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Article Artículo

Globalization and Trade

WSJ Joins the TPP Stumble

The Wall Street Journal promised "trade deficit myths" in its editorial on the Trans-Pacific Partnership (TPP), and it certainly delivered. It begins by telling readers:

"The first problem with Ms. DeLauro’s charge is that running a trade deficit—that is, having more imports than exports—isn’t necessarily bad. In the U.S. it can signal economic health: that American consumers and businesses are saving money by buying cheaper foreign goods, and that the U.S. economy is attracting overseas investment, which drives productivity and demand for domestic and imported goods."

That's right, when the economy is near full employment a trade deficit allows the United States to have more consumption, investment, and/or government spending than would be possible if it had balanced trade. The key phrase here is, "when the economy is near full employment."

The U.S. economy is very far from full employment these days. The employment-to-population ratio (the percent of people who are employed) for prime-age workers (ages 25–54) is still down by 3.0 percentage points from its pre-recession level and 4.0 percentage points from its 2000 level. The number of workers who involuntarily are working part-time is still roughly 2 million above its pre-recession level.

These data, along with many other labor market indicators, show the economy is still far from full employment. In this context, the trade deficit translates into demand that is being drained away from the United States. Most folks would consider the resulting unemployment and underemployment to be bad, even if that apparently is not the view at the WSJ.

Dean Baker / June 09, 2015

Article Artículo

Brazil

Globalization and Trade

IMF

Latin America and the Caribbean

World

Why is the US Government Still Hiding What They Did to Brazil in 1998?

On Sunday, October 4, 1998, as international bankers, investors, finance ministers and officials from the leading multilateral development banks met in Washington for the annual World Bank and International Monetary Fund meetings, many eyes were looking south, to Brazil.

Late in the afternoon, when Brazil’s finance minister broke the news that Fernando Henrique Cardoso had narrowly won Brazil’s election in the first round, “the room broke into loud applause,” according to Bob Fernandez reporting for Knight Ridder. “Cardoso is an International Monetary Fund favorite,” Fernandez explained.

Officials had been scrambling for weeks to put together an international bailout package for Brazil in response to the Asian Financial Crisis, which threatened to spread to other emerging markets, including those in South America. But the negotiations were held behind closed doors. With key elections on the horizon in Brazil, Cardoso, the incumbent and leading candidate, went to great lengths to distance himself from the IMF package. The New York Times reported on October 1: “Among ordinary Brazilians, the I.M.F. is associated, if not faulted, for a punishing recession through the 1980's.”

On October 2, Reuters reported that Cardoso “has repeatedly denied that he will announce austerity measures immediately after the polls close.” Even after his first-round victory, Cardoso was reluctant to announce any measures before governors and state officials faced critical run-off elections later in the month, worried that an embrace of the IMF plan could hurt their chances.

Cardoso’s main opponent in the presidential race was Luiz Inacio Lula da Silva of the Workers’ Party, who would later go on to win the presidency in 2002, and again in 2006. Lula voiced strong criticism of any potential deal with the IMF, saying that it would “tighten one more knot on the neck around Brazilians.” Lula would go on to end Brazil’s borrowing relationship with the Fund in 2005 when he was president. But the U.S. and other leading players in the global financial system were seen as heavily supportive of Cardoso in ‘98. The New York Times reported in late September (emphasis added):

The proposed package would be openly negotiated only after the presidential election in Brazil next Sunday, and only if -- as expected -- Mr. Cardoso is re-elected. Nevertheless, a senior Clinton Administration official acknowledged on Friday that active discussions are already in progress with the Brazilians, the I.M.F., other governments and private lenders.

CEPR / June 08, 2015