Home' Trinidad and Tobago Guardian : October 15th 2015 Contents BG22 INTERNATIONAL
BUSINESS GUARDIAN www.guardian.co.tt OCTOBER 15 • 2015
Until this week the world had not seen a new
big, multilateral trade pact in more than 20
years. The deal that has broken the drought---
the Trans-Pacific Partnership, which comprises
12 countries in Asia and the Americas, includ-
ing the United States and Japan---is welcome.
However, those who believe in free trade, and the benefits
it brings, ought not to miss the bigger picture. The backdrop
to this week s deal is a bleak one.
First, the pact itself. It has flaws---what compromise does-
n t?---but the advantages are greater. The negotiators who bro-
kered the agreement in Atlanta not only lowered tariffs in
coddled sectors such as agriculture, but also drew up shared
rules on everything from visas for business travelers to com-
petition policy. The deal limits veiled forms of protectionism,
such as special treatment of state-owned firms and arbitrary
import bans after safety scares.
The benefits of such steps are hard to quantify, especially
because the fine print of the deal has not yet been released,
but the most comprehensive assessment thus far reckons that
they could boost the GDP of its members by one per cent by
2025. The impact on emerging-market signatories to the deal
is likely to be by far the biggest.
Viewed from a different angle, however, the tale of the TPP
tells a different story.
First, there is the fact that the agreement has been so hard
to sell in America. It took months, and several legislative
setbacks, before President Barack Obama won the authority
to fast-track a congressional vote on the TPP. The deal may
still be voted down, in America or elsewhere. Those who would
succeed Obama as president know that the agreement holds
few votes. This week former Secretary of State Hillary Clinton,
the Democratic front-runner and once a promoter of the pact,
came out against it.
The beneficiaries of the TPP, consumers as well as exporters,
are numerous, but their potential gains are diffuse. By contrast,
inefficient companies and farms, about to be exposed to greater
foreign competition, are obvious and vocal. Canada, for example,
limited the threat to its dairy farmers and doled out a big new
subsidy. The saga is a reminder of how hard free trade is to
Second, the TPP deal underscores the shift away from global
agreements. The World Trade Organisation, which is responsible
for global deals, has been trying---and largely failing---to negotiate
one since 2001. Reaching agreement among its 161 members,
especially now that average tariffs around the world are relatively
low and talks are focused on more contentious obstacles to
trade, has proven almost impossible.
Regional deals are the next best thing, but, by definition,
they exclude some countries and so may steer trade away from
the most efficient producer. In the case of the TPP, the glaring
outcast is China, the linchpin of most global supply chains.
Third, good news on the TPP stands in contrast to bad news
elsewhere. Cross-border trade today is as much about the
exchange of data as it is about the flow of goods and services,
and this week saw a European court s annulment of a deal that
had enabled American companies to transfer customer data
across the Atlantic.
Conventional trade faces even stronger headwinds. The
volume of goods shipped in the first half of this year was only
1.9 per cent higher than in the same period of 2014, far below
its long-term average growth of five per cent. This reflects not
only China s soggy demand for imports, a threat to the developing
economies that supply it, but also the accumulation of minor
measures that clog up global trade.
Deals like the TPP are the most effective way to reverse this
sorry trend, by reducing tariffs and other obstacles to trade.
Optimists hope that it can now be expanded to include China
Sadly, experience suggests that this will be hard.
@2015 The Economist Newspaper Ltd. Distributed by
the New York Times Syndicate
Avoting member of the Fed-
eral Reserve s policy com-
mittee said Friday that he
still thinks an interest-rate
increase will be appropriate
by year s end. But he
acknowledged that the outlook for the economy
appears cloudier than it did a few weeks ago.
Dennis Lockhart, president of the Fed s
Atlanta regional bank, noted that the most
recent economic figures have sent mixed sig-
nals, with higher risks than he had earlier fore-
cast. Notably, the government said last week
that employers cut back sharply on hiring in
September and added fewer jobs in July and
August than previously thought.
"While I have not changed my basic outlook,
very recent data have not provided much con-
firmation that my narrative still holds," Lock-
hart said. "I perceive a touch more downside
risk today than I saw some weeks ago."
In particular, Lockhart said he will closely
review consumer activity before deciding how
to vote on whether to raise rates at one of the
Fed s two final meetings of 2015.
For now, he said, he thinks the economy s
progress remains "satisfactory."
"I continue to feel that cumulative progress
is consistent with liftoff relatively soon," Lock-
hart said in his remarks to the annual meeting
of the Society of American Business Editors
The Fed has kept its key rate at a record
low near zero since December 2008. Many
had expected the first rate hike to occur in
September. But minutes of that meeting
released Thursday revealed concern that a
sharp slowdown in China, which roiled markets
this summer, could weaken the US economy,
and that inflation could remain excessively
The Fed voted 9-1 at that meeting to keep
rates unchanged. Lockhart voted with the
Lockhart is one of five regional bank pres-
idents with a vote this year on the Federal
Open Market Committee, the panel of Fed
bank presidents and board members that meets
eight times a year to set interest rate policy.
The Atlanta Fed president is a moderate,
outside both the "dovish" camp that includes
Yellen and others who focus more on unem-
ployment and the "hawkish" camp of poli-
cymakers who worry mainly about inflation
During a question-and-answer period,
Lockhart stressed that the Fed s policymakers
will be studying the economic data before the
next two meetings. The final meetings this
year will be October 27-28 and December 15-
16.Before the December meeting. the Fed will
have data on job growth in October and
November, inflation data for September and
October and the first two estimates for overall
economic growth in the third quarter. The
data on consumer spending, Lockhart said,
may be the most telling.
Speaking of his own views, he said, "I am
slightly less confident today than I was six
He added: "The argument for October or
December (to raise rates) is a committee deci-
sion, and I can t anticipate where the com-
mittee will be in a few weeks."
Many economists say the weak jobs report
for September released last week makes an
October rate hike unlikely. Some still foresee
an increase in December, others not until next
When the Fed does start raising rates, some-
thing it has not done in nine years, it will
eventually mean higher rates for consumer
and business borrowers. But Fed officials,
including Chair Janet Yellen, have stressed
that the rate increases will likely be very grad-
ual, meaning that rates would still remain near
historic lows for a while.
Lockhart said that trying to interpret the
recent twists and turns in the economy has
been like riding a roller-coaster.
"The ambiguity of the moment reinforces
the need to closely watch the vital signs of
the economy over the coming weeks to deter-
mine if the outlook has changed," Lockhart
The Trans-Pacific Partnership: Every silver lining has a cloud
In this September 25, 2014 file photo, Dennis Lockhart speaks during a news conference in
Jackson, Mississippi. Lockhart, a voting member of the Federal Reserve's policy committee said
Friday, October 9, 2015, that he believes the economy is on a satisfactory track and that an
increase in interest rates is likely to be appropriate in either October or December. AP
Fed official still
hike but notes
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