INTERNATIONAL

 

Sept  15 - 21 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF


RICH AND POOR CLASH OVER FARM AID

Europe and the United States have been accused of trying to break-up a powerful new alliance of poor states bent on re-writing world trade rules. The Group of 21 (G21), which includes China, India and Brazil, threatened the traditional dominance of rich countries, on the second day of world trade talks in Cancun, Mexico. The G21 is demanding the complete abolition of subsidies paid by rich countries to their farmers which, they say, locks the developing world out of international markets.

 

 

 

Aid agency Action Aid accused the US delegation at Cancun of attempting to bully poor nations into accepting its proposals an accusation the Americans have denied. The charity claims US trade representative Robert Zoellick attempted to bribe some countries into leaving the G21 with trade incentives. It said Costa Rica, El Salvador and Guatemala had been offered increased trade quotas if they quit the alliance.

The EU and the US have promised to reform the subsidies, but their initial suggestions have been criticised for not going far enough. The WTO has agreed to admit Nepal and Cambodia as new members. They are the first countries classified as least developed to join the trade body since it was founded in 1995. The EU and US says poorer countries must agree to broader legal and commercial reforms in return for any concessions on farming. Rich countries give their farmers $320bn in handouts, more than six times the amount they give to poor countries as aid. The G21 was, so far, standing firm and new members were expected to join in the next few days, Action Aid added.

GROWTH SURGES IN JAPAN

Japan is growing faster than expected on the back of surging exports, raising hopes that the country might finally be emerging from a decade-long downturn. Growth in the three months to June was 1.0%, even better than the 0.6% estimate published in August. The news will come as a relief to Prime Minister Junichiro Koizumi, who faces an internal party election this month which he must win to keep the top job. His opponents in the Liberal Democratic Party have criticised his economic package, calling for huge tax cuts to kickstart the economy. The news helped support banking shares, although the broader market ticked down on pressure from a weak Wall Street. The renewed vigour in the second quarter gives Japan annualised growth of 3.9%, faster even than the US performance in the same period.

Sales abroad are driving the gains, with the current account surplus the broadest measure of trade leaping 34.6% in the 12 months to July. For once, the export performance on which Japan is relying to pull itself out of the doldrums is being reinforced to some extent by the domestic market. Personal consumption underwent an unexpected surge in the second quarter although the figures may have been flattered by cancellations of foreign trips in the face of the Sars virus. But the government is still seen as too cautious in its economic policies and many economists warn that it remains much too early to be sure of genuine revival. "There's no doubt the economy is recovering, but the figures are probably overstating it," said Sumitomo Trust and Banking economist Toshikimi Kaneki.

US STATE REJECTS 'CHRISTIAN' TAX HIKE

Voters in the US state of Alabama have overwhelmingly rejected calls for a large tax increase. Governor Bob Riley had appealed to voters to back the $1.2bn, saying it was their Christian duty to help fund projects for the poor. Early reports indicated that two-thirds of voters had rejected the $1.2bn plan reputedly the largest tax hike ever proposed in a US state.

Opponents of the plan argued state politicians needed to rein in wasteful spending instead of raising taxes.Riley claimed the plan would have provided much-needed funds for the poor, improved educational resources and reduced its crippling $675bn tax deficit.

US TRADE GAP SWELL

The US trade deficit widened slightly in July as consumers bought the second highest level of imported goods on record, according to official figures. The trade gap grew to $40.3bn in July from a revised $40bn in June, broadly in line with expectations. Exports also rose, reflecting a pick-up in consumer spending and economic activity. But the markets were more concerned about a surprise increase in weekly jobless figures.

Despite signs of life elsewhere in the economy, US employment has remained stubbornly weak, prompting speculation about a "jobless recovery". The US Labor Department said new claims for state jobless benefits rose by 3,000 to 422,000 in the week ending 6 September.

DUISENBERG DEFENDS EURO BUDGET RULES

Flouting EU rules on budget deficits will damage growth prospects in the eurozone, the outgoing head of the European Central Bank (ECB) has said. Speaking at what is expected to be his last appearance in front of the European Parliament, Wim Duisenberg said some countries had failed to show "sufficient determination" in meeting budget rules. Both France and Germany are in danger of breaching the budget deficit limit of 3% of gross domestic product for three years in a row, a move which could lead to fines from the European Commission.

 

 

MOST COUNTRIES 'FLOUTING EU RULES'

The European Central Bank (ECB) has warned that most countries are in danger of over-spending and breaking EU budget rules. "Recent fiscal developments in the euro area are of great concern," the bank said in a monthly report. "There is growing evidence that most countries will miss their budgetary target for 2003 by a significant amount."

France and Germany have faced criticism for some time over the size of their budget shortfalls, with both looking likely to breach the budget deficit limit of 3% of gross domestic product for three years in a row. But it is the first time that the bank has indicated that many other countries in the eurozone are in a similar predicament.

'END COTTON SUBSIDIES' DEMANDS AFRICA

Several African nations have joined forces to put the issue of cotton onto the agenda of the World Trade Organisation meeting in Cancun. Benin, Burkina Faso, Chad and Mali are demanding wealthier countries end subsidies to farmers which they say results in them losing $250m a year in exports.

SWEDISH PM TALKS UP EURO VOTE

Sweden's Prime Minister has predicted a strong surge by the "yes" camp ahead of Sunday's vote on joining the European single currency as polls continue to show a strong lead for the anti-euro camp.

UK GRANTS ASYLUM TO RUSSIAN TYCOON

Boris Berezovsky, the controversial Russian billionaire, has been granted political asylum in the UK on account of his increasingly bitter relationship with the Kremlin. Berezovsky was briefly held by the British authorities in April, in response to Moscow's request for his extradition to face charges of massive fraud.

APPLE SELLS 10M TUNES ON THE NET

Music fans have snapped up more than 10 million songs from Apple's iTunes music store in four months. Apple said the 10 millionth song bought from its online store for 99 cents (66 pence) was Complicated by Avril Lavigne.

AUSTRALIAN HUNT FOR AFRICAN OIL

An Australian consortium has started exploration drilling at the Chinguetti oilfield off the coast of Mauritania, Perth-based company Hardman Resources has announced. The drilling is expected to confirm the presence of 95 million barrels, the company said a significant find for a small explorer and impoverished country but a relatively small field by international standards. Chinguetti 4-5 is the first of four wells to be drilled this year. The consortium consists of five companies: Hardman, which has a 21.6% stake, Woodside Mauritania (35%), AGIP Mauritania (35%), Fusion Oil & Gas (6%) and Rock Oil (2.4%).

FRESH SARS FEARS HIT ASIAN MARKETS

Markets across Asia have fallen after a Singapore man was found to be infected with the Sars respiratory virus. Singapore's stock exchange weakened further after a sharp fall, the day the case was discovered, while Hong Kong's Hang Seng index was 2% lower at midday. Taiwan, Malaysia and the Philippines followed suit, with airline stocks taking the worst of the beating.

GERMANY DRAFTS 'RISKY' BUDGET

German Finance Minister Hans Eichel has asked parliament to back what he admitted was a highly risky 2004 draft budget. By combining borrowing, projected revenue from privatisations and an optimistic assessment of economic growth prospects, Eichel hopes to keep Germany's budget deficit within the fiscal limits set by Brussels.

Germany has been the most glaring delinquent from the so-called Stability Pact, which prevents eurozone member states from running excessive deficits. But Eichel's assumption of 2% economic growth next year has been criticised by the opposition, a level of uncertainty admitted in the budget text itself.

SRI LANKA UPBEAT ON ECONOMY

Sri Lanka's economic prospects are strong, its central bank has insisted, shrugging off fears that its peace-process-related recovery could backfire. The rupee hit a 12-month high last week, buoyed by hopes that ongoing talks to end the country's 20-year civil war could spark an influx of foreign money. This has, however, sparked fears that Sri Lanka may no longer be competitive in international markets, especially for its crucial textile exports.

GOLD SOARS ON GLOBAL TENSIONS

Gold has soared to its best level in seven years, as its safe haven image shone in the face of a weak dollar and the imminent second anniversary of the 11 September 2001 terrorist attacks. On New York's Comex market, the price of gold for delivery in December - the benchmark for the market rose $6.60 to $382.80 an ounce.

BROWN DELIVERS TOUGH PAY WARNING

Chancellor Gordon Brown has insisted that the government will not give into any unaffordable demands that would risk the upsetting the UK's current economic stability. In a warning against inflation-busting wage demands by union leaders, Brown said that he would not yield to "short term fixes or soft options".

SERVICE SECTOR 'FAR FROM RECOVERY'

The UK's service sector is far from recovering with jobs, investment and confidence still hard to come by, a survey has found. The quarterly study, prepared by the Confederation of British Industry (CBI) and accountancy firm Grant Thornton, found few positive signs for professional and business services firms such as employment agencies and computer services companies.

VIETNAM EASES PATH FOR FOREIGN CASH

Vietnam is to simplify and clean up its commercial law in an attempt to attract more foreign investment. A sweeping series of reforms aims to combat the country's reputation for excessive red tape, corruption and official mismanagement. The reforms, which take effect at the beginning of next year, are the latest step in a rapid liberalisation and modernisation of Vietnam's economy, one of the fastest-growing in Asia.

ARGENTINA WRESTLES WITH IMF

Argentine ministers and International Monetary Fund (IMF) officials are wrestling over the terms of a new loan that will save the South American country from a fresh default. If an agreement is not reached within 24 hours, Argentina will be forced into a damaging $2.9bn (1.8bn) default on its debt. The government in Buenos Aires received some important backing on Monday from the US - by far the most influential member of the IMF - which called for flexibility.

"The US believes the conditions for reaching an agreement with the IMF are favorable and thatArgentina enjoys terrific political support from the US and the G8 in general," said US Assistant Secretary of State Roger Noriega. The loan in negotiation is a three-year pact that will allow Argentina to just pay the interest on the $13bn of debts it owes the IMF, allowing it put more money into its social programme.

MAHATHIR TO UNVEIL FINAL BUDGET

The Malaysian prime minister, Dr Mahathir Mohamad, will unveil the country's budget for 2004 on Friday. Dr Mahathir, who is also Malaysia's finance minister, is due to step down in October after 22 years in charge. The budget is also expected to be the last before the general election. Two decades under Dr Mahathir have seen the country and its economy transformed. His last budget will be designed to protect that legacy.