New EU Budget Revealed

The first post-Brexit European Union (EU) budget plan is causing tension between the region have’s and have-nots. The 2021-2027 EU budget was revealed on Wednesday by Budget Commissioner Guenther Oettinger. The financial hole left by the exit of the UK is a big gap to fill and the new budget reflects that shortfall. The hole will work out to be a deficit of €12-14bn annually, which will need to be made up through a combination of increased demands on other member nations, as well as cuts in spending elsewhere.

The current 2014-2020 budget accounts for approximately 1% of the 28-member county’s total gross national income (GNI). The new budget will clock in at about €1tn (£879bn; $1.2tn). This represents an increase of about .1% of total GNI, which equates to approximately €1.28tn spread over the seven years of the budget period.

The new budget proposal is far from a done deal. Politicians and economists are preparing for months of debate leading up to the vote to approve the new plan. Under EU rules, all member countries must approve the proposal with a unanimous vote. The EU budget officials will aim to have the plan approved prior to next May’s European Parliament elections. Other hot-button issues will surely be brought into the battle over the budget to use as leverage. Included among these issues is the debate over the EU’s obligation to take in fleeing refugees and anger that some countries are pulling more than their fair share of the weight.

UK February Consumer Price Inflation Rates Drop

Consumer price inflation in the UK dropped 0.3% in the month of February, the lowest data point since July 2017. Financial experts point to lower petrol prices combined with a slower rise in food costs as the reason for the drop. Heading into the month, price inflation had sat at 3%, but the month ended at 2.7%.

 

Diesel costs fell 0.1p per liter, while overall petrol prices fell by 0.2p per liter. The cost of food only increased 0.1% between the months of January and February. This small increase contrasted to a total rise of 0.8% for the year 2017. This smaller rise was to be expected since last year’s big increase was largely attributed to a shortage of vegetables due to poor weather in the southern Mediterranean negatively affecting export prices.

 

Consumers now look to the Bank of England to determine if interest rates will remain steady or if the Bank will continue with its anticipated plan to raise these rates at its May meeting. The Bank is hopeful that the economic future is bright for the country, as it has previously stated that it expects wage increases to outpace inflation in the coming year. Financial employment experts are confirming this optimism as data points to a wage increase of 2.6% over the first three months of 2018. The official pay growth data will be released on Wednesday by the Office for National Statistics (ONS).

UK Seeking Exemption From US Steel Tariffs

UK Trade Secretary Liam Fox is traveling to the United States and meeting with government and economic officials in an effort to seek exemption from the newly announced US steel and aluminum tariffs. Two weeks ago, President Donald Trump declared that his country will begin imposing a 25% duty on imported steel and a 10% tariff on imported aluminum with the goal of strengthening and protecting the internal US production of those materials. Trump believes that the US production of steel and aluminum has suffered due to unfair trade regulations and his objective is to boost the domestic market for these industries.

In a response to these tariffs, the European Union said it will be requesting an exemption of the duties for all of its 28 member countries, including the UK. Many countries, including influential China, have criticized Trump’s new trade plan, which goes into effect in just two weeks. Neighboring nations Mexico and Canada were granted a temporary exemption from the tariffs due to their partnership in the North American Trade Agreement (NAFTA). The US risks alienating many of its most important global allies and these countries have already threatened to bring this matter in front of the World Trade Organization (WTO).

Trade Expert Addresses the Additional Effects of U.S. Tariffs

The plan by President Donald Trump to impose tariffs on certain imported products has raised concerns beyond the fear that such a policy could increase costs for American businesses and consumers. One economic observer believes that a “trade war” could reduce foreign investments, resulting in even more serious consequences for the U.S. economy.

Susan Aaronson, a professor of international affairs at George Washington University and an expert on trade policy, expressed the belief that such a policy could weaken the image of the United States as a reliable trading partner and thus a good place to make an investment. This is significant when considering that foreign businesses or organizations comprise approximately one-third of the investors in the American stock market. Additionally, about the same number of foreign entities own American treasury bonds, which are used to finance the American government and its many services.

In a theory outlined by Aaronson, foreign investors may turn against the United States for the imposition of tariffs and retaliate by discarding the bonds they have purchased. The result could be a dramatic increase in the cost of borrowing, with the effects falling on the U.S. government, corporations and even American citizens. Learn more about the possible consequences of a “trade war” at www.reddit.com/r/Economics.

According to Aaronson, the main resistance might come from America’s closest trading partners, including Canada, the European Union and Japan. When recommending the imposition of tariffs, Aaronson said that American leaders should first consider who will benefit and who will be harmed by the policy.

Capitalism and White Working Class Americans

Is capitalism, as an economic policy, something that benefits everyone? New research done by a Nobel Peace Prize winner shows that it has some disadvantages.

In Angus Deaton’s research, he found that mortality rates were rising for working class Americans ever since 1999. This is only in regards to white working class Americans.

Deaton attributes this to a change of life and lower wages for many Americans. In a way, it can be compared to how Native Americans experienced a change of lifestyle when the settlers came and started settling in America. This current change of life can be attributed to many things. Globalization and technology are just two of them.

Angus pointed out that there are ways we can improve this. For example, our healthcare system can be improved. The healthcare system wastes a lot of money. If we took this money and put in back into workers’ wages, then workers would be healthier emotionally and would be in better shape.

Angus also pointed out that many people become rich at the expense of others. Angus has no problem with people making smart inventions and becoming successful. The problem lies with people who lobby Congress to make deals that would benefit them at the expense of the working class.

There are still some unanswered questions. Median wages have dropped in Britain, but they have not experienced the same rise in mortality rates.

African Trade Said to be Significantly Enhanced by CFTA

Forbes magazine reported the latest developments regarding CFTA, technically known as the Continental Free Trade Area. CFTA is making the African continent the largest free trade zone on the planet.

 

Countries from Egypt to South Africa have joined the pan-African trade deal. According to the African Union, the objective has been to have CFTA in place before the end of 2017.

 

In the absence of CFTA, intra-African trade accounted for about 12 percent of total trade on the continent. This contrasts with about 60 percent in Europe and approximately 40 percent in North America.

 

The implementation of CFTA has not been without at least some controversy. This is seen in regard to other free trade agreements involving multiple nations around the globe. Nonetheless, support for the trade agreement has generally been relatively strong across the African continent.

 

With the implementation of CFTA in Africa, nearly all points on the planet will participants in broader free trade agreements. Having said that, there have been isolated movements away from these agreements, most notable the United Kingdom in the process now known as Brexit. In addition, U.S. President Donald Trump has taken steps to pull back the participation in certain multi-nation free trade agreements. With that said, overall the movement internationally has been to create, rather than avoid or dissipate these types of pan-national trade agreements similar to CFTA on the African continent.

China and the US Come To Deal on Rice

China and the United States were negotiating some recent economic policies this week, but those talks mostly appeared to have fallen through without much progress in Sino-American relations.

However, a new announcement indicated that the rice market in China is being opened up to American companies for the first time. China first opened up twenty years ago, namely for Asian suppliers. China is the largest consumer of rice in the world and opening up these markets to American producers should allow them to increase revenues.

China imports about five million tons of rice per year, spending up to $1 billion when doing so. This is more than the United States exports which is approximately three to four million tons per year. Still, the deal with the United States will allow the country to diversify away from Asian producers and have several options for importing the stable food in China.

China was previously able to feed itself with rice, but has experienced challenges in doing so, namely in relation to their rapidly aging population which is not able to produce the rice needed by the population. Further, the quality of the soil is depleted and pollution problems contribute to the inability to feed the population with internally produced rice.

The U.S. President, Donald Trump, and his administration, has made a point of attempting to reduce the trade deficit that exists with China by opening up several different industries that China restricts foreign investment with, as well as manipulating their currency. China’s economy is rapidly expanding and growing and is the second largest economy in the world and is poised to become the largest in the next century, namely as a result to their large population.

Chinese officials will inspect U.S. rice supplies before allowing U.S. exporters to import to their country. This may be the first step to opening up a potentially large market.

Latest News Concerning the World Economics and Economic Policy

World economics is the global trade of goods and services in the form of cash. At times, some people refer global economy as the global or international financial system. The rise or fall of the economy is the determining factor for the expansion of international businesses. Consistent stock exchange results in the quick development of the world economy.

Economic policy is the steps taken by various governments in the world to venture into the trade and industrial fields. Additionally, it involves setting heights of interest rates, labor markets, national budgets, tax variations and supply of money. Economic policy is majorly for the thriving of the world economics. Hence, a well set economic policy results in a tremendous growth of the global economy.

Top World Economies

Currently, United States has the best economy in the world. However, its position is lately in a threat by the China’s fast growing economy. The advanced technology, plentiful natural resources, and outstanding infrastructure are the factors that have made U.S feature out as the superpower of the world economy since the beginning of ranking in 1871.

According to the 2017 estimates by the International Monetary Fund’s World Economic Outlook Database, the top ten world economies include United States, China, Japan, Germany, United Kingdom, India, Brazil, Italy, and Canada simultaneously. The nominal rates of the ten economies contribute more than half of the world economy.

China’s Rise and Threat to the World economic Superpower

For the last 30years, the economic development performance of China has been impressive. According to the World financial analysis, China posted the highest gross domestic product surpassing the U.S economy in 2014. Since then, it has been a significant threat to the United States.

United States Financial Plan to Raise Their Economy

The stiff competition from various nations like China makes the U.S economists come up with new unique economic ideas. Currently, they have come up with a strategic plan to improve their economy. The method includes inoculation of capital for the banks to absorb unpredictable losses and to open out Fed’s program to sustain lending of services to the consumers. U.S focuses on maintaining their pace as the economic giants in the globe.

Economic Talks Between US and China Fall Apart

Talks with China appear to have broken down over revising the economic policy and opening up China to more trade with the United States. In scheduled talks, Wilbur Ross and Steve Mnuchin broached the topic of opening up China to more United States competition which the Chinese government has balked at.

China is currently protecting many facets of their economy, thereby protecting jobs in their country. The United States currently does not have any tariffs or restrictions on Chinse companies operating in the United States which many individuals have indicated lead to unfair treatment on the part of China.

The United States has been attempting to ease these regulations as well as confront China about currency manipulation that places United States exporters at a disadvantage to the United States. Many are indicating that the United States should implement new tariffs to combat these forms of governmental support.

President Donald Trump has indicated his intention to place a 55% tariff on Chinese goods, though many are attributing this to bluster and think a course of action such as this unlikely. China would likely reply with a tariff of their own which could have a major impact on the world economy. A trade war between the United States and China could potentially push the world economy into a recession and threaten many notable industries that the U.S. has significant exports to China including soybeans, technology, and a wide range of food products.

Wilbur Ross and Steve Mnuchin announced that the talks with China will continue and believe that their differences will be ironed out to the mutual satisfaction and benefit of both China and the United States. While talks will continue, they will do so absence of any concrete results from these discussion, along with much uncertainty about the future of Chinese and American economic relations.

China’s and the U.S. Economic Policy: The World’s Strongest Nations are Planning Ahead

China has the world’s second largest economy and the United States is the world’s premiere economic nation. Both of these countries wield considerable influence across the globe. China’s primary trade partners are Hong Kong, Japan, South Korea, Germany, Vietnam and of course the United States.

The United States has trade partners as well. The nations they primarily do business with include Canada, Japan, Mexico, the European Union and China. Both of these nations are the top two economic powers in the world. However, they do not agree on a lot of economic and business policies and issues in general.

China has a growing national debt that is threatening its stability. The U.S. is struggling with slow economic growth and productivity. Both nations have to trade with each other and they both have to establish policies that will help each other and other nations around the world.

America has to proceed with caution with how it deals with China. They do not want to make trade difficult with this nation, otherwise they could inadvertently cause China import prices to rise. This in turn would force the average American person to pay more money for the products they consume. Don’t forget that China makes a lot of the products that American people use.

Chinese people have to be mindful about cutting out the prosperity that the U.S. brings to their nation. With at least 300 million people living on less than $3.10 a day, China needs to keep creating products for the U.S. so that more jobs will become available for their population.

The two governments are set to discuss their economic policies and difference at a conference in July of 2017. They will try to figure out what will be the best policies to use regarding trade, economic stability and growth. This gathering between both nations is extremely important because they will in fact be creating policies that will impact the rest of the world. More information about China’s and America meeting is available in Fortune.