Thursday, January 13, 2005
"Trade, not aid, is really the engine for growth"
said Mr. Jayasinghe, Sri Lanka's ambassador to the EU - The Asian Wall Street Journal, Thursday, January 13, 2005
For you crazy cats about liberal trade...
Debt Talks - A Dead End?
So, we've had the debt moratorium talks with the Paris Club and G7. The wealthy nations are not ready to give out debt cancellation, but they are offering moratoriums. And what the heck is a "moratorium" anyway?
n. mor·a·to·ri·um
1. An authorization to a debtor, such as a bank or nation, permitting temporary suspension of payments.
2. An authorized period of delay in the performance of an obligation.
Okay, now that's cleared up... It's a fancy word for a temporary debt freeze. So when it comes to debt, how do all the countries balance out? Check out this article by BBC for a comparison of country debt in the tsunami-affected region and a (way too) brief history of debt in Third World countries today.
So far, Indonesia, Sri Lanka and the Seychelles indicated they would accept the suspension of debt, and even asked more aggressively for debt forgiveness and unconditional aid. Thailand and India have refused the moratorium, in fear that it will be like screaming "Fire!" in a crowded theater, scaring valuable (and cautious) investors away.
Developmental economists debate about debt all the time (in favor of debt reduction over more loans, which inevitably will go to corrupt or incompetent governments/cronies). I said I'll comment on the debt issues for the tsunami - I'm afraid that at this point in time, the world remains wary from the 60's and 70's era and has left it for WB and IMF to take care of complex issues. A clean slate (with debt cancellation) for developing countries remains an idealist's dream.
Continued from the WSJ article...
Sri Lankan officials are lobbying the EU to relax some of its import restrictions, such as the "rules of origin" requirement that puts some Sri Lankan exports in a higher tariff bracket. Though Sri Lanka was pressing the EU for trade concessions long before the tsunami, Colombo hopes that the disaster will give added impetus to the talks.
"Trade, not aid, is really the engine for growth," said Mr. Jayasinghe. "Market access [to Europe] is something we would also hope for."
So... What About This Trade Thing?
The EU's trade department is exploring 3 ways to help areas affected by the tsunami:
1. It will speed up an overhaul of a system that gives trade preferences to poor and developing countries. - All developing countries can benefit from the new rules, but coincidentally, they will go a long way to propping up tsunami-hit economies. The EU had been working on this proposal already, but is now in talks for speeding up the system overhaul to all developing countries.
Thai shrimp, Indonesian fish, and Indian and Sri Lankan textile exports to the EU are expected to boom under the new rules. Significantly, the rules will give Sri Lanka duty-free access to EU textiles markets.
2. In the regions affected, the EU also may opt within the next two weeks to eliminate punitive import tariffs on some companies that are considered to be "dumping" on the EU market. This is a selective measure on companies affected by the tsunami disaster (excludes in-land companies) - such as Indian plastics, Indonesian chemicals, and Thai steel and iron tubes.
"We will give relief to companies that were touched by the disaster, but we will not lift measures across the board," said an EU official close to the case. Fair enough - for both the Asian countries and the EU market.
3. The EU is also looking into diverting existing funds into trade assistance for affected area. Every year, the EU gives several million euros toward long-term trade-development projects, such as training. These funds, for instance, could be redirected to help reubuild devastated fishing industries to meet international food-safety standards. Fungibility is key.
A very crude logic to all this is:
EU trade preferences (trade barriers) go down
--> developing countries can export products to EU market + EU consumers benefit from cheaper goods
--> developing countries are able to build their export economy, pumping in technology and improvements over time for long-term development
--> competition increases, labor wages will rise, cost and quality of living will rise, developing countries will start importing goods from developed countries out of need/want = trade
--> More level global playing field
Again, this is a very crude logic of capitalism and trade. It's a country's choice not to go on this capitalism band-wagon, but it's not even an option right now with high trade barriers.
What's the Catch?
Before the EU can install the new rules, it needs approval from the EU's 25 states as well as the European Parliament. That approval has been stalled, as individual members have quibbled over sections of the reform.
And what about the US? Well, incidentally, the WSJ that day reported that in November 2004 there was a record-high in a US trade gap. The weak dollar would have been good news for US exports, but the indexes showed that it wasn't the case. Due to high oil demand and prices, US imports are on the rise. The US is on a guard for its trade policies, no doubt.
For the last 1 1/2 year I was in Asia, the local papers were quite sensitive each time Bush put up safeguards on Chinese and Hong Kong textiles - and it happened a lot. When trouble's a-brew at the homefront, I foresee the policies becoming more hostile and the gates closing tighter.
Breakthrough or Another Disappointment?
One of the things that I am starting to see is the momentum that this tsunami-crisis has. This can potentially be a breakthrough for world development (developing countries penetrating First World markets). My bets are still on the cautious side, but never say never.
I wish investigating about this could be my day-job...
For you crazy cats about liberal trade...
Debt Talks - A Dead End?
So, we've had the debt moratorium talks with the Paris Club and G7. The wealthy nations are not ready to give out debt cancellation, but they are offering moratoriums. And what the heck is a "moratorium" anyway?
n. mor·a·to·ri·um
1. An authorization to a debtor, such as a bank or nation, permitting temporary suspension of payments.
2. An authorized period of delay in the performance of an obligation.
Okay, now that's cleared up... It's a fancy word for a temporary debt freeze. So when it comes to debt, how do all the countries balance out? Check out this article by BBC for a comparison of country debt in the tsunami-affected region and a (way too) brief history of debt in Third World countries today.
So far, Indonesia, Sri Lanka and the Seychelles indicated they would accept the suspension of debt, and even asked more aggressively for debt forgiveness and unconditional aid. Thailand and India have refused the moratorium, in fear that it will be like screaming "Fire!" in a crowded theater, scaring valuable (and cautious) investors away.
Developmental economists debate about debt all the time (in favor of debt reduction over more loans, which inevitably will go to corrupt or incompetent governments/cronies). I said I'll comment on the debt issues for the tsunami - I'm afraid that at this point in time, the world remains wary from the 60's and 70's era and has left it for WB and IMF to take care of complex issues. A clean slate (with debt cancellation) for developing countries remains an idealist's dream.
Continued from the WSJ article...
Sri Lankan officials are lobbying the EU to relax some of its import restrictions, such as the "rules of origin" requirement that puts some Sri Lankan exports in a higher tariff bracket. Though Sri Lanka was pressing the EU for trade concessions long before the tsunami, Colombo hopes that the disaster will give added impetus to the talks.
"Trade, not aid, is really the engine for growth," said Mr. Jayasinghe. "Market access [to Europe] is something we would also hope for."
So... What About This Trade Thing?
The EU's trade department is exploring 3 ways to help areas affected by the tsunami:
1. It will speed up an overhaul of a system that gives trade preferences to poor and developing countries. - All developing countries can benefit from the new rules, but coincidentally, they will go a long way to propping up tsunami-hit economies. The EU had been working on this proposal already, but is now in talks for speeding up the system overhaul to all developing countries.
Thai shrimp, Indonesian fish, and Indian and Sri Lankan textile exports to the EU are expected to boom under the new rules. Significantly, the rules will give Sri Lanka duty-free access to EU textiles markets.
2. In the regions affected, the EU also may opt within the next two weeks to eliminate punitive import tariffs on some companies that are considered to be "dumping" on the EU market. This is a selective measure on companies affected by the tsunami disaster (excludes in-land companies) - such as Indian plastics, Indonesian chemicals, and Thai steel and iron tubes.
"We will give relief to companies that were touched by the disaster, but we will not lift measures across the board," said an EU official close to the case. Fair enough - for both the Asian countries and the EU market.
3. The EU is also looking into diverting existing funds into trade assistance for affected area. Every year, the EU gives several million euros toward long-term trade-development projects, such as training. These funds, for instance, could be redirected to help reubuild devastated fishing industries to meet international food-safety standards. Fungibility is key.
A very crude logic to all this is:
EU trade preferences (trade barriers) go down
--> developing countries can export products to EU market + EU consumers benefit from cheaper goods
--> developing countries are able to build their export economy, pumping in technology and improvements over time for long-term development
--> competition increases, labor wages will rise, cost and quality of living will rise, developing countries will start importing goods from developed countries out of need/want = trade
--> More level global playing field
Again, this is a very crude logic of capitalism and trade. It's a country's choice not to go on this capitalism band-wagon, but it's not even an option right now with high trade barriers.
What's the Catch?
Before the EU can install the new rules, it needs approval from the EU's 25 states as well as the European Parliament. That approval has been stalled, as individual members have quibbled over sections of the reform.
And what about the US? Well, incidentally, the WSJ that day reported that in November 2004 there was a record-high in a US trade gap. The weak dollar would have been good news for US exports, but the indexes showed that it wasn't the case. Due to high oil demand and prices, US imports are on the rise. The US is on a guard for its trade policies, no doubt.
For the last 1 1/2 year I was in Asia, the local papers were quite sensitive each time Bush put up safeguards on Chinese and Hong Kong textiles - and it happened a lot. When trouble's a-brew at the homefront, I foresee the policies becoming more hostile and the gates closing tighter.
Breakthrough or Another Disappointment?
One of the things that I am starting to see is the momentum that this tsunami-crisis has. This can potentially be a breakthrough for world development (developing countries penetrating First World markets). My bets are still on the cautious side, but never say never.
I wish investigating about this could be my day-job...
// posted by sakit @ 8:23 PM 
Comments:
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It’s not a question of how much money we will give to these countries. The real question is how to help the Third World Countries develop a culture of science.
We know that more people in Third world countries will die at birth, of malaria, AIDS, and malnutrition. People in these countries can expect a life of 52 years. Put another way, the average person in a Third world nation will be approaching their death bed while the average American will just be exiting his middle age years and enter the prime of their earning years. It is stunning that some of these Third World Nation-States have negative population growth.
Is debt relief a feasible solution to Third World poverty or a waste of time and corpus? Does debt relief promote investment and growth? The simple answer is no.
Is debt relief needed for Tsunami victims? I don’t think it is the best solution. I would like to see data that shows that loan market in the country has come to a halt. If there is no investment money flowing into the country then debt relief would be needed.
But, what good would debt relief do?
Third World Countries lack much of the basic infrastructure that are the basis for profitable economy. The U.S. and international efforts would be better suited by helping these countries establish property rights, roads, schools, hospitals, and clean water. Nonprofit organizations need to help make Third World Countries attractive places for both domestic and foreign investment. Until these problems are solved, the best and the brightest people will continue to live Third World Countries causing a brain drain, and there won’t be any real investments in these countries.
Until these countries have the required basic infrastructure, they will continue to languish in poverty. But, there is hope. Hopefully, the race to the bottom will eventually lead to better labor laws, stronger economies, and better infrastructure in Third World Countries.
Sweatshops bring better roads, hospitals, and clean water. It is up to the national and local governments of Third World nations to build adequate labor laws once they have these things. The corporations use them. They need to use the corporations. Of course, these type of reasoning will only make corporations richer. But, again they are their to make money. It is up to the government to protect the people's rights. Without strong labor regulations in the United States, people Children would still be working in coal mines. This is my two cents.
We know that more people in Third world countries will die at birth, of malaria, AIDS, and malnutrition. People in these countries can expect a life of 52 years. Put another way, the average person in a Third world nation will be approaching their death bed while the average American will just be exiting his middle age years and enter the prime of their earning years. It is stunning that some of these Third World Nation-States have negative population growth.
Is debt relief a feasible solution to Third World poverty or a waste of time and corpus? Does debt relief promote investment and growth? The simple answer is no.
Is debt relief needed for Tsunami victims? I don’t think it is the best solution. I would like to see data that shows that loan market in the country has come to a halt. If there is no investment money flowing into the country then debt relief would be needed.
But, what good would debt relief do?
Third World Countries lack much of the basic infrastructure that are the basis for profitable economy. The U.S. and international efforts would be better suited by helping these countries establish property rights, roads, schools, hospitals, and clean water. Nonprofit organizations need to help make Third World Countries attractive places for both domestic and foreign investment. Until these problems are solved, the best and the brightest people will continue to live Third World Countries causing a brain drain, and there won’t be any real investments in these countries.
Until these countries have the required basic infrastructure, they will continue to languish in poverty. But, there is hope. Hopefully, the race to the bottom will eventually lead to better labor laws, stronger economies, and better infrastructure in Third World Countries.
Sweatshops bring better roads, hospitals, and clean water. It is up to the national and local governments of Third World nations to build adequate labor laws once they have these things. The corporations use them. They need to use the corporations. Of course, these type of reasoning will only make corporations richer. But, again they are their to make money. It is up to the government to protect the people's rights. Without strong labor regulations in the United States, people Children would still be working in coal mines. This is my two cents.
# posted by 
: 10:08 PM
: 10:08 PM
I'm glad you posted the definition of moratorium for me, because I kept thinking for some time, that it had to do with mortuaries. This is what I get for taking Latin in high school.
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