Peterson Institute Press

Bergsten on China's Economic Stimulus Package and The World Economy

C. Fred Bergsten discussed on the Diane Rehm show with Eswar Prasad (Brookings Institution) and Yashen Huang (MIT) China's economic stimulus plan, whether it can stave off a recession at home, and how it might affect the global economy. Bergsten is coauthor of the Institute's recent book China's Rise: Challenges and Opportunities.

Book Event at the World Bank: China's Rise: Challenges and Opportunities

Authors C. Fred Bergsten, Charles Freeman, Nicholas R. Lardy, and Derek J. Mitchell discussed the conclusions of their latest book, China's Rise: Challenges and Opportunities, at a book-signing event at the World bank organized by the Peterson Institute for International Economics, Center for Strategic and International Studies, and the World Bank InfoShop. Video available online.

Book Release Event: The Future of International Financial Regulation

The Peterson Institute released its new study Banking on Basel: The Future of International Financial Regulation by Daniel K. Tarullo on October 23, 2008. The current financial crisis demonstrates that future financial regulation must be more extensive and internationalized. Tarullo's central question is whether financial institutions would have been sounder if the Basel II Framework had already been implemented and/or whether the crisis has revealed a need for further strategies for capital regulation.

Audio and video of Tarullo's presentation of Banking on Basel are available online.

Book Event at CSIS: China's Rise: Challenges and Opportunities

The Peterson Institute and the Center for Strategic and International Studies (CSIS) hosted a joint conference to release their new book China's Rise: Challenges and Opportunities on October 8, 2008 at CSIS. Audio and video are available online.

New Book: Banking on Basel: The Future of International Financial Regulation

The turmoil in financial markets that resulted from the 2007 subprime mortgage crisis in the United States indicates the need to dramatically transform regulation and supervision of financial institutions. Would these institutions have been sounder if the 2004 Revised Framework on International Convergence of Capital Measurement and Capital Standards (Basel II accord)—negotiated between 1999 and 2004—had already been fully implemented? Basel II represents a dramatic change in capital regulation of large banks in the countries represented on the Basel Committee on Banking Supervision: Its internal ratings–based approaches to capital regulation will allow large banks to use their own credit risk models to set minimum capital requirements. The Basel Committee itself implicitly acknowledged in spring 2008 that the revised framework would not have been adequate to contain the risks exposed by the subprime crisis and needed strengthening. This crisis has highlighted two more basic questions about Basel II: One, is the method of capital regulation incorporated in the revised framework fundamentally misguided? Two, even if the basic Basel II approach has promise as a paradigm for domestic regulation, is the effort at extensive international harmonization of capital rules and supervisory practice useful and appropriate? This book provides the answers. It evaluates Basel II as a bank regulatory paradigm and as an international arrangement, considers some possible alternatives, and recommends significant changes in the arrangement.

Banking on Basel: The Future of International Financial Regulation, by Daniel K. Tarullo, is available for preview and purchase online.

New Book: China's Rise: Challenges and Opportunities

China has emerged as an economic powerhouse (projected to have the largest economy in the world in a little over a decade) and is taking an ever-increasing role on the world stage. China’s Rise: Challenges and Opportunities will help the United States and the rest of the world better comprehend the facts and dynamics underpinning China’s rise—an understanding that becomes more and more important with each passing day. Additionally, the authors suggest actions both China and the United States can take that will not only maximize the opportunities for China’s constructive integration into the international community but also help form a domestic consensus that will provide a stable foundation for such policies. Filled with facts for policymakers, this much anticipated book’s narrative-driven, accessible style will appeal to the general reader. This book is unique in that it analyzes the authoritative data on China’s economy, foreign and domestic policy, and national security.

China's Rise: Challenges and Opportunities, by C. Fred Bergsten, Charles Freeman, Nicholas R. Lardy, and Derek J. Mitchell, is available for preview and purchase online.

New Book: Challenges of Globalization: Imbalances and Growth

With high growth rates in Asia, most notably in China, India, and Southeast and Central Asia, Eurasia's economic center of gravity is rapidly shifting to the East. At the same time, most of Europe faces serious barriers to growth in the long term. The volume examines the causes and consequences of this major shift in economic power and considers the options available to policymakers in various parts of Europe and Asia. The ten chapters in this book focus on long-term challenges of globalization rather than short-term problems of individual countries and explore two themes: global macroeconomic imbalances and growth. This work is based on a Center for Social and Economic Research conference.

Challenges of Globalization: Imbalances and Growth, edited by Anders Åslund and Marek Dabrowski, is available for preview and purchase online.

New Book: Accountability and Oversight of US Exchange Rate Policy

The dispute over Chinese exchange rate policy within the United States has generated a series of legislative proposals to restrict the discretion of the US Treasury Department in determining currency manipulation and to reform the department's accountability to the Congress. This study reviews the Treasury's reports to the Congress on exchange rate policy—introduced by the 1988 trade act—and Congress's treatment of them. It finds that the accountability process has often not worked well in practice: The coverage of the reports has sometimes been incomplete and not provided a sufficient basis for congressional oversight. Nor has Congress always performed its own role well, holding hearings on less than half of the reports and overlooking important substantive issues. Several recommendations can improve guidance to the Treasury, standards for assessment, and congressional oversight. These include (1) refining the criteria used to determine currency manipulation and writing them into law; (2) explicitly harnessing US decisions on manipulation to the IMF's rules on exchange rates; (3) clarifying the general objectives of US exchange rate policy; (4) reaffirming the mandate to seek international macroeconomic and currency cooperation; and (5) institutionalizing multicommittee oversight of exchange rate policy by Congress. As they develop legislation targeting manipulation, furthermore, legislators should not lose sight of the broader purposes of the 1988 act relating to the effective valuation of the dollar, the current account, and their ramifications for the US economy overall.

Accountability and Oversight of US Exchange Rate Policy, by C. Randall Henning, is available for preview and purchase online.

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New Book: Leveling the Carbon Playing Field: International Competition and US Climate Policy Design

As the US Congress addresses domestic climate legislation and the world pursues multilateral climate negotiations, policymakers are particularly concerned about the effects of climate policy on carbon-intensive manufacturing industries such as iron and steel, cement, paper, and chemicals. Many of these industries are already under pressure from foreign competition, particularly in large emerging economies like China, India, and Brazil that are not planning to reduce emissions under the current international climate framework.

US policymakers are looking for ways to avoid putting US industry at a competitive disadvantage lest a decline in industrial emissions at home is simply replaced by increases in emissions abroad. While this would be best achieved through harmonized international climate policy, the differences between countries in levels of economic development, historic emissions, and responsibilities arising from future emissions mean harmonization is still a long way off.

How can the United States maintain a level playing field for carbon-intensive industries during a period of transition, when trading partners are moving at different speeds and adopting a variety of policies to reduce emissions? Can this be done in a way that does not threaten the prospects of broader international agreement down the road and avoids the risk of new trade conflicts? This book evaluates a wide range of policy options, including trade measures on foreign-produced goods (currently included in draft US legislation and under consideration in the European Union).

Preview and purchase book online at a special 10% discount.

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New Book: Debating China's Exchange Rate Policy

More than two and a half years have passed since China announced a number of changes to its foreign exchange regime in July 2005. During this period, the debate on the pros and cons of China's exchange rate policy, which had begun in earnest several years earlier, intensified. This important new book, based on an Institute conference in October 2007, takes stock of exchange rate policy in China and identifies the major policy options going forward. Specific proposals presented in the volume address how best to eliminate any misalignment of the renminbi; how best to reduce pressures emanating from the sterilization of large reserve accumulation; how best to make capital flows the ally—not the enemy—of exchange rate policy; and what institutional arrangements and policy guidelines to put in place to reap the greatest benefits from management of China's large foreign exchange reserves. Leading experts—including three from China—have contributed to the volume. The keynote address by Wu Xiaoling, deputy governor of the People's Bank of China at the time of the conference, is also presented in the book.

Debating China's Exchange Rate Policy, edited by Morris Goldstein and Nicholas Lardy, is available for preview and purchase online.

New Book: Blue-Collar Blues: Is Trade to Blame for Rising US Income Inequality?

International trade accounts for only a small share of growing income inequality and labor-market displacement in the United States. Author Robert Z. Lawrence deconstructs the gap in real blue-collar wages and labor productivity growth between 1981 and 2006 and estimates how much higher these wages might have been had income growth been distributed proportionately and how much of the gap is due to measurement and technical factors about which little can be done.

While increased trade with developing countries may have played some part in causing greater inequality in the 1980s, surprisingly, over the past decade the impact of such trade on inequality has been relatively small. Many imports are no longer produced in the United States, and US goods and services that do compete with imports are not particularly intensive in unskilled labor. Rising income inequality and slow real wage growth since 2000 reflect strong profit growth, much of which may be cyclical, and dramatic income gains for the top 1 percent of wage earners, a development that is more closely related to asset-market performance and technological and institutional innovations rather than conventional trade in goods and services.

The minor role of trade, therefore, suggests that any policy that focuses narrowly on trade to deal with wage inequality and job loss is likely to be ineffective. Instead, policymakers should (a) use the tax system to improve income distribution and (b) implement adjustment policies to deal more generally with worker and community dislocation.

Blue-Collar Blues: Is Trade to Blame for Rising US Income Inequality?, by Robert Z. Lawrence, is available online for preview and purchase.

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New Book: The Accelerating Decline in America's High-Skilled Workforce: Implications for Immigration Policy

Policy Analyses in International Economics 84
by Jacob Funk Kirkegaard
December 2007 | 112 pp. ISBN Paper 978-0-88132-413-6

In his latest book, author Jacob Funk Kirkegaard explores the increasingly dysfunctional state of present US high-skilled immigration laws and recommends a coherent set of immediate reforms, which should aim to facilitate continuously high and increasingly economically necessary levels of high-skilled immigration to the United States. In recent decades American skill levels have stagnated and struggled to make the global top 10. As baby boomers retire, the United States risks losing these skills altogether. In response, the United States should address high-skilled immigration in its broader foreign economic policies in an attempt to remain a global leader in the face of accelerating global economic integration.

About the Author
Jacob Funk Kirkegaard has been a research associate at the Institute since 2002. Before joining the Institute, he worked with the Danish Ministry of Defense, the United Nations in Iraq, and in the private financial sector. He is a graduate of the Danish Army's Special School of Intelligence and Linguistics with the rank of first lieutenant; the University of Aarhus in Aarhus, Denmark; and Columbia University in New York. He is author of The Accelerating Decline in America's High-Skilled Workforce: Implications for Immigration Policy (2007) and coauthor of Transforming the European Economy (2004) and assisted with Accelerating the Globalization of America: The Role for Information Technology (2006). His current research focuses on European economies and reform, pension systems and accounting rules, demographics, offshoring, high-skilled immigration, and the impact of information technology.

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New Book: Russia's Capitalist Revolution: Why Market Reform Succeeded and Democracy Failed

The Russian revolution, collapse of the Soviet Union, and Russia's ensuing transformation belong to the greatest dramas of our time. Revolutions are usually messy and emotional affairs, challenging much of the conventional wisdom, and Russia's experience is no exception. This book focuses on the transformation from Soviet Russia to Russia as a market economy, and explores why the country has failed to transform into a democracy. It examines the period from 1985, when Mikhail Gorbachev became the Soviet Union's Secretary General of the Communist Party, to the present Russia of Vladimir Putin. Author Anders Åslund provides a broad overview of Russia's economic change, highlighting the most important issues and their subsequent resolutions, including Russia's inability to sort out the ruble zone during its revolution, several failed coups, and the financial crash of August 1998.

Russia's Capitalist Revolution: Why Market Reform Succeeded and Democracy Failed, by Anders Åslund, is available online for preview and purchase.

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New Book: US Taxation of Foreign Income

Since 1992, new issues have arisen in international taxation—for example, taxation of electronic commerce, novel means of shielding passive income, the World Trade Organization (WTO) debate over the foreign sales corporation and subsequent passage of the American Jobs Creation Act of 2004, the problem of corporate inversions, and alleged "earnings stripping" by foreign-based multinational enterprises (MNEs) operating aboard have used a variety of methods to cut the effective US tax on repatriated foreign source income to around 2 percent. This revised study analyzes the impact of taxes on industry location and profit shifting using new panel econometric studies. It also discusses and evaluates new paradigms that have been suggested for the international tax system.

US Taxation of Foreign Income, by Gary Clyde Hufbauer and Ariel Assa, is available online for preview and purchase.

New Book: Global Warming and Agriculture: Impact Estimates by Country

How will global warming affect developing countries, which rely heavily on agriculture as a source of economic growth? William Cline asserts that developing countries have more at risk than industrial countries as global warming worsens. Using general circulation and agricultural impact models, Cline boldly examines 2070–99 to forecast the effects of global warming and its economic impact. This detailed study outlines existing studies on the agricultural impact of climate change; estimates projected changes in temperature, precipitation, and agricultural capacity; and concludes with policy recommendations. Cline finds that agricultural production in developing countries may fall between 10 and 25 percent, and if global warming progresses unabated, India's agricultural capacity could fall as much as 40 percent. Thus, policymakers should address this phenomenon now before the world's developing countries are adversely and irreversibly affected.

Global Warming and Agriculture: Impact Estimates by Country, by William R. Cline, is available online for preview and purchase.

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New Book: Toward a US-Indonesia Free Trade Agreement

Indonesia is the largest Muslim country in the world. Would a free trade agreement (FTA) with the country be beneficial both economically and politically to the United States? What kind of benefit could Indonesia expect? This book presents a case for improved trade relations between Indonesia and the United States and recommends advancing exploratory talks toward a US-Indonesia FTA. Authors Gary Clyde Hufbauer and Sjamsu Rahardja present a detailed study of the stakes involved in the various areas of the proposed negotiation and estimate the FTA's potential for trade creation, trade diversion, and welfare under different scenarios.

Toward a US-Indonesia Free Trade Agreement, by Gary Clyde Hufbauer and Sjamsu Rahardja, is available online for preview and purchase.

Author Interview: Reverse Brain Drain for the Middle East

Tue, 29 Jan 2008 00:00:00 -0500

One strategy to improve Middle Eastern economies would be to reverse the brain drain, a development that contributed to the blossoming of the high-tech sector in Taiwan and India. Using Peterson Institute Senior Fellow Marcus Noland's book The Arab Economies in a Changing World as a springboard for discussion, Devin T. Stewart at the Carnegie Council interviewed Dr. Noland and Michele Wucker, World Policy Institute, on the current brain drain in the Middle East. The transcript is available online.

Book Release: The Arab Economies in a Changing World

Marcus Noland discussed the economic situation in the Middle East and presented his findings from his coauthored book The Arab Economies in a Changing World, at a meeting held at the InfoShop at the World Bank on November 12, 2007.

Authors Marcus Noland and Howard Pack argue in their book The Arab Economies in a Changing World that the principal challenge facing the Middle East, defined as stretching from Morocco to Iraq, over the next decade or two is job creation. The demographics of the region are such that labor force growth is on the order of 3.5 percent a year. This growth does not include increases in female labor force participation, which in fact has also been rising. Given plausible assumptions about productivity and deepening investment capital, the authors calculate that the region as a whole will have to grow at a steady rate of 5.5–6.0 percent a year over the next decade or so to create the jobs necessary to absorb this significant labor increase.

News Release: Arab Economies Face Massive Bulge in Labor Force and Require Renewed Globalization to Respond [pdf]

Washington—The Arab world faces a demographic imperative—a possible 150 million person increase in population, equivalent to two Egypts, over the next decade or so. If this daunting challenge can be successfully addressed, the region could look forward to a "demographic dividend" as a new generation enters its most productive working years. A new book from the Peterson Institute, The Arab Economies in a Changing World, finds that growing prosperity, confidence, and optimism about the future could underpin movement toward greater political openness and social tolerance.

Read the full news release online.

New Book: The Arab Economies in a Changing World

The tragic events of 9/11 and the subsequent war in Iraq have focused international attention on a nexus of problems involving economic underperformance, problematic internal politics, and externalization of domestic dissent in the Muslim world. This book examines the economics of the Middle East, with the aim of identifying changes to economic policy that could address at least the economic component of the challenges facing this part of the globe. The authors analyze the interaction of trade, productivity growth, and the political difficulties that may ensue as these countries move towards greater openness. Relevant comparisons are drawn from the experience of the transition economies and India on potentially successful policies and those likely to exacerbate existing problems.

A Choice Outstanding Academic Title for 2007

The Arab Economies in a Changing World, by Marcus Noland and Howard Pack, is available online for preview and purchase.