Economy

What Xi and Biden forgot to mention on the economy – East Asia Forum

Published

3 years ago

November 21, 2021

Author: Tom Westland, ANU

According to the official readout, in their virtual summit this week, US President Joe Biden and Chinese President Xi Jinping discussed ‘managing competition responsibly’. For Biden, the talks were a chance to press Xi on China’s actions in Hong Kong and its assertive posture in the Taiwan Strait, as well as human rights abuses in Xinjiang. Xi, for his part, warned Biden against leading the United States into a new Cold War against China.

US President Joe Biden speaks virtually with Chinese leader Xi Jinping from the White House in Washington, US, 15 November 2021 (Photo: Reuters/Jonathan Ernst).

Missing on the agenda was any serious discussion about the problems facing the global economy as it recovers from the deep recession of 2020.

Aside from some worthy breakthroughs, like the agreement to hold bilateral ‘stability’ talks on nuclear issues, it’s not clear what Xi’s and Biden’s responsibly managed competition will look like. If it looks anything like the managed trade that now governs the economic interactions of world’s two largest economies, then ‘competition’ is a wild misnomer. The trade war between the two countries, and the ensuing ‘Phase One’ trade deal, represent the worst kind of anti-competitive policy kludge, designed to protect politically favoured industries in the United States and kicking out Australian and Canadian farmers and gas suppliers who can produce more efficiently than their American counterparts. In economics as in sport, competition is best managed by neutral umpires, not by the participants themselves.

The failure of the two presidents to discuss what they could do to shore up the economic recovery is a big, missed opportunity. There is a desperate need for bolder leadership that tackles the short-term pressures and – just as importantly – the longer-term structural fault lines. The global economy was looking decidedly sickly even before COVID-19 struck. The Brexit referendum in June 2016, and the election of a populist protectionist to the White House later that year, marked the start of an inward turn in the advanced economies. The yield curve for US Treasuries inverted in May 2019, usually a reasonably reliable harbinger of recession. The structural damage to the world economy inflicted by Britain’s exit from the European Union and the tariffs put in place under President Trump has been masked by the much greater immediate destruction wrought by the pandemic, but as the recovery gains pace, it will become increasingly difficult to ignore.

Though the Biden administration has more or less made peace, though on the wrong terms, with Europe — lifting the Trump-era tariffs but imposing quotas on steel and aluminium exports from the bloc —it has stuck with Trump’s belligerent posture towards China. It has maintained tariffs on a broad swathe of Chinese imports and continues to hold back exports of semiconductors in the name of national security – even though the likely long-run effect will just be to stimulate semiconductor manufacturing elsewhere.

The effect of both of these policies is to restrict the supply of consumer goods in the United States. That isn’t the only reason for the US experiencing the highest inflation rate since George Bush Sr was president. Compared to the ‘Great Resignation’ of workers not wanting to return to low-paying jobs and the logistical issues at American ports, though, it is a problem that is easily fixed – at least in theory. The domestic politics of removing the Trump tariffs might be tricky, but Biden could use his power to issue broad exemptions that would render the tariffs a dead letter. Biden will also remember the political fate of the last two one-term Presidents, both of whom presided over economic contractions that stemmed in part from tighter monetary policy in the face of inflationary pressures.

Inflationary pressures, in the United States and elsewhere in the global economy, may be only temporary, and for the most part central bankers are choosing not to overreact by precipitously raising rates and choking off the economic recovery. But the task is made harder by senseless trade restrictions that have not yielded any tangible security or economic benefits to the countries imposing them. Ever since the dismantling of the Corn Laws, economists have known that removing barriers to international trade lowers prices; politicians, though, captured by special interests, often have to be dragged screaming and kicking to recognising it.

Though he touched on it only lightly in the summit, President Xi and his advisers would be well aware of the possible impact on the Chinese economy of policy tightening in the United States and other advanced economies: among other things, a depreciation of the yuan, which would make it harder for Chinese borrowers, like troubled real estate giant Evergrande, to service dollar-denominated debts. Had Trump won last year’s election, he might have gloated at the thought of a hard landing for the Chinese economy: Biden’s team is smart enough to know that a recession in China would knock the wind out of the global economy, too.

The failure of the two presidents to come up with a strategy to drag the world out of the economic doldrums during their summit may be hardly surprising, given the political constraints, but it is a major missed opportunity. Australia, and the world more generally, is best served by managed political and economic cooperation between Chinese and American leaders and intense trade competition between their businesses.

Instead, the small victories of the summit notwithstanding, we seem to be in line for more political competition and trade collusion. The hard heads in Asian capitals should not be fooled by policy illywhackers purveying managed trade solutions in Washington or Beijing.

Tom Westland is Research Director of the Asian Bureau of Economic Research in the Crawford School of Public Policy at The Australian National University.

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

1 day ago

November 8, 2024

Anne Joseph

OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

3 days ago

November 6, 2024

Anne Joseph

The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

3 days ago

November 6, 2024

Anne Joseph

As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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