Avoiding the New Mediocre:The IMF,Doha and the New Multilateralism

Madame Christine Lagarde,Managing Director of the International Monetary Fund,addressed the Atlantic Council in Washington on 9 April.She spoke about the "new mediocre" she feels the global economy is falling into for reasons including aging populations and falling productivity growth.Reversing that decline in developed markets takes improving access to finances for SMEs,small and medium-sized enterprises,which represent most of the employment.The same applies to China.In Japan and the euro area,there are too many tax disincentives for them.
In too many countries,legal inequities still exist preventing access by women to the labour market.There are potentially huge global gains to be had by trade reform and integration.Completion of the Doha Round could give an economic boost of a trillion dollars.
The Doha Round is a series of trade negotiations among the World Trade Organization membership.It aims to achieve major reform of the international trading system through the introduction of lower trade barriers and revised international trade rules.The negotiations were named after the WTO's Fourth Ministerial Conference in Doha,Qatar,where they officially began in November 2001.The Doha Ministerial Declaration that came out of the Conference set forth the mandate for the negotiations,including on agriculture,services and an intellectual property topic,which had already begun.
The ministers at the Fourth Ministerial Conference also agreed on how to address the problems developing countries face when implementing the current WTO agreements.A fundamental objective of the Doha Round is to improve the trading prospects of developing countries.
How to dispel this new mediocre that is lurking on the horizon? We can only win by working together,Madame Lagarde insisted.The challenge for policy makers is to combine the policies that create growth with those that boost tomorrow's prospects.If countries strengthen their banks,it will reinforce the global financial system.If they implement climate-friendly policies,it will benefit their people and lower the global level of emissions.There is simply no alternative to the new multilateralism.The emerging markets and developing countries must have a seat at the table.Virtually our entire membership agrees,and they all await ratification by the United States Congress-if only to assert US leadership to a major institution for global financial stability,enhancing cooperation with new institutions in Asia and other places,the integration of dynamic emerging markets into the global economy through:
1.Financing for development.
2.New,sustainable development goals.
3.Addressing climate change.
They all interlink in many ways.How can we contribute on the IMF's three core deliverables?
1.Financing:we recently gave 390 million euros to the Ebola-affected countries from a catastrophe and containment relief trust that was set up.
2.Policy advice and analysis such as on domestic resource mobilisation;the role of inequality;energy subsidy reforms;carbon taxation-the time is right to price it right.
3.Technical assistance and training,such as our Massive Online Open Courses,which range from debt sustainability analysis to removing energy subsidies.Success will require a recommitment to international cooperation.In conclusion,Madame Lagarde quoted Winston Churchill,"I never worry about action;only inaction."

China Dominates Rare Earth Metals

Please note that this week,in addition to this post,two other posts of global interest have been published in the Extra Content blog.One deals with NATO ally Greece's debt crisis resolution program.The other explores the nature of Chinese naval power in the Asia-Pacific region.You may visit Extra Content by clicking on the link in the right column.
Speaking in Brussels last week,Chinese Premier Wen Jiabao was in a defensive mode.He said Europe shouldn't join the call for China to release its currency,the Yuan,from tight control.The problem wasn't with the Yuan,but with the U.S. dollar,Mr.Wen remarked.He also claimed China wasn't using rare earth metals as a bargaining chip with Japan.
There is considerable concern about China's control over the world's rare earth metal supply.China produces more than 90% of the world's rare earth metals.It has cut exports of the metals by 75% this year.The U.S. is considering filing a complaint with the World Trade Organization over possible Chinese hoarding of the metals.
Rare earth metals are used in everything from tanks to iPhones and hybrid cars.The U.S. has only one rare earth metal mine.It could take 15 years for the U.S. to restart its rare earth metal supply chain.There is a bill before Congress to do just that.

WTO Director Sees Progress

Pascal Lami,Director of the World Trade Organization,noted progress at the G8 summit in Italy last week:1.solid impetus,solid commitment to push back protectionist tendencies;2.commitment to finish the Doha round of negotiations;3.commitment to keep pushing on open trade,which is what developing nations need.As compared to last year,the U.S. and India have expressed the political will together.There remains a bit of compromising to be done,but their commitment to Doha 2010 is something new,Mr.Lami observed.
The G20 group of developed and key developing nations are to meet in Pittsburgh,Pennsylvania in September.The G8 summit may be considered to have been preparation for what many believe to be the more significant meeting.

Global Trade In Decline

The World Trade Organization says global trade will shrink by 9% this year,which is the worst performance since World War II.Jakob Kirkegaard of the Petersen Institute of International Economics thinks that is truly devastating.It starts the stuttering halt to the engine of globalization.The idea of decoupling will definitely have taken a shot across the bow.Asia has been dependent on ultimate demand by the U.S. and Europe.The bailouts are going to promote protectionism.There is a sense that tax money must be spent on domestic industries,Mr.Kirkegaard indicated.

Indian Ambassador Concerned

India's Ambassador to the World Trade Organization,Ujay Sing Bhatia,has noted the effect of financial rescue packages on free trade.Mr.Bhatia observed that such measures could add up to three billion dollars' worth since Q4 of 2008.These plans are regarded as ultimately distortive of free trade,with their components of industrial support,bank rescues and tariff increases.Mr.Bhatia called for clarifications in order to assess how this government aid is altering competitiveness.Indeed,many of the steps could be seen as violations of European Union free trade rules.WTO officials complained that they are not getting enough official information to make accurate assessments of possible distortions.With their export-driven economies,developing nations such as India are especially vulnerable to protectionist leanings.

EU Raises Offer

The European Union has raised an offer to cut farm tariffs from an average of 54% to 60%.The offer would be part of a new global commerce pact.EU Trade Commissioner Peter Mandelson said the offer was intended to jump-start a critical week of talks,which aim to open up the global economy.Negotiators hope to reach agreement this week to liberalize global agriculture and manufacturing.The World Trade Organization has been seeking the agreement for seven years.If agreement is not reached,it could be a lengthy period before such an opportunity presents itself again.