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Global Policy Space

1.      BRICS Leaders Eye Increased Coordination at Russia Summit 

 JUly 16, 2015:

Leaders from the BRICS countries – Brazil, Russia, India, China, and South Africa – confirmed plans to begin financing infrastructure projects through their new development bank by early 2016, while also releasing an “economic partnership strategy” document to be reviewed every five years.

Meeting in the Russian city of Ufa from 8-9 July, leaders also confirmed that they will be directing their ministers or Sherpas to look into the potential feasibility of putting together a “trade, economic, and investment cooperation roadmap” through 2020.

In the years since the group began holding its annual summit, its members have been dogged by questions over whether they can form a true alliance, given the wide disparity in political circumstances and varying economic situations and interests.

These questions have grown particularly given Russia’s strained ties with many of its Western trading partners in the wake of the Ukrainian crisis, including the various economic sanctions it has faced as a result, as well as Moscow’s demotion from the G-8 coalition, now the G-7.

Leaders from the group have countered that the BRICS can provide a new approach, one that builds on the emerging economy perspective. The five countries together make up 40 percent of the global population and one-fifth of its economic output.

“BRICS can be a beacon of hope in a world of economic and political turmoil and upheaval because our initiatives are not only geared toward the member countries, but also toward the whole world, especially emerging countries,” said Indian Prime Minister Narendra Modi, according to a translated version of his remarks.

This year’s summit came immediately ahead of a meeting of the Shanghai Cooperation Organisation (SCO), a group that includes two BRICS countries – China and Russia – as well as Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. India and Pakistan are working to accede to the organisation.

An informal joint leaders’ meeting of these two groups was also held in Ufa, together with leaders of the new Eurasian Economic Union. The latter entered into force at the beginning of this year, and includes Russia, Belarus, Kazakhstan, and Armenia. 



2.     TPP Countries Gear Up for High Stakes Ministerial Meeting

July 9 2015 :

The Trans-Pacific Partnership (TPP) countries are gearing up for a highly-awaited ministerial meeting at the end of July, in a gathering that many officials predict could bring the talks to a close.

The gathering, now scheduled for 28-31 July in the US state of Hawaii, will be preceded by a meeting of chief negotiators from 24-27 July.

“Since they last met in May, trade ministers from the twelve TPP countries have been working continuously. As a result, we have made considerable progress in closing gaps on remaining issues, and we continue to work intensively to address specific issues bilaterally,” the Office of the US Trade Representative (USTR) said in announcing the meeting.

“The upcoming ministerial provides an important opportunity to build on this progress as we work to conclude the negotiation,” the statement said.

The ministerial announcement comes less than two weeks after US President Barack Obama signed Trade Promotion Authority (TPA) into law, following a bruising trade debate among American lawmakers over the merits of the TPP and other trade deals.

The TPA legislation, which outlines Washington’s negotiating priorities in trade deals and sets the terms for their ratification in Congress, among other provisions, was widely considered an essential step for any TPP deal to come to fruition, with US trading partners unwilling to put their final offers on the table beforehand. (See Bridges Weekly, 2 July 2015) 



3.     Germany donates EUR 1 million to help developing countries participate in Doha Round

July 20, 2015

The government of Germany is contributing EUR 1 million (CHF 1,042,478) to the WTO’s Doha Development Agenda Global Trust Fund (DDAGTF) in 2015 to help developing countries and least-developed countries (LDCs) improve their participation in the Doha Round, the latest round of trade negotiations among WTO members.

WTO Director-General Roberto Azevêdo said: “Germany’s new donation is very important — it will boost our technical assistance activities which aim to help developing and least-developed countries participate in the world economy. I welcome Germany’s continued generosity.”

Germany’s ambassador Joachim Rücker said: “Germany believes that trade continues to be a critical engine for sustainable economic growth, development, and poverty reduction. Germany takes pride in supporting the excellent work of the WTO by providing technical assistance and training to economies at different stages of development, especially the world’s poorest countries. With its donation of EUR 1 million to the Doha Development Agenda Global Trust Fund for 2015, Germany is showing its strong commitment and determination to assist developing and least-developed countries in participating in the multilateral trading system. Germany’s contribution is a concrete expression of our continued commitment to create inclusive growth through trade and to help combat poverty and foster sustainable development.”

Since 2000, Germany has donated EUR 23,020,402 (CHF 24,015,205) to WTO trust funds.


4.     Gold slumps to five-year low, dollar at highest in months 

July 20, 2015 

Gold prices plunged to their lowest in more than five years on Monday, at one point dropping 4 percent on aggressive selling out of China, while the U.S. dollar hit a three-month high on expectations for higher U.S. interest rates.

Equity markets posted modest gains, with the focus remaining on earnings season.

The dramatic sell-off in gold came in a matter of minutes in Shanghai. More than 33 tonnes of gold, worth about $1.3 billion, traded in two minutes.

The exact reason for the selling was unclear. Recent strength in the U.S. currency and expectations for higher U.S. rates have undermined the case for holding gold and other precious metals, while analysts also note that China imported a record volume of gold in 2013 that has created an oversupply situation. Still, the swiftness of the decline surprised traders and resulted in two separate trade halts in U.S. gold futures.

The spot price for gold XAU= was at $1,094.5 an ounce, after hitting a low of $1,088.50 overnight.

"We have breached significant support levels, we know U.S. rate hikes are coming, there is no inflation and there is no catalyst to hold gold when other markets are doing better," Societe Generale analyst Robin Bhar said.

Other commodities were sinking as well. U.S. crude oil CLc1 fell 93 cents to $49.96, the first time it has been below $50 since April. Brent crude LCOc1 was last down 59 cents a barrel at $56.51.

The dollar jumped to its highest since April 23 against a basket of major currencies .DXY but was then flat on the day.

The greenback posted its best weekly performance in about two months last week after Federal Reserve Chair Janet Yellen reiterated that U.S. interest rates will probably rise later in the year.

Global equity markets held close to Friday's three-week highs .MIWD00000PUS and European shares approached seven-week peaks as Greece-related fears continued to recede.

The country's banks reopened for the first time in three weeks following a deal to start talks on a new bailout. The pan-European FTSEurofirst 300 .FTEU3 index rose 0.3 percent to its highest since late May.

On Wall Street, the Dow Jones industrial average .DJI rose 13.96 points, or 0.08 percent, to 18,100.41, the S&P 500 .SPX gained 1.64 points, or 0.08 percent, to 2,128.28 and the Nasdaq Composite .IXIC added 8.72 points, or 0.17 percent, to 5,218.86.

The Nasdaq hit a record on Friday after strong results from Google (GOOGL.O). Tech earnings will dominate reports this week. Investment bank Morgan Stanley's (MS.N) shares fell 0.4 percent following its results.

The euro EUR= fell to its lowest since late May on the EBS trading platform but last traded up 0.06 percent at $1.0838. The yen JPY= dropped 0.2 percent to 124.38 to the dollar.

The yield on the 10-year U.S. Treasury bond US10YT=RR rose to 2.377 percent, as the price fell 6/32 of a point.


5.     Global slowdown boosts Africa's hopes of achieving development goals 

July 15, 2015

Africa is likely to benefit from weak global growth by attracting more investment that will drive its development, experts said at a financing conference in Ethiopia on Wednesday.

Investors have been pouring money into Africa in recent years, buoyed by its strong economic growth and improved governance amid slow growth in Europe, China and the United States.

"As the global economy continues to be sluggish and large emerging markets slow down, clearly the future is on this continent," African Development Bank (AfDB) President Donald Kaberuka said.

"They need this continent... because their own economies have reached a point, I think, of no return."

The global economy should expand by 3 percent this year, according to the International Monetary Fund, amid continued uncertainty over Greece's debt crisis and volatile Chinese financial markets.

Africa is home to some of the world's fastest-growing economies, such as Ethiopia which has double digit growth.

"Africa is the destination for the investors of tomorrow," Ethiopian Prime Minister Hailemariam Desalegn said at an event focused on African development.

"Twenty years ago, investors were enthralled by... tiger economies from Southeast Asia. Today, it is Africa’s emerging lion economies that are increasingly attracting investment at scale."

African government bonds outperformed emerging market bonds globally in 2014, according to the JP Morgan index.

One key talking point at the conference is the increased role of the private sector in bankrolling the United Nations' bold new global development agenda, at a time of shrinking aid budgets.

The United Nations estimates it will cost between $3.3 trillion and $4.5 trillion a year to implement the Sustainable Development Goals, which aim to end poverty and hunger, combat climate change and achieve gender equality by 2030.

Development aid accounts for only 22 percent of external flows to Africa, less than half the percentage of gross private capital flows, Desalegn said.

Investment in infrastructure, industrialization and agriculture are critical to transforming the world's poorest continent, the experts said.

Sub-Saharan Africa needs to spend $93 billion a year over the next 10 years on infrastructure, but less than half of that is currently being provided, according to the AfDB.

It is working to close this $50 billion a year gap and has, through its new Africa50 fund, raised almost $1 billion from regional governments to develop roads, ports and energy projects across the continent.

"It's very difficult to do manufacturing when your power keeps cutting out," said AfDB Vice President Solomon Asamoah.

The potential is huge as Africa tends to add little value to its exports. Most African oil-producing states export crude oil and then import refined petroleum products.

Africa imported 83 percent of its food in 2013, said Carlos Lopes, executive secretary of the Economic Commission for Africa.

Anti-poverty groups question the private sector's increasingly prominent role in development, saying its projects are often costly and secretive. 



6.     Laws passed, Greece to open bailout talks as recession pushes goals further 

July 24, 2015

Greece's creditors prepared on Thursday for the start of bailout talks in Athens, after lawmakers adopted a second package of reform measures before dawn despite a left wing rebellion that may bring early elections.

In a sign of how the goal of coming to grips with the country's debt is swiftly sliding even further away, Greece's most influential think tank predicted a sharp drop back into recession.

That adds to the headwinds facing leftwing Prime Minister Alexis Tsipras, who must negotiate a bailout worth up to 86 billion euros (£60.6 billion) with sceptical lenders while struggling to hold his divided Syriza party together.

After another marathon session that ended in the early hours of Thursday, the Greek parliament voted overwhelmingly to approve the second package of reform measures. But 36 Syriza lawmakers rebelled, forcing Tsipras to rely on opposition votes.

While his personal popularity is high, a renewed drop into recession after a modest recovery last year would test his government's ability to push through the tough mix of tax hikes, spending cuts and economic reforms demanded by the lenders.

A spokeswoman for the European Commission, one of the three creditor institutions alongside the European Central Bank and the International Monetary Fund, welcomed the Greek vote. Formal negotiations are due to start on Friday.

Greek officials say they aim to wrap the talks up and have a deal approved in parliament by Aug. 20, when a 3.4 billion euro repayment to the ECB falls due.

The new IMF representative for Greece, Delia Velculescu, and officials from the Commission and the ECB are expected in Athens on Friday. Talks will be on two parallel tracks, one dealing with a new memorandum of understanding on actions Greece has to take and a second stream on the loans it hopes to obtain.

But already there have been doubts about whether the severely weakened Greek economy can support the programme after a six year-long slump that has cut national output by a quarter and sent unemployment over 25 percent.



Disclaimer: India’s Global Policy Space mainly compiles and disseminates Global trade related news and featured articles. The stories covered do not necessarily represent the views of the EEPC India and have been put together solely for informational and outreach purposes.


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