Trade, Finance, and the Global Recession
William R. Cline, Peterson Institute for International Economics中ip
暮光之城4破晓下上映时间Remarks prented to the V Symposium on International Trade, Brazil Institute, Woodrow Wilson International Center for Scholars, Washington, DC
February 20, 2009
© Peterson Institute for International Economics
This year the International Monetary Fund (IMF) predicts that real global growth will be clo to zero (figure 1). The last time a global recession of this verity took place was in 1982. That recession triggered the Latin American debt crisis, and the region’s collap can be en in this chart. This time around, it is the center not the periphery that has collapd. Growth in advanced, industrial economies is projected at -2 percent for this year. Moreover, the widespread banking problems and the credit crunch, especially in the United States and Europe, give this recession the feel of something much clor to the 1930s Great Depression than anything experienced in the past veral decades. Synchronized Global Recession
雅思 报名This global recession is also marked by a tighter synchronization, or correlation, of downswings across countries than in the 1982 recession (figure 2). For the main industrial countries, the fall in growth rates projected by the IMF and the Blue Chip private forecasters is nearly identical for the United States, the eurozone, Japan, and the United Kingdom; and the rebound predicted for 2010 is also strikingly similar. In contrast, in 1982 it was the United States that experienced a sharp decline; Europe and the United Kingdom maintained or incread growth.
Figure 1 Global growth over 3 decades
Figure 2 Growth in developed countries, 1980–83 and 2007–10
光棍节吃什么There is similarly a clo correlation across the main Latin American economies in the decline in growth rates projected by the IMF and private forecasters for 2009 and in the partial rebound for 2010. Although this decline is more cloly correlated, it is far less vere than in the 1982–83 debt crisis (figure 3). Fortunately, the Latin American economies are in far better shape today than they were in the early 1980s in terms of sustainability of external debt. They have built up large external rerves and kept their debt moderate relative to GDP (figure 4). As a result, their ratios of net external debt (gross debt minus rerves) to GDP are typically in the range of 10 to 20 percent now, in contrast with about 50 percent or higher in the early 1980s. It ems unlikely that the cond-worst global recession since the depression will trigger a Latin American debt crisis similar to the first one. A major reason is that this time international interest rates are low, whereas in the early 1980s there was the Volcker shock to international interest rates, monetary tightening made necessary by the worst postwar global inflation. The burden of debt depends on both the amount of debt and its price, the interest rate.
Figure 3 Growth in Latin America, 1980–83 and 2007–10
Figure 4 Net external debt: Latin 7, percent of GDP
The same pattern of highly correlated growth decline can be en in the main Asian emerging-market economies (figure 5). Even China will e its growth fall from 12 percent in 2007 to about 7 percent in 2009. This pattern is similarly in contrast to the much more disper growth performances in the region in the 1982 global recession, when average growth rates remained broadly unaffected.
babuFigure 5 Growth in Asia, 1980–83 and 2007–10
Trade Policy and Recovery
Becau of the nearly universal pattern of falling growth in this global recession, it will be difficult for individual countries to export their way out of the slowdown. In the East Asian crisis of the late 1990s, it was possible for Thailand, Korea, Indonesia, and other affected countries to recover growth through sharp export expansion and a swing from current account deficits to large current account surplus, becau the United States andall at once
other major economies were sustaining growth. In the prent global recession, some
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emerging-market economies may be able to achieve export growth as a conquence of
the substantial currency depreciation that has already taken place. However, the
contribution to recovery from exports ems likely to be modest becau of the uniformly weak growth prospects of trading partners.
If rising exports hold limited potential, some countries will be tempted to boost domestic demand by raising import protection. But that would be a negative sum game: Each country acting this way in isolation would generate an overall outcome that would amount to a downward spiral in trade and growth, as happened in the global depression of the 1930s. For Latin America and many other emerging-market regions, the temptation to impo protection could be especially ductive becau the levels of bound tariffs are much higher than tho of tariffs actually applied (figure 6).Bound tariffs on manufactures are in the range of 25 to 35 percent in the main Latin American economies, in contrast to applied tariffs averaging about 10 to 12 percent for manufactures. The rates could be more than doubled without violating WTO obligations.
Figure 6 Bound versus applied tariffs on manufactures, percent
In Latin America, it may also be tempting for some of the regional trading area partners to indulge in incread nontariff barriers. Within the MERCOSUR, the imposition of such barriers, justified on grounds of macroeconomic crisis, has frequently occurred in recent years. But again the overall result would be counterproductive.
So far there has been no widespread outbreak of international protectionism rembling that in the 1930s global depression. The United States is providing an auto bailout just to domestic firms, and it has limited import eligibility for public spending in the stimulus package to foreign trading partners that are comembers in the government procurement agreement. The measures are a far cry, however, from the Smoot-Hawley tariff increas of 1930. Moreover, WTO obligations today limit overt tariff increas for countries with applied rates clo to the bound ceilings, as is true for the United States and other industrial countries.
In the financial sphere, there has been some protection but also some international cooperation. The Federal Rerve extended $30 billion in swap lines each to Brazil, Mexico, Korea, and Singapore, an action that in effect helped assure that special support to US banks did not have the effect of draining resources away from major emerging-market economies toward a US safe haven.描述一个人
Trade Performance
Despite any widespread surge in protection so far, exports show signs of sharp deceleration (figure 7). In contrast to continued rapid growth in the first three quarters of 2008, by the fourth quarter there were major declines in exports for the leading emerging-market economies. In Brazil, annual export
growth fell from 30 percent in the first three quarters to 7 percent in the fourth. The decline is partly due to the partial reversal of the commodities price boom, as illustrated by the ca of Chile, but there has been a large deceleration for manufactured exporters as well (including Korea and China).
Figure 7 Export growth over year earlier: 2008, Q1–Q3 versus Q4, percent
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commissionedCapital Flows
The financial crisis has reverd the period of artificially low risk spreads, and private capital flows to emerging-market economies declined substantially in 2008 and are likely to fall further in 2009, according to the Institute of International Finance (figure 8). Total net inflows fell from a peak of about $930 billion in 2007 to about $470 billion in 2008, and will fall further to less than $200 billion this year. Foreign direct investment has held up the best, but even it is declining. Emerging-market exchange rates also came under pressure in the cond half of last year, as it became apparent that emerging-market economies could not remain “decoupled” from the global crisis (figure 9). Even so, the
