Whenever we think of textile workers nowadays, we tend to think about cheap labor—particularly women sewing in overcrowded factories. In fact, the textile industry nurtures the narrative of how maquiladoras in the south have robbed manufacturing jobs from countries like the U.S., or how China has inundated the global market with cheap goods.
The volatility in commodity prices continues. Sure, they have come down in the last few days on Eurozone crisis fears but, all in all, they remain volatile, and in the case of food, very high. One of the reasons for this is that world commodity markets–particularly those for agricultural commodities—have become highly distorted.
“So what?” you may ask. Well, distorted price levels and excess price volatility are detrimental to producers and consumers alike.
Trade logistics, or the capacity of countries and companies to ship goods to international markets, is a key ingredient for economic competitiveness, growth, and poverty reduction. Poor logistics performance creates a deadweight loss for producers and consumers alike, and results in a net waste of resources. Improved trade logistics, on the other hand, would give a welcome boost to the economy at a time of fragile recovery from the global recession.
Perhaps it is not surprising that trade with emerging economies is often more complicated, time consuming, and costly than one would want. In addition to lacking some of the necessary physical infrastructure to transport goods, emerging economies frequently have complex and opaque regulatory requirements that create additional delays and increase transaction costs at their borders.
In 2009, an EU-based chemical manufacturer opened a plant inside one of FYR Macedonia’s recently-established special economic zones. The plant began production of catalysts, a type of emissions-control component used in automobiles. Two years later, this investment drove chemical products to the third-highest spot on Macedonia’s export list, lessening the country’s reliance on metals and textiles.
In Nicaragua, low labor costs and high security compared to its neighbors have led zonas francas to expand dramatically, attracting producers of electronic wires and medical devices and expanding the country’s exports beyond an already-strong apparel sector. Between 2006 and 2008, for example, ignition wiring sets for vehicles were the country’s fourth biggest export.
These two examples demonstrate a new trend in small economies. Increasingly, as global value chains grow in importance,
The state of the global economy is now more troubled than what most pundits had predicted. The great recession of 2007-09 has left permanent scars and the global recovery has lost steam. In the industrialized world, the Eurozone is struggling to save its common currency and avert an even larger debt crisis. Across the Atlantic, although things are looking slightly better, the United States still faces damaged household balance sheets, depressed consumption, and persistent unemployment. In the developing world, the remarkable role that emerging markets have played as alternate engines of global growth is no longer certain. And this is truly worrisome because in the years that followed the recession, developing countries came to the global economy’s partial rescue, helping advanced economies from slipping into an even deeper recession.
In 2010 and 2011, developing countries grew 7.3 and 6 percent respectively, compared to the 3 and 1.6 percent growth of high-income countries, according to the World Bank’s latest Global Economic Prospects. Nevertheless, growth in several major developing countries like Brazil, China and India is significantly slower than earlier in the recovery, mainly reflecting a tightening of monetary policy to combat rising inflationary pressures but also the low-growth path in advanced economies. As a result, developing countries are now expected to grow only 5.4 percent this year.
After the Second World War, advanced economies began an ambitious process toward capital account liberalization, which prioritized the liberalization of trade, the maintenance of fixed exchange rates, and a commitment to current account convertibility.
The state-owned operator of Indonesia’s Tanjung Priok Port is taking major steps to decrease congestion at the country’s main gateway. The company, Pelindo II, recently announced it will increase storage fees at the port to discourage shippers from leaving containers there for long periods of time. It has also said it will install a new information technology system to better monitor and direct traffic at the port.
The two initiatives are an effort to boost the performance of a port that handles two-thirds of Indonesia’s international trade. The container traffic at Tanjung Priok has grown at a rate of about 20 percent the last two years and is expected to double by 2015. But containers arriving at the port spend an average of 6 days to obtain clearance and get removed, one of the highest “dwell time” rates in the region and up from 4.9 days in 2010.
Economists and government officials are trying to bring down this number. As a statistic, dwell time is a vital measure of a country’s ease of trade. When dwell time is high,
A troubling phenomenon is occurring in large, emerging economies: the gates are closing. Governments, skittish about global economic trends, are introducing new policies to limit imports and exports. The aim is to protect domestic industry in tough times, but the tools governments are using threaten to make their economic problems worse.
A December World Bank analysis documents a trend of creeping protectionism in countries such as Argentina, Brazil and Indonesia – all countries with burgeoning industry. Instead of tariffs, other more indirect policies are being used to hinder free commerce between countries. The Bank analysis, based on World Trade Organization (WTO) monitoring reports and data from the Global Trade Alert, a network of think tanks around the globe, found that the number of non-tariff measures (NTMs) –including quotas, import licensing requirements and discriminatory government procurement rules –showed an increasing trend in the first two years post-2008, and rose sharply in 2011. India, China, Indonesia, Argentina, Russia, and Brazil together accounted for almost half of all the new NTMs imposed by countries world-wide.
The measures take various forms. In December, amid a political shake-up, Indonesia announced its intention to