Archive for October, 2009
Trade and environment intersect in many ways. Aside from the broad debate as to whether economic growth and trade adversely affect the environment, there are linkages between existing rules of the World Trade Organization (WTO) and rules established in various multilateral environmental agreements. Controlling greenhouse gas emissions promises to be a top priority for both […]
Nicholas R. Lardy, analyzing the origins of the dispute with China over tire imports, warns that the fight could imperil future US-China economic and political cooperation. Recorded September 14, 2009. © Peterson Institute for International Economics. Steve Weisman: This is Steve Weisman at the Peterson Institute for International Economics. Nicholas Lardy, senior fellow at the […]
Testimony before the Subcommittee on Asia, the Pacific and the Global Environment, Committee on Foreign Affairs, US House of Representatives September 10, 2009
The Policy Context
The United States and China are the two most important national economies in the world:
- China will shortly pass Japan to become the world’s second largest economy behind the United States;
- the two together accounted for almost one half of all global growth during the four-year boom prior to the crisis;
- they are the two largest trading nations;
- they are the two largest polluters;
- they are on opposite ends of the world’s largest trade and financial imbalance: the United States is the largest deficit and debtor country while China is the largest surplus country and holder of dollar reserves; and
- they are the leaders of the two groups, the high-income industrialized countries and the emerging markets/developing nations, that each now account for about one half of global output.
It is clear that effective international policy coordination requires the closest possible cooperation between the United States and China. The two countries do not have to agree on every issue, let alone pursue identical policies. But they must be willing and able to work constructively together, in terms of the domestic politics of each as well as their direct diplomatic contacts, if enough agreement is to ensue to permit progress across the entire spectrum of crucial international economic issues—ranging from recovery from the current crisis to creating a new global regime to counter global warming. Their relationship must therefore focus increasingly on the wide range of global economic issues for which they bear systemic responsibility rather than the bilateral frictions that have traditionally been its centerpiece.
In anticipation of these conditions, I proposed five years ago that the United States and China work toward the creation of an informal G-2 that could provide effective joint leadership of the world economy.1 The idea was, and is, to develop a close working relationship between them that would supplement (not supplant) the existing steering committees, including the G-7/8 and the newly dominant G-20, and the multilateral institutions (notably the IMF and WTO). The overriding goal is to make those institutions function more effectively and thus strengthen the world economy.
My assessment of the initial meeting of the Strategic and Economic Dialogue (S&ED), and of its future prospects, is thus governed largely by an assessment of whether it is helping to create such a G-2. Viewed as a further extension of the earlier Senior Dialogue and Strategic Economic Dialogue (SED), I believe that the S&ED is indeed moving in that direction and holds considerable promise for continuing to do so. I thus strongly endorse the administration’s initiative, praise the Chinese for their active participation in the process, and offer a few suggestions for how it can best be used to achieve the desired outcome.
The Conceptual Framework
Op-Ed in the Moscow Times Do you remember the Kremlin hubris of the summer of 2008? Forget it! The ruble cannot possibly become a reserve currency for the next half-century. To become a major financial center, Moscow needs many years of serious reforms not even contemplated today. In June 2008, Prime Minister Vladimir Putin proclaimed, […]
Remarks at the Inaugural Symposium of the US-Japan Research Institute September 22, 2009 It is a pleasure to participate in the inaugural symposium of the US-Japan Research Institute along with my longtime friend and colleague in arms Takatoshi Ito. I should confess that in the past much of our jousting was shoulder to shoulder, but […]
Edwin M. Truman finds that the G-20 summit accomplished more than might have been expected on a future growth strategy, financial regulation, and global governance. Recorded September 29, 2009. © Peterson Institute for International Economics. Steve Weisman: This is Steve Weisman at the Peterson Institute for International Economics. Ted Truman, senior fellow at the Institute, […]
Op-ed in the Business Standard, New Delhi The IMF will strike a triumphalist tone at its forthcoming annual meetings in Istanbul. Some of this will be warranted because the IMF’s record in responding to the global financial crisis was commendable, even if its record leading up to it was less stellar (see “The IMF Crisis […]
Op-ed in YaleGlobal September 30, 2009 The much-awaited G-20 summit in Pittsburgh was overshadowed by the surprise announcement of Iran’s underground nuclear facility. But the summit was notable for defining a new economic direction to be taken by the United States and its partners. The leaders pledged to work for a “strong, sustainable, and […]