Monthly Archives: June 2005

China Trade With EU

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I’m not very happy with the ‘US Trade Figures‘ post I put up last Friday. I think it’s a glorious mess. The key to the problem is that I tried to deal with two – interrelated but disinct – topics at once: the euro and China trade. So today lets ignore the euro (which has once more resumed the downwards drift, even as I write) and take a bit of a closer look at where we are – in trade terms – with China. (Btw: the planet has finally returned to its orbit, and Brad Setser has an analysis of the US trade data here).

The big item in this weekend’s news is, of course, the agreement reached with Beijing on textiles. The EU textile industry will now have three years to adapt, but since textile manufacturers don’t appear to have taken too much advantage of the ten previous years, it is hard to know whether this will serve any useful purpose. Doubly so, since it is not yet clear how the calculations will be made, and I have the distinct impression that much of the recent surge in imports will now, in effect, be consolidated.

Be that as it may, what about the broader issue?
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Asterix Economics

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There is no doubt that the EU Budget debate will warm up considerably this week. Unfortunately, as Le Monde suggests it is a case of “Le budget europ?en entre rabais britannique et subventions agricoles” (The EU budget: between the British rebate and the agricultural subsidies). Now it does occur to me that there is another dimension here:

“Generations of French children have grown up on the “Asterix” comic books and the myth of the leisurely British who were conquered by Rome because among their shortcomings was a horror of working on weekends. Today, instead of poking fun at their island neighbor, some in France are wondering whether they can learn from it.”

Now *a* generation of French children grew up on this because there was a time when it bore some relation to reality: let’s say in the 60’s and 70’s. But things have changed. Today, according to French Socialist politician Henri Emmanuelli:

“You can’t speak about Great Britain without specifying that to earn a living, people there have to have two or three jobs….Even better than that would be slavery with a bowl of rice as recompense. That way there would be no unemployment at all.”

There is just one snag attached to all this fun-poking at the expense of the Brits, and it is called the rebate. If things in the UK are going so badly, then how come they are considered to be so rich they can afford to pay proportionally more? There appears to be an inconsistency here. Isn’t someone about to find themselves hoisted on their own petard?

The Forint Is Not The Swiss Frank

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Interesting to note, following our discussion of the state of play of the Hungarian economy, that Hungary’s finance minister is not a euro pessimist. Janos Veres said in an interview with the Financial Times that he did not foresee a wider crisis for the single currency and that Hungary had ‘no option’ but to continue aiming to join the eurozone in 2010:

“I do not think Hungary has any other playing field,” said Mr Veres. “The Hungarian forint is not the Swiss franc. It cannot be maintained independently for decades.”

But Mr Veres, whose left-liberal government faces elections next spring, rejected calls for deep spending cuts that many economists view as necessary to keep Hungary on track for joining the single currency.

Instead, he outlined a plan for moderate spending cuts and the introduction of a simplified tax system designed to increase revenues next year. “We will not do anything that represents a radical, structural change,” he said.

Obviously the attraction is those nice low interest rates, to help pay for all that extra debt. But seriously, with the economically healthier Czech Republic now questioning whether it will join the euro, isn’t there a danger of the eurozone becoming a club for those structurally incapable of walking alone. “Oh when you walk, through the storm, hold your head up high,……….”

Not Europe, But Still a Good Story

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Give me one real live anarchist over a bunch of yipping libertarians any day of the week, and twice on Sunday.

And so it was that the nation’s most militant labor organization, the brotherhood of Big Bill Haywood and Joe Hill, came to publish the lyrics of “Run, Cthulhu, Run,” a Lovecraftian parody of the bluegrass standard “Molly and Tenbrooks.”

The rest is just as wacky, just as human.

African Debt Deal

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Well, this isn’t the end of Africa’s suffering, but it is a start.

“British Finance Minister Gordon Brown said the deal would provide 100 percent write-offs immediately for 18 countries and that more countries would qualify for relief later.” The debt deal is very good news for people in the 18 countries that will immediately benefit,” Romilly Greenhill of ActionAid said. “But it will do little to immediately help millions in at least 40 other countries that also need 100 percent debt relief.” Among those in line for rapid relief are countries such as Rwanda, Ethiopia, Mauritania and Zambia as well as, beyond Africa, Honduras and Bolivia.”

OK, the thread is open if anyone wants to express an opinion.

World Class Model Services

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“Ufff”, my partner said as she put to rest a bunch of plastic bags she had just managed to drag from the supermarket, “so many things to buy”. I was pealing the spuds at the kitchen sink at the time, preparing the lunch, but I still managed to lean over, give her a kiss, and remind her that not everything can be bought: as the Beatles used to say “money can’t buy you love”. Then I remembered this headline.

Cabins designed in the Netherlands, (made in China no-doubt), sex workers from Eastern Europe (some 40,000 of them apparently), (capital possibly kindly provided by hedge funds), and customers from Western Europe, the US and Japan. Well, comparative advantage triumphs again. I imagine the terms of the Bolkestein directive will not be applied.

US Trade Numbers Are In

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So are the China trade surplus ones. Dave at MacroBlog has the details on China. I’m waiting for Brad Setser to post, but he must be either doing his sums, or having a late breakfast :). Before we get some blog analysis (even Brad Delong is quiet today) you can get the basics here. In fact the rise in the April CA deficit to $57bn, from $53.6bn in March, is supposed to be good news, since the increase wasn’t as big as expected.

Essentially I am outside the Atlantic blog consensus here, since I think the US dollar will hold, and that it is the euro which is in trouble. I have a little post on this here. Logically if the other major alternative as a reserve currency is in trouble under Bretton Woods Mark I, everyone goes home to Daddy. I think that is how it will be.

Update: Well Brad still isn’t there but Stephen Roach is. I think his view is the dominant one on the US blogging scene, and shared by non-blogging economists like Paul Krugman. I’m sorry, I think it’s wrong, and by a long way.

Update 2 I’m getting a little tired of waiting (incidentally General Glut has just passed by in comments, and he *does* have a post on the topic). Now the politically sensitive US trade gap with China widened $14.0 percent in April to $14.7 billion. This means it was $12 billion in March, or that it rose $2.7 billion. Now China’s surplus widened to $8.99 billion from $4.59 billion. Doing the arithmetic the surplus rose $4.4 billion. $4.4 billion minus $2.7 billion gives $1.7 billion, a hell of a big chunk of which was probably with Europe. I wish someone who really knew about this would write something, but my educated guess is that Chinese import penetration in Europe is now big and getting bigger by the month. Hence the row about globalisation in the French referendum. Basically what I am saying is that having this kind of issue in the Free Trade US of A is one thing, having it in the more anti-globalisation European core is going to be quite another. China the global imbalance to end all (im)balances.

Now if you want to understand something about China:
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Lithuania To Take Decision on Euro Referendum

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The Lituanian parliament is to debate a motion which proposes holding a referendum on euro membership. Lithuania is scheduled to join the euro in 2007. The Prague Daily Monitor also has an article which draws attention to the growing ‘euro’ scepticism in the Czech republic.

“The Lithuanian parliament will vote on whether or not to hold a referendum on the introduction of the single currency to the country, according to news agency AFP.

The Lithuanian opposition Liberal Democrat party has gathered the necessary 36 signatures required for the parliament to vote on the matter. It has now to do so within a month, as under Lithuanian law, lawmakers have to vote within one month after a proposal is introduced, says the press agency. After the EU Constitution was rejected by France and the Netherlands, the euro has found itself at the centre of debates.”