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October 5, 2011 Experts Call for More Transparency in International Trade


  • Increasing online trade is problematic
  • Public authorities and companies cooperate in order to ensure security
  • Global harmonization of patents is necessary

 

The Global Economic Symposium (GES) round table in Kiel on Wednesday agreed unanimously that less complexity and more transparency are needed to make international trade more efficient. Professor Renato G. Flôres of the Brazilian Getulio Vargas Foundation stated: “Free trade is a blessing and should thus be a major objective. But we have to be realistic. Governments are under pressure to protect industries and jobs in their countries. Further, he stated that if a country has to resort to protectionism, it should at least be clever about it. “It is important to protect some parts of the economy, but to do so without slowing down technological progress,” he said.

Trade barriers are necessary to ensure security stressed Kunio Mikuriya, secretary-general of the World Customs Organization: “Previously, customs officials collected fees. Today, they are mainly involved in preventing dangerous goods from entering their countries.” In recent years, for example, imports of counterfeit drugs have increasingly become a problem. “We have to make people aware of the fact that such drugs are dangerous to their health,” said Mikuriya. He continued that close cooperation between the public sector and private sector will be necessary to accomplish this. Karl Ulrich Garnadt, chairman of the board at Lufthansa, stated that security is taken very seriously at Lufthansa Cargo. “The airline industry cannot make any compromises as regards security, which is why we work closely together with the public authorities to ensure that appropriate standards are established,” said Garnadt.

Thomas Kipp, CEO of DHL Global Mail, said that “the young, Internet-oriented generation is increasingly less tolerant of barriers. “Harmonization and standardization is thus imperative, especially given the increases in trade over the Internet.” Turalay Kenç, vice-president of the Turkish Central Bank, also addressed the problems inherent in the increasing amount of trade over the Internet: “Online payment systems do not involve the central banking system. If online trade continues to increase, we will no longer be able to assess payment flows.” Nikolaus Thumm, chief economist at the EU Patent Office, said that a further problem caused by the increased significance of the Internet is that intellectual property rights are subject to various interpretations: “Harmonization of such rights at the global level is urgently needed.”

 

EMERGING COUNTRIES CALL FOR EUROPEAN POLICY ACTION

‘Political leadership is something that is missing in the industrialized countries – or should I call them the crisis countries’, said one of the speakers at a panel on ‘Coping with Systemic Risk’ at the Global Economic Symposium in Kiel today.

‘The source of the original financial crisis lay in the markets. But the source of the current crisis is in government policies. We’ve gone from ‘banks too big to fail to ‘countries too big to default’.’

‘We need to come back to the fundamentals of macroeconomic policy. We need fiscal responsibility – that is what has been established by law in Brazil, for example. Each country in the eurozone needs a law like that.’

Another speaker from the emerging countries added that: ‘Greece is a ticking bomb. Europe is dancing on verge of systemic danger. The collateral damage could be huge. If a eurobond or a fiscal union is out of question, perhaps we need a private solution leveraged by the European Central Bank.’

And another contributor was very critical of the economics profession: ‘Economic models failed to focus on systemic issues. We are now paying the price of a doctrinaire, ideological wing of economics.’

The experts agreed that what led to the crisis was that we forgot a basic principle of economics. Why doesn’t the market take care of systemic risk? It’s because there’s an important externality in financial markets that goes unchecked. Comprehensive regulation of leverage is the heart of the issue.

GES-Interviews (please reference to the GES 2011)

INTERVIEW WITH ANNE KRUEGER ON GREECE, THE EURO AND DEBT CRISES

Professor Anne Krueger, former chief economist at the World Bank and the IMF and author of the forthcoming book ‘Struggling with Success: Challenges for the International Economy’:
What’s going to happen to Greece?
‘Many people have known for a long time that Greek debt is unsustainable. They have had fiscal excesses and they need to restructure their economy.’
‘But not recognizing the inevitable for so long has led to a more extreme situation. There’s going to be much more spillover when this finally does fall apart, which seems to be happening as we speak.’
What future for the euro?
‘The euro is a political issue. Normally in such crises, there’s a conflict of what the economics says you should do and what the politics says you should do – and in Europe, the politics has always won out. The issue has been resolved in ways that allow European integration to keep going.’
‘What worries me this time is that things could unravel so fast that it’s impossible for 17 countries to agree on action in time. The real danger is not from a total absence of European will – but an inability to get ahead of events.’
How do we deal with debt crises in the future?
‘The international economy does not have a mechanism for resolving sovereign debt crisis there are times when debt is truly unsustainable.’
‘In my judgment, you need to have some kind of bankruptcy mechanism to preserve the assets and to enable the economy that is under siege to restart more quickly.’

‘DON’T TAKE THE WRONG LESSONS FROM LEHMAN’ – FORMER PRESIDENT BUSH ADVISER’S MESSAGE TO EUROPE

 

Is Europe facing a Lehman moment? Speaking on the sidelines of the Global Economic Symposium in Kiel, Germany today, Professor Ed Lazear, who was President Bush’s chief economic adviser when Lehman failed in October 2008, said:

‘It’s important to remember that Lehman was an exacerbating factor, but it was not the cause of the crisis. And I’m worried that the Europeans are making the same mistake with respect to Greece and the importance of contagion.’

‘Contagion is an important factor but dealing with it doesn’t solve the problem. Even had Lehman been propped up (and we tried to), we still were in a very serious financial crisis.’

‘Europe is taking the wrong lesson out of that. The notion that if we save Greece, the problems will be dealt with in an orderly fashion – that’s not the case.’

‘Looking at Spain, Portugal, Ireland, Italy, very few of their problems have to do with contagion from Greece. They have underlying problems of fiscal consolidation, and housing and banking crises, which have to be dealt with independently of what happens with Greece.’

‘Greece is already implicitly in default. The question is how to deal with it.’
‘It’s important not to get distracted and worry about Greece alone. We need to worry about other countries, and we need to plan for the future.’

GES-Interview with Shumeet Banerji, CEO Booz & Company

‘The notion that the eurozone crisis can be contained is simply laughable’, Booz & Company-CEO Shumeet Banerji said at the Global Economic Symposium in Kiel today, Wednesday 5 October 2011.

The head of the global consultancy sees a ‘serious contagion risk’. He added: ‘‘As far as the world is concerned, Greece is dead. This is a solvency problem not a liquidity problem. We are seeing a Lehman moment in Europe. Disorderly default seems to be where we’re heading.’

The problems in Europe don’t stop with the immediate crisis. The Booz & Company-CEO sees the demographics in Europe as one of the driving forces for future economic development: ‘Europe is aging very fast, but we are trapped in an entitlement philosophy of the sixties of the last century.’

This will damage the performance of the economy, Banerji argues: ‘Europe is getting progressively less productive. One per cent growth rates in the future would be pretty good.’

GES-Interview with Carlos Geraldo Langoni, Director The World Economics Center, Getulio Vargas Foundation:

Will the euro still be there in five years?
Langoni: ‘The euro will survive. The cost of euro disintegration is so high for every member that I can´t believe that a Europe with all its tradition, know-how, human capital and resources won´t find a solution.
Should there be euro-bonds?
Langoni: ‘There definitely should be euro-bonds. Europe should move to a fiscal union. The first step is for each country to have a fiscal responsibility law like we had in Brazil’
Will Greece default?
Langoni: ‘Greece should default in an orderly way so that there will be surprises for the markets. It is a question of organizing the restructuring in a no-surprise, orderly way like the Brady bonds in 1989. It was done in a very effective way and did not create problems for banks and markets.’

GES-Interview with Aolin Liu, Executive Director of the Research Department, China International Capital Corporation Limited

Will the euro still be there in five years?
Liu: ‘Yes.’
Should there be euro-bonds?
Liu: ‘Euro-bonds will not be avoidable, but it requires time to set the legislature in place.’
Will Greece default?
Liu: ‘What you have to do is a restructuring. I hope for an orderly restructuring, but fear that it might be disorderly.’

THE WORLD NEEDS A NEW CONSTITUTION FOR THE INTERNET

A new globally agreed constitution for the internet must guarantee the medium’s essential freedoms and it must contain rules against abuse. That was one of the conclusions reached by a group of experts debating ‘Internet Governance Structures’ at the Global Economic Symposium in Kiel today.

The participants noted that the internet is a fundamental innovation characterized by features that are very different from other means of communication. Therefore the governance instruments for the internet should also be innovative, not relying only on traditional hierarchical structures.

The decentralized character of the internet means that a multi-stakeholder approach has to be strengthened.

The experts also agreed that a compromise will be needed between the needs of internet infrastructure providers to invest in new infrastructure and users’ interests in accessing the net without additional costs. In the US, the needed investment in internet infrastructure is estimated at $350bn in the next few years.

As to the fear that the US government rules the internet, the group defused that fear. They cited the fact that although the US government did not like the proposal of a new top-level-domain ‘.xxx’ (which will probably be used for pornographic sites) and EU commissioner Neelie Kroes encouraged the US government to block the domain, it did not. Instead it argued that the new top-level domain was cleared by ICANN and thus was discussed by all.

GLOBAL POVERTY AND CLIMATE CHANGE: AN INTERVIEW WITH RANDALL CRANE, PROFESSOR AND VICE CHAIR OF THE DEPARTMENT OF URBAN PLANNING, UNIVERSITY OF CALIFORNIA AT LOS ANGELES.

What global problem keeps you awake at night?
Global poverty and climate change. I think both are closely related. There are some larger environmental problems that affect the poor seriously.
What solutions do you propose?
In short I would say education and public information. The Millennium Development Goals have done a lot of good. But these problems cannot be solved quickly. It is literally an eternity-long project.
How can we implement the solutions the world needs?
Constant lobbying and leadership by influential countries and personalities – for example, the Bill Gates of the world. But also through political reforms: I’m talking mainly about Africa, but also in other parts of the world.

All interviews can be cited when reference is made to the GES 2011.

The fourth Global Economic Symposium (GES) is being jointly hosted by the Kiel Institute for the World Economy and the Bertelsmann Stiftung, in cooperation with the German National Library of Economics (ZBW) – Leibniz Information Centre for Economics.
Further information can be found at www.global-economic-symposium.org.

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