The Obama administration has expressed great enthusiasm about free-trade agreements with Asia and Europe, but the recent trend of global trade hasn't been positive, says Jeremy Warner
, assistant editor at The London Telegraph.
"It’s been called 'peak globalization,' and it is a good term for what is now not just a fashionable theory but an observable phenomenon," he writes.
While global trade rebounded a bit in June, "the trend is unambiguously down," he explains. Global trade volume dipped 0.5 percent in the second quarter and 1.5 percent in the first quarter. "This is the first such fall in global trade since the collapse of Lehman Brothers" in 2008, Warner notes.
"It may be that June’s bounce presages the beginning of an anemic recovery, yet scarcely anyone believes that international trade is about to return to pre-crisis levels of growth."
In the United States, a shrinking trade deficit added 0.23 percentage point to third-quarter GDP growth (3.7 percent), only the second time since 2014 that trade was a positive factor for the economy.
As for the global picture, "I’m with the optimists," Warner writes. "Yet those of us who still believe in free trade as the most effective route to prosperity . . . have a fight on our hands defending it from the forces of reaction."
Meanwhile, many experts are concerned about the ramifications of recent volatility in the financial markets. Former Treasury Secretary Larry Summers is one of them.
The Harvard professor argued in a Washington Post piece Monday that the Federal Reserve should refrain from raising interest rates soon, and he told CNBC
Tuesday that we're going through a dangerous period.
Until this week most economists expected the Fed to boost rates in September or December, but now uncertainty reigns.
"I'm not prepared to predict that we're in the midst of a crisis," Summers told CNBC. "But certainly the risks feel greater now than they have at moments in the past, and I think the orientation of policy, which had been toward resisting overconfidence, now has to again shift toward providing confidence."
There's a possibility of "significant instability," he said.
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