First headline: "Beggar-Thy-Neighbor Protectionism Looms After Doha Trade Talks".
Bloomberg reports that the latest round of global trade talks may be faltering, and that discussions among WTO negotiators could be the last of their kind. The effects of globalization and technology may have rendered multilateral trade deals obsolete, although past benefits of such deals were substantial.
The flagging momentum for multilateral trade deals in part reflects the success of earlier negotiations. After eight previous rounds of global agreements, developed countries have lowered tariffs to an average 4 percent from 40 percent, and more than half the world's trade is now duty-free.
Multilateral accords may also be made irrelevant by globalization, as technology cuts obstacles to trade in computing, banking and the media with less government involvement.
Although these factors have allowed for continued growth in global trade, market strategists are still worried about looming signs of protectionism.
Meanwhile, protectionist sentiment in the U.S. and elsewhere is killing lawmakers' appetite for big new multinational accords as voters and politicians blame competition from emerging economies for the loss of thousands of manufacturing jobs.
Protectionism ``is likely to become an increasing concern for the market in the months ahead,'' says Jens Nordvig, an economist at Goldman Sachs Group Inc. in New York.
A poll for NBC News and the Wall Street Journal in March found only 28 percent of Americans viewed free trade deals as beneficial, compared with 46 percent who said they were harmful. When the same question was asked in December 1999, 39 percent were positive about free trade, 30 percent negative.
The article goes on to recite claims from the US and Europe that China is unfairly supporting its exporters by maintaining an undervalued currency. This, as the now-familiar refrain suggests, gives the Chinese an unfair advantage in trade. What to make of these claims?
Caroline Baum takes up the subject of currency manipulation in her recent editorial, "China Isn't a Manipulator, U.S. Congress Is".
She notes that while the U.S. Treasury had officially avoided labeling the Chinese currency manipulators, members of Congress are far more willing to publicly level charges while voicing support for all manner of (protectionist) trade legislation.
Here's Caroline's take:
Critics of China's currency-management policy claim the yuan is undervalued by as much as 40 percent, giving the country's exports a competitive advantage.
You never hear much about the disadvantages, about China paying artificially inflated prices for the capital goods and intermediate materials it imports. It overpays for vast amounts of raw materials, everything from oil to copper to steel.
At the same time, do American consumers want to pay 40 percent more for underwear and other low-end apparel from China? (China's lost market share would be other emerging countries' gain, but it would still mean higher import prices for Americans.)
And in case you'd like to get another perspective on these issues (without having to do a bit of additional reading), listen to Jim Puplava's comments in the "Big Picture" segment (part 2, at the 26:30 mark) of the Financial Sense Newshour's June 2, 2007 broadcast. Transcript is available.