Author: / Publishing Institution: Peterson Institute for International Economics / Political Geography: United States / Topic: International Trade and Finance

1. Reshoring by US Firms: What Do the Data Say?

Author:: Lindsay Oldenski
Publication Date:: 09-2015
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Reshoring—when firms shift manufacturing production back to the United States—has been getting a great deal of publicity lately. Oldenski examines the most recent data on the global operations of US firms and concludes that although some companies have reversed their previous offshoring decisions, there is no evidence of a widespread reshoring trend. But this should not be considered a defeat for US competitiveness. US multinationals continue to move operations offshore, but they also continue to grow stronger, producing more in their US operations and adding more to total US exports. The structure of US manufacturing has changed, but the ability to adapt to the changing nature of global business has been and will continue to be crucial to the continued growth of US manufacturing.
Topic:: Economics and International Trade and Finance
Political Geography:: United States

2. An Assessment of the Korea-China Free Trade Agreement

Author:: Jeffrey Schott, Eujiin Jung, and Cathleen Cimino-Isaacs
Publication Date:: 12-2015
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Of all the free trade agreements (FTAs) concluded by Korea with its major trading partners since the turn of the century, the Korea-China FTA may be the largest in trade terms. It is, however, far from the best in terms of the depth of liberalization and the scope of obligations on trade and investment policies. Korea and China agreed to liberalize a large share of bilateral trade within 20 years, but both sides incorporated extensive exceptions to basic tariff reforms and deferred important market access negotiations on services and investment for several years. Political interests trumped economic objectives, and the negotiated outcome cut too many corners to achieve such a comprehensive result. The limited outcome in the Korea-China talks has two clear implications for economic integration among the northeast Asian countries. First, prospects for the ongoing China-Japan-Korea talks will be limited and unlikely to exceed the Korea-China outcome. Second, Korea and Japan need to strengthen their bilateral leg of the northeast Asian trilateral and the best way is by negotiating a deal in the context of the Trans-Pacific Partnership.
Topic:: Economics, International Trade and Finance, Politics, and Bilateral Relations
Political Geography:: United States, China, Asia, and Korea

3. Estimates of Fundamental Equilibrium Exchange Rates, November 2015

Author:: William R. Cline
Publication Date:: 11-2015
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The latest semiannual fundamental equilibrium exchange rate (FEER) estimates find that the US dollar is now overvalued by about 10 percent, comparable to levels in 2008 through early 2010 and again in 2011. Unlike then, the current strong dollar does not reflect a weak renminbi kept undervalued by major exchange rate intervention by China. Instead, China's current account surplus has fallen sharply relative to GDP, and its recent intervention has been to prevent excessive depreciation rather than to prevent appreciation. Additionally, declines in the real effective exchange rates (REERs) for major emerging-market economies and resource-based advanced economies, driven by falling commodity prices in recent months, have strengthened the dollar. Recent increases in the REERs for the euro area and Japan have removed their modest undervaluation identified in the last FEERs estimates in May, and the Chinese renminbi remains consistent with its FEER. The dollar's rise by nearly 15 percent in real effective terms over the past two years could impose a drag of nearly one-half percent annually on US demand growth over the next five years. As the Federal Reserve moves to normalize US monetary policy, it may need to consider a gentler rise in interest rates than it might otherwise have pursued, both to temper possible further strengthening of the dollar in response to higher interest rates and to help offset the demand compression from falling net export
Topic:: Economics, International Trade and Finance, Monetary Policy, and GDP
Political Geography:: United States and China

4. Rethinking the National Export Initiative

Author:: Caroline Freund
Publication Date:: 02-2014
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: As the United States struggled with unemployment and other effects of the Great Recession in January 2010, President Barack Obama set the goal of doubling exports within five years and creating 2 million new export-related jobs. Four years later, however, exports are less than halfway toward that goal and the rate of export growth is slowing. More worrisome, the administration's strategy failed to boost average export growth from historical levels, despite the robust recovery in international trade after the collapse of 2009. The National Export Initiative (NEI) has come up short.
Topic:: Economics, Industrial Policy, International Trade and Finance, Markets, and Maritime Commerce
Political Geography:: United States

5. Monetary Policy with Abundant Liquidity: A New Operating Framework for the Federal Reserve

Author:: Joseph E. Gagnon and Brian Sack
Publication Date:: 01-2014
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The dramatic increase in the Federal Reserve's balance sheet since 2009 has attracted the attention of economists, pundits, and ordinary citizens. The amount of assets held by the Fed recently crossed $4 trillion and will likely continue to rise to a peak of about $4.5 trillion. This run-up in asset holdings has resulted from the Fed's large-scale asset purchase programs, which were intended to support economic growth. However, a side-effect of these asset purchases is the creation of unprecedented amounts of liquidity in the financial system.
Topic:: Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:: United States

6. Income Inequality Developments in the Great Recession

Author:: Tomas Hellebrandt
Publication Date:: 01-2014
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The Great Recession, which cost tens of millions of jobs, a collapse of asset values around the world, and threatened the global financial system, has generated renewed concern over the long-standing issue of the fairness of the distribution of wealth and income in many societies. Economic inequality has increased in the United States and many other advanced economies over the past 20 to 30 years. This trend generated less worry in the boom years, when unemployment rates were low and cheap credit enabled consumers to borrow and maintain higher standards of living, masking the impact of growing income disparity on consumption patterns and perceptions of well-being.
Topic:: Debt, Economics, International Trade and Finance, Poverty, Social Stratification, and Financial Crisis
Political Geography:: United States, United Kingdom, Germany, Spain, Italy, and Ireland

7. Addressing Currency Manipulation Through Trade Agreements

Author:: C. Fred Bergsten
Publication Date:: 01-2014
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: A bipartisan majority in both Houses of Congress is insisting that the United States include a provision in future trade agreements that would bar currency manipulation. A letter from 60 senators to Secretary of the Treasury Jacob Lew and United States Trade Representative (USTR) Michael From an on September 23, 2013, called for "strong and enforceable foreign currency manipulation disciplines" in the Trans-Pacific Partnership (TPP) while 230 members of the House of Representatives told President Barack Obama on June 6, 2013, that "it is imperative that (the TPP) address currency manipulation.to create a level playing field for American businesses and prevent more US jobs from being shipped overseas." The trade promotion authority (TPA) legislation proposed by congressional trade leaders on January 9, 2014, establishes the avoidance of currency manipulation as a "principal US negotiating objective" in its future trade agreements.
Topic:: Economics, Emerging Markets, International Trade and Finance, and Monetary Policy
Political Geography:: United States

8. Making Labor Market Reforms Work for Everyone: Lessons from Germany

Author:: Jacob Funk Kirkegaard
Publication Date:: 01-2014
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Mark Twain once wrote an essay about the difficulties of learning what he called "The Awful German Language." Similar barriers to comprehension seem to plague those trying to explain recent German economic performance. By most measures, Germany has the best functioning labor market among large economies in the West, with levels of employment reaching those in the United States at the end of the turbo-charged 1990s. A debate has stirred, however, about whether this success has come with a price—specifically, whether Germany's domestic structural reforms have lowered living standards for Germany's low income workers and worsened income inequality and whether Germany is fortuitously and perhaps selfishly riding a wave of strong foreign demand for German exports.
Topic:: Economics, Industrial Policy, International Trade and Finance, Markets, and Labor Issues
Political Geography:: United States, Europe, and Germany

9. IMF Reform Is Waiting on the United States

Author:: Edwin M. Truman
Publication Date:: 03-2014
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The vital role played by the International Monetary Fund (IMF) in stabilizing the world economy and financial system is in serious jeopardy. The failure in mid-January by the US Congress to approve IMF reform legislation that had been pending for more than three years did not simply bring to a screeching halt a decade of slow progress reforming the governance of the Fund to make it more representative, legitimate, and therefore effective. Congress's balking on this issue also did substantial, actual damage to the US reputation around the world, as the leaders of many countries called into question Washington's ability to deliver on promises made in international economic agreements.
Topic:: Economics, International Trade and Finance, International Monetary Fund, and Reform
Political Geography:: United States

10. Sustainability of Public Debt in the United States and Japan

Author:: William R. Cline
Publication Date:: 10-2014
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper applies the probabilistic debt sustainability model developed for the euro area in Cline (2012, 2014) to sovereign debt in the United States and Japan. The results indicate that to avoid further increases in the expected ratio of public debt to GDP over the next decade, average annual primary deficits will need to be reduced by about 0.75 percent of GDP in the United States and by about 3 percent of GDP in Japan from the likely baselines as of mid-2014.
Topic:: Debt, Diplomacy, and International Trade and Finance
Political Geography:: United States, Japan, and East Asia

11. Estimates of Fundamental Equilibrium Exchange Rates, November 2014

Author:: William R. Cline
Publication Date:: 11-2014
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: This semiannual review finds that most of the major international currencies, including the US dollar, euro, Japanese yen, UK pound sterling, and Chinese renminbi, remain close to their fundamental equilibrium exchange rates (FEERs). The new estimates find this result despite numerous significant exchange rate movements associated with increased volatility in international financial markets at the beginning of the fourth quarter of 2014, and despite a major reduction in the price of oil. The principal cases of exchange rate misalignment continue to be the undervalued currencies of Singapore, Taiwan, and to a lesser extent Sweden and Switzerland, and the overvalued currencies of Turkey, New Zealand, South Africa, and to a lesser extent Australia and Brazil. Even so, the medium-term current account deficit for the United States is already at the outer limit in the FEERs methodology (3 percent of GDP), and if the combination of intensified quantitative easing in Japan and the euro area with the end to quantitative easing in the United States were to cause sizable further appreciation of the dollar, an excessive US imbalance could begin to emerge.
Topic:: Economics, Foreign Exchange, International Trade and Finance, and Monetary Policy
Political Geography:: Africa, United States, Japan, Turkey, South Africa, Brazil, and New Zealand

12. US Policies toward Liquefied Natural Gas and Oil Exports: An Update

Author:: Gary Clyde Hufbauer and Cathleen Cimino
Publication Date:: 07-2014
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Unconventional extraction methods, namely horizontal drilling and fracking, are transforming global energy production, consumption, and trade. Th e extraction of large amounts of oil and gas from shale formations has led to an unprecedented surge of domestic production in the United States. Th e US Department of Energy (DOE) is now processing more than 40 applications from domestic producers to export liquefi ed natural gas (LNG). While experts still disagree about the magnitude and duration of the energy boom, we are at the "dawn of a US oil and gas renaissance" (Houser and Mohan 2014).
Topic:: Economics, International Trade and Finance, and Monetary Policy
Political Geography:: United States and North America

13. Five Challenges for Janet Yellen at the Federal Reserve

Author:: David J. Stockton
Publication Date:: 12-2013
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Janet Yellen, who will serve as the 15th chair of the Board of Governors of the Federal Reserve System after her likely confirmation in December 2013, has the experience, intelligence, and judgment to be an excellent successor to Ben S. Bernanke. But she will need to employ all those strengths, and then some, to deal with the challenges facing the nation's central bank. Her success in confronting these challenges will profoundly affect the United States and world economies. Five key challenges await her.
Topic:: Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:: United States

14. Estimates of Fundamental Equilibrium Exchange Rates, November 2013

Author:: William R. Cline
Publication Date:: 11-2013
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Since the previous estimates of fundamental equilibrium exchange rates (FEERs) in this series in May (Cline 2013), numerous exchange rates have moved substantially in response to the announcement in late May that the US Federal Reserve would likely begin to "taper" its quantitative easing program of large-scale asset purchases. The new estimates here again take as their point of departure the medium-term current account projections of the most recent World Economic Outlook (WEO) of the International Monetary Fund (IMF 2013b). However, because of a seeming inertia in the Fund's projections despite large exchange rate moves, this round of calculations pays special attention to compiling alternative estimates for economies with large changes in exchange rates.
Topic:: Economics, Foreign Exchange, International Trade and Finance, Markets, Monetary Policy, and Governance
Political Geography:: United States

15. Stabilizing Properties of Flexible Exchange Rates: Evidence from the Global Financial Crisis

Author:: Joseph E. Gagnon
Publication Date:: 11-2013
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: There is a long-standing debate among economists and policymakers on the benefits of flexible versus fixed exchange rates (Klein and Shambaugh 2010). In principle, flexible exchange rates allow a country's central bank to focus on stabilizing economic growth and inflation, which are the ultimate goals of monetary policy. However, some argue that in practice central banks often do not use their powers wisely and it may be better to restrict their freedom by requiring them to peg their currency to that of an important trading partner. Others note that flexible exchange rates are far more volatile than fundamental factors can explain (Flood and Rose 1995), raising the possibility that they may introduce wasteful cross-sectoral fluctuations in economic activity. One common viewpoint is that flexible exchange rates may be fine for large countries but that the smallest countries are better off with fixed exchange rates (Åslund 2010).
Topic:: Economics, Foreign Exchange, International Trade and Finance, Markets, and Financial Crisis
Political Geography:: United States, Japan, China, and United Kingdom

16. US Employment Deindustrialization: Insights from History and the International Experience

Author:: Robert Z. Lawrence and Lawrence Edwards
Publication Date:: 10-2013
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Manufacturing is a key sector of the US economy. Although value added in manufacturing represented just 11.9 percent of GDP in 2012, manufacturing activity is strongly associated with economic growth, because manufacturing serves as the fulcrum of supply chains that combine and process raw materials and services to produce goods.1 In addition, the sector is among the most dynamic—accounting for about 70 percent of US spending on business research and development—and it regularly outstrips the rest of the economy in productivity growth. Over the long run, the contributions of US manufacturing to total output growth have been steady. Measured in 2005 dollars, for example, the share of manufacturing in US output was about the same in 2005 as in 1947.
Topic:: Economics, Emerging Markets, Industrial Policy, and International Trade and Finance
Political Geography:: United States

17. Financial Services in the Transatlantic Trade and Investment Partnership

Author:: Simon Johnson and Jeffrey J. Schott
Publication Date:: 10-2013
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: In July 2013, the United States and the European Union launched negotiations on a Transatlantic Trade and Investment Partnership (TTIP). The talks aim to craft a comprehensive accord matching or exceeding the reforms achieved in their previous trade pacts. Since both sides have included financial services in prior free trade agreements (FTAs), they implicitly recognized that the TTIP accord would also cover this sector. But what will be included in the financial services chapter is still subject to debate.
Topic:: Economics, International Trade and Finance, Treaties and Agreements, and Bilateral Relations
Political Geography:: United States and Europe

18. How to Measure Underemployment?

Author:: David G. Blanchflower and David N. F. Bell
Publication Date:: 08-2013
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: One of the factors that may inhibit reductions in unemployment as the economy recovers is the extent to which existing workers would like to work more hours and employers may prefer to let them work longer hours before making new hires. This phenomenon suggests that the unemployment rate does not capture the full extent of excess capacity in the labor market. But how should it be measured? In this paper we argue that the United States does not have the necessary statistical tools to calibrate this form of underemployment. We describe an index that captures the joint effects of unemployment and underemployment and provides a more complete picture of labor market excess capacity. We show how this index can be implemented using British data and describe its evolution over the Great Recession. Comparisons of our index with unemployment rates suggest that unemployment rates understate differences in labor market excess capacity by age group and overstate differences by gender. We also show that being unable to work the hours that one desires has a negative effect on well-being. Finally, we recommend that the Current Population Survey conducted by the US Bureau of Labor Statistics might be extended to enable the construction of an equivalent US index.
Topic:: Economics, International Trade and Finance, Markets, and Labor Issues
Political Geography:: United States and Europe

19. Lehman Died, Bagehot Lives: Why Did the Fed and Treasury Let a Major Wall Street Bank Fail?

Author:: William R. Cline and Joseph E. Gagnon
Publication Date:: 09-2013
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Five years after the Federal Reserve and the Treasury allowed the investment bank Lehman Brothers to fail, their actions (or inaction) remain a focus of debate. Some argue that it was an inconsistent policy to have let Lehman fail while making emergency loans to save other large financial institutions in the same time frame. In this Policy Brief we present evidence that the Fed and Treasury had a sound reason to have bailed out other institutions while letting Lehman fail. Simply put, Lehman was insolvent—probably deeply so—whereas the other institutions arguably were solvent. In addition, the other institutions had abundant collateral to pledge, whereas what little collateral Lehman had to pledge was of questionable quality and scattered across many affiliated entities. Thus, federal officials, at least in hindsight, appear to have followed the dictum of Walter Bagehot (cited above), which has guided central banks for almost 150 years.
Topic:: Debt, Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:: United States

20. How Can Trade Policy Help America Compete?

Author:: Robert Z. Lawrence
Publication Date:: 10-2012
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: America deserves credit for not having succumbed to the global financial crisis by repeating the protectionist mistakes of the 1930s. Nonetheless, since 2007, although lip service has been paid to boosting US exports, its trade policy accomplishments have been modest. This is unfortunate because active trade policies can promote American living standards and facilitate America's return to full employment and sustained growth. These policies can also help to create a global trade order that advances American interests. This policy brief argues that the United States needs new initiatives that discipline foreign practices, increase access to foreign markets, revitalize the World Trade Organization (WTO), improve the administrative and regulatory environment for trade, and assist workers and communities adversely affected by change.
Topic:: Economics, Globalization, International Trade and Finance, Markets, Global Recession, Monetary Policy, and Financial Crisis
Political Geography:: United States and America

21. Combating Widespread Currency Manipulation

Author:: Joseph E. Gagnon Gagnon
Publication Date:: 07-2012
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Widespread currency manipulation, mainly in developing and newly industrialized economies, is the most important development of the past decade in international financial markets. In an attempt to hold down the values of their currencies, governments are distorting capital flows by around $1.5 trillion per year. The result is a net drain on aggregate demand in the United States and the euro area by an amount roughly equal to the large output gaps in the United States and the euro area. In other words, millions more Americans and Europeans would be employed if other countries did not manipulate their currencies and instead achieved sustainable growth through higher domestic demand.
Topic:: Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:: United States, America, and Europe

22. Currency Manipulation, the US Economy, and the Global Economic Order

Author:: C. Fred Bergsten and Joseph E. Gagnon
Publication Date:: 12-2012
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: More than 20 countries have increased their aggregate foreign exchange reserves and other official foreign assets by an annual average of nearly $1 trillion in recent years. This buildup of official assets—mainly through intervention in the foreign exchange markets—keeps the currencies of the interveners substantially undervalued, thus boosting their international competitiveness and trade surpluses. The corresponding trade deficits are spread around the world, but the largest share of the loss centers on the United States, whose trade deficit has increased by $200 billion to $500 billion per year as a result. The United States has lost 1 million to 5 million jobs due to this foreign currency manipulation.
Topic:: Economics, Globalization, International Cooperation, International Trade and Finance, and World Trade Organization
Political Geography:: United States

23. Right Idea, Wrong Direction: Obama's Corporate Tax Reform Proposals

Author:: Gary Clyde Hufbauer and Martin Vieiro
Publication Date:: 05-2012
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The need for US corporate tax reform is blindingly obvious. Conservatives contend that the top corporate tax rate— whether measured in statutory or effective terms—is the second highest in the Organization for Economic Cooperation and Development (OECD). Liberals argue that the US corporate tax system is riddled with complex “loopholes,” enabling many firms—whether incorporated or not—to pay less than their fair share.
Topic:: Economics, International Trade and Finance, Monetary Policy, and Governance
Political Geography:: United States

24. US Tire Tariffs: Saving Few Jobs at High Cost

Author:: Gary Clyde Hufbauer and Sean Lowry
Publication Date:: 04-2012
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: In his 2012 State of the Union address, President Obama claimed that "over a thousand Americans are working today because we stopped a surge in Chinese tires." The tire tariff case, decided by the president in September 2009, exemplifies his efforts to get China to "play by the rules" and serves as a plank in his larger platform of insourcing jobs to America.
Topic:: Economics, Industrial Policy, International Trade and Finance, and Governance
Political Geography:: United States, China, and America

25. Projecting China's Current Account Surplus

Author:: William R. Cline
Publication Date:: 04-2012
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: For several years China has run persistent current account surpluses that have been widely seen as the most serious single source of global imbalances on the surplus side, and mirrored by persistent systemically large US current account deficits on the other side. In recent years, however, both imbalances have shown moderation (figure 1). China's surpluses have posed questions of international policy rules, because they have reflected in part an unwillingness to allow the exchange rate to appreciate sufficiently to act as an effective equilibrating mechanism. Exchange rate intervention resulted in a massive buildup of international reserves, which rose from $615 billion at the end of 2004 to $3.2 trillion at the end of 2011 (IMF 2012a).
Topic:: Economics, Emerging Markets, Foreign Exchange, and International Trade and Finance
Political Geography:: United States, China, and Israel

26. Transactions: A New Look at Services Sector Foreign Direct Investment in Asia

Author:: Jacob Funk Kirkegaard
Publication Date:: 10-2012
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: In this paper Kirkegaard presents new micro-level data consisting of individual greenfield investment projects and mergers and acquisitions as a source for detailed analysis of services sector cross-border investment flows among the Asian Development Bank (ADB) regional membership in Asia. The new transactional foreign direct investment (FDI) data are methodologically distinct from traditional BPM5-compliant FDI data but found to yield generally comparable aggregates, when compared with the latest available International Monetary Fund (IMF) data from the Comprehensive Direct Investment Survey for the ADB regional membership. The services sectors are found to receive considerably larger amounts of foreign investment, when compared with the Asian region's manufacturing and raw materials sectors. OECD countries account for roughly three-quarters of total recorded inward services sector FDI of about $2 trillion, relatively evenly split between the United States, the EU-27, and regional OECD-level-income countries. The presence of sizable regional "upward flowing" services sector investments into OECD-level-income economies is verified. Kirkegaard draws preliminary policy conclusions based on the new transactional FDI data results concerning prospects for regional services sector liberalization, threshold income levels for inward services sector FDI, upward-flowing regional services FDI, and preferred modes of services sector investments.
Topic:: Economics, Emerging Markets, International Trade and Finance, and Foreign Direct Investment
Political Geography:: United States, Israel, and Asia

27. The Dollar and Its Discontents

Author:: Olivier Jeanne
Publication Date:: 05-2012
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Has the US dollar delivered the benefit that the rest of the world is expecting from its holdings of international liquidity? US government debt has been liquid and safe, and it is supplied in sufficient quantity. But it has given a low return to the countries that accumulated the most reserves, especially when those returns are measured in terms of the countries' own consumption. Jeanne argues that countries that accumulate the most reserves should expect a low return in terms of their own consumption and that international monetary reform can do little to change that fact.
Topic:: Economics, International Trade and Finance, and Markets
Political Geography:: United States

28. Another Shot at Protection by Stealth: Using the Tax Law to Penalize Foreign Insurance Companies

Author:: Gary Clyde Hufbauer
Publication Date:: 01-2012
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The United States suffers from a severe self-inflicted wound. Together, federal and state governments impose almost the highest corporate tax rate found among advanced countries, 39 percent. Only Japan is fractionally higher. The high US rate has adverse consequences—lost investment, lost jobs, and less innovation—and goes a long way to explain slipping US competitiveness in the world economy.
Topic:: Economics, Industrial Policy, International Trade and Finance, and Markets
Political Geography:: United States and Japan

29. Using US Strategic Reserves to Moderate Potential Oil Price Increases from Sanctions on Iran

Author:: Philip K. Verleger
Publication Date:: 02-2012
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The United States has initiated new sanctions against Iran aimed at preventing it from collecting revenue from exports of crude oil. The European Union has followed, embargoing all imports of Iranian crude from July 1, 2012 and preventing any firms from entering into new contracts to import Iranian oil after January 23, 2012. The new US and EU sanctions could be the most draconian in many years. If implemented fully, US sanctions would force trading partners to choose between the United States and Iran. EU sanctions would cut Iran off from an important market. These sanctions, while reducing Iranian income, could pose a very serious economic threat to countries that have significant trade with the United States and/or import significant quantities of oil from Iran.
Topic:: Conflict Resolution, Foreign Policy, International Trade and Finance, Markets, Oil, and Sanctions
Political Geography:: United States, Europe, Iran, and Middle East

30. Foreign Manufacturing Multinationals and the Transformation of the Chinese Economy: New Measurements, New Perspectives

Author:: Theodore H. Moran
Publication Date:: 04-2011
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: What is the relationship between foreign manufacturing multinational corporations (MNCs) and the expansion of indigenous technological and managerial technological capabilities among Chinese firms? China has been remarkably successful in designing industrial policies, joint venture requirements, and technology transfer pressures to use FDI to create indigenous national champions in a handful of prominent sectors: high speed rail transport, information technology, auto assembly, and an emerging civil aviation sector. But what is striking in the aggregate data is how relatively thin the layer of horizontal and vertical spillovers from foreign manufacturing multinationals to indigenous Chinese firms has proven to be. Despite the large size of manufacturing FDI inflows, the impact of multinational corporate investment in China has been largely confined to building plants that incorporate capital, technology, and managerial expertise controlled by the foreigner. As the skill-intensity of exports increases, the percentage of the value of the final product that derives from imported components rises sharply. China has remained a low value-added assembler of more sophisticated inputs imported from abroad—a “workbench” economy. Where do the gains from FDI in China end up? While manufacturing MNCs may build plants in China, the largest impact from deployment of worldwide earnings is to bolster production, employment, R, and local purchases in their home markets. For the United States the most recent data show that US-headquartered MNCs have 70 percent of their operations, make 89 percent of their purchases, spend 87 percent of their R dollars, and locate more than half of their workforce within the US economy—this is where most of the earnings from FDI in China are delivered.
Topic:: Economics, Industrial Policy, International Trade and Finance, and Science and Technology
Political Geography:: United States, China, and Israel

31. The Liquidation of Government Debt

Author:: Carmen M. Reinhart
Publication Date:: 04-2011
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts. A subtle type of debt restructuring takes the form of "financial repression." Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks. In this paper, the authors describe some of the regulatory measures and policy actions that characterized the heyday of the financial repression era. In the heavily regulated financial markets of the Bretton Woods system, several restrictions facilitated a sharp and rapid reduction in public debt/GDP ratios from the late 1940s to the 1970s. Low nominal interest rates help reduce debt servicing costs while a high incidence of negative real interest rates liquidates or erodes the real value of government debt. Thus, financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation. Inflation need not take market participants entirely by surprise and, in effect, it need not be very high (by historical standards). For the advanced economies in Reinhart and Sbrancia's sample, real interest rates were negative roughly half of the time during 1945–80. For the United States and the United Kingdom, their estimates of the annual liquidation of debt via negative real interest rates amounted on average to 3 to 4 percent of GDP a year. For Australia and Italy, which recorded higher inflation rates, the liquidation effect was larger (around 5 percent per annum).
Topic:: Debt, Economics, International Trade and Finance, and Markets
Political Geography:: United States and United Kingdom

32. What Should the United States Do about Doha?

Author:: Jeffrey J. Schott
Publication Date:: 06-2011
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The Doha Round of multilateral trade negotiations in the World Trade Organization (WTO) remains stalled despite the political impetus provided by the Seoul G-20 Summit in November 2010. The major trading nations have not revised their positions enough to propel new negotiations on agriculture, manufactures, and services. There is now little chance to complete an agreement this year and little indication that current efforts could succeed next year.
Topic:: Economics, International Cooperation, and International Trade and Finance
Political Geography:: United States

33. US Tax Discrimination Against Large Corporations Should Be Discarded

Author:: Gary Clyde Hufbauer and Martin Vieiro
Publication Date:: 10-2011
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The United States holds contradictory views about large corporations. When Americans speak of breakthroughs in research and engineering, they are justly proud of large firms that pioneered railroads and steam engines in the 19th century, automobiles, electric power, and oil exploration in the 20th century, and computers, software, and biotechnology in the 21st century. Yet when talk turns to paying taxes, public opinion holds that large corporations should pay a higher statutory tax rate than other business firms, and enjoy fewer deductions in computing their taxable income. Despite common sense and the teachings of economics, tax discrimination is alive and well.
Topic:: Economics, Globalization, International Trade and Finance, Markets, and Financial Crisis
Political Geography:: United States and America

34. What Can and Cannot Be Done about Rating Agencies

Author:: Nicolas Véron
Publication Date:: 11-2011
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Credit Rating Agencies (CRAs) are prominent participants in the assessment of credit risk by financial markets. They determine and publish credit ratings, which represent the CRA's opinions on issuers' relative probability of default. The market for credit ratings is currently dominated in most western countries by three players: n Standard Poor's (S) is a division of the McGraw- Hill Companies, a US-based media group whose ownership is dispersed (the largest shareholder is Capital Group, with 12 percent of shares); n Moody's Corporation is an autonomous US-based listed company with dispersed ownership (the largest shareholder is Berkshire Hathaway, with 12.5 percent of shares); n Fitch Ratings is a division of the Fitch Group which is jointly owned by Fimalac, a Paris-based listed investment vehicle (60 percent of shares), and the US-based Hearst Corporation (40 percent of shares).
Topic:: Debt, Economics, Globalization, International Trade and Finance, and Markets
Political Geography:: United States

35. The United States Should Establish Permanent Normal Trade Relations with Russia

Author:: Gary Clyde Hufbauer and Anders Åslund
Publication Date:: 11-2011
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: After 18 years, Russia is finally on the verge of acceding to the World Trade Organization (WTO). No country has struggled for so long to become a member of this important organization. The last impediment was removed on November 9, when Russia and Georgia concluded an agreement on monitoring trade flows across their disputed border. The WTO Working Party, which oversaw the negotiations, then approved Russian accession on November 10, clearing the way for formal membership to be adopted at the WTO ministerial conference to be held December 15–17, 2011 (WTO 2011).
Topic:: Conflict Resolution, Economics, International Trade and Finance, Markets, and Bilateral Relations
Political Geography:: Russia, United States, and Georgia

36. Revitalizing the Export-Import Bank

Author:: Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong
Publication Date:: 05-2011
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The United States has experienced persistent trade deficits for decades, and thoughtful observers have concluded that deficits cannot be sustained at levels much exceeding 4 percent of GDP annually. There are only two ways to decrease the trade deficit: reduce imports or increase exports. For global economic health, increased exports are a far better proposition.
Topic:: Economics, International Trade and Finance, and Monetary Policy
Political Geography:: United States

37. Corporate Tax Reform for a New Century

Author:: Gary Clyde Hufbauer and Woan Foong Wong
Publication Date:: 04-2011
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: In his State of the Union address, President Barack Obama stressed four ingredients of American prosperity: faster innovation, better education, less deficit, and more jobs. As the president recognized in his address, the US free enterprise system drives the private sector to innovate, invest, and create jobs. This policy brief concentrates on how reforming the corporate tax system can strengthen the private sector, thereby spurring both innovation and job.
Topic:: Economics, Globalization, International Trade and Finance, Monetary Policy, and Financial Crisis
Political Geography:: United States

38. A Generalized Fact and Model of Long-Run Economic Growth: Kaldor Fact as a Special Case

Author:: Daniel Danxia Xie
Publication Date:: 02-2011
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper provides new evidence on the long-run relationship between economic growth and labor's share in national income, based on a comprehensive panel data set for 123 countries from 1950 to 2004. Xie's primary finding is that labor's share follows a cubic relationship with real GDP per capita over the long process of development. At the beginning of the modern economic growth process, the share of labor in national income first decreases until an initial threshold is reached. After that, labor's share keeps increasing until the country's GDP per capita reaches a second threshold before falling again. Xie argues that these dynamics apply not only to the less developed countries in the postwar years, but also to the advanced countries like the United States and the United Kingdom during their early economic take-offs, starting in the late 18th and 19th century, respectively. Finally, he proposes a two-sector constant elasticity of substitution (CES)-type growth model and simulate the model to replicate and explain the possible mechanism behind such a nonlinear pattern of movements in labor's share.
Topic:: Economics, International Trade and Finance, Labor Issues, and Monetary Policy
Political Geography:: United States and United Kingdom

39. The Substitution Account as a First Step Toward Reform of the International Monetary System

Author:: Peter B. Kenen
Publication Date:: 03-2010
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Today, the international monetary system is based largely on the US dollar, but reserve currency diversification has begun, thanks to the advent of the euro, and it is apt to continue. Eventually, the renminbi could acquire reserve currency status, and the resulting reserve currency diversification could be more disruptive than it has been to date. To forestall that possibility the quasi-currency issued by the International Monetary Fund (IMF), Special Drawing Rights (SDRs), could be made to play a larger role in the international monetary system, precluding potentially disruptive diversification and achieving more orderly growth in the stock of international reserves.
Topic:: Economics, International Political Economy, International Trade and Finance, and Monetary Policy
Political Geography:: United States

40. Wholesalers and Retailers in US Trade

Author:: J. Bradford Jensen, Andrew B. Bernard, Peter K. Schott, and Stephen J. Redding
Publication Date:: 06-2010
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: International trade models typically assume that producers in one country trade directly with final consumers in another. In reality, of course, trade can involve long chains of potentially independent actors who move goods through wholesale and retail distribution networks. These networks likely affect the magnitude and nature of trade frictions and hence both the pattern of trade and its welfare gains. To promote further understanding of the means by which goods move across borders, this paper examines the extent to which US exports and imports flow through wholesalers and retailers versus producing and consuming firms.
Topic:: Economics, International Trade and Finance, and Markets
Political Geography:: United States

41. Do Developed and Developing Countries Compete Head to Head in High Tech?

Author:: Robert Z. Lawrence and Lawrence Edwards
Publication Date:: 06-2010
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Concerns that growth in developing countries could worsen the US terms of trade and that increased US trade with developing countries will increase US wage inequality both implicitly reflect the assumption that goods produced in the United States and developing countries are close substitutes and that specialization is incomplete. In this paper we show on the contrary that there are distinctive patterns of international specialization and that developed and developing countries export fundamentally different products, especially those classified as high tech. Judged by export shares, the United States and developing countries specialize in quite different product categories that, for the most part, do not overlap. Moreover, even when exports are classified in the same category, there are large and systematic differences in unit values that suggest the products made by developed and developing countries are not very close substitutes—developed country products are far more sophisticated.
Topic:: Development, Emerging Markets, International Trade and Finance, Markets, Science and Technology, and Labor Issues
Political Geography:: United States

42. The Margins of US Trade

Author:: J. Bradford Jensen, Andrew B. Bernard, Peter K. Schott, and Stephen J. Redding
Publication Date:: 05-2010
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Recent research in international trade emphasizes the importance of firms' extensive margins for understanding overall patterns of trade as well as how firms respond to specific events such as trade liberalization. In this paper, we use detailed US trade statistics to provide a broad overview of how the margins of trade contribute to variation in US imports and exports across trading partners, types of trade (i.e., arm's length versus related party) and both short and long time horizons. Among other results, we highlight the differential behavior of related-party and arm's-length trade in response to the 1997 Asian financial crisis.
Topic:: Economics, International Trade and Finance, and Markets
Political Geography:: United States

43. Intra-Firm Trade and Product Contractibility

Author:: J. Bradford Jensen, Andrew B. Bernard, Peter K. Schott, and Stephen J. Redding
Publication Date:: 05-2010
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper examines the determinants of intra-firm trade in US imports using detailed country-product data. We create a new measure of product contractibility based on the degree of intermediation in international trade for the product. We find important roles for the interaction of country and product characteristics in determining intra-firm trade shares. Intra-firm trade is high for products with low levels of contractibility sourced from countries with weak governance, for skill-intensive products from skill-scarce countries, and for capital-intensive products from capital-abundant countries.
Topic:: Economics, Industrial Policy, International Trade and Finance, and Markets
Political Geography:: United States

44. Revisiting the NAFTA Agenda on Climate Change

Author:: Jeffrey J. Schott and Meera Fickling
Publication Date:: 07-2010
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: A year ago, we wrote a policy brief titled Setting the NAFTA Agenda on Climate Change, which explored issues of energy and environmental cooperation among the three North American countries in light of the climate legislation that had recently passed the US House of Representatives. Similar legislation did not pass the Senate, and Congressional leaders are now considering much more modest measures aimed at reducing greenhouse gas (GHG) emissions and reforming US energy policy.
Topic:: Climate Change, Economics, International Trade and Finance, and Treaties and Agreements
Political Geography:: United States and North America

45. Deepening China-Taiwan Relations through the Economic Cooperation Framework Agreement

Author:: Daniel H. Rosen
Publication Date:: 06-2010
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: On Sunday, June 13, 2010 representatives from China and Taiwan held a third round of talks in Beijing on an Economic Cooperation Framework Agreement (ECFA) that would liberalize important aspects of cross-Strait economic relations. Details of what was agreed and what remains under negotiation are still trickling out, and in any case the nature of this framework is that various elements will be agreed upon on an ongoing basis rather than at once. But it is clear from available details that ECFA will be an ambitious accord that fundamentally changes the game between Taiwan and China and hence affects the regional economy and even the transpacific tempo for the United States.
Topic:: Economics, International Cooperation, International Trade and Finance, Treaties and Agreements, and Bilateral Relations
Political Geography:: United States, China, and Taiwan

46. Hobbling Exports and Destroying Jobs

Author:: Gary Clyde Hufbauer and Theodore H. Moran
Publication Date:: 06-2010
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The US House of Representatives has just passed the American Jobs and Closing Tax Loopholes Act (HR 4213). This bill will hurt American workers, reduce American exports, and make American companies less competitive in the international marketplace. Since the US Senate has already passed companion legislation, the American Workers, State, and Business Relief Act (S 3336), these ill-considered bills could soon be reconciled in conference and become the law of the land. If so, American firms and workers will pay the price.
Topic:: Economics, International Trade and Finance, Markets, and Labor Issues
Political Geography:: United States and America

47. A Trade Agenda for the G-20

Author:: Jeffrey J. Schott
Publication Date:: 05-2010
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: For the past 18 months, the G-20 summit countries have worked together to contain the global economic crisis and encourage a sustainable economic recovery. As part of these efforts, the G-20 leaders have sought to constrain the protectionist pressures that invariably arise during times of economic stress and to maintain an open international trading regime. The G-20 trade agenda, as enunciated in the three summit declarations, has covered two specific trade actions: a “standstill” on new protectionism and a charge to complete the Doha Round of multilateral trade negotiations.
Topic:: Development, Human Rights, International Organization, and International Trade and Finance
Political Geography:: United States and Washington

48. Higher Taxes on Multinationals Would Hurt US Workers and Exports

Author:: Gary Clyde Hufbauer and Theodore H. Moran
Publication Date:: 05-2010
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: As presidential candidate, Barack Obama repeatedly advocated tax “reforms” aimed squarely at US-based multinational enterprises (MNEs). As president, he again declared—in the same State of the Union address that laid out an ambitious goal for export expansion—that “it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America."
Topic:: Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:: United States

49. KORUS FTA 2.0: Assessing the Changes

Author:: Jeffrey J. Schott
Publication Date:: 12-2010
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: On December 3, 2010, the United States and South Korea agreed to incremental changes to the Korea-US Free Trade Agreement (KORUS FTA) that was signed in June 2007 but not ratified by the US Congress or the Korean National Assembly. Most of the changes affect bilateral trade in autos and light trucks; other minor changes involve pharmaceutical patents, US pork exports, and US visas.
Topic:: International Trade and Finance, Treaties and Agreements, and Bilateral Relations
Political Geography:: United States and South Korea

50. Prospects for Implementing the Korea-US Free Trade Agreement

Author:: Jeffrey J. Schott
Publication Date:: 10-2010
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The Korea-US Free Trade Agreement (KORUS FTA) was signed on June 30, 2007. Since then, the Korean National Assembly has vetted the agreement and the pact cleared a major legislative hurdle when the Foreign Affairs and Trade Committee approved it in April 2009; the full assembly has deferred final passage pending comparable action by the US Congress. In the United States, the ratification process has not yet begun; neither President George W. Bush nor President Barack Obama has submitted implementing legislation to Congress.
Topic:: Diplomacy, International Trade and Finance, Bilateral Relations, and Law
Political Geography:: United States, Israel, Asia, and Korea

51. Trade Disputes Between China and the United States: Growing Pains so Far, Worse Ahead?

Author:: Gary Clyde Hufbauer and Jared C. Woollacott
Publication Date:: 12-2010
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This study covers the history of Sino-US trade relations with a particular focus on the past decade, during which time each has been a member of the World Trade Organization (WTO). Providing a brief history of 19th and 20th century economic relations, this paper examines in detail the trade disputes that have arisen between China and the United States over the past decade, giving dollar estimates for the trade flows at issue. Each country has partaken in their share of protectionist measures, however, US measures have been characteristically defensive, protecting declining industries, while Chinese measures have been characteristically offensive, promoting nascent industries. We also cover administrative and legislation actions within each country that have yet to be the subject of formal complaint at the WTO. This includes an original and comprehensive quantitative summary of US Section 337 intellectual property rights cases. While we view the frictions in Sino-US trade a logical consequence of the rapid increase in flows between the two countries, we caution that each country work within the WTO framework and respect any adverse decisions it delivers so that a protracted protectionist conflict does not emerge. We see the current currency battle as one potential catalyst for such conflict if US and Chinese policymakers fail to manage it judiciously.
Topic:: Economics, International Trade and Finance, Markets, and Bilateral Relations
Political Geography:: United States and China

52. Pacific Asia and the Asia Pacific: The Choices for APEC

Author:: C. Fred Bergsten
Publication Date:: 07-2009
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The Asia Pacific Economic Cooperation (APEC) forum comprises 21 developed and developing economies that surround the Pacific Rim. The organization was created in 1989 and holds annual Leaders' Meetings that bring together its heads of government. In this policy brief, I assess the record of the APEC over the 20 years of its existence and discuss the world environment in which APEC is likely to be operating in the next 20 years, with a particular focus on the major change in global institutional arrangements implied by the replacement of the Group of Seven/Eight (G-7/8) by the Group of Twenty (G-20) as the chief steering committee for the world economy and, within that group and other international economic organizations, the increasingly central role of an informal and de facto Group of Two (G-2) between China and the United States.
Topic:: International Relations, International Trade and Finance, Regional Cooperation, and Treaties and Agreements
Political Geography:: United States, China, Asia, and Australia/Pacific

53. Understanding Special Drawing Rights

Author:: John Williamson
Publication Date:: 06-2009
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: A once-familiar but long-neglected acronym has reappeared in newspapers in recent weeks. We have read that the G-20 meeting in London endorsed a proposal that the International Monetary Fund (IMF) should create $250 billion in Special Drawing Rights (SDRs). We have been told that one problem with this proposal is that most of the SDR allocation would accrue to countries that are unlikely to use them, and some readers may have seen proposed ways around this difficulty. We have read that the governor of the People's Bank of China, Zhou Xiaochuan, has proposed that the SDR should gradually displace the dollar at the center of the international monetary system and that surplus countries should be able to convert their dollar holdings into SDR-denominated assets. No one can doubt that the SDR is back.
Topic:: Economics, International Cooperation, International Political Economy, International Trade and Finance, and Monetary Policy
Political Geography:: United States and China

54. The Future of the Dollar

Author:: Richard N. Cooper
Publication Date:: 09-2009
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The US dollar is not the world's key currency by policy design, just as English is not the leading global language by policy design. It is the evolutionary outcome of practice and experience. It would take both a major shock to the dollar and a viable alternative to dislodge it from widespread use. Like a common language, the dollar enjoys “network externalities”— the greater the number of people who use and accept it, the more useful it is to everyone, and the more entrenched it becomes. Also, what is not quite the same thing, the dollar enjoys a large market in low-risk and highly liquid securities, most notably US Treasury bills; the liquidity both enhances and is enhanced by the network externalities. Most of the world's foreign exchange transactions directly involve the US dollar. It is easy to hold and easy to use, even on a large scale. In short, it is highly convenient.
Topic:: Economics, Foreign Exchange, and International Trade and Finance
Political Geography:: United States

55. Why SDRs Could Rival the Dollar

Author:: John Williamson
Publication Date:: 09-2009
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: In a recent Cato Institute paper, Swaminathan S. Anklesaria Aiyar (2009) asserts that the International Monetary Fund's special drawing rights (SDRs) cannot rival the US dollar, as suggested by the Chinese central bank governor (Zhou Xiaochuan 2009). “The SDR is not a currency and never can be,” Swami declares confidently in the first paragraph of his paper. He presents two arguments, which are presumably supposed to be proofs of this proposition.
Topic:: Economics, Foreign Exchange, and International Trade and Finance
Political Geography:: United States

56. The 2008 Oil Price "Bubble"

Author:: Mohsin S. Khan
Publication Date:: 08-2009
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: As oil prices began to rise in 2009 from a low point of about $40 a barrel in January to around $70 a barrel in July, a key question is whether the world is in for another oil price spike in the near term similar to that witnessed in early 2008. Several hypotheses were advanced when world oil prices started their inexorable climb from 2003–04 onwards, then skyrocketed from $92 a barrel in January 2008 to cross the $140 a barrel mark in June, finally hitting a record high of $147 a barrel on July 11, 2008, before collapsing to less than $40 a barrel in December (figure 1). There was the “peak oil” explanation, based on the theories of M. King Hubbert of “Hubbert's Peak” fame and his supporters, notably Colin Campbell and Matthew Simmons, that the world was running out of oil. There were the market “fundamentalists,” including importantly John Lipsky, the first deputy managing director of the International Monetary Fund (IMF), and Philip Verleger, a well-known oil expert, who argued that the fundamentals of demand and supply were primarily behind the extraordinary rise in oil prices in the first half of 2008 (Lipsky 2009a, 2009b; Verleger 2005, 2008). Interestingly, this fundamentals view was also shared by the US Treasury and was articulated by David McCormick, then undersecretary for international affairs, in a presentation in July 2008 at the Peterson Institute for International Economics. Finally, there were those who maintained that such an increase could only be a “bubble,” unexplained by peak oil theory or market fundamentals. Many financial-market participants were proponents of this third view, notably Michael Masters (2008), as well as the main oil producers, who were as surprised as anyone at the speed and size of the price increase over only a few months. Their argument was that the phenomenal increase in financialization of commodity markets during 2006–08, including in particular the oil market, led to speculation and momentum trading, which pushed oil prices way beyond their long-term equilibrium level as determined by fundamentals.
Topic:: Economics, International Trade and Finance, and Oil
Political Geography:: United States

57. Structural and Cyclical Trends in Net Employment over US Business Cycles, 1949-2009: Implications for the Next Recovery and Beyond

Author:: Jacob Funk Kirkegaard
Publication Date:: 08-2009
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Th is paper expands on the methodology of Groshen and Potter (2003) for studying cyclical and structural changes in the US economy and analyzes the net structural and cyclical employment trends in the US economy during the last 10 trough-to-trough business cycles from 1949 to the present. It illustrates that the US manufacturing sector and an increasing number of services sectors, including parts of the fi nancial services sector, are experiencing structural employment declines. Structural employment gains in the US labor market are increasingly concentrated in the healthcare, education, food, and professional and technical services sectors and in the occupations related to these industries. Th e paper concludes that the improved operation of the US labor market during the 1990s has reversed itself in the 2000s, with negative long-term economic eff ects for the United States.
Topic:: Economics, International Trade and Finance, and Markets
Political Geography:: United States

58. American Multinationals and American Economic Interests: New Dimensions to an Old Debate

Author:: Theodore H. Moran
Publication Date:: 07-2009
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The 2008 election rekindled debate about whether US multinationals shift technology across borders and relocate production in ways that might harm workers and communities at home. President Obama now pledges to end tax breaks for corporations that ship jobs overseas. The preoccupation about the behavior of American multinationals takes three forms: (1) that US-based multinational corporations may follow a strategy that leads them to abandon the home economy, leaving the workers and communities to cope on their own with few appealing alternatives after the multinationals have left; (2) worse, that US-based multinational corporations may not just abandon home sites but drain off capital, substitute production abroad for exports, and “hollow out” the domestic economy in a zero-sum process that damages those left behind; and (3) worst, that US-based multinational corporations may deploy a rent-gathering apparatus that switches from sharing supranormal profits and externalities with US workers and communities to extracting rents from the United States. Each of these concerns contains a hypothetical outcome that can be compared with contemporary evidence from the United States and other home countries.
Topic:: Economics, International Political Economy, International Trade and Finance, Markets, and Financial Crisis
Political Geography:: United States and America

59. Money for the Auto Industry: Consistent with WTO Rules?

Author:: Gary Clyde Hufbauer and Claire Brunel
Publication Date:: 02-2009
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: As the financial crisis threatens to lead to a depression, the woes of the automobile industry are second only to the distress of the financial sector. Employment in the US auto industry dropped 9 percent between 2007 and 2008, with much more to follow in 2009. Overall, US auto sales dropped 18 percent between 2007 and 2008, and sales of SUVs plunged 44 percent on a year-over-year basis. Since some sort of financing is required for 90 percent of US car sales, the global credit freeze hit the auto industry with a second blow.
Topic:: Economics, International Political Economy, International Trade and Finance, Poverty, and Financial Crisis
Political Geography:: United States

60. A Green Recovery? Assessing US Economic Stimulus and the Prospects for International Coordination

Author:: Trevor Houser, Shashank Mohan, and Robert Heilmayr
Publication Date:: 02-2009
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: As the 111th Congress begins and a new president takes office, the economic crisis dominates the US policy agenda. The financial system remains in a tenuous state despite massive bank recapitalization, and the economy, more than a year into the current recession, shows no signs of recovery. Given the scale of the challenge Washington faces and the amount of money required to combat it, there will likely be little room for other legislative priorities. As a result, policymakers are hoping to direct government spending over the next two years in a way that not only generates short-term economic growth and employment but also addresses long-term policy goals sidelined by the current crisis.
Topic:: International Relations, Climate Change, Economics, Environment, International Political Economy, and International Trade and Finance
Political Geography:: United States

61. Buy American: Bad for Jobs, Worse for Reputation

Author:: Gary Clyde Hufbauer and Jeffrey J. Schott
Publication Date:: 02-2009
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: On January 28, 2009, the US House of Representatives passed its economic stimulus plan, the American Recovery and Reinvestment Act of 2009. Out of the bill's 700 text pages, a small half-page section attracted enormous media attention: the section requiring that all public projects funded by the stimulus plan must use only iron and steel produced in the United States (box 1). Another provision, which drew less attention, extends the so-called Berry Amendment (an old Buy American provision) to uniforms purchased by the Department of Homeland Security.
Topic:: Economics, Globalization, Government, Industrial Policy, International Political Economy, International Trade and Finance, and International Affairs
Political Geography:: United States

62. Policy Liberalization and US Merchandise Trade Growth, 1980-2006

Author:: Matthew Adler and Gary Clyde Hufbauer
Publication Date:: 05-2009
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This working paper draws on historical and contemporary data on tariffs, nontariff barriers, and transportation costs (for the United States and its major trading partners) to estimate the role of policy liberalization in US merchandise trade growth over the period 1980 to 2006. Both partial equilibrium analysis and computable general equilibrium analysis are used to make the estimates. Both methods indicate that roughly 25 percent of US trade growth since 1980 can be attributed to policy liberalization. Policy liberalization plays a larger role in US export growth (35 to 40 percent) than US import growth (25 percent). According to these estimates, policy liberalization accounts for almost all US merchandise growth in excess of growth that can be explained by expanding GDP in the United States and abroad.
Topic:: International Political Economy and International Trade and Finance
Political Geography:: United States

63. 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

64. 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

65. Multilateralism beyond Doha

Author:: Arvind Subramanian and Aaditya Mattoo
Publication Date:: 10-2008
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: A fundamental shift is taking place in the world economy to which the multilateral trading system has failed to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were not even on the negotiating agenda. The paper advances five propositions: (1) the traditional negotiating dynamic, driven by private-sector interests largely in the rich countries, is running out of steam; (2) the world economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic security has become a paramount concern for consumers, workers, and ordinary citizens; (3) international economic integration can contribute to enhanced security; (4) addressing these new concerns-relating to food, energy, and economic security-requires a wider agenda of multilateral cooperation, involving not just the World Trade Organization but other multilateral institutions as well; and (5) despite shifts in economic power across countries, the commonality of interests and scope for give-and-take on these new issues make multilateral cooperation worth attempting.
Topic:: Security, Economics, International Trade and Finance, Treaties and Agreements, and World Trade Organization
Political Geography:: United States, China, and Europe

66. Distance Isn't Quite Dead: Recent Trade Patterns and Modes of Supply in Computer and Information Services in the United States and NAFTA Partners

Author:: Jacob Funk Kirkegaard
Publication Date:: 10-2008
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper evaluates the statistical strengths and weaknesses of available data on US computer and information services trade and estimates the scope of delivery through GATS modes 1, 3, and 4. Trade values are estimated using a new methodology that adheres, to the greatest extent possible, to the definitions of modes of supply in the 2002 Manual on Statistics of International Trade in Services. This paper finds that US trade (particularly exports) in computer and information services are overwhelmingly and increasingly delivered through mode 3. The United States is found to have experienced declining overall revealed comparative advantage (RCA) in traditional mode 1 cross-border computer and information services trade from 1986 to 2006, while having a stable, positive RCA in mode-3 trade. A new methodology for tentatively estimating US imports of computer and information services in GATS mode 4 suggests that the IT services sector dominates US mode-4 imports, and that these are several times larger than US traditional mode-1, cross-border imports of computer and information services.
Topic:: Economics, International Trade and Finance, and Science and Technology
Political Geography:: United States

67. On What Terms Is the IMF Worth Funding?

Author:: Edwin M. Truman
Publication Date:: 12-2008
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: In the first decade of the 21st century the International Monetary Fund (IMF) faced crises of legitimacy, relevance, and budgetary finance. It now confronts what likely will be the worst global recession since World War II, potentially huge demands for its financial assistance with limited resources, and calls for it to play a more central role in the international financial and regulatory systems. At the same time, the incoming Barack Obama administration must decide what to do about the modest package of IMF reforms that was completed in the spring of 2008. The package requires US congressional approval to go into effect. This paper reviews the recent, slow progress on IMF reform and makes recommendations to the Obama administration against the background of that record, the emerging global recession, and continuing financial turmoil. I recommend that the IMF package be reopened to include a doubling of IMF quotas and an amendment that will permit the Fund to swap special drawing rights (SDR) with major central banks to finance its short-term lending facility. I also recommend a special allocation of 50 billion SDR. If these proposals are turned down by the G-20 at its meeting in April 2009, I reluctantly recommend that the Obama administration seek congressional approval of the IMF package as it now stands because a failure to do so would seriously undermine the Fund as a central multilateral institution.
Topic:: Development, International Organization, International Political Economy, International Trade and Finance, and Global Recession
Political Geography:: United States

68. Policy Liberalization and FDI Growth, 1982 to 2006

Author:: Matthew Adler and Gary Clyde Hufbauer
Publication Date:: 08-2008
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Over the last three decades the global economy has expanded in a remarkable fashion. While nominal world GDP has increased four times, world bilateral trade flows have grown more than six-fold, and the stock of foreign direct investment (FDI) has grown by roughly 20 times since 1980. The sources of global trade and investment growth are well known—general economic expansion, policy liberalization, and better communications and technology—but the impact of each source is unclear. In this paper we attempt to uncover the contribution of policy liberalization to the rising ratios of US inward and outward FDI stocks to GDP over the last three decades.
Topic:: Economics, Globalization, International Political Economy, International Trade and Finance, Markets, and Political Economy
Political Geography:: United States

69. "Fear"and Offshoring: The Scope and Potential Impact of Imports and Exports of Services

Author:: Lori G. Kletzer and J . Bradford Jensen
Publication Date:: 01-2008
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: While the uproar over offshoring has largely subsided since the 2004 presidential campaign, there continues to be concern and anxiety regarding the potential impact of offshoring in general and services offshoring in particular. With the economy softening and potentially headed for a recession in the midst of the current presidential campaign, worries about jobs and globalization seem likely to reemerge.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States

70. Strengthening Trade Adjustment Assistance

Author:: Howard F. Rosen
Publication Date:: 01-2008
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: In 1962, when the United States was running a trade surplus, imports were barely noticeable, and manufacturing employment was increasing, Congress made a commitment to assist American workers, firms, and communities hurt by international trade, by establishing the Trade Adjustment Assistance (TAA) program. This commitment was based on an appreciation that despite their large benefits, widely distributed throughout the economy, international trade and investment could also be associated with severe economic dislocations.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States

71. The Case for Exchange Rate Flexibility in Oil-Exporting Economies

Author:: Brad Setser
Publication Date:: 11-2007
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Brad Setser is a fellow at the Greenberg Center for Geoeconomic Studies at the Council on Foreign Relations. He previously worked as a senior economist at RGEMonitor, an online financial information service. He served in the US Treasury Department from 1997 to 2001, where he concluded his tenure as the acting director of the Office of International Monetary and Financial Policy, and spent 2002 as a visiting scholar at the International Monetary Fund. He is the coauthor of Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies (Institute for International Economics, 2004) with Nouriel Roubini.
Topic:: Economics, Foreign Exchange, International Trade and Finance, and Oil
Political Geography:: United States

72. Congress, Treasury, and the Accountability of Exchange Rate Policy: How the 1988 Trade Act Should Be Reformed

Author:: Randall Henning
Publication Date:: 09-2007
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The controversy within the United States over Chinese exchange rate policy has generated a series of legislative proposals to restrict the discretion of the Treasury Department in determining currency manipulation and to reform the department's accountability to Congress. This paper reviews Treasury's reports to Congress on exchange rate policy—introduced by the 1988 Trade Act—and Congress's treatment of them. It finds that the accountability process has often not worked well in practice: The reports provide only a partial basis for effective congressional oversight. For its part, Congress held hearings on less than half of the reports and overlooked some important substantive issues. Several recommendations can improve guidance to the Treasury, standards for assessment, and congressional oversight. These include (1) refining the criteria used to determine currency manipulation and writing them into law, (2) explicitly harnessing US decisions on manipulation to the International Monetary Fund's rules on exchange rates, (3) clarifying the general objectives of US exchange rate policy, (4) reaffirming the mandate to seek international macroeconomic and currency cooperation, (5) requiring Treasury to lead an executivewide policy review, and (6) institutionalizing multicommittee oversight of exchange rate policy by Congress. Legislators should strengthen reporting and oversight of broader exchange rate policy in addition to strengthening the provisions targeting manipulation.
Topic:: Economics, Foreign Exchange, and International Trade and Finance
Political Geography:: United States and China

73. Measurement and Inference in International Reserve Diversification

Author:: Anna Wong
Publication Date:: 07-2007
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper analyzes international reserve diversification by examining changes in quantity shares of currencies held in foreign exchange reserves. It discusses alternative methodologies for constructing quantity shares and applies the preferred methodology to three sets of data on the currency composition of foreign exchange reserves: quarterly aggregate International Monetary Fund's Composition of Foreign Exchange Reserves (IMF COFER) data, quarterly IMF COFER data for industrial- and developing-country groups, and annual data for 23 individual countries that disclose the currency composition of their foreign exchange reserve holdings. What can one infer from available data about the diversification of foreign exchange reserves since 1999? The analysis suggests four conclusions: (1) The behavior of the quantity shares of the US dollar and the euro in total reserves is consistent with net stabilizing intervention; their quantity shares tend to rise when these currencies are declining and vice versa. (2) The principal driver of this stabilizing diversification over the period 1999Q1–2005Q4 is Japan. (3) The industrial countries as a group but excluding Japan do not indicate stabilizing diversification. (4) The nonindustrial countries as a group display stabilizing diversification over short periods of only a few quarters. In summary, the aggregate data conceal much diversity in the practices of individual countries.
Topic:: Economics, Foreign Exchange, and International Trade and Finance
Political Geography:: United States, Japan, and Asia

74. Can Doha Still Deliver on the Development Agenda?

Author:: Kimberly Elliott
Publication Date:: 06-2006
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The Doha Round of multilateral trade negotiations, so named because it was launched in the Qatari capital, is in deep trouble. Negotiators have yet to meet any of the interim deadlines for completing the talks, and they missed another at the end of April 2006. While it is still possible to finish the round by early 2007, the odds are diminishing by the day, and this deadline matters more than most. Trade promotion authority (TPA) in the United States will expire in June 2007, and if the round does not make significant progress before then, TPA might not be renewed, and the round would likely drag on for several more years.
Topic:: Economics, International Organization, International Trade and Finance, and Political Economy
Political Geography:: United States

75. A Currency Basket for East Asia, Not Just China

Author:: John Williamson
Publication Date:: 08-2005
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: China recently announced that it is adopting a basket of currencies as the peg for its exchange rate instead of the US dollar. This announcement raises questions of how such a system works, whether other East Asian countries would be advised to follow China in adopting a basket numeraire, and whether it would be advantageous to these countries if they were all to adopt the same basket. This brief answers these questions.
Topic:: Economics, International Cooperation, and International Trade and Finance
Political Geography:: United States, Israel, East Asia, and Asia

76. Prospects for Regional Free Trade in Asia

Author:: Gary Clyde Hufbauer and Yee Wong
Publication Date:: 10-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Frustrated with lackluster momentum in the WTO Doha Round and the Asia Pacific Economic Cooperation (APEC) forum, and mindful of free trade agreement (FTA) networks centered on the United States and Europe, Asian countries have joined the FTA game. By 2005, Asian countries (excluding China) had ratified 14 bilateral and regional FTAs and had negotiated but not implemented another seven. Asian nations are also actively negotiating some 23 bilateral and regional FTAs, many with non-Asian partners, including Australia, Canada, Chile, the European Union, India, and Qatar. China has been particularly active since 2000. It has completed three bilateral FTAs—Thailand in 2003 and Hong Kong and Macao in 2004—and is initiating another 17 bilateral and regional FTAs. However, a regional Asian economic bloc led by China seems distant, even though China accounts for about 30 percent of regional GDP. As in Europe and the Western Hemisphere, many Asian countries are pursuing FTAs with countries outside the region. On present evidence, the FTA process embraced with some enthusiasm in Asia, Europe, and the Western Hemisphere more closely resembles fingers reaching idiosycratically around the globe rather than politico-economic blocs centered respectively on Beijing, Brussels, and Washington.
Topic:: Economics, International Trade and Finance, and Regional Cooperation
Political Geography:: United States, China, Europe, Washington, Canada, India, Beijing, Asia, Australia, Qatar, Chile, Hong Kong, Brussels, and Macao

77. The US Trade Deficit: A Disaggregated Perspective

Author:: Catherine L. Mann and Katharina Plück
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The paper prepares new estimates for the elasticity of US trade flows using bilateral, commodity-detailed trade data for 31 countries, using measures of expenditure and trade prices matched to commodity groups, and including a commodity-and-country specific proxy for global supply-cum-variety. Using the United Nations Commodity Trade Statistics Database (UN Comtrade) we construct bilateral trade flows for 31 countries in four categories of goods based on the Bureau of Economic Analysis's "end-use" classification system--autos, industrial supplies and materials-excluding energy, consumer goods, and capital goods. We find that using expenditure matched to commodity category yields more plausible values for the demand elasticities than does using GDP as the measure of demand that drives trade flows. Controlling for country and commodity fixed effects, we find that industrial and developing countries have demand elasticities that are statistically significant and that generally differ between development groups and across product categories. Relative prices for the industrial countries have plausible parameter values, are statistically significant and differ across product groups, but the relative prices for developing countries are poorly estimated. We find that variety is an important variable for the behavior of capital goods trade. Because the commodity composition of trade and of trading partners has changed dramatically, particularly for imports, we find that the demand elasticity for imports is not constant. Comparing the in-sample performance of the disaggregated model against a benchmark that uses aggregated data and GDP as the expenditure variable, our disaggregated model predicts exports better in-sample but does not predict imports as well as the benchmark model.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States

78. Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods

Author:: J. Bradford Jensen, Peter K. Schott, and Andrew B. Bernard
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper provides an integrated view of globally engaged US firms by exploring a newly developed dataset that links US international trade transactions to longitudinal data on US enterprises. These data permit examination of a number of new dimensions of firm activity, including how many products firms trade, how many countries firms trade with, the characteristics of those countries, the concentration of trade across firms, whether firms transact at arm's length or with related parties, and whether firms import as well as export. Firms that trade goods play an important role in the United States, employing more than a third of the US workforce. We find that the most globally engaged US firms, i.e. those that both export to and import from related parties, dominate US trade flows and employment at trading firms. We also find that firms that begin trading between 1993 and 2000 experience especially rapid employment growth and are a major force in overall job creation.
Topic:: Economics, Globalization, and International Trade and Finance
Political Geography:: United States

79. What Might the Next Emerging-Market Financial Crisis Look Like?

Author:: Morris Goldstein and Anna Wong
Publication Date:: 07-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper addresses the following question: If a financial crisis affecting a group of emerging economies were to take place sometime over the next three years, where would the crisis likely originate, how could it be transmitted to other economies, and which economies would be most affected by particular transmission or contagion mechanisms? A set of indicators is presented to gauge the vulnerability of individual emerging economies to various shocks, including a slowdown in import demand in both China and the United States, a fall in primary commodity prices, increased costs and lower availability of external financing, alternative patterns of exchange rate changes, and pressures operating on monetary and fiscal policies in emerging economies.
Topic:: Economics, Emerging Markets, Globalization, and International Trade and Finance
Political Geography:: United States and China

80. Affinity and International Trade

Author:: Marcus Noland
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper examines the impact of American public attitudes toward foreign countries on the volume of trade. The issue is whether popular attitudes, as elicited in these surveys, convey any information about trust, risk, or transactions costs beyond what can be explained through standard economic models. The results of this paper suggest that they do, with a one standard deviation increase in warmth of feeling associated with a 20 to 31 percent larger trade volume when evaluated at the sample means. These public attitudes are in turn correlated with indices of cultural affinity and political ideology. A one standard deviation increase in the democracy score is associated with a 5 to 7 percent increase in trade. There might be additional secondary effects if democratization was associated with an increased likelihood of the removal of sanctions or the initiation of preferential trade relations.
Topic:: Foreign Policy, Economics, and International Trade and Finance
Political Geography:: United States

81. The Euro and the World Economy

Author:: Fred Bergsten
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The dollar has been the dominant currency of the world economy for almost a century for a single overwhelming reason: It had no competition. No other economy came close to the size of the United States. Hence no currency could acquire the network externalities, economies of scale and scope, and public goods benefits necessary to rival the dollar at the global level. A similar situation for the United Kingdom explains sterling's dominance in the 19th century.
Topic:: Economics and International Trade and Finance
Political Geography:: United States, United Kingdom, and Europe

82. The US Economic Outlook

Author:: Martin Neil Baily and Jacob Funk Kirkegaard
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Oil prices have risen and are expected to remain high. Slow job and wage growth result in slow income growth. Low interest rates kept housing and auto sales strong after 2000 – borrowing future growth. No new stimulus from monetary or fiscal policy. The Iraq war and the terrorism threat may be a drag on confidence. Because 9/11 did not have significant macroeconomic effects, the impact of the war and terrorism seems to be mostly on oil prices No new stimulus from monetary or fiscal policy.
Topic:: Debt, Economics, and International Trade and Finance
Political Geography:: United States and Iraq

83. Global Economic Prospects: Slower But Still Solid Growth in 2005; Worries About Growth and Inflation for 2006

Author:: Michael Mussa
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: After surging to the highest growth rate in a generation, world real GDP is set to slow from a rate of just over 5 percent for 2004 to about 4 percent for 2005 and a tad slower for 2006. The economic slowdowns in several important economies in the second half of last year, including much of continental Europe and Japan, already make it clear that year-over-year growth will slow for 2005. But the continued strong growth of domestic demand in other countries, most notably the United States and China, virtually assures that global growth this year will not fall below potential.
Topic:: Economics and International Trade and Finance
Political Geography:: United States, Japan, China, Europe, Israel, and East Asia

84. China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity

Author:: Nicholas R. Lardy and Morris Goldstein
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: According to a popular argument put forward by three Deutsche Bank economists (Dooley, Folkerts-Landau, and Garber, here after DFG), one needn't worry about the sustainability of either the large US current account deficit or the undervalued exchange rates of a group of Asian economies (Dooley, Folkerts-Landau, and Garber 2003, 2004a, 2004b, 2004c; Folkerts-Landau 2004). In their view, the United States and the Asian economies have entered into an implicit contract—the so-called revived Bretton Woods system (hereafter BW2)—that can comfortably carry on for another decade or two, with significant net benefits to both parties.
Topic:: Economics and International Trade and Finance
Political Geography:: United States, China, and Asia

85. US Trade Policy in 2005

Publication Date:: 02-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Some time ago, Fred Bergsten and I were talking about the fact that, if trade liberalization is to move forward and retrogression is to be prevented, the focus of the policy community and the public on the benefits of trade-in the full sense, including imports-and on the issues around trade needs to increase. The adverse effects trade has on some people are very keenly felt and often lead to vociferous opposition, while the benefits of trade for a far greater number of people are diffuse and usually little if at all understood-for example, by consumers-and seldom generate political activity on behalf of trade.
Topic:: Economics, Human Welfare, and International Trade and Finance
Political Geography:: United States

86. This is Bangalore Calling: Hang Up or Speed Dial? What Technology-Enable International Trade in Services Means for the US Economy

Author:: Catherine L. Mann
Publication Date:: 01-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Globalization, always a contentious issue, has become even more so with media reports of U.S. service-sector jobs being outsourced to emerging-market economies, such as call center operations to Ireland or programming jobs to India. Traditionally, these jobs have been considered “nontradable” and therefore safe from the competitive forces of international trade and investment. But increasingly, technological advances are making it easier to buy services from other companies, even those in developing countries, where savings in the cost of labor or the opportunity to use the 24- hour clock to speed product develop- ment can be irresistible.
Topic:: Economics, Globalization, International Trade and Finance, and Science and Technology
Political Geography:: United States and Ireland

87. Senator Kerry on Corporate Tax Reform: Right Diagnosis, Wrong Prescription

Author:: Gary Clyde Hufbauer and Paul Grieco
Publication Date:: 04-2004
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Senator John Kerry has proposed a major overhaul in corporate taxation, with the goal of persuading multinational companies (MNCs) to employ more workers at home and fewer abroad. Kerry has correctly emphasized that domestic production is often taxed at a higher rate than production abroad, but his prescriptions will not boost US jobs.
Topic:: Development, Globalization, and International Trade and Finance
Political Geography:: United States, South America, Central America, Caribbean, and North America

88. North American Agriculture under NAFTA

Author:: Gary Clyde Hufbauer, Jeffrey J. Schott, and Yee Wong
Publication Date:: 12-2004
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The NAFTA agreement on agricultural trade consists of three bilateral agreements—between the United States and Mexico, the United States and Cana da, and Canada and Mexico. The US-Canada agreement largely carried into NAFTA the tariff and nontariff barrier rules that had been adopted in the Canada-US Free Trade Agreement (CUSFTA). Under CUSFTA, most agriculture tariffs between the United States and Canada were to be phased out by January 1998, and this schedule was adopted by NAFTA for US-Canada agricultural trade. However, Canada was allowed to maintain permanent tariff-rate-quota (TRQ) restrictions on imports of dairy, poultry, and eggs; and the United States was allowed to maintain TRQs on imports of sugar, dairy products, and peanuts from Canada (see table 1). Although a tariff snapback provision remains in effect until 2008, it has rarely been used by Canada. Agricultural trade between Mexico and Canada was limited by virtually the same restrictions. As might be expected, some agriculture trade associations favored NAFTA and others opposed. Box 1 summarizes the lineup of important trade associations.
Topic:: Agriculture, Economics, and International Trade and Finance
Political Geography:: United States, Canada, North America, and Mexico

89. NAFTA Dispute Settlement Systems

Author:: Gary Clyde Hufbauer, Jeffrey J. Schott, and Yee Wong
Publication Date:: 11-2004
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Building on the 1989 Canada-US Free Trade Agreement (CUSFTA), the NAFTA contains dispute settlement provisions in six separate areas. NAFTA Chapter 11 is designed to resolve investor-state disputes over property rights; Chapter 14 creates special provisions for handling disputes in the financial sector via the Chapter 20 dispute settlement process (DSP); Chapter 19 establishes a review mechanism to determine whether final antidumping and countervailing duty decisions made in domestic tribunals are consistent with national laws; and Chapter 20 provides government-to-government consultation, at the ministerial level, to resolve high-level disputes. In addition, the NAFTA partners created interstate dispute mechanisms regarding domestic environmental and labor laws under the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC), respectively. This chapter examines the first four dispute settlement systems; the NAAEC and NAALC systems are evaluated in the environment and labor chapters of this book.
Topic:: International Relations, Economics, and International Trade and Finance
Political Geography:: United States and Canada

90. Adjusting China's Exchange Rate Policies

Author:: Morris Goldstein
Publication Date:: 06-2004
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: During the past year, there has been considerable debate about, and much international criticism of, China's exchange rate and its currency regime. Yes, criticism of China in the United States would likely be more muted if the ongoing recovery were not so “jobless,” if employment in the US manufacturing sector had not (mainly for other reasons) declined so much in the three-year run-up to this presidential elect ion year, if so much attention were not focused on the very large bilateral US trade deficit with China instead of China's economically—more meaningful overall balance-of-payments position, and if the United States had not done such a poor job of improving its saving-investment imbalance—particularly in the public sector.
Topic:: Economics and International Trade and Finance
Political Geography:: United States, China, and Asia

91. The US Current Account, New Economy Services, and Implications for Sustainability

Author:: Catherine L. Mann
Publication Date:: 01-2004
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This essay considers the implications for sustainability of the US current account of widespread uptake of new economy services around the world. The main contribution of this paper is to estimate new income elasticities for US exports and imports of services that have become increasingly internationally tradable on account of the networked information technologies characteristic of the new economy. These elasticity estimates are then incorporated into a simple model of the US current account. Assumptions on the increase in global growth coming from widespread uptake of new economy services around the world are taken from other sources. The new estimates of income elasticities and the assumptions on global growth yield a trajectory for the US current account deficit that is compared to a base case without increased integration of new economy services in international trade and around the world. The paper concludes that although new economy services reduce the asymmetry in estimated income elasticities and contribute to raising global growth, reasonable estimates of these two structural improvements are not sufficient to stabilize the US current account deficit, in part because the share of new economy services in trade is still small.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: United States

92. Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth

Author:: Catherine L. Mann
Publication Date:: 12-2003
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Businesses throughout the US economy continue to transform even after the technology boom has faded. The key sources of this continuing transformation are investment in the information technology (IT) package (hardware, software, and business-service applications) and reorientation of business activities and processes to use both information and technology effectively.
Topic:: Economics, Globalization, International Trade and Finance, and Science and Technology
Political Geography:: United States

93. Next Move in Steel: Revocation or Retaliation?

Author:: Gary Clyde Hufbauer and Ben Goodrich
Publication Date:: 10-2003
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: In May 2003, the World Trade Organization (WTO) dispute panel ruled that US steel safeguards imposed in March 2002 are illegal. The WTO Appellate Body is all but certain to confirm the panel's judgment, probably by December 2003. Then the Bush administration will face an important choice. It can keep the safeguards in place, pleasing steel producers and important constituencies in West Virginia, Pennsylvania, and Ohio. However, doing so would further anger steel users, who have probably lost more business and jobs as a direct consequence of the safeguards than steel producers have gained. Maintaining the safeguards would also send a signal to the world's trading nations that the United States is not prepared to endure the political cost of eliminating steel protection. Furthermore, the administration would run the risk that, in the middle of a presidential election season, foreign countries will exercise their rights under the WTO to retaliate.
Topic:: Government and International Trade and Finance
Political Geography:: United States, Pennsylvania, Ohio, and West Virginia

94. More Pain, More Gain: Politics and Economics of Eliminating Tariffs

Author:: Gary Hufbauer and Ben Goodrich
Publication Date:: 06-2003
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: A good proposal to eliminate tariffs must take into account both the pain and gain that developing countries are likely to experience. The authors take the measure of these costs and benefits and urge rich countries to maximize the benefits to developing countries while giving them ample time to accept, and adjust to, the changes that trade liberalization will require. But trade liberalization should not stop with tariff proposals. The United States and other industrial countries should generously reduce subsidies to farmers and eliminate nontariff barriers on agricultural imports. The United States should offer more concessions on services trade, particularly in its allowances for temporary foreign workers. Unless rich countries put more on the table, a WTO agreement to eliminate tariff barriers may be postponed for years.
Topic:: Economics, International Trade and Finance, Political Economy, and Third World
Political Geography:: United States

95. Rules Against Earnings Stripping: Wrong Answer to Corporate Inversions

Author:: Gary Hufbauer and Ariel Assa
Publication Date:: 05-2003
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The tax-driven expatriation of US corporations is a troubling phenomenon. In a “corporate inversion,” a new foreign corporation, typically located in a low-tax or no-tax country, replaces the existing US parent corporation of a multinational enterprise (MNE). The US corporation then becomes a subsidiary of the new foreign parent. Since the US tax treatment of an MNE operating in the United States is significantly less favorable when the top-tier parent corporation is a domestic rather than a foreign corporation, the inversion transaction averts a substantial amount of US tax. Inversions have attracted adverse attention from tax specialists, media, the US Treasury Department, and Congress. In the wake of September 11, it seemed downright unpatriotic for US firms to invert as a way of skimping on their tax payments.
Topic:: Economics, Government, and International Trade and Finance
Political Geography:: United States

96. The Strategic Importance of US-Korea Economic Relations

Author:: Marcus Noland
Publication Date:: 05-2003
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Despite the passage of 50 years since an armistice ended military hostilities, the Korean peninsula remains divided, a Cold War vestige that seemingly has been unaffected by the evolution that has occurred elsewhere. If anything, US confrontation with North Korea—a charter member of its “axis of evil”—has intensified in recent years. Yet today, increasing numbers of South Koreans, accustomed to living for decades in the shadows of the North's forward-deployed artillery, do not regard the North as a serious threat. Growing prosperity and confidence in the South, in marked contrast to the North's isolation and penury, have transformed fear and loathing into pity and forbearance. Instead, it is the United States, an ocean away, that regards the North and its nuclear weapons program with alarm. As the United States has focused on the nuclear program, its ally, South Korea, has observed the North Koreans' nascent economic reforms and heard their talk of conventional forces reduction, and the gap in the two countries' respective assessments of the North Korean threat has widened dangerously, threatening to undermine their alliance.
Topic:: Security and International Trade and Finance
Political Geography:: United States, Israel, East Asia, Asia, South Korea, North Korea, and Korea

97. The Impact of Economic Sanctions on US Trade: Andrew Rose's Gravity Model

Author:: Gary Clyde Hufbauer and Barbara Oegg
Publication Date:: 04-2003
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: With the end of the Cold War, the focus of US foreign policy changed—and so did that of economic sanctions. Partly because of increased cooperation within the UN framework, economic sanctions were imposed so routinely in the early 1990s that scholars called that period the sanctions decade. This proliferation sparked intense debate about the effectiveness of sanctions as a policy tool and moved US sanctions policy to the center of public discourse.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: United States

98. Steel Policy: The Good, the Bad, and the Ugly

Author:: Gary C. Hufbauer and Ben Goodrich
Publication Date:: 01-2003
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: While the US steel industry has been in distress for decades, the “steel crisis” of 1999-2001 was particularly acute. More than 30 steel producing and steel processing firms fell into bankruptcy between 1997 and 2001, and most of the failures occurred after President Bush took office. During his presidential campaign, Bush promised steelworkers that he would not neglect them. As the crisis worsened, the steel industry and the United Steel Workers of America (USWA) pressed the Bush administration to make good on its campaign promise.
Topic:: Government, Industrial Policy, and International Trade and Finance
Political Geography:: United States and America

99. US-Brazil Trade Relations in a New Era

Author:: Jeffrey J. Schott
Publication Date:: 08-2003
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The United States and Brazil are the largest economies in North and South America, respectively. A generation ago, both were relatively closed economies in terms of the proportion of their trade to gross domestic product (GDP), but for sharply different reasons. The US market was highly competitive except for some light manufactures (e.g., textiles, clothing, and footwear) and a few agricultural sectors with high border barriers. By contrast, Brazilian industry was largely uncompetitive and highly subsidized; important commodities like coffee provided the bulk of exports while a large share of the value of most industrial exports was attributable to export subsidies.
Topic:: International Trade and Finance
Political Geography:: United States, Brazil, South America, Latin America, and Caribbean

100. Revitalizing the Economies of Japan and the United States

Author:: C. Fred Bergsten
Publication Date:: 06-2003
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The United States and Japan are the two largest national economies in the world. Since the early 1990s, they have been moving in opposite directions. The United States enjoyed an expansion of record duration from the end of the Gulf War in 1991 until early 2001, growing much faster than any other G-7 country and much faster than it had at any time since the Second World War. Japan's economy, by contrast, has been virtually stagnant since its financial bubble burst in the early 1990s and has clearly experienced its worst performance since its recovery from the ravages of the Pacific War.
Topic:: Economics and International Trade and Finance
Political Geography:: United States, Japan, Israel, and East Asia

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