Monday, May 14, 2007

Here is my fifth and last post.

Globalisation and Outsourcing in the US:

globalisation has caused many companies in the US to outsource, because companies can now employ other people to do less important jobs, and they also do not have to pay much, and yet can remove a burden and thus can concentrate on other economical affairs.

Ousourcing has become increasingly popular among US companies since globalisation. US has outsourced many jobs to foreigners, causing the number of jobs available to the locals to become lesser and lesser. Therefore, this has caused many people to suffer from unemployment. for example, "The loss of jobs in San Jose in 2001 and 2002 was huge, second only to New York City -- a much larger area that was uniquely wounded by terrorism. In 2001 and 2002, San Jose lost 120,700 jobs. Unemployment peaked at 8.8 percent in November 2002, falling to 7.1 percent last November. ". Another example is "Grand Rapids lost 17,500 jobs in those two years, which was nonetheless the 29th worst job loss among 319 metropolitan areas. Unemployment in Grand Rapids peaked at 8½ percent in July, falling to 6.8 percent in November."

Another problem caused by outsourcing is the loss in quality of products and services. Since companies outsource, they are unable to frequently monitor and check the quality of goods or services produced by the companies they outsource to, therefore sometimes resulting in worse and worse goods being produced, causing the reputation of the company to be tarnished.

Thus, when deciding whether to outsource or not to, companies have to consider the pros and cons. and also, if they decide on outsourcing, they have to constantly monitor the quality of their output, so as to prevent the problem of low quality goods from happening.

references:
1.http://www.cato.org/dailys/02-16-04.html
2.http://en.wikipedia.org/wiki/Outsourcing#Benefits_of_outsourcing

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Sunday, May 13, 2007

Here is my fourth post.

Reflections:

Say yes to free trade. Free trade has so many advantages to the country's economy as well as the global economy.

Free trade means the elimination of tariffs and other protective barriers. This means that countries exporting would not have to pay extra taxes, and so meaning that they have more profit.

The first advantage of free trade on countries is that they allow countries to specialize on their goods and services which they are more efficient in producing as compared to other countries in the world. These goods and services can be exported to other countries without tariffs, and products which other countries are specialised in can be imported into the country also without tariffs. This allows both countries to have higher profit, and yet get goods and service of good quality at lower prices.

So, to specialise (to be efficient in producing a certain good or service, or having good quality goods and services in a certain area), countries have to be innovative, whereby they have to create and invent goods which are much better than similar goods from other countries. Such innovation develops technology, and also promotes economic growth, which creates more highly paid jobs, and thus creating higher standard of living.

Free trade also causes countries to be at peace with each other. This is because countries see the economic benefit of being at peace with other countries. If they are not at peace, and countries severe ties, causing no them to be unable to get the benefits from free trade with those countries.

Global free trade also has alot of benefits on the global economy and the global population.

The first benefit is that it can lift at least 500 million people out of poverty over 15 years. Since most of the poor are farmers, the elimination of agricultural tariffs can allow them to have higher profits and thus break free from the cycle of poverty.

Global free trade also can improve the global economy, since there are no tariffs and taxes on imports and exports. Thus countries can have higher profits, and also, countries will invest more in each other, and also increase in terms of GDP.

References:
1. http://www.iie.com/publications/newsreleases/newsrelease.cfm?id=101
2. http://www.heritage.org/Research/TradeandForeignAid/bg1761.cfm

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Hi everyone, heres my third post.

There have been debates about whether globalisation is truly helping the poor, because many think that globalisation is making the rich richer and the poor poorer. Thus, this post will be an analysis of the article : "Does Globalization Help or Hurt the World’s Poor?"

The article: http://www.globalpolicy.org/globaliz/econ/2006/0326helphurt.htm

Does Globalization Help or Hurt the World’s Poor?
By Pranab BardhanScientific American March 26, 2006
Globalization and the attendant concerns about poverty and inequality have become a focus of discussion in a way that few other topics, except for international terrorism or global warming, have. Most people I know have a strong opinion on globalization, and all of them express an interest in the well-being of the world's poor. The financial press and influential international officials confidently assert that global free markets expand the horizons for the poor, whereas activist-protesters hold the opposite belief with equal intensity. Yet the strength of people's conviction is often in inverse proportion to the amount of robust factual evidence they have.
As is common in contentious public debates, different people mean different things by the same word. Some interpret "globalization" to mean the global reach of communications technology and capital movements, some think of the outsourcing by domestic companies in rich countries, and others see globalization as a byword for corporate capitalism or American cultural and economic hegemony. So it is best to be clear at the outset of this article that I shall primarily refer to economic globalization--the expansion of foreign trade and investment. How does this process affect the wages, incomes and access to resources for the poorest people in the world? This question is one of the most important in social science today.
For a quarter century after World War II, most developing countries in Africa, Asia and Latin America insulated their economies from the rest of the world. Since then, though, most have opened their markets. For instance, between 1980 and 2000, trade in goods and services expanded from 23 to 46 percent of gross domestic product (GDP) in China and from 19 to 30 percent in India. Such changes have caused many hardships for the poor in developing countries but have also created opportunities that some nations utilize and others do not, largely depending on their domestic political and economic institutions. (The same is true for low-wage workers in the U.S., although the effects of globalization on rich countries are beyond the scope of this article.) The net outcome is often quite complex and almost always context-dependent, belying the glib pronouncements for or against globalization made in the opposing camps. Understanding the complexities is essential to taking effective action.
Neither Plague nor Panacea
The case for free trade rests on the age-old principle of comparative advantage, the idea that countries are better off when they export the things they are best at producing, and import the rest. Most mainstream economists accept the principle, but even they have serious differences of opinion on the balance of potential benefits and actual costs from trade and on the importance of social protection for the poor. Free traders believe that the rising tide of international specialization and investment lifts all boats. Others point out that many poor people lack the capacity to adjust, retool and relocate with changing market conditions. These scholars argue that the benefits of specialization materialize in the long run, over which people and resources are assumed to be fully mobile, whereas the adjustments can cause pain in the short run.
The debate among economists is a paragon of civility compared withthe one taking place in the streets. Antiglobalizers' central claim is that globalization is making the rich richer and the poor poorer; proglobalizers assert that it actually helps the poor. But if one looks at the factual evidence, the matter is rather more complicated. On the basis of household survey data collected by different agencies, the World Bank estimates the fraction of the population in developing countries that falls below the $1-a-day poverty line (at 1993 prices)--an admittedly crude but internationally comparable level. By this measure, extreme poverty is declining in the aggregate.
The trend is particularly pronounced in East, South and Southeast Asia. Poverty has declined sharply in China, India and Indonesia--countries that have long been characterized by massive rural poverty and that together account for about half the total population of develop-ing countries. Between 1981 and 2001 the percentage of rural people living on less than $1 a day decreased from 79 to 27 percent in China, 63 to 42 percent in India, and 55 to 11 percent in Indonesia.
But although the poorest are not, on the whole, getting poorer, no one has yet convincingly demonstrated that improvements in their condition are mainly the result of globalization. In China the poverty trend could instead be attributed to internal factors such as the expansion of infrastructure, the massive 1978 land reforms (in which the Mao-era communes were disbanded), changes in grain procurement prices, and the relaxation of restrictions on rural-to-urban migration. In fact, a substantial part of the decline in poverty had already happened by the mid-1980s, before the big strides in foreign trade or investment. Of the more than 400 million Chinese lifted above the international poverty line between 1981 and 2001, three fourths got there by 1987.
Similarly, rural poverty reduction in India may be attributable to the spread of the Green Revolution in agriculture, government antipoverty programs and social movements--not the trade liberalization of the 1990s. In Indonesia the Green Revolution, macroeconomic policies, stabilization of rice prices and massive investment in rural infrastructure played a substantial role in the large reduction of rural poverty. Of course, globalization, by expanding employment in labor-intensive manufacturing, has helped to pull many Chinese and Indonesians out of poverty since the mid-1980s (though not yet as much in India, for various domestic institutional and policy reasons). But it is only one factor among many accounting for the economic advances of the past 25 years.
Those who are dubious of the benefits of globalization point out that poverty has remained stubbornly high in sub-Saharan Africa. Between 1981 and 2001 the fraction of Africans living below the international poverty line increased from 42 to 47 percent. But this deterioration appears to have less to do with globalization than with unstable or failed political regimes. If anything, such instability reduced their extent of globalization, as it scared off many foreign investors and traders. Volatile politics amplifies longer-term factors such as geographic isolation, disease, overdependence on a small number of export products, and the slow spread of the Green Revolution [see "Can Extreme Poverty Be Eliminated?" by Jeffrey D. Sachs; Scientific American, September 2005].
Sweatshops
Global market competition in general rewards people with initiative, skills, information and entrepreneurship in all countries. Poor people everywhere are handicapped by their lack of access to capital and opportunities to learn new skills. Workers in some developing countries--say, Mexico--are losing their jobs in labor-intensive manufacturing to their counterparts in Asia. At the same time, foreign investment has also brought new jobs. Overall, the effect appears to be a net improvement. In Mexico, low-wage poverty is declining in the regions that are more involved in the international economy than others--even controlling for the fact that skilled and enterprising people migrate to those regions, improving incomes there independently of what globalization accomplishes. A recent study by Gordon H. Hanson of the University of California, San Diego, which took into account only people born in a particular region (thus leaving out migrants), found that during the 1990s average incomes in the Mexican states most affected by globalization increased 10 percent more than those least affected.
In poor Asian economies, such as Bangladesh, Vietnam and Cambodia, large numbers of women now have work in garment export factories. Their wages are low by world standards but much higher than they would earn in alternative occupations. Advocates who worry about exploitative sweatshops have to appreciate the relative improvement in these women's conditions and status. An Oxfam report in 2002 quoted Rahana Chaudhuri, a 23-year-old mother working in the garment industry in Bangladesh:
This job is hard--and we are not treated fairly. The managers do not respect us women. But life is much harder for those working outside. Back in my village, I would have less money. Outside of the factories, people selling things in the street or carrying bricks on building sites earn less than we do. There are few other options. Of course, I want better conditions. But for me this job means that my children will have enough to eat and that their lives can improve.
In 2001 Naila Kabeer of the University of Sussex in England and Simeen Mahmud of the Bangladesh Institute of Development Studies did a survey of 1,322 women workers in Dhaka. They discovered that the average monthly income of workers in garment-export factories was 86 percent above that of other wage workers living in the same slum neighborhoods.
Another indication of this relative improvement can be gauged by what happens when such opportunities disappear. In 1993, anticipating a U.S. ban on imports of products made using child labor, the garment industry in Bangladesh dismissed an estimated 50,000 children. UNICEF and local aid groups investigated what happened to them. About 10,000 children went back to school, but the rest ended up in much inferior occupations, including stone breaking and child prostitution. That does not excuse the appalling working conditions in the sweatshops, let alone the cases of forced or unsafe labor, but advocates must recognize the severely limited existing opportunities for the poor and the possible unintended consequences of "fair trade" policies.
The Local Roots of Poverty
Integration into the international economy brings not only opportunities but also problems. Even when new jobs are better than the old ones, the transition can be wrenching. Most poor countries provide very little effective social protection to help people who have lost their jobs and not yet found new ones. Moreover, vast numbers of the poor work on their own small farms or for household enterprises. The major constraints they usually face are domestic, such as lack of access to credit, poor infrastructure, venal government officials and insecure land rights. Weak states, unaccountable regimes, lopsided wealth distribution, and inept or corrupt politicians and bureaucrats often combine to block out the opportunities for the poor. Opening markets without relieving these domestic constraints forces people to compete with one hand tied behind their back. The result can be deepened poverty.
Conversely, opening the economy to trade and long-term capital flows need not make the poor worse off if appropriate domestic policies and institutions are in place--particularly to help shift production to more marketable goods and help workers enter new jobs.
Contrasting case studies of countries make this quite apparent. Although the island economies of Mauritius and Jamaica had similar per capita incomes in the early 1980s, their economic performance since then has diverged dramatically, with the former having better participatory institutions and rule of law and the latter mired in crime and violence. South Korea and the Philippines had similar per capita incomes in the early 1960s, but the Philippines languished in terms of political and economic institutions (especially because power and wealth were concentrated in a few hands), so it remains a developing country, while South Korea has joined the ranks of the developed. Botswana and Angola are two diamond-exporting countries in southern Africa, the former democratic and fast-growing, the latter ravaged by civil war and plunder.
The experiences of these and other countries demonstrate that antipoverty programs need not be blocked by the forces of globalization. There is no "race to the bottom" in which countries must abandon social programs to keep up economically; in fact, social and economic goals can be mutually supportive. Land reform, expansion of credit and services for small producers, retraining and income support for displaced workers, public-works programs for the unemployed, and provision of basic education and health can enhance the productivity of workers and farmers and thereby contribute to a country's global competitiveness. Such programs may require a rethinking of budget priorities in those nations and a more accountable political and administrative framework, but the obstacles are largely domestic. Conversely, closing the economy to international trade does not reduce the power of the relevant vested interests: landlords, politicians and bureaucrats, and the rich who enjoy government subsidies. Thus, globalization is not the main cause of developing countries' problems, contrary to the claim of critics of globalization--just as globalization is often not the main solution to these problems, contrary to the claim of overenthusiastic free traders.
What about the environment? Many conservationists argue that international integration encourages the overexploitation of fragile natural resources, such as forests and fisheries, damaging the livelihoods of the poor. A common charge against transnational companies is that they flock to poor countries with lax environmental standards. Anecdotes abound, but researchers have done very few statistical studies. One of the few, published in 2003 by Gunnar Eskeland of the World Bank and Ann Harrison of the University of California, Berkeley, considered Mexico, Morocco, Venezuela and Ivory Coast. It found very little evidence that companies chose to invest in these countries to shirk pollution-abatement costs in rich countries; the single most important factor in determining the amount of investment was the size of the local market. Within a given industry, foreign plants tended to pollute less than their local peers.
Like persistent poverty, lax environmental standards are ultimately a domestic policy or institutional failure. A lack of well-defined or well-enforced property rights or regulation of common property resources often leads to their overuse. Responding to pressure from powerful political lobbies, governments have deliberately kept down the prices of precious environmental resources: irrigation water in India, energy in Russia, timber concessions in Indonesia and the Philippines. The result, unsurprisingly, is resource depletion. To be sure, if a country opens its markets without dealing with these distortions, it can worsen the environmental problems.
When Talk Gives Way to Action
Fortunately, the two sides of the globalization debate are--slowly--developing some measure of agreement. In many areas, advocates in both camps see the potential for coordination among transnational companies, multilateral organizations, developing country governments and local aid groups on programs to help the poor. Going beyond the contentious debates and building on the areas of emerging consensus and cooperation, international partnerships may be able to make a dent in the poverty that continues to oppress the lives of billions of people in the world. Here are some measures under discussion.
Capital controls. The flow of international investment consists both of long-term capital (such as equipment) and of speculative short-term capital (such as shares, bonds and currency). The latter, shifted at the click of a mouse, can stampede around the globe in herdlike movements, causing massive damage to fragile economies. The Asian financial crisis of 1997 was an example. Following speculators' run on the Thai currency, the baht, the poverty rate in rural Thailand jumped 50 percent in just one year. In Indonesia, a mass withdrawal of short-term capital caused real wages in manufacturing to drop 44 percent. Many economists (including those who otherwise support free trade) now see a need for some form of control over short-term capital flows, particularly if domestic financial institutions and banking standards are weak. It is widely believed that China, India and Malaysia escaped the brunt of the Asian financial crisis because of their stringent controls on capital flight. Economists still disagree, though, on what form such control should take and what effect it has on the cost of capital.
Reduced protectionism. The major hurdle many poor countries face is not too much globalization but too little. It is hard for the poor of the world to climb out of poverty when rich countries (as well as the poor ones themselves) restrict imports and subsidize their own farmers and manufacturers. The annual loss to developing countries as a group from agricultural tariffs and subsidies in rich countries is estimated to be $45 billion; their annual loss from trade barriers on textile and clothing is estimated to be $24 billion. The toll exceeds rich countries' foreign aid to poor countries. Of course, the loss is not equally distributed among poor countries. Some would benefit more than others if these import restrictions and subsidies were lifted.
Trust-busting. Small exporters in poor nations often lack the marketing networks and brand names to make inroads into rich-country markets. Although transnational retail companies can help them, the margins and fees they charge are often very high. Restrictive business practices by these international middlemen are difficult to prove, but a great deal of circumstantial evidence exists. The international coffee market, for example, is dominated by four companies. In the early 1990s the coffee earnings of exporting countries were about $12 billion, and retail sales were $30 billion. By 2002 retail sales had more than doubled, yet coffee-producing countries received about half their earnings of a decade earlier. The problem is not global markets but impeded access to those markets or depressed prices received by producers, as a result of the near-monopoly power enjoyed by a few retail firms. In certain industries, companies may actively collude to fix prices. Some economists have proposed an international antitrust investigation agency. Even if such an agency did not have much enforcement power, it could mobilize public opinion and strengthen the hands of antitrust agencies in developing countries. In addition, internationally approved quality-certification programs can help poor-country products gain acceptance in global markets.
Social programs. Many economists argue that for trade to make a country better off, the government of that country may have to redistribute wealth and income to some extent, so that the winners from the policy of opening the economy share their gains with the losers. Of course, the phrase "to some extent" still leaves room for plenty of disagreement. Nevertheless, certain programs stir fairly little controversy, such as assistance programs to help workers cope with job losses and get retrained and redeployed. Scholarships allowing poor parents to send their children to school have proved to be more effective at reducing child labor than banning imports of products.
Research. The Green Revolution played a major role in reducing poverty in Asia. New international private-public partnerships could help develop other products suitable for the poor (such as medicines, vaccines and crops). Under the current international patent regime, global pharmaceutical companies do not have much incentive to do costly research on diseases such as malaria and tuberculosis that kill millions of people in poor countries every year. But research collaborations are emerging among donor agencies, the World Health Organization, groups such as Doctors Without Borders and private foundations such as the Bill & Melinda Gates Foundation.
Immigration reform in rich countries. A program to permit larger numbers of unskilled workers into rich countries as "guest workers" would do more to reduce world poverty than other forms of international integration, such as trade liberalization, can. The current climate, however, is not very hospitable to this idea.
Simplistic antiglobalization slogans or sermons on the unqualified benefits of free trade do not serve the cause of alleviating world poverty. An appreciation of the complexity of the issues and an active interweaving of domestic and international policies would be decidedly more fruitful.

My reflections:

In summary, this article talks about the economic conditions in less developed countries like china, india, and africa. "For a quarter century after World War II, most developing countries in Africa, Asia and Latin America insulated their economies from the rest of the world. Since then, though, most have opened their markets. For instance, between 1980 and 2000, trade in goods and services expanded from 23 to 46 percent of gross domestic product (GDP) in China and from 19 to 30 percent in India. Such changes have caused many hardships for the poor in developing countries but have also created opportunities that some nations utilize and others do not, largely depending on their domestic political and economic institutions." The article also gives statistics about the conditions in extreme poverty in countries and how they have improved. "Between 1981 and 2001 the percentage of rural people living on less than $1 a day decreased from 79 to 27 percent in China, 63 to 42 percent in India, and 55 to 11 percent in Indonesia. " However, many economists think that it is not globalisation that has improved these conditions, but attributed them to other events such as "expansion of infrastructure, the massive 1978 land reforms (in which the Mao-era communes were disbanded), changes in grain procurement prices, and the relaxation of restrictions on rural-to-urban migration" for china, and "spread of the Green Revolution in agriculture, government antipoverty programs and social movements" in India. Measures are also under discussion, measures such as capital controls, reduced protectionism, trust busting, social programs, as well as immigration reforms.

I feel that there is net improvement of the conditions of the extreme poor due to globalisation, because of the reduction of people living on less than $1 a day. I also think that in the long run, globalisation will balance income distribution in both developed and less developed countries.

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Thursday, April 26, 2007

Globalisation and the Economy

Hi everyone! im back again for my 2nd post!

As we all know, music plays an important part in the lives of people of all ages all over the world. In 1997, a South Korean invented the first audio player. This audio player was further perfected into what is now known as our portable mp3 player. In the modern world, people all over the world own an mp3 player. This is due to GLOBALISATION. And so, the invention of the mp3 player has greatly impacted the economy, by boosting the economy of many countries, like China, which exports many mp3 players.

The ipod, being one of the most popular mp3 players ever created, has contributed greatly to the annual income of Apple. "The announcement revealed sales figures of 4.4 million for the iPod in its fiscal year, an increase of 370 per cent. Total income from iPod sales rose $961 million, 279 per cent, on last year."(1).

However, recently, i realised the emergence of various mp3 players of unknown brands in the market, most of which are China companies. The significance of such a situation is that those mp3 players manufactured by China companies are sold at very low prices, because of low cost price in China (This is related to my previous post). An ipod nano 4GB costs about S$348 , while mp3 players from China companies of the same storage capacity could just cost S$100. Only those brand conscious people would go for the ipod nano, but some would ask themselves: why pay so much for something of the same storage capacity? Thus, the sales of such mp3 players have increased, causing more and more companies to enter the mp3 player market. Due to competition, prices of mp3 players are forced lower and lower. For example, the 1st generation ipod nano 4GB cost the same as the 2nd generation ipod nano 8GB. " 'Compressed-audio players are coming into the mainstream as portable flash-player prices fall and capacities rise; the iPod mini and other small form-factor portable jukeboxes are introduced; and more and more devices, such as DVD players, support compressed audio as a secondary feature,' Kevorkian pointed out." (2)

There have been many articles regarding the mp3 player market exploding. According to an article, "The worldwide market for MP3 players will hit $58 billion by 2008, according to a study released on Tuesday by IDC." "The volume of flash players shipped will jump to 50 million units in 2008, up from 12.5 million in 2003. Other segments will grow modestly." (3) According to studies, the number of players shipped will increase to 50 million units in 2008, which is alot. So is the sum of $58 billion, which will definitely impact the economy of many countries.

As more and more mp3 players enter the market, companies face competition, especially from China companies as mentioned above. They are forced to lower their prices until they cannot afford to lower it anymore. This has caused many companies to withdraw from the market, either because they income is greatly decreasing, or that they forsee that they will not benefit much from the mp3 market due to competition. Companies like Dell, Benq, and Olympus have realised the sudden increase in cheap mp3 players in the market and decided to withdraw from the market. (4)

Technology has improved so much that it has created cheaper and cheaper products. Thus, I forsee that the prices of mp3 players will continue decreasing. In this article, it is seen how globalisation has led to the worldwide usage of mp3 players, causing explosion in the mp3 player market, greatly impacting the global economy. The explosion of the mp3 player market has benefitted the global economy, as well as the economy of many countries, because it has brought high income, and has increased the Gross Domestic Product of many countries. It has also brought the price of the mp3 player down, allowing consumers to get it at a low price.


(1):http://news.ipodworld.co.uk/index.php/weblog/61/
(2):http://www.newsfactor.com/perl/story/27117.html
(3):http://news.com.com/Study+MP3+player+market+to+explode/2100-1041_3-5376070.html
(4):http://www.macnn.com/articles/06/08/22/dell.concedes.defeat.again
http://www.engadget.com/2005/11/25/benq-exiting-mp3-player-market/
http://www.theregister.co.uk/2005/11/10/olympus_quits_mp3_biz/

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Wednesday, April 18, 2007

Globalisation and the Economy

Hi everyone!
Sorry for the late post, coz it was posted in the group blog but i just transferred it here.
Ok. lets start.
Globalisation has a very large impact on the economy. Exporting to other countries and importing from other countries is one of the main sources of income for countries. However, they can also be a source of problems. For example, China has been selling cheap goods in the market, causing other countries to have no market in selling their goods because of much higher cost price and more expensive labour. Recently, many countries have been unhappy about this, because it would have a negative impact on their economy. One example is the US, complaining about China having trade barriers, piracy of goods, as well as subsidising of manufactured goods.
These are the following articles:
Article 1:
http://www.nytimes.com/2007/04/10/business/worldbusiness/10trade.html
U.S. Toughens Its Position on China Trade By STEVEN R. WEISMANPublished: April 10, 2007WASHINGTON, April 9 — Has the Bush administration’s economic team run out of patience with China? Doug Mills/The New York Times
For years, President Bush has avoided confronting Beijing with sanctions or legal challenges to its trade practices, preferring to use diplomacy to press China to bring down its trade deficit with the United States, now at $232 billion. But these days, the conciliatory approach looks as if it is being reconsidered, if not discarded.
The latest in a string of tough actions against China came on Monday, when the top American trade envoy, Susan C. Schwab, announced that the United States would take China to court at the World Trade Organization over suspected trade barriers and piracy of books, music, videos and other goods.
That action came after two other unfair trade complaints earlier this year, one last month threatening stiff new duties on certain imports, and the other in February, challenging China over its subsidies of manufactured goods.
Ms. Schwab said that even though negotiations had failed to solve trade problems, the latest steps “should not be viewed as hostile actions against China” and that resolving issues at the World Trade Organization in Geneva was “the normal way for mature trading partners” to handle differences.
The new policy risks angering or embarrassing those in Beijing who may be trying to reform economic policies as Washington wants. In addition, many trade experts worry that China might retaliate against American imports or cut back on cooperation sought by Washington on other issues, like diplomatic problems involving Iran, North Korea and Sudan.
Still, the new policy was widely seen by trade specialists and industry spokesmen as necessary to send a signal not only to Beijing but also to Democrats in Congress, who plan even tougher sanctions against China if the administration does not act.
The announcement by Ms. Schwab on piracy and trade barriers brought cautious praise from an array of Democratic trade hawks, from Senators Charles E. Schumer of New York to Sherrod Brown of Ohio, who won last year in part by taking a tough line on trade. Many Republicans echoed their endorsement. All said the action was overdue and in need of follow-up.
But even those who praised the administration’s actions warned that more such efforts were needed.
“I’ve been sending letters to this administration for years urging these kinds of actions, and they’ve been ignored,” said Representative Sander Levin, Democrat of Michigan and chairman of the trade subcommittee for the House Ways and Means panel. “Obviously the pressure has been building in this new Congress.”
Within the Bush administration the new actions were defended less as a shift than a complement to the policy proclaimed by Treasury Secretary Henry M. Paulson Jr. since he took office last summer — that it is better to solve economic disputes by negotiation. But he has also warned China that it would be dangerous to ignore the restive mood in Congress.
Unlike Commerce Secretary Carlos M. Gutierrez, who praised Ms. Schwab’s announcement on Monday, Mr. Paulson issued no public statement in support of it. Aides say that as a former Goldman Sachs executive with long business experience in China, he has been reluctant to be identified with punishments or threats.
Mr. Paulson, who has visited China three times in the last six months, is the instigator of a “strategic economic dialogue” with top Beijing leaders aimed at getting them to change Chinese policies and practices over the long term. People who have talked to the secretary about trade with China say he has been taken aback by the anti-China mood in Congress.
The Treasury chief signed off on the recent steps against China, however, according to administration officials.
“What the action today means is that Paulson realizes his approach will not deliver concrete results in time to avoid the risk of serious Congressional reaction,” said C. Fred Bergsten, director of the Peterson Institute for International Economics, a policy institute in Washington.
“The problem is that the secretary’s Chinese friends have not given him much help,” Mr. Bergsten added, referring to the unwillingness or inability of Mr. Paulson’s counterparts to move on issues as quickly as Washington wants.
Mr. Paulson has tried not to get into the specifics of trade issues like subsidies, the piracy of intellectual property in software, videos and pharmaceuticals or the welter of Chinese trade barriers on American goods and financial services.
The one issue he has spoken out on the most is currency, echoing the criticism of many economists that China’s practice of buying huge amounts of dollars has kept the value of its currency, the yuan, artificially low in order to promote its own exports by making them cheaper.
But China has taken only moderate steps to allow its currency values to float on the open market. Many in the administration are known to be increasingly impatient over the lack of progress in this area.
The next test of the administration’s tough new approach will be in late May, when a delegation of Chinese officials, led by Vice Premier Wu Yi, will come to Washington for another session of the strategic dialogue started by Mr. Paulson.
It is to be a second round of the talks begun in December, when the Treasury secretary took a team of cabinet members, and Ben S. Bernanke, the Federal Reserve chairman, to push the dialogue as the best way to solve problems.
At the time, Democrats said they would pause in their plans to push for tough measures against China to give the dialogue a chance to work. Now they say it has clearly failed and the more recent escalation is welcome.
What China will do next is an open question in the administration. The answer may not be clear until Mr. Paulson’s economic meeting with the Chinese in May.
But many Chinese experts warn that the latest steps by the administration will not help persuade China to change its reliance on a low-valued currency and other restrictions on imports and investment. The power and influence of Communist Party leaders tied to the export sector is too great, they say.
“If the U.S. takes more actions against China, it will harm Paulson’s dialogue with China and future trade meetings,” said Chen Jianan, a professor of economics at Fudan University in Shanghai. But he said the most recent actions could compel both sides to negotiate.
In the meantime, China is considered likely to try to ease tensions, not by opening up its own markets, but by opening up its wallet and purchasing more American exports, whether planes or machinery or computer chips.
There are media reports in China that the leadership will announce new purchases in advance of the May meeting, just as they did before President Hu Jintao’s visit to the White House last year.
Mr. Gutierrez, the Commerce secretary, has said repeatedly that the way to reduce the trade deficit with China, which now is about a third of the total trade deficit with other countries, is to export more. But Congress is considered unlikely to be impressed by a Chinese shopping spree.
All sides agree that the latest American actions portend a period of rough weather in United States-Chinese relations.
David Barboza contributed reporting from Shanghai.
Article 2:
http://www.nytimes.com/2007/04/11/business/worldbusiness/11yuan.html?ref=worldbusiness
China Conveys ‘Regret’ Over Trade Complaints By KEITH BRADSHERPublished: April 11, 2007
HONG KONG, Wednesday, April 11 — The Chinese government expressed “deep regret and strong dissatisfaction” on Tuesday with the Bush administration’s decision to file two complaints against China with the World Trade Organization.
The American decision to complain to the W.T.O. “will seriously undermine the cooperative relations the two nations have established in the field and will adversely affect bilateral trade,” Wang Xinpei, a Commerce Ministry spokesman, said in a statement on the ministry’s Web site.
Mr. Wang’s emphasis on bilateral trade could suggest that the dispute with the United States would remain limited to trade issues, and would not necessarily spill over into areas like pressure on North Korea to abandon its nuclear weapons program.
But David Zweig, a China specialist at the Hong Kong University of Science and Technology, said that Chinese officials appeared to be worried that President Bush was losing his ability to block protectionist moves in Congress, and they were prepared to retaliate, at least on trade issues, if the United States continued to step up pressure on China.
The Chinese reaction to the trade complaints was slightly stronger than China’s statement on March 31 regarding American duties on imported paper. That statement expressed “strong dissatisfaction,” but did not mention “deep regret.”
The Bush administration announced on March 30 that it would impose duties on imports of coated paper from China to counteract what it said were government subsidies to the Chinese paper industry.
An editorial in the official China Daily newspaper on Wednesday took the toughest Chinese position yet, warning that, “In fact, actions against China could trigger an outbreak of massive protectionism that could seriously undermine global economic growth.”
The editorial described the United States as engaging “in a series of protectionist actions,” and added that, “While such protectionist moves may appeal to some U.S. industries or interest groups for a while, they do nothing to promote the restructuring the U.S. economy needs to reduce its budget and trade deficits.”
China’s customs agency released statistics Tuesday showing that Chinese exports to the rest of the world grew last month at the slowest pace in five years, rising just 6.9 percent from a year earlier. Correspondingly, the country’s trade surplus narrowed to $6.9 billion in March, from $23.8 billion in February.
But the surplus for the entire first quarter doubled from a year earlier, to $46.4 billion. And economists predicted that the surplus would continue to rise and dismissed the importance of the slowdown in March.
“So, in our view, this number will do nothing, zilch, nada, to address political concerns in the U.S. about China’s overall trade surplus,” Stephen Green, an economist in the Shanghai offices of Standard Chartered Bank, wrote in a research note.
The deceleration followed a slowdown of exports from the major Southeast Asian economies: Indonesia, Malaysia, the Philippines, Singapore and Thailand. That has prompted some in Asia to worry whether industrialized countries were losing some of their appetite for Asian goods.
But economists said that last month’s slowing of exports from China was probably temporary, a result of short-term events.
Many exporters made extra shipments in February before a threatened phase-out of certain tax rebates in China. Exporters had expected the phase-out to be broadened at the start of March to cover more products, but this has not yet happened.
The Chinese New Year also fell unusually late in February, so many factories that closed then may have had fewer goods ready for shipment in March, said Liang Hong, an economist in the Hong Kong offices of Goldman Sachs. The Chinese New Year started nearly three weeks earlier last year, so exports were stronger in March 2006.
The slowing of exports was not a result of any sudden move in the value of China’s currency. The currency, the yuan, was virtually unchanged against the dollar in March, after rising steadily through January and February.
The statistics released on Tuesday were a “flash” estimate of overall exports, imports and the trade balance that the government provides on a schedule set months in advance. It did not include figures for trade with individual countries.
Ma Jun, an economist in the Hong Kong office of Deutsche Bank, said that the bank’s monthly survey of Chinese purchasing managers had found that their incoming orders for future exports had increased faster in March than in any month since the survey began in early 2005.
Facing criticism from Congress that more should be done to address the widening United States trade deficit with China, the Bush administration announced Monday that it would file complaints with the W.T.O. The complaints, which were lodged at the organization’s headquarters in Geneva on Tuesday, accuse China of tolerating widespread violations of trademarks and copyrights and of unfairly limiting the importation of books, journals, movies, videos and music to state-owned companies.
Mr. Wang denied the American allegations, saying that “the Chinese government has always been firm in protecting intellectual property.” He added that until now, China and the United States had been “in good communication and consultation with each other over access to the Chinese publication market.”
The statement and the one on March 31 regarding coated-paper duties were both notable for citing Mr. Wang by name, instead of a more senior official. Chinese government ministries cite spokesmen and spokeswomen in most pronouncements, but sometimes cite more senior officials on issues considered to be of grave importance.
China is far more dependent on exports for economic growth than any other large country, and it has shown reluctance to be drawn into a broad dispute with the United States.
The Chinese government faces domestic pressures to not be seen as caving in to American pressure.
A steep rise in China’s currency would make Chinese exports less competitive in foreign markets and would make imports more competitive in China, so the Bush administration and many members of Congress have made this a top priority. Complaints to the world body and duties on narrow categories of American imports like coated paper tend to have a limited effect on monthly trade figures.
But senior Chinese officials are worried that a steep rise in the currency could result in job losses at factories and on farms as imports become more competitive, and that unemployed workers could become a threat to social stability.
Reflections:
The two articles are about the US complaining to the World Trade Organisation about China. China has been practicing capital control, supressing the value of the Yuan, causing the cost of raw materials to be low, labour to be cheap, and also causing locals to refrain from buying exported goods. China has also subsidised manufactured goods, allowing them to be exported to other countries. This causes other countries to be greatly disadvantaged because they have higher cost price and so cannot afford to lower the prices of their goods. Most people will go for cheaper goods, and so, the economy of these countries would be badly affected.
To counter this, the US has engaged "in a series of protectionist actions". Protectionism in an economic sense is the protection of local industries from foreigh competition through the imposing of tariffs and duties. These raise the price comsumers pay for imported goods. In this way, the price of goods from China will be greatly increased, though they might be still cheap. This can greatly decrease the number of imported goods bought by the consumers, and thus increasing the number of local goods bought by the people, benefiting the economy.
"The deceleration followed a slowdown of exports from the major Southeast Asian economies: Indonesia, Malaysia, the Philippines, Singapore and Thailand. That has prompted some in Asia to worry whether industrialized countries were losing some of their appetite for Asian goods." This paragraph tells us that the US imposing tariffs and duties can also affect the exports from asian countries, thus impacting their economies. This also shows that just one economy can impact so many other economies. In this case, the US imposing tariffs and duties has affected the economy of not only China, but other asian countries as well.
Globalisation in this case actually includes connection and interaction between countries in the form of import and export. These articles and their analysis shows how globalisation can impact the global economy.

Economic Expert Yeo Chang Long

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Hi everyone,

Sorry for the late setting up of my blog, because i had problems. Now its up, thanks to coco. Have fun reading about how globalisation has an effect on the economy!

Economic Expert Yeo Chang Long

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