Monday, August 29, 2011

Show me your consumers and then I will show you mine!

The way things are going, it seems that the US may have to leave the WTO system (same for the EU).

Leaving the WTO means relying on existing and new bilateral agreements for trade with other countries. Avoiding the plenary negotiations by the WTO 153 country members (153 includes the EU 27).

Of course leaving the WTO is not in the best interest of US & EU firms that produce cheapo in China! They may have to focus more on the US and EU internal markets respectively. especially if the BRICs and other developing economies maintain the tariffs they impose (it is consistent with WTO rules) on US and EU industrial goods.

Complicated, interesting times. The Ancient Chinese were right, they are a curse for the average person. Are the modern Chinese right, actually their government, in not fostering domestic demand? How much longer are the US and the EU (with the exception of Germany) going to be offering access to their consumers to the exporters of the rest of the rest of the world who do not (like Germany in the EU) do not reciprocate? One way to be protectionist is to raise barriers to imports, official or sneaky/unofficial ones. The other is to have public policies that discourage domestic consumption.

In today's oxymora, net importing economies/countries are more rare than exporting ones. In supply and demand terms, that makes them more "valuable" than before. Will they negotiate using this extra value?



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Nick

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