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BUSINESS GUARDIAN guardian.co.tt DECEMBER 22 • 2016
Globalisation took hits in 2016
Globalisation, the path that the
world economy has largely
followed for decades, took
some hefty blows in 2016.
The election of Donald
Trump as US president and
Britain's decision to leave the European Union
have raised questions over the future of tar-
iff-free trade and companies' freedom to move
production to lower-cost countries.
Borders are back in vogue. Economic na-
tionalism is paying political dividends.
"We want our country back" was the rally-
ing cry of those backing Brexit, a sound bite
that had echoes in Trump's "Make America
The rise of Trump and the triumph of Brexit
had their roots in the global financial crisis
of 2008. Eight years later, the world economy
has still not yet fully gotten past that shock to
its confidence--- people are nervous, some are
angry, and many are seeking novel solutions
to their problems. Next year, there's scope for
more uncertainty with elections in France and
Here's a look at the year's top business stories
In what was a sign of things to come, Britain
voted to leave the EU in a referendum in June.
The decision came as a surprise---certainly to
bookmakers and many pollsters who had con-
sistently given the "remain" side the edge---and
means Britain has to redefine itself after 43
years of EU membership. David Cameron re-
signed as prime minister after the vote and the
new Conservative government led by Theresa
May is planning to trigger the formal process
by which Britain exits the EU early next year.
There are many shades of potential Brexit,
from an outright divorce that could put up tar-
iffs on goods and services, to a more amicable
parting that sees many of the current trading
arrangements kept in place.
The pound's fall to a 31-year low below
US$1.20 at one point is testament to that
Pollsters and bookmakers got it wrong again
a few months later when Trump defeated
Hillary Clinton in the US presidential elec-
tion. Whether he translates his "America First"
platform into action following his inauguration
in January will help shape the global economy
for the next four years at least.
Trump has railed against long-standing
trading agreements, including the North
American Free Trade Agreement, and vowed
to punish China for the way it devalues its cur-
rency against the dollar and to tax US firms
that move jobs overseas.
He has also laid out plans to bring Ameri-
ca's creaking infrastructure up to 21st-century
standards, a new spending pitch that has the
potential to boost jobs---but which could also
lay the seeds of higher inflation.
MARKETS MARCH ON
Trump's victory did not cause the bottom
to fall out of the stock market rally that's been
largely in place since 2009, when the world
economy started to first claw out of its deepest
recession since World War II.
In fact, both the Dow and the S&P 500 rallied
to hit a series of record highs. Stocks have also
benefited from a raft of big corporate deals this
year; executives are seeing takeovers as a fast
way to generate growth in what is otherwise
a low-growth global economy disrupted by
non-stop technological innovations.
Notable deals in 2016 included the an-
nouncement of an US$85 billion merger
of Time Warner and AT&T and the US$57
billion takeover of Monsanto by Germany
medicine and farm-chemical maker Bayer.
The US$100 billion takeover of SABMiller by
Budweiser maker Anheuser-Busch InBev was
FED FINALLY DELIVERS
During his campaign, Trump criticised
Federal Reserve Chair Janet Yellen, saying
she should be "ashamed" of the way she's run
policy since taking the helm in 2014. A year
ago, the Fed appeared set to follow up its first
interest rate hike in nearly a decade with three
or four more in 2016. But there was no move
until December 14, when the US central bank
raised its main interest rate to a range between
0.5 per cent and 0.75 per cent.
Many factors explained its hesitation to raise
rates, including unease over the global impact
of China's economic slowdown and uncertainty
surrounding the US election.
But with the US economy continuing to do
better than most developed countries --- with
unemployment below 5 per cent and inflation
on the way up --- the Fed finally delivered an-
The markets are predicting another three
or four increases next year. Those expecta-
tions have helped the dollar rally, especially
as other major central banks persevere with
super-loose monetary policies to breathe life
into their economies.
CHINA'S KEY ROLE
As the world's second-largest economy, Chi-
na is playing a bigger role in the functioning
of the global economy.
Nowhere was that more evident than in the
early months of 2016, when jitters over the
scale of the slowdown in China caused wild
swings in financial markets. Stocks took a
pounding while commodities tanked, with oil
skidding to 13-year lows, as traders factored in
lower demand from resource-hungry China.
The slump in commodities weighed heavily on
economies like Australia that are big exporters
of raw materials.
China's economy is ending the year in rel-
atively good health as authorities try to pivot
the economy's focus from manufacturing to
more consumer spending. But Trump's prom-
ises to take a tough stance in trade will be of
concern to Beijing.
OPEC TAKES A STAND
For the first time since December 2008, at
the height of the financial crisis, the Organi-
sation of Petroleum Exporting Countries cut
its production levels in 2016. November's cut,
soon followed by more cuts by non-OPEC
countries like Russia, helped push oil prices
At over US$50 a barrel, benchmark New York
crude is markedly higher than the near 13-year
lows around US$30 recorded at the start of
2016, when investors focused on high supply
and concerns over an economic slowdown. The
oil slump helped put several crude-produc-
ing countries into severe recessions, including
Brazil and Venezuela, and even saw wealthy
Saudi Arabia cut back on spending.
The question for 2017 is whether OPEC---
and non-OPEC---countries can deliver on their
production promises. If they do and higher oil
prices stick, that will push up inflation in the
IT JUST GRATES
One of the major reasons why popular senti-
ment has turned against governments has been
a growing distrust of elites. Perhaps nothing
illustrated the issue more than the "Panama
Papers," a leaked trove of data on thousands of
offshore accounts that helped the wealthy, the
powerful and celebrities shelter their cash from
the taxman, often without breaking the law.
Critics say these tax schemes are the core
of a system that gives an unfair advantage to
big corporations and the wealthy.
Outrage grew in the US when it was revealed
that Wells Fargo employees opened up to two
million bank and credit card accounts fraud-
ulently to meet sales goals. Bank employees
also allegedly moved money between those
accounts and created fake email addresses to
sign customers up for online banking.
It just grates.
Will 2017 lead to more?
In this Thursday, Feb 25, 2016 file photo, Chinese investors monitor stock prices in a brokerage
house in Beijing at the height of market concerns over the scale of the slowdown in the world's
number 2 economy. Worries over China have been one of the underlying themes in the world of
business in 2016.
In this Monday, Oct 24, 2016 file photo, clouds are reflected in the glass facade of the Time
Warner building in New York. AT&T's plans to buy Time Warner for around US$85 billion was
one of the biggest business stories of 2016. AP
In this Wednesday, Nov 30, 2016 file photo, oil ministers of the Organisation of the Petroleum
Exporting Countries, OPEC, gather at their headquarters in Vienna, Austria. In one of the main
business stories of 2016, OPEC agreed to cut production for the first time since 2008 to support
oil prices, which earlier in the year had sunk to 13-year lows. AP
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