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Following the financial crisis, advanced countries are weak and recovering unsteadily, implying that capital flows to emerging markets are likely to be volatile in the years ahead.
There is still a great deal of uncertainty regarding the current debt crisis, since there is no simple way to determine whether a country will default and the necessary major global adjustments have not yet taken place.
As international integration deepens and the global trading system becomes increasingly more complex, the WTO can take important steps to not only promote trade liberalization, but also to reaffirm its role as the ultimate regulator of global trade.
Investors concerned that China will dump its holdings of U.S. Treasury bonds should be worrying instead about an increase of foreign capital in U.S. markets, which will cause the U.S. trade deficit to surge.
While the upcoming G20 meeting likely influenced the specific timing of Beijing's announcement that it would allow greater flexibility in its currency, the collapse of the euro offered a good opportunity for change.
Aside from adjusting their currency, Chinese policy makers must also consider other important factors in order to increase domestic demand and cut reliance on exports.
Though the U.S.-Brazil agreement on cotton subsidies prevented a damaging “trade war,” it nonetheless exposed the limitations of the current WTO dispute settlement system.
The strong recovery in global trade is now threatened by the European debt crisis, which will depress demand in Europe, reduce trade financing, and potentially force the early withdrawal of stimulus measures across the G20 and increase protectionism.
Following its spectacular recovery from the financial crisis, China is now confronting a serious housing bubble, labor unrest, and potential debt problems. Though China’s economic prospects remain strong, a slowdown would have important international implications.
Foreign investors interested in Africa are facing similar risks and opportunities to those they faced when investing in India. By partnering on investment and business activities, the United States and India can help Africa get the necessary resources to spur economic development.
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