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3821. The G20 Meetings: No Common Framework, No Consensus

Author:
Michael Pettis
Publication Date:
05-2009
Content Type:
Policy Brief
Institution:
Carnegie Endowment for International Peace
Abstract:
Participants in the recently completed G20 meeting in London agreed on a number of measures, some substantial and some merely symbolic, but they sidestepped the real issues dividing the major economic powers and, in so doing, failed to address the root causes of the global trade and investment imbalances. This was almost inevitable. China, Europe, and the United States have incompatible conceptual frameworks for understanding the causes of the global financial crisis; furthermore, their conflicting domestic political constraints make agreement on solutions hard to reach. Europeans believe that the root cause of the crisis was excessively deregulated financial systems, and they are skeptical about U.S. and Chinese calls for fiscal expansion, worrying that excessive spending would prolong the imbalances and make the ultimate adjustment more difficult. China also believes that the roots of the crisis lie within the structure of the global financial system, although Beijing insists that it was mainly the reserve status of the U.S. dollar that permitted imbalances to develop to unsustainable levels. China is particularly vulnerable to trade protection and seeks to maintain open markets for its continued export of domestic overcapacity. Like the United States, it is pushing for more aggressive, globally coordinated fiscal expansion. However, because of rigidities in its financial system and development model, its fiscal response to the crisis may exacerbate the difficult global adjustment and may, ironically, increase the chances of trade friction. In a time of contracting demand, the United States controls two-thirds of the most valuable resource in the world: net demand. Consequently, it is U.S. policies that will determine the pace and direction of the global recovery, along with the institutional framework that will govern trade and investment relationships for decades to come. The crisis puts the United States more firmly at the center of the emerging world order than ever. So far, the United States has not understood the need to consider the global outcomes of its recovery policies. Until the major powers can reach consensus about the roots of the imbalance and cooperate on policies to promote recovery, it is likely that the world economy will get worse before it gets better. The United States will drive the recovery process, but in order to do so effectively it will need to recognize its position of strength and negotiate the appropriate agreements with other major powers, especially China, on the pace and nature of the adjustment.
Topic:
Economics, Globalization, International Trade and Finance, and Monetary Policy
Political Geography:
United States, China, Europe, and London

3822. 2009 Estimates of Fundamental Equilibrium Exchange Rates

Author:
William R. Cline and John Williamson
Publication Date:
06-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
When we first published our estimates of fundamental equilibrium exchange rates (FEERs) in July 2008 (Cline and Williamson 2008), we stated that this was intended to be a regular series of publications. This policy brief updates those estimates in light of the momentous changes in the world economy during the past year. Many of those changes, notably changes in actual exchange rates, should not influence FEERs, except insofar as we allow a range of variation of the target current account balance. But equally clearly, one does expect some of the changes, notably forecasts of the prices of oil and other commodities, to be important determinants of equilibrium exchange rates.

3823. The Alien Tort Statute of 1789: Time for a Fresh Look

Author:
Gary Clyde Hufbauer
Publication Date:
05-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In 2007 the Second Circuit Court of Appeals held that US companies that had done business with apartheid South Africa could be found liable for monetary damages under the Alien Tort Statute (ATS) of 1789 (Khulumani v. Barclay Nat. Bank Ltd., 504 F.3d 254 [2d Cir. 2007]). Liability arises, the Second Circuit declared, from their possible connections with human rights violations committed by South Africa during the apartheid era. Firms named in the suit include Bank of America, IBM, Coca-Cola, and General Motors. The governments of the United Kingdom, Germany, and Switzerland all opposed the lawsuit, as did the government of South Africa, which argued that the suit ran counter to its policy of reconciliation. The Bush administration also opposed the suit, but the Second Circuit rejected the argument that the cases could be dismissed for foreign policy reasons.
Topic:
Apartheid, Human Rights, International Law, and International Trade and Finance
Political Geography:
Africa, United States, United Kingdom, America, South Africa, and Germany

3824. Energy Efficiency in Buildings: A Global Economic Perspective

Author:
Trevor Houser
Publication Date:
04-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
At the 2008 summit in Hokkaido, Japan, G-8 leaders called for a 50 percent global reduction in greenhouse gas (GHG) emissions by 2050 to avoid “the most serious consequences of climate change.” Meeting this goal will require transforming the way energy is produced, delivered, and consumed across all sectors of the economy and regions of the world. The International Energy Agency (IEA) estimates that the building sector alone will need to reduce annual emissions by 8.2 gigatons below business-as-usual by 2050, an amount equal to nearly one third of global emissions today (IEA 2008a).
Topic:
Climate Change, Energy Policy, and International Cooperation
Political Geography:
Japan

3825. US Taxation of Multinational Corporations: What Makes Sense, What Doesn't

Author:
Gary Clyde Hufbauer and Jisun Kim
Publication Date:
03-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
As the administration and Congress catch their breath from rescuing the economy, their thoughts are quickly turning to other issues—including the structure of the US tax system. Everyone agrees that the US tax system inflicts enormous complexity on the American public. But reform is never easy. Who pays the tax burden ranks among the most contentious issues that Congress has historically faced, and this time around will be no different.
Topic:
Economics, International Trade and Finance, and Financial Crisis
Political Geography:
United States

3826. Pressing the "Reset Button" on US-Russia Relations

Author:
Anders Åslund and Andrew Kuchins
Publication Date:
03-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Whither Russia? Russia's economic circumstances as well as its articulated goals hold the answer to this eternal question. Drawing on our analysis in the forthcoming book The Russia Balance Sheet, we outline here a policy approach for the Barack Obama administration. We believe our views reflect to some degree an emerging consensus for the new administration's Russia policy. Russia is important for US foreign policy in many ways. The United States needs a more constructive relationship with Russia to address many core global security issues including nuclear security and nonproliferation, terrorism, energy, and climate change.
Topic:
International Relations, Foreign Policy, and Economics
Political Geography:
Russia and United States

3827. North Korea: Getting Back to Talks

Publication Date:
06-2009
Content Type:
Policy Brief
Institution:
International Crisis Group
Abstract:
The motivations for North Korea's second nuclear test are, as with many of its actions, mostly impenetrable. It may be the latest step in an unrelenting drive to become a permanent nuclear state or it could be advertising nuclear wares to potential buyers. It may be driving up the price others will pay for the North to give up its weapons or it might be about ensuring that the military will accept whatever decision Kim Jong-il has made on his successor. Most likely, North Korea's nuclear weapons program serves multiple purposes for the leadership. Whatever the rationale, there are no good options in response. Finding a way to resume talks on ending the nuclear program may appear to reward Pyongyang's bad behaviour, but diplomacy is still the least bad option. At the same time, the UN Security Council's strong and united condemnation of the test in Resolution 1874 must be enforced, while containment of proliferation and deterrence of North Korean provocations need to be boosted.
Topic:
Nuclear Weapons and Weapons of Mass Destruction
Political Geography:
Israel, Asia, and North Korea

3828. Pakistan's IDP Crisis: Challenges and Opportunities

Publication Date:
06-2009
Content Type:
Policy Brief
Institution:
International Crisis Group
Abstract:
In the wake of a conceptually flawed peace agreement, the Taliban takeover of large parts of Malakand division, subsequent military action in the area, almost three million internally displaced persons (IDPs) have fled to camps, homes, schools and other places of shelter across Northwest Frontier Province (NWFP). The challenge for the Pakistan Peoples Party (PPP)-led government and international actors is to make relief, rehabilitation and reconstruction efforts responsive to needs and empower local communities in Malakand Division. Failure to do so will reverse any gains on the battlefield and boost radical Islamist groups.
Topic:
Terrorism, War, and Insurgency
Political Geography:
Pakistan, Central Asia, Asia, and Taliban

3829. Georgia-Russia: Still Insecure and Dangerous

Publication Date:
06-2009
Content Type:
Policy Brief
Institution:
International Crisis Group
Abstract:
Ten months after the “August war” between Georgia and Russia, violent incidents and the lack of an effective security regime in and around the conflict zones of South Ossetia and Abkhazia create a dangerous atmosphere in which extensive fighting could again erupt. Russia has not complied with key aspects of the cease-fire agreements that President Medvedev reached in August/September 2008 with French President Sarkozy in his then EU presidency role. Its 15 June Security Council veto of an extension of the sixteen-year-old UN observer mission mandate in Georgia and Abkhazia and its apparent intention to require the removal of the mission of the Organisation for Security and Co-operation in Europe (OSCE) by the end of the month are blows to regional security that will further fuel tensions. Most of the on-the-ground conflict resolution machinery is thus being dismantled. Moscow should review its counterproductive position and work for a reasonable compromise allowing the UN and OSCE monitors to continue their important work.
Topic:
Conflict Resolution, Security, and War
Political Geography:
Russia, Eastern Europe, Moscow, Georgia, South Ossetia, and Abkhazia

3830. The Internationalization of Chinese and Indian Firms: Trends, Motivations and Policy Implications

Author:
Sandeep Kapur and Suma Athreye
Publication Date:
01-2009
Content Type:
Policy Brief
Institution:
United Nations University
Abstract:
The last two decades have seen a significant rise in the internationalization of firms from developing economies. In addition to their growing participation in international trade, a number of leading emerging economies are contributing to growing outflows of foreign direct investment (FDI) and cross-border mergers and acquisitions. According to the 2008 World Investment Report, outward flows of FDI from developing countries rose from about US$6 billion between 1989 and 1991 to US$225 billion in 2007. As a percentage of total global outflows, the share of developing countries grew from 2.7% to nearly 13.0% during this period.
Topic:
International Relations, Economics, Globalization, International Political Economy, Markets, Foreign Direct Investment, and Financial Crisis
Political Geography:
United States, China, and India