Issue 7 | Sept. 23, 2011

U.S. Announces Major Trade Enforcement Action Against China
The United States Trade Representative Ron Kirk filed a complaint with the World Trade Organization, stating that China violated international trade rules by imposing tariffs on U.S. chicken exports. The tariffs ranged from 50 percent  to 100 percent, driving up prices of U.S. imported chicken in China to double their U.S. prices. The tariffs, enacted in Sept. 2010 by the Chinese government, are said to counter low export prices due to U.S. subsidies. Countries are permitted to impose punitive tariffs to counter both practices, but the U.S. claims China did not follow proper procedure when enacting them. The tariffs have dropped chicken exports by 90 percent, which is expected to cost the U.S. $1 billion by the end of the year.

July Trade Gap Narrows
The U.S. trade deficit fell 13.1 percent to $44.8 billion in July. Exports rose to a record $178 billion, as manufacturers sold more cars, airplanes and industrial machinery abroad. Imports decreased 0.2 percent to $222.8 billion, due to a drop in the price of oil, which drove imports of the resource down 6 percent to $35.5 billion. The trade deficit with China, however, rose 1.1 percent to $27 billion, the largest imbalance since Sept. 2010. Trade with Japan began to return to pre-earthquake levels, with the deficit between the two countries rising 30 percent to $5.3 billion.

California Exports Increase
The number of exports from West Coast ports is increasing.  More than 300,000 20-foot containers of goods left the ports of Los Angeles and Long Beach, an increase of 12 percent from a year earlier. Imports still outnumber exports, but that gap is slowly decreasing.  More than 600,000 loaded containers entered the two ports last month, down 9 percent from a year earlier.

IMF Cuts Global Growth Forecast
The International Monetary Fund (IMF) predicts “severe” repercussions if Europe defaults on its debt. According to the IMF, the world economy will grow by 4 percent this year, down from 4.3 percent in June forecasts. The IMF also predicts Europe and the United States could fall into another recession, causing global output to fall by 3 percent.

Liquidity Fix Not Enough for Europe Investors
Top investors are demanding more aggressive capital injections from the European Central Bank. Demand for short-term loans is in decline due to their exposure to government debt from troubled euro zone countries. Investors fear Greece will struggle to pay its debts, since it has been pushed to adopt a severe austerity plan of tax hikes and spending cuts. Investors fear it is only a matter of time before the recession hits top European Union economies.

Emerging Market Countries Buy European Debt
Brazil, Russia, India and China nations (BRICS)  bought debt through the European Financial Stability Facility (EFSF) to help euro zone economies. EFSF is rated AAA by rating agencies, which means its investment in debt is close to risk-free. Other emerging economies are skeptical about buying debt, thinking it is too risky.

Bank of China Halts Foreign Exchange Trading with European Banks
The Bank of China stopped foreign exchange forwards and swaps trading with several European banks in light of growing concern over the European debt crisis and the recent rogue trading scandal by Swiss bank UBS. Banks across Asia have been cutting credit lines to European banks in recent months, fearful of a default by Greece or any of the other economies from Portugal, Italy, Greece and Spain.

South Korean Retail Sales Growth Slows
Retail sales growth rates for non-food items slowed down August in South Korea. Department store sales rose by 7.1 percent in August from the previous year, down from the 7.9 percent rise year-on-year in July, and the weakest growth since Sept. 2010. The new data adds to evidence of cooling in the South Korean economy, the fourth-largest in Asia.