Brazil and Trade Developments
July 1, 2007
The global trading system is currently in the process of a major transformation, and the rise of Brazil is part of that tectonic shift. Over the past three decades, the international economy has undergone a massive transformation as globalization has connected national economies and economic power has spread from developed to developing countries. The world economy has been transformed due to revolutions in technology, computing, communications, and transport technologies. The rapid integration of world markets has heightened competition not only for goods and services, but also for labor capital, knowledge and ideas. World economic growth has now reached its highest level in 30 years.
A larger trade debate is taking place in Washington on the trade-offs of competitive liberalization of markets in the context of globalization, and the analysis is seemingly grim. Most notable is the U.S. trade deficit with China which has increased from $57 billion in 1998 to $233 billion in 2006, although the U.S. unemployment rate in 2006 was a mere 4.6%, and according to the Federal Reserve, U.S. manufacturing output in 2006 was 20% higher than in 1998. China has also reiterated its unwillingness to adjust its undervalued exchange rate even with its capital reserves of $1.2 trillion now the highest in the world. These reserves have accumulated largely from China’s export performance and have been converted into foreign-exchange reserves to prevent domestic inflation.