Global Economy & Trade 2019

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IMF cuts world economic forecast for 2019, citing trade tensions
(Market Watch/AP) The International Monetary Fund has cut its forecast for world economic growth this year, citing heightened trade tensions and rising U.S. interest rates.
The IMF said Monday that it expects global growth this year of 3.5%, down from 3.7% in 2018 and from the 3.7% it had forecast for 2019 back in October.
Unveiling its forecasts at the World Economic Forum in Davos, Switzerland, the fund left its prediction for U.S. growth this year unchanged at 2.5%. But it trimmed the growth outlook for the 19 countries that use the euro currency to 1.6% from 1.8%.
“Higher trade uncertainty will further dampen investment and disrupt global supply chains,” said IMF chief economist Gita Gopinath.
Rising interest rates in the U.S. and elsewhere are also pinching emerging-market governments and companies that borrowed heavily when rates were ultra-low in the aftermath of the 2007-2009 Great Recession.

17 January
A brief history of globalization
by Peter Vanham, Media Lead, US and Industries, World Economic Forum
(WEF) Silk roads (1st century BC-5th century AD, and 13th-14th centuries AD)
People have been trading goods for almost as long as they’ve been around. But as of the 1st century BC, a remarkable phenomenon occurred. For the first time in history, luxury products from China started to appear on the other edge of the Eurasian continent – in Rome. They got there after being hauled for thousands of miles along the Silk Road. Trade had stopped being a local or regional affair and started to become global.
That is not to say globalization had started in earnest. Silk was mostly a luxury good, and so were the spices that were added to the intercontinental trade between Asia and Europe. As a percentage of the total economy, the value of these exports was tiny, and many middlemen were involved to get the goods to their destination. But global trade links were established, and for those involved, it was a goldmine.

2 January
The Trump administration is weakening the global trading system
(The Economist) The coming year is shaping up to be one of preferential trade deals, where two or a group of countries agree on their own trading rules. As well as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which came into effect on Sunday, and an EU-Japan deal, America is aiming to strike several such accords. But do these act as stepping stones towards broader trade liberalisation? Or do they distort trade and divide the world into competing trade regions? And what will be the impact on the multilateral system overseen by the World Trade Organisation (WTO)?
Nearly 300 preferential trade deals are now recorded by the WTO. Many go beyond tariff-cutting to include rules on state-owned enterprises, intellectual property and trade in services. Having grown into an integrated trading area, the EU became an enthusiastic proponent, striking many reciprocal deals, including with Canada, Mexico and Singapore. In June it started talks with Australia.
As they proliferated, economists learnt more about their impact. One fear had been that they might divert custom from more efficient producers in third countries. But a study by Aaditya Mattoo, Alen Mulabdic and Michele Ruta of the World Bank, published in 2017, found that shallow deals do little to reduce trade with third countries, and deep ones tend to increase it. This, they think, is because rules on competition policy, subsidies and standards are hard to apply in a discriminatory way.
Though previous American administrations were sometimes frustrated with the WTO, they viewed it as the foundation of the trading system. Preferential deals were an instrument of diplomacy. TPP was intended to create a template for a trading system that might eventually include China, and perhaps give reform-minded Chinese policymakers something to aim for.
Mr Trump’s trade agenda could hardly be more different. His “America First” rhetoric, threats of tariffs on allies and of withdrawal from the WTO, and policies of blocking appointments to the WTO’s court and using tariffs as a national-security tool, are inimical to an even-handed system that all can support. Even if these policies turn out to be temporary, the uncertainty they cause may be permanent.

31 December
Canada and 5 other nations pull trigger on world’s biggest trade deal — leaving America out in the cold
Opinion: The world’s most radical trade pact has come into force across the Pacific as the U.S. sulks on the sidelines
The world’s most radical trade pact has come into force across the Pacific as the U.S. sulks on the sidelines, marking a stunning erosion in American strategic leadership.
Eleven countries are pressing ahead with the Comprehensive Agreement for Trans-Pacific Partnership (CPTPP), defying barely-disguised efforts by the Trump administration to kill the treaty.
A vanguard of Japan, Singapore, Mexico, Australia, Canada and New Zealand activated the treaty over the weekend, ripping down barriers to trade in almost all goods. It eliminates 18,000 tariffs and slashes others in stages over coming years.
The pact opens up trade in services on the basis of equal treatment. It cuts the costs of customs clearance, rules of origin and compliance to a minor friction. Once Vietnam, Malaysia, Peru, Chile and Brunei have ratified the treaty it will cover 13.5 per cent of global GDP, bigger than the EU’s post-Brexit market and a faster-growing region of the global economy.
South Korea, Thailand, Taiwan, Indonesia and Colombia have all expressed interest in joining. So has the U.K., despite being in the Atlantic. It promises to become the world’s biggest free trade zone in short order, and perhaps the nucleus of a new global order.
The White House assumed that the TPP would wither on the vine without U.S. impetus. Instead, long-standing U.S. allies across the Pacific have brushed off pressure from Washington and forged ahead regardless with what is now known as the “anti-Trump pact.”
America is the biggest loser,” says the Peterson Institute in Washington. The fall in food tariffs under the CPTPP means that U.S. farmers will be undercut by exporters from Australia, Canada, and New Zealand in the lucrative Japanese market.
The latest twist is that Chinese officials have begun to explore the possibility of joining the pact that was supposed to exclude them, prompting a wary riposte from its founders.

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