Showing posts from June, 2015

Export Import Bank debate in the US

Ex-Im Bank of the USA  is a federal government backed institution which specialises in trade finance. It is similar in functions to I ndia's Exim bank  except that Indian Exim bank doesn't get into trade insurance, which is handled by another body called Export Credit Guarantee corporation of India . In fact, India's Exim bank copies most of the functions of US Ex-Im bank given that US institution predates Indian one by more than five decades.  US Ex-Im bank is under threat of being de-authorized , unless the US congress re-authorizes it shortly.  The bank's critics, mainly the republicans, bank on the argument that such subsidising banks lead to market distortion and help private sector players, and therefore, they are a form of corporate welfare scheme. They choose the winners in the private sector by choosing whom to help by providing easy access to credit for international trade. It is nothing but crony capitalism in another form, subsidising the rich. 

The frigidity of Indian Exports

The trade figures for May 2015 are here . The trade decreased, both in terms of exports and imports.   Exports were down by around 20% this month over last year, and imports were down by around 16%.  We exported around 22 Billion USD of merchandise in May and imported around 32 Billion USD worth of goods. At this rate, we would be lucky to touch the figure of USD 300 Billion of exports by the end of year.  On services front, the net services earning stood at around 5.6 Billion USD. A new foreign trade policy was released last month, with a stated aim of doubling the exports in next five years. The last sentence of the above paragraph is in contrast to all other sentences. Therein lies the problem in making policies that target the outcomes that rely on multiple underlying factors. We can't just double exports without addressing the fundamentals that lead to better export performance.  Now, there are reasons as to why the figures are not encouraging. Oil prices are low. Th

The ITA II at WTO and India's stand

Way back in 2012, I had written about how India is wrong in opposing ITA 2 agreement at WTO blindly. You can find it here . ITA 2 is the Information Technology agreement - Version 2, that is currently being negotiated at WTO. The agreement is solely a tariff cutting mechanism in the trade of IT hardware products. India was a signatory to the first version, and rightly or wrongly blames it for the poor state of electronic hardware manufacturing industry in India today. India has strongly opposed any expansion of product coverage under the deal. You may read the news reports  here and here . The premise is, if we cut the import duties on electronic goods, our domestic electronic manufacturing would suffer as it would then be easier to import than to produce locally. In the light of time that has elapsed since the last post,  I thought I should revisit the issue. Meanwhile, Krugman has opposed USA's trade deals , the transpacific and transatlantic deals that are under di