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The euro’s naysayers have it all wrong. True, the continent’s powerhouses have yet to agree on a clear plan to save the common currency, as each one is seeking to secure the best deal for itself. But they all also know that the collapse of the eurozone would be a political and economic disaster, so they will ultimately pay whatever price is necessary to keep it together.
C. Fred Bergsten analyzes 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown.
The global economic crisis has revealed the folly of large U.S. budget and trade deficits, as well as of the strong dollar that makes them possible. If it is serious about recovery, the United States must balance the budget, stimulate private saving, and embrace a declining dollar.
This book is the third report on China prepared jointly by staff members of the Peterson Institute for International Economics and the Center for Strategic and International Studies and there is no better place to find a compact overview of recent developments in China.
C. Fred Bergsten's update to his July/August 2008 article, 'A Partnership of Equals.'
Beijing is shirking its responsibilities to the global economy. To encourage better behavior, Washington should offer to share global economic leadership.
The Doha Round could become the first major multilateral trade talks to fail since the 1930s. To prevent a collapse, policymakers in the G-8 and key developing countries must resolve global monetary and current account imbalances, counter the backlash against globalization, and find a way to jolt the talks back to life.
Even in a time of terrorism and war, no successful foreign policy can neglect the global economy. The next U.S. administration will therefore need to balance the country's books, liberalize trade, and reduce its reliance on foreign energy. Above all, Washington must shore up domestic and foreign support for globalization, so that it can continue to benefit the United States and the rest of the world.
The Bush administration's recent protectionist measures have attracted intense international criticism. U.S. backtracking on free trade could give other countries an excuse to do likewise. But critics should note that those measures also made it easier for Bush to win "fast-track" negotiating authority from Congress, providing the political base necessary for further liberalization.
America now faces the prospect of economic conflicts with both Europe and East Asia. The United States and the European Union have already fired the first shots of retaliatory sanctions over their ever-growing trade disputes. On the other side of the world, meanwhile, Asian countries are creating a bloc of their own that could include preferential trade arrangements and an Asian Monetary Fund. These developments could produce a tripolar world and hamper global economic integration. To avert this outcome, the United States must quell its domestic backlash against globalization and reassert its economic leadership in the world. The new Bush administration should make multilateral trade liberalization a top priority -- or it will face unpleasant economic and political consequences as the U.S. and foreign economies slow.
The euro's launch will transform the transatlantic relationship for good by placing Europe on an equal economic footing with the United States. If Washington does not face up to this and tackle outstanding trade and monetary-policy issues with its European partners soon, its current concerns-such as ballooning trade deficits and rising protectionist pressures at home-could spiral out of control. A good starting point for cooperation would be a joint initiative to limit fluctuations in the dollar and the euro. Trade negotiations between Europe and the United States also need a shot in the arm to get commerce flowing freely. An effective U.S. partnership with Europe is essential to avoid a showdown and maintain global leadership.
With the creation of a single European currency, the dollar will have its first real competitor since it surpassed the pound sterling as the globe's dominant currency. As much as $1 trillion of international investment may shift from dollars to euros. The political impact of the euro will be just as great. Europe could try to export its high unemployment by undervaluing the euro's initial exchange rate. Protectionist battles could break out. The euro's arrival need not cause instability in world markets, but it will probably cause volatility. A smooth transition to a stable dollar and euro system will require a quantum leap in transatlantic cooperation.
Regional trade blocs, which account for 60 percent of world trade, have opened markets, but they cannot substitute for worldwide reciprocity. To prevent free trade from remaining their privilege alone, rich Northern countries should strike a bargain with poorer ones: low tariffs for greater market access. The grander the initiative, the greater the chance of success, particularly now that the United States is in danger of backsliding. Since export industries offer higher pay and more stable jobs, a firm date for free trade can solve America's most pressing problem, stagnating wages and the attendant social ills.
Housing a host of flourishing economies, the Asia-Pacific Economic Cooperation forum can serve as a laboratory to test and refine global trade negotiations.
Explains (1) the post-Cold War advent of a world security regime in which "the Big Three of economics" (USA, Europe, Japan) "supplant the Big Two of nuclear competition" (2) the economic bloc rivalries that this must inevitably bring with it, and the sorts of instability that might ensue. Suggests various internal reforms and external initiatives which might serve to reduce these.
The unprecedented international imbalances of the first half of the 1980s have fundamentally altered the structure of the world economy. The United States, the creator of the postwar economic system and home of the world's key currency, has become the largest debtor nation ever known to mankind--and its red ink will continue to flow at least into the 1990s. Japan, widely viewed as a developing country only a generation ago, has become by far the largest creditor--and its massive buildup of foreign assets will continue expanding rapidly as far ahead as one can predict. The actions taken to date to correct these imbalances have gone only about half the distance needed, so there is now no prospect for their early elimination--and very little for steps to cope with the structural transformation they will bring. The forces set in train by these historic changes will dominate the course of global economic events for the next five to ten years, and may go far to influence world politics as well.
We are now experiencing the third episode of major economic conflict between the United States and Japan in the last 12 years. The first of these episodes led to the U.S. import surcharge of August 1971, viewed in Japan as the second of the "Nixon shocks" aimed at that country, and a U.S. threat to invoke the "Trading with the Enemy Act" against its chief Pacific ally. The second episode produced major U.S. pressure on Japan during 1977-78 to boost its domestic growth rate, with lasting damage to Japanese confidence in its American connection and immediate impact on the political career of the then Prime Minister, Takeo Fukuda. The third, current, episode promises to be the nastiest yet--with the United States joined as demandeur by the European Community, with racist overtones already creeping into the rhetoric and frustration on both sides of the Pacific, and with obvious spillover onto the reemerging issue of security relations between the two countries.
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