Who will be the EU's "Romans"?

Judging by some of the arguments being used around the EU27 and the Euro17 today the EU could wind up with city-states or 500,000,000 states of one!

While the best interest of the 500,000,000 imo is ONE country of 500,000,000. (1/14th of world population) able to stand tall next to China (1,300,000,000), India (1,200,000,000) and USA (310,000,000).

Or maybe Europe has "too much" history while not enough wisdom to survive as anything and soon may be taken over (become economic or other subsidiary or cantons) by others! 

Ancient Greece did not have the wisdom to unite into a political union. And paid the price. Does Europe have to wisdom to avoid same price?

Ancient Athens was acting like a primadona (in the Delos Alliance, Sparta left early). Then Sparta beat Athens and acted like an even bigger primadona-bully to the other Greek city-states. Then Thebes eliminated Sparta as a power. Then Macedonia took the lead (reminds one of the EU, with Germany, UK, France playing corresponding parts).

Then came the Romans and engulfed all Greek city states under the Roman Empire. Then others. Greece became a country 180 years ago. So: Who will be the EU's "Romans"? The Russians? China? America? All three? Someone else?

Oh Europe, wake up and see what is going on in the world!

More analysis of the above topic available to clients and close friends

World (econ/trade) Cup news and dynamics!

""We are in trade war. But today we’re fighting back,” said Democratic Senator Sherrod Brown" after the US Senate passed a "China currency manipulation" bill (See "Senate passes China currency manipulation bill" in The Raw Story, October 11, 2011).

1) "War" is a heavy/loaded word, that I would not use, but Senator Brown is right in that globalisation has turned into a fierce economic/trade World Cup instead of a cooperation "game" of nations. So what was billed as a world championship primarily between multinational corporations (and "local"/national champions (companies)) has gained a second level, the economic competition (World Cup) between countries. With exports (goods and increasingly services), investment, etc as its tools (instead of eg a ball, see football). Countries are ranked by various sources (including the WEF's Global Competitiveness Report, the rating agencies, etc). Based on GNP/GDP, trade or CA balances, etc. The genre of the game is mostly competitive, and mostly fierce, not cooperative.

After the 2008 US subprime driven crisis, some spoke of "over-dependency on exports". Others spoke of "over-dependency on the financial industry" (eg of the UK/London, by a now former German Minister). An equivalent to the US over-dependency on oil that even GW Bush Jr. spoke of?

In more recent months, the US has accused Germany of exporting too much and consuming tooo little! We are also reminded that many economists especially of past times have argued that trade is supposed to be in near balance and that excessive trade surpluses are as damaging to the world economic systemics as trade deficits are.http://www.blogger.com/img/blank.gif

Some have even argued that "good" domestic consumers are a precious asset for a country (eg the US, consumption is 2/3 of the economy). Of course it helps when the market is big enough (eg the US 300 million one) and realy internal and single (unlike the EU not that single after all Single Market and the Eurozone (330 million ie larger than the US in theory, but not as internal as the US in practice). See also my August 29, 2011 post: "Show me your consumers and then I will show you mine!"

2) Back to the bill that just passed in the US Senate, it is not active yet anyway. Merely passed in Senate. Not the GOP majority House of Reps, at least not yet. Normally pro-free trade USA (Bush even tried to create a Free Trade Area for the whole Americas (North, Central and South in Mar del Plata in mid-2000s) but did not inspire most other Americas countries, that are nevertheless into things like Mercosur and the evolving UNASUR, while NAFTA is not too big a success according to all 3 members, and the Democrats in the House and Senate had managed to stall the adoption of bilateral agreements that Bush had concluded) But with 2012 so close, will GOP stand on its pro "free trade" principles or take into account the electoral climate too? By the way, as far as I know, Obama wa never given "fast track" powers like the ones the Democrats led House and Senate had given Bush to negotiate the now shifted towards a "lite" version WTO Doha Round of trade talks.

And while WTO exists with its 150+ members, internationa trade is still not free (only more free than it was 20 or 30 years ago) and according to many studies that there too many "hidden"/covert barriers/protectionist defenses employed by countries (eg many G20 ones) that otherwise partake in the G20 and others' public rhetoric pro-free trade!

4) I have been pondering (and blogging) as per how long before USA and/or EU realise that for them WTO membership has more restrictions than opportunities (& that they can be better served via bilateral agreements between countries, not even free trade areas)?

5) I am not even sure how compatible the US "China currency manipulation" bill is with WTO rules! Could US measures against China activated via this bill lead to China complaint to the WTO that currency manipulation is not covered by WTO rules (and thus not forbidden) and that thus the US measures justify WTO approved counter-measures by China? Not an expert, but wondering.

6) Of course, nowadays, there are only 2 economic super-powers in the world today: China and USA. Russia could be added as a +1 (in a G2+1 instead of G7+1 configuration). The U is not an world economic superpower, unless it unites politically. And the UK, France and Italy have long lost real "G" status (eg G7).

What about Germany, the ex-No1 exporter in the world (now it is China)? Well, Germany is economic/trade champion only in a EU league, not the world league, since most of its exports stay in the EU! Plus Germany (unlike USA, China, and potentially India and Russia) has too small of an internal market to "survive" bumps. That is why it needs EU/Euro.

7) Daring to be different. Not sure how Russia's plans to be a world power via oil and natura gas are working out (calls for a return to the USSR's military superpower status would suggest that the oil and natural gas strategies are not working too well), but Russia is clever in that it puts extra criteria for foreign state (vs private) investments in Russia. And no WTO membership (eve if it is aid to be vetoed by Georgia). Why? Because while USA and Germany had to offer people rebates as a stimulus for their car industries but to be consistent with WTO rules they had to make the rebates available to buyers of made in WTO inports too, Russia, not being a member of WTO merely hiked the tarrifs of car imports!

To be continued in a market near you and around the world!

Systemics and prospects of the WTO and of a USA, EU, Russia, Canada merger!

"Doha Trade Deal Seems Likely" reports the Wall Street Journal on May 31. 2011 (must read, here).

Whether the Doha lite, or in my opinion "extra lite" agenda is agreed upon by the end of the year, or even a "zero" one (ie no deal, end of the round that started in November 2001 in Doha) I do agree with the view that the era of progress in trade multilateralism is probably over.

As I have pointed out in my posts that one can find on this blog, after the 2003 failed Cancun meeting of the WTO, many bilateral and regional trade (or more than just trade) agreements have popped up.

A few days ago (25/5), I posted on what systemics I can see developing post Doha. IMO China, India, the US, the EU (mainly) plus Japan, Russia and Brazil or UNASUR (South America's "EU" project that of course includes Brazil) will be the main "players" in the world economic "arena".

The WTO rules as they stood before the Doha Round of talks in 2001 will probably still exist (although the survival of the WTO is not a given IMO) plus whatever rules come out of the Doha lite agenda that some seem to hope to be concluded (I have my doubts, read the WSJ article for some of the reasons, aka USA, plus. as far as I know, the US Pres has no fast track powers given by Congress on concluding a deal, and if that is indeed so, it is possible that the US Congress may decide to amend (!!) any deal, thus bringing a new deal back to the WTO, etc).

Conclusions

1) Most progress in rules or deals will most likely between 2 or more of the above 4+3 main players.

2) The EU, the US, and the other main players will continue to conclude (or at least try to, see US) bilateral deals with others, in some cases group agreements, regional or not.

3) The EU needs to strengthen its position and a political union of the EU is the main such way.

More:

Here comes some thinking that some may consider sci-fi, but we shall see:

I was involved in a most interesting discussion on Twitter (aka "tweetscussion") with a very esteemed fellow tweeter, @paulstpancras) on the night of May 29 to May 30. At some point, talking of the EU, political union potential, the UK POV, I said: "Or maybe UK would be OK with EU if merged with (the) USA; 77+ states. Then (UK) could ally with Texas, Arizona, etc! :)".

"Or a circumpolar space... USA, Canada, EU, Russia ..." proposed my fellow tweeter, which was exactly what I was also thinking as another potential scenario.

Why, because in addition to covering a ring around the planet, this union would have a population size that starts to approach that of China (1.3 billion) and India (1.2 billion):

USA+CAN+EU+Russia = 0.3 + 0.03 + 0.5 + 0.14 = 0.97 billion people.

In terms of GDP (nominal (in trillion USD) 2010 estimates (Source: CIA, World Factbook)) the picture would then be:

European Union 15.9 + United States 14.6 + Canada 1.6 + Russia 1.5 = 33.6

China 5.7
India 1.4

There is an obvious imbalance between the 33.6 and China's and India's GDP but with their rapid growth the potential for more GDP balance between the three exists.

There is another reason why a USA+EU merger would have to bring in Russia too. Russia would get very itchy if the US and EU were to merge, and including it could fix that. Canada has only 30+ million inhabitants but huge natural resources.

So while one scenario is EU+USA+Russia+Canada, another is EU+USA+Russia with almost the same population as the former, 0.94 billion and 32.0 instead of 33.6 2010 trillion USD.

But is a EU+US merger scenario even a remote possibility? Well, yes and no. 2-3 years ago, when I think the US proposed a free trade deal, some in the European Parliament said, why not a "single market". Well, IMO a single market, even without a common currency, needs single laws, which brings things, again IMO, towards a single legislature, ie political union. IMO the US+EU potential will largely depend on developments in/with China.

But what about the rest of the world? Well, China+India+EU+USA+Russia = almost 3.5 billion people. That leaves out 3.4 billion people (of the 6.9 billion total in 2010). Note: Only 11 countries have population size over 100 million but there are many countries, more than 200 in the world (planet).

Since world GDP was estimated at 62.2 trillion USD in 2010, the result of this scenario would be:

EU+USA+Russia: 32.0

China 5.7

India 1.4

Rest of the world: 23.1

including in that 23.1:

Japan 5.4

Brazil 2.0
Canada 1.6
Australia 1.2
Mexico 1.0

Such a merger could prompt other countries to merge in groups, eg Japan, ASEAN & rest of Asia (with or without some of the ex-USSR states) plus Oceania, Africa, South and Central America. The world would not become a global polity, but a small number of super-countries/states (regionalisation+). Global trade talks would bring to a table reps of 4 to 6 such super-states. Not all of the world's countries would want or be included of course (and why should they, there should be room for exceptions and other approaches).

But in any case, in the complicated and perpetually changing world after 10% of the 21st century has elapsed, and the rapid growth, economic and in "power" of the BRICs as well as other developing countries, the EU has to be a single polity, it cannot continue to be a loose group of 27 countries. EU political union is a must, for the EU to be taken seriously by the rest of the world (see eg recent issues re selection of new IMF chief, the issue of a UN Security Council seat for the EU, the marginal role played by the EU as opposed to the US and China in the Copenhagen COP 15+, etc).

What are France, the UK, Germany and Italy doing in the G8?

This is one of the follow up posts to yesterday's post Key factors of "strength" in "post Doha" (and post WTO?) world systemics and on the occasion of the G8 meeting in Deauville (France), today and tomorrow.

The G8 started as G6 in the 1970s with France, Germany, Italy, Japan, the UK and the United States ie 4 large and "rich" (GDPwise) European countries members of the then EEC plus USA and Japan (also large and rich, see yesterday's post). Canada was invited later, and later Russia.
The EU is an extra, "associate" type of, participant.

My observations and points:

1) With G20 now in existence, what is G8 for?

2) Since the EEC is EU (since the 1990s) what is the point/sense of having France, Germany, Italy and the UK?

3) Considering Canada's population size compared to the other 7, why is it there (plus China and Brazil are in 2010 GDP terms richer than Canada)

4) Why is China (No. 1 in population and No. 2 in GDP) not there?

5) India is marginally less rich than Canada and Russia (1.4 vs 1.6 and 1.6 trillion USD 2010 see yesterday's article).

Hence, and depending of the weigt attached to GDP and population, the G8 should be:

either

A) G4: EU, USA, China and Japan

or

B) G7: EU, USA, China, Japan, India, Russia; plus Brazil (or the UNASUR).

The current G8 seems so 20th century and so globally irrelevant to 2011!

And in any case, EU members states have no place there, the EU does.

See also: Key factors of "strength" in "post Doha" (and post WTO?) world systemics

Time to talk about the sovereignty of Europe from China, USA, Russia, et al

BBC News this morning reports that "The Chinese government, which is sitting on $2 trillion of foreign exchange reserves, has ample amounts of cash to fund loans which help promote its strategic objectives."

$2 trillion of foreign exchange reserves, $2 trillion of foreign exchange reserves! Enough to "buy" the world, including US & Europe?

The European Union is being built el cheapo, ie on a measly budget. Is it now being "sold" to China, el cheapo? EUropeans must understand that!

Time to talk about the sovereignty of EUrope! EU independence from China, Russia, USA, et al via full Union!

That is what Mrs Merkel, M. Sarkozy, all leaders of EU countries, even MM Cameron & Clegg, must explain to the voters/taxpayers!

This responsibility, of major historical proportions, also lies with all political parties, media & opinion makers, in Germany & around the EU.

Wake up calls for England, the UK and the EU

Russia has changed its strategy and now seeks WTO membership (it has been the largest economy outside the WTO since China entry in 2001). Also wins bid for 2018 World Cup!

Some of the reactions FIFA's decision in Russia's win in the bid for WC 2018 (and WC 2022) seem to indicate that some countries seem to not have realised the world doesn't revolve around them anymore & there's a trend for a more balanced globalisation (BRICs etc)

WTO has blocked EU duties on Chinese screws. IMO this should serve the EU and its members as a cue to consider the correlation between the start of the Euro & China's entry into the WTO & how it affected the systemics of the EU Single Market (and thus contributed to the current "Euro crisis")

Dynamics such as these make the need for a United States of Europe (political union) urgent and override parochialist tendencies of/within some EU member states.

Thus I am not surprised that according to the recent "leaks", the Governor of a certain central bank thinks that the Euro crisis may accelerate political union in the EU, a view I have expressed many times this year.

Russia GDP in 2009

Russia's GDP will shrink 7.5% in 2009, according to President Dmitry Medvedev

Is Russia's new stance re WTO membership a sign of waning WTO importance?

I have been arguing for weeks if not months now that WTO is losing importance. For many reasons.

One, is the failure of its members to reach agreement on the so called "Doha Round" of world trade talks.

A second one is the proliferation, in the last 4-5 years of "hedging" tools by many countries, not only the US and the EU, of bilateral trade agreements that IMO undermine the value of WTO agreements/rules and increase the complexity of the global map for trade and its rules/constraints/factors.

A third is the increased appeal of Free Trade Areas, such as Mercosur, ASEAN, and many others that either have progressed or been established in the last 4-5 years (NAFTA not being a successful example nevertheless, but that is an interestng case study). Or even ambitious projects such as the "African Union".

A new, recent one, is the expansion of the G8 to G20 (or, more precisely, the focus on G20 rather than G8).


With all those in mind, the alleged change of policy, over the summer, of Russia's top political leasership re WTO membership (Russia is still not a member, note that China joined in 2001) makes, IMO, lots of sense.

Assuming then that indeed Russia is not as keen in joining WTO as before, at least at present, let's consider why that makes sense:

1) Russia is a global powerhouse in energy, both oil and gas, and its main compant pans to become a world leader in the export of both in the coming years. Couple this with current developments in the field of energy in the world, and then you realise that Russia can feel that its energy card gives it enough negotiating power to sign bilateral trade deals with any country it so wishes. Why mess with the WTO plenary of 152 or so members? 20 seem enough, and after all, they represent more than 70% of world GDP or trade. Simply, WTO is not as important as it was some years ago and Russia is in a position to see that and why not, think, "why join, after all (at least for now)"?

2) Russia has receltly formed, together with Kazakhstan and Belarus, a customs union, of strategic importance to Russia and it says, well, why not enter WTO as a group-customs union, instead of the traditional way. If this may delay entry, well what harm is in that?

3) Because of its non-membership of WTO Russia was more free than other countries/economies to deal with the world recession. For example, it was free to stamp very high customs taxes to foreign cars in order to help its own car manufacturing base. WTO member countries such as Germany, the US, Italy, France, etc, could not do that, they offered the replacement incentive instead, putting out thousands of USD or Euros instead as an incentive to buyers.

4) According to many sources in China, China rushed its own entry in the WTO in 2001 and "gave up" too much. It may have opened foreign markets for its products but also created many constraints. Russia, not a member, has none of those.

Would be make sense for other countries to not be contrained by a WTO membership, at least the way WTO is at present?

IMO, yes.
Which ones?
Well that is a good topic for a future post.

(tip: think EU and US for example, even as a theoretical exercise in world and country systemics)

Germany - Russia relations warm

The German Chancellor Angela Merkel and Russia's President Dmitry Medvedev have held talks for the second time this month and the third time this year! They focused on Russian human rights and boosting investment links as well as ways to overcome the consequences of the global recession.

Should the USD be replaced by an international currency?

China's central bank has reiterated its call for a new reserve currency to replace the US dollar.

The head of the Central bank of China Mr. Zhou Xiaochuan has led calls for the US Dollar to be replaced consider an alternative benchmark currency, divorced from sovereign states, for international debt, reserves and other international economic-financial "affairs". The Russian President, Mr. Dmitry Medvedev has also supported this view, but not as an immediate decision.

Notably, the Chinese central bank's recent report calls for more regulation of the countries that issue currencies that underpin the global financial system.