VACACIONES OCTUBRE 2016 (CLICK ON LINK)
miércoles, octubre 19, 2016
THE PARABLE OF TICINO / THE ECONOMIST
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Etiquetas:
Brexit,
Europe Economic and Political,
Switzerland
Charlemagne
The parable of Ticino
The harsh lessons from Switzerland for Brexiteers
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FOR the European Union’s high priesthood in Brussels, the right of people to live and work anywhere in Europe is sacred. But free movement is a worldlier concern for Franco Puffi, who runs Precicast, a high-tech metal foundry in Ticino, a Swiss canton next to the Italian border.
Fully 90% of those who toil in its workshops are Italian, as are the engineers who design its moulds and the managers who seek new export markets for aerospace and biomedical components. Mr Puffi would like to employ more locals, but says the Swiss prefer banking and public-sector jobs. Northern Italians, by contrast, value industrial work and have the technical skills he needs. Their country’s economic woes make them “hungrier”. And there are a lot more of them.
For others, that is precisely the problem. “Ticino is confronted with Italy,” says Norman Gobbi of the Ticino League, a local party that backs immigration curbs. “And Italy is an example of the non-functioning of the EU.” Switzerland, a small, federal construct that protects its sovereignty furiously—it became a full UN member only in 2002—is in many respects a curiosity. Its relationship with the EU, governed by a complex set of bilateral deals, is no exception. But its recent experience provides lessons for others, not least a Brexiting Britain, on how far European states outside the EU can set the terms of their relationship with the union.
Since 2002 all EU citizens have had the right to live and work in Switzerland (and vice versa).
Millions of Italians live within 50 kilometres of the border. Tens of thousands of them commute across it every day. In 2014 concerns that Italians were undercutting local wages drove 68% of Ticinese to vote “yes” in a national referendum that called for curbs on immigration and cross-border commuting. The proposal squeaked through by 20,000 votes. Some credit the Ticinese with its victory.
In doing so they landed Switzerland with a giant headache. A “guillotine” clause in Switzerland’s accords with the EU means that unilaterally overturning the free-movement provisions jeopardises the rest of the agreements reached in 2002, which cover everything from procurement to agriculture. One government study found that scrapping all this could, by 2035, leave Swiss GDP 7.1% lower than it would otherwise be.
Owing largely to immigration, the Swiss population has grown by over 10% in a decade. As a country of nothing but “water and rocks”, in the words of Paolo Beltraminelli, the centrist president of Ticino, Switzerland has always had to look abroad to plug labour gaps. But anti-immigrant populists have a deadly weapon: the popular initiative, which triggers lots of referendums. In 1970 a proposal to cap immigrants at 10% of the total population (bar Geneva) almost succeeded; today the figure is 23%. Votes against burqas and minarets have followed, as concerns about asylum-seekers and Muslims were added to the mix.
The EU was at first minded to compromise with Switzerland over free movement. But that changed after last year’s election in Britain returned a government with a mandate to renegotiate its EU membership. Fearful that concessions to the Swiss would be seized on by the British, the EU toughened its stance; the Brexit vote in June made things worse. Now the Swiss look set to back down. This week the lower house of parliament approved a law that encourages employers to recruit in Switzerland before looking abroad; hardly the strict curbs demanded by the right-wing Swiss People’s Party (SVP) that proposed the referendum.
Infuriated, the SVP could seek a second referendum to overturn the law, or to tear up the bilateral deals entirely. The Ticinese won’t wait: on September 25th they are set to approve a local initiative, backed by Mr Gobbi, to privilege Swiss workers over foreigners. The proposal is a legal nonsense; such matters are national rather than cantonal responsibilities. Much more of this sort of thing, says Mr Puffi, and he will move Precicast to Italy.
Given the choice, Swiss voters tell pollsters they would not ditch the accords with the EU to cut immigration. But hardliners think the backlash against migration across the EU means that one day Brussels will have to take a less rigid stance; and that it is in the EU’s interest to keep Switzerland happy. The parallels with the British debate are irresistible: Brexiteers, too, argue that the EU will have to bow before the will of referendum voters. Yet Britain’s vow to cut immigration from the EU will mean losing some access to the single market, possibly including the “passporting” rights that allow financial firms to operate freely across the EU. Confronted with the potential collapse of Britain’s most important trading relationship, the promise to keep out Polish workers will look less compelling, or so some pro-EU voices suggest.
There is another lesson from the Alps. The Swiss are hanging tough for now on a further EU demand: that the “static” bilateral agreements become “dynamic”, meaning that Switzerland automatically accepts new developments in EU law, be they new rules from Brussels or rulings by the European Court of Justice. Foreign judges are as distrusted in Switzerland as they are in Britain, and the Swiss can in theory pick and choose which rules to apply (in practice many are simply copy-pasted from Brussels). Refusing the EU’s demands means Switzerland will be cut out of future single-market developments, such as energy integration.
Britain will face a similar dilemma. Whatever access it maintains to the single market, the rules will inevitably change; if Britain does not apply them automatically it will be progressively excluded from it. Britain may be far larger than Switzerland, a small country surrounded by the EU; and its security and police ties with the rest of Europe give it extra clout in striking a deal. But like Switzerland, Britain will face tough questions about what it means to preserve sovereignty when its biggest trading partner is making rules over which it will have no say.
Immigration could be the least of its worries.
Fully 90% of those who toil in its workshops are Italian, as are the engineers who design its moulds and the managers who seek new export markets for aerospace and biomedical components. Mr Puffi would like to employ more locals, but says the Swiss prefer banking and public-sector jobs. Northern Italians, by contrast, value industrial work and have the technical skills he needs. Their country’s economic woes make them “hungrier”. And there are a lot more of them.
For others, that is precisely the problem. “Ticino is confronted with Italy,” says Norman Gobbi of the Ticino League, a local party that backs immigration curbs. “And Italy is an example of the non-functioning of the EU.” Switzerland, a small, federal construct that protects its sovereignty furiously—it became a full UN member only in 2002—is in many respects a curiosity. Its relationship with the EU, governed by a complex set of bilateral deals, is no exception. But its recent experience provides lessons for others, not least a Brexiting Britain, on how far European states outside the EU can set the terms of their relationship with the union.
Since 2002 all EU citizens have had the right to live and work in Switzerland (and vice versa).
Millions of Italians live within 50 kilometres of the border. Tens of thousands of them commute across it every day. In 2014 concerns that Italians were undercutting local wages drove 68% of Ticinese to vote “yes” in a national referendum that called for curbs on immigration and cross-border commuting. The proposal squeaked through by 20,000 votes. Some credit the Ticinese with its victory.
In doing so they landed Switzerland with a giant headache. A “guillotine” clause in Switzerland’s accords with the EU means that unilaterally overturning the free-movement provisions jeopardises the rest of the agreements reached in 2002, which cover everything from procurement to agriculture. One government study found that scrapping all this could, by 2035, leave Swiss GDP 7.1% lower than it would otherwise be.
Owing largely to immigration, the Swiss population has grown by over 10% in a decade. As a country of nothing but “water and rocks”, in the words of Paolo Beltraminelli, the centrist president of Ticino, Switzerland has always had to look abroad to plug labour gaps. But anti-immigrant populists have a deadly weapon: the popular initiative, which triggers lots of referendums. In 1970 a proposal to cap immigrants at 10% of the total population (bar Geneva) almost succeeded; today the figure is 23%. Votes against burqas and minarets have followed, as concerns about asylum-seekers and Muslims were added to the mix.
The EU was at first minded to compromise with Switzerland over free movement. But that changed after last year’s election in Britain returned a government with a mandate to renegotiate its EU membership. Fearful that concessions to the Swiss would be seized on by the British, the EU toughened its stance; the Brexit vote in June made things worse. Now the Swiss look set to back down. This week the lower house of parliament approved a law that encourages employers to recruit in Switzerland before looking abroad; hardly the strict curbs demanded by the right-wing Swiss People’s Party (SVP) that proposed the referendum.
Infuriated, the SVP could seek a second referendum to overturn the law, or to tear up the bilateral deals entirely. The Ticinese won’t wait: on September 25th they are set to approve a local initiative, backed by Mr Gobbi, to privilege Swiss workers over foreigners. The proposal is a legal nonsense; such matters are national rather than cantonal responsibilities. Much more of this sort of thing, says Mr Puffi, and he will move Precicast to Italy.
Given the choice, Swiss voters tell pollsters they would not ditch the accords with the EU to cut immigration. But hardliners think the backlash against migration across the EU means that one day Brussels will have to take a less rigid stance; and that it is in the EU’s interest to keep Switzerland happy. The parallels with the British debate are irresistible: Brexiteers, too, argue that the EU will have to bow before the will of referendum voters. Yet Britain’s vow to cut immigration from the EU will mean losing some access to the single market, possibly including the “passporting” rights that allow financial firms to operate freely across the EU. Confronted with the potential collapse of Britain’s most important trading relationship, the promise to keep out Polish workers will look less compelling, or so some pro-EU voices suggest.
The meaning of sovereignty
Britain will face a similar dilemma. Whatever access it maintains to the single market, the rules will inevitably change; if Britain does not apply them automatically it will be progressively excluded from it. Britain may be far larger than Switzerland, a small country surrounded by the EU; and its security and police ties with the rest of Europe give it extra clout in striking a deal. But like Switzerland, Britain will face tough questions about what it means to preserve sovereignty when its biggest trading partner is making rules over which it will have no say.
Immigration could be the least of its worries.
miércoles, octubre 19, 2016
CHINA´S CURRENCY? THAT´S THE LEAST OF THE PROBLEMS FOR THE NEXT U.S. LEADER / THE WALL STREET JOURNAL
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Etiquetas:
China,
Economics,
The Yuan o Renminbi,
U.S. Economic And Political
China’s Currency? That’s the Least of the Problems for the Next U.S. Leader
China’s ambitious rise presents issues far more complex than Trump’s outdated yuan manipulation charges
By Andrew Browne
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SHANGHAI—In his video documentary “Death by China” the economist Peter Navarro, a Donald Trump adviser, promptly shows a Chinese dagger plunging into the heart of America, as blood spurts from the wound.
Almost as quickly, the Republican presidential nominee raised the Chinese threat in his debate with Hillary Clinton on Monday night. He identified China as a currency cheat that steals American jobs. China, he said, “is the best ever at it.”
Except that Mr. Trump, like many a general, is fighting the last battle. His opponent’s weapons and tactics have changed.
Whoever wins the elections in November must face challenges from China that are far more potent and complex than the ones that preoccupy Mr. Trump’s campaign. He doesn’t exaggerate the competitive threat from China; if anything, he underestimates it.
Indeed, U.S. politicians of all stripes have consistently failed to appreciate both the scope of China’s ambitions and, above all, the extent of the adjustments that will be required within America to respond effectively.
When President Obama took office in 2009, the Chinese economy was less than a third the size of America’s. It’s now 60% as big—and by some calculations is already larger.
Back then, China’s investments in the world were modest, mainly state-owned companies acquiring mining assets in Africa and other developing economies. Last year, China’s outbound investment flows exceeded inflows and they have become far more sophisticated.
The latest dazzling deal: China’s richest man, Wang Jianlin, who already controls America’s largest movie theater chain, seeks to buy control of Hollywood’s Dick Clark Productions, which stages the Golden Globe Awards.
In another contrast from 2009, China was then rebuilding after a devastating earthquake that revealed serious equipment shortages in the Chinese military, which lacked heavy-lift helicopters and transport planes to reach the disaster site in Sichuan province.
Just this week, in a startling illustration of how China’s economic might has since translated into military muscle, Chinese bombers and fighters flew past Japanese islands to the Western Pacific on a route such a large sortie of planes had never traveled before.
The biggest change since then, though, may be psychological. The 2008 collapse of Lehman Brothers convinced the Chinese leadership that America’s best days were behind it.
The next American president must face a China that feels assured of its unstoppable ascendancy, one that no longer seeks merely to game the American-led global trading system by manipulating its currency, or dumping steel. The new China increasingly aspires to set the rules.
After all, China now has many of the world’s largest industries, and its expanding middles classes are the spur for innovation in products and services that are set to become a huge driver of global growth. Access to its markets is a major new battle ground.
Mr. Trump, or Mrs. Clinton, can expect an early test from a Chinese leadership eager to underline the message that China is no longer prepared to accept a position as America’s junior.
That could take the form of a military challenge. China has recently shown signs it may be preparing to build another fortification in the South China Sea on the Scarborough Shoal within striking distance of Manila and military bases used by American forces. Or, it could even be another tilt at the American institutional order, building on the success of the Asian Infrastructure Investment Bank, which Washington saw as a rival to the World Bank.
It’s true, as “Death by China” points out, that China once manipulated its currency to keep its value low and exports high. No longer. Beijing is now propping up the yuan, not beating it down. China’s current account surplus was just 3% of GDP last year.
And, despite Mr. Trump’s exhortations, the low-end American factory jobs lost to China won’t return. In fact, some of them are now leaving China for countries with lower labor costs, like Vietnam. Traditional manufacturing in China is struggling, too.
While Mr. Trump is fixated on the U.S.-China trade gap—according to Mr. Navarro’s documentary, fueled by “slave labor” and other abuses—China is focused on higher value production and emerging technologies as it rebuilds an economy around domestic consumption and services rather than exports and investment. That means everything from robotics to artificial intelligence. On Sunday, China introduced the world’s largest radio telescope, capable of searching for signals from distant galaxies, and possibly extraterrestrial life.
These are the kinds of projects that inspire the Chinese leaders, even as they grapple with legacy problems from the old economy—a mountain of bank debt, polluted air and unfunded pension obligations.
Swaths of blue-collar America may be suffering, but the country as a whole is nowhere near death.
No matter how you measure it—high-quality patents, license fees, college rankings, financial depth—China isn’t even close. The real threat is that America squanders its extraordinary advantages. The dagger pointed at America’s heart, if there is one, is gripped in its own hands.
The Return of Fiscal Policy
Nouriel Roubini
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NEW YORK – Since the global financial crisis of 2008, monetary policy has borne much of the burden of sustaining aggregate demand, boosting growth, and preventing deflation in developed economies. Fiscal policy, for its part, was constrained by large budget deficits and rising stocks of public debt, with many countries even implementing austerity to ensure debt sustainability. Eight years later, it is time to pass the baton.
As the only game in town when it came to economic stimulus, central banks were driven to adopt increasingly unconventional monetary policies. They began by cutting interest rates to zero, and later introduced forward guidance, committing to keep policy rates at zero for a protracted period.
In rapid succession, advanced-country central banks also launched quantitative easing (QE), purchasing massive volumes of long-term government securities to reduce their yields. They also initiated credit easing, or purchases of private assets to reduce the costs of private-sector borrowing.
Most recently, some monetary authorities – including the European Central Bank, the Bank of Japan, and several other European central banks – have taken interest rates negative.
While these policies boosted asset prices and economic growth, while preventing deflation, they are reaching their limits. In fact, negative policy rates may hurt bank profitability and thus banks’ willingness to extend credit. As for QE, central banks may simply run out of government bonds to buy.
Yet most economies are far from where they need to be. If below-trend growth continues, monetary policy may well lack the tools to address it, particularly if tail risks – economic, financial, political, or geopolitical – also undermine recovery. If banks are driven, for any reason, to reduce lending to the private sector, monetary policy may become less effective, ineffective, or even counter-productive.
In such a context, fiscal policy would be the only effective macroeconomic-policy tool left, and thus would have to assume much more responsibility for countering recessionary pressures.
But there is no need to wait until central banks have run out of ammunition. We should begin activating fiscal policy now, for several reasons.
For starters, thanks to painful austerity, deficits and debts have fallen, meaning that most advanced economies now have some fiscal space to boost demand. Moreover, central banks’ near-zero policy rates and effective monetization of debt by way of QE would enhance the impact of fiscal policy on aggregate demand. And long-term government bond yields are at an historic low, enabling governments to spend more and/or reduce taxes while financing the deficit cheaply.
Finally, most advanced economies need to repair or replace crumbling infrastructure, a form of investment with higher returns than government bonds, especially today, when bond yields are extremely low. Public infrastructure not only increases aggregate demand; it also increases aggregate supply, as it supports private-sector productivity and efficiency.
The good news is that the advanced economies of the G7 seem poised to begin – or perhaps have already begun – to rely more on fiscal policy to bolster sagging economic growth, even as they maintain the rhetoric of austerity. In Canada, Prime Minister Justin Trudeau’s administration has announced a plan to boost public investment. And Japanese Prime Minister Shinzo Abe has decided to postpone a risky consumption-tax hike planned for next year, while also announcing supplementary budgets to increase spending and boost the household sector’s purchasing power.
In the United Kingdom, the new government, led by Prime Minister Theresa May, has dropped the target of eliminating the deficit by the end of the decade. In the wake of the Brexit vote, May’s government has designed expansionary fiscal policies aimed at spurring growth and improving economic conditions for cities, regions, and groups left behind in the last decade.
Even in the eurozone, there is some movement. Germany will spend more on refugees, defense, security, and infrastructure, while reducing taxes moderately. And, with the European Commission showing more flexibility on targets and ceilings, the rest of the eurozone may also be able to use fiscal policy more effectively. If fully implemented, the so-called Juncker Plan, named for European Commission President Jean-Claude Juncker, will boost public investment throughout the European Union.
As for the United States, there will be some stimulus, regardless of whether Hillary Clinton or Donald Trump wins the presidential election. Both candidates favor more infrastructure spending, more military spending, loosening limits on civilian spending, and corporate-tax reform. Trump also has a tax-reduction plan that would not be revenue-neutral, and thus would expand the budget deficit (though the effect on demand would likely be small, given the concentration of benefits at the very top of the income distribution).
The fiscal stimulus that will result from these uncoordinated G7 policies will likely be very modest – at best, 0.5% of GDP of additional stimulus per year for a few years. This means that more stimulus, particularly spending on public infrastructure, will probably be warranted.
Nonetheless, the measures undertaken or contemplated so far already represent a step in the right direction.
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