Tag Archives: Trade

Cybersecurity and digital trade: What role for international trade rules?

By Joshua P. Meltzer – Trade and cybersecurity are increasingly intertwined. The global expansion of the internet and increased use of data flows by businesses and consumers—for communication, e-commerce, and as a source of information and innovation—are transforming international trade. The spread of artificial intelligence, the “internet of things,” (IoT) and cloud computing will accelerate the global connectivity of businesses, governments, and supply chains.

As this connectivity grows, however, so does our exposure to the risks and costs of cyberattacks. As the President’s National Security Telecommunications Advisory Council observed, the U.S. is “faced with a progressively worsening cybersecurity threat environment and an ever-increasing dependence on internet technologies fundamental to public safety, economic prosperity, and overall way of life. Our national security is now inexorably linked to cybersecurity.

Not only are traditional defense and other national security targets at risk of cyberattack, so too is the broader economy. This includes critical infrastructure—such as telecommunications, transport, and health care—which relies on software to network services. There is also cybertheft of intellectual property (IP) and manipulation of online information. More broadly, these risks undermine business and consumer trust in the internet as a basis for commerce and trade.

Many countries are adopting policy measures to respond to the threat. According to one estimate, at least 50 percent of countries have adopted cybersecurity policies and regulations. more>

Updates from Chicago Booth

Trade policy is upending markets—but not investment
By Steven J. Davis – Trade-policy concerns became a major source of US stock market volatility in 2018. For example, the S&P 500 fell 2.5 percent on March 22, 2018, reacting to news about just-announced US tariffs on tens of billions of dollars of Chinese imports. Four days later, the index rose 2.7 percent on news the United States and China had begun trade negotiations. Still, tariffs and tariff threats between the two countries ratcheted upward over the next several months.

This prominence marks a striking change, as demonstrated in my research with Northwestern’s Scott R. Baker, Northwestern PhD candidate Marco Sammon, and Stanford’s Nicholas Bloom. We took a systematic look at the role of trade-policy developments and other news in large daily stock market moves. We first identified every daily move of 2.5 percent or more, up or down, in the US stock market. By this criterion, there were 1,112 large daily moves from 1900 to the end of 2018.

For each large move, we read next-day news articles in the Wall Street Journal to classify perceptions of what moved the market. The WSJ attributed seven of 1,103 large moves from 1900 to 2017 mainly to news about trade policy. But in a remarkable turnabout, the newspaper attributed three of nine large moves in 2018 to trade-policy news. From a historical perspective, the prominent role of trade policy in recent US stock market swings is highly unusual.

The highly visible US–China dispute is only one of the heightened trade-policy concerns behind the pattern we chart. The US has also become enmeshed in trade-policy disputes with several other major trading partners since Donald Trump became president.

How much do these heightened concerns affect capital-investment expenditures by US businesses? Not as much as you might think. more>

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Why a trade war with China would hurt the U.S. and its allies, too

By David Dollar and Zhi Wang – Two-thirds of world trade now occurs through global value chains that cross at least one border during the production process, and often many borders. As a result, the typical “Chinese product” that the United States imports has a lot of value-added from countries other than China.

Furthermore, in computers and electronics, more than half of China’s exports come from multinational firms operating in China.

U.S. firms are also involved in production chains. Thirty-seven percent of U.S. imports from China are intermediate products used by American firms to make themselves more competitive. Putting tariffs on intermediate products is shooting oneself in the foot. The list of targeted products posted by the United States includes some intermediates, such as aircraft propellers.

Many of the targeted products are consumer goods such as televisions and dishwashers.

What all this means is that tariffs are a very poor instrument for punishing China for any unfair trading practices. Some of the cost will be borne by American consumers; some by American firms that either produce in China or use intermediate products from China; some by firms in countries (mostly U.S. allies) that supply China; and some by Chinese firms (mostly private ones). more>

Would Free Trade Be OK If The U.S. Had A Trade Surplus?

By Nathan Lewis – There are a lot of issues surrounding trade – for example, the tendency of trade agreements to come attached with globalist institutions that erode national sovereignty. The European Coal and Steel Community (1951) not only allowed trade in coal and steel, it introduced a whole new supranational government structure, including three branches of government and a parliamentary body, that later grew into the European Union. This sort of thing should be avoided with extreme prejudice.

Today’s environment of floating fiat currencies introduces new problems. The devaluation of the Mexican peso in 1995, shortly after the passage of the North American Free Trade Agreement in 1994, caused all sorts of hardship for U.S. competitors that cannot be attributed to any meaningful “comparative advantage.”

At present, gross exports of goods and services are about 80% of gross imports. The 20% difference is the “trade deficit.” Today, gross exports of goods and services are greater than at any time before 2007 – around 12% of GDP. We don’t seem to have any trouble selling our wares to foreigners. We are selling more to foreigners than ever. In the 1960s, when the U.S. had a trade surplus, total exports were about 5% of GDP. Imports, of course, were less than this.

If the amount we sell to foreigners has been steadily rising, why can’t we manage to run a trade surplus? more> https://goo.gl/oiM9eC

The Global Economy Remains Unbalanced


By Otaviano Canuto – Discussions around large current account imbalances among systemically relevant economies as a threat to the stability of the global economy faded out in the aftermath of the global financial crisis.

More recently, some signs of a possible resurgence of rising imbalances have brought back attention to the issue. We argue here that, while not a threat to global financial stability, the resurgence of these imbalances reveals a sub-par performance of the global economy in terms of foregone product and employment.

The “era of global imbalances” up to the GFC (global financial crisis) had two distinctive-yet-combined processes at its core:

On the one hand, credit-driven, asset bubble-led growth in the U.S., along with wealth effects, intensified the existing trend of domestic absorption (particularly consumption) growing faster than GDP. This resulted in falling personal saving rates and increasing current account deficits (Canuto, 2009; 2010).

On the other hand, the accelerated structural transformation and rapid growth in China, led to high and rising savings and investments and producing ever larger current account surpluses (Canuto, 2013a). more> https://goo.gl/QcdbMq

We’ve Reached the End of Global Trade

By Rana Foroohar – Globalization is usually defined as the free movement of people, goods and capital. It’s been the most important economic force of modernity.

Until the financial crisis of 2008, global trade grew twice as fast as the global economy itself. Yet, thanks to both economics and politics, globalization as we have known it is changing fast.

The question is: Have we reached peak trade?

“If you think about globalization in traditional terms, in terms of old-line trade in goods, for example, then yes,” says McKinsey Global Institute research director Susan Lund.

“But if you think of it in terms of the flow of digital data and ideas, then no—it’s actually increasing.” Indeed, the cross-border flow of digital data—e-commerce, web searches, online video, machine-to-­machine ­interactions—has grown 45 times larger since 2005 and is projected to grow much faster than the global economy over the next few years. more> https://goo.gl/5xcMO5

How Much Do We Really Know About Global Trade’s Impacts?

BOOK REVIEW

The China Shock, Authors: David Autor, David Dorn and Gordon Hanson.
Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money, Author: Nathaniel Popper.

By Nathaniel Popper – There are many reasons that the disadvantages have received more attention than the gains. In American political discussions, after all, the focus is understandably on domestic losses rather than foreign benefits.

Trade also presents a classic case of concentrated costs and diffuse benefits — the lower prices and higher employment that trade can produce are generally distributed thinly over many beneficiaries, while the loss of jobs falls hard on a smaller number of people.

Last year, economists at the University of Groningen, in the Netherlands, said that by their very rough estimates total foreign demand for Chinese goods may have led to the creation of as many as 70 million jobs in China in the five years after China joined the W.T.O. This “export shock” has been described by economists as the most important factor in China’s economic development in the 2000s; foreign consumers were able to support higher wages than Chinese consumers could.

Of course, trade liberalization is not always a boon for poorer countries. During an earlier era of American trade agreements, especially in Latin America, countries often agreed to lower tariffs on their own protected industries, like textile manufacturing in Brazil and India. Those changes often ended up hurting poor workers in those industries.

Other costs have emerged, however. Urban Chinese are choking on pollution and confronting growing income inequality. In the United States, jobs have disappeared, and there is social unrest. Our exposure to foreign markets is partly to blame, but economists attribute many of the job losses to changes in technology and productivity. (American manufacturing output has grown even as the number of manufacturing workers has shrunk.) more> https://goo.gl/h9QLb4

Setting A New Agenda For Fair World Trade

By Liina Carr – With the date set for the signing of the controversial EU-Canada Comprehensive Economic and Trade Agreement (CETA) in October drawing nearer, positions are hardening.

On 17 September, Germans and Austrians will take to the streets to oppose CETA in a demonstration supported by trade unions and NGOs. On 20 September it will be the turn of Belgian protesters.

The European Trade Union Confederation opposes both CETA and the Transatlantic Trade and Investment Partnership (TTIP) with the USA in their current form. We believe the EU must fundamentally change its trade negotiation strategy, if it is to avoid damaging jobs and working conditions in Europe, putting public services at risk and further alienating public opinion.

Public services must be safeguarded and labor standards as laid down in International Labor Organization (ILO) core conventions must be binding. We have joined with the CLC (Canadian Labour Congress) in insisting that local governments must retain the right to impose social and environmental conditions on the supply of services and public procurement. Above all, we rejected the dangerous and undemocratic Investor State Dispute Settlement (ISDS) mechanism.

The European Commission bowed to pressure from unions and many other sectors of civil society in replacing the ISDS with a new Investment Court System (ICS). While this marks an important achievement for us, the scheme does not go far enough. We reject any alternative legal system that gives additional rights to powerful multinational companies. more> http://goo.gl/gI9cBs

Why China has the upper hand in the South China Sea

By Barry C. Lynn – Back in the 1990s, advocates of liberalizing U.S. trade with China said economic interdependence would inevitably lead to peaceful coexistence.

Washington must now address the fundamental flaws in the international trade system that gave China such a big advantage. The White House claims the proposed Trans-Pacific Partnership will help offset China’s increasing heft. Unfortunately, the pact, which includes 11 Pacific Rim allies but excludes Beijing, will do nothing to fix the problems.

The fact that the global trading system is not working as promised is most dramatically evident in the seas around China. Beijing is engaged in a pattern of provocation bordering on recklessness. more> http://tinyurl.com/o6oj3d5

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Can trade agreements stop currency manipulation?

By Kemal Derviş – Trade negotiations are hard enough to conclude. The need to wrestle with macroeconomic-policy issues could easily cause talks to bog down — and give protectionist lobbies the political ammunition they need.

None of this means that macroeconomic policies that affect exchange rates are not problematic. They are.

But trade negotiations are not the right forum for discussing the causes and consequences of current-account imbalances and reaching agreements on macroeconomic-policy coordination; that is what the IMF [2] and the G-20 [2] are for. more> http://tinyurl.com/odk45wc