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The Czech Republic exports only a small number of cars and car parts directly to the United States, but it’s likely to suffer significant economic damage if that country were to impose tariffs on auto imports. The reason: the Czech Republic supplies parts that are used to build cars exported by other European countries. Europe’s auto industry is one of many that are part of global value chains, in which different stages of manufacturing are dispersed among several countries. Because almost 70 percent of European exports are linked to value chains, tariffs imposed on products shipped by one country can affect many others. That is why, as we explain in a recent study, it’s important to view manufacturing through the prism of value chains when assessing the potential economic impact of tariffs or other economic shocks. Two yardsticks To do that, we need to distinguish between two yardsticks: gross value and value added. When a German resident buys a Volkswagen shipped from a...

The government in Oslo spending billions of oil export dollars to help the affluent buy an electric second car they wouldn’t otherwise want is European environmentalism at its phoniest and most hare-brained. It’s not that you can’t financially encourage societies to be more planet-conscious, but this charade of perverse incentives, inefficiencies, and negative side effects is not it. Norway’s electric car miracle is primarily one of numbers. Last year, EVs accounted for 49.8 percent of all cars purchased in the country, and so far this year three in five new cars bought in Norway are electric. For comparison, 2.1 percent of new cars registered in the US last year were EVs, while for the EU the figure is even lower – 0.9 percent. Thus, with a population of only 5 million, Norway has become the world’s third biggest electric car market. This has burnished the Scandinavian country's credentials as a land populated by uniquely-ethical people. But how has this incredible out...

Prime Minister Narendra Modi has made exports a high priority. Indeed, India would do well if it gave them the highest priority and pursued their success in mission mode. No nation has sustained growth rates of 9-10% for two or more decades without succeeding in global markets. China’s share in global merchandise exports rose from 2% in 1991 to 12.4% in 2012. These two decades saw China fully transform from a primarily agrarian to a modern industrial economy. Today, India’s share in global merchandise exports remains low at 1.7%. In 2000, when China’s GDP was no more than India’s today, it already accounted for 4% of global merchandise exports. Sustaining high growth and creating good jobs will require a strategy centred on building an exportfriendly ecosystem in the country. The starting point for this strategy is shedding three of our current obsessions: import substitution, micro and small enterprises, and a strong rupee. Import substitution has never produced sustained ...

A few days ago, when talking to an the assembled chief ministers of India’s states, Prime Minister Narendra Modi declared that he wanted India to be a “$5 trillion economy” by 2024, when he once again faces reelection. This would, he said, be “challenging, but achievable.” Modi could never be accused of lacking ambition, but the fact is that getting India’s GDP to $5 trillion in five years will be far more challenging than achievable. India is, currently, a $2.8 trillion economy; to reach the $5 trillion mark by 2024, the economy would require nominal growth in dollar terms of over 12% a year. To put this in context, in the last quarter for which data is available, India grew at slower than 6% in real terms — and, if you believe the Modi government’s former top economist, that data is flawed and India may well be growing a few percentage points less than that. India could and should aspire to double-digit growth. Without sustained growth at that level it has little hope of em...

In her Budget speech, finance minister Nirmala Sitharaman said that India would start borrowing in external markets in external currencies. This is a marked change from the past when India issued government bonds in rupees, and borrowed in foreign exchange only from official lenders like the World Bank. Two possible rationales in the speech are that, first, “India’s sovereign external debt to GDP is among the lowest globally at less than 5%” and, second, this will “have [a] beneficial impact on [the] demand situation for the government securities in domestic market”. The first is not really a rationale. India’s sovereign external debt is low precisely because past policymakers worried about the risks of issuing in foreign currency. Indeed, Arun Jaitley wrote in the finance ministry’s own status paper on public debt published in February 2018 that “Most of the debt is of domestic origin insulating the debt portfolio from currency risk.The limited external debt, almost entirely fro...

In 2010, scientists warned we’d already built enough carbon-dioxide-spewing infrastructure to push global temperatures up 1.3 ˚C, and stressed that the fossil-fuel system would only continue to expand unless “extraordinary efforts are undertaken to develop alternatives.” In a sequel to that paper published in Nature today , researchers found we’re now likely to sail well past 1.5 ˚C of warming, the aspirational limit set by the Paris climate accords, even if we don’t build a single additional power plant, factory, vehicle, or home appliance. Moreover, if these components of the existing energy system operate for as long as they have historically, and we build all the new power facilities already planned, they’ll emit about two thirds of the carbon dioxide necessary to crank up global temperatures by 2 ˚C. If fractions of a degree don’t sound that dramatic, consider that 1.5 ˚C of warming could already be enough to expose 14% of the global population to bouts of severe heat, m...

China has been steadily accumulating U.S. treasury securities for decades. Additionally, trade data from the U.S. Census Bureau shows that China has been running a big trade surplus with the U.S. since 1985. This means that China sells more goods and services to the U.S. than the U.S. sells to China. The question is, is China—the world’s largest manufacturing hub and an export-driven economy with a burgeoning population—trying to “buy out’ the U.S. markets through its debt accumulation, or is it a case of forced acceptance? This article discusses the business behind the continuous Chinese buying of US debt. Chinese Economics China is primarily a manufacturing hub and an export-driven economy. Chinese exporters receive U.S. dollars (USD) for their goods sold to the U.S., but they need Renminbi (RMB or Yuan) to pay their workers and store money locally. They sell the dollars they receive through exports to get RMB, which increases the USD supply and raises demand for RMB. China...

More than 600 million Indians face “acute water shortages,” according to a report last summer by NITI Aayog, a prominent government think tank. Seventy percent of the nation’s water supply is contaminated, causing an estimated 200,000 deaths a year. Some 21 cities could run out of groundwater as early as next year, including Bangalore and New Delhi, the report found. Forty percent of the population, or more than 500 million people, will have “no access to drinking water” by 2030. India gets more water than it needs in a given year. But the vast majority of rain falls during the summer monsoon season, generally a four-month window. The country’s other major source is melting snow and glaciers from the Himalayan plateau, which feeds rivers in the north. Capturing and delivering the water to the right places at the right times across thousands of miles, without wasting or contaminating tremendous amounts along the way, is an enormous engineering challenge. India captures and uses o...

 Russian-backed Indian refiner Nayara Energy is set to secure its biggest fuel-backed loan, a $1.5 billion advance from Trafigura, BP and some banks, according to industry and banking sources familiar with the matter. It takes the total size of Nayara’s pre-payment deals to nearly $3 billion despite concerns over U.S. sanctions. The company, previously owned by the debt-laden Essar Group, is gradually raising its profile on India’s energy map. It is scouting to secure its future revenue streams by locking in export financing deals. Trafigura and oil major BP are in the process of syndicating a $1.5 billion loan to be repaid with future gasoline and gasoil cargoes from the refinery over four years, the sources said. The syndication is expected to be completed before the end of the year, they said. Nayara, formerly Essar Oil, was taken over by a consortium led by Russian oil major Rosneft in 2017. Rosneft owns 49.13 percent of Nayara, while Russian fund UCP and Swiss commodi...

Watching the drama of Russia’s private banks collapsing one by one naturally triggers fear: of more than 3,000 registered banks, about 2,600 have already lost their licenses. After the bailout of Otkritie and BIN, the government’s share in Russia’s banking system assets exceeds 80 percent. Fixing Russia’s banking system requires addressing the deep and systematic flaws in the central bank and the financial sector at large. The contemporary Russian financial system began to emerge twenty to thirty years ago on the ruins of the Soviet banking structure, which was unable to serve the evolving demands of the nascent free market. In the “wild 1990s,” the financial system was rife with profitable but gray activities, including the accumulation of liquidity for privatization investments, the illegal export of capital, tax evasion, and money laundering. Every local “oligarch” had his own bank, and geographic expanse and the informality of economic ties helped create a very fragmented banking...