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/

The U.S. should still be wary of Mexico's drug cartels

          A war has been raging south of the U.S. border and has claimed the lives of over 60,000 lives in the past five years. While the words "If you don't pay, the place burns down" may resonate near the U.S.-Mexico border, the scene is much different in the southern provinces of Mexico (Huffington Post). In southern states such as Guanajuato and Querétaro,  a growing auto industry has elevated Mexico to the position of the world's 4th largest exporter of automobiles. Much of this economic development is laid out in Stephanie's blog, in which she details both the bright spots and roadblocks of Mexico's development. Her main point, however, is to call for the U.S. to reform its trade, border, and immigration policies directed towards Mexico. In agreement with Stephanie, I think it is important to emphasize the significance of Mexico's economic rise, but it is equally important to recognize that drug cartels remain a large roadblock to developing stronger relations with Mexico.

          Although we did not get to cover the predominantly political issues of the trafficking of drugs, people, and weapons during our International Political Economy course, the prevalence of these issues around the world is a major concern in the international community. These three deplorable and sometimes horrific businesses operate not only on the global stage but also domestically in the United States. Fortunately, the violence along the U.S.-Mexico border has subsided, and murders, kidnappings, and other violent crimes have fallen drastically in some of the war-torn Mexican states like Chihuahua. However, some experts of the Mexican drug war say that this might simply be a sign that the drug cartels are biding their time to see what the new President Enrique Peña Nieto will do (Huffington Post). Meanwhile, despite the apparent success in Chihuahua, authorities are seeing negative results in other areas where drug cartels operate.

          In Ventura, California, located 200 miles north of the U.S.-Mexico border,  Martin Madrigal, a kind of regional manager for the Mexican Mafia, has been indicted along with 26 other suspects for violent crimes, drug and arms trafficking, and extortion (LA Times). The article notes how this one guy was so feared (his nickname is "Evil") that he was able to coordinate other Mexican gangs in the area.

          In a city not far from Guanajuato called Tiquicheo, the city's former mayor, a defiant opponent of drug cartels, was murdered by hitmen after a third assassination attempt on her life (Fox News Latino). The area has apparently been a hotbed for the growing of  poppy for heroin and marijuana, and it has also been importing large amounts of  chemicals for the production of methamphetamines and cocaine.

           These incidents show a still powerful and influential criminal network that can operate within U.S. borders and cause terror for many Mexican families. This is an issue that needs to be dealt with before the U.S. opens up the border to more immigrants precisely because liberalizing immigration policy would facilitate the movement of drug cartels into the United States. Because the United States is the main source of demand for these drug cartels, the United States would likely see an increase of drug cartel members crossing the border if immigration were to be liberalized. As President Obama said in his meeting with Mexico's next President, the United States certainly wants to aid hardworking Mexican immigrants who are coming here to work (Latino Post). At the same time, however, the U.S. should not run the risk of allowing drug cartel members to immigrate.

          Additionally, while many Mexicans are willing to do the menial and hard labor that other Americans will not do provide a boon for agribusiness in the United States, the many immigrants that want to bring their families may impose a stress on the already faulty and expensive healthcare and educational systems in the U.S.
         
          So for the time being, it is more important for the U.S. and Mexico to continue their efforts to control the prevalence of drug cartels and the violence that they cause. While the cartels have not really bothered the auto producers that have enabled Mexico's rise economically, they are still disrupting everyday life for Mexican local businesses, politics, and families (Wall Street Journal). Accordingly, the Mexican authorities still have a lot of work to do, and it may ultimately be impossible to eradicate the drug cartels. In order to eradicate drug cartels, there needs to be greater cooperation among the U.S. and Mexico in terms of criminal justice and possibly regulation of the drug industry. Thankfully, California and the Attorney General of Mexico have already begun to coordinate efforts against the drug cartels by agreeing to help one another in the prosecution of transnational criminal organizations (Fox News Latino).

         Despite the exciting developments of Mexico's economy, until the United States and Mexico can get the drug cartel problem under control, the U.S. should wait before liberalizing immigration on the southern border.



President of Mexico's plans for reform: http://www.reuters.com/article/2012/11/29/us-mexico-penanieto-idUSBRE8AS0YR20121129 (Reuters)
In depth article on Mexico's Auto Industry: http://online.wsj.com/article/SB10000872396390444083304578018462369529592.html (Wall Street Journal)

A Different Take on "Cities of the Future"

          After reading Annelise's post on Tianjin's new "Eco-City" (Mind the fact that Tianjin is actually already a city with a population of ~13 million) and having followed the link in her post, I wondered how I might address her last sentence: "America should also get on board because a city like Tianjin is the city of the future." Although I am excited by the enthusiasm and initiative of the project, I cannot help but wonder, how they expect to pull this project off. Tianjin itself is an extremely environmentally-unsafe city, which has lead some critics to argue that attempting to build an eco-friendly city is simply a propaganda move by the Chinese government (ThinkDesign). I, however, do not think that making the Eco-City itself is actually the main focus of this project. Instead, the city provides a breeding ground for testing new approaches to creating greener cities.
          As Annelise said, over 600 companies already have signed on to the project, but going further, they have signed on to test out their own environmentally friendly products. Take for instance GM's driver-less cars that are expected to be ready or on the market by 2020. GM, like many other "green" companies, wants to use Tianjin as a proving ground/practice area to test their new technologies. Other innovations include in-home medical evaluations, a Swedish waste management systems that takes trash away from your house, and not to mention the widespread use of solar, wind, and various other green technologies that will be integrated throughout the city (Good but possibly outdated NY Times article discusses more of the proposed projects). 
          This city will not only feature many state-of-the-art green technologies but also the development of eco-friendly city planning on a huge scale. With seven city sectors, each designed for a specific purpose, and widely accessible green transportation, getting around the city will be very environmentally friendly. Reshaping our transportation practices, water and waste management techniques, and energy consumption proclivities certainly is on the cutting edge of city planning. Going back to Annelise's last sentence, I wonder whether the U.S. should get on board and how might we benefit from this forward-looking development in urban planning and green tech-integrated cities. 
          Obviously, with 80% of the population already living in urban areas, the U.S. will not be engaging in city building like China, but hopefully lawmakers can adapt the technologies that are going into these eco-cities into our own urban surroundings. However, if our cities, which are mainly centers of employment for people living in the suburbs, are unable to be re-planned, will we be forever stuck with this environmentally-unfriendly, antiquated public infrastructure?  Is Tianjin really a futuristic city or just some narrow experiment that does not apply to countries with already highly urbanized populations? What does this say about the idea of eco-cities as the "cities of the future"? Only time will tell to see if Tianjin can prove to be environmentally friendly. I would doubt that the Tianjin eco-city will change much for its future inhabitants, considering the widespread heavy pollution ~6 miles to the south, where morning commutes are like this:

(by the way that's not fog)


ThinkDesign Article: http://www.thinkdesignmagazine.com/architecture/tianjin-eco-city-the-future-or-a-chinese-hoax 

P4T: Africa, the Resource Curse, and China

          Last Thursday, I went to the second P4T (Preparing for Tomorrow) symposium, which focused on aid to Africa. One of the moderators, Blaise Buma, from Cameroon, mentioned how little the U.S. trades with African nations and how China has taken the route of trying to develop African countries through trade as opposed to aid. Reading Stiglitz's chapter on "Lifting the Resource Curse" after attending this P4T event, I found it interesting that Stiglitz mentioned using trade as a vehicle to help countries develop only at the end of the chapter in saying that trade practices can be used to enforce "good behavior," i.e. political openness, economic transparency, and fair-trading.
          I know I am probably forgetting my economics 101, but when there is a "resource curse," the economy becomes focused on developing natural resources, preventing workers from developing secondary, tertiary, or other industries. Given this understanding, could the problem of the "resource curse" be sidestepped by liberalizing trade?
          Earlier in the course, we discussed how trade liberalization can be a vehicle for national growth, but for the United States and Africa, from what I understand, there is a lack of bilateral economic and trade relations. The U.S. sends aid to Africa, hoping that this will help improve social or health conditions, but the U.S. does not focus on building up trade with Africa. Perhaps the reason is that the U.S. imposes social and political benchmarks for African countries applying for aid or trade agreements. This runs counter to what Stiglitz says. The demands for more liberal social and political policies are often forced onto countries that do not have a demand for such policies, which can hinder the development of liberal policies such as transparency or eliminating corruption (Stiglitz 152). Considering the U.S.'s development practices might do more harm than good, is it any wonder that China, which is focusing on trading with Africa rather than promoting democracy and anti-corruption policies, is quickly gaining influence in Africa?
          Already China is helping Africa develop their agriculture, which has to compete with U.S. subsidized agribusinesses on the global market. By helping Africa become self-sustaining agriculturally, they will not have to import food from the U.S. as they do now. Perhaps, this will help Africa to "stand on its own two feet" economically. If the real trouble in Africa is that they are under-developed because of social and political structural problems, i.e. corruption, lack of the rule of law, etc., could it be possible to sidestep these problems by focusing on their economic development rather than political and social development?         
          Using China as a case study, they have corruption on a massive scale, an undemocratic political system, and poor people on the scale of the hundreds of thousands. Because they are not exactly resource rich per capita, they do not have a "resource curse." However, they have developed at incredible rates, despite these perceived political and social shortcomings. It is interesting therefore that Blaise mentioned that many African countries are beginning to look to China as their bedrock for development.

P4T Latin America Summit

          Tonight, I took the opportunity to go to the Latin America - U.S. aid summit put on by P4T (Preparing for Tomorrow). With Stephen Vetter the president of Partners of the Americas, a historian on Bolivian history, and Bethany Reynolds, a W&L senior holding the presentation, the summit gave me some insight into the U.S.-Western Hemisphere relations.
          Bethany, who spent the past summer in Guatemala, discussed how around the start of the Cold War, because of the purported communist leanings of Guatemala's democratically elected president Bermejo, the U.S. used the CIA to force Bermejo out of government. The anti-communist measures employed in Guatemala drastically harmed the country's development. Even today, over half of the population lives below the poverty line because of the lack of economic development and other social problems in Guatemala, some of which arose from the civil war fomented by the U.S..
          Next, a historian on Bolivia covered the relationship between the U.S. and Bolivia from its inception up until the present day. He noted that the U.S. style of pursuing economic development is not received well in Bolivia, especially because the Bolivians have their own way of doing things. They have a particular cultural and social identity and traditional economic practices that they would like to keep in place, but US-AID would harm these things. Instead of supplying aid and experts who will only attempt to change Bolivian culture and traditional economic practices, he said that US-AID or other NGOs need to aim for a grass-roots development strategy. By helping Bolivians to have more education, open commercial markets, and an equal society, the U.S. can make a great deal of progress in helping Bolivia develop.
          Finally, Mr. Stephen Vetter spoke about the relations between the U.S. and other Western Hemisphere nations by highlighting the efforts of the not-for-profit "people to people" organization Partners of the Americas  in Jamaica and Brazil. In Jamaica, Partners of the Americas tried to create cultural centers that would help women, people in poverty, and the development of human capital in Jamaica, but they ran into limits imposed by multiple actors: the U.S. itself, Jamaican political parties, and other private sector organizations that wanted to put their own influence on what was intended to be a grass-roots project. However, the project never managed to get off the ground, but in Brazil, the story is different. Because the Partners of the Americas group garnered so much attention, other NGOs have taken its place, effectively allowing the grass-roots efforts to escape the limits imposed by other controlling parties. Recent proposals for development include encouraging college exchange programs between South America and the United States. By doing this, the U.S. can improve Western-Hemisphere relations, increase economic development and redefine the image of U.S. Aid.

          What I learned through all the stories was that the United States has been very controlling and lacking in empathy in attempting push its agenda for how countries should develop and become part of the global markets. It is this mindset, in fact, that has caused a lot of problems for development and for our international relations. Perhaps, the lesson is that, the U.S. should be thinking of these relationships in terms of partnerships  rather than as investments.

**There will also be another summit tomorrow night which will cover U.S. Aid to Africa. It starts a 7:00 in the Commons room 216. This time it includes a panel with professor Dickovick. I recommend going.

Krugman on Romney's Economic Advisors

          Here's an article written by Paul Krugman last week, in which he says that the U.S. is finally "recovering in earnest." The article has a political message in that it is meant to discredit those who favor Romney's economic plan, who believe that this recession is similar to the recessions in 1981-2 and that it is the mere presence of Obama in the White House that is discouraging economic success. he makes a point that is not strongly highlighted in his book "The Return of Depression Economics."
          In the article, he makes the distinction between this recession as a financial-crisis recession and the 1981-2 recession as a "postmodern recession," which are brought on by high interest rates. As Krugman argues in his book that a lack of understanding worsened the recession, it is important to make sure that we fully understand the nature of the crisis and of this current recession if we are to overcome it and prevent future crises (190).
          If Krugman is right that our economy is already well on the road to recovery, this will mean that regardless of who is elected today, the next President will have the opportunity to start with a much healthier economy. What will this mean for the next four years? Perhaps it will provide a free political range for the candidates to carry out their objectives, or considering there will be divided government with a Republican House maybe there will be greater partisanship.