1/11
There is almost as much excited the-world-is-changing nonsense generated by the signing of the RCEP as there was by the creation in 2016 of the AIIB, and because of many of the same confusions over the sources and consequences of global imbalances.
scmp.com/news/china/dip…
There is almost as much excited the-world-is-changing nonsense generated by the signing of the RCEP as there was by the creation in 2016 of the AIIB, and because of many of the same confusions over the sources and consequences of global imbalances.
scmp.com/news/china/dip…
2/11
According to this article, "the RCEP encompasses close to one-third of the world’s population and global economy, and is projected to add US$186 billion to the world economy through improved regional trade."
According to this article, "the RCEP encompasses close to one-third of the world’s population and global economy, and is projected to add US$186 billion to the world economy through improved regional trade."
3/11
How? The RCEP countries together have been running current account surpluses of more than 2% of their collective GDP, and except perhaps in the cases of Australia and New Zealand, these surpluses are based on structural savings imbalances. They are consequently...
How? The RCEP countries together have been running current account surpluses of more than 2% of their collective GDP, and except perhaps in the cases of Australia and New Zealand, these surpluses are based on structural savings imbalances. They are consequently...
4/11
very hard to eliminate without politically-difficult domestic adjustments that none of them want to accept.
This means that the RCEP can only function as a trade bloc either if some of its members are forced into running deficits (in practice only Australia and...
very hard to eliminate without politically-difficult domestic adjustments that none of them want to accept.
This means that the RCEP can only function as a trade bloc either if some of its members are forced into running deficits (in practice only Australia and...
5/11
New Zealand, but they are too small to absorb more than a small fraction of the total), or if the RCEP is simply a surplus trading bloc in search of counterparts willing to run large deficits.
But who? The developing world is too small to absorb these deficits. The EU...
New Zealand, but they are too small to absorb more than a small fraction of the total), or if the RCEP is simply a surplus trading bloc in search of counterparts willing to run large deficits.
But who? The developing world is too small to absorb these deficits. The EU...
6/11
is itself running large surpluses, and while these might be declining, it will be many years before the weaker EU economies in the south and east can tolerate a collective deficit.
That leaves only the US, the UK, and Canada, and if they should take real steps to limit...
is itself running large surpluses, and while these might be declining, it will be many years before the weaker EU economies in the south and east can tolerate a collective deficit.
That leaves only the US, the UK, and Canada, and if they should take real steps to limit...
7/11
the deficits they are willing or able to run with RCEP, for example by limiting net capital inflows, the RCEP will fall apart as each surplus country tries to protect its all-important exports at the expense of imports and its trade partners.
the deficits they are willing or able to run with RCEP, for example by limiting net capital inflows, the RCEP will fall apart as each surplus country tries to protect its all-important exports at the expense of imports and its trade partners.
8/11
In the end many of us seem to be stuck in a past in which the problem of global trade is high frictional costs. This hasn't been the case for decades, and in fact, as Matthew Klein and I explain in our book, the frictional costs of trade may even...
yalebooks.yale.edu/book/978030024…
In the end many of us seem to be stuck in a past in which the problem of global trade is high frictional costs. This hasn't been the case for decades, and in fact, as Matthew Klein and I explain in our book, the frictional costs of trade may even...
yalebooks.yale.edu/book/978030024…
9/11
already be too low. The point is that the problem of global trade is deep, persistent, structural imbalances, not high frictional costs. RCEP proposes only to reduce the latter, and it ignores the former.
In the end the global trading system can only function...
already be too low. The point is that the problem of global trade is deep, persistent, structural imbalances, not high frictional costs. RCEP proposes only to reduce the latter, and it ignores the former.
In the end the global trading system can only function...
10/11
because collectively trade, by definition, is balanced. In practice this means that it functions because the US and the other "Anglophone" countries are able to run the deficits that balance the surpluses of the rest. A trading system that is structurally geared to...
because collectively trade, by definition, is balanced. In practice this means that it functions because the US and the other "Anglophone" countries are able to run the deficits that balance the surpluses of the rest. A trading system that is structurally geared to...
11/11
running surpluses is not a trading system. Unless the RCEP explains what each country is going to do to bring their collective trade into balance, it is just a bunch of countries in a Wikipedia article.
running surpluses is not a trading system. Unless the RCEP explains what each country is going to do to bring their collective trade into balance, it is just a bunch of countries in a Wikipedia article.
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