When Commodity Prices Fall

C.P. Chandrasekhar and Jayati Ghosh

There was a period in the 2000s when primary commodity prices appeared to have bucked their long term trend of stagnation or decline. As Chart 1 shows, between the trough of December 2001 and the peak of August 2008, the price index for all primary commodities (in US dollar terms) rose by 445 per cent, that is nearly four and a half times.

Chart 1

chandrasekhar and ghosh--commodity prices--fig 1

This increase came after a decade of relative stagnation in nominal dollar prices (which reflected a decrease in relative prices of commodities) over the previous decade. The strength and rapidity of the increase in prices over the 2000s led some analysts to argue that changing patterns of global production and consumption meant that there would be secular tendencies towards increase in such prices in the medium term. In particular, the more rapid growth of and therefore increased demand from China, India and other “emerging markets” was seen to indicate a structural shift in global demand that would generate continued increases in primary commodities prices for some time.

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“Free Trade” In Trouble in the United States

Martin Khor

“Free trade” seems to be in deep trouble in the United States, with serious implications for the rest of the world.

Opposition to free trade or trade agreements emerged as a big theme among the leading American presidential candidates.

Donald Trump attacked cheap imports especially from China and threatened to raise tariffs. Hillary Clinton criticised the Trans-Pacific Partnership Agreement (TPPA) which she once championed, and Bernie Sanders’ opposition to free trade agreements (FTAs) helped him win in many states before the New York primary.

That trade became such a hot topic in the campaigns reflects a strong anti-free trade sentiment on the ground.

Almost six million jobs were lost in the US manufacturing sector from 1999 to 2011.

Wages have remained stagnant while the incomes of the top one per cent of Americans have shot up.

Rightly or wrongly, many Americans blame these problems on US trade policy and FTAs.

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