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Marek Dabrowski says that the global economy’s glory days are in the past. – Project Syndicate

Marek Dabrowski says that the global economy’s glory days are in the past. – Project Syndicate.

WARSAW – The global economy’s glory days are surely over. Yet policymakers continue to focus on short-term demand management in the hope of resurrecting the heady growth rates enjoyed before the 2008-09 financial crisis. This is a mistake. When one analyzes the neo-classical growth factors – labor, capital, and total factor productivity – it is doubtful whether stimulating demand can be sustainable over the longer term, or even serve as an effective short-term policy.

Consider each of those growth factors. Over the next 15 years, demographic changes will reverse, or at least slow, labor-supply growth everywhere except Africa, the Middle East, and South Central Asia. Europe, Japan, the United States, and eventually China and East Asia will face labor shortages.

Although large-scale migration from labor-surplus regions to deficit regions would benefit recipient economies, it would almost certainly trigger popular resistance, especially in Europe and East Asia, making it difficult to support. Increasing the labor-force participation rate, especially among women and the elderly, might ease tight labor markets, but this alone would be insufficient to counter the decline in working-age populations.

The world economy cannot count on higher investment levels either. The global investment/GDP ratio, especially in advanced economies, has been gradually declining over the past 30 years, and there is no obvious reason why it would pick up again in the medium to long-term. Until recently, falling investment in the developed world had been offset by rapid increases in investment in emerging markets, mostly in Asia. But high rates of investment there are also unsustainable. As in Japan, China’s investment rate (running at almost 50% of GDP since 2009) will decline as its per capita income rises.

The third engine of growth, total factor productivity, will also be unable to maintain the relentless gains witnessed from the late 1990’s to the mid-2000’s. During this time, the global economy benefited from the confluence of several unique developments: an information and communications revolution; a “peace dividend” resulting from the end of the Cold War; and the implementation of market reforms in many former communist and other developing economies. Moreover, global growth received a further boost from the completion of the Uruguay Round of free-trade negotiations in 1994 and the overall liberalization of capital flows.

It is difficult to point to any growth impetus of similar magnitude – whether innovation or public policy – in today’s economy. No new technological revolution appears to be on the horizon. The World Trade Organization produced only a limited agreement in Bali in December, despite 12 years of negotiations, while numerous bilateral and regional free-trade agreements might even reduce world trade overall.

Worse, in the wake of the 2008 financial crisis, sluggish growth and high unemployment in developed countries have fueled demands for more protectionism. Thus, the financial liberalization of the 1990’s and early 2000’s is also under threat.

The far-reaching macroeconomic and political reforms of the post-Cold War era also seem to have run their course. The easy gains have already been banked; any further structural change will take longer to agree and be tougher to implement.

Thus, with supply-side factors no longer driving global growth, we must reassess our expectations of what monetary and fiscal policies can achieve. If actual growth is already close to potential growth, then continuing the current fiscal and monetary stimulus will only create more bubbles, exacerbate sovereign-debt problems, and, by reducing the pool of global savings available to finance private investment, undercut long-term growth prospects.

Instead, policymakers should focus on removing their economies’ structural and institutional bottlenecks. In advanced markets, these stem largely from a declining and aging population, labor-market rigidities, an unaffordable welfare state, high and distorting taxes, and government indebtedness.

The list of growth obstacles in emerging markets is even longer: corruption and weak rule of law, state capture, organized crime, poor infrastructure, an unskilled workforce, limited access to finance, and too much state ownership. In addition, markets of all sizes and levels of development continue to suffer from protectionism, restrictions on foreign capital flows, rising economic populism, and profligate or poorly targeted welfare programs.

If these problems can be addressed, both globally and at the national level, we can end the dangerous fiscal and monetary expansionism on which the world economy has come to rely and allow growth to be sustained over the long term – though at lower rates than in recent years.

Read more at http://www.project-syndicate.org/commentary/marek-dabrowski-says-that-the-global-economy-s-glory-days-are-in-the-past#7I5qemdSvu2IukCr.99

Are we trading away our rights and environment? | Science Matters | David Suzuki Foundation

Are we trading away our rights and environment? | Science Matters | David Suzuki Foundation.

Photo: Are we trading away our rights and environment?

(Credit: Gord McKenna via Flickr)

By David Suzuki with contributions from with contributions from David Suzuki Foundation Communications Manager Ian Hanington.

Global trade has advantages. For starters, it allows those of us who live through winter to eat fresh produce year-round. And it provides economic benefits to farmers who grow that food. That could change as oil, the world’s main transport fuel, becomes increasingly scarce, hard to obtain and costly, but we’ll be trading with other nations for the foreseeable future.

Because countries often have differing political and economic systems, agreements are needed to protect those invested in trade. Canada has signed numerous deals, from the North American Free Trade Agreement (NAFTA) to several Foreign Investment Promotion and Protection Agreements (FIPA), and is subject to the rules of global trade bodies, such as the World Trade Organization (WTO).

Treaties, agreements and organizations to help settle disputes may be necessary, but they often favour the interests of business over citizens. With Canada set to sign a 31-year trade deal with China, a repressive and undemocratic country with state-owned corporations, we need to be cautious.

Should we sign agreements if they subject our workers to unfair competition from lower-paid employees from investor nations, hinder our ability to protect the environment or give foreign companies and governments excessive control over local policies and valuable resources? Under some agreements, basics like protecting the air, water and land we all need for survival can become difficult and expensive.

One recent case could put Canada on the hook for $250 million. Quebec has put a hold on fracking pending a study into the environmental impacts of blasting massive amounts of water, sand and chemicals into the ground to fracture rock and release gas deposits. A U.S. resource company plans to sue Canada under Chapter 11 of NAFTA, claiming compensation for the moratorium’s damage to its drilling interests. Similar disputes have already cost Canada millions of dollars.

Ontario also wants assurances that fracking is safe before it allows the practice. That province is facing costs and hurdles because of another conflict between trade and environment. Japan and the European Union filed a complaint with theWTO, claiming a requirement under the Ontario Green Energy Act that wind and solar projects must use a set percentage of local materials is unfair.

Many of the problems arise because of an investor-state arbitration mechanism, which is included in NAFTA, as well as the proposed Canada-China FIPA, Canada-European Union Comprehensive Economic and Trade Agreement and Trans-Pacific Partnership. It allows foreign investors to bring claims before outside arbitrators if they believe their economic interests are being harmed by a nation’s actions or policies. So economics trump national interests.

This has caused many countries, including Australia, South Africa, India and several in Latin America, to avoid signing deals that include the investor-state arbitration mechanism. In Australia’s case, the country recognized the pitfalls when tobacco companies, including Philip Morris, attempted to claim damages under a bilateral investment treaty after the federal government introduced a science-based law requiring cigarettes to be sold in plain, unappealing packages.

According to Australian National University law professor Thomas Faunce, Philip Morris then lobbied the U.S. government to include a similar mechanism in a new trade agreement it was negotiating with Australia. In an article for Troy Media, Faunce wrote that, with such a mechanism, the International Centre for the Settlement of Investment Disputes “would, in effect, become the final arbitrators on major Australian public policy questions concerning mineral royalties, fossil fuel and renewable energy, water, telecommunications, banking, agriculture and power.”

The 31-year trade agreement between Canada and China is worrisome, with its 15-year opt-out clause (compared to just six months for NAFTA), but the inclusion of the mechanism in other agreements is also cause for concern. At the very least, we could be on the hook for millions or billions of dollars if our environmental, health, labour or other policies were deemed to harm the interests of those investing in or trading with Canada.

The government’s desire to expand global trade may be understandable, but we mustn’t give away too much. We must tell our elected representatives to at least delay the Canada-China FIPA until it has been examined more thoroughly, and to reconsider the inclusion of investor-state arbitration mechanisms in all trade deals.

Trans-Pacific Partnership: Canada Caving On Controversial Issues?

Trans-Pacific Partnership: Canada Caving On Controversial Issues?.

The federal government is staying quiet on reports it has caved to U.S. demands on intellectual property and copyright issues in a new Pacific trade deal currently under negotiation, saying only that talks are ongoing.

Citing a report from the Washington Trade Daily, the Council of Canadians saysCanada has backed off its resistance to “outrageous” new intellectual property rights the U.S. wants to see included in the Trans-Pacific Partnership.

WikiLeaks, which released a draft copy of the IP chapter of the deal last month, described it as having “far-reaching implications for individual rights and civil liberties.”

Critics of the deal say if the U.S. gets its way, the result could be the criminalization of small-scale copyright infringement and households being disconnected from the internet under laws that punish unauthorized downloading. Internet providers would be forced to do more monitoring of their subscribers, and it would be easier for governments to remove websites, critics say.

Additionally, proposed extensions to drug patents and copyright terms would mean more expensive drugs and other products, critics say.

Australia, New Zealand and Canada, among others, dropped their objections to the high-standard disciplines in intellectual property and came on board by agreeing to the modified text,” the Council of Canadians quoted the Trade Daily as saying.

“Effectively, there is consensus on the intellectual property dossier except for one developing country.”

The Department of Foreign Affairs and International Trade did not address the claims directly, but told HuffPost Canada that “the IP chapter is still under negotiation and Canada continues to advance its interests at the negotiating table.”

Canada “is committed to ensuring that its intellectual property regime balances the interests of both rightholders and users,” a DFAIT spokesperson said in an emailed statement.

Documents released by WikiLeaks last month showed Canada had been in the majority of negotiating countries in resisting the IP provisions the U.S. wants. It’s unclear whether Canada’s reported change of stance, along with the shift by other countries, now gives the U.S. the muscle to make the IP provisions part of the final agreement. Negotiations continue under a veil of secrecy, with the latest round wrapping up in Singapore last week.

Council of Canadians trade campaigner Stuart Trew called on the federal government to release the proposed text of the TPP to the public.

“This is a transparent effort to find more profits for U.S.-based pharmaceutical companies by undermining other countries’ efforts to keep health costs down,” he said.

“People have a right to see what other ridiculous trade-offs are happening in the TPP negotiations. The Harper government, and all TPP countries, owe it to everyone to make the full text public now.”

Along with Canada and the U.S., the countries negotiating the TPP are Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

A trade area among those countries would have a population of nearly 800 million and would represent more than 38 per cent of the world economy.

WTO deal aims to boost global commerce – Asia-Pacific – Al Jazeera English

WTO deal aims to boost global commerce – Asia-Pacific – Al Jazeera English.

Critics warn the new WTO deal could wipe out industries and cause job losses around the world [AFP]
Commerce ministers from around the world have approved a World Trade Organisation agreement to lower trade barriers that they hailed as a “historic” boost for the trade body.

The agreement reached on Saturday in Bali, Indonesia, falls far short of WTO’s vision of dismantling global trade barriers through the 12-year-old Doha Round of talks.

But the accord reached on the Indonesian resort island of Bali nevertheless marks the first global agreement struck by the Geneva-based body since its 1995 founding.

“For the first time in our history, the WTO has truly delivered,” Roberto Azevedo, WTO director-general, told a closing ceremony.

We’re back in business … Bali is just the beginning.

Roberto Azevedo, WTO chief

“We’re back in business … Bali is just the beginning.”

Al Jazeera’s Step Vaessen, reporting from Jakarta on Saturday, said reaching the agreement was “very difficult.”

She said India resisted part of the deal covering agriculture, and Cuba walked away from the meeting at the last minute.

“But everything came together at the last minute and it is now a historic deal. It was a very, very tough negotiation.”

The pact includes commitments to facilitate trade by simplifying customs procedures.

The Washington-based Peterson Institute for International Economics estimated in a report this year the customs measures could create $1tn in economic activity and 21 million jobs if properly implemented.

WTO officials have conceded, however, that uncertainty surrounded how effectively the measures would be implemented, especially in underdeveloped countries.

Analysts say the hard-fought nature of the talks indicates how difficult it could be for the body to make real progress on the Doha Round, launched in Qatar in 2001.

Days of haggling

The agreement was reached after more than four days of haggling in Bali that stretched past the conference’s Friday deadline and overnight.

Gita Wirjawan, Indonesia’s trade minister, called the accord “historic”.

Azevedo said it had important symbolic value for Doha.

“The decisions we have taken here are an important stepping-stone toward the completion of the Doha Round,” he said, adding the WTO would soon get to work on a “road map” for reviving Doha.

The Doha Round aims to remove hurdles to commerce and establish a globally binding framework of trade rules fair to both rich and poor countries.

But protectionist disputes among the WTO’s 159 members have foiled agreement.

WTO trade deal could leave India’s poorest without support from welfare programme in the name of food security.

Azevedo has expressed concern over the rise of alternative regional trading pacts that he fears could render the WTO obsolete if the Geneva-based body did not start clinching major worldwide agreements.

The Bali negotiations teetered repeatedly on the brink of collapse due to various differences.

India – which aims to stockpile and subsidise grain for its millions of poor – had demanded that such measures be granted indefinite exemption from WTO challenge.

The US, which implements large farm supports of its own, and others had said India’s grain policy could violate WTO limits on subsidies.

A later hurdle emerged as four Latin American countries objected to the removal in the accord’s text of a reference to the US embargo on Cuba.

Compromise wording smoothed over those hurdles.

Job losses feared

Critics say the sudden reduction of import taxes may wipe out industries, causing job losses in both rich and poor countries, our correspondent said.

The agreement will come as a major personal victory for the Brazilian Azevedo, who took the organisation’s helm in September and injected a sense of urgency into the talks.

“With this landmark accord on trade facilitation and other issues, the WTO has re-established its credibility as an indispensable forum for trade negotiations,” the US Chamber of Commerce said in a statement released in Washington.

The package also included pledges to limit agricultural subsidies, and policies to aid least-developed countries.

As the Doha Round has faltered, alternative regional pacts have emerged between major trading nations, such as the 12-country Trans-Pacific Partnership (TPP) spearheaded by the US.

TPP negotiators hold their latest meeting in Singapore starting on Saturday as they work to figure out the outlines of that trade alliance.

Azevedo has said such alliances could have “tragic” consequences on poor nations by denying them a place at the trade-rules table.

 

WTO on verge of global trade pact – FT.com

WTO on verge of global trade pact – FT.com.

Negotiators are poised to seal the first global trade deal for more than a decade, in a rare victory for the World Trade Organisation, whose struggle to secure an international pact has increasingly threatened its relevance.

The US and powerful developing-nation players, including China and India, have overcome differences in agriculture. This leaves negotiators in Geneva to put the final touches to a deal that will impose binding requirements to reduce red tape and ease the path for goods at borders around the world.

It could add about $1tn to annual global trade worth more than $18tn, some analysts have said.

Roberto Azevêdo, the recently appointed head of the WTO, is expected to present a finished draft of the agreement to the body’s highest organ, the general council, in a meeting as soon as Sunday or Monday.

Barring any unforeseen problems – and negotiators gave warning on Thursday that they could still emerge – the agreement would be signed by trade ministers from the WTO’s 159 member countries in Bali next month. “They have crossed over the threshold,” said a senior trade official in Geneva.

Sealed, the deal would be a victory for Mr Azevêdo, who warned that the WTO risked irrelevancy if it did not deliver something substantive in Bali when took over in September.

The deal’s three broad pillars – tackling bureaucratic barriers at borders, a series of agriculture issues, and several development-related subjects – were plucked from the wider Doha agenda two years ago as watered-down but “deliverable” elements of a deal.

But they have still been the subject of difficult negotiations and officials and observers of the process insist the deal at hand is important in both substance and what it says about the state of the WTO as a forum for trade negotiations.

“We can do negotiations on a multilateral basis and deliver. That’s the big lesson,” one senior ambassador to the WTO said.

Mr Azevêdo, a former Brazilian diplomat, and others want to use the deal to re-energise the now 12-year-old Doha Round of trade negotiations which for years has been stalled due to differences between the US and developing world countries over agriculture.

The biggest element of the Bali deal is the chapter on “trade facilitation”, WTO jargon for removing bureaucratic barriers at borders. It will set binding standards for WTO members on matters such as how long goods should take to clear borders, how customs officials can charge tariffs and penalties and what paperwork can be required at borders.

Some details of the facilitation deal need to be finalised, such as how poor countries should be required to meet the obligations. Mr Azevêdo is due to present a potential wording on that issue to negotiators on Friday and officials in Geneva expect negotiations through the weekend.

But the most prickly issues in Geneva have been related to agriculture and involved India, China, and Argentina.

After months of haggling, negotiators earlier this week settled on a four-year “peace clause” that will give India and other countries latitude to buy staples from farmers and operate food programmes for the poor.

The US and China have also agreed to set aside a dispute over certain agricultural tariffs, while Argentina appeared set to allow compromise language linked to eliminating subsidies for agricultural exports, a long-standing bone of contention in the developing world.

 

Is The Cult Of Central Bankers Unravelling? | Asia Confidential

Is The Cult Of Central Bankers Unravelling? | Asia Confidential.

 

Canada says it may take EU to WTO over oil sands dispute | Canada | Reuters

Canada says it may take EU to WTO over oil sands dispute | Canada | Reuters.

 

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