Trade and Finance

Teaching a course on international economics (trade and finance) for international relations students. More on that later. Just wanted to post the exports to GDP ratio for the world.

This is to give students a sense of the increase in trade in the last few decades, and also the relative stagnation since the 2008 Global Financial Crisis. Note that while exports are about US$ 23 trillion in a year, the daily turnover in the foreign exchange market is about US$ 5 trillion, according to the last time I checked the BIS Report.

I put the US recessions bars too. Note that it seems that US recessions always have a significant impact on the expansion of world exports.

New Book By Eric Helleiner - Forgotten Foundations of Bretton Woods, Int. Dev. & Making of Postwar Order

Professor Helleiner is an astounding international political economist and economic historian. His archival research is impressive, and his explications and understandings of international finance are not only lucid and prolific, but extensively articulate & eloquent. His new book on Bretton Woods, like many of his other works, is certainly a tour de force.

Eric Helleiner's new book provides a powerful corrective to conventional accounts of the negotiations at Bretton Woods, New Hampshire, in 1944. These negotiations resulted in the creation of the International Monetary Fund and the World Bank—the key international financial institutions of the postwar global economic order. Critics of Bretton Woods have argued that its architects devoted little attention to international development issues or the concerns of poorer countries. On the basis of extensive historical research and access to new archival sources, Helleiner challenges these assumptions, providing a major reinterpretation that will interest all those concerned with the politics and history of the global economy, North-South relations, and international development. The Bretton Woods architects—who included many officials and analysts from poorer regions of the world—discussed innovative proposals that anticipated more contemporary debates about how to reconcile the existing liberal global economic order with the development aspirations of emerging powers such as India, China, and Brazil. Alongside the much-studied Anglo-American relationship was an overlooked but pioneering North-South dialogue. Helleiner’s unconventional history brings to light not only these forgotten foundations of the Bretton Woods system but also their subsequent neglect after World War II.

See rest here.

A Band-Aid Solution to Economic Development: The False Promise of 'Fair Trade'

The process of economic development elicits many thoughts, analyses, speculations, suggestions, descriptions, prescriptions, and conclusions. Nevertheless, it invokes an imagined reality that is fundamentally progressive. It entails a commitment to the idea that we as human beings, in order to maximize our human potential, can, and should, try to change the world for the better. That is, it should be an attempt to reduce vast inequalities, social injustices, and hegemonic forces that intrinsically develop extensive imbalances of rights, privileges, and responsibilities across the world's population, and moreover deny many a condition of life regarded as materially, culturally, spiritually, and symbolically superior.

This paper is an exploration of the role of fair trade as an effective developmental initiative in promoting economic self-sufficiency for marginalized producers of the periphery. From Sen and Nussbaum's 'capabilities approach' for evaluating human well-being, I focus on the foundation, structure, and influence of fair trade as an alternative development model and analyze the model within the UNICEF empowerment framework. The UNICEF framework is based on the premise that empowerment involves five levels: 1) Welfare, 2) Access, 3) Conscientization, 4) Participation, and 5) Control. From this discussion, I conclude that, in the long run, fair trade fails to be a sustainable substitute for the neoliberal orthodoxy that currently dominates the institutional mechanisms addressing global poverty.

Read the rest here.

Gains from Trade? The Net Effect of the Trans-Pacific Partnership Agreement on U.S. Wages

By David Rosnick

Recent estimates of the U.S. economic gains that would result from the proposed Trans-Pacific Partnership (TPP) are very small — only 0.13 percent of GDP by 2025. Taking into account the un-equalizing effect of trade on wages, this paper finds the median wage earner will probably lose as a result of any such agreement. In fact, most workers are likely to lose — the exceptions being some of the bottom quarter or so whose earnings are determined by the minimum wage; and those with the highest wages who are more protected from international competition. Rather, many top incomes will rise as a result of TPP expansion of the terms and enforcement of copyrights and patents. The long-term losses, going forward over the same period (to 2025), from the failure to restore full employment to the United States have been some 25 times greater than the potential gains of the TPP, and more than five times as large as the possible gains resulting from a much broader trade agenda.

See rest here.

New Book From Monthly Review Press: 'Capitalist Globalization - Consequences, Resistance, and Alternatives'

Globalization, surely one of the most used and abused buzzwords of recent decades, describes a phenomenon that is typically considered to be a neutral and inevitable expansion of market forces across the planet. Nearly all economists, politicians, business leaders, and mainstream journalists view globalization as the natural result of economic development, and a beneficial one at that. But, as noted economist Martin Hart-Landsberg argues, this perception does not match the reality of globalization. The rise of transnational corporations and their global production chains was the result of intentional and political acts, decisions made at the highest levels of power. Their aim—to increase profits by seeking the cheapest sources of labor and raw materials—was facilitated through policy-making at the national and international levels, and was largely successful. But workers in every nation have paid the costs, in the form of increased inequality and poverty, the destruction of social welfare provisions and labor unions, and an erratic global economy prone to bubbles, busts, and crises.

Read rest here.
Other books by Hart-Landsberg, see here

New Book: 'The Clash of Globalizations' by Kevin P. Gallagher

 

Collecting and synthesizing a series of essays on the political economy of trade and development policy, this book explores the following research questions: to what extent is the global trading regime reducing the ability of nation-states to pursue policies for financial stability and economic growth; and what political factors explain such changes in policy space over time, across different types of trade treaties and across nations? Gallagher presents intriguing findings on the policy constraints on the Uruguay Round, as well as the significant restrictions that the USA places upon the ability of developing nations to deploy a range of development strategies for stability and growth.

See rest here.

The Trade Deal Scam

From Dean Baker

As part of its overall economic strategy the Obama administration is rushing full speed ahead with two major trade deals. On the one hand it has the Trans-Pacific Partnership which includes Japan and Australia and several other countries in East Asia and Latin America. On the other side there is an effort to craft a U.S.-EU trade agreement. There are two key facts people should know about these proposed trade deals.

See rest here.

The New Banks in Town: Chinese Finance in Latin America

By Kevin P. Gallagher, Amos Irwin, & Katherine Koleski

"Although China's impact in Africa receives the most attention, China trades just as much in Latin America as in Africa, and has more investments in the region. Chinese finance in Latin America – chiefly from the China Development Bank and the Export-Import Bank of China – is staggeringly large and growing [...] China's presence is a great opportunity for Latin America, but it brings new risks. If the region can seize the new opportunities that come with Chinese finance, countries could come closer to their development goals, and pose a real challenge to the way western-backed development banks do business. However, if Latin American nations don't channel this new trade and investment toward long-term growth and sustainability, the risks may take away many of the rewards."

Read the rest here.

IMF's New View on Capital Controls

By Kevin P. Gallagher and Jose Antonio Ocampo

"Weeks before the spring meetings of the International Monetary Fund (IMF) in Washington next month, GDAE Senior Researcher Kevin P. Gallagher and Colombia University economist Jose Antonio Ocampo offer a critical analysis of the IMF's new view on capital account liberalization and the management of capital flows. The article, “The IMF’s New View on Capital Controls,” appears in India's Economic and Political Weekly (see here).

In the 1970s the International Monetary Fund became an advocate of capital account liberalization, and in 1997 it tried to change its Articles of Agreement to include capital account convertibility among its mandates. In contrast, the IMF embraced in December 2012 a new "institutional view" on this issue. While it remains wedded to eventual financial liberalization, it now acknowledges that free movement of capital rests on a weak intellectual foundation. Gallagher and Ocampo claim that this is a step in the right direction, but that the new institutional view still suffers from a number of shortcomings that will need to be addressed in national capitals and in other international fora.

Although a significant step forward, the new institutional view is still out of step with country experience and economic thinking in many respects. In particular, it continues to insist on eventual capital market liberalization despite the lack of evidence supporting it, is too narrow concerning the sanctioned use of capital account regulations on inflows and outflows, and does not deal with the implications for multilateral aspects of regulating cross-border finance."

South-South Trade

The Human Development Report (see here p. 46), which was the topic of a recent post, has a great graph on the huge expansion of South-South trade, when compared to North-South and North-North trade, in the last decade.

As one can see, the share of North-South trade in total world trade has expanded at a relatively slow pace, while the share of South-South trade has exploded. The obvious counterpart is the collapse of North-North trade.

I had a teacher that used to say that if someone asked you a question about globalization, and you didn't know the answer, just say China, and you'll be right a third of the times. So let's say China explains what is going on in South-South trade. [China entered the World Trade Organization (WTO) in 2001].