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News Of Economy

EU approves historic Trans-Atlantic air pact with US

May 22, 2012

European Union transportation ministers have finally approved the ‘Open Skies’ deal with the United States to unlock the $18 billion trans-Atlantic aviation market for better competition, with a view to encourage growth and bringing down air fares. The EU governments and the European commission have claimed that transatlantic air travel will now increase by 50 percent and passengers will save €15 billion (£7.7bn) on fares by 2013. The agreement will allow European and American airlines to fly to any destination in Europe and US. The deal is expected to bring British consumers benefits of £250m per year. However, German Transport Minister Wolfgang Tiefensee, whose country currently holds the rotating EU presidency, has accepted that the arrangement was only second-best for the EU since it has not fully opened the trans-Atlantic air travel market. EU ministers have further said that they were prepared to immediately start negotiations on a second deal with the US in an effort to secure more access to the closed US market. The recent deal will definitely have far reaching affect on the western aviation industry. The EU transport commissioner, Jacques Barrot, has stated that the agreement would create 80,000 additional jobs and insisted that approval meant that the EU has entered the next stage of negotiations in a strong position. He further argued that it would trigger a new wave of mergers and acquisitions within the European aviation industry as near-bankrupt Alitalia seeks a partner and Lufthansa, the German carrier, was linked with Spain’s Iberia. According to the EU, the new treaty will boost transatlantic passenger numbers by 26 million and provide $16 billion of economic benefits within five years. Following the deal almost every airline except BA and Virgin will benefit. Britain’s BMI that flies between Britain and Europe and owns several slots at Heathrow, is one of the biggest winners. On the other side of the story, though the deal indeed favor U.S. airlines more than European ones, but it is not expected as of now that they will quickly ramp up services in Europe. Most of the American airlines at present are passing through tough financial straits.

News Of Economy

South Korea, US enter final stage of talks on free trade agreement amid huge protests

May 19, 2012

Senior negotiators from South Korea and the United States have entered the final full day of free trade talks on Friday, in quest to resolve the remaining hindrance for an agreement before a weekend deadline. As the deadline increasingly becoming visible for the potentially historic free-trade talks between the US and South Korea, the biggest impediment are turning out to involve the same thing as in most trade negotiations, food. In the meanwhile, a South Korean news agency reported that the US and South Korean officials say that they are certain to reach a free-trade agreement by Friday’s deadline. Optimism for a final deal grew stronger after the presidents of the two countries, Roh Moo Hyun and George Bush, confirmed their support for a bilateral free trade agreement (FTA) in a telephone conversation on Thursday. In an official statement, South Korea has said, ‘the two heads of state discussed the final obstacles to a pact, including in the areas of agriculture, cars and textiles. Other unresolved issues included the Korean pharmaceuticals market and US anti-dumping regulations’. Both the countries have been negotiating the ambitious free trade agreement for almost 10 months. Both sides have stated that they want a ‘win-win’ deal to cut tariffs and other trade barriers to encourage both countries’ economic growth. However, Korean opponents claim that an influx of cheaper U.S. goods will damage livelihoods and hope the talks would breakdown. Negotiators are aware of the fact that in case of failure to meet the deadline could mean talks dragging on for years, only if the White House could persuade a reluctant, Democrat-controlled Congress to extend the authority.

News Of Economy

US-South Korea free trade deal comes under scanner

May 17, 2012

The recently concluded a landmark free trade agreement between the US and South Korea is drawing intense criticism in both countries. U.S. automakers, farmers and lawmakers have expressed dissatisfaction to the trade agreement the Bush administration worked out with South Korea, signaling it may stumble upon a rough road toward congressional approval. In South Korea, labor unions and farmers have opposed the agreement on the ground that it has practically opened rice market and there are strong chances that it would result in growing unemployment. The FTA will abolish some 90 percent of each side’s tariffs on industrial goods immediately, and the remainder will be phased out over three to 15 years. Both the countries would immediately lift tariffs, currently 8 percent in South Korea, 2.5 percent in the US, on auto parts and all cars with engines smaller than 3,000 cc. However, tariffs on larger models will be phased out gradually. According to the agreement, Seoul will change its tax structure on autos based on engine size, which will make US models cheaper in the South Korean market. Focusing on the other crucial bone on contention, South Korea has agreed to eliminate its 40 percent tariff on US beef over 15 years and start importing instantaneously after the World Organization for Animal Health gives report of its final review on the status of the US in combating mad cow disease. In addition to it, at one hand experts are of the view that South Korea has not opened its rice market substantially and it will not benefit US. But in Korea farmers are arguing that the deal has practically opened its rice market to the US. The Seoul- based Korea Rural Economic Institute has said in its report that South Korea`s agricultural production would fall off by as much as the corresponding to 2.1 billion US dollars annually. The report further suggested that the production of beef, chicken and other meat may suffer severely as US imports gain ground. A completely open South Korean market for US beef is expected to be worth around a billion per year. Analysts are also arguing that the free trade agreement could derail South Korea’s universal health care system. The deal prohibits South Korea from buying generic and lower-priced medicines in place of brand name products produced by the pharmaceutical industry in the US. This provision would potentially drive the cost of health care coverage so high the South Korean government may be compelled to cancel it. The South Korean economy, the world’s 11th-largest economy, is immensely dependent on exports. The total volume of its external trade constitutes 70 percent of the country’s gross domestic product. However, the state-run Korea Institute for International Economic Policy has said that South Korea’s exports to the United States will grow as much as 15.1 percent. In the meanwhile, Congressional Democrats have threatened to nullify the Bush administration’s free-trade deal with South Korea unless the Asian tiger does more to open its market to U.S. automobiles and beef. Senator Max Baucus, chairman of the influential Senate Finance Committee, has bluntly threatened to block the deal, saying negotiators failed to ensure sufficient access for US beef exports. Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group have expressed that they will oppose the free trade agreement between the US and South Korea when it goes before the Congress later this year. In addition to it, the US traders are also dissatisfied over the fact that rice segment has been not opened up completely. The US lobby has argued that around half of South Korea’s farmers grow rice, and duties on rice imported into Korea make its price about four times that of the world average. Further, according to a deal, signed as part of trade negotiations in the early 1990s, Korea was allowed to preserve a quota on imports of rice, and the clause will remain in force.

News Of Economy

China hits back at US over piracy action

May 14, 2012

In the escalating battle against pirated American movies, music and other intellectual property in China, Beijing has hit back at a US decision to file a WTO objection against it for copyright abuse, threatening that the move was ill-informed and would harm trade relations between the two countries. The US has decided that it would file a case at the WTO over the contentious issue of widespread copyright piracy as US companies are deprived from billions of dollars each year. Chinese and U.S. officials have been working together to solve the problem in recent year. However, the issue is still unresolved and the US has held the lax attitude of Chinese authorities to work in this direction responsible for this problem. US Trade Representative Susan Schwab has recently disclosed that 80 percent of all counterfeit products seized at U.S. borders still come from China. Reacting on the move, China’s top copyright official has said that the US did not understand the huge efforts Beijing had undertaken to combat the problem. While announcing the case, Susan Schwab has said that the US recognized Beijing’s efforts to crackdown on copyright piracy and asked that the complaints ‘not be viewed as hostile action against China’. On the other hand, Chinese Intellectual Property Office commissioner Tian Lipu has said, ‘By doing so, the United States has ignored the Chinese government’s immense efforts and great achievements in strengthening IPR protection and tightening enforcement of its copyright laws’. Since no major breakthrough was achieved through bilateral talks between the countries, the US authorities decided to seek WTO intervention. Technically, both the countries have been given 60 days time to resolve the issue and in case of failure to reach agreement WTO will be called for arbitration. The latest decision has raised the possibility of angering or embarrassing those in Beijing who may be trying to reform economic policies on the lines of Washington. In addition, many trade analysts are anxious that China might strike back against American imports or cut back on support sought by Washington on other issues, such as diplomatic problems involving Iran, North Korea and Sudan. In addition to it, the move is largely perceived by trade specialists and industry spokesmen as essential to send a signal not only to Beijing but also to Democrats in Congress, who plan even tougher measures against China if the administration does not take action.

News Of Economy

Japan economic growth pace downs to 2.4%

April 24, 2012

Japan faces a major set back as its economic growth lacerate to record low 2.4 percent amid worries about the decreasing trade with United States. US is Japan’s biggest export market, and recent decline might leave many Japanese multinational companies in a limbo. However, many economists assure that there is no need to worry, as Japan’s overall growth is still healthy and seems to be stabilizing. The gross domestic product figures, released by the government, also came after an unusually strong October-December quarter, when the economy surged ahead at a 5 percent annual pace. Chief economist for Macquarie Securities in Tokyo Richard Jerram said It is a mistake to interpret it as poor figures being a sign of a new trend, as growth seems to be stabilizing at a solid healthy rate, without major fluctuations in either direction Economists are not convinced with the report at all, but do not rule out the possibility to discourage any immediate interest rate hike, but would not derail the Bank of Japan from pursuing future increases. Just hours after the figures were released, the central bank announced that bank is keeping its benchmark rate at 0.50 percent. Economists argue that consumer spending increases in the first quarter, which accounts for more than half the economy. It climbed 0.9 percent from the previous quarter, but the area of concern is the pace of expansion, which relatively slowed too, from 1.1 percent in October-December. Declined exports prove a blessing in disguise for the nation’s economy as it helped to increases business investment in the country, which shoots up by 3.3 percent. Business investment had dropped in the January-March quarter to 0.9 percent, but now it is showing upward trend. However, gaining much from the increasing investment, but the declining exports is worrisome for the economy in the long run. Japan can’t ignore market like US, as US market is a biggest market in itself for the Japanese product than the any other markets.

News Of Economy

Tony Blair tipped as the next World Bank President

April 20, 2012

Wolfowitz chapter has been closed after his resignation from the World Bank and now bank is searching for a new president. The European Commission has called for a quick appointment, saying the poverty fighting institution needs stable and strong political leadership. Who will be the new president? Traditionally, American nominee is a favored choice for the World Bank president and the White House has already announced that it will move quickly to find a successor. . Some of probable candidates are – Robert Zoellick (Deputy Secretary of State), Robert Kimmit (No. 2 at the Treasury Department), Henry Paulson (Treasury Secretary), Jin Leach (former Republic Congressman) and Stanley Fischer (formerly at IMF and now with the Bank of Israel.) US President nominates World Bank President and Bank’s Board of Governors only ratifies the proposed name. Nevertheless, this is not a written law that only American will preside the seat, but its’ only a tradition, which has been followed since World Bank’s inception. Most of the member nations support the American supremacy. Germany’s finance minister, Peer Steinbrueck, said, “I don’t think we should change this,” whereas Japan’s finance minister, Koji Omi, thinks that US dominance is necessary for the overall development. He said, ‘It’s important that the U.S. maintains its leadership of the World Bank for the sake of the overall global economy.’ However this time, a few non-American names have surfaced for the post as member nations are murmuring for a merit-based system. Members are chiefly interested in opening up the process to select the leader for the institution. Outgoing British Prime Minister Tony Blair’s name has come into the light for discussion, evoked by the Nobel prize-winner Joe Stiglitz – a former senior Vice President at the World Bank. Mr Blair has announced to vacate Downing Street on 27 June. It is but obvious that the World Bank needs a person with experience in development. Blair as President will at least accomplish this criterion. His previous experiences might prove fruitful for the apex lending institution. Image Via: Washington Post

News Of Economy

Colombia can eschew ‘Plan Colombia’

April 19, 2012

Colombia warns America that it will not support American led Plan Colombia, which linked to curb drug trafficking and terrorism, if the United State don’t sign free trade agreement with Colombia. Immensely hurts with the US decision to mar the bilateral free trade agreement, Head of Uribe’s Social National Unity Party, Sen. Carlos Garcia, said If the U.S. Congress does not support Colombia in expanding its markets, there is absolutely no reason to accept Plan Colombia aid. That is just one component of the solution. The best way out of poverty and the cultivation of illegal crops is the marketplace Colombia incensed over the American decision to thwart the agreement, but bewildered as the Bush administration okayed a deal this month with Peru and Panama, but put Colombia on hold. Country’s brass leaders are considering the decision to discard the Colombo plan as a ‘national dignity” and possibly prompt Colombia to move away from its close relationship with the United States. Colombia indicts America for ill-treating and asserts that Colombia would not accept treatment as a “pariah” and asked U.S. Embassy to “take that message back to your Congress.” After the drama, Colombia affirms to redefine its relations with the U.S. whereas US is firm on its stand, not to consider it before the 2008 presidential elections. Plan Colombia has produced a mixed result for America. Although, it helped to curb anti social elements in Colombia, yet it could not hindered the supply of cocaine to U.S. markets. Image: soawne Via: latimes

News Of Economy

U.S. ordered energy firms and bank to leave Iran

April 17, 2012

Battle between US and Iran is not soothing down. US is trying to isolate the Islamic Republic over its atomic program as it urged to all European banks and energy firms to sum up their business with Iran. US sent a blunt message to their European supporting nation that reputations are at stake if they do so. US, has cleared its intention to thwart Iranian strife to develop nuclear expertise. United Nation has already implemented the sanction on Iran and now US is impeding other prosper nation to give any kind of financial advantage to Iran. If European bank implements U.S. urge then it will adversely affect the Iranian business because European banks are major financiers in Islamic nation oil refineries. After US displeasure over investment in Iran, all major banks and oil drillers are pulling their money out from the Iranian economy. French bank, Societe General has stop financing for a $5 billion project to develop part of Iran’s massive South Pars gas field. Oil giant Statoil is also protecting U.S. interests, and leaving its investment in the Azar oilfield. Other European big oil players are also bowing in front of American decision as Royal Dutch Shell, Eni and Total are renouncing its assets in Iran and latest political concerns forced companies to change their investment plans. The U.S. Treasury’s top anti-terrorism official Stuart Levey said The world’s top financial institutions and corporations are re-evaluating their business with Iran because they are worried about the risk and their reputations Iran has confirmed that under US pressure multinational companies are leaving their hefty profit and reluctant to invest in the country. Akbar Torkan, head of Iran’s Pars Oil and Gas Company, said No European bank is ready to prepare new financing for us. The U.S. is putting pressure on all European banks Amid US sanctions, Iran is fighting back with plans to set up an overseas investment fund in Bahrain or Dubai to help finance South Pars. Iran said that despite US’s despotic attitude, Iran have long queue of foreign investors, those who are keen to invent in its oil and gas reserves. On paper, the National Iranian Oil Company has contracts of $40 billion worth. Although UN and US have implemented financial sanctions over Iranian economy to thwart nation to get nuclear access yet it will be difficult to stop investors from lucrative Iranian oil field. Apart from it, US and Europe are fighting for the rising oil prices, which has already inundated many market leaders’ profits, that will touch new heights and in all phases US will be a biggest looser. Image: lazerbrody Via: Reuters

News Of Economy

Clash of Titans – Economic dialogue between China and US

April 16, 2012

In order to unfasten the booming Chinese markets for the American supplies, Bush officials are sternly negotiating with China for some profitable fresh agreements. Whereas China has declared its plan to United States of making an approximate $30 billion purchase. This economic dialogue between the biggest economies and fastest growing economies of world has questioned that such action will be able to calm down the fuming Congress over some trade deficit with China which last year fall to $232 billion. During an interview, Henry M. Paulson Jr, Treasury Secretary stated that, “Some people will look at this and say there is not enough progress,” Followed by, “The key question is, Do we have more progress than we would have had otherwise?” Mr. Paulson also stated that tensions are under control, although Chinese practices have been challenged at World Trade organization. New duties are also being threatened on imports. Well, talks mainly focuses on the long term issues and requesting China to go for market-based economic as well as monetary policies. In order to improve tense economic relationship, Mr. Paulson along with Ben S. Bernanke, the Federal Reserve Chairman and cabinet ministers went to Beijing. But, there were no significant results. In case, dialogues are unable to produce result then it would be quite difficult to control Congress. Mr. Paulson said, “I’ve explained to them that Congress legislates and there will be trade legislation in Congress,” he further added that, “I’ve also said that the Congress is, to a large extent, reflecting the views of the American people who don’t believe that the benefits of trade are shared evenly or fairly.” Recently, Central Bank of China has announced Yuan to fluctuate. US said by lowering the value of Yuan, China is lower the cost of export and higher cost of import. On retaliation, Congress is threatening with higher duties on Chinese goods. Via-nytimes

News Of Economy

Canada seeks WTO panel to settle US farm subsidies dispute

April 16, 2012

The Canadian government heats up a dispute with the US over American farm subsidies, when it asked the World Trade Organization to form a panel and rule on its accusations that Washington is over and over again violating global trade rules. The suit filed with the WTO may end up discomforting the US government on the international stage once judges start inquiring its farm subsidies. Simultaneously, it could also help free-marketers in US President George Bush’s administration beat back present demands to increase US farm subsidies. Consultations at the WTO in February failed to resolve the issue and Canada’s concerns about US subsidies remained contentious. Interestingly, a dispute over US corn subsidies brought up during the consultations was left out in the latest request for a panel, Canada said in its official statement. No reasons have so far been extended for this move by the Canadian government. Canada has asked the WTO to resolve a claim that the US is exceeding a $19.1 billion annual restriction on farm subsidies. The Canadian government had filed the complaint to pressurize US policymakers to lessen the subsidies when they rewrite the farm bill, which comprises most of the payouts. Canada and the US, who together make the worlds biggest trade partnership, also involved in dispute in the recent past over Canadian subsidies on lumber exports. Canada has alleged that the US agricultural subsidies violated WTO rules in every year from 1999 to 2005 except for 2003. It further contended that the US is also inappropriately using ‘export credit guarantees’ to strengthen its international sales. The subsidies covered commodities such as corn, wheat, soybeans, pulses and sugar, the Canadian government said. US farm subsidies have always been a major concern and obstacle during the latest round of global trade talks. The European Union along with India and Brazil pressing the Bush administration to reduce the subsidies before they improve their offers. The EU has alleged that US farm subsidies force down global prices, discouraging producers. However, the US has been resisting pressure to make deeper reductions in spending on its farmers. The US conceded that it would do so only if the EU and Japan agreed to significant cuts in their duties on agricultural commodities. Moreover, a legal triumph for Canada at the WTO will not compel the US to abandon or make substantial reduction in its huge farm subsidy program. However the Canadian government seems to have taken the step to put pressure on US legislators. On the other hand, the US Congress seems to be increasingly protectionist after last elections when Republicans were defeated comprehensively and is contemplating a new Farm Bill to determine the size of future US agriculture subsidies. At the same time, reports suggest that Congress is under strain to increase annual farm subsidies by almost 50 percent above WTO limits. Image Read