On August 22, 2012, after 18 years of negotiations, Russia became the 156th formal member of the World Trade Organization (WTO). With the world’s ninth largest market, a $1.9 trillion economy, and—with a population of 140 million—Europe’s number one consumer market, Russia was the largest economy in the world that was not a member of that august international trade governing body. As part of its accession package, Russia agreed to implement a host of economic reforms that will further open the country’s markets to the goods and services of its WTO trading partners, ensure greater respect for the rule of law, better protect intellectual property rights, and safeguard foreign investors.
Global Economy, Economic Environment, Recession, Money & Finance, Currency
The EU summit held in late June produced two breakthroughs. First, the European Financial Stability Facility (EFSF) and its successor, the European Stability Mechanism (ESM), are to directly fund shaky banks. Second, requirements were relaxed for EFSF/ESM to engage in bond purchases of troubled sovereigns. These steps are significant in that they address immediate needs (a liquidity provision, support for banks) as opposed to long-term solutions (fiscal adjustment, institutional change).
Global Economy, Money & Finance, GDP, Government Finance
The Eurozone sovereign debt crisis is far from over. It will take years, not months, for excessively high government debt-to-GDP ratios to stabilize, much less begin to decline. Eurozone political leaders recently agreed upon a second multilateral assistance package that is designed to give the Greek government a respite when the first tranche is paid in. Subsequent disbursements, however, are subject to reviews by the IMF, which will check on progress in many areas; poor compliance by the Greek government on tax reform or privatization, for example, could derail the program.
Global Economy, Competitiveness, Foreign Trade, Imports & Exports
Intense discussion of the eurozone financial crisis has centered on fiscal accounts and the banking sector. Little attention has been paid to the impact on trade beyond the obvious fact that if there is slower eurozone growth, import growth will also be down. The adverse trade impact of the eurozone on third countries, however, and on U.S. exports of manufactures in particular, is significant and growing, and faces uncertain prospects ahead.