Author: Luke Nottage, University of Sydney

The Productivity Commission (PC) last month released a Draft Report for its Review of Bilateral and Regional Trade Agreements to reconsider the Australian government’s policy in negotiating Free Trade Agreements (FTAs). The report acknowledges the inefficiencies of preferential agreements compared to multilateral approaches and pragmatically suggests various means to maximise benefits in the short-term.

Unfortunately, that ideal is unlikely to be achieved – risking perverse implications throughout the Asia-Pacific, where Australia has concentrated its FTA activity – if the PC’s Final Report includes all of the suggestions in its Draft Recommendation 5. Read more…

Author: Purnendra Jain, University of Adelaide

Japan is likely to sign a civil nuclear cooperation agreement with India as early as when India’s Prime Minister Manmohan Singh visits Tokyo later this year. Media reports on Japanese Foreign Minister Katsuya Okada’s visit to New Delhi last month reveal that negotiations for an agreement are already under way. This is a remarkable development given Japan’s international pre-eminence as a voice against nuclear proliferation and its continued strong criticism of India’s nuclear policy, voiced most loudly in response to India’s nuclear tests in 1998.

Why has Japan changed its position? Read more…

Author: Peter Drysdale, ANU

Today, after a remarkable three weeks in which there was almost total uncertainty about which of the major Australian political parties would be able to form government following the recent federal elections, Julia Gillard has been confirmed as Australian Prime Minister. Ms Gillard first became Prime Minister when former Labor leader, Kevin Rudd, was ousted in June in a surprise Party coup and, last month, took the country to the polls a little early to confirm her mandate to govern.

The result was an historic hung parliament with four regional independents and a Green Party member left to the task of determining which of the major parties they would back on ‘no confidence’ and ‘supply’ bills to guarantee stable government over the next three years. Read more…

Authors: Raghav Gaiha, MIT/University of Delhi; Raghbendra Jha, Australian National University and Vani S Kulkarni, Yale University

Recent studies on food intake and incomes in India are puzzling. Despite rising incomes, there has been a sustained decline in the per capita calorie intake. In an important contribution, A Deaton and J Dreze offer a detailed analysis of the decline in calorie intake in 1983-2004.

Average calorie consumption was about 10 per cent lower in rural areas in 2004-05 than it was in 1983. The proportionate decline was larger among the more affluent sections of the population. In urban areas, there was a slight change in average calorie intake over this period. Read more…

Author: Kaliappa Kalirajan, ANU

Developing countries embark on economic liberalisation to close the gap between their potential and actual economic performances. Liberalisation measures are aimed at eliminating structural and institutional rigidities which are a drag on economic performance, promoting export growth and attracting greater flows of FDI. Success induces further structural change through technology transfer, and sustains the overall economic performance of an economy. The outstanding example of this is the case of China.

Critics argue that liberalisation leads to increased inequality, which at times may even aggravate absolute poverty among some groups in certain regions. Read more…

Author: Peter Drysdale

At the end of last month, quarterly GDP data revealed that China surged ahead of Japan to become the world’s second biggest economy, in aggregate and measured in current exchange rate terms — a first in modern times. Japan’s seasonally unadjusted GDP totalled US$1.29 trillion in the second quarter, slightly less than China’s US$1.34 trillion, in current dollar terms. As Justin Li in this week’s lead essay points out, this development had been widely anticipated as a major landmark in the shift in the structure of Asian economic power.

In reality China’s has been a bigger economy than that of Japan for at least close to a decade, measured in real terms (or in purchasing power parity) not in terms of nominal GDP converted at current exchange rates. Read more…

Author: Justin Li, ICE

On 16 August, the Japanese Cabinet Office released Japan’s quarterly economic statistics. Its seasonally unadjusted GDP totalled US$1.29 trillion in the second quarter, slightly less than China’s US$1.34 trillion. This confirmed what pundits have been predicting for some time — that China’s GDP would surpass that of Japan this year.

China has finally managed to reclaim its coveted position as the premier nation in East Asia after more than three decades of reform and opening up to the wider world. In fact, China’s real GDP overtook that of Japan in 2001 measured at Purchasing Power Parity, according to the International Monetary Fund (IMF). Read more…

Author: Joel Rathus, Adelaide University

On August 25, Japan’s Foreign Minister Okada announced the transfer of 100 diplomats from offices and duties in the developed nations to assignments on emerging economies.

The shift in focus away from traditional western powers towards countries like India, South Africa, Brazil and Turkey will be brought about through the creation of an ‘Emerging Countries Bureau’ at the Ministry of Foreign Affairs. Read more…

Authors: Yiping Huang and Bijun Wang, Peking University

Despite its extraordinary growth performance during the past decades, China’s structural risks have also increased significantly.  Premier Wen and other senior leaders have repeatedly emphasised that the existing growth pattern is unstable, unbalanced and unsustainable.

One of the most widely identified imbalance problems is the rising share of investment in GDP, which increases the risk of excess capacity and low returns. Read more…

Author: Renu Kohli

India’s labour market is in for a vigorous shake up over the next few years. The inexorable march of market forces, and their interplay with the structural and political dynamics of the country, could end up drawing many unemployed persons into the job market.

India is still far from creating mass jobs in large-scale manufacturing. But over the medium term, absorbing such unutilised human capital will help preserve the economy’s competitiveness in an environment of rapid growth. Read more…

Author: Yanrui Wu, UWA

After three decades of rapid growth, the Chinese economy is now at a crossroads, heading towards the next phase of development. While China’s economic growth has indeed been phenomenal, it has also been resource intensive and environmentally damaging.

For high growth to be sustained in the coming decades, the role of technological progress has to be boosted. This can either occur through technology transfer flows from abroad, or through indigenous innovation. While the former has been widely discussed, the latter has largely been under-documented. Read more…

Author: Aidan Foster-Carter, Leeds University

Kim Jong-il headed to China at the end of last month less than four months after his last visit. This timing was the more surprising since it meant he missed Jimmy Carter. The former US president arrived in Pyongyang to secure the release of a US prisoner Aijalon Mahli Gomes: a 30 year old black Bostonian, who had taught English in South Korea and was arrested in January when he apparently walked into North Korea from China to preach the Gospel. For this act of trespass the DPRK Central Court sentenced him on April 6 to eight years’ hard labour and a fine of 70 million won (about US$490,000 at the official rate). In July Gomes had reportedly attempted suicide.

There is a double déjà vu here. Gomes seemed to be copying his friend and fellow Christian human rights activist Robert Park, a Korean-American who pulled the same stunt a month earlier on Christmas Day 2009. The DPRK unexpectedly released Park after only 43 days. Read more…

Authors: Sherry Tao Kong, Xin Meng and Dandan Zhang, Australia National University

The global financial crisis (GFC) reduced export orders sharply and led to a decline in China’s economic growth.  As China’s exporting industries are labour intensive and most likely to employ rural migrants, it was widely believed that the GFC has had significant negative impacts on the employment and/or wages of rural migrants.

Reflecting this, at the height of the crisis, laid-off Chinese migrant workers protested outside closed factories and millions lamented lost jobs and embarked on journeys home. Read more…

Author: Ashima Goyal, IGIDR

Change is afoot in the area of Indian financial regulation. A Delhi-based body (the proposed Financial Stability and Development Council) is set to supplant existing the existing regulator, the High-Level Coordination Committee. This follows a series of committee reports that sought to shift power away from Reserve Bank of India (the RBI) towards market development.

These twin shifts are a mistake. They ignore the performance of the RBI during the global financial crisis. They also place greater power in the hands of elected officials, which is problematic. Read more…

Author: John D Conroy, FDC

Enthusiasm for microfinance has surged since Professor Yunus and his Grameen Bank shared the Nobel Peace Prize in 2006. APEC Finance Ministers will be asked to adopt an initiative on ‘financial inclusion’ when they meet at Kyoto in November. Unfortunately, this coincides with a wave of financialisation in the ‘micro-lending’ sector of the industry, a phenomenon Yunus deplores. As events unfold, micro-lending may come to provide an uncomfortable analogy, in terms of credit ‘bubbles’ and systemic damage, with ‘sub-prime’ home mortgage lending. APEC should avoid endorsing negative aspects of financialised microcredit.

Thinking about financial services for the poor has evolved since the 1980s, when Yunus pioneered micro-lending. Read more…