Assigned News Items
Note: I will list here, for most of the term, the major news items that have appeared that are relevant for the course. I will usually discuss these, if only briefly, on Tuesdays (or the following Thursdays when Tuesdays are not available). You should be sure to be familiar with them from whatever news sources you are using. Where possible, I will provide links to the items online. I will include questions about some of them on exams.
- WTO rules that EU continues illegally to subsidize Airbus
-- WSJ: 9/23
| FT: 9/22
- Continuing a 12-year dispute between the EU/Airbus and the US/Boeing, the WTO has ruled that the EU has failed to eliminate its subsidies to Airbus, as it was required to do in an earlier WTO ruling.
- The US hailed the ruling as a victory, while the EU objected to parts of the report and will appeal the decision. A similar previous finding of US subsidies for Boeing still awaits a decision on a similar issue, which is likely to find against the US.
- If not resolved, the US may be permitted to impose more than $5 billion in annual tariffs against EU exports.
- Currency news:
-- WSJ: 9/21
| WSJ: 9/21
| FT: 9/20
- South Africa's rand rose in value due to rising prices for its exports of platinum and manganese.
- Japan's yen rose in value 1% on Wednesday, continuing its rise of 20% against the dollar in 2016. This is contrary the the intent and hopes of the Japanese government and central bank, "adding to the pressure on Japan’s fragile economy."
- Mexico's peso fell to its lowest level ever against the dollar, having fallen 13% this year and 33% over the past two years. Reasons are said to include prospects of higher US interest rates, the fall in prices of Mexico's oil exports, slower GDP growth, and the rise in the polls of Donald Trump.
- Canada and China begin talks for possible FTA
-- NYT: 9/22
- Prime Minister Justin Trudeau announced, during a visit to Canada by China's Premier Li Keqiang, that talks with China would begin on a possible free trade agreement.
- In August, Mr Li had made a similar announcement, but Canadian officials had said it was premature. Now it appears that several contentious issues -- labor standards, environmental protections and the role of Chinese state-owned firms -- have been resolved.
- This is part of Trudeau's efforts to develop stronger ties with China, efforts that have included that Canada is negotiating an extradition treaty with China.
- US lifts sanctions on Myanmar
-- WSJ: 9/15
| NYT: 9/15
- President Obama announced that the US would end its economic sanctions on Myanmar, after he met with Myanmar's de facto leader and Nobel laureate, Aung San Suu Kyi.
- Myanmar was known as Burma until 1989 after the country was taken over by its military. US sanctions were imposed in 1997. Removing the sanctions is meant to recognize and reward the moves the country has made recently toward democracy with last year's election that was won by Ms Aung San Suu Kyi. Some object that those moves are incomplete, especially as the military retains some seats in the parliament.
- The sanctions limit trade with Myanmar in jade and precious stones and limit Americans in doing business with the country's military officials and their affiliates. Other sanctions on doing business with Myanmar were lifted by Obama in May. And Myanmar will now be eligible for US trade preferences for developing countries. Sanctions imposed by Congress, related to North Korea and to arms sales and military cooperation, will remain.
- UK Approved the Hinkley Point Nuclear Project
-- WSJ: 9/16
| NYT: 9/16
- The UK government announced that it had approved the building of a nuclear power station, Hinkley Point, the first new plant in a generation. It will be owned 2/3 by the state-owned French firm EDF, and 1/3 by a Chinese firm.
- The project had been controversial in part because of the Chinese participation, but also because of a commitment to pay a high price for the electricity that it produces.
- Previously, the new Prime Minister, Theresa May, had put the project on hold due to security concerns, but this decision is apparently meant to signal that the UK is open to foreign investment in spite of the Brexit vote.
- World Bank President likely to serve a second term
-- FT: 9/15
- The President of the World Bank, Jim Yong Kim, is nearing the end of his five-year term and it now looks likely that he will serve a second term. This is of interest, because there is broad feeling within the Bank and also among policy professionals that he has not been effective and should be replaced.
- The implicit rules, ever since the Bretton Woods institutions were created after World War II, have been that the head of the World Bank would be American and the head of the IMF would be European. Pressures to give other parts of a world more of a role prompted the US to select Mr. Kim in 2012, as a Korean-born American. But as the President of Dartmouth, a medical doctor and an anthropologist, the development community did not view him, even then, as an appropriate choice.
- The reappointment is being pushed by the Obama administration before the election. No other candidates have emerged, and Mr Kim has been able to get the support of China, India, and Brazil for a second term.
- Hanjin bankuptcy strands cargo at sea
-- WSJ: 9/8
- One of the world's biggest shipping lines, Hanjin Shipping Co. of South Korea, filed for bankruptcy protection last week.
- As a result, the company's container ships are unable or unwilling to access ports and they are stranded at sea. Some ports won't let them in, because of uncertainty about who will pay for the port's services, as the company says it has no money. Other ports are being avoided in fear that creditors will seize the ships. They are carrying as much as $14 billion worth of cargo.
- Containers carry 95% of the world's manufactured goods. Of this, Hanjin accounts for only 3.2% of global capacity, but the disruption for those affected is substantial. Retailers are stocking up for the holiday season, and this may interfere with that, if not resolved soon.
- G20 Summit Meeting finished in China
-- WSJ: 9/6
| FT: 9/5
- Leaders at the G20 Summit in Hangzhou, China, which was held Sunday and Monday September 5-6, issued a communiqué calling for actions to increase global growth and improve the lives of ordinary citizens. They said they must "civilise capitalism" and address concerns about free trade and globalization.
- The communiqué steered largely clear, however, of a major topic of concern at the summit, which has been China's suplus of steel and its exports of steel onto world markets. It did include setting up a global body to monitor steel overproduction. China produces half of the world production of steel, and has begun to close some factories to deal with this.
- The leaders also committed to resist protectionist pressures and avoid competitive devaluations of their currencies.
- Egypt reimposed a zero-tolerance policy on imports of wheat contaminated with the fungus ergot
-- Economist: 9/3
- Most countries allow grain with up to 0.05% ergot, which is harmless. Egypt last year enforced a ban on imports with even trace amounts, which hardly any exporters could achieve. It disrupted markets, Egypt abandoned the policy, but now has reimposed it. This will likely reduce imports close to zero and push up prices both to consumers and to the government which buys wheat to provide low-cost bread to the masses.
- A UN study had found that the fungus posed no risk to Egyptian crops, but Egypt's own scientists ("pseudo-scientists" says the Economist) reached the opposite conclusion.
- This is only one example of many policies that Egypt uses to interfere with trade, motivated by protectionism and permitting corruption.