Monetary regionalism: regional integration without financial crises

The financial crises of the late 1990s have marked a watershed for the global economy and for regionalism. Prior to these crises, deregulation and liberalisation, in particular of financial markets, enjoyed widespread support. On the other hand, regional integration was aimed at improving conditions for regional trade and was based on Bela Balassa’s forty year old theory of regional integration. At the beginning of the 21st century, the theoretical approach to regional integration will have to be a different one. Regionalism will have to offer enhanced protection against financial crises, whereas trade liberalisation in an era of rapid trade liberalisation both offers fewer benefits and may be too complicated to implement due to high administrative costs associated in particular with free trade areas. The aim of this paper is to provide a theoretical framework for the emerging new monetary regionalism. Regions that wish to strengthen their co-operation in monetary and financial affairs today have the option of regionalism without trade agreements. East Asia is the most likely candidate for the implementation of monetary regionalism, also because East Asian policy makers continue to be frustrated with the lack of progress in the IMF’s reform process

Bilateral trade agreements in the Asia Pacific: wise or foolish policies?

Bilateralism is mushrooming in the Asia - Pacific, yet the motives for it remain puzzling. Why do countries devote substantial effort to bilateral free trade agreements that are providing limited additional benefits when compared both with unilateral liberalisation and with the multilateral regime? Furthermore, some of the deals recently implemented are less trade liberalising than the powerful rhetoric would suggest. For example , the free trade agreement between Australia and the United States is not including “substantially all the trade” and, on top of that, is asymmetric – Australia’s access to the American market is more restricted than vice versa. The paper first addresses some conceptual issues and analyses the disadvantages of bilateral free trade agreements. Here, the need for rules of origin is of particular concern. These have two effects. First, they result in additional costs to producers. Whilst the dismantling of tariffs reduces the cost of trade, the need to administer rules of origin increases them. Second, transnational production is made more complicated. In order to qualify for duty free trade, the region for the sourcing of inputs shrinks, with negative consequences for competitiveness. Subsequently, the bilateral agreements of Australia, Singapore and Thailand will be examined. At closer inspection, these preferential deals are not convincing. All of them require complex rules of origin and do not make a significant contribution to the liberalisation of trade

RCEP-Countries create Asia-Pacific free trade zone: trade facilitation but no integrated bloc

The signing of the Regional Comprehensive Economic Partnership (RCEP) on 15 Novem­ber 2020 establishes the world’s largest free trade area. The agreement was hailed as an important step forward for the international trade system: protectionism is no longer the only visible option for the third decade of the twenty-first century. But RCEP is a relatively weak instrument. It consolidates existing trade agreements in the region, but does not represent a breakthrough to a liberal economic space. It lacks the potential to make the Asia-Pacific region into a monolithic trading bloc, nor does it contribute to overcoming growing political tensions in the Indo-Pacific. (author's abstract

First summit of the anti-China coalition: Cornwall G7 highlights BRICS weakness

The 2021 G7 Summit of the heads of state and government of the seven leading indus­trial nations (Germany, France, Italy, Japan, Canada, United States, United Kingdom) will be held in Cornwall, UK, from 11 to 13 June. As host, British Prime Minister Boris Johnson has placed future relations with China at the top of the agenda. That priori­tisation is reflected in the guest list: Australia, India, South Korea and South Africa. The Cornwall G7 has been set up to develop a broad alliance against an increasingly aggressive China. The German government tends to play up China's economic signifi­cance and risks slipping into an outsider role, enabling a totalitarian state for eco­nomic gain. (author's abstract

Crises in Asia or crisis of globalisation?

The crises in Southeast and East Asia have started a new round of debate on the benefits and disadvantages of globalisation. We have to ask whether the crises in Asia were the result of failures in national economic policy or whether they were the consequence of ill-constructed global financial markets. It can be concluded that the crises were caused by a number of factors, both internal and external, but that the decisive shifts came from actors on international financial markets as well as from the IMF, whose activities fuelled the crises. To avoid a repetition, a number of options are discussed, including the introduction of a currency regime between the major players in the world economy as well as unilateral measures to defend developing countries’ economies against volatile international financial markets

Collateral damage from ECB strategy: ultra-loose monetary policy has little benefit - and harms many

"2015 will be a defining year for the European Central Bank. It is expected to start buying up government bonds from member states from the end of January. This means the ECB is entering into significant risk and becoming dependent on the fiscal policy of the member states. As the example of Greece demonstrates, the central bank is thus making itself -along with other state creditors- vulnerable to blackmail. Governments can threaten to stop servicing their debt, forcing the ECB to continue financing them. Furthermore, the reasoning for starting to finance member states is spurious. The supposed risks of deflation are actually small: while the prices of apples and heating oil have fallen, those of machine tools and consumer durables have not. At the same time, it is becoming increasingly apparent that the depreciation of the euro brought about by the loose monetary policy harbours huge disadvantages for many of Europe’s trade partners - from Switzerland to the US." (Autorenreferat

Stubbornly Germany first: options for reducing the world's largest current account surplus

Germany continues to be a major exporter of both goods and capital. In 2018, the current account surplus - at about $340 billion - will continue to be the world’s largest. Whilst German policy-makers and society celebrate the surpluses as the result of the competitiveness of German companies, they persistently ignore the other side of the balance of payments. Germany finances consumption and investment - abroad. The repeated explanations of the German government - arguing that the surpluses reflect private decisions that cannot be influenced by government policy - are not convincing. The German government has many options to reduce or raise taxes and can shape incentives to save or invest, but prefers to ignore these opportunities. Whilst many German observers eagerly point to the self-interested economic policies of the United States, Germany itself continues to place its own interests above the legitimate concerns of both its European and Atlantic partners. A continuation of the "Germany First" economic policies of the past two decades would constitute both a burden for European integration and the global trading system. (Autorenreferat

The structural weaknesses of TTIP: transatlantic partnership threatens more than just consumer protection

Questions concerning consumer rights have thus far dominated discussions about the planned Transatlantic Trade and Investment Partnership (TTIP). This is surprising, because very much more is at stake. Firstly, TTIP and similar large-scale projects endanger the future of the multilateral trading order. Secondly, before the agreement can be signed, enormous and as yet entirely unexplored obstacles will need to be overcome; this includes the question of inter-state dispute settlement. The economic benefits of TTIP will also be smaller than claimed, whereas the long-term political damage, especially for Germany, could be considerable. (author's abstract

Reshaping globalisation: a new order for international financial markets

Since the Mexican crisis in 1994/95, a large number of developing countries and emerging markets have been hit by financial crises. Argentina is the last country that is suffering from dramatic economic problems. The main cause of these crises are the deregulation and liberalisation of financial markets that have been associated with the current model of globalisation. This model is not sustainable: Is has contributed to massive economic problems in the developing world without providing the promised rewards in form of higher growth and reduced poverty. In this paper, the three main areas that influence the shape of financial markets are discussed and improvements are suggested: Firstly the exchange rate regimes of developing countries, secondly the shape of international credit markets and the asymmetric relationship between creditors and lenders and thirdly the main institution that provides partial governance, i.e. the International Monetary Fund. International financial markets have gained in importance, but they still lack many of the features that characterises the national financial sector. If globalisation shall be continued, we need those governance structures, e.g. a lender of last resort, at the international level. The reform agenda suggested in this paper is comprehensive, but rather evolutionary. Markets need rules and regulations, and today these are often not existent at the international level