Posts Tagged ‘World Economic Forum’

Leaders meet in Dubai as World Economic Forum’s prelude to Davos begins

November 11, 2018

The World Economic Forum’s (WEF) Annual Meeting of the global future councils began in Dubai on Sunday, with the UAE’s Minister of Cabinet Affairs Mohammed Al Gergawi gave the opening remarks at the

The WEF conference is attended by more than 600 members from government, academia, civil society and business, as well as other fields. The conference will address global, regional and geopolitical issues and explore topics related to the ‘fourth industrial revolution.’

Most of the forum’s sessions will be off-record and not attended by the media, with talks targeting globalization and preparing for the future.

The speakers at the sessions will include Former Australian Foreign Minister Julie Bishop, and Norwegian Diplomat Terje Roed-Larsen.

The WEF event is a warm up to the WEF Annual Meeting in Davos in 2019, where it will shape its agenda based on the outcome and talks at the sessions.

Arab News


U.S. Is World’s Most Competitive Economy for First Time in a Decade

October 16, 2018

Country regains top spot in World Economic Forum rankings thanks to strong economic growth; report says room for improvement on social issues

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The report’s authors cautioned that the U.S. could still improve on competitiveness. When measured on judicial independence and levels of corruption, the U.S. falls outside the top 10. PHOTO: DAVID STOCKMAN/ZUMA PRESS

The U.S. is back on top as the most competitive country in the world, regaining the No. 1 spot for the first time since 2008 in an index produced by the World Economic Forum, which said the country could still do better on social issues.

America climbed one place in the rankings of 140 countries, with the top five rounded out by Singapore, Germany, Switzerland and Japan. All five countries’ scores rose from 2017, with the U.S. notching the second-biggest gain after Japan’s.

The top spot hasn’t gone to the U.S. since the financial crisis stalled output and triggered a global economic slowdown.

“Economic recovery is well underway, with the global economy projected to grow almost 4% in 2018 and 2019,” said the report, published Tuesday by the organization that produces the Davos conference on global politics and economics.

However, “recovery remains vulnerable to a range of risks and potential shocks,” the authors warned. They cite a brewing trade war between the U.S. and China as a possible hindrance to growth that could potentially derail the recovery and deter investment. The U.S. has levied tariffs on a total of $250 billion of Chinese goods and China has retaliated with tariffs on $110 billion of U.S. exports as the two nations spar over trade imbalances and other issues.

Companies that have repatriated manufacturing to the U.S. say that tariffs are increasing their costs and making them less competitive.

The Global Competitiveness Report this year assessed 140 countries on 98 indicators that measure business investment and productivity. The indicators are organized into 12 main drivers of productivity including the nations’ institutions, tech savvy, infrastructure, education systems, market size and innovation.

The report scores countries on how closely they match up to the competitive ideal. The U.S. scored 85.6 out of a possible 100. America’s vibrant entrepreneurial culture and its dominance in producing a competitive labor market and nimble financial system “are among the several factors that contribute to making the U.S.’ innovation ecosystem one of the best in the world,” the report said.

Still, “There is still room for improvement,” according to the authors. While the country’s institutional framework remains relatively sound, there are indications of a weakening social fabric and worsening security situation, it found. The report notes the U.S. homicide rate is five times the average for advanced economies.

When measured on judicial independence and levels of corruption, the U.S. falls outside the top 10.

The country also lags behind most advanced economies in terms of healthy life expectancy, which measures expected years of life in good health. The U.S. figure is 67.7 years, slightly lower than Sri Lanka’s and China’s and three years below the average for advanced economies.

Technology penetration is also relatively low compared to other developed economies, including mobile-broadband subscriptions and internet use. Only 76% of adult Americans regularly use the internet, below the average for the Organization for Economic Cooperation and Development.

Overall in the index, Switzerland fell to fourth place this year from first place last year, overtaken by the U.S., Singapore and Germany. The top 10 was completed by Japan, the Netherlands, Hong Kong, the U.K., Sweden and Denmark.

The rankings rely on public data on measures such as inflation and debt levels along with a survey of chief executives.

Write to Joanna Sugden at

Trump Gaining Allies in Trade War Against China

September 19, 2018

Trump pressure on partners pays off as they succumb to the art of the deal

South China Morning Post

PUBLISHED : Wednesday, 19 September, 2018, 9:16pm
UPDATED : Wednesday, 19 September, 2018, 11:19pm
US President Donald Trump has touted the success of trade negotiations with US allies which could leave China exposed in the trade war. Photo: EPA

China risks standing alone against the United States in US President Donald Trump’s trade war, with its allies showing signs of compromise, a former American trade official has warned.

Wendy Cutler, vice-president of the Asia Society Policy Institute and a former deputy US trade representative, made the assessment from the sidelines of the World Economic Forum in Tianjin, northeast China, following sustained pressure from Trump on US allies to compromise in trade negotiations.

Trump has touted the success of negotiations with Mexico to revise the North American Free Trade Agreement, while Canada is showing signs it may make concessions in its Nafta talks with the US. In July, meanwhile, the EU and US reached a deal pledging zero tariff and zero barriers on non-car products.

Former deputy US trade representative Wendy Cutler warns China risks standing alone against the US in Donald Trump’s trade war. Photo: Bruce Yan

Despite efforts by South Korea and Japan to diversify trade patterns, Seoul is about to sign a trade deal with Washington in the coming weeks and Tokyo, a close ally, is also on Trump’s agenda in trade talks.

“So with all of these trading partners, it looks like the Trump administration is close to finding a path forward, a way to resolve differences,” Cutler said.

She said she expected the US administration would be able to focus more on China and probably ask its allies to “support the US position on China and to work with the US to urge China to open its market and to reform”.

China’s major trading partners share US concerns about the sluggish progress in opening Chinese markets significantly, as well as heavy state interference in the economy and technology, which may squeeze foreign business out of China.

Observers are bracing for the growing likelihood that the trade dispute may last for some time as both China and the US have refrained from backing down first.

The two countries have engaged in a series of retaliatory moves, imposing 25 per cent tariffs on US$50 billion worth of each other’s imports.

In a further escalation this week, the US announced it would impose 10 per cent tariffs on an additional US$200 billion worth of Chinese products from September 24, with the tariff rate increasing to 25 per cent on January 1 next year unless China makes concessions. China responded by imposing tariffs on US$60 billion worth of US goods.

“We all need to get prepared for a world where there will be significant tariffs in place between the two countries for the foreseeable future,” Cutler said.

Chinese Vice-Premier Liu He is reported to be organising a meeting to discuss China’s response to the latest US trade tariffs. Photo: Reuters

Chinese Vice-Premier Liu He was reported to be organising a meeting to discuss the response to the latest US tariffs which have fuelled concerns about an already slowing Chinese economy.

There have been suggestions China may go beyond using tariffs, using instruments such as regulatory harassment of US firms operating in China, or even depreciating the yuan and dumping Chinese holdings of US Treasury bonds.

Cutler warned China faced a “conundrum” as such moves could further provoke the Trump administration and add to the difficulties of finding a negotiated solution.

The opening up of the “Made in China 2025” sectors, however, could send a signal to the US about China’s seriousness to resolve the issue, she said.

A former assistant US trade representative speaking on the sidelines at the World Economic Forum said he expected China would move very cautiously to avoid further escalating the situation.

Timothy Stratford, now managing partner in law firm Covington & Burling’s Beijing office, said he believed the Chinese government had come to the conclusion that the Trump administration was very serious about addressing issues stemming from the systemic differences between the two countries.

“Now that this new round of tariffs is being imposed by both sides, the most realistic goal for our countries to focus on next would be to agree on a moratorium on any further sanctions – so that each side has a chance to evaluate the impact of the existing tariffs and consider the best path forward,” he said.

“This would probably require them to agree on a process, agenda, and time frame for negotiations in the systemic issues.”

Japan, Vietnam urge US to rejoin Pacific trade deal

September 13, 2018

Japan and Vietnam on Thursday urged the United States to rejoin a sprawling Pacific trade deal, almost two years after President Donald Trump’s withdrawal dealt a major blow to what would have been the world’s largest free trade pact.

Trump pulled out of the Trans-Pacific Partnership (TPP) deal in one of his first post-election moves as part of his “America First” clarion call, declaring the 12-nation trade pact a “job killer”.

The 11 remaining countries have pledged to move ahead with the deal, which could go into effect by the end of this year, although in a significantly watered-down version without the US.

They have kept a door open for Washington’s return, and have also not ruled out allowing other non-Pacific countries to join the deal.

Japan’s foreign minister on Thursday encouraged the US to come back to the pact, speaking at a regional World Economic Forum (WEF) where concerns over trade protectionism have dominated discussions.

© POOL/AFP | Japan’s Foreign Minister Taro Kono and his Vietnamese counterpart Pham Binh Minh encouraged the US to come back to the Pacific trade pact

“We believe TPP is still the best option for (the) United States,” Taro Kono said.

“It will be very attractive for American industries, American farmers to join it.”

Japan, the largest remaining economy in the TPP, has led the charge to keep it alive.

The newly rebranded deal, dubbed the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and which forms a market of 500 million people, could go into effect by the end of 2018, Kono added.

Vietnam’s foreign minister Pham Binh Minh echoed Kono’s appeal, calling the deal “a very high-standard agreement”.

Vietnam stood to be the biggest winner from US involvement before Trump’s withdrawal from the pact, which would have opened access to US markets for its cheap manufactured goods — from shoes and shirts to mobile phones and computer processors.

For smaller signatories like Vietnam, unfettered access to US markets was a major draw.

In its original iteration, the free trade bloc would have made up 38 percent of the global economy. Today, the remaining signatories comprise about 13.5 percent.

Japan and Vietnam’s comments come after Trump said in April the US could re-enter the agreement if it was a “better” deal.

Leaders at this year’s regional WEF summit for the Association of Southeast Asian Nations (ASEAN) have railed against protectionism and called for breaking down trade barriers.

Trade in the region has grown at breakneck pace in the past decade, transforming some of Southeast Asia’s poorest countries into fast-growing export economies.

Earlier at the summit, which closes Thursday, Indonesia’s President Joko Widodo compared trade disputes to “infinity wars” — a reference to the latest Avengers movie — vowing to fight protectionism.

“Not since the Great Depression of the 1930s have trade wars erupted with the intensity that they have today,” said the leader, who is seeking re-election next year.

“But rest assured I and my fellow avengers stand ready to prevent Thanos from wiping out half the world population,” he said, referring to the film’s villain.


Vietnam Hosts World’s Top Human Rights Abusers at World Economic Forum, Shuts Out Independent Media and Human Rights NGOs

September 12, 2018

A Vietnamese dissident was jailed Wednesday for 12 years on charges of trying to overthrow the state, days after the communist country refused entry to rights campaigners for a major business forum in Hanoi.

Vietnam has a dismal rights record and has come under fire for a brutal crackdown against critics in the past two years that has seen scores jailed.

Earlier this week it barred two rights campaigners from entering the country for the World Economic Forum attended by regional leaders — many of whom face criticism for their own rights record at home.

© Vietnam News Agency/AFP/File | In April, six members of the Brotherhood for Democracy, which has chapters across the country, were jailed on anti-state charges, including co-founder Nguyen Van Dai who was later quietly released and exiled to Germany

Nguyen Trung Truc, a member of the Brotherhood for Democracy group, was sentenced to 12 years in jail for attempting to overthrow the state, his lawyer said after his half-day trial in central Quang Binh province.

The 44-year-old denied the charges, while his lawyer said Truc was not given a fair chance in court.

“I didn’t intend to overthrow anyone. I only supported and praised democracy, human rights and environmental protection in Vietnam,” Truc said in court, according to his attorney Nguyen Van Mieng.

Truc is the latest Brotherhood for Democracy member jailed in Vietnam, where political parties, public protests and independent media are all banned.

In April, six members of the the group, which has chapters across the country, were jailed on anti-state charges, including co-founder Nguyen Van Dai who was later quietly released and exiled to Germany.

Wednesday’s trial came as regional leaders, including Myanmar’s Aung San Suu Kyi, Cambodian strongman Hun Sen and Singaporean leader Lee Hsien Loong — who have come under fire for their grim rights record — gathered in Hanoi for a WEF summit with business bigwigs that closes Thursday.

Representatives from Amnesty International and the International Federation for Human Rights (FIDH) were set to attend the meeting but were denied entry by Vietnam, which does not allow international rights groups to have offices in the country.

At least 97 activists are behind bars in Vietnam as of April this year, with some 40 convicted this year on various anti-state charges.

One jailed dissident, Tran Huynh Duy Thuc, who was sentenced to 16 years in prison in 2010, has been on a hunger strike for 30 days to send a message to authorities to improve rights in the country, his family told AFP.

“We’re shocked and so worried for him because he had made a very difficult and dangerous decision (not to eat),” Thuc’s brother Tran Huynh Duy Tan said.


China warns of ‘serious hazard’ of protectionism at WEF meeting

September 12, 2018

China warned Wednesday that protectionism poses a “serious hazard” to growth and cautioned “individual countries” against isolationism, in a veiled reference to the deepening trade spat between Washington and Beijing.

The comments from China’s vice premier comes as the world’s top two economic powers edged closer to an all-out trade war after imposing tit-for-tat tariffs on billions of dollars of imports.

Tensions were heightened last week when President Donald Trump threatened to hit all China’s exports to the US, worth more than $500 billion as he doubles down on “America First” agenda he says aims to protect jobs and industries from overseas competition.

But without directly naming Trump or the United States, Hu Chunhua warned on Wednesday against countries going it alone and upending the globalised trading system.

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Hu Chunhua (left)

“Some individual countries’ protectionist and unilateral measures are gravely undermining the rules-based multilateral trading regime, posing a most serious hazard to the world economy,” Hu said at the World Economic Forum in Hanoi.

“Self-isolation will lead nowhere and only openness for all represents the right way forward,” he added.

The escalating trade spat between Washington and Beijing is being closely watched in Southeast Asia where some export-focused economies may be set to gain from the fallout.

Rising labour costs in China have already precipitated a push into countries such as Vietnam and Cambodia where Adidas shoes, H&M T-shirts and Samsung phones are made on the cheap.

But the trade war has accelerated that process, with several Chinese firms turning to the region to produce items from bike parts to mattresses in a bid to avoid the US tariffs.

“ASEAN countries don’t want to count their chickens before they hatch,” Fred Burke, managing partner at Baker McKenzie in Vietnam, told AFP.

© AFP | The trade row looms over a regional World Economic Forum (WEF) kicking off in the Vietnamese capital Wednesday morning

“But I think they see it on a net basis as a gain for them because it means shifting manufacturing into Southeast Asia that was… (earlier) in China.”

– Protectionist woes –

Although there could be a short-term boon to Southeast Asia, some analysts warn the long-term may be less rosy.

The region is “very export-driven…. so any shift toward more trade barriers… is not good”, Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, told AFP.

ASEAN trade increased by a value of nearly $1 trillion between 2007 and 2014, according to WEF, as the bloc has enthusiastically embraced trade liberalisation — in contrast to the policies promoted by Trump.

In one of his first post-election moves, the US president pulled out of the sprawling 12-nation Trans-Pacific Partnership (TPP), calling it a job killer.

The current edition of the WEF, which closes Thursday, is officially themed “Entrepreneurship and the Fourth Industrial Revolution”, with a focus on how economies should adapt to so-called “disruptive technologies” like automation and artificial intelligence that threaten to replace human jobs.

Several regional leaders are slated to attend the forum, including Indonesian President Joko Widodo, Cambodia’s newly re-elected strongman Prime Minister Hun Sen and Myanmar’s de facto leader Aung San Suu Kyi, who faces fresh global scrutiny over the Rohingya crisis.

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Cambodia’s Prime Minister Hun Sen

She is scheduled to speak at the forum Thursday, though organisers have not said whether she will discuss last week’s ruling by the International Criminal Court that allows its chief prosecutor to investigate the forced deportation of 700,000 Rohingya Muslims by Myanmar’s military as a possible crime against humanity.

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Aung San Suu Kyi

Myanmar has also faced international censure over the decision to jail two Reuters journalists for seven years for their coverage of a Muslim massacre, under a draconian state secrets law.

South Korean and Japanese foreign ministers will also host a session touching on tensions with North Korea and regional security issues Thursday.


India’s Economy Beats China

June 15, 2018

(Photo by Mikhail MetzelTASS via Getty Images)

Modi’s Indian economy expanded at an annual rate of 7.7% in the first quarter of 2018, compared to 5.6% a year ago, as manufacturing and investments picked up steam. Meanwhile, China’s economy expanded at an annual rate of 6.8% over the first quarter of 2018, the same as a year earlier — see Table 1

By  Opinions expressed by Forbes Contributors are their own.

Table 1

Economy Expansion Rate

Month India China
July 2017 5.6% 6.8%
January 2018 7.0 6.8
May 2018 7.7 6.8

Source: 6/12/18

What’s behind this metric? The growth stages the two economies are in.

India’s economy is still in an early growth stage, where there’s still plenty of excess resources. Therefore, it can grow by better utilizing these resources with conventional technologies. China’s economy, by contrast, is in an advanced growth stage, operating close to full capacity. Therefore, it can no longer grow by using conventional technologies. It must innovate, and that isn’t easy given China’s current economic structure where most of its economic sectors are controlled by the government.

That could explain why India’s economy is beating China in another metric: competitiveness. In the last four years, India gained 20 points in the World Economic Forum’s (WEFR) Global Competitiveness rankings, while China’s ranking remained roughly unchanged — see Table 2.


Table 2

Competitiveness Rankings For Selected Years

Year India China
2010 49 29
2012 56 26
2014 60 29
2016 55 28
2018 40 27

Source:; World Economic Forum

Rising competitiveness hasn’t been sufficient to help India close its current Account gap. For the fiscal year 2016-17, India’s current Account deficit remained 0.70% of GDP. Meanwhile, China recorded a current Account surplus of 1.30% of GDP.

This means that Indians continue to live beyond their means, while Chinese live below their means.

This is situation that could spell trouble for India’s currency and financial markets, as U.S. interest rates are rising and foreign capital flows back from emerging markets to the U,S.

Financial markets have taken noticed, with dollar denominated Indian ETFs underperforming Chinese ETFs—see Table 3.

Table 3

Dollar Denominated ETF Performance

Index/Fund 12-month Performance 2-year Performance
IShares China (FXI) 19.57% 46.12%
iShares S&P India 50 (INDY) 4.72 17.91%

Source: /6/12/2018

The Secret to Winning The Trade War

May 24, 2018

Authored by Valentin Schmid via The Epoch Times,

Liberalize domestic trade to compete in international trade…


In early 2018, the gloves finally came off: The United States started to punish China for its unfair trade practices and threatened allies, like Europe and Canada, for their uneven trade policies. Since then, trade has been dominating the headlines, with threats and counterthreats from the opposing sides.

But the bluster is distracting the world from the fact that we’re in an outdated paradigm, and a major solution could be fairly simple.

For the current trade paradigm, when viewed from inside the complex, rigid, and bureaucratic international trade system that is the World Trade Organization (WTO) and the different domestic institutions tasked with managing trade, the Trump administration’s move to escalate the trade war is entirely understandable and justified.

According to the – severely flawed – rules of the game, China is exploiting the United States’ and Europe’s relatively free-trade policies to officially pursue its policy of complete domination of all industries. Europe and the rest of Asia are trying to gain an edge over the United States, although they are more interested in fair trade in principle than China.

For the United States, the tolerance of such trade practices resulted in persistent trade deficits with the rest of the world worth hundreds of billions of dollars, the loss of millions of manufacturing jobs, and trillions in international debt obligations. On the flip side, it also increased profit margins for multinational American corporations who produce abroad to sell in the United States, and it lowered prices of gadgets (some productive, many useless) for consumers.

So the Trump administration’s plan is to level the playing field by more or less getting even with tariffs on inbound goods, which are, on average, 10 percent in China, 4.8 percent in the European Union, and 3.5 percent in the United States. Those tariffs may be a simplified proxy of the complex trade barriers every country manages, but they do provide a good estimate of how much a country is really interested in free trade.

Whether the increase of tariffs will ultimately work remains to be seen. China has more to lose but can also suppress discontent much more easily than the United States, where some states and industries will mobilize politically to defend the status quo once they suffer from retaliatory measures.

Liberalize Domestic Trade

A cursory glance at the WTO proceedings for applying tariffs and counter-tariffs as well as the many unintended consequences of managed trade, even if they are pro-American, show that this problem needs to be solved at a higher level, outside the paradigm of government-managed trade.

The solution is to radically liberalize trade, but not only internationally—the liberalization of domestic trade is more important.

Domestic trade? Mainstream economics and the mainstream media have indoctrinated us to believe that only nations trade. However, as with all aggregate economic statistics, this is nonsense. It is private companies and private individuals who trade, and it doesn’t really matter whether this is domestic or international.

If I order a couple of bars of Cailler Frigor Swiss chocolate on Amazon, I do the trading with the company that ships them to me from Europe through Amazon. I send them money, and they send me the product.

But the same is true if I buy a couple of domestically produced bars of Hershey’s—much cheaper but certainly not as good—from Amazon here in the United States.

Goods or services are exchanged for money, whether domestically or internationally. Every tax, tariff, or regulation that stands in the way of these transactions is hindering trade.

For domestic trade in the United States, the most important barriers to trade between individuals and companies are taxation on buying and selling goods and services (sales tax) and, more importantly, taxation on selling labor services (income tax).

Capital gains taxes and taxes on dividends stand in the way of the free flow of capital. The corrupt fractional reserve fiat money system under the management of the Federal Reserve further prevents capital from finding the right places to invest, leading to overcapacity in sectors like real estate and a complete lack of infrastructure investment, to cite just one problem.

Add to this other regulations that limit or prohibit commercial transactions, especially in the labor market, and you get the picture that domestic trade is severely crippled and operating far below its potential.

It is ironic that most of the people who are ostensibly pushing for the liberalization of international trade—in reality, they merely want regulations to favor them—are most against the liberalization of trade domestically.

If the potential of domestic trade were fully unleashed, the United States would not have to worry about 10 percent average tariff rates in China or exports to China at all, because domestically produced goods could easily compete with products coming from a semi-state planned, developing economy. Without the tax and regulatory costs, even solar panels produced in the United States would be cheaper and better than the state-subsidized products from China.

State planning is less efficient and effective than the operation of free markets; therefore, China cannot win the game in the long run, just as the Soviet Union could not win it, nor Japan, whose markets were very heavily managed by the state during its boom years. Of course, this does not mean China could not score some victories here and there by dumping some products on the U.S. market virtually for free and undermining an industry. Nothing is perfect. But the costs of China doing so would be even higher than they are today and would deplete the country’s resources in the long term.

As a result of liberalized domestic trade, people and companies in the United States would either produce domestically, because the added cost of taxation and regulation would be much lower, if not removed entirely, or trade with countries who are interested in real free trade. The ideal scenario would be that almost every product that now comes from China would be produced for the same price or less domestically, so no international trade tariffs would be necessary.

Interestingly, the Trump administration is also pushing in this direction, and its tax cuts and deregulation are going in the right direction considering the starting point of illiberal domestic trade. However, if the United States wants to compete with hostile foreign players like China, taxes and regulation need to all but disappear.

Stuck in the Middle

At the moment, the United States occupies an awkward middle ground. Its international trade policies are relatively free compared to its competitors, and so are its national trade policies and regulations—and this is why the United States is still the most competitive large economy, according to the World Economic Forum (WEF) Global Competitiveness Index.

However, as job losses and the increase in debt have shown, U.S. domestic trade is not free enough to compete with hostile actors like China in the short term. This is the main risk of the free domestic trade strategy.

When unnecessary regulations, taxes, and tariffs are scrapped, there is bound to be some volatility as the economy adjusts to the freer environment. A hostile actor like China could use this adjustment period to move in and buy up companies and intellectual property.

Maybe this is why the Trump administration’s strategy of domestic liberalization and international interventionism could be just right for the time being, although both domestic and international barriers to commerce have to be removed eventually.

Many countries in the top 10 of the WEF competitive index who also rank highly in the enabling trade index, most notably Singapore (No. 1) and Hong Kong (No. 3), had their adjustment periods a few decades ago and are thriving with free domestic and international trade. They are international trading hubs and have relatively benign tax and regulatory regimes.

Both countries also have relatively balanced trade, with Singapore averaging a small surplus since the 1950s and Hong Kong a small deficit.

At the end of the economic cycle and in the long run, trade should always be balanced. By liberalizing domestic trade and unleashing the full productive capacity of the economy, the United States could achieve this goal and avoid trade wars.

ECB minutes highlight policymakers’ fears over currency wars — Is the Trump administration was deliberately trying to engage in currency wars?

February 22, 2018

Image may contain: skyscraper, sky and outdoor

Claire Jones in Frankfurt
Financial Times (FT)

The extent of European officials’ concerns over the weakness of the dollar was laid bare on Thursday in a set of European Central Bank accounts that highlighted fears that the US administration was deliberately trying to engage in currency wars.
The accounts of the ECB’s January monetary policy vote also reveal that the governing council’s hawks pushed for a change in the bank’s communications, saying economic conditions were now strong enough to drop a commitment to boost the quantitative easing programme in the event of a slowdown.Mario Draghi, ECB president, last month hit out at US Treasury secretary Steven Mnuchin’s claim that a weak dollar was good for the American economy, saying Washington needed to uphold the rules of the international monetary system, which forbid nations from deliberately devaluing their currencies.

Image result for Mario Draghi, photos

Mario Draghi

The remarks were seen as a signal that the US could ditch its strong dollar policy — and in so doing damage euro exports and lower imported inflation. US President Trump has since reaffirmed the strong dollar policy.

The accounts of the January ECB meeting, published on Thursday, show Mr Draghi’s fears were widely shared among the bank’s decision makers. “Concerns were . . . expressed about recent statements in the international arena about exchange rate developments and, more broadly, the overall state of international relations,” the account said. “The importance of adhering to agreed statements on the exchange rate was emphasised.” Those agreements explicitly rule out competitive devaluations.

The volatility in the euro was, the account said, “a source of uncertainty which required monitoring”.

The decline in the greenback following Mr Mnuchin’s remarks led the euro to soar to $1.25 in the days following the January 25 meeting of the ECB. The euro is now trading below $1.23.

The minutes highlighted dissent over the bank’s communications on its policy intentions, an element of what policymakers dub “forward guidance”.

The dissent was over the ECB’s promise to boost QE should economic conditions disappoint or financial conditions worsen.

“Some members expressed a preference for dropping the easing bias regarding the [QE programme] from the governing council’s communication as a tangible reflection of reinforced confidence in a sustained adjustment in the path of inflation,” the account said. “However it was concluded that such an adjustment was premature and not yet justified by the stronger confidence.”

The central bank is now buying €30bn of bonds a month under the €2.5tn QE programme.



U.S. GDP Grew 2.6% at Year End, Extending Strong Stretch — Federal Reserve predicts 2.5% growth again in 2018

January 27, 2018

Image may contain: 2 people, suit

U.S. President Donald Trump at the World Economic Forum in Davos, January 26, 2018


By Josh Mitchell
The Wall Street Journal
Updated Jan. 26, 2018 3:32 p.m. ET

Eight years into what has been an unexpectedly slow expansion, the U.S. economy appears to have picked up steam.

Business executives have reported solid quarterly earnings in recent weeks and pointed optimistically to investment and hiring plans for 2018, supported in part by federal tax cuts. Stock prices keep churning higher. And on Friday the Commerce Department reported that U.S. economic output remained on an above-trend path in the final three months of last year.

Gross domestic product—the value of goods and services produced in the U.S.—rose at a 2.6% annual rate in the fourth quarter, the government said. That didn’t match the second and third quarters’ above-3% growth rates, but it exceeded the 2% average that has prevailed since the early 2000s. Output grew 2.5% in 2017 as a whole, the most in three years, and the Federal Reserve predicts 2.5% growth again in 2018.

That puts the economy in unusual territory: not quite booming, but still gaining momentum deep into an expansion. The growth cycle that began in mid-2009 already ranks as the third-longest ever and is set to become the second-longest this spring. Rather than fizzling, the expansion is being spurred on by robust consumer spending and business investment. It isn’t near the vigor of the late 1990s, but that was the last time growth clearly accelerated this deep into an expansion.

“We don’t have a lot of history to guide us here,” said Richard Moody, chief economist of Regions Financial Corp. “It is unusual to see what looks to be a strong acceleration this late in the cycle.”


  • Heard on the Street: Why Consumers Can’t Keep Driving the Economy
  • Fourth-Quarter GDP At a Glance
  • How Hurricanes Hurt and Helped
  • Durable-Goods Orders Rose 2.9% in December
  • U.S. Employers Slowed Pace of Hiring in December
  • Tax Incentive Puts More Robots on Factory Floors

Investors cheered the latest evidence of an economy that won’t quit, driving up the Dow Jones Industrial Average by more than 100 points, or 0.4%, at midday.

President Donald Trump has pledged to return the economy to a growth rate of 3% or more, pinning his agenda on a $1.5 trillion tax cut he signed into law last month, a rollback of environmental, labor, financial and other regulations, and tougher trade positions. By Mr. Trump’s standard, growth didn’t measure up in the fourth quarter, but the pickup that has played out over the past nine months still has given the president something to boast about.

“There has never been a better time to hire, to build, to invest and to grow in the United States,” he said to business and political leaders in Davos, Switzerland Friday. “America is open for business and we are competitive once again.”

While many economists anticipate a further pickup this year, many also say 3% will be difficult to achieve over the long haul given an aging population and meager productivity growth.

Several developments are helping the economy perk up. Among them: Synchronized global economic growth and renewed investment spending by U.S. firms, who had spent years hunkering down. Those factors have converged with low unemployment, tame inflation, low interest rates and a booming stock market to bolster business and household optimism and spending.

Shelving manufacturer B-O-F Corp. of Aurora, Ill., spent about $750,000 to combine two factories into a larger, single plant that opened this year. The company, which builds slanted shelves in cases at grocery and convenience stores, is aiming to boost production capacity by a third with the new plant.

Jamie Knorring, B-O-F’s president, credits the rebound in the housing market with his company’s good fortune, including a fourth quarter that was the company’s best ever.

“When they’re building more houses, they need to build more stores,” he said, adding the company plans additional factory upgrades and equipment purchases this year.

The global upswing is driving sales for Rockwell Automation Inc., the Milwaukee-based maker of factory software and hardware, as companies in a range of sectors look to boost productivity. Rockwell said this week its fiscal first-quarter revenue jumped 7% to $1.6 billion, driven by sales to heavy industry and energy companies.

Through Friday, 26% of S&P 500 companies have reported quarterly results, and out of those 76.69% beat earnings-per-share expectations. The current growth rate for earnings compared with last year is 12.3%.

Firms that earlier in the expansion focused on boosting payrolls while labor was cheap now appear to be renewing investment in facilities and equipment.

Employees perform quality control inspections on 2018 Honda Accord vehicles.Photo: Ty Wright/Bloomberg News

Stronger domestic demand prodded Heartland Produce Co., which sells fresh fruits and vegetables to grocers in the Midwest, to recently add 4,000 square feet to its warehouse in Kenosha, Wis.

“With the economy being stronger and unemployment being low, people have more buying power and they’re spending it at the store,” Heartland President Bill Dietz said in an interview. He said his company might look at opening another facility this year.

Investment in business equipment expanded at an 11.4% annual rate in the fourth quarter after a 10.8% growth rate in the third, the best six-month stretch since a burst of activity in mid-2014, Friday’s economic-output report showed.

While they were investing more, businesses pared back their inventories in the fourth quarter, which helped to reduce output. Inventory rebuilding could boost output in the months to come.

Consumers are driving growth, too. Consumer spending rose at a 3.8% rate in the period, an increase last exceeded in late 2014. Spending on long-lasting items known as durable goods rose at a 14.2% rate, the fastest pace since 2009.

David Alter, 34 years old, spent much of the past decade building his savings and investing in stocks. In December, he bought a car and a second home, in Orlando, Fla., where he just started a new job as a technology manager for a major theme-park company. He said the new job coupled with a big rise in technology stocks he owns gave him the confidence he needed to take on a second mortgage, a fixer-upper for which he just bought a new heating and ventilation system.

“I feel very good on how things are performing,” he said of the economy. “But it does make me worry like when that’s going to stop. It can’t ride up forever.”

There are other reasons for caution. A chunk of the fourth quarter’s growth likely reflected a temporary boost in spending related to a pair of hurricanes that ripped through Texas and Florida last summer. Spending that was halted by the storms—such as restaurant visits by consumers and construction—was simply pushed back into the year’s final stretch. Likewise the storms spurred a temporary boost in spending on repairs and replacement items, like cars.

The global upswing is a two-edged sword for the U.S. Exports are rising, but so are imports. So while consumer spending is on an upswing, many of the goods Americans are buying are being produced abroad. That runs against Mr. Trump’s “America First” agenda. A widening trade deficit subtracted more than a percentage point from growth in the fourth quarter, the Commerce Department said. That came even though the dollar has weakened, a development that should be improving the U.S. trade position by making imports more expensive and exports cheaper.

—Andrew Tangel contributed to this article

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