June 6, 2003
DEFLATION, WEAK DOLLAR TOP GLOBAL ECONOMIC
WORRIES
KEY FINDINGS
** "There is no magic
wand" to fix slow growth in the world's economy.
** No longer a
"textbook" phenomenon, deflation has become the "common
enemy."
** Europeans fear fall of
the dollar, rise of the euro could mean "economic disaster."
MAJOR THEMES
'Dark clouds are gathering over the international economy' -- Editorialists were
alternately gloomy and cautiously optimistic about the global economic outlook. Papers judged that "the world economy is
shaking" and feared there would be "no turn for the better, even in
the United States" where growth is at "a near stand-still." While noting that the end of the Iraq war,
low interest rates and declining oil prices "are good framework conditions
for every economy," Germany's center-right Allgemeine Zeitung of
Mainz held that these "will not resolve the structural problems"
facing almost all countries. One
Canadian daily detected an "apparent revival" of manufacturing in the
U.S., calling expanding business activity in the U.S. "our best hope for a
healthy economy." Observers chided
G-8 leaders for taking only "rudimentary" steps to boost growth at
the Evian summit, a failure that "should come back and haunt" them.
'Deflation hovers like a shadow' over the world's leading
economies -- Pessimists worried that
"both recessionary and deflationary moves are spreading"
quickly. They observed "a hardening
deflation trend" spreading from East Asia, leading Western economies
"into a pattern of falling prices, profits and prospects." Deflation, said Italy's left-leaning Repubblica,
is "the disease Washington fears most today." Papers held "the causes of deflation are
subject to debate" and found little common ground seeking a remedy: a
Japanese daily called on the U.S., France and Germany to "let bygones be
bygones and join hands" to get the world economy "back on
track," a Hong Kong paper took aim at "violent foreign exchange
movements" and the liberal Toronto Star called on Japan to
"shovel money" into its economy.
Europeans worry that a weak dollar 'creates dangers for all sides'
-- Though concerns about the falling value of
the dollar were not confined to Europe--South Africa's Business Day, for
example, fretted that the Bush administration's "attitude" towards a
weaker dollar "could have the makings of a currency crisis"--outlets
in Europe were especially concerned that their exports would be left
uncompetitive after "the plunge of the dollar and the rise of the
euro." A centrist German paper
called the U.S. dollar policy "risky not only for Europe but for the
U.S." because the American economy is "financed with the flow of
international money." An Irish
writer opined that a "sustained decline" in the dollar "could do
serious damage" to the EU's "already poor" growth
prospects. A commentator for one German
business daily took a more relaxed view, however, arguing that Europeans
"are wasting their time" complaining about a strong euro and should
adapt, adding that increasing trade denominated in "strong" euros
would be beneficial in creating a more "stable framework" for the
global market.
EDITOR: Steven Wangsness
EDITOR'S NOTE: This
analysis is based on 42 reports from 19 countries, May 19-June 6, 2003. Editorial excerpts from each country are
listed from the most recent date.
EUROPE
FRANCE: "Deflation
Sings The Blues"
Pascal Aubert judged in centrist La Tribune (5/20): “The fact that America has abandoned its
strong dollar policy, in order to protect the U.S. economy against deflation,
may well be interpreted by some as the monetary counterpart to Washington’s
diplomatic and military policy change, shifting from ‘containment’ to
anticipation of future dangers.”
GERMANY: "Nice
Try"
Center-right Allgemeine Zeitung of Mainz judged (6/3): "It was a nice attempt, no more. The G-8 summit in Evian did not bring the
world forward, nor did it change the power balance between America and Europe. It also remains a mystery what is the
background of the optimistic view that an economic recovery will take place in
the second half of 2003. It is true that
President Bush is orchestrating an economic program at home that he finances
with enormous debt. With this move, he
is trying to secure his re-election. But
even the Evian summit did not give an answer to the question of how this should
result in a sustainable push for the global economy, which will also create
long-term employment. It is certainly
right that the end of the Iraq war, the globally low interest rates and
declining oil prices are good framework conditions for every economy. But they will not resolve the structural
problems of almost all countries, since they must be resolved on a national
level."
"Summer Festival In Evian"
Center-left Sueddeutsche Zeitung of Munich editorialized
(6/2): "President Chirac has
invited an extended circle of participants, reportedly to increase the
legitimacy of the meeting. This is
commendable, but has a counter-productive effect.... But all promises to the poorer nations will
not result in much if we do not feel anything of G-8 common economic
policy. The real play is being performed
far away from Evian: in the big capitals
where the governments influence exchange rates to stimulate their
economies. The dollar exchange rate to
the euro is plunging to such a degree that it creates dangers for all sides
involved.... A rise of the global
economy would be more useful for all developing nations than all courteous
invitations. But this economic upturn
will not come if blank self-interests determine economic policy activities.
This is especially true for the childish trade conflicts between Europeans and
Americans. If summits like the one in
Evian make sense, they must deliver results.
The global economy offers enough problems."
"To Evian -- To Clarify Things"
Gerd Appenzeller had this to say in an editorial in centrist Der
Tagesspiegel of Berlin (6/2):
"Modesty and future perspectives would be appropriate for the
meeting of the G-8 in Evian. Unlike the
communiqués they G-8 leaders grandiloquently announce during their regular
meetings, they only take modest efforts to stabilize the global economy. Their efforts to give Third World economies
access to the markets of the industrialized nations are rather rudimentary.... In this situation it is really hypocritical
that France's President Chirac demands with great gestures the promotion of
global trade and wants to give economic growth highest priority. He has invited state leaders from many
developing nations for an 'extended dialogue'...but once the summit is over,
doors will be closed and the G-8 nations will again stick with
themselves.... They will certainly
accept a sobering reality: The eurozone
is not suited to act as a economic engine for the world. Only the United States has this power."
"Let's Hope For The Best"
Peter Ehrlich held in business daily Financial Times
Deutschland of Hamburg (5/28):
"Today, the 'global economic summit' has turned into a mixture of
discussions over relevant global problems and the term 'economic' has even
disappeared from the name.... For the
global economy, this is bad news. There
are enough urgent economic problems to discuss, like the plunge of the dollar
and the rise of the euro...but the most powerful politicians in the world will
not lose too many words on the economic risks.
They will mainly focus on foreign policy.... It is likely that the same will happen [at
the G-8 summit] that happened in Canada last year.... The leaders discussed the situation of the
entire global economy in one and a half hours.... This economic policy ignorance is negligent
but comfortable for the politicians....
As a matter of fact the lack of economic policy commitment should come
back and haunt the leaders during the entire three days of Evian. The development of the global economy
decisively depends on economic growth in the large industrialized nations. Crises of the economy promote protectionism and
restrict the means necessary in the fight against epidemics, for instance. And what is even worse: a recession of the
global economy would mean a decline of prosperity in the industrialized
countries, and at the periphery of the global economy, it would mean even more
poverty, famine, and conflicts."
"The Weak Dollar Is Also Detrimental To The U.S.
Economy"
Ursula Weidenfeld opined in centrist Der Tagesspiegel of
Berlin (5/28): "U.S. Treasury
Secretary John Snow does not hide his delight when looking at the exchange rate
between the euro and the dollar. The
euro has reached its highest exchange rate to the dollar for over four
years. This helps the U.S. economy and
looks like a free economic growth program for U.S. industry.... But the U.S. treasury secretary and his
European colleagues know that his is only a snapshot situation: the euro and the dollar tend to
overreact. A further rapid decline of
the U.S. currency cannot be ruled out.
And this will be all the more so if the U.S. government welcomes the
development with a mild smile. But such
a policy is risky not only for Europe but also for the United States, because
America has lived beyond its means for years.
Its foreign trade deficit has been financed with the flow of
international money.... And if the U.S.
government now talks the dollar down, it will also talk down assets in the
United States. And if the U.S.
government also pretends that everything is in order, investors could quickly
get the feeling that the United States is no longer the right site for their
investments. But a quick and resolute
sellout of the dollar would have devastating consequences."
"No Fear Of The Euro"
Hermann-Josef Knipper judged in business daily Handelsblatt
of Duesseldorf (5/28): "The euro is
as strong as never before. But those who
are lamenting the lack of competitiveness of the export economy are wasting
their time. Pragmatism is necessary,
since the situation could even worsen: experts are predicting an increase of
the euro to 1.30 dollar. We must now
adapt to lasting times with an expensive euro.
The European Central Bank will be unable to change this situation, even
if it decided to lower interest rates next week. The difference in interests rates between
Europe and the United States will be too great, and Washington's interest in a
weak dollar is still too strong and the central bankers in Frankfurt will be
unable to counter this trend.... But a
strong currency has two advantages: It
can be a means of pressure to modernize the economy...and only a strong euro
can establish itself as a key currency in addition to the dollar. If an increasing number of central banks
change their reserves into euros, if an increasing number of exports and
imports are paid in euros, then this can only be beneficial for the creation of
stable framework conditions on the global markets. And in the end, Germany will also profit from
this."
ITALY: "Bush Reassures
The G-8, 'Yes' To The Strong Dollar"
Emanuele Novazio reported from Evian in centrist, influential La
Stampa (6/3): “President Bush
assured that the U.S. will follow a policy for a strong dollar, thereby
accepting the concerns and the criticism from his European partners on the
negative impact of a weak dollar on European exports. But the President did not make an official
commitment on the documents devoted to the economy.... Indeed, we think that the main message from
Evian was to strengthen the positive trend represented by the end of the war on
Iraq, by low interest rates and by the reasonable price of oil."
"The Aim: The U.S.
Vote"
Mario Platero commented in leading business daily Il Sole 24
Ore (5/20): “The flag of recovery is
more important than pride. This is how
we should read the Administration’s changed policy on the dollar. Especially when elections are nearing and
when a sentence, ‘It’s the economy, stupid,’ comes back to mind. Bush 41 did not take care of it, and this
cost him the White House in 1992.
President Bush knows that in order to avoid an economic defeat, he has
to bring growth rates back up to 4 or 5 per cent, plus create jobs within the
next year.”
"America Blesses The Devaluation"
Federico Rampini noted in left-leaning, influential La
Repubblica (5/20): “The fall of the
dollar is welcome. Devaluation
relaunches U.S. companies’ profits and, above all, it exports to Europe the
disease Washington fears most today: deflation.”
AUSTRIA: "Not A
Miracle Cure"
Liberal daily Der Standard economic affairs writer Stefan
Brändle commented (6/3): “Quite
possibly, the mineral water in Evian really does have healing qualities. But whether the G-8 summit is going to get
the world’s economy back into shape is another question.... The current main problem of the world’s
economy--the weak dollar--did not even make it on the official agenda.... Much more efficient are the G-8 opponents, an
unholy alliance of anti-globalization groups, who condemn the ‘Club of the
Rich’ on principle, and the falcons in Washington, who--equally true to
principle--undermine every attempt at multilateralism. Host Jacques Chirac is trying to twist
himself in to a gigantic split between the two camps, desperately trying to
please both the G-8 critics and the U.S. president. The world economy could certainly do with a
successful G-8 meeting--i.e., concrete economic decisions and guidelines, based
on the acceptance of globalization and the will to get its negative effects
under control. However, all the
divergences between the Great 8 make a proper synthesis impossible. What remains is a lot of smooth blandishing. It seems that even the mineral water in Evian
can’t work miracles.”
BELGIUM: "Blaming
America For Everything"
Vincent Slits judged in independent La Libre Belgique
(5/28): “The strength of the euro should
be put in perspective. It is first and
foremost due to the weakness of its main rival, the dollar. The United States, which is looking for a
miracle solution to give its economy a boost, is using the good old method of
competitive devaluation, giving up the doctrine of the ‘strong dollar’ that the
White House favored for a long time.
This is a pragmatic solution, especially in light of the fact that the
Bush administration has already tried all the other methods that could achieve
the same objective, such as budgetary margins or lowering interest rates. So, is Europe--whose competitiveness is
deteriorating before one’s very eyes--the victim of this war of exchange
rates? Is the United States, by going it
alone, trying to put the ‘Old Europe’ on its last legs? For the time being, European economic leaders
remain reassuring.... Yet, at the G-8,
there will need to be a discussion on the necessary closer cooperation between
the United States and Europe, with, as an objective, the need to sustain world
growth in a concerted manner. In any
case, next June 5, pressure will be huge on the European Central Bank to lower
its rate. But let us not be naive:
lowering interest rates in Europe won’t solve everything. Let us only mention budgetary deficits that
have an unfortunate tendency to get out of control.”
CROATIA: "How Bush The
Winner Could Become Bush The Loser"
Zagreb-based Government-owned daily Vjesnik commented
(5/21): “Simultaneously with Bush's
possible rejoicing because the French economy is almost under water, and
Germany’s (economy) is seriously endangered, soon this won’t be good news for
him either. Unfortunately, there is no
magic wand for resolving economic setbacks, and the bill for leading the war
and post-war reconstruction in Iraq will be large. If exploitation of oil doesn’t start very
soon, the final effect will be even worse.
That’s how Bush the winner is risking ever more to become, in the end,
Bush the loser.”
FINLAND: "Increased
Cooperation Necessary In Fighting Terrorism"
Finland's leading daily, centrist Helsingin Sanomat
editorialized (5/20): "It is a
bitter fact that the terrorist activities exacerbated by al-Qaeda have caused
great confusion in the world. At least
in the short term, the terrorists have been successful. The world economy is shaking with no turn for
the better in sight even in the United States."
IRELAND: "Cutting
Interest Rates"
The center-left Irish Times judged
(6/6): "The European Central Bank
has recognised the risks facing the euro zone economy and announced a half
point cut in its base interest rates to 2 percent. It brings interest rates to their lowest
levels in half a century and is likely to lead to some modest reduction in
borrowing costs here.... The ECB's cut
and the even lower level of U.S. interest rates highlight the concern of
monetary authorities on both sides of the Atlantic about the prospects for
economic growth. More optimistic commentators
believe that a gradual recovery in the U.S. can help to lift the world economy
later this year, but this can be by no means guaranteed. A nervous few months now lie ahead, when we
will see whether the medicine of low interest rates can revive the ailing world
economy."
"Summit Silence On Key Issues"
The center-left Irish Times editorialized (6/3): "If the summit leaders wanted to have a
lasting impact on growth then there are a couple of key issues that they should
have tackled.... The leaders did commit
themselves to successfully concluding the trade talks. Unfortunately, however,
they were unable to signal any of the key compromises that would get the round
moving again. Unless progress can be
made before a key review meeting in September, there is a risk that the whole
round will fall apart, or be seriously delayed.
At a time when--post-Iraq--the future of multilateralism is in question,
a failure to conclude the Doha round would threaten to damage seriously the
global economy.... The U.S. president,
Mr Bush, said his administration still supported a 'strong dollar' but this did
little to change the view in the markets that the White House is quite content
with the currency's recent decline, which could help to boost U.S. growth and
exports. However, a sustained decline in
the dollar--and rise in the euro--could do serious damage to EU growth
prospects, which are already poor. There
may be a case for international co-operation through central bank intervention
to support the U.S. currency, but for the moment the Bush administration does
not support such action."
"Leaders Fail To Tackle Key Threats To World Growth"
Cliff Taylor observed in the center-left Irish Times
(6/3): "The G-8 summit will have
little lasting impact.... There is little
sign that the summit leaders had serious discussions on the dollar, or that
significant progress was made on other key threats to world growth.... There is a belief in the markets that,
despite its talk of support for a 'strong' dollar, the Bush administration is
quite happy to see the currency slide, in the hope that this will boost U.S.
exports and growth in the run up to the 2004 election..... A malign view of U.S. policy is that the
administration is shedding no tears for Europe's problems, feeling that the EU
should do more to spur growth through cutting interest rates and economic
reform.... While the G-8 appears to have
spent limited time discussing currencies, the leaders did issue a statement on
trade, committing themselves to completing the current trade talks--the Doha
round--on schedule by the end of next year.
However beyond the usual platitudes on the importance of free trade, the
statement did not point the way forward in the key areas now blocking the
talks: the row over agricultural subsidies, particularly the EU's export
subsidies; the U.S. block on agreement over moves to allow poorer countries to
import cheap generic drugs to combat disease; and a series of damaging trade
rows, most recently the U.S.-led attack through the World Trade Organisation on
the EU's restrictions on genetically modified foods.... Lack of progress on cutting agricultural
subsidies, which give EU and U.S. exporters an unfair advantage on world
markets, on opening developed markets to poorer countries and on overcoming the
objections of the U.S. to the widespread provision of generic drugs suggest
that the same old vested interests are blocking progress."
KOSOVO: "Euro-ization
Of Kosovo"
Leading, independent Koha Ditore commented (5/23): “It was expected that the dollar would
recover after the end of the war in Iraq.
But this is yet not happening. On
the other side, the American Minister of Finance...showed satisfaction with the
rate between the euro and dollar....
Firstly, through weak dollar he wants to reactivate the American economy
that is on the verge of recession and stimulate the American exports to
European markets. He will achieve two
objectives by that: revive the economy and earn a strong currency. The plans would be only spoiled if domestic
consumption starts going up to damage the exports.... The Kosovar economy will not shake at all, no
matter how far down dollar goes. Here
all transactions are done in euros...imports are all from the countries that
accept the euro as the currency for transactions, and those few exports from
Kosovo are all in that same market.”
ROMANIA: "No
Rhythm"
In the respected financial weekly, Capital, economic
analyst Paul Lacatus opined (5/28): “In
a global system which cannot not find its own rhythm, the idea that one of the
major players can re-launch its own economy by profiting from the others, would
be a major error. Connected politically
through a common and economic vocation, through trade which is worth billions
of dollars annually, both Europe and America can record huge losses from the
current tensions.... If the boycott
applied by American consumers to French wines in the first days of the war in
Iraq was an emotional gesture, punctual and symbolic, we notice now that not
only have transoceanic trade relations evolved lately toward acute levels, but
also the official trade commercial politics as well. Going down this path, America and Europe risk
engaging themselves in a war in which any position taken would become a strike,
which should be responded to, in turn, by a counter-strike.”
EAST ASIA AND PACIFIC
JAPAN: "G-8 Should Put
House In Order"
The top-circulation, moderate Yomiuri editorialized
(6/4): "The Evian G-8 summit has
raised once again the question of what the annual meeting of major powers
should seek to accomplish as its raison d'etre.
A major focus of this year's summit was on what kinds of specific
prescriptions the G-8 nations would be able to write in their efforts to solve
the economic and political challenges facing them. This was particularly significant in that
this latest summit came as the U.S. has been at odds with France, Germany and
Russia over the Iraq war. But President
Bush left France early for talks with Middle East leaders in Egypt."
"Economy -- Common Enemy Of G-8 Nations"
The liberal Asahi editorialized (5/30): "Twenty-eight years after the first G-7
summit in Rambouillet, economic issues will be high on the agenda--after a long
absence--at the Evian G-8 summit opening on Sunday. Both recessionary and deflationary moves are
spreading so fast that the world community can no longer overlook it. The summit leaders should come up with
measures to dispose of Japan's bad loans, reduce U.S. trade and other deficits
and to improve the unemployment situation in Europe. The implementation of these measures would
also stem the growing deflationary trend.
The expansion of world trade and assistance to developing nations is
also necessary to get the world economy back on track to growth.... Now is the time for the U.S. and two EU
summit nations to let bygones be bygones and join hands to fight a common enemy
called deflation."
"G-8 Solidarity Must Be Reaffirmed At Evian Summit"
The moderate Tokyo Shimbun editorialized (5/29): "At the Evian summit...highest on the
agenda...that the U.S. will have to mend fences with France, Germany and
Russia, following the 'Iraq row,' and show leadership in reaffirming
international solidarity in managing and stabilizing the world economy. Although France and Russia approved the
U.S.-drafted Iraq resolution submitted at the UNSC, the U.S. and France are
still at odds over the 'justification' of the U.S.-led war on Iraq. But given global and regional issues, including
the ailing world economy, terrorism, the proliferation of WMD, the DPRK's
nuclear crisis and the environment, it is imperative that the U.S. and 'Old
Europe" EU allies close the gap and reaffirm cooperation and solidarity to
address these problems in a more positive manner."
CHINA (HONG KONG SAR):
"Welfare For The Wealthy"
Independent English-language The Standard held (5/26): "The countdown to the next United States
presidential election got under way in earnest last week with the passage of a
tax bill that Republicans hope will fire up the faltering economy just in time
for their candidate to take the credit and win re-election to the White
House. In a world in which
spin-doctoring counts for more than cold reality, it matters very little whether
such a recovery--if it obliges by arriving on time--is due to economic cycles
well beyond the manipulation of policy engineers, or to the handouts now due
under the tax breaks [in the] law....
Bush will take the credit anyway, and the spin doctors will do the rest
to try and secure his re-election.... It
should come as no surprise that critics are deeply divided.... Critics say the real agenda is to reward the
rich even though that may come at the expense of the poor...a welfare system
for the wealthy."
"Weak U.S. Dollar Will Lead To Economic Recovery"
The independent Chinese-language Hong Kong Economic Times
commented (5/20): "Devaluation of
the U.S. dollar will benefit global economic development. Since the technology bubble burst, the
U.S.--the world's sole economic engine--has fallen on hard times, bringing the
global economy to a near-standstill.
Salaries and benefits in Europe are too high, as is the ratio of bad
debts in Japanese banks. These
structural difficulties will take time to resolve, making it difficult for
Europe or Japan to become the world's economic engine. The U.S. remains the only hope. If a weak U.S. dollar succeeds in leading to
U.S. economic recovery, the global economic engine will roar to life. Not only will this benefit Hong Kong and
mainland China, but it may help avoid a global recession."
"The U.S. Should Lead The Fight Against Deflation"
The independent English-language South China Morning Post
observed (5/19): "Global economic
tensions hit new levels last week with the latest data from the U.S. and Japan
showing a hardening deflationary trend.
The phenomenon of falling prices--not so long ago an issue only
considered in textbooks of economic history--is spreading from East Asia, with
leading Western economies apparently slipping into a pattern of falling prices,
profits and prospects. As dark clouds
gather over the international economy, there was widespread expectation that
this weekend's meeting in France of the Group of Seven finance ministers from
leading industrial nations would seek co-ordinated action to ease tensions in
foreign exchange markets. The causes of
global deflation are the subject of much debate.... All agree, however, that violent foreign
exchange movements, as seen with the U.S. dollar's dramatic weakening in recent
weeks, pose serious risks for fragile economies.... The 1990s saw the U.S. rise to undisputed
economic leadership, being the dominant consumer market and investment
destination of choice. Productivity
trends suggest its prospects are only temporarily dimmed, and a dash for growth
through deliberate weakening of the dollar is unnecessary while damaging the
country's wider prospects. More than
ever the world needs U.S. economic leadership and, if markets dictate, an
orderly weakening of the once mighty dollar."
INDONESIA: "G-8 Meets
Again, Global Economy Remains Unbalanced"
Leading independent daily Kompas commented (6/3): “The unbalanced structure of the economy
remains unchanged. Developed countries
continue to enjoy an incredible level of welfare, whereas developing countries
continue to struggle with backwardness and poverty. Ironically, developed countries continue to
urge developing countries to liberate their markets while putting barriers on
food imports from these countries....
Economic gaps and injustice are a sensitive issue that could threaten
world peace. Under economic pressure,
people could easily get frustrated, commit violence, and be aggressive.”
SOUTH AND CENTRAL ASIA
INDIA: "G-8 Evian
Summit: Crucial For The Global Economy"
Chennai-based independent business daily Business Line
commented (5/31): "The differences
among G-8 countries over security and political issues could well spill into
the economic arena, exacerbating trade frictions and clouding global
economy."
"Merciless Market"
The centrist Times of India editorialized (5/30): "Scores of blue chip American
brick-and-mortar companies have in the last two decades taken advantage of
lower wages in the Third World to 'relocate' their manufacturing bases there. Far from making an issue of this, American
champions of a globalized free market usually cited it as proof of the virtues
of a borderless capitalist world, which led to the most efficient use of
capital and a lowering of costs for consumers all over the world.... The fact is that most countries in the world,
particularly protected and isolationist economies like India, have long learnt
to endure the pain of living in a brave new world of American-led
globalization, where uncompetitive sectors of the domestic industry have either
closed down or severely curtailed their operations in the face of cheaper
foreign imports."
"It Takes Two To Trade"
Sanjaya Baru penned this analysis in pro-economic reforms The Financial Express
(5/30): "With the U.S. economy in
recession, with a mounting trade deficit, and with trade in services coming to
the center stage of multilateral trade negotiations in the World Trade
Organisation, reciprocitarianism is raising its head once again. When United States Ambassador Robert
Blackwill complains that India-U.S. economic relationship is 'as flat as a
chapati' because U.S. exports to India are not increasing at the same pace as
Indian exports to the U.S., he is mouthing 'reciprocitarian' ideology. Trade is not about tit for tat.... The real issue in India-U.S. trade is that a
purely bilateral perspective does not help clarify matters. If both countries remain committed to
multilateralism, they can resolve many disputes. While the U.S. repeatedly declares its
support for multilateralism, every now and then the 'fair trade' rhetoric of
the Reciprocitarians keeps coming up....
The complaint about loss of jobs is not new. All cross-border trade
entails cross-border movement of jobs....
The solution to this tangle lies in setting up multilateral rules of the
game for trade in services.... Both the
U.S. and India can work together for a rules-based system. Finally, easing of high-tech export controls
and increased defense cooperation can also help step up U.S. exports to
India."
"Economic EKG"
The centrist Times of India editorialized (5/27): "Concern persists amidst economists and
market players about the state of the U.S. economy and the weakening
dollar. The Bush administration itself is
remarkably sanguine; recent remarks by treasury secretary John Snow seem to
indicate that it has no problems with letting the dollar fall further. The reasoning appears to be that a weaker
dollar would boost American exports....
In theory, the American government would seem to be doing the right
thing. The problem is, the U.S. also has
a huge current deficit, which is being financed almost entirely by foreign
capital inflows.... The European
situation isn't too encouraging either.
The rapid rise of the euro may be a political triumph, but economists
and corporates fear it could be an economic disaster, since it renders European
exports uncompetitive. Some conspiracy
theorists even argue that the weak dollar is America's retribution against
Germany and France for their opposition to the Iraq invasion.... The weaker dollar will take (India's) toll on
exports, but it will also reduce India's oil bill and make external borrowings
cheaper.... Whether India fritters away
the advantages of a strengthening rupee or keeps them will determine how this
particular scenario turns out for us."
"A Fistful Against Dollars"
Prem Shankar Jha commented in the nationalist Hindustan Times
(5/23): "The appreciation of the
rupee is only one of many indicators of a weakening American economy.... But, one may persist, it is the dollar that
has weakened, not the American economy....
The precipitous fall in the dollar is being caused not by any sudden
widening of the current account deficit of the country.... To make matters worse, the new American
aggressiveness has added an element of uncertainty to the future of the global
economy and to government expenditure in the U.S. Despite all that, Bush is persisting with his
tax cut plans.... Half a century ago,
America's dominance of the free world was unquestioned.... Today, it is aspiring to a higher level of
political dominance when it is the world's largest debtor and investors have
begun to lose faith in the dollar. This
could be a bridge too far."
"Dollar Dilemmas"
The centrist Telegraph held (5/23): "From a balance of payment point of
view, what matters is overall supply of dollars. If that is boosted through capital inflows
and service exports, so be it. The
dollar's continued depreciation is not something that will disappear in a
hurry. Growth in the United States of
America is indeed higher than in Europe, and with the Iraq war over, oil prices
dropping and consumer confidence and stock market indices inching up, Alan
Greenspan is right to presume that the U.S. economy will do better than in 2002. U.S. domestic concerns, including tax-cut
proposals, are linked more to growth not leading to jobs, reminiscent of the
senior George Bush's electoral loss.
Globally, dollar depreciation has been driven not by lack of U.S.
growth, but more by investor unwillingness to finance high U.S. current account
deficits. European interest rates are
also higher. U.S. foreign liabilities
and debt service payments require the dollar to drop further, a policy that the
U.S. Treasury and Federal Reserve seem to favor. After all, on both growth and inflation, a
depreciating dollar has the same impact a cut in interest rates does.... At the moment, the dollar seems to be headed
further downwards."
AFRICA
SOUTH AFRICA:
"Post-War Economy Still In The Trenches"
Jeremy Gardiner wrote in balanced Business Day (5/29): "There was much speculation during the
war that once it was over, we would see a market rally such as was evidenced
after the previous Gulf war.... Pundits
of this theory have clearly not noticed that the U.S. today is a very different
place from what it was in 1991.... The
economic and market-specific factors in 1991 were very different from what they
are today. During 1990/91 the U.S. was
broadly in current account balance, with the private sector running a high
level of saving.... In 2003 the U.S. is
running a record current account deficit with the private sector still running
a historically low level of saving....
So where does that leave markets now?
What we can't say is where they will go in the short term. What we can say for certain, however, is that
current economic conditions and current market valuation levels have never in
history marked the start of a sustainable advance in either economic growth or
equity market prices."
"Is Dollar Weapon Of Mass Destruction?"
Andile Mazwai wrote in balanced Business Day (5/28): "Simply stated the strong dollar is
hurting the U.S. more than a weak dollar would, and so it is letting it
slide.... Since [US Treasury Secretary
John] Snow began his soft stance on the strong dollar, the currency has
fallen.... Snow describes this rate of
depreciation as acceptable....
Economists will not disagree that the dollar was overvalued.... Snow is doing the right thing in letting the
greenback find a lower trading level. My
concern is that he may succeed.... The
current administration's attitude towards the dollar could have the makings of
a currency crisis, where the dollar enters into free fall. This would be very disruptive for the global
economy, and especially for small, open export-based economies such as
ours. But if the dollar falls, then the
price of gold must rise (on the premise a bar of gold is worth a bar
gold). I am of the opinion that without
intervention, the dollar will accelerate its rate of decline, and gold will
continue to rise sharply."
WESTERN HEMISPHERE
CANADA: "U.S.
Manufacturing Could Rescue Canada"
Columnist Jay Bryan observed in the nationalist Ottawa Citizen
(6/3): "As the Canadian economy
staggers under the weight of Toronto's SARS episode, Alberta's mad cow scare
and a darkening domestic economic landscape, the importance of exports to the
U.S. has become critical.... That's why
the apparent revival in U.S. manufacturing couldn't be more welcome. Since Canada's rising interest rates and
dollar are acting to squeeze our still-robust growth rate, a reviving U.S.
economy is our best hope for a healthy economy this time next year.”
"Snubbing G-8 Makes No Sense"
Foreign affairs editorial writer Gordon Barthos wrote in the liberal
Toronto Star (5/29): "The
great and the good gather in Evian, France, on Sunday to sample the spas and
sort out the world's problems at the Group of Eight summit. It's the most powerful club in the
world.... Bush would be unwise to snub
the G-8, and risk a wider rift. The club
in turn should help Bush tackle some of the world's big problems. With its $18 trillion output, in a global
economy of $31 trillion, the club has enough political, military and economic
clout to make a difference.... Bush
should restrain his proclivity to slash taxes except those which provide direct
stimulus, and should try to contain the fast-rising U.S. deficit before it
wreaks havoc with the world economy.
Japan should write off massive nonperforming bank loans, shovel money
into the economy to fight deflation and improve its social safety net. And Europe should lower interest rates,
refinance pension plans and free up hidebound labour markets. The entire club should lower barriers to farm
and industrial trade. And it should step
up trade, debt relief and aid for Africa and other poor regions. The prospects
at Evian are pretty dismal."
ARGENTINA: "The G-8
Trusts It Will Overcome The Economic Crisis"
Maria Laura Avignolo, Paris-based correspondent
for leading Clarin judged (6/4):
"Pragmatism and diplomacy have overcome disagreement and continue
intact.... The economy was a mater of
concern for the G-8, and particularly the euro-dollar parity. Now, they committed themselves to
implementing growth conditions to make world economy more dynamic and undertake
structural reforms. They are determined
to conclude in 2004 the cycle of multilateral trade negotiations started in
November 2001 in Doha. Vis-à-vis
multinational scandals like Enron, they promote 'a responsible market economy'
and insist on 'corporate social liability.'
Good news for Latin America: the G-8 has promised to analyze every case
to respond to the indebtedness of intermediate countries that are not eligible
for the plan for highly indebted poor countries. This is a reward for Lula's action at the
G-8."
"G-8 Summit Unable To Achieve Tangible Agreement"
Eduardo Febbro, leftist Pagina 12 correspondent, wrote
(6/3): "The G-8 leaders gathered at
Evian were unable to respond to a question...which asked the major world
economies if they were going to save global economy from its downfall.... The only answer the summit provided was
wishful thinking and ideas but no concrete measures.... According to French President Chirac, the
present situation is much clearer now because the 'uncertainties on the war
against Iraq have been dispelled, there's an important reduction in oil prices
and interest rates are low.' Later,
Chirac assured that G-8 members expressed their 'determination to take over a
responsibility' aimed at guaranteeing economic growth, they accepted 'the need
to adapt' to international demands, and they said they are ready to 'prevent
eventual financial crises such as the Asian one.'... Nevertheless, no practical announcement was
made to restore the stability of those markets affected by the constant fall of
the dollar vis-a-vis the euro.... The
head of the European Commission, Romano Prodi, mentioned that Bush told his
partners that he would not use the dollar 'as an economic weapon' and that he's
not interested in a 'weak dollar' either....
Although the leading 8 countries believe that 'exchange market
stability' is of key importance to favor economic growth, Bush left Evian with
a weak promise made behind closed doors."
"Investors In Search Of Good Business"
Business-financial El Cronista editorialized (5/20): "Today's world is growing slowly. Europe is on the verge of recession and its
GDP will hardly increase over 1 per cent.
The U.S. will not increase more than 2.2 per cent in 2003.... Words like depression and deflation appear in
the new dictionary.... This reveals that
the central banks of developed countries have already relaxed their monetary
policies very much, and have not succeeded in boosting their economies. In this world scenario, and with steady
commodity prices, president-elect Nestor Kirchner will take power.... Argentina is now at a new historical crossroads. It could isolate itself from the world as it
has happened so many times before and it could think that globalization is a
confabulation of wealthy countries aimed at exploiting our resources.... But there is another choice. One can observe what happens in the world and
decide to attract that capital seeking new places for larger profits. It can send conclusive signs that foreign
investment will be respected in every way, with strong regulation that will
promote a competitive atmosphere.... The
new president has no reasons to blame the world or his inheritance. He can only look ahead and advance in this
direction."
BRAZIL: "World Economy
Lacks Leadership"
Center-right O Estado de S. Paulo editorialized (6/4): "The G-8 leaders ended their meeting in
Evian with an optimistic declaration about the world economy...[but] the most
important economic issues were avoided....
U.S President George W. Bush said in Evian that his administration is
committed to a strong dollar. He added,
however, that the status of the American currency will still be determined by
the market.... In the final document
issued from the meeting, the topic of the exchange rate was not even mentioned,
even though it is a focal point of debates between the U.S and the European Union.... [On the topic of agriculture,] the U.S has
already presented its proposal and made it clear that it will reduce export
subsidies if the Europeans make the same commitment. But the European Union did not respond as
hoped. Consequently, not one issue of
great importance for the world economy was settled during the G-8
meeting.... In the final analysis, it is
clear that there is a lack of leadership to solve the impasses that the world
economy faces."
"One Warning"
Right-of-center O Globo editorialized (5/20): "Deflation...hovers like a shadow over
important economies.... The IMF, in a
study made public last week declaring the risk of world deflation is low. It calls attention, however, to the high
possibility of the problem occurring in Germany, Taiwan, Hong-Kong and
Japan--the latter actually already suffering from this evil for over a
decade. The attention obviously is
concentrated on the U.S.... Besides this
threat, the world's largest economy is amidst a large adjustment to re-establish
the equilibrium of its balance of payments in the current account (goods and
services). As it occurred with the real,
the dollar is facing great devaluation....
The U.S. [economic] adjustment--the world's greatest importers--strongly
threatens exporting economies. That's
why the world today has more doubts than assurances before the future. It's a situation that serves as an alert to
Brazil. It's necessary to reduce our
vulnerability to turbulence from abroad."
MEXICO: "Offerings Of
Smoke"
Business-oriented El Financiero editorialized (6/3): "If Europe managed to incorporate basic
topics like hunger, health, access to markets, and world governance into the
agenda of the world's wealthiest nations in exchange for an anti-terrorist
agreement imposed by George W. Bush, then the attendance of a dozen developing
countries--to include Mexico--was not in vain.... Even if there were no concrete results
derived from the G-8 summit, [Brazilian President] Lula's proposal in favor of
access to markets to fight poverty was outstanding, because it generated the
concern for a less unequal globalization, even in the case of Bush."
"Political Responsibility"
Business-oriented El Financiero commented
(5/28): "The triumph of the United
States within the United Nations, given that most of its members decided not to
support the war against Iraq, requires new conditions. These conditions should guarantee the
reactivation of world economy. This is
where the agenda of the Group of the seven most powerful countries in the world
is pointing to--along with Russia, the G-8.
The summit could not be more timely, especially when there is no
apparent political will to free world markets, when the fight against terrorism
hinders human-capital mobility, and a slaughtering fight for capital flows is
developing. All of this will hurt the
weakest nations. In order to block out
the United States' hegemony, which also tends to annul organizations derived
from the Bretton Woods group, France invited Mexico and Brazil--the leaders of
the Latin American Rio Group--to insist on growth and fight poverty in a
democratic environment that is probably not suitable for the summit's
picture."
##
