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Global flows in a digital age

Now, one in three goods crosses national borders, and more than one-third of financial investments are international transactions. In the next decade, global flows could triple,

Exchanges of goods such as aircraft and automobiles, semiconductors, pharmaceuticals, and microelectronics, as well as professional services and foreign direct investment flows, are growing faster than others.

In 2008-09, there was a collapse of global trade. We were all very surprised. Output was not doing well, but the collapse in global trade was enormous. We realized at the time that the elasticity of trade with respect to global output was not 1, as you might think, but more like 3 to 4. So this explained it. And then it recovered like crazy.

This is still true. If global output goes down by 1%, global trade goes down by 3% to 4%.

What Europe needs to do:

Global Coal Use Predicted to Keep Growing

At the heart of the new global economy are what Prof Nolan calls “systems integrator” companies – businesses with dominant brands and superior technologies, which are at the apex of value chains that serve the global middle classes. These global businesses, in turn, exert enormous pressure on their supply chains, creating ever-rising consolidation there, as well.

Using data from 2006-09, Prof Nolan concludes that the number of globally dominant businesses in the manufacture of large commercial aircraft and carbonated drinks was two; of mobile telecommunications infrastructure and smart phones, just three; of beer, elevators, heavy-duty trucks and personal computers, four; of digital cameras, six; and of motor vehicles and pharmaceuticals, 10. In these cases, dominant businesses supplied between half and all of the world market. Similar degrees of concentration have emerged, after consolidation, in many industries

Gross trade accounting: A transparent method to discover global value chain-related information behind official trade data: Part 1

With the rapid increase in intermediate trade flows, trade economists and policymakers have reached a near consensus that official trade statistics based on gross terms are deficient, often hiding the extent of global value chains. There is also widespread recognition among the official international statistics agencies that fragmentation of global production requires a new approach to measure trade, in particular the need to measure trade in value-added. This led the WTO and the OECD to launch a joint “Measuring Trade in Value-Added” initiative on 15 March 2012, which is designed to mainstream the production of trade in value-added statistics and make them a permanent part of the statistical landscape.

All the estimation methods used in recent efforts to measure trade in value-added are rooted in Leontief (1936). His work demonstrated that the amount and type of intermediate inputs needed in the production of one unit of output can be estimated based on the input-output structures across countries and industries.

The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.

Jeffrey E. Garten, the author of “World View: Global Strategies for the New Economy” and a former dean of the Yale School of Management, said that companies “cannot take a risk that the just-in-time system won’t function, because the whole global trading system is based on that notion.” As a result, he said, “they are going to have to have redundancies in the supply chain, like more warehousing and multiple sources of supply and even production.”

In a more regionalized trading world, economists say, China would probably end up buying more of the iron ore it needs from Australia and less from Brazil, and farming out an even greater proportion of its manufacturing work to places like Vietnam and Thailand.

Cross-border capital flows abruptly collapsed. Almost five years later, they remain 60% below their pre-crisis peak.

After expanding across national borders with the creation of the euro, eurozone banks have now reduced cross-border lending and other claims within the eurozone by $2.8 trillion since the end of 2007. Other types of cross-border investment in Europe have fallen by more than half. The rationale for the euro’s creation – the financial and economic integration of Europe – is now being undermined.

Current trends seem to be leading toward a more fragmented global financial system in which countries rely primarily on domestic capital formation. Sharper regional disparities in the availability and cost of capital could emerge, particularly for smaller businesses and consumers, constraining investment and growth in some countries. And, while a more balkanized financial system does reduce the likelihood of global shocks creating volatility in far-flung markets, it may also concentrate risks within local banking systems and increase the chance of domestic financial crises.

Global flows in a digital age

Global flows in a digital age

The clothing needs to be labeled correctly so that it travels smoothly through a large retailer’s distribution centers

The process requires formidable numbers of skilled workers who can oversee quality control as well as labeling and shipping of garments.

The eurozone has been at the epicenter of this contractionary force on global growth. Since eurozone countries trade extensively with each other and the rest of the world, their slowdowns have contributed significantly to a decrease in global trade, in turn undermining global growth. In particular, as European imports from East Asia have fallen, East Asian economies’ growth is down sharply from last year and the 2010 forecast – and, predictably, growth in their imports from the rest of the world has lost momentum.

In fact, some economists view the German reform narrative as a myth

Wage restraint was instead a function of weak demand after the collapse of the reunification-fueled construction boom in the mid-1990s.

Even if one accepts the story, economists also point out that Germany undertook its labor-market reforms when the winds of the world economy were extremely favorable. The global economy was growing, and China and other emerging economies were sucking in machine tools and other capital goods in which German manufacturers excelled.

THE European Monetary Union, the basis of the euro, began with a grand illusion. On one side were countries — Austria, Finland, Germany and the Netherlands — whose currencies had persistently appreciated, both within Europe and worldwide; the countries on the other side — Belgium, France, Greece, Italy, Portugal and Spain — had persistently depreciating currencies.

Rather than pulling the lagging countries forward, the low interest rates of the European Central Bank have lured governments and households, especially in the southern part of the euro zone, into frivolous budgetary policies and excessive consumption.

the solution is clear: the only way to avoid further harm to the global economy is for Germany to lead its fellow stable states out of the euro and into a new and stronger currency bloc.

Green growth is a worthwhile goal

A particularly important aspect of that uncertainty is tipping points

It is irrational to play in the climate casino without seeking to eliminate worst-case outcomes

You can think of Mr. Obama’s argument as falling into two categories (even if he didn’t say so): the reasons that overall economic growth may accelerate, and the reasons that middle- and low-income workers may benefit more from that growth than they have lately.

On the growth side of the ledger, both energy and education have been problems.

And the number of high-school and college graduates is rising. The financial crisis deserves some perverse credit, because it sent people fleeing back to school, much as the Great Depression did

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Growth in Global Trade Is in Ideas, Not Stuff

The agreement includes $1 billion for extraction and exports of bauxite to the UAE as well as a $4 billion aluminium refinery and a port, Mohamed Lamine Fofana, Guinea's minister for mines and geology told Reuters at a Guinea investors' conference in Abu Dhabi.The investment forms part of the UAE's expansion plans for its Emirates Global Aluminium business, set to become the world's fifth largest aluminium company by output next year.Emirates Global Aluminium was created from the merger of DUBAL and Emirates Aluminium (EMAL). The merged group has two aluminium plants in the UAE, one in Dubai and a second at Taweelah near Abu Dhabi.

In May 2013, Mubadala and DUBAL said they would jointly take over a Guinea Alumina Corp project in Guinea, acquiring 66.6 percent from BHP Billiton (BHP.AX) and Global Alumina.