Tags: china | us | trade | apec

US, China Failure at APEC Summit Doesn't Bode Well for G-20

glass globe on us dollar and china yuan banknotes.
(Nuthawut Somsuks/Dreamstime)

Monday, 19 November 2018 08:30 AM Current | Bio | Archive

This weekend there was the APEC summit that broke up without a final communique.

As these things are normally bland statements of the obvious, the failure of the U.S. and China to agree on a final communique does not bode well for next week’s Xi-Trump meeting at the Group of Twenty or G20 meeting that will take place on Friday and Saturday October 30 and December 1.

This may all be “art of the deal” negotiation, but the “art of the deal” is starting to look really difficult to decipher.

Anyway, the Wall Street Journal reported that APEC’s final communique stumbled, according to a U.S. official, who had said it stumbled over the proposed sentence: “We agreed to fight protectionism including all unfair trade practices,” China wouldn’t agree to that language, believing it amounted to a “singling out” of Chinese trade practices.

Yes, it looks like U.S.-China relations seem to be a little less than cordial for the moment, especially after Vice-President Pence had given his speech wherein, he had mentioned China by name at several occasions and had not diplomatically alluded to as President Xi had done with the U.S. in his speech a couple of days before.

President Xi said: “Disagreements should be resolved through consultation. Attempts to form exclusive blocs or impose one's will on others should be rejected. History has shown that confrontation, whether in the form of a cold war, a hot war or a trade war, will produce no winners.”

Vice President Pence said: “We’ve taken decisive action to address our trade imbalance with China. We’ve put tariffs on $250 billion in Chinese goods and we could more than double that number. But we hope for better. The United States though will not change course until China changes its ways.”

He also warned countries not to take Chinese loans stating that the United States did not drown its partners in a sea of debt. He said: “As we speak, as we’re all aware, some are offering infrastructure loans to governments across the Indo-Pacific and the wider world. Yet the terms of those loans are often opaque at best. Projects they support are often unsustainable and of poor quality. And too often, they come with strings attached and lead to staggering debt … Know that the United States offers a better option. We don’t drown our partners in a sea of debt.”

NY Fed President Williams to Speak 

John Williams, the President of the New York Federal Reserve is scheduled to speak today. Williams serves as one of the key voices on economic policy at the Federal Reserve. There is little question about the direction of the Fed policy in the near term. A rate increase is universally expected in December and the Fed would be “crazy” not to raise rates then.

However, there are some questions about next year.

The Fed should clearly tighten policy further given the state of the U.S. economy. The question is how to get the right mix between monetary and quantitative tightening.

Furthermore, with a review of all aspects of the Fed policy now scheduled, the nature of the tightening becomes more uncertain, which is of course of great importance to investors.

The very low “real” borrowing costs today are not desirable, but there are many routes to changing that situation.  

The Brexit Divorce Process Continuous

Finally, in the interminably tedious process of separating the European Union (EU) and the United Kingdom (UK), nothing much is happening. 

The governing Conservative party does not have yet the votes to call a motion of no-confidence in the Prime Minister, which argues very much that they don’t have the votes to remove the Prime Minister as leader of the party.

The leader of the opposition Corbyn does not know how to vote in the admittedly unlikely event of a second referendum on leaving the European Union. The topic has dominated British politics for over two years now.

As the case remains that there will be a negotiated exit, but that is likely to come on the second attempt, the so-called “Troubled Asset Relief Program," or Tarp, something inspired by what the U.S. government did in 2008 to address the subprime mortgage crisis.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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This may all be “art of the deal” negotiation, but the “art of the deal” is starting to look really difficult to decipher.
china, us, trade, apec
Monday, 19 November 2018 08:30 AM
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