Greg Ip

Articles by The Economist’s U.S. Economics Editor

Archive for the ‘Trade’ Category

Regulation, trade and job creation: Defining the state

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The role of government intervention in the economy is perhaps the starkest difference between the candidates

Oct 6th 2012 | from the print edition

[Greg Ip] THIS year’s election carries big implications for economic policy well beyond the budget and taxes. Barack Obama and Mitt Romney have very different ideas about regulation, monetary policy, international trade and labour markets, although their rhetoric sometimes exaggerates the distance between their positions.

In his first term Mr Obama presided over a big increase in the number of major newregulations (as measured by their economic impact), from air-cargo screening to fuel efficiency in trucks. On top of those come thousands of pages of new rules implementing his financial-regulation and health-care reforms (see article). The White House claims that the benefits of the new regulations easily exceed the costs, although some economists contest the way the benefits are measured.

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October 6, 2012 at 3:29 pm

China’s economy and the WTO: All change

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In two articles, we examine how China has been altered by its entry into the WTO ten years ago. First, the economy.

[By Greg Ip and The Economist's Asia Economics Editor] THE World Trade Organisation (WTO), like many clubs, denies patrons the right of automatic readmission. Having quit the organisation’s predecessor shortly after the Communist revolution of 1949, China had to wait 15 long years to gain entry after reapplying in the 1980s. The doors finally opened on December 11th 2001, ten years ago this week.

The price of re-entry was as steep as the wait was long. China had to relax over 7,000 tariffs, quotas and other trade barriers. Some feared that foreign competition would uproot farmers and upend rusty state-owned enterprises (SOEs), as to some extent it did. But China, overall, has enjoyed one of the best decades in global economic history. Its dollar GDP has quadrupled, its exports almost quintupled.

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December 8, 2011 at 6:03 pm

Trade with China: And now, protectionism

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America’s latest anti-China bill tackles a problem already being solved

Oct 15th 2011 | from the print edition

[Greg Ip] THE global economy is sicker than a man with a bellyful of bad oysters. The last thing it needs now is a trade war. Yet on October 11th America’s Senate passed the Currency Exchange Rate Oversight Reform Act, which would allow any “fundamentally misaligned” currency to be labelled a subsidy subject to countervailing duties. No prizes for guessing which large Asian nation the senators have in mind.

Variants of this bill have been introduced regularly since 2003; all have failed. But this time may be different: anti-China sentiment in both parties has grown. Republican leaders have so far resisted holding a vote on a similar bill in the House of Representatives and look unlikely to change their minds; but if they do, the bill would almost certainly pass.

It may seem contradictory that the Senate is threatening to raise barriers to trade with China even as it has just passed bilateral trade pacts with Colombia, South Korea and Panama. But those treaties were first signed four to five years ago. Public support for free trade has been withering for a decade, tracking the decline in middle-class American manufacturing jobs. The main cause of that decline is rising productivity, which lets factories produce more stuff with fewer workers, but cheap Chinese imports have also been a factor (seearticle). America’s resentment of China has grown as its economy sputters while China’s has galloped ahead. Barack Obama has pinned his hopes for recovery on a doubling of exports, a goal that China’s many barriers to trade, from discriminatory government procurement to the undervalued yuan, impede.

America has legitimate beefs with China, but this bill is the wrong way to address them. Read the rest of this entry »

Written by gregip

October 13, 2011 at 9:36 am

Free trade and the yuan: One step forward, one back

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As trade deals head towards approval, a backlash grows against China

Oct 8th 2011 | WASHINGTON, DC | from the print edition

 [Greg Ip] THIS was supposed to be a good week for American trade policy. On October 3rd Barack Obama submitted three long-stalled trade agreements to Congress for ratification. Republican and Democratic leaders promised speedy passage. If all goes as planned, the pacts with Colombia, Panama and South Korea could be ratified in time for a state visit on October 13th by Lee Myung-bak, the Korean president.
But that advance for trade was tempered by a revival of protectionism against China. Read the rest of this entry »

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October 6, 2011 at 9:09 pm

Manufacturing: Rustbelt Recovery

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Against all the odds, American factories are coming back to life. Thank the rest of the world for that
CHICAGO AND WASHINGTON, DC | from the print edition

[Greg Ip] ACME INDUSTRIES is a small contract manufacturer with only ten big customers. But those customers are a cross-section of the industrial economy, spanning mining, oil, transport and construction. Right now, Acme’s order book is bulging. “Everyone is up across the board,” says Bob Clifford, the company’s head of sales and marketing.

In one corner of its factory just outside Chicago, three workers polish what looks like a steel Lego brick the size of a steamer trunk. This is designed to channel water underground at high pressure, and will go into natural-gas-drilling equipment. In another corner sit rows of hollow steel cylinders that will hold bearings inside the wheels of gigantic mining trucks being built in nearby Peoria. Mr Clifford points to several parts destined for diesel locomotives built by a subsidiary of Caterpillar a big maker of heavy equipment. Caterpillar is booming, and its ecosystem of suppliers across Illinois is “seeing a real trickle-down effect,” he says.

At the nadir of the recession Acme’s sales had fallen 20% and it had laid off ten of its 125 employees. Sales are back up, the head count is now up to 130, and Acme reckons it will hire 20 more people this year to handle the growing order book.

For the first time in many years, American manufacturing is doing better than the rest of the economy. Manufacturing output tumbled 15% over the course of the recession, from December 2007 to the end of June 2009. Since then it has recovered two-thirds of that drop; production is now just 5% below its peak level (see chart 1).

The entire article is linked here.

 

Written by gregip

March 10, 2011 at 12:05 pm

Does monetary protectionism lead to trade protectionism?

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Nov 11th 2010, 22:48 by G.I. | WASHINGTON, DC

[Greg Ip] BEHIND today’s hand-wringing over currency wars is the fear that it’s one small step from currency intervention and capital controls to traditional, noxious protectionism: tariffs, quotas, subsidies, etc. For example, Gerald O’Driscoll at the Cato Institute writes:

The Fed’s announced purchase is an exercise in monetary protectionism. It has already produced countermeasures in terms of capital controls by Brazil and perhaps others. It may lead to trade protectionist countermeasures. Monetary protectionism breeds trade protectionism and risks a global meltdown in trade as occurred in the 1930s, which paved the way for World War II.

And Alan Greenspan obliquely makes the same point today in the Financial Times.

But is it true? Does monetary protectionism breed traditional protectionism? I could argue the opposite. If monetary protectionism softens the pain felt by the trade sector, it weakens demands for the traditional variety. When America succeeded in devaluing the dollar against the yuan in 2005, it stopped the momentum of anti-China trade bills in Congress.

 

The original blog post is linked here.

Written by gregip

November 11, 2010 at 10:24 pm

America’s economy: Time to rebalance.

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A special report on America’s economy

Time to rebalance America’s economy is set to shift away from consumption and debt and towards exports and saving. It will be its biggest transformation in decades, says Greg Ip

Note: This is a nine-part, 14 page report. You can read the entire thing at this blog post or on The Economist’s web site here.

Mar 31st 2010 | From The Economist print edition 

STEVE HILTON remembers months of despair after the collapse of Lehman Brothers in 2008. Customers rushed to the sales offices of Meritage Homes, the property firm Mr Hilton runs, not to buy houses but to cancel contracts they had already signed. “I thought for a moment the world was coming to an end,” he recalls. 

In the following months Mr Hilton stepped up efforts to save his company. He gave up options to buy thousands of lots that the firm had snapped up across Arizona, Florida, Nevada and California during the boom, taking massive losses. He eventually laid off three-quarters of its 2,300 employees. He also had its houses completely redesigned to cut construction cost almost in half: simpler roofs, standardised window sizes, fewer options. Gone were the 12-foot ceilings, sweeping staircases and granite countertops everyone wanted when money was free. Meritage is now catering to the only customers able to get credit: first-time buyers with federally guaranteed loans. It is clawing its way back to health as a leaner, humbler company. 

The same could be said for America. Virtually every industry has shed jobs in the past two years, but those that cater mostly to consumers have suffered most. Employment in residential construction and carmaking is down by almost a third, in retailing and banking by 8%. As the economy recovers, some of those jobs will come back, but many of them will not, because this was no ordinary recession. The bubbly asset prices, ever easier credit and cheap oil that fuelled America’s age of consumerism are not about to return. 

Instead, America’s economy will undergo one of its biggest transformations in decades. This macroeconomic shift from debt and consumption to saving and exports will bring microeconomic changes too: different lifestyles, and different jobs in different places. This special report will describe that transformation, and explain why it will be tricky.  Read the rest of this entry »

The president and trade: Go sell

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As Barack Obama embraces exports, trade friction looms

Mar 11th 2010 | CHICAGO AND WASHINGTON, DC | From The Economist print edition

[Greg Ip and The Economist's midwest correspondent] A GLOOMY office park in suburban Chicago is the home of NewMedical Technology. At the moment the young company has only one main product, silicone strips to reduce scarring after surgery. But in its tiny warehouse, employees busily pack boxes to be shipped to Brussels. In the past year the firm’s business has expanded quickly; NewMedical now exports to South America, Europe and Asia.

It is the type of growth Barack Obama dreams of. Consumers are nursing battered balance sheets and the government is wallowing in debt. That puts the burden on exports to carry the recovery; Mr Obama wants them to double over the next five years.

On March 11th, as The Economist went to press, the president was rolling out a batch of initiatives to help the process along. Read the rest of this entry »

Written by gregip

March 11, 2010 at 4:00 pm

The tyre wars: Playing with fire

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Sep 17th 2009 | WASHINGTON, DC AND BEIJING
From The Economist print edition

By succumbing to domestic pressures, America has started an alarming trade row with China

Illustration by KAL
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[GREG IP and The Economist's Beijing Correspondent] IN RAW economic terms Barack Obama’s imposition of tariffs on Chinese tyres hardly registers. The number of jobs affected is barely a rounding error in measurements of the mighty American workforce. The cost to consumers is also slight. But in geopolitical terms, it is a whopper. Read the rest of this entry »

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September 17, 2009 at 8:00 pm

Rebalancing the world economy: America: Dropping the shopping

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The original article is linked here.

By Greg Ip

Jul 23rd 2009 | WASHINGTON, DC
From The Economist print edition

Can America wean itself off consumption? The first of a series on how the world’s four biggest economies must change to ensure sustainable global growth

 
 

GENERAL ELECTRIC has historically been a manufacturer, but in the long boom leading up to the financial crisis it became more like a bank. Half its profit came from its finance arm, GE Capital, which among other things had a lucrative business issuing mortgages and credit cards to American consumers. GE’s chief executive, Jeffrey Immelt, now talks like a man chastened. With GE Capital acting as a drag on the company, he vows that in the future finance will be a smaller part of the company. In its place GE touts its manufacturing and exporting prowess. Mr Immelt boasts of record aircraft engine orders at the Paris Air Show in June, none of them to American airlines.

Like GE, the entire American economy is at an inflection point. For decades, its growth has been led by consumer spending. Read the rest of this entry »

Written by gregip

July 23, 2009 at 1:03 pm

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