Thursday, January 24, 2008

Slow down in US affects Southeast Asia Most

Southeast Asia will face stiffer export competition from China and likely bear the brunt of any impact in Asia from a major economic slowdown in the United States, an IMF official said Tuesday.

A recession in the United States, anticipated by some economists as a result of a current housing slump and related credit crunch, will obviously lead to a cutback in exports by Asia's rapidly-growing economies, led by China.

Based on a "rough rule of thumb," for about a one percentage point decline in US economic growth, there could be a "half to a full percent decline in Asian growth, depending upon what the effects are beyond the United States," said Steven Dunaway, deputy director of the International Monetary Fund's Asia and Pacific department.

"There will be much more of an impact in Southeast Asia," which faces direct competition from China in terms of a number of export products, he said.

"Those (Southeast Asian) countries will all face a much tougher time with the slowdown in the United States and probably some extra competition from China," he said at a forum on the Chinese economy at the Woodrow Wilson International Center for Scholars in Washington.

Dunaway said Asia's exporting nations were "going to be competing for a piece of a smaller pie" if US imports shrunk. He raised the possibility of China slashing prices to remain competitive.

"If the Chinese themselves face a more difficult environment, there will be some tendency probably at least to hold prices if not cut prices," he said.

This would "affect profit margins and put some additional competitive pressure on Southeast Asian firms as well as firms in other countries competing with Chinese companies," he said.

Labor-intensive manufacturing already appears to have given a competitive edge to China in trade and investments at the expense of export-driven Southeast Asian countries such as Thailand, Indonesia, Vietnam, and the Philippines, economists say.

But rapid Chinese economic growth in recent years has also resulted in increased imports of raw materials and intermediate inputs from Southeast Asia, helping propel growth in the region, they say.

Amid the competition for exports to the United States, China and Southeast Asia are also opening up their economies to each other through a free trade agreement covering a total of nearly two billion people.

IMF head Dominique Strauss-Kahn warned in Paris Monday that the global economic situation in the wake of a US slowdown was "serious" and could impact the world's emerging economies.

"Fortunately emerging nations continue to have fairly strong growth and to drive growth worldwide. But it is not impossible that even in emerging nations it could have a certain effect, that growth could be weaker than expected."

Dunaway said any decline in growth in Asian economies as a result of a US slowdown would depend on policy responses.

"Most of the countries are in positions where they can ease monetary policy, they can ease fiscal policy, so they can offset some of the decline coming out of the US," he said.

There is one school of thought that a US slowdown would provide a much needed breather for China, which was stepping up efforts to cool inflation to prevent the world's fastest growing major economy from overheating.

"There may also be some impact with respect to FDI (foreign direct investment) that might slow (in China)," Dunaway said.

But Beijing would probably raise government spending, particularly on infrastructure investment, to keep the economy chugging along at a growth rate of nine to 10 percent, he added.

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Thursday, January 17, 2008

Japan May Protect G8 Site with Missiles

Weapons of Mass Destruction. All in the name of security.

Japan may position missile interceptors around the site of the Group of Eight summit of industrialized nations, to be held on the northern island of Hokkaido in July, a newspaper said on Wednesday.

Japan introduced its first Patriot Advanced Capability 3 (PAC-3) ground-to-air missile interceptors at the Iruma air base north of Tokyo last March, as part of a shield aimed at protecting the country from ballistic missile attack.

But the interceptors have a range of about 20 km, so they would need to be positioned closer to the summit venue at Lake Toyako in order to provide protection during the conference. The G8 summit brings together the leaders of the United States, Canada, the United Kingdom, France, Germany, Italy and Russia as well as Japan.

The Sankei Shimbun quoted a Defense Ministry official as saying that although the chances of a ballistic missile attack on the venue are extremely low, Japan wants to take all possible precautions against air attack.

"We must consider measures to deal appropriately with whatever situations may arise," said a Defense Ministry spokesman, who declined to comment directly on the report.

A "Summit Unit" made up of air, ground and sea troops is also to be set up to respond immediately to any eventuality, the Sankei Shimbun said.

An outer layer of Defense against ballistic missiles is provided by ship-based SM-3 missiles. Japan became the United States' closest missile Defense ally after North Korea fired a ballistic missile across the country in 1998, which landed in the Pacific Ocean.

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Monday, January 14, 2008

US Holds Fire on Sanctions Against EU in Biotech Food Dispute

The United States said Monday it would temporarily hold fire on sanctions on European Union goods in a last-ditch attempt to resolve a bitter trade dispute over genetically modified crops.

The EU missed a World Trade Organization deadline Friday to comply with a decision against EU restrictions on some genetically modified organisms (GMOs).

And on the same day, the French government announced it was imposing a ban on the only genetically modified crop grown in the country.

"We have agreed with the EU to suspend for a limited period the proceedings on our WTO request for authority to suspend concessions in order to provide the EU an opportunity to demonstrate meaningful progress on the approval of biotech products," said US Trade Representative (USTR) spokeswoman Gretchen Hamel.

"The United States remains very concerned with EU treatment of agricultural biotech products," she said.

The European Commission on Friday failed meet the WTO deadline in a GMO case that Europe lost in September 2006. The WTO ruled that an EU moratorium on the authorization of GM products between 1999 and 2004 broke world trade rules.

The United States was joined in the 2003 complaint by Canada and Argentina. The complainants are entitled to launch retaliatory customs duties in the absence of compliance with the decision.

"US seed companies, farmers and exporters continue to experience significant commercial losses as a result of the EU actions," Hamel said. "The patience of US stakeholders is close to exhaustion."

In Brussels, a European Commission spokesman said: "We welcome the measured response by the United States, and reiterate our commitment to advance the difficult dossier of biotechnology through dialogue."

Hamel said the US would evaluate EU progress toward normalizing trade over the coming months, without setting a deadline for WTO compliance.

The Canadian government said it has extended the deadline for compliance to February 11. "Canada has found there is constructive progress on this issue," said foreign affairs and international trade ministry spokeswoman Renee David. Under EU laws, a member state can invoke a safeguard clause enabling it to bar a genetically modified (GM) crop that has otherwise been given EU-wide authorization, provided it has scientific evidence to back this decision.

Although the import of some of the GM products covered by the case have been authorized in the EU, Austria has continued to practice a ban, in particular on the import of GM maize strain, Mon 810, which is produced by US agricultural biotechnology giant Monsanto.

France's decision to join the ban on the planting of Mon 810, the only biotech corn variety currently cultivated in the EU, drew sharp words from the USTR spokeswoman.

"It is hard to overstate our disappointment with this new biotech ban announced Friday by the Government of France," she said.

"This newly banned variety of corn has been grown safely in the EU, the United States, and around the world for over a decade."

Opponents of GMOs -- a fiercely contested issue in Europe -- welcomed the French government's decision to invoke the EU procedure to bar the Mon 81, the only GM crop grown in France.

"With the principle of precaution at stake, I am making a major political decision to carry our country to the forefront of the debate on the environment," French President Nicolas Sarkozy said over the weekend.

The Austrian agriculture ministry last week told AFP that it was determined to maintain its "rejection of any sort of use of GM organisms" in the country.

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