The 75th anniversary of Bretton Woods is an ironically low point in global trade

This month marks the 75th anniversary of the Bretton Woods conference. In July 1944, 44 nations agreed to new rules for establishing an international monetary order and open trade system. The World Bank and International Monetary Fund were then created to promote international trade and development, and facilitate greater exchange rate stability minus the gold standard. Such coordinated decisions were an important step by countries to rebuild the world economy after World War II. Multilateral cooperation strengthened thereafter, morphing into the rules-based international trading system at World Trade Organization in 1995. But since then, dissatisfaction over the international monetary ‘non-system’ has grown; the asymmetric World Bank and IMF governance structure has diluted their legitimacy. But all countries nonetheless progressed steadily towards greater openness in trade, finance and exchange rate flexibility. That is, until recently. Multilateral cooperation has consistently weakened since the global financial crisis in 2008, marking a distinct reverse turn in recent years. It is ironic that the Bretton Woods anniversary coincides with possibly the lowest point in international economic cooperation.

Divisive trade policies and retaliatory import tariffs have reached dangerous levels, dragging down world growth. Outstanding damage is inflicted by trade tensions between the United States of America and China, triggered by Donald Trump’s trade policies. The downshift is significant: manufacturing activity has shrunk across advanced and emerging economies as exports contract; Chinese growth has slipped to its lowest in three decades, and the US economy is slowing too. The IMF lowered its world output growth forecast by 0.2 percentage points to 3.3 per cent in April 2019 and pared this by 0.1 point last week, underpinned by weaker-than-anticipated global activity owing to sluggish global trade. In April, the WTO estimated goods’ trade volume growth to fall to 2.6 per cent in 2019 from 3.0 per cent last year from heightened trade tensions and economic uncertainties.

It is worth recalling that trade was the key propeller of the pre-crisis global boom that dramatically reduced the number of global poor, including in India. Over 2003-08, trade volumes grew an average 3 percentage points (8.5 per cent) each year above the preceding five-year average. World trade plunged to -10.5 per cent in 2009 with the 2008 crisis. It was outstanding multilateral cooperation and macroeconomic policy coordination led by the G-20 that averted a global recession and financial meltdown. An informal forum of 20 countries representing 80 per cent of world gross domestic product and two-thirds its population, the G-20 constantly avowed its commitment to free trade, shunning protectionism. Positive outcomes followed: global trade rebounded to 12.5 per cent and 7.3 per cent in 2010-11, weakening thereafter to an average 3.1 per cent annually in 2012-16. An uplift in 2017 (5.4 per cent) proved short-lived and global trade slipped back into the 3 per cent region last year. This year’s performance looks set to worsen.

The interesting feature in relation to declining volumes of world trade is the progressive increase in trade restrictions imposed by G-20 members since 2012, that is, inversely proportional to world trade growth. The WTO computes the total number of restrictive measures — at 145 from mid-October 2015 to mid-May 2016, these reached an all-time high in 2018-19. The reasons why world trade never recovered its pre-crisis levels are many — structural changes induced by demography, low productivity and secular stagnation in advanced economies, the changing nature of global manufacturing and restructured supply chains, technology shifts, and so on. But the adverse effect of increased trade barriers upon exports and imports is undoubted.

It is unfortunate that the world’s largest nations fail to see this. The captive hold of trade protection to combat domestic depression and high unemployment — beggar-thy-neighbour trade policies that temporarily benefit the endorsing country but harm trading partners — is proving counterproductive. Worse, this is threatening to spill over into competitive currency devaluation as the US mulls weakening the dollar to spur its exports. Trump hopes its import barriers will force China into agreement on liberalizing its trade policies, leading to their eventual removal. These talks are on a bilateral basis. The G-20 leaders’ meeting in Japan last month was unable to resolve the US-China trade impasse. The US has shifted towards bilateralism in trade matters elsewhere too, undermining the multilateral framework built since Bretton Woods. Global growth is the chief casualty of the weakened multilateralism in global trade, capital and labour flows. Many countries, including India, still have to reap the full benefits of free trade.

The weak economic cooperation observed today contrasts with the joint cross-country efforts seen at the time of Bretton Woods. The latter aimed to revive the world economy; the former is actually pulling it down. This raises the question as to who exactly safeguards global economic objectives in the current times. In a somewhat different but equally concerning context, the G-20 arose to be the premier forum for global economic cooperation to combat the 2008 crisis shock and forestall a worldwide recession. Since then, the G-20’s effectiveness has steadily diminished as national interests dominate, eluding consensus and cooperation at the forum. At its leaders’ summit in Argentina last year, even the G-20’s steadfast commitment to “fighting protectionism” yielded to “strive to realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, to keep our markets open”. After 75 years of Bretton Woods, the turn from multilateral cooperation is notable as is its drag upon the global economy.

Source:The Telegraph

Logged out: On protecting Amazon rainforest

It is a matter of global concern that deforestation in the Amazon rainforest in Brazil is increasing rapidly since January, when Jair Bolsonaro took office as President. Satellite images show that about 4,200 sq km of forests have been destroyed up to July 24 under the new government. While most nations tend to view their land and forests through the narrow prism of short-term economic gain, climate science data show that they play a larger environmental role. The Amazon basin, spread across millions of hectares in multiple countries, hosts massive sinks of sequestered carbon, and the forests are a key factor in regulating monsoon systems. The rainforests harbour rich biodiversity and about 400 known indigenous groups whose presence has prevented commercial interests from overrunning the lands. Much of the Amazon has survived, despite relentless pressure to convert forests into farmlands, pastures and gold mines, and to build roads. That fragile legacy is now imperilled, as Mr. Bolsonaro has spoken in favour of “reasonable” exploitation of these lands. Although the forest code has not been changed, his comments have emboldened illegal expansion into forests. Armed gold-hunting gangs have reached tribal areas and the leader of one tribe has been murdered in Amapa in an incursion. These are depressing developments, and the Brazilian leader’s criticism of satellite data and denial of the violence are not convincing at all.

As the custodian of forests in about 5 million sq km of Amazon land, Brazil has everything to gain by engaging with the international community on meeting the opportunity cost of leaving the Amazon undisturbed. Mr. Bolsonaro lost a valuable opportunity to seek higher funding for forest protection by refusing to host the annual convention of the UN Framework Convention on Climate Change this year, but he has been wise not to exit the Paris Agreement. Abandoning that pact would jeopardise Brazil’s access to the important European Union market. Globally, there is tremendous momentum to save the Amazon forests. Brazil must welcome initiatives such as the billion-dollar Amazon Fund backed by Norway and Germany, which has been operating for over a decade, instead of trying to shut them down. Remedial funding, accounting for the value of environmental services, is the most productive approach, because forest removal has not helped agriculture everywhere due to soil and other factors. One estimate by the World Bank some years ago noted that 15 million hectares had been abandoned due to degradation. Brazil’s President must recognise that rainforests are universal treasures, and the rights of indigenous communities to their lands are inalienable. The international community must use diplomacy to convince Mr. Bolsonaro that no other formulation is acceptable.

Source: The Hindu

Burning bright: on India’s tiger census

If India has increased its population of tigers to an estimated 2,967 individuals in 2018-19, putting behind fiascos such as the Sariska wipeout 15 years ago, it adds to its global standing as a conservation marvel: a populous country that has preserved a lot of its natural heritage even amid fast-paced economic growth. Since the majority of the world’s wild tigers live in India, there is global attention on the counting exercise and the gaps the assessment exposes. The National Tiger Conservation Authority (NTCA) has asserted in its report, ‘Status of Tigers in India 2018’, that 83% of the big cats censused were individually photographed using camera traps, 87% were confirmed through a camera trap-based capture-recapture technique, and other estimation methods were used to establish the total number. Previous estimates for periods between 2006 and 2010 and then up to 2014 indicated a steady increase in tiger abundance. Such numbers, however, are the subject of debate among sections of the scientific community, mainly on methodological grounds, since independent studies of even well-protected reserves showed a lower increase. It is important to put all the latest data, which are no doubt encouraging, through rigorous peer review. Conservation achievements — and some failures — can then be the subject of scientific scrutiny and find a place in scientific literature to aid efforts to save tigers.

There are several aspects to the latest counting operation — a staggering exercise spread over 3,81,400 sq km and 26,838 camera trap locations — that are of international interest, because some tiger range countries are beginning their own census of the cats. Moreover, even developed countries are trying to revive populations of charismatic wild creatures such as wolves and bears through a more accurate outcome measurement. For India’s tigers, not every landscape is welcoming, as the official report makes clear. The less accessible Western Ghats has witnessed a steady increase in numbers from 2006, notably in Karnataka, and Central India has an abundance, but there is a marked drop in Chhattisgarh and Odisha; in Buxa, Dampa and Palamau, which are tiger reserves, no trace of the animal was found. It is imperative for the NTCA to analyse why some landscapes have lost tigers, when the entire programme has been receiving high priority and funding for years now at ₹10 lakh per family that is ready to move out of critical habitat. Ultimately, saving tigers depends most on the health of source populations of the species that are estimated to occupy a mere 10% of the habitat. The conflict in opening up reserves to road-building has to end, and identified movement corridors should be cleared of commercial pressures. Hunting of prey animals, such as deer and pig, needs to stop as they form the base for growth of tiger and other carnivore populations. As some scientists caution, faulty numbers may hide the real story. They may only represent a ‘political population’ of a favoured animal, not quite reflective of reality.

Source:The Hindu