As globalization grows and the world economies shift, what is it the best investment?

Emerging market investment is certainly full of opportunities but not without risk. Equity isn't the only option when it comes to emerging markets. There is an ample field of fixed income category that has grown over time and emerging markets debt has become a worthwhile asset of its own.

The Fixed Income Market

Global fixed income covers a variety of debt obligation types: bank certificates of deposit, bonds, loans, and commercial paper, among others.

The unique feature of these products is a legal contract for the issuing entity to pay the creditor a stated rate of interest plus the full principal invested over a defined time period. “This contractual obligation is what makes fixed income a lower-risk asset class when compared with equities. Issuing entities include sovereign and municipal governments, government agencies, corporations and special purpose vehicles (SPVs) backed by assets such as mortgages, auto loans or credit card receivables or asset backed-securities.” Most tradable fixed-income securities have a credit quality rating from a rating agency such as Moody's or Standard & Poors which helps investors realize an assessmentof an individual bond's creditworthiness.

According to the Bank for International Settlements, (BIS), the size of the global bond market was $82.2 trillion in 2009, making it the world's largest investment market. More than half of that figure is debt issued outside the U.S. The size of the world equity market is estimated to be about $36 trillion. Bond market growth has come from different sources, in the issuance of new product types and an increase in the number of countries willing, able and qualified to participate in the international sovereign and corporate debt markets.

Emerging market debt had its origins back in the 1970s, when multinational banks in the U.S. and Europe were active lenders to the governments of developing countries, specially, in Latin America.

The world economy experienced difficulties in the late '70s and early '80s, from a steep rise in oil prices, double-digit inflation and high interest rates. These factors led a number of less developed economies to fall behind on their external debt servicing obligations which led to the Mexican debt crisis of 1982, followed by other countries under these conditions multinational banks found themselves holding a bag of nonperforming debt assets.

But new opportunity came out of this crisis; U.S. and European banks began swapping their nonperforming loans and by the late '80s this practice had grown into a reasonably systematic market, which was initiated with the Brady Plan in 1989. This plan was named after U.S. Treasury Secretary Nicholas Brady serving at the time.

The Brady-based bond market was an early instance of “securitization”: the creation of trad-able securities backed by specific assets and cash flows. Banks were able to convert their outstanding LDC loans into Brady bonds, which were trad-able instruments, denominated in U.S. dollars and collateralize by U.S.Treasury Bonds. “ Secured Brady bonds allowed the banks to systematically write down the nonperforming loans on their balance sheets. In 1990 Mexico issued the first Brady bond and the market responded by growing to the sum of $190 billion, which represent 13 countries in its first six years.

At the same time, the world economy was going through major changes. The Berlin Wall was torn down and the economies of Eastern Europe and the former Soviet Union joined the global community. In the southeastern part of the world China, India and the markets of Southeast Asia were rapidly evolving into high-growth, prosperous economies. As these economies grew in size and creditworthiness, the global debt and equity markets tagged along. Capital was flowing from the developed markets of North America, Europe and Japan into emerging markets, which became the alternative term for LDC countries. A large portion of this investing was speculative, which included hedge funds and others seeking to gains from the potential returns offered by the liberalizing markets.

However, growth on the fast lane got ahead of itself and liberalization outpaced the implementation of a sound legal and economic infrastructure. Weak banking systems and current account deficits made these countries vulnerable to external financial shocks. In 1997 Thailand's currency, the Thai baht, depreciated by more than half; the Korean won followed shortly thereafter, with a 70% plummet.

This uncertainty by the currency shocks led to massive capital flight from the region, causing local bond and stock markets to nose-dive. But, the crisis didn't stop at the steps of Asian countries when investors perceived emerging markets as a single asset class and cashed out of their holdings in Eastern Europe and Latin America as well as Asia in a massive flight to safe capital heavens. But bad things didn’t stop there as the Russian government defaulted on its outstanding debt obligations in August 1998. This created massive global financial dislocation including the well-publicized meltdown of the massive hedge fund Long Term Capital Management in the fall of 1998. In 2007–8 the mortgage financial crisis brought the world capital markets to its knees with the threat of a financial melt down in the US economy. The Obama administration was able to save the day by issuing a large financial package to rescue the failing banking system followed by stiff regulations to prevent a repeat with critical mass.

In 2017 currency manipulators ran down the value of the Mexican peso as NAFTA became an issue for the Trump administration and uncertainty about the outcome of inter-connectivity of the markets in the NAFTA trade agreement became a reality. In short, there are plenty of investment opportunities in emerging markets but those investments are not risk free.

 What course would help in financial data management for, data science, big data, or data analytics.

Alfonso Llanes, studied at Florida International University

Answered just now

Transforming data into knowledge is the current trend of data driven decision making, machine learning; as a consequence, the Internet has become a giant data warehouse. Nonetheless, this data has to be collected and index from any source then combine as machine data from multi-site clustering and automatic load balancing scale to proprietor’s relational databases for understanding and use.

Open development platforms for customizing and meet specific requirements are available. For instance, the Splunk platform makes it easy to customize. Splunk Enterprise is available to meet the needs of any project. Developers can build custom Splunk applications or integrate Splunk data into other applications.

“IBM provides multiple data warehouse offerings so that clients can select the right workloads and platforms based on their requirements to deliver a high performance data foundation.”

In recent time businesses have been slow to implement big data analytics in supply chain management than in other areas of operation such as marketing, manufacturing or finance. However real time analytics of vast, rapidly growing and very messy unstructured data-sets were largely absent as data had been driven in the recent past, by statistics and quantifiable performance indicators.

Here are some schools that offer training in the field of big data analytics.

University of Arkansas

Weber State University

Stanford Data Mining and Applications Graduate Certificate

University of Delaware

Columbia University

Big Data Certificate

Certificate in Engineering Excellence Big Data Analytics and Optimization (CPEE)

Certification of Professional Achievement in Data Sciences

Certified Analytics Professional

Cloudera Certified Associate (CCA) Administrator

Cloudera Certified Associate (CCA) Data Analyst

Cloudera Certified Associate (CCA) Spark and Hadoop Developer

Cloudera Certified Professional (CCP): Data Engineer

EMC Proven Professional Data Scientist Associate (EMCDSA)

IBM Certified Data Architect – Big Data

IBM Certified Data Engineer – Big Data

Microsoft Certified Solutions Expert (MCSE): Data Management and Analytics

Mining Massive Data Sets Graduate Certificate

MongoDB Certified DBA Associate

MongoDB Certified Developer Associate

Oracle Business Intelligence Foundation Suite 11 Certified Implementation Specialist

SAS Certified Big Data Professional

SAS Certified Data Scientist Using SAS 9

IBM Professional Certification Program

What are the trends in the international trade since 2010 and the most traded commodities?

The historical record indicates that, international trade has grown remarkably in the last couple of centuries. After a long period of slow growth and of up and down cycles after the Second World War, international trade started growing again, and in the last decades trade development has been faster than any previous time in history. “Today, the sum of exports and imports across nations is higher than 50% of global production. At the turn of the 19th century this figure was below 10%.”

Transport and communication costs have decreased across the world In a substantial way, and the creation of the World Trade Organization (WTO) has promoted preferential trade agreements particularly among developing countries. Trade among developing nations South-to-South tripled in the period 1980–2011.

International trade is a desirable outcome because it allows countries to specialize, and produce goods where they are relatively efficient, while at the same time, importing the goods where they have not competitive advantage. This is the essence of the comparative advantage argument that supports gains from trade in which the Ricardian doctrine on trade, allows countries to make what they are best a doing and import the rest.

Empirical evidence shows that while trade leads to economic growth on the aggregate, it also creates winners and losers within countries – so it is important for policy makers to consider distributional consequences of trade liberalization within each country.

There was a long period during the 18th century considered stagnant for international trade as globally the aggregate of exports and imports never exceeded 10%. In the course of the 19th century, a technological period triggered a period of remarkable growth in world trade which was called 'first wave of globalization'. The first wave of globalization came to an end with the beginning of WWI, when the rise of nationalism led to a slump in international trade.

After the end of WWII trade started growing again. With this new wave of globalization international trade has grown faster than ever before. Today the sum of exports and imports across nations is higher than the value of 50% of the global production.

https://ourworldindata.org/inter...

The last few decades have not only seen an increase in the volume of international trade, but also a growth in the number of countries joining WTO through which preferential trade agreement take place.

“These numbers include notified and non-notified preferential agreements (the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO), and are disaggregated by country groups.”

This figure shows the increasingly important role of trade between developing countries (South-to-South trade), contrast by trade between developed and developing countries (North-to-South trade).

At the end of 1970s, North-South agreements accounted for more than half of all agreements but by 2010, they only accounted for about one quarter. Today, the majority of the existing preferential trade agreements are between emerging economies. The increase in trade among emerging economies over the last 50 years has been supplemented by a change in the composition of exported products from-to- these countries.

“These figures, produced by the World Bank, correspond to the Standard International Trade Classification, in which 'food' includes, among other, live animals, beverages, tobacco, coffee, oils and fats. The resistance that geography imposes on trade has long been studied in the empirical economics literature, typically under the label of 'gravity trade models'. The main conclusion in this literature is that trade intensity is strongly linked to geographic distance. Data from the 19th century onwards for countries around the world is available in the International Historical Statistics (IHS). These statistics – originally published under the editorial leadership of Brian Mitchell (since 1983)”

Links to trade data

Penn World Tables

Data: Real and PPP-adjusted GDP in US millions of dollars, national accounts (household consumption, investment, government consumption, exports and imports), exchange rates and population figures.

Correlates of War Bilateral Trade www.correlatesofwar.org

Data: Total national trade and bilateral trade flows between states. Total imports and exports of each country in current US millions of dollars and bilateral flows in current US millions of dollars. Export and import value index and volume index.

Available at: Online at http://data.worldbank.org

UN Comtrade

Data: Bilateral trade flows by commodity

Bilateral trade flows can be sorted by goods or services, monthly or annually, with choice of classification (including HS codes, SITC, and BEC). Data is likely to be very time consuming to collate as there is no bulk data download unless a user has a premium site license.

UNCTAD stat

UNCTAD stat reports export and import data between 1995 and 2016 but primarily to different regional groupings than any one country, so it's probably not best suited to comparing country-to-country bilateral flows.

Eurostat - COMEXT

Also, the Eurostat website 'Statistics Explained' publishes up-to-date statistical information on international trade in goods and services.

World Trade Organization - WTO

The WTO offers a bulk download of trade datasets which can be found here. Amongst these are annual WTO merchandise trade values and WTO-UNCTAD-ITC annual trade in services datasets.

How does our national savings rate impact our trade deficit?

Some economists claim U.S. trade deficits are caused by the low savings rate of Americans. But mainstream trade journals continue to assert that trade deficits don’t really matter.

On June 20, 2017, the Coalition for a Prosperous America released a research paper, “Do Savings Rates Cause Trade Deficits?” by CEO Michael Stumo and Research Director Jeff Ferry that shows why globalist economists are wrong about what causes trade deficits, offshoring and job losses.

They write, “A popular, but misleading, claim is that low U.S. savings, relative to investment, causes our trade deficit. For example, Harvard professor and former Reagan administration advisor Martin Feldstein has said that the U.S. fiscal deficit, which indeed reduces national savings, is the cause of the trade deficit. ‘If a country consumes more than it produces, it must import more than it exports.’”

Other economists view the issue of trade deficits with a different lens. They say that America is exporting its paper money for goods made in China and other countries that need reserve currencies such as dollars, to purchase raw materials from other countries.

The traditional macroeconomics equation of basic Gross Domestic Product does not reflect the issue of currency markets or exchange rates. For instance the recent tax cut Trump instituted in the American economy places the GDP to debt ratio at 106% which inflates the value of the dollar or undervalues the dollar reserves many countries are already holding. In contrast the EU has a GDP to debt ratio of 81% making it a more desirable reserve currency.

Everybody agrees that reform is needed in currency exchange markets and not only in merchandise trade markets for as long as budget deficits and national debt continue to rise, specially, in the USA for its dollar preferred place in the world as a reserve currency retracts while other currencies begin to displace it.

These real-world changes directly impact one or more variables within the identity GDP equation, transmitted through by mathematical necessity. In short, national savings is related to the trade deficit in an accounting sense but it is not its causation.

The relationship between savings and trade deficits can be best explained in a mathematical accounting identity but this do not reflect the causal relationships between savings, investment, and trade flows. A merchandise trade deficit reduces the incomes of domestic workers however; exporting paper money reduces the cost of imports which benefits the lower income brackets.

In 2005, the Federal Reserve Board chairman Ben Bernanke argued that “the large and growing U.S. current account deficit is caused not by anything happening in the U.S., but by decisions taken by emerging economy nations to run very high savings rates, pursue export-led growth, and lend money to other countries, especially the U.S. He called the situation a global savings glut. These excessive inflows of foreign savings raise the U.S. dollar exchange rate, drive down our interest rates, and force our economy into a trade deficit.”

Tactics of Surplus Producing Countries Use

Many authors agree that “Export-oriented or investment-oriented countries can utilize domestic and foreign policies to reduce consumption, increase production and export at very competitive prices.”

In the case of China:

Wage growth is constrained to below the growth of worker productivity

Undervalued exchange rate

Government subsidizes to Chinese manufacturers

Vast amounts of surplus labor that produces more than it consumes

Unethical accounting practices for valuation and investment

How will China's devaluation of its currency affect the stock market?

"China would win a 'trade war' with the US."Nicholas Lardy at the Peterson Institute for International economics

China would win in a trade war with U.S., analyst says

China expert Nicholas Lardy, lays out various arguments of why a US trade war with the Chinese would be a losing enterprise. He agrees that China’s economy would suffer if the United States were to impose a 45 percent tariff on nearly $500 billion worth of Chinese import and fears of American protectionism is already stoking capital flight from China.

But Lardy also, states that China might be better placed than the United States to take the effects of protective trade barriers and will sure react. The voice of the Communist Party is probably not wrong when stating that “A batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted.” A hurricane effect for many manufacturing corporations that cannot afford to lose or diminish trade with China.

Retaliation from China can take several forms: It could stop state-owned companies (SOE’s) from doing business with American businesses. It could stall access to essential commodities, such as exports of rare earth minerals crucial to the electronics industry. It could ignore efforts to combat the piracy of American patents and copyrights.

With these actions, some of the United States’ most successful companies would be in for a bumpy ride and recreating these entire corporations in different countries would be an almost impossible task without incurring in a massive out flow of cash.

“An analysis by the pro-trade Peterson Institute for International Economics concluded that a full-blown trade war with China and Mexico would push unemployment in the United States to nearly 9 percent in 2020, from 4.9 percent today. “ That would wreak havoc in the economic outlook for the millions of working-class Americans Trump has proposed to defend from “unfair trade.”

Moreover, a disruption at the American border with Mexico plays in favor of China in many ways. In this game of chicken, no matter how many deceits the Chinese government might arrange against American interests, China would remain the victim in the eyes of many nations, as a champion of the foundation of open rules-based trade.

Even if Trump is bluffing to get a better deal when negotiating with China his bulling has changed the perception role the United States has played in the world since the end of WWII. Specially, when China is the only major country in the world proclaiming the notion that globalization is a win-win for all nations and that will surely be a loss for the US. This issue is greatly reinforced by countries in the developing world that believe national prosperity depends on the integration into the supply chains that crisscross the global economy. Isolationism which has been a move reinforced by the rejection of the Trans-Pacific Partnership the United States appears to be on his own in this fight.

Slapping trade barriers against China would do little to slender the American trade deficit. American companies building things in China wouldn’t bring much manufacturing home; as in most cases they would seek other countries with cheap labor. Furthermore, restoring production in the US more likely than not will be robotized and automated which would result in more unemployment for Americans. Most economists would agree that balanced trade doesn’t bring back jobs. Trump’s rhetoric might seem a political winner but a hold or increase in popularity would be unlikely when the reality of the markets become apparent.

China faces more challenging issues on its transition toward a more service-dominated economy:

Bloated savings in the Chinese Economy

Large state-owned enterprise SOEs and its growing trend

Complexity of the financial sector and fragile dependence on the governing party

High SOE’s Corporate Debt

Overcapacity of the industrial sector

“The only way to deal with a trade deficit is raise savings and investment rates,” Lardy said recently, referring to the reason deficits occur. In other words, Americans are consuming and spending more than they produce.” Lardy continues “It’s a strategy that’s almost certain to fail, that’s because U.S. trade deficits are largely the result of the shortfall in national savings relative to investments — a long-running imbalance that isn’t likely to change any time soon. Everything is working against Trump’s announced objective.”

Trump Tax Cuts are a Walk on the Brink

Can America under Trump win a trade war with China? One option to be considered might have a nuclear effect on world economy and that is— China’s dumping US debt and replacing its dollars holdings with another reserve currency. By planning to add to the bulging US debt newly printed $2 trillion dollars, the GOP is putting the US at the mercy of its debtors mainly China and Japan. Trump, ignorant of world economics hinted he wanted to renegotiate the US debt during his electoral campaign which was quickly walked back. Nevertheless, in the eyes of other world leaders Trump’s views of a US empire able to do as it pleases and seeking to negotiate sensitive world problems with the same grandiloquence and bully in the room as he negotiates a land deal or a new hotel with a weaker side is totally irresponsible conduct for his handlers.

How much damage will China's new tariffs on USA imports can do to the USA economy?

https://m.washingtontimes.com/news/2018/mar/22/china-retaliates-tariffs-us-imports/

The losers in this action by Trump will be the industries that depend on steel and aluminum which will face higher prices. That means some of the nation’s largest industries: automobile, aircraft, heavy machinery and heavy equipment manufacturing industries. These manufacturers that use steel and aluminum for their products are significantly larger than are steel and aluminum producers. Statistically, steel imports are only about one-third of what US industry needs and so, the tariff would not apply to domestic steel production. Aluminum is a different matter for only 10 percent is produced domestically.

WTO RULES

The World Trade Organization (WTO) agreement states that countries are free to take actions they consider critical to their security interests. However, WTO members are very cautious about using this provision because of the dire consequences to trade and the implications it can provoke. It follows that China, India, Brazil and other countries are just as capable of making such fake claims based on similar national security rationales for restricting imports. The provision of law that Trump is relying on for the imposition of this new tariffs is “Section 232 of the Trade Expansion Act of 1962 which allows imports to be blocked on national security grounds. “Previous administrations had interpreted the provision narrowly, requiring evidence that the military needs or strategic industries could not be supplied by U.S. production. The US Commerce Department under Trump is disregarding a half century of precedent by finding that steel imports coming from the most-trusted U.S. allies, such as Canada and the EU need be taxed. The risk assessment of Trump’s action is hard to quantify for the affected countries can easily retaliate by imposing tariffs on American goods. Moreover, tariffs could be imposed on targeted goods in order to cause economic and political sting. American exporters of all economic sectors should be weary of steps that might follow whether they are exporters of agricultural products or aerospace vehicles for once wars is started it is impossible to predict how it will end as history indicates from the 1930′s world economy experience. The invocation of national security concerns by Trump could be used as a precedent in which other nations might be willing to use national security as grounds for tariffs, and thus, neutralizing the ability of the World Trade Organization to arbitrate disputes. Whether a hot war or a trade war neither case is as easy as Trump claims it to be for our historical record indicates that wars in general have been started by either madness or stupidity.

In “The Art of War,” Sun Tzu states that "Every battle is won or lost before it's ever fought". Détente was used during the cold war for easing strained relations, especially, in using the threat of a pre-empty attack. Today, a battle space has many dimensions which now include cyberspace. The defensive plan may not survive first contact with an adversary, but the general staff will quickly formulates a new plan and adapt making the evolving plan a part of the plan as the pieces move before the actual battle begins. In this scenario, it would be foolish to predict the outcome of a battle where the enemy is fully committed to fight back in any way they can and with whatever resources they muster together. China today is not an underdog to be bullied.

A report last week states that China’s government is contemplating reducing its purchases of U.S. treasury bonds and briefly rattled financial markets. Against the tensions between the two countries, it was widely understood as a warning that aggressive American action on trade might jeopardize the willingness of China to subsidize the drunken spending of the U.S. government.

China is now, and has been for a decade, the largest foreign buyer of U.S. treasury debt, with Japan being a close second. The Chinese central bank has halted new purchases and sold old holdings, each time the Trump administration rattles noise about China, which triggers concerns in U.S. economic

China’s foreign currency reserves now stand at more than $3 trillion. In contrast, the U.S. has foreign exchange reserves that hover at around $120 billion. Trump’s tariffs would automatically trigger penalties against the U.S. in the World Trade Organization (WTO), and might even lead to serious disruption of WTO’s years of negotiating or total collapse, which would inevitably lead to higher world tariffs against U.S. exports. Even if it doesn’t take place immediately the sense of turmoil to come would be enough to trigger dire uncertainty for American business and employment. China, on the other hand with a centralized party government system has a better probability of surviving the hard blow of global trade disruptions.

“The only way to deal with a trade deficit is raise savings and investment rates,” Lardy said recently, referring to the reason deficits occur. In other words, Americans are consuming and spending more than they produce.” Lardy continues “It’s a strategy that’s almost certain to fail, that’s because U.S. trade deficits are largely the result of the shortfall in national savings relative to investments — a long-running imbalance that isn’t likely to change any time soon. Everything is working against Trump’s announced objective.”

Trump Tax Cuts are a Walk on the Brink

Can America under Trump win a trade war with China? One option to be considered might have a nuclear effect on world economy and that is— China’s dumping US debt and replacing its dollars holdings with another reserve currency. By planning to add to the bulging US debt newly printed $2 trillion dollars, the GOP is putting the US at the mercy of its debtors mainly China and Japan. Trump, ignorant of world economics hinted he wanted to renegotiate the US debt during his electoral campaign which was quickly walked back. Nevertheless, in the eyes of other world leaders Trump’s views of a US empire able to do as it pleases and seeking to negotiate sensitive world problems with the same grandiloquence and bully in the room as he negotiates a land deal or a new hotel with a weaker side is totally irresponsible conduct for his handlers.

Is a building task a positive or a normative theory?

Normative Theories of Ethics or moral theories are meant to help us figure out what actions are right and wrong. Normative theories include Aristotelian virtue ethics, utilitarianism, categorical imperatives, stoic virtue ethics, and so on. Positive theory is a theory that tries to explain how the world works in a value-free way, while a normative theory provides a value-based view about what the world ought to be like or how it should to work. In general, positive theories express what is, while normative theories express what ought to be. It follows that social choice theoretic methods are often used as truism to analyze the performance of rules or institutions. For instance, welfare analysis suggests as social preferences goal, to permit an optimization approach to social choice, therefore, welfare analysis is normative theory. On the other hand, a positive analysis, is equivalent to the study of electromagnetism or molecular biology, which involves only the attempt to understand the world around us without making a judgments.

One famous quote about theory came from Winston Churchill when he said that theory is an ambiguous word: “We shape our buildings, thereafter they shape us.”. It means different things to different people.

Positive theory has been described as a system of ideas or statements, a mental state of mind that is believed to describe and explain a phenomenon or a group of phenomena and some theory has been proved using scientific methods. In this case such theory is referred to as “positive theory” because it consists of positive statements and claims about reality. In a wide sense theory can refer to a mental model, or the way of perceiving reality that requires a structure of that reality. Moreover, theory can also refer to predicting outcomes by a given action and those predictions are referred to as hypotheses.

According to other scholars theory can be used as a recipe for action and this kind of normative theory can be applied to architecture, design principles, standards and methods as examples of such theory. It is based on the idea of what the world, good architecture, landscapes, and urban designs should be. Nevertheless, a theory cannot be proved but it stands until it is disapproved.

According to Marcus Vitruvius Pollio, commonly known as Vitruvius, a Roman author, architect, civil engineer and military engineer during the 1st century BC, known for his multi-volume work entitled “De architectura Vituvius,” a building must fulfill three basic purposes: utilitas, venustas, and firmistas and what Schulz calls “building task,” regarded as the functional goal “form” in simple Norberg-Schulz’s terms, the aesthetic goal.

Technology has been a predominant concern in explaining the evolution of human tasks. A city for example is a construction in space, on a vast scale with moving elements in particular the people and their activities that are as important as the stationery physical parts. By participating in this scenario we are not simply observers of this spectacle, but are ourselves a part of it, on the stage with the other participants.

“The world is stage and we are all actors in it”

What should Nepal do to develop foreign trade and to minimize trade deficit?

There are several problems with Nepal’s foreign trade: It is a land-locked country competes with India in high imports and low exports, it produces low quality goods with a high cost of production, capital formation is inefficient and government policy is antiquated.

Land-locked

Geography is not in favor of Nepal. As a land-locked country it has to import/export through India which by itself raises the cost of commercial transactions not only in transportation costs, but on merchandise shifting from one mode of transportation to another, also, border crossing fees and transit time among other issues.

Open Border:

Nepal is bordered by India from three different sides that include an open border policy. As a result, there is a large flow of Indian goods at low prices. At borders, Indian goods are smuggled in and imported foreign goods trafficked into India through unofficial routes. Smugglers are the only beneficiaries of the illegal practices while the country has little to gain from these activities.

Balance of trade in Nepal is negative as it imports more than it exports both in terms of volume and value. Most exports are agricultural products, handcrafts and raw materials, which are all of low commercial value resources which bring little foreign currency to its treasury.

Nepal does not have a well-developed industrial base, therefore, production is of low quality and it cost more to produce which makes its products non-competitive for the international market place.

Low capital formation is another major problem for Nepal’s foreign trade by depriving the country with limited economic activity. It also lacks modern infrastructure for developing an industrial base while it lacks a favorable environment for private and foreign investment. This leaves the country dependent on domestic finances with little capital formation to grow and expand its productive base.

As more countries enter global trade Nepal is being left behind as it is becoming less and less competitive. Many countries are now exporting good quality manufactures at a lower price that Nepal can produce. Additionally, Nepal does not have the skill resources, educational base and modern production technologies to compete with international trade markets.

Modern trade policy is a major standing problem for Nepal’s efficiency in foreign trade. Since the 1990’s Nepal adopted a liberal trade policy of open borders. This permits the flow of foreign goods into Nepal unrestricted and with no effective policy to police its borders by poorly trained human resources. The combination of issues is causing large trade deficits with no trade policy in place because of either political will, corruption, or a combination of both.

What are the solutions?

• Enhance industrial bases
• Promote export-oriented goods
• Give appropriate incentives to exports
• Improve quality of goods
• Adopt proper trade policies
• Enhance training and skills

After 15 years of trying and hard work, Nepal became a member of WTO, the global trade body in 2004. Access to the WTO group of nation was supposed to aid in expanding Nepal’s international trade and its competitiveness abroad. However, after 14 years, Nepal’s exports have undergone a sharp decline, while imports are quickly rising and increasing the trade deficit. In joining WTO, Nepal was expected to diversify its exports and develop new trading partners. However, this hasn’t happened.

The main causes of widening trade deficit with India, China, and other countries are as follows:

• Nepal’s supply side constraints include political instability, low connectivity, a power generation crisis and difficult labor relation. In addition, geographic constraints such as high transit costs, delays at border crossing by red tape, waiting for transportation and lack of temporary storage at crossings has in total a negative effect on trade.

It follows that the recommendation for Nepal is that it must urgently address the factors that are minimizing its opportunities participating in WTO and relieve its widening global gap.

• The country should focus on promoting products and services where it has competitive advantage.
• It needs to expand its human resources base with better training and education for its entire work force.
• The government should facilitate the financial means and encourage entrepreneurs to engage in trade activities.
• Nepal should simplify transportation modalities that have high transit costs, improve its border crossing time, facilitate temporary storage and remove administrative hassles.
• Overall improvements should also be made to the exports of agricultural products that could mean accesses to 400 million consumers in bordering India.
• The government needs to implement policies that can attract foreign investment to develop or enhance basic industries that can promote capital growth and economic diversification.
• The country must invest in primary infrastructure like roads, railways electricity generation and storage depots to improve border crossing time and transport mode switching to minimize delays at the borders. Nepalese industries need to supply a sizable part of domestic demand of household goods in the wake of strong internal demand and the rapid price rise of Chinese goods.

In general, there is a great need for creating a favorable business environment in Nepal. Industrial unrest and rigid labor laws are some of the biggest obstacles to the industrialization of Nepal and its future participation in a fast globalizing economy.

Why does the EU tax cars from the US at 10%, while the US taxes European cars only at 2.5%?

Alfonso Llanes, Master Degree in International Development

Answered just now

Trump wrote on Twitter: “If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.,” They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

A burning issue with Trump’s tweets and statements is that they cannot pass a lie detector test for apparently this President has a lot of trouble with the truth. The United States imposes a 2.5% tariff on cars assembled in Europe and a 25% tariff on European-built vans and pickup trucks. Europe imposes a 10-percent tariff on U.S.-built cars which makes it a 13.75% on the average for cars and trucks going across the Atlantic. However, the proposed North Atlantic Free Trade Agreement would eliminate those tariffs but the process is yet to be started with Trump favoring bi-lateral trade agreements so that he can bully the weaker partner into concessions. The European Union on the other hand, prefers entering trade agreements as a block for its bargaining power is better aligned with large economies such as China’s US, Japan and so on.

In a recent statement Trump said: “The European Union has been brutal to us,” at a Florida fundraiser. “They’ve banded together in order to beat the United States in trade.” In response to Trump harsh criticism European Commissioner in a speech Friday night at Harvard University, Margrethe Vestager said the EU will respond to the tariffs “to defend European industry, and the world trading system,” according to a copy of her remarks. She called the Trump action “one-sided protectionist measures, which hurt, not just jobs, but the whole system of rules that makes our global economy work.”

German automakers argue that Volkswagen AG, Daimler AG and BMW AG build vehicles at plants in the United States. BMW employs more than 9,000 workers in South Carolina and is one of the state’s largest employers making Trump’s statements sound hollow. Moreover, the United States accounts for about 15% of worldwide Mercedes-Benz and BMW brand sales, while it accounts for 5% of VW brand sales and 12% of Audi sales. In contrast, the United States had a $22.3 billion automotive vehicle and parts trade deficit with Germany in 2017 and a $7 billion deficit with the United Kingdom, according to U.S. government data. But Germany’s automotive trade association said “the United States would be shooting itself in the foot by imposing tariffs or other trade barriers.”

Trump’s threat comes amid mounting transatlantic tension on trade as European Commission President Jean-Claude Juncker told German television that “We will put tariffs on Harley-Davidson (motorcycles), on bourbon and on blue jeans - Levis.” Canada and Mexico also said they will retaliate for any tariffs on steel and aluminum.

“Germany's carmakers responded by pointing out that German and European carmakers are major investors in the U.S. In 2017, German automakers alone were invested in 265 plants across the country and employed approximately 110,000 American workers.” According to Germany's Association of the Automotive Industry, Germans produced 854,000 vehicles in the U.S. in 2016, a four-fold increase in about seven years. More than 60% of those were exported to foreign markets. There are, however, at least 10 major European car makers that sell in the U.S. but do not produce there — these reportedly include the U.K.'s Land Rover and Jaguar as well as Audi and Porsche. Sweden's Volvo manufactured 6% of its cars in the U.S. in 2016.”

President Obama’s past announcement of the proposed Transatlantic Trade and Investment Partnership (TTIP) is hugely important to the car industry and to car enthusiasts that Trump now is trying to undermine. The Partnership’s objectives include eliminating tariffs on imported cars, as well as finally implement parallel standards to meet U.S. and European automotive safety and environmental requirements. If adopted, the agreement could result in increased US manufacturing by European brands and American dealers stocking a broader product for consumers to choose from. Individual European countries don’t charge import duties, but the European Union charges a flat rate of 10 percent on imported automobiles. In simple terms, tariffs are taxes. They’re paid to governments by the businesses that import and export products are factored into the prices consumers pay. In contrast, if the proposed TTIP is in place, all tariffs on cars and about a billion other products that are exchanged across the Atlantic would almost definitely disappear. Whether ignorance, stupidity or both the Trump administration is exceeding disruption of sources and methods that the US has strongly articulated for over 50 years to improve trade and commerce among nations in general.

What is balance of power?

The equilibrium that must be maintain to prevent armed conflict among countries or alliances and to prevent any one country from becoming stronger than others and gain the ability to enforce its will on other nations is defined as Balance of Power. A main aspect of “real politik” where self-preservation is the primary guiding principle which leads to forging alliances with nations that shared ideologies. During the Cold War years, NATO and the Warsaw Pact operated with a balance of power principle, aware that "unbalancing" actions would trigger greater conflicts or even nuclear war.

The theory of “balance of power” predicts that a country will take advantage of its strength and attack weaker neighbors, thus providing an incentive for those threatened to unite in a defensive alliance such as NATO. The theory maintains that the status quo would be more stable as bellicosity would appear unattractive and would be deterred if there was equilibrium of power between the rival coalitions of nations. Other schools of international relations, such as the constructivists, are critical of the balance of power theory, disputing the core assumption realists make regarding the international order.

David Hume explained in his Essay on the Balance of Power, that the concept is as old as history, whereas it was used by Greeks such as Thucydides who was both a political theorists and a practical statesmen.

The concept was reenacted during the Renaissance among the Italian city-states in the 15th century. “Francesco Sforza, Duke of Milan, and Lorenzo de' Medici, ruler of Florence, were the first rulers actively to pursue such a policy, with the Italic League, though historians have generally attributed the innovation to the Medici rulers of Florence.”

Universalist doctrine, which was the central direction of European international relations before the Peace of Westphalia, gave way to the doctrine of the balance of power. This idea of balance-of-power principle, once formulated as a theory it became a subject-maxim of political science. Honore Daumier a famous French cartoonist represented in 1866, the balance of power as men in different military uniforms balancing the earth with bayonets.

Prime Minister Winston Churchill once said in 1946 that “If the Western Democracies do not stand together then indeed catastrophe may overwhelm us all.” He follows with the population of the English-speaking Commonwealths be added to that of the United States with all that such co-operation implies in the air, on the sea, all over the globe and in science and in industry, and in moral force, there will be no quivering, precarious balance of power to offer its temptation to ambition or adventure. On the contrary, there will be an overwhelming assurance of security.”

Today’s international system is built not around a balance of power but around American hegemony with a work in progress theory of “Overwhelming Power” This new theoretical interpretation supersedes the old one and becomes the new 'paradigm' for successive inquiry into the subject.

Robert Pape, T. S. Paul, and Stephen Walt argue that traditional power balancing is not occurring, but instead they say the US is engaging in 'soft balancing where the net effect is that independent states are free to join or to refrain from joining alliances or align with others as each seeks to maximize its security and to advance its national interest.

The necessary preponderance of power is unlikely to emerge from any other international combination aside from the permanent alliance of the United States in NATO, with the addition of such Latin American states and such European democracies that might wish to join.

The US strategy throughout the Cold War was a strategy of preponderance or overwhelming force. This post-Cold War strategy holds that "only a preponderance of US power ensures peace.” This theory states that US capabilities are sufficient to intimidate all potential challengers and to comfort all coalition partners.

“Power Preponderance is going to replace balance-of-power neo-realism and become the dominant brand of American “Real Politik” for the foreseeable future.

Russian President Vladimir Putin complained: “Instead of establishing a new balance of power the United States has taken steps that throws the international system into a sharp and deep imbalance.”

Of course, such statement coming from a thug and dictator like Putin is laughable considering his current criminal behavior in the Ukraine and Syria.