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1. China's CPTPP bid spurs South Korea to act on Asia-Pacific trade pacts

Author:
Jeffrey J. Schott
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
China’s sudden application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in September 2021 has broad implications for South Korea’s economic relations with China, Japan, and the United States. In the past, Korea frequently debated but invariably postponed deciding whether to participate in negotiations on the CPTPP, despite the substantial benefits to be gained from doing so. However, China’s application has prompted Korean officials to get off the fence and apply as well. As China moves to deepen its ties to regional partners, Korea needs to follow suit, complementing the ongoing implementation of the Regional Comprehensive Economic Partnership (RCEP) with expedited negotiations to join the CPTPP and participation in the US-led Indo-Pacific Economic Framework for Prosperity (IPEF). Korean participation in the RCEP, CPTPP, and IPEF is desirable and mutually reinforcing and should allow Korea to sustain its strong commercial interests in both the US and Chinese markets.
Topic:
Economics, International Trade and Finance, Treaties and Agreements, and Trade
Political Geography:
China, South Korea, and Asia-Pacific

2. Public responses to foreign protectionism: Evidence from the US-China trade war

Author:
David Steinberg and Yeling Tan
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
Topic:
Economics, International Trade and Finance, Protectionism, and Competition
Political Geography:
China, Asia, North America, and United States of America

3. Chinese Investments in the US and EU Are Declining—for Similar Reasons

Author:
Jacob Funk Kirkegaard
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
For years China has been one of the world’s most rapidly growing sources of outward foreign direct investment. Since peaking in 2016, however, Chinese outward investments, primarily to the United States but also the European Union, have declined dramatically, especially in response to changes in China’s domestic rules on capital outflows and in the face of rising nationalism in the United States. Concerns about growing Chinese influence in other economies, the ascendant role of an authoritarian government in Beijing, and the possible security implications of Chinese dominance in the high-technology sector have put Chinese outward investments under intense international scrutiny. This Policy Brief analyzes the most recent trends in Chinese investments in the United States and the European Union and reviews recent political and regulatory changes both have adopted toward Chinese inward investments. It also explores the emerging transatlantic difference in the regulatory response to the Chinese information technology firm Huawei. Concerned about national security and as part of the ongoing broader trade friction with China, the United States has cracked down far harder on the company than the European Union.
Topic:
Economics, International Trade and Finance, National Security, Foreign Direct Investment, and Investment
Political Geography:
China, Europe, Asia, North America, and United States of America

4. The 2018 US-China Trade Conflict after 40 Years of Special Protection

Author:
Chad P. Bown
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In 2018, the United States suddenly increased tariffs on nearly 50 percent of its imports from China. China immediately retaliated with tariffs on more than 70 percent of imports from the United States. This paper assesses what happened in 2018 and attempts to explain why. It first constructs a new measure of special tariff protection to put the sheer scope and coverage of the 2018 actions into historical context. It then uses the lens provided by the 2018 special tariffs to explain the key sources of economic and policy friction between the two countries. This includes whether China’s state-owned enterprises and industrial subsidies, as well as China’s development strategy and system of forcibly acquiring foreign technology, were imposing increasingly large costs on trading partners. Finally, it also examines whether the US strategy to provoke a crisis—which may result in a severely weakened World Trade Organization—was deliberate and out of frustration with the institution itself.
Topic:
Economics, International Trade and Finance, World Trade Organization, Bilateral Relations, Trade Wars, Donald Trump, and Imports
Political Geography:
China, Asia, North America, and United States of America

5. Service Sector Reform in China

Author:
Ryan Rutkowski
Publication Date:
01-2015
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Faced with slowing economic growth, Chinese policymakers now recognize that the service sector of the economy—transportation, communications, finance, and health care—could spur economic activity and employment. The catch is that China must reform these and other areas to accomplish this goal. Chinese leaders have outlined an ambitious agenda for reform, but myriad vested interests could slow or block their plans. This Policy Brief evaluates the steps taken so far and the difficulties that lie ahead in implementing them. If policymakers fail to reform and open up the service sector, they run the risk of seriously impairing China's growth prospects.
Topic:
Economics, International Trade and Finance, Labor Issues, Financial Crisis, and Reform
Political Geography:
China

6. 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

7. 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

8. The Hyperglobalization of Trade and Its Future

Author:
Arvind Subramanian and Martin Kessler
Publication Date:
08-2013
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper describes seven salient features of trade integration in the 21st century: Trade integration has been more rapid than ever (hyperglobalization); it is dematerialized, with the growing importance of services trade; it is democratic, because openness has been embraced widely; it is criss-crossing because similar goods and investment flows now go from South to North as well as the reverse; it has witnessed the emergence of a mega-trader (China), the first since Imperial Britain; it has involved the proliferation of regional and preferential trade agreements and is on the cusp of mega-regionalism as the world's largest traders pursue such agreements with each other; and it is impeded by the continued existence of high barriers to trade in services. Going forward, the trading system will have to tackle three fundamental challenges: In developed countries, the domestic support for globalization needs to be sustained in the face of economic weakness and the reduced ability to maintain social insurance mechanisms. Second, China has become the world's largest trader and a major beneficiary of the current rules of the game. It will be called upon to shoulder more of the responsibilities of maintaining an open system. The third challenge will be to prevent the rise of mega-regionalism from leading to discrimination and becoming a source of trade conflicts. We suggest a way forward—including new areas of cooperation such as taxes—to maintain the open multilateral trading system and ensure that it benefits all countries.
Topic:
Economics, Globalization, International Trade and Finance, Markets, and Treaties and Agreements
Political Geography:
China

9. China's Credit Boom: New Risks Require New Reforms

Author:
Nicholas Borst
Publication Date:
10-2013
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The Chinese financial system has undergone almost continuous reform since the dismantling in the 1980s of the Soviet- style system where only one state-controlled bank existed. Government efforts to create a financial system that adheres to international best practices of commercial lending accelerated in the 1990s (box 1). Reforms progressed quickly during this period, but they were accompanied by excessive credit growth and a massive increase in nonperforming loans, threatening the solvency of some banks and the financial stability of the entire economy. The risk of these weaknesses was dramatized by the 1997 Asian financial crisis, in which several nearby countries were crippled by plunging currency values, rising interest rates and difficulties servicing their foreign-held debts.
Topic:
Debt, Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
China

10. 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

11. Why Growth in Emerging Economies Is Likely to Fall

Author:
Anders Åslund
Publication Date:
11-2013
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Emerging-market growth from 2000 to 2012 was untypically high. This paper highlights the many reasons why emerging-economy growth is likely to be lower going forward. Much of the catch-up potential has already been used up. The extraordinary credit and commodity booms are over, and many large emerging economies are financially fragile. They have major governance problems, so they need to carry out major structural reforms to be able to proceed with a decent growth rate, but many policymakers are still in a state of hubris and not very inclined to opt for reforms. They are caught up in state and crony capitalism. Rather than providing free markets for all, the West might limit its endeavors to its own benefit. Economic convergence has hardly come to an end, but it has probably reached a hiatus that is likely to last many years. The emerging economies need to improve their quality of governance and other economic policies substantially to truly catch up. For a decade or so, the West could take the global economic lead once again as in the 1980s.
Topic:
Economics, Emerging Markets, International Trade and Finance, Monetary Policy, and Governance
Political Geography:
Russia, China, India, South Africa, and Brazil

12. Chinese Investment in Latin American Resources: The Good, the Bad, and the Ugly

Author:
Theodore H. Moran, Julia Muir, and Barbara Kotschwar
Publication Date:
02-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's need for vast amounts of minerals to sustain its high economic growth rate has led Chinese investors to acquire stakes in natural resource companies, extend loans to mining and petroleum investors, and write long-term procurement contracts for oil and minerals in Africa, Latin America, Australia, Canada, and other resource-rich regions. These efforts to procure raw materials might be exacerbating the problems of strong demand; "locking up" natural resource supplies, gaining preferential access to available output, and extending control over the world's extractive industries. But Chinese investment need not have a zero-sum effect if Chinese procurement arrangements expand, diversify, and make more competitive the global supplier system. Previous Peterson Institute research (see Moran 2010) and new research undertaken in this paper, show that the majority of Chinese investments and procurement arrangements serve to help diversify and make more competitive the portion of the world natural resource base located in Latin America. For a more comprehensive analysis, the authors conduct a structured comparison of four Peruvian mines with foreign ownership: two Organization for Economic Cooperation and Development-based, and two Chinese. They examine what conditions or policy measures are most effective in inducing Chinese investors to adopt international industry standards and best-practices, and which are not. They distill from this case study some lessons for other countries in Latin America, Africa, and elsewhere that intend to use Chinese investment to develop their extractive sectors: first, that financial markets bring accountability; second, that the host country regulatory environment makes a significant difference; and third, that foreign investment is a catalyst for change.
Topic:
Economics, International Trade and Finance, and Natural Resources
Political Geography:
China, Canada, Latin America, and Australia

13. 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

14. 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

15. Choice and Coercion in East Asian Exchange Rate Regimes

Author:
C. Randall Henning
Publication Date:
09-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper examines the exchange rate regimes of East Asian countries since the initial shift by China to a controlled appreciation in July 2005, testing econometrically the weights of key currencies in the implicit baskets that appear to be targeted by East Asian monetary authorities. It finds, first, that Malaysia, Thailand, Singapore and the Philippines have formed a loose but effective “renminbi bloc” with China, and that South Korea has participated tentatively since the global financial crisis. Second, the emergence of the renminbi bloc in terms of the exchange rate has been facilitated by the continued dominance of the US dollar as a trade, investment, and reserve currency. Third, exchange rate stabilization is explained by the economic strategies of these countries, which rely heavily on export development and financial repression, and the economic rise of China. Fourth, analysts should specify the exchange rate preferences of these emerging market countries carefully before drawing inferences about Chinese influence within the region.
Topic:
Development, Emerging Markets, Foreign Exchange, and International Trade and Finance
Political Geography:
China, Malaysia, Asia, South Korea, Philippines, Singapore, and Thailand

16. Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration

Author:
Stephan Haggard and Marcus Noland
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although the authors cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
Topic:
Foreign Policy, Economics, International Trade and Finance, and Bilateral Relations
Political Geography:
China, Israel, and North Korea

17. A China Round of Multilateral Trade Negotiations

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Until recently, the World Trade Organization (WTO) has been an effective framework for cooperation because it has continually adapted to changing economic realities. The current Doha Agenda is an aberration because it does not reflect one of the biggest shifts in the international economic and trading system: the rise of China. Even though China will have a stake in maintaining trade openness, an initiative that builds on but redefines the Doha Agenda would anchor China more fully in the multilateral trading system. Such an initiative would have two pillars. First, a new negotiating agenda that would include the major issues of interest to China and its trading partners, and thus unleash the powerful reciprocal liberalization mechanism that has driven the WTO process to previous successes. Second, new restraints on bilateralism and regionalism that would help preserve incentives for maintaining the current broad non-discriminatory trading order.
Topic:
Economics, Globalization, International Trade and Finance, and Markets
Political Geography:
China and Israel

18. The Elephant in the "Green Room": China and the Doha Round

Author:
Arvind Subramanian, Aaditya Mattoo, and Francis Ng
Publication Date:
05-2011
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The puzzle about the Doha Round of multilateral trade negotiations in the World Trade Organization (WTO) is not why it is on life support now but how it has survived as a viable multilateral initiative for so long. From the very beginning, it was clear that the Round suffered from a lack of private-sector interest, the engine that had driven previous rounds of successful trade negotiations. At most, Doha promised to deliver some security of access for unilateral liberalization previously undertaken by countries and some modest incremental market opening (Martin and Mattoo 2009; Hufbauer, Schott, and Wong 2010). That the Round had much to be modest about was reflected in the failure of even antiglobalization protesters to show up for the more recent meetings of the Doha Round.
Topic:
Economics, Globalization, International Trade and Finance, and Markets
Political Geography:
China

19. Getting Surplus Countries to Adjust

Author:
John Williamson
Publication Date:
01-2011
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The world has witnessed two distinct attempts to build a multilateral mechanism to discipline surplus countries that declined to adjust their surpluses, and several proposals are currently on the table to do the same. On the two previous occasions the major surplus country of the day defeated attempts to create such a mechanism, and today China (not to mention Japan or Germany) exhibits no enthusiasm for the idea. Despite the importance of the issue, there has been remarkably little discussion of these proposals.
Topic:
Economics, International Trade and Finance, International Monetary Fund, and Monetary Policy
Political Geography:
Japan, China, and Germany

20. 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

21. 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

22. 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

23. 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

24. China's Changing Outbound Foreign Direct Investment Profile: Drivers and Policy Implications

Author:
Daniel H. Rosen and Thilo Hanemann
Publication Date:
06-2009
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In 1967 Jean-Jacques Servan-Schreiber published Le defi americain, a call to beware of American multinationals buying up the world. In the 1980s and 1990s it was Japan's turn, spawning books like Clyde Prestowitz's 1993 Trading Places: How We Are Giving Our Future to Japan. Today it is China's outbound foreign direct investment (OFDI) that elicits the most anxiety China's OFDI has reached commercially and geoeconomically significant levels and begun to challenge international investment norms and affect international relations.
Topic:
International Relations, Economics, International Trade and Finance, and Foreign Direct Investment
Political Geography:
China, America, and Asia

25. 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

26. Sanctioning North Korea: The Political Economy of Denuclearization and Proliferation

Author:
Stephan Haggard and Marcus Noland
Publication Date:
07-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
As a small country dependent on foreign trade and investment, North Korea should be highly vulnerable to external economic pressure. In June 2009, following North Korea's second nuclear test, the UN Security Council passed Resolution 1874, broadening existing economic sanctions and tightening their enforcement. However, an unintended consequence of the nuclear crisis has been to push North Korea into closer economic relations with China and other trading partners that show little interest in cooperating with international efforts to pressure North Korea, let alone in supporting sanctions. North Korea appears to have rearranged its external economic relations to reduce any impact that traditional sanctions could have.
Topic:
Economics, International Trade and Finance, and Sanctions
Political Geography:
China, North Korea, and United Nations

27. Reconciling Climate Change and Trade Policy

Author:
Arvind Subramanian, Aaditya Mattoo, Dominique van der Mensbrugghe, and Jianwu He
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. While this paper confirms the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects, output and exports of energy-intensive manufactures are projected to decline, potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. The paper's quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.
Topic:
Climate Change, Economics, Energy Policy, Environment, and International Trade and Finance
Political Geography:
China

28. 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

29. 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

30. 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

31. 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

32. The Chinese Economy: Prospects and Key Policy Issues

Author:
Morris Goldstein
Publication Date:
04-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
No abstract is available.
Topic:
Economics, Industrial Policy, and International Trade and Finance
Political Geography:
China and Asia

33. 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

34. 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

35. China Bashing 2004

Author:
Gary Clyde Hufbauer and Yee Wong
Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
On April 26, 2004, Senator John Kerry released his six-point trade pro - gram, “Trade Enforcement: Asleep at the Wheel,” and conspicuously targeted China for violating worker rights, dumping, and supporting “illegal currency manipulation” (Kerry 2004). Five days earlier, senior Bush administration officials met with Chinese Vice Premier Wu Yi to settle a few trade disputes (e.g., WiFi) but did not resolve the most contentious ones (exchange rates, semiconductors, and labor rights).
Topic:
Development, Globalization, and International Trade and Finance
Political Geography:
China and Asia

36. 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

37. Foreign Direct Investment in China: Effects on Growth and Economic Performance

Author:
Edward M. Graham and Erika Wada
Publication Date:
04-2001
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
By almost all accounts, foreign direct investment (FDI) in China has been one of the major success stories of the past 10 years. Starting from a base of less than $19 billion in 1990, the stock of FDI in China rose to over $300 billion at the end of 1999. Ranked by the stock of inward FDI, China thus has become the leader among all developing nations and second among the APEC nations (only the United States holds a larger stock of inward FDI). China's FDI consists largely of greenfield investment, while inward FDI in the United States by contrast has been generated more by takeover of existing enterprises than by new establishment, a point developed later in this paper. The majority of FDI in China has originated from elsewhere in developing Asia (i.e., not including Japan). Hong Kong, now a largely self-governing “special autonomous region” of China itself, has been the largest source of record. The dominance of Hong Kong, however, is somewhat illusory in that much FDI nominally from Hong Kong in reality is from elsewhere. Some of what is listed as Hong Kong-source FDI in China is, in fact, investment by domestic Chinese that is “round-tripped” through Hong Kong. Other FDI in China listed as Hong Kong in origin is in reality from various western nations and Taiwan that is placed into China via Hong Kong intermediaries. Alas, no published records exist to indicate exactly how much FDI in China that is nominally from Hong Kong is in fact attributable to other nations.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States, Japan, China, Israel, East Asia, Asia, and Hong Kong

38. The New Asian Challenge

Author:
C. Fred Bergsten
Publication Date:
03-2000
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The initial postwar challenge from East Asia was economic. Japan crashed back into global markets in the 1960s, became the largest surplus and creditor country in the 1980s, and was viewed by many as the world's dominant economy by 1990. The newly industrialized countries (Korea, Taiwan, Hong Kong, Singapore) followed suit on a smaller but still substantial scale shortly thereafter. China only re-entered world commerce in the 1980s but has now become the second largest economy (in purchasing power terms), the second largest recipient of foreign direct investment inflows, and the second largest holder of monetary reserves. Indonesia and most of Southeast Asia grew at 7 percent for two or more decades. The oil crises of the 1970s and the financial crises of the late 1990s injected temporary setbacks but East Asia has clearly become a third major pole of the world economy, along with North America and Western Europe.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Japan, China, Europe, Israel, Taiwan, East Asia, Asia, North America, Korea, Singapore, and Hong Kong