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PIIE Update Newsletter
July 14, 2010
"Top Think Tank in the World" in 2008
as determined by
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FEATURED |
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New Book
China's Strategy to Secure Natural Resources: Risks, Dangers, and Opportunities
Theodore H. Moran
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The rapid emergence of China as a major industrial power poses a complex challenge for global resource markets. Backed by the Chinese government, Chinese companies have been acquiring equity stakes in natural resource companies, extending loans to mining and petroleum investors, and writing long-term procurement contracts for oil and minerals. These activities have aroused concern that China might be "locking up" natural resource supplies, gaining "preferential access" to available output, and extending "control" over the world's extractive industries. On the demand side, Chinese appetite for vast amounts of energy and minerals puts tremendous strain on the international supply system. On the supply side, Chinese efforts to procure raw materials can either exacerbate or help solve the problems of high demand.
Evidence from the 16 largest Chinese natural resource procurement arrangements shows that Chinese efforts—like Japanese deployments of capital and purchase agreements in the late 1970s through the 1980s—fall predominantly into categories that help expand, diversify, and make more competitive the global supplier system. Investigation of smaller projects indicates the 16 largest do not suffer from selection bias. However, Chinese attempts to exercise control over mining of rare earth elements may constitute a significant exception.
The investigative focus of this analysis is deliberately narrow and precise, assessing the impact of Chinese resource procurement on the structure of the global supply base. The broader policy discussion in the concluding chapter raises other separate important issues, including the impact of Chinese resource procurement on rogue states, on authoritarian leadership, on civil wars, on corrupt payments and the deterioration of governance standards, and on environmental damage. Such effects may make patterns of Chinese resource procurement objectionable, on grounds quite apart from the debate about possible "control" of access on the part of China and Chinese companies.
>> Preview and purchase book online
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Op-ed
Let's Do a Doha Deal
Gary Clyde Hufbauer and
Robert Z. Lawrence
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Originally scheduled to end in 2005, the Doha Round of multilateral trade negotiations have dragged into their ninth year. While many observers assign blame to the complexity of 153 members reaching a consensus, the heart of the matter is far simpler. If the United States and China come up with new offers, the momentum for a speedy agreement will be unstoppable. Currently, political considerations prevent this from happening. President Obama has pushed trade policy to the back burner while he concentrates on healthcare, financial reform, and climate change. China is reluctant to make new concessions having made formidable concessions in the talks that led to its accession to the World Trade Organization (WTO) in 2001.
Hufbauer and Lawrence argue that given the passage of time, China now needs to put additional offers on the table: agree to join the WTO's Government Procurement Agreement; volunteer to join sectoral liberalization agreements in chemicals, electronics, and environmental goods and services; and be at the front of talks to liberalize services, not dragging the rear. In return for Chinese concessions, the United States and other developed countries should grant China recognition as a market economy, with normal remedies in antidumping and safeguard cases, and also put an end to the annual compliance reviews of its implementation of the accession agreement. If the United States and China are on board, other major players will feel enormous pressure to contribute.
>>
Read full op-ed
>> See also Figuring Out the Doha Round
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Working Paper 10-11
The Design and Effects of Monetary Policy in Sub-Saharan African Countries
[pdf]
Mohsin S. Khan
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Since the 1990s there have been a number of major changes in the design and conduct of monetary policy. In a globalized environment, there is less time to adjust to shocks and greater need to achieve closer convergence of economic performance among trading partners. As a result, a number of developing countries have adopted exchange rate regimes with more flexibility, and thereby greater scope for monetary policy. Notable examples include a number of sub-Saharan African countries moving from fixed exchange-rate regimes to more flexible regimes and the adoption of formal or informal inflation targeting regimes by some of these countries. These changes have triggered considerable debate on how monetary policy should be conducted and the effects it has on the real economy. Mohsin Khan discusses the conventional objectives, targets, and instruments of monetary policy, including an analysis of the monetary transmission process. This paper examines the problems of dynamic inconsistency and inflationary bias, where governments deviate from their stated or target inflation level in order to obtain short-run output gains. Most economists now agree that any rules-based regime permits a margin for discretion, and they reject the idea that rules and discretion are mutually exclusive. As policymakers in many countries throughout the world have gravitated toward an approach based more on rules than on full discretion, a key issue is choosing an appropriate policy target, or nominal anchor. Khan discusses nominal anchors and current monetary frameworks before moving on to analyze the output effects of monetary policy. He looks at the relationship between the growth of GDP and different monetary aggregates in 20 sub-Saharan African economies and finds empirical support for the hypothesis that credit growth is more closely linked than is money growth to the growth of real GDP in these countries.
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Read full working paper [pdf]
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PIIE Noted in the News and on the Web
KUOW Puget Sound Public Radio
European Economy
Steve Scher at KUOW Puget Sound Public Radio discusses whether the European Union is cracking under economic pressure and if austerity measures really work with guests John Authers, Financial Times; Debra Glassman, University of Washington; Jacob Kirkegaard, Peterson Institute for International Economics; and Antonio de Lecea, Economic and Financial Minister of the Delegation of the European Union to the United States.
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Gary Clyde Hufbauer
Woan Foong Wong
Hufbauer and Wong update the augmented misery index and find that rising inflation, a 9.7 percent unemployment rate, and retreating home prices have pushed the augmented misery index in the first half of 2010 to double digits. The augmented misery index is an indicator that combines the inflation rate, the unemployment rate, and the change in housing prices to capture the national economic mood of bad times (a high index number) or good times (a low index number).
Read the augmented misery index. |
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Peterson Institute for International Economics
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Tel: 202-328-9000 | Fax: 202-659-3225 | www.piie.com
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