Position Paper: China

          With the developing countries and much of the global community still climbing out of recession, there is still a risk for plunging the global economy into a "double dip" recession. In attending this meeting, China hopes countries will recognize not only this risk but also the need for a gradual progression to instituting the WTO principles.

          China is still a developing economy. Keeping in mind that liberalizing our economy could lead to instability and retardation of growth, we urge the community gathered to carefully deliberate on the issues of liberalizing capital accounts and trade practices.  In working towards having a developed economy, a speedy and full liberalization of our capital account, removal of non-trade barriers, and elimination of some subsidies would hurt our progress.

          The global community must listen to the developing countries and be fair if we are to have a system of equal trade and investment. In East Asia and Southeast Asia, we are trying to encourage economic growth for over one third of the world's population. While the rest of the world is eager for our economies to grow so that we can all share in a higher level trade, investment, and prosperity, the developed countries must recognize the gradual process necessary to establishing parity for developing countries with advanced economies and ensuring stability before moving on to full liberalization.

          In dealing with the proposed topics, China hopes to keep in mind fairness, the interests of the developing countries, China's competitive advantages, and the aims of our domestic economic development.

For proposal I, this argument ties into the role of subsidies and so we must not forget that some countries would trade using unfair advantages. At the same time, China must take into account its developing economy and the hundreds of millions still in poverty and the many people that are unemployed.

For proposal II, as has been the case for some time, developed countries such as the United States and those in the European Union have engaged with China in anti-dumping disputes. The misunderstandings arise from a lack of communication about our strengths and weaknesses in producing certain goods. Hopefully, our community can come together to recognize our strengths and weaknesses and design our economies accordingly.

For proposal III, although there is not much interest in genetically modified foods, China does have a concern for the safety and well-being of countries around the globe and hopes for regulations to be instituted to guarantee the health and safety issues of GMO.

For proposal IV, as China is still a developing country and needs the appropriate levels of growth in all sectors of the economy, subsidies are a necessary tool for developing our economy. All countries around the world engage in subsidies, so we must work together to find solutions for lessening the reliance that developed and developing countries have on subsidies.

For proposal V, China still needs to stabilize and grow its economy. It was only twenty years ago that the Asian Crisis caused much suffering and inhibited China's economic growth. Recognizing the risks of instability  that free flows of capital could cause, China must remain wary about the full liberalization of the capital account.

For proposal VI, China is well on the way to promoting free trade in the global community. We certainly hope that other countries will join in developing the world economy and opening up to trade.

Sources:
IMF Report on Capital Flows: http://www.imf.org/external/pubs/ft/wp/2012/wp12275.pdf

The Fiscal Cliff and Signals of Uncertainty

          With the upcoming fiscal cliff, the U.S. government faces the possibility of massive reduction in the deficit. You may be thinking that this is exactly what needs to be done in order to stop the ever-increasing debt that threatens to burden future generations with high interest payments on the debt and higher taxes/lower spending. Certainly, the United States needs to regain control of its debt spending habits. However, letting the Bush/Obama Tax Cuts expire (the trigger for the fiscal cliff) deliver a shock to everyone in the form of higher taxes (households would receive as much as a 6% reduction in income, according to the Urban Institute and Brookings Institution Tax Policy Center). Clearly not doing anything to avoid the fiscal cliff would cause some serious harm and likely put the economy back into recession.

          Besides the future costs, small businesses currently are holding back investments and hiring as the time for legislation to solve the inevitable tax increases gets shorter and shorter (Wells Fargo small business survey). The uncertainty that the U.S. government is instilling in the private sector is inhibiting growth and that is a deplorable outcome of the gridlocked government.

          Holiday shoppers on the other hand have not quite taken heed to the implications of the fiscal cliff. Spending among holiday shoppers has risen since last year and online spending once again hit its highest mark (according to Mercury News the Economy continues to improve despite the fiscal cliff).

          Small businesses are set to have a wealth of investment materials ready to hire and grow businesses if the fiscal cliff is avoided, but conversely, consumers would face a rude awakening of tax increases on top of heavy holiday spending if the fiscal cliff is not avoided. These imbalances are a result of the signals of uncertainty that the government is giving to the economy. Hopefully, things can be solved soon so that businesses and consumers can rest easy over the holiday break.



Washington Post Blog about the effects of the Fiscal Cliff: http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/01/how-a-sane-political-system-would-deal-with-the-fiscal-cliff/