cover sectors that have a moderate (1-25%) level of revenue exposure overseas. Nearly as many (37%) cover sectors that derive more than 25% of their revenue from overseas, while 22% of our respondents reported that their companies have only domestic or unspecified operations.

Currencies: Jobs, the ‘K/L Model’, and the Dollar Recommended!
Stephen L. Jen (MSDW) Mar 15, 2004
There are no jobs because interest rates are too low. Why is the US having so much difficulty generating jobs? I argue that the super-low interest rate stance in the US has had an unintended effect of skewing the incentives in favour of firms expanding capital rather than labour. The irony here is that, as long as interest rates stay low, the job market will struggle to recover, with labour being crowded out by capital. This causality is precisely the opposite of the conventional thought process, that as long as the job market is weak, the Fed cannot raise interest rates. The net impact on the US dollar (USD), in the long run, should be positive. However, in the short run, as investors misinterpret the reason behind the joblessness in the US, they may try to sell the dollar every time they are disappointed by a weak labour report.

Currencies: Updated 2004 G3 Currency Forecasts
Stephen L Jen & Tim Stewart (MSDW) Mar 15, 2004
We are updating our official forecasts for 2004. Our end-2004 target for EUR/USD is now 1.20 (down from 1.23 previously), and our new target for USD/JPY is 105 (up from 102 previously). What has changed?

The IMF is not the property of the rich
Augusto Lopez-Claros (IHT) Mar 16, 2004
As Horst Köhler prepares to step down as managing director of the International Monetary Fund to take up his new office as president of Germany, one can imagine the fierce competition to succeed him. Which European Union country will get the prize this time? Will the next director be French, again? Or might Germany press to complete Köhler's term? Isn't it time Italy had a go?

The Jobs Muddle Wall Street Journal Subscription Required
WSJ Mar 16, 2004
The response to outsourcing will only cost more jobs.

Rely on the U.N.? Are You Kidding? Wall Street Journal Subscription Required
George Melloan (WSJ) Mar 16, 2004
Saddam's private files reveal why international organizations cannot be counted on to support us.

Revalue the Yuan Recommended! Wall Street Journal Subscription Required
Sam Baker & Chen-Yuan Tung (AWSJ) Mar 16, 2004
China's best option is a one-time revaluation and a move to a basket of currencies.

`Dragon's Head' May Spur Jobs Flight
Andy Mukherjee (Bloomberg) Mar 16, 2004
China has put together a software industry group it unofficially refers to as ``Long Tou,'' which in Mandarin means ``Dragon's Head.'' For what it's supposed to do, the name couldn't have been more appropriate. Just as a dragon's powerful head leads the rest of its long body into battle, the 50-company group set up by the science and technology ministry in Beijing will guide China's low-wage onslaught into computer software.

What Is Japan Really Saying About the Yen?
David DeRosa (Bloomberg) Mar 17, 2004
Japan is sending confusing messages about the yen, and greatly contributing to the volatility in foreign exchange markets.

Outsourcing Is Not Just About Cost Cutting Wall Street Journal Subscription Required
John Hagel (AWSJ) Mar 18, 2004
Offshore companies can also deliver superior performance and a better platform for entering new markets.

DSB Update: EC-Sugar, US-Cotton
BRIDGES Weekly Trade News Digest - Vol. 8, Number 10 Mar 18, 2004
Two major agriculture cases -- targeting subsidies in the EC sugar sector and the US cotton sector -- recently saw a first submission from the EC, and new data provision from the US. Both cases were initiated before the expiry of the so called 'peace clause' under which Members agreed to refrain from challenging each other's domestic agricultural subsidies. No new agricultural cases have been brought to the WTO since the expiry of the 'peace clause,' and the ongoing sugar and cotton cases are not related to the specific issue of its expiration. Rather, in the cotton case, Brazil has asserted that the US has no defence under the 'peace clause,' as its subsidies are in excess of what the 'peace clause' covered. In addition, Members have expressed differing opinions about the exact expiry time of the 'peace clause'. During a hearing on the US-cotton case, Brazil referred to the now-expired 'peace clause' -- meaning it expired 10 years after it was activated in 1994 -- while the US said for countries whose accounting was based on 1995, the 'peace clause' had not yet expired.

WTO Rules Group Switching To Informal Mode To Address Numerous Proposals
BRIDGES Weekly Trade News Digest - Vol. 8, Number 10 Mar 18, 2004
The WTO Negotiating Group on Rules gathered on 16 March for its first meeting after the failed Cancun ministerial conference in September last year. The group, which focuses on the review and improvement of WTO rules that govern issues such as dumping, antidumping measures, subsidies and countervailing measures has seen over 150 submissions on all these issues since the start of the Doha round. During the meeting -- which lasted only half a day rather than the scheduled two -- the new Chair of the group, Ambassador Eduardo Pérez Motta (Mexico), said he would mainly hold informal sessions in the foreseeable future to allow a more focused discussion. Due to the large number of highly technical proposals, he said Members would benefit from informal discussions to gain a greater understanding of them. So far, while Members have been active in making proposals at the formal negotiating sessions, there has been no convergence of positions. Sources indicated that any movement would only follow progress in key areas such as agriculture.

China Must Cool Down to Sustain Growth Wall Street Journal Subscription Required
Weijian Shan (AWSJ) Mar 19, 2004
China is subsidizing the rest of the world with its costly growth.

Argentina's Paper-Money Mire
Grant M. Nülle (Mises Daily) Mar 19, 2004
Argentina's descent from economic prominence throughout most of the 1990s to purgatory by the end of the decade is a miserable tale instilling heartache and frustration in all parties involved. More importantly, this tragedy underscores the inherent hazards of state participation in capital markets.

The cost of U.S. policy
Daily Star (IHT) Mar 22, 2004
The Pew Research Center global survey results released last week showed rising distrust of the United States around the world, even among traditional U.S. allies in Western Europe. Anybody who was out and about in the world in the past several years would not have been surprised by the results. The reasons for, and intensity of, criticism of America's foreign policies have both increased in a linear fashion since the advent of the Bush administration, when Washington started trying to rearrange the world instead of interacting with the world.

What Lies Ahead for Asia's Emerging Markets
David Burton (IMF) Mar 23, 2004
I would like to talk about the economic outlook for Asia, focusing mainly on the emerging market economies, and to discuss some of the challenges the region needs to meet to fulfill its enormous potential. Although the focus of my remarks is on Asia's future, a brief look at its recent performance is necessary to set the stage.

The Widening Safety Net
Christopher Mayer (Mises Daily) Mar 23, 2004
With JP Morgan’s acquisition of Bank One, America can claim to be the home of two banks with assets in excess of $1 trillion each (the other being Citigroup). On a list traditionally dominated by foreign banks, US banks will now claim two of the top three spots. The US banking system is also becoming more concentrated, according to Minneapolis Fed chiefs Stern and Feldman. Whereas the top ten banks held only 17% of total bank assets in 1990, now the top ten hold about 44% of all bank assets.

Meant Well, Tried Little, Failed Much: Policy Reforms in Emerging Market Economies
Anne O. Krueger (IMF) Mar 23, 2004
Perhaps unfortunately for economic policymakers, Robert Louis Stevenson is no longer around to defend them. Failed reforms tend to be judged more harshly—by economists, of course, but above all by those who suffer as a result—the poor, the jobless and the hungry.

America in the world: The right mix of hard and soft power
H.D.S. Greenway (IHT) Mar 23, 2004
The grand debate over U.S. foreign policy and its war on terrorism can be reduced to a single question: How many carrots versus how much stick?

The New Protectionism Wall Street Journal Subscription Required
WSJ Mar 24, 2004
The AFL-CIO vs. U.S. manufacturing jobs.

Ever Heard of Insourcing? Wall Street Journal Subscription Required
Walter B. Wriston (WSJ) Mar 24, 2004
The U.S. imports far more jobs than it exports.

Mideast democracy is a long-term, global project
François Heisbourg (IHT) Mar 24, 2004
The Madrid bombings have driven home the realization that Al Qaeda's capability to wreak mass destruction in the heart of the industrialized world remains intact. Although the immediate response will be to beef up defenses against terrorism, the Madrid atrocity also gives renewed salience to efforts to promote development and democratization in the Middle East.

Global: China — Determined to Slow
Stephen Roach (MSDW) Mar 24, 2004
After five days in Beijing, I am convinced that a slowdown in the Chinese economy is at hand. China’s leadership is clearly worried about the risks of overheating. And those worries will likely translate into actions that should result in a meaningful deceleration of Chinese GDP growth over the course of 2004. For world financial markets and global commodity markets that are expecting the China boom to continue, a likely soft landing could come as quite a surprise. For China’s trading partners who are counting on open-ended support from the Chinese demand dynamic, a slowdown could comes as a rude awakening.

U.S. election: The world should also have a vote Recommended!
Yoichi Funabashi (IHT) Mar 25, 2004
''I have heard from people, foreign leaders elsewhere in the world who don't appreciate the Bush administration and would love to see a change in the leadership of the United States." So spoke Senator John Kerry at a fund-raiser this month as the two-horse race for the most powerful presidential seat in the world swung into full gear.

Argentina and Brazil Join Forces to Tame the IMF
David DeRosa (Bloomberg) Mar 26, 2004
In yet another affront to the authority of the International Monetary Fund, Argentina and Brazil have agreed to stand as one in future negotiations over loan conditions.

Japan-China: Political storms amid economic bliss
J Sean Curtin (AT) Mar 26, 2004
Japan-China economic ties have never been better, as Beijing's booming capitalism fuels Tokyo's economic recovery. The political picture is not so pretty. The landing and arrest of Chinese activists on disputed rocky islets and the gruesome murder of a Japanese family have fueled deep resentments.

Global: Asia's Recovery Void Recommended!
Stephen Roach (MSDW) Mar 26, 2004
There are two Asias these days — China and everyone else. China remains an overheated production story, in my view. And the rest of Asia remains very much an external demand story — driven in large part by the Chinese producer and the over-extended American consumer. If China slows, as I now suspect, Asia’s nascent economic recovery could be in serious trouble. That remains a key risk in the second half of 2004, in my view.

Currencies: The US C/A Deficit May Have Already Peaked
Stephen L Jen (MSDW) Mar 26, 2004
We believe that the US current account (C/A) deficit — a critical factor that has helped propel the USD index lower in the past two-and-a-half years — is possibly peaking in percent of GDP, if it has not already peaked. While the US’s external imbalance is not likely to narrow sharply, we believe this development, once proven and taken seriously by investors, will provide an important medium-term support for the USD. It is still unclear if a potential turning point in the US C/A deficit will be sufficient to halt the structural slide in the USD, but it is, to us, a necessary condition. If, in addition, the underlying quality (i.e, the jobs outlook and the private sector’s savings rate) of the US recovery continues to improve, and the federal fiscal deficit also peaks out with a recovery in revenue collection, the USD index is likely to stop falling. We caution that all of these prospective developments are highly tentative. But we believe we have reached a point where it is now possible that these factors may materialise, leading to an important change in USD sentiment, and guiding the USD to a soft landing.

U.S. Online Gambling Policy Violates Law, W.T.O. Rules
Matt Richtel (NYT) Mar 26, 2004
The World Trade Organization, in its first decision on an Internet-related dispute, has ignited a political, cultural and legal tinderbox by ruling that the United States policy prohibiting online gambling violates international trade law.

Global Commerce In the Crossfire
WP Mar 27, 2004
This week's news that the European Commission is launching an unprecedented challenge to Microsoft's intellectual property rights brought back memories of another bitter dispute between the United States and Europe -- over the proposed General Electric-Honeywell merger in 2001.

The Sick Man of the World
Saad Eddin Ibrahim (WP) Mar 28, 2004
In the 19th century, "Sick Man of Europe" was a phrase used to describe the 500-year-old Ottoman Empire. Decaying, unable to protect its territories, it was ruled by sultans who steadfastly resisted change. Ottoman subjects on three continents -- Arabs, Turks, Greeks, Kurds, Armenians, and Serbs -- and of three faiths -- Muslim, Christian and Jewish -- clamored for change, to no avail. Instead of reforming itself, the empire simply grew more repressive.

David Burton on outlook for Asia Adobe Acrobat Required
IMF Survey Mar 29, 2004
Plus: IT still key to U.S. productivity growth; Financial sector vital to growth in the Baltics; Call for transparent selection of Managing Director; Crises and trade finance; Argentina program; West Afritac's 2004 agenda.

Expanding the Alliance of Democracies Wall Street Journal Subscription Required
R. Nicholas Burns (WSJE) Mar 29, 2004
The accession of seven countries coincides with NATO's shift toward safeguarding peace beyond Europe's borders.

A Fishy Approach to Fair Trade
Sebastian Mallaby (WP) Mar 29, 2004
One of the great achievements of Sen. Robert Byrd, that august pillar of Senate decorum, has been to unite the ethic of ambulance-chasing lawyers with dumb trade protectionism. Thanks to a law he jammed through in 2000, the old procedure by which weak U.S. companies could seek tariffs against cheap imports has been spiced up: The receipts from such "anti-dumping" duties now get paid to the complaining companies rather than to the government. That way, you see, uncompetitive firms get trade protection plus cash prizes. Over the past three fiscal years, protectionist plaintiffs have been awarded more than $800 million, and their lawyers have made out like bandits.

Should the United Nations run the Internet?
Declan McCullagh ( Mar 30, 2004
The United Nations wants to expand its influence over the Internet, but would it be wise to let that happen?

What's Up With Oil
WSJ Mar 30, 2004
A guide to why prices are so high.

Of Labour, Lords and Democracy Wall Street Journal Subscription Required
Richard D. North (WSJE) Mar 31, 2004
A representative democracy needs accountable elitism.

The surging Japanese yen
Economist Mar 31, 2004
The yen is surging again. Will the Japanese authorities halt its rise? Can they?

Global: Offshoring -- Myth and Reality
Stephen Roach (MSDW) Mar 31, 2004
In America, the global labor arbitrage has quickly turned into the major domestic issue of Campaign 2004. In Asia, the political backlash to the globalization of employment is seen as the single greatest threat to the hopes and aspirations of economic development. Nowhere is this more evident than in India, where I have just begun the final leg of my two-week swing through Asia.

Argentina: Remaining Economic Challenges
Anne O. Krueger (IMF) Mar 31, 2004
This is an apt moment to take stock of the challenges still facing Argentina. As you know, the IMF has just completed the second review of Argentina's Fund-supported program, and a new letter of intent was published only last week. I want to use this opportunity today to outline briefly what we in the Fund see as the principal economic challenges facing Argentina, and to say something about how we think we can help Argentina respond to those challenges.

IMF Executive Director Shaalan Nominates Three Candidates for the Post of Managing Director of the IMF
IMF Mar 31, 2004
In accordance with established procedures the IMF has nominated, for consideration by the Executive Board at the appropriate time, the following candidates for the post of Managing Director of the International Monetary Fund: Andrew Crockett, Mohamed El-Erian, and Stanley Fischer.

WTO Headed For Agriculture Modalities Framework By July
BRIDGES Weekly Trade News Digest - Vol. 8, Number 12 Mar 31, 2004
WTO delegates that participated in agriculture negotiations from 22-26 March reported a change of tone in the concluding plenary of the WTO Committee on Agriculture (CoA) special session. Reportedly, the week's intensive consultations led to a more positive negotiating climate as Members finally started listening to each other, following months marked by a generally negative tone in the post-Cancun agriculture debate. While Chair of the special (negotiating) session ambassador Tim Groser (New Zealand), said in his concluding assessment that Members had not yet reached a "problem-solving mode", he said he had sensed consensus emerging on the aim to agree on a negotiating framework by end-July, which would later be fleshed out to full modalities. Negotiators would act on the "working hypothesis" that the framework text might not include numbers. This sequencing meant that Members needed to show "conditional trust" so as to get the process moving, Groser said. On substance, market access reportedly emerged as the most contentious negotiating area. Groser scheduled another four 'Agriculture Weeks' in April, June and July. The upcoming April session will use the current negotiating format -- consisting mainly of informal negotiations -- but may be somewhat more structured, sources reported.

China: The New America?
Robert J. Samuelson (WP) Mar 31, 2004
Chinese working conditions don't look too different from those in the U.S. a century ago.

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