Comments on Productivity Commission "Trade and assistance review 2013-14", 30/06/2015
While I have not read the full report, I sense some of the statements in this short summary hard to understand or problematic. For example, the sixth paragraph states that a large proportion of the seemingly manufacturing exports consists of services:
The review highlights that services are more important than traditional trade statistics suggest. While trade statistics suggest that manufactures are about 36% of Australian exports, on a value added basis much of this is composed of services. Consequently, services are more like 42% of Australian trade; and manufactures fall to around 14%. Imposing a net burden on services through industry assistance measures in part designed to promote exports appears even less explicable.
If that is true, then trade assistance to the manufacturing exports may also be beneficial to services when they are inputs to those manufacturing exports, because the assistance would allow the manufacturing to pay a higher price to its inputs including those services used in the exported manufacturing. Although this may be second or third round effects, the summary does not seem to take that into account.
Showing posts with label trade. Show all posts
Showing posts with label trade. Show all posts
2010-04-20
Worsening terms of trade for China
Second comments on Yiping Huang “China needs to adjust its monetary policy now”, 18/04/2010, http://www.eastasiaforum.org/2010/04/18/china-needs-to-adjust-its-monetary-policy-now/comment-page-1/#comment-112078
Further to my comments yesterday, it seems that so far we all have ignored an important point that is the change in terms of trade detrimental to China, in addition to the volume effects on its current account balance.
As Asian economies including China and India expand, commodity and oil prices are moving up and fast. We have heard reports that iron ore prices have doubled for major Australian miners, that means possibly a new record, given that the last year’s fall in price was about a third from its record high. Oil prices have been above $US80 and are trending up.
The sluggish demand from most industrialised countries mean falling or steady prices for their imports of labour intensive and manufactured goods that are the main exports from China.
This means a sharp deterioration in China's terms of trade is appearing, which will have serious effects on Chinese businesses and its economy including increasingly large current account deficits over the coming months and possibly years to come.
That indicates that it will be economic suicide to appreciate the Chinese currency now.
Further to my comments yesterday, it seems that so far we all have ignored an important point that is the change in terms of trade detrimental to China, in addition to the volume effects on its current account balance.
As Asian economies including China and India expand, commodity and oil prices are moving up and fast. We have heard reports that iron ore prices have doubled for major Australian miners, that means possibly a new record, given that the last year’s fall in price was about a third from its record high. Oil prices have been above $US80 and are trending up.
The sluggish demand from most industrialised countries mean falling or steady prices for their imports of labour intensive and manufactured goods that are the main exports from China.
This means a sharp deterioration in China's terms of trade is appearing, which will have serious effects on Chinese businesses and its economy including increasingly large current account deficits over the coming months and possibly years to come.
That indicates that it will be economic suicide to appreciate the Chinese currency now.
2010-03-19
Threats of a trade war or wars
Comments on Alan Kohler “Trade war sabre-rattling”, 19/03/2010, http://www.businessspectator.com.au/bs.nsf/Article/Trade-war-sabre-rattling-pd20100319-3NRFS?OpenDocument&src=sph
The Americans and their allies are in full play to have possibly their last show of imperialism in their long and inevitable declines, this time not in the military sense but in economic sense.
All we have seen is some sort of threats, that is, how the surplus countries are more likely to lose or unlikely to be the winners, how a trade war can result in a rebalance of the world economy, etc.
Strategic gaming to show their desperation, or scare tactics to scare non-full grown children?
Who cares what they say and what they might do!
Let it happen and we will see another 1930s for some countries.
Yes, undoubtedly there will be a rebalance of the world economy, with acceleration of the declines of some and faster ascendance of others.
Will be fascinating to see!
On Rudd’s public warning on the Stern Hu case, it indicates he has not learnt from his past failures, not just his lecture in China, but also his Copenhagen.
Be mature, and don't use that as a distraction from his domestic problems!
The Americans and their allies are in full play to have possibly their last show of imperialism in their long and inevitable declines, this time not in the military sense but in economic sense.
All we have seen is some sort of threats, that is, how the surplus countries are more likely to lose or unlikely to be the winners, how a trade war can result in a rebalance of the world economy, etc.
Strategic gaming to show their desperation, or scare tactics to scare non-full grown children?
Who cares what they say and what they might do!
Let it happen and we will see another 1930s for some countries.
Yes, undoubtedly there will be a rebalance of the world economy, with acceleration of the declines of some and faster ascendance of others.
Will be fascinating to see!
On Rudd’s public warning on the Stern Hu case, it indicates he has not learnt from his past failures, not just his lecture in China, but also his Copenhagen.
Be mature, and don't use that as a distraction from his domestic problems!
2009-09-16
Rethink international imbalances and the East Asian model
Comments on Mohamed Ariff “US-East Asia trade: Is East Asia ready for a rebalance?” 16/09/2009, http://www.eastasiaforum.org/2009/09/16/us-east-asia-trade-is-east-asia-ready-for-a-rebalance/
I had also thought the existing model would not be able to continue until a short while ago after I had read this article and had another thought about this.
It does not appear to me that the existing model needs to change.
When thinking and talking about the existing model in the wake of the financial and economic crises, most thought and argued that the international imbalance is unsustainable. While that is obviously true for the long run. But what is the "long run"? Until that is well defined, then one can get easily confused by "short term" inequilibrium and the needs for long run balancing.
Further, the existing model can continue when assets and trade in them are taken into account, e.g. the US households trade some of their assets for consumption. In that way, current account imbalance can last for a very very long time. That should and need not be a problem.
It is all too easy for one to blame international trade imbalance for any problems, whether it is the cause or not, or the real cause or not.
Comprehensive and solid analyses are needed to understand the implications of the "international imbalances". Partial analysis does not help to address the perceived problems and are very likely to be highly misleading to wrong policies with huge economic costs.
Economists should not just simply follow what a layman or some politicians say. They need to apply serious and rigorous economic thinking.
I had also thought the existing model would not be able to continue until a short while ago after I had read this article and had another thought about this.
It does not appear to me that the existing model needs to change.
When thinking and talking about the existing model in the wake of the financial and economic crises, most thought and argued that the international imbalance is unsustainable. While that is obviously true for the long run. But what is the "long run"? Until that is well defined, then one can get easily confused by "short term" inequilibrium and the needs for long run balancing.
Further, the existing model can continue when assets and trade in them are taken into account, e.g. the US households trade some of their assets for consumption. In that way, current account imbalance can last for a very very long time. That should and need not be a problem.
It is all too easy for one to blame international trade imbalance for any problems, whether it is the cause or not, or the real cause or not.
Comprehensive and solid analyses are needed to understand the implications of the "international imbalances". Partial analysis does not help to address the perceived problems and are very likely to be highly misleading to wrong policies with huge economic costs.
Economists should not just simply follow what a layman or some politicians say. They need to apply serious and rigorous economic thinking.
2009-08-19
What this gas deal between Australia and China indicates?
Comments on the report “Australia signs $50bn gas deal with China” by Michael Sainsbury, China correspondent, The Australian, 19/08/2009, http://www.theaustralian.news.com.au/business/story/0,28124,25950461-5005200,00.html
This gas deal is a big trade deal between Australia and China. It is reported this deal will facilitate “The Gorgon venture (that) promises to be Australia's biggest resources project, pumping $40bn into the federal government's tax coffers over the next 20 to 30 years.”
It demonstrates the great complementarities between Australian and Chinese economies. Australia has abundant natural resources, including minerals and energies. Trade and external markets are important to Australia. China has a huge population, abundant cheap labour, enormous domestic market and a booming economy with rapid industrialisation. Secure supply in mineral and energies from trade is important to China. The geographical proximity of the two countries adds some natural advantages to trade between them. Trade between the two countries has huge and unprecedented potentials to benefit both countries.
The deal also indicates that it is “business as usual” in terms of the fundamental relations between the two countries, especially in trade.
While there can be tensions over certain issues between the two countries, the common interests of the two countries are overwhelming and paramount. Politicians in both countries always need to focus on important issues between them, while resolving any other issues subtly to the satisfactions of both sides. Great diplomatic skills are required to manage this bilateral relationship.
This gas deal is a big trade deal between Australia and China. It is reported this deal will facilitate “The Gorgon venture (that) promises to be Australia's biggest resources project, pumping $40bn into the federal government's tax coffers over the next 20 to 30 years.”
It demonstrates the great complementarities between Australian and Chinese economies. Australia has abundant natural resources, including minerals and energies. Trade and external markets are important to Australia. China has a huge population, abundant cheap labour, enormous domestic market and a booming economy with rapid industrialisation. Secure supply in mineral and energies from trade is important to China. The geographical proximity of the two countries adds some natural advantages to trade between them. Trade between the two countries has huge and unprecedented potentials to benefit both countries.
The deal also indicates that it is “business as usual” in terms of the fundamental relations between the two countries, especially in trade.
While there can be tensions over certain issues between the two countries, the common interests of the two countries are overwhelming and paramount. Politicians in both countries always need to focus on important issues between them, while resolving any other issues subtly to the satisfactions of both sides. Great diplomatic skills are required to manage this bilateral relationship.
2009-08-06
Sinodinos' extraordinary vision
Comments on Arthur Sinodinos “Why not trade our way out of the climate crisis?” 6/08/2009, http://www.theaustralian.news.com.au/story/0,25197,25888591-5013480,00.html
This is an excellent article with an extraordinary vision to link the three most important and urgent world economic issues, namely, climate change the global warming, the Doha round trade negotiation and the current great economic recession. Trade liberalisation is the common thread to all these issues.
All members of the international community should realise that by further liberalising international trade and investment, every nation will benefit. Undoubtedly, it will assist the world to recover from the recession. With true world leaderships by important and influential world leaders, it will accelerate the international efforts on climate change and reach a meaningful international agreement. Both developed and developing nations should participate in and contribute to the course of limiting human induced adverse climate change in a practical and equitable way.
I think Australian government needs to take Sinodinos’ idea very seriously and lead the international community in this direction. Sinodinos should be invited to be an advisor on these issues.
If the international community can achieve Sinodinos’s vision, he should be nominated for a Nobel prize.
This is an excellent article with an extraordinary vision to link the three most important and urgent world economic issues, namely, climate change the global warming, the Doha round trade negotiation and the current great economic recession. Trade liberalisation is the common thread to all these issues.
All members of the international community should realise that by further liberalising international trade and investment, every nation will benefit. Undoubtedly, it will assist the world to recover from the recession. With true world leaderships by important and influential world leaders, it will accelerate the international efforts on climate change and reach a meaningful international agreement. Both developed and developing nations should participate in and contribute to the course of limiting human induced adverse climate change in a practical and equitable way.
I think Australian government needs to take Sinodinos’ idea very seriously and lead the international community in this direction. Sinodinos should be invited to be an advisor on these issues.
If the international community can achieve Sinodinos’s vision, he should be nominated for a Nobel prize.
2009-07-25
A strategic game that Rio can't win
Comments on st_sem的日志 "力拓“抛弃”中国市场 中方损失更大", 24/07/2009, http://www.pinggu.name/space-994566-do-blog-id-16670.html
This is a purely argument based on logic and does not reflect my personal view. I hope both China and Rio can settle their differences and have a fair and cooperative relationship.
The reason for a logic argument was that I saw that article had some problems in terms of fear unnecessarily.
The worst thing is to have unfair games and I personnally don't like that, no matter which side tries to take advantages of the other. I support a fair game.
如果澳大利亚政府支持力托，为什么中国政府不采取合适对策？
不要被力托小计吓住。他的损失要比中方大得多。
买东西比卖东西容易。中方要长期抵制力托，它受得了么？
在战略上中方有优势，不要害怕，要敢于和它都到底。
最终胜利是属于中方的。
干吧，干到底。把它斗倒。
This is a purely argument based on logic and does not reflect my personal view. I hope both China and Rio can settle their differences and have a fair and cooperative relationship.
The reason for a logic argument was that I saw that article had some problems in terms of fear unnecessarily.
The worst thing is to have unfair games and I personnally don't like that, no matter which side tries to take advantages of the other. I support a fair game.
如果澳大利亚政府支持力托，为什么中国政府不采取合适对策？
不要被力托小计吓住。他的损失要比中方大得多。
买东西比卖东西容易。中方要长期抵制力托，它受得了么？
在战略上中方有优势，不要害怕，要敢于和它都到底。
最终胜利是属于中方的。
干吧，干到底。把它斗倒。
Trade and politics
Comments on Philippa Dee “Can the global financial crisis actually deliver Doha?” 23/07/2009, http://www.eastasiaforum.org/2009/07/23/can-the-global-financial-crisis-actually-deliver-doha/
It is true that trade improves the well beings of all trading nations. It is also true that when an economic hard time or crisis hits, the pressure becomes higher to sacrifice trade for domestic political purposes. So Jagdish Bhagwati has a point to make.
It, however, does not mean that it is less important for world leaders to make greater efforts to bring the Doha round to a successful conclusion. They need to show true and greater and stronger leadership, especially in this harder economic environment. Although politically less popular, improved international trade is good for more speedy recovery from the crisis.
What puzzles me is why trade has been affected much more severely by the financial and economic crisis. Trade in some quarters in some countries declined by 40 or even 50 per cent. Surely their economies would not have fallen by that much in those quarters.
Dee has argued the role of finance. Maybe that is the case that finance plays a greater role in international trade than in domestic trade, so when finance becomes difficult, international trade is hit harder.
I would appreciate that someone can explain the relationships between finance and trade, both external and internal.
It is true that trade improves the well beings of all trading nations. It is also true that when an economic hard time or crisis hits, the pressure becomes higher to sacrifice trade for domestic political purposes. So Jagdish Bhagwati has a point to make.
It, however, does not mean that it is less important for world leaders to make greater efforts to bring the Doha round to a successful conclusion. They need to show true and greater and stronger leadership, especially in this harder economic environment. Although politically less popular, improved international trade is good for more speedy recovery from the crisis.
What puzzles me is why trade has been affected much more severely by the financial and economic crisis. Trade in some quarters in some countries declined by 40 or even 50 per cent. Surely their economies would not have fallen by that much in those quarters.
Dee has argued the role of finance. Maybe that is the case that finance plays a greater role in international trade than in domestic trade, so when finance becomes difficult, international trade is hit harder.
I would appreciate that someone can explain the relationships between finance and trade, both external and internal.
2009-07-23
What to do when exports falls?
Comments on huangyihello “扩大需求、恢复经济也可以在供给上做文章”, 23/07/2009, http://www.pinggu.name/space-1125736-do-blog-id-16296.html
I am delighted to read this article. huangyihello has raised a very good point in the current debate.
In addition to those two points, there is also an important point very few people have discussed, that is, to increase investment (physical capital) for future more rapid growth. This is a more difficult issue at a higher level than just considering consumption along. It is a change of product mix at another level.
Also, even when using cash handouts to people, consideration should be given to how they are distributed and whether there are other better options than pure cash handouts. For example, government may provide interest-free loans to people to buy goods. The latter can reduce the potential burden for future people, because cash handouts increase government debts and any government debts will have to be repaid.
Government does not have free money, although it can print money. Even printing money has its costs of inflation and devaluation of current assets for their owners.
I am delighted to read this article. huangyihello has raised a very good point in the current debate.
In addition to those two points, there is also an important point very few people have discussed, that is, to increase investment (physical capital) for future more rapid growth. This is a more difficult issue at a higher level than just considering consumption along. It is a change of product mix at another level.
Also, even when using cash handouts to people, consideration should be given to how they are distributed and whether there are other better options than pure cash handouts. For example, government may provide interest-free loans to people to buy goods. The latter can reduce the potential burden for future people, because cash handouts increase government debts and any government debts will have to be repaid.
Government does not have free money, although it can print money. Even printing money has its costs of inflation and devaluation of current assets for their owners.
2009-06-05
A confidence boost – Australia has so far avoided a recession in the face of a great world recession
The ABS release on the Australians 2009 March Quarter GDP data shows that the Australian economy defied the world wide recession and grew in the March Quarter. It is excellent news for Australia, Australians and the Australian government. It is a strong boost to the confidence of consumers in Australia.
Irrespective what contributed to that positive growth, Australia was not in a recession. No matter whether one likes the definition of a technical recession or not, one should accept that fact that it was not in recession. One can debate for a better definition for the future use, but so far we have used that definition.
Consumption is an important component of the economy. Consumer confidence is very important to current and near future economy growth. The positive economic growth provides a strong shot in the arm to consumer confidence in Australia. That will be good for the economy and for the welfare of all Australians.
Exports, though world trade collapsed, was a positive factor to the Australian growth, largely due to China factor. Australia has benefited from its close economic relations with Asia and China where the economies have been more dynamic. We Australians should value those economic relations we have with Asia.
Irrespective what contributed to that positive growth, Australia was not in a recession. No matter whether one likes the definition of a technical recession or not, one should accept that fact that it was not in recession. One can debate for a better definition for the future use, but so far we have used that definition.
Consumption is an important component of the economy. Consumer confidence is very important to current and near future economy growth. The positive economic growth provides a strong shot in the arm to consumer confidence in Australia. That will be good for the economy and for the welfare of all Australians.
Exports, though world trade collapsed, was a positive factor to the Australian growth, largely due to China factor. Australia has benefited from its close economic relations with Asia and China where the economies have been more dynamic. We Australians should value those economic relations we have with Asia.
2009-04-24
Strategic gaming by Australian government - good or bad?
This blog will discuss potential strategic gaming by governments in relation to investment and trade. This issue arose from reading an article on KGB's Business Spectator, asking for the Australian government to price out the Chinalco bid to invest in Rio Tinto.
It seems that author seemed to understand more about Rio's business its own management team. He was concerned that the management is going to sell its assets short. Unable to influence the management, he attempted to influence the government.
It might appear to be legitimate concerns and a reasonable approach, if one assumes the game is going to be played only once and only Australian government has the choices to move, other governments are assumed to not react irrespective what the Australian government does.
However, assumptions are just assumptions. Sometimes they cannot be farther away from the truth. Anyone with some knowledge of game theories would understand that the above assumptions are very simplistic, unpractical and cannot be applied to real businesses.
If more realistic assumptions are made in the context of Australia - China relations and the international mining sector, one would certainly wonder why the Australian government would want to engage strategic gaming in relation to such investments. One has to consider carefully the potential possible options each government has, any first move, counter moves and continuous plays. Were it to start, there could be many rounds of plays and the outcomes for each side are very hard to predict.
Australia is a middle power internationally as it often self claimed. Its influence in the international arena is noticeable but fairly limited if one to be realistic. It is located in the Asia Pacific region and naturally wants to develop deep relationships with the Asia region where some of our important trading partners lie.
China is an emerging power with a rapidly growing economy now ranked third in the world. It will probably not be too long for it to replace Japan to become the second. Some forecast that China will become the largest economy before the middle of the century.
China would probably regard Australia highly. The main reasons include:
· The two countries are very complementary with each other economically;
a) Australia, an industrialised country with expensive labour costs, is rich in mineral and agricultural resources;
b) China, an industrialising and emerging economy with a huge need for resources, has abundant cheap labour supply, but lack of natural resources in per capita terms;
c) Compared to some other big resources rich countries, Australia is closer to China geographically;
d) Australia does not have too overly discriminative trade barriers for China, as some other larger industrialised countries do.
· As a result, the two sides are more likely to be partners rather than competitors or foes;
a) Australia needs external markets for its rich mineral and agricultural products;
b) China needs reliable and stable supplies of natural resources and needs friendly external markets for its labour intensive goods and services; and
c) Australia will benefit from cheap imports.
· Looking from international geopolitical point of view, there appears to be a need for China to have a close friend that is also the friend of the US – the world sole superpower, so when important matters can’t be more effectively be dealt with between China and the US, the mutual friend of both sides can play an intermediate role to facilitate achieving a better resolution of issues;
a) Australia is a strong US ally and is realistically pragmatic in dealing with China,
b) It is highly unlikely that the Australia and China will clash over extremely important strategic issues largely because of the larger international context, mutual needs and geographical locations.
Australia is likely to continue its strong engagement with Asia, including China to gorge stronger relations with them. After all, as Garnaut’s (1989/90?) book indicates, Asia is in the ascendance. It has been occurring for some time already. The 21st century is likely to be dominated by dramatic shifts between continental heavy weights with lasting implications for the whole world.
Before engaging in governmental strategic gaming, perhaps all sides will have and need to carefully ponder strategic thinking first. If we ask for transparency by the Chinese government on important issues, such as military spending, we ourselves will need to be transparent on important issues as well. Trade, investment and commercial considerations are likely to be more dominant issues in the heads of Australian and Chinese governments. Whether it is established on mutual trust or mutual deterrence, some transparency will be needed and equilibrium to be reached. It will be in our own interest to do our homework well and first before making strategic gaming moves.
It seems that author seemed to understand more about Rio's business its own management team. He was concerned that the management is going to sell its assets short. Unable to influence the management, he attempted to influence the government.
It might appear to be legitimate concerns and a reasonable approach, if one assumes the game is going to be played only once and only Australian government has the choices to move, other governments are assumed to not react irrespective what the Australian government does.
However, assumptions are just assumptions. Sometimes they cannot be farther away from the truth. Anyone with some knowledge of game theories would understand that the above assumptions are very simplistic, unpractical and cannot be applied to real businesses.
If more realistic assumptions are made in the context of Australia - China relations and the international mining sector, one would certainly wonder why the Australian government would want to engage strategic gaming in relation to such investments. One has to consider carefully the potential possible options each government has, any first move, counter moves and continuous plays. Were it to start, there could be many rounds of plays and the outcomes for each side are very hard to predict.
Australia is a middle power internationally as it often self claimed. Its influence in the international arena is noticeable but fairly limited if one to be realistic. It is located in the Asia Pacific region and naturally wants to develop deep relationships with the Asia region where some of our important trading partners lie.
China is an emerging power with a rapidly growing economy now ranked third in the world. It will probably not be too long for it to replace Japan to become the second. Some forecast that China will become the largest economy before the middle of the century.
China would probably regard Australia highly. The main reasons include:
· The two countries are very complementary with each other economically;
a) Australia, an industrialised country with expensive labour costs, is rich in mineral and agricultural resources;
b) China, an industrialising and emerging economy with a huge need for resources, has abundant cheap labour supply, but lack of natural resources in per capita terms;
c) Compared to some other big resources rich countries, Australia is closer to China geographically;
d) Australia does not have too overly discriminative trade barriers for China, as some other larger industrialised countries do.
· As a result, the two sides are more likely to be partners rather than competitors or foes;
a) Australia needs external markets for its rich mineral and agricultural products;
b) China needs reliable and stable supplies of natural resources and needs friendly external markets for its labour intensive goods and services; and
c) Australia will benefit from cheap imports.
· Looking from international geopolitical point of view, there appears to be a need for China to have a close friend that is also the friend of the US – the world sole superpower, so when important matters can’t be more effectively be dealt with between China and the US, the mutual friend of both sides can play an intermediate role to facilitate achieving a better resolution of issues;
a) Australia is a strong US ally and is realistically pragmatic in dealing with China,
b) It is highly unlikely that the Australia and China will clash over extremely important strategic issues largely because of the larger international context, mutual needs and geographical locations.
Australia is likely to continue its strong engagement with Asia, including China to gorge stronger relations with them. After all, as Garnaut’s (1989/90?) book indicates, Asia is in the ascendance. It has been occurring for some time already. The 21st century is likely to be dominated by dramatic shifts between continental heavy weights with lasting implications for the whole world.
Before engaging in governmental strategic gaming, perhaps all sides will have and need to carefully ponder strategic thinking first. If we ask for transparency by the Chinese government on important issues, such as military spending, we ourselves will need to be transparent on important issues as well. Trade, investment and commercial considerations are likely to be more dominant issues in the heads of Australian and Chinese governments. Whether it is established on mutual trust or mutual deterrence, some transparency will be needed and equilibrium to be reached. It will be in our own interest to do our homework well and first before making strategic gaming moves.
Subscribe to:
Posts (Atom)
Posts
