Does It Matter Who Will Be The Next Director of the WTO?

M. Shafaeddin

This coming spring, a new Director General of the World Trade Organization (WTO) is to be chosen. Nine candidates have thrown their hats into the ring to replace Pascal Lamy, the current Director General (DG). A recent forum and debate was held with five of the candidates at the Institute of Management and development (IMD-Lausanne, Switzerland), which prompted a lively discussion as to why the press is not paying more attention to the contest to replace Lamy or the candidates vying for this position.

In my view, the main issue is not the question of awareness of the press on the appointment of the DG. Far more important are key issues surrounding the functions and the philosophy behind GATT/WTO rules.

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Central Bank Autonomy: A Dangerous Mirage

Alejandro Nadal

The global financial crisis is breathing and evolving. In Europe it is treated as a sovereign debt crisis. But given the fact that the crisis exploded in the midst of the private financial sector, how did we get here?

Four decades ago, more precisely on January 3 1973, a new law on central banking was approved in France. The new statute for the Banque de France contained critical provisions for the independence of the monetary institute. Article 25 turns out to be particularly relevant for today’s debate on Europe’s crisis. It stated that the Treasury would not be able to resort to the Banque de France to borrow money.

This represented a historical transformation in public finance and left the State at the mercy of the private commercial banking system. Instead of using the money emission capacity of the central bank, the French government had now embarked on a new course, one that turned out to be a milestone in financial liberalization. Many other countries followed this example. Incidentally, when the law was passed Georges Pompidou was the President of France. He had been director of the Banque Rothschild between 1956-1962, a fact that generated suspicion as to the motivations of the Loi 73-7 of 1973.

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Yellen to Washington, D.C.: Fiscal Austerity Slows Recovery

Thomas Palley

Last Monday, Federal Reserve Vice-Chair Janet Yellen gave the keynote speech at an AFL-CIO economic policy conference on restoring shared prosperity.

Dr. Yellen began by noting that the Federal Reserve “is the only agency assigned the job of pursuing maximum employment.” She then went on to acknowledge “the gulf between maximum employment and the very difficult conditions workers face today.” That gulf is the reason behind the Federal Reserve’s on-going actions to strengthen the recovery and why there is continued need for “forceful action to increase the pace of economic growth and job creation.”

Read more at:

http://www.aflcio.org/Blog/Economy/Yellen-to-Washington-D.C.-Fiscal-Austerity-Slows-Recovery

Banks on the Counter-Attack in the Food and Finance Debate

Jennifer Clapp

NGOs have stepped up their critique of large investment banks’ involvement in agricultural commodity derivatives markets in recent months. Now, it appears that the banks are starting to fight back.

Last September, the World Development Movement estimated that Barclays earned some $785-million from financial speculation on food commodities in 2010 and 2011. And last month a new WDM report estimated that Goldman Sachs’ earnings from food price speculation in 2012 were over $400 million.

These figures were the latest to come out of a prominent NGO campaign against ‘gambling on hunger’ that has captured widespread attention and concern, particularly in Europe, over the past few years. Investment banks have been a primary target of this campaign, given their important role in facilitating large-scale financial investments in agricultural commodity derivatives, which NGOs say is responsible for food price spikes and rising hunger in the world’s poorest countries.

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Two Tales in Post-Crisis Adjustment

Erinc Yeldan, Guest Blogger

Two Latin American style economies, Argentina and Turkey, shared a common history until very recently.  This “commonness” included a prolonged history of import substitution industrialization (ISI) with inward-looking, state-led development paths.  Both economies had relatively high rates of growth during their respective stages of ISI and yet, found out that these paths reached their limits by late 1970s (Argentina perhaps half a decade earlier than Turkey).

Both countries had also witnessed a lost decade, respectively; Argentina the 1980s, Turkey 1990s.  For both countries the period after was one of active reform.  Both countries suffered from an almost identical type of financial crisis in 2001, while both of them were following an IMF-led disinflation programme that rested on exchange rate-based stabilization adventures.  The contraction of the GDP and the burden of adjustment through rapid currency depreciation, banking collapses, and a severe rise of unemployment were also at comparable scale across the two countries.  However, the two had divergent paths of adjustment subsequently. Turkey followed a strict orthodox adjustment programme under the auspices of the IMF, while Argentine chose to set its own course with debt default and an adherence to what is commonly referred to as a heterodox adjustment programme, while maintaining a strong anti-poverty and pro-employment stance.

Almost a decade into this divergence, Argentina was in the international news once again, now with a ruling by the district court of New York that the Argentinian government ought to pay $1.3 billion to a “vulture fund”: Elliott Capital Management.  The ruling further contained a statement that prohibited third parties to aid Argentina in its efforts of debt re-structuring.

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Let's Stop Calling Countries "Markets"

Robin Broad

Here’s my most recent — and, I believe, imminently winnable — campaign: Let’s stop calling countries “markets” or “economies.” And while we’re at it, let’s not call any set of countries “emerging markets.”

It seems like a small thing – the change in terminology from “countries” and “people” to “markets” and “economies.” But it makes countries and people – in all their diverse reality – disappear.  And it puts an unspoken premium on places that are buying lots of goods from U.S. corporations.

Some of us slip into this terminology ourselves, from time to time, without even thinking. But, when I hear my colleagues and students use it, I find myself cringing for all that is unsaid between the lines. And I cringed even more at a recent Washington, D.C. event when an Obama government official proudly introduced herself as someone with “emerging market” expertise.

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Let’s Stop Calling Countries “Markets”

Robin Broad

Here’s my most recent — and, I believe, imminently winnable — campaign: Let’s stop calling countries “markets” or “economies.” And while we’re at it, let’s not call any set of countries “emerging markets.”

It seems like a small thing – the change in terminology from “countries” and “people” to “markets” and “economies.” But it makes countries and people – in all their diverse reality – disappear.  And it puts an unspoken premium on places that are buying lots of goods from U.S. corporations.

Some of us slip into this terminology ourselves, from time to time, without even thinking. But, when I hear my colleagues and students use it, I find myself cringing for all that is unsaid between the lines. And I cringed even more at a recent Washington, D.C. event when an Obama government official proudly introduced herself as someone with “emerging market” expertise.

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Food Crisis Update: Main Drivers of Price Volatility Still Not Addressed

Timothy Wise and Sophia Murphy

Last year international food markets suffered their third price spike in five years. The trigger was a terrible drought in the United States—a major agricultural producer and exporter. An unstable climate met low levels of international grain reserves, while U.S. ethanol gobbled up maize supplies. The resulting high and volatile prices struck yet another blow at the world’s already fragile food systems.

This is exactly the scenario we warned of a year ago when we published “Resolving the Food Crisis,” a comprehensive assessment of the international community’s response to the global food price crisis. High and volatile food prices in international markets will continue until structural reforms to trade, finance and agriculture are put in place to address the real drivers of the food crisis.

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China is the new bank in Latin America. Is it a better deal?

Kevin Gallagher and Estefanía Marchán

China’s presence grows ever larger in Latin America. Yet it is still unclear whether the Asian giant’s expanding influence will favor sustainable development in the region.

Latin America’s abundance of oil, minerals, and other natural resources attract China to the region and the numbers prove it: our study “The New Banks in Town: Chinese Finance in Latin America,” estimates that, since 2005, China has provided approximately $86 billion in loan commitments to Latin American countries. Sixty-nine percent of these loans were loans in exchange for oil.

Putting the data in context, in 2010, for example, China offered more loans to Latin America than the World Bank, the Inter-American Development Bank, and the Export-Import Bank of the United States combined. What does this deepening of ties with China mean for the region?

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