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A budget proposal put forward by Italy’s populist government would create a prohibitively high deficit and has sharpened the conflict between Rome and the European Union.

Despite warnings from Brussels, the ruling Italian coalition of La Lega and the 5 Star Movement submitted its 2019 budget proposal to the European Union (EU) on October 15. A combination of tax cuts, increased social spending, and a roll back of pension reforms will cause the deficit to jump from 0.8 percent to 2.4 percent of the gross domestic product (GDP), according to the government’s calculations. The proposal, which creates a deficit that is more than triple the level desired by the EU, has left investors jittery about the trajectory of the Italian economy.
As the world’s economic and financial leaders gathered in Bali, Indonesia, last week, they were expected to scrutinize each other’s economic outcomes and policies against the backdrop of the International Monetary Fund’s reports on the world’s economic outlook (World Economic Outlook), the global financial situation (Global Financial Stability Report), and fiscal developments (Fiscal Monitor). These reports, which were prepared by teams of economists ahead of the annual meetings of the IMF and the World Bank, are intended to inform world leaders and the public at large about current economic developments, prospects, and risks. 
This week, the Boards of Governors of the International Monetary Fund (IMF) and World Bank Group (WBG) will convene for their annual meetings in Indonesia to discuss issues of global concern, including global economic growth. In the context of the meetings, the IMF publishes the World Economic Outlook (WEO) which analyzes global growth prospects in the short- and medium-term and the risks which impede these prospects. While this October’s report still predicts a steady expansion for 2018-19 at a 3.7 percent growth rate, this forecast is 0.2 percent lower than in April. One of the major reasons for this downward correction are recent trade policies which are expected to continue to be a downward risk leading to further disruption, uncertainty, and weaker growth.
US legislators weighing options to punish rogue actors using the plumbing of the international financial system – the Society for Worldwide Interbank Financial Telecommunication (SWIFT) – must carefully weigh the benefits of any such decision against the broad potential consequences. Unilateral, isolated policy making that implicates SWIFT risks hampering the flow of global financial transactions and trade, harming US businesses as well as further antagonizing European allies.
US Vice President Mike Pence took direct aim at Beijing in an October 4 speech in which he accused China of “pursuing a comprehensive and coordinated campaign to undermine support for the president, our agenda, and our nation’s most cherished ideals.”

Pence’s speech followed similar remarks by US President Donald J. Trump at the United Nations Security Council on September 26. Trump there accused Beijing of “meddling… because I am the first president ever to challenge China on trade and we are winning on trade.” China and the United States have been locked in a tit-for-tat exchange of tariffs after Trump placed restrictions on $50 billion worth of Chinese goods in June. On September 17, the United States placed additional tariffs on $200 billion worth of Chinese goods, in response to Beijing’s retaliatory tariffs for the initial June measures.
The new trade agreement between the United States, Canada, and Mexico “modernizes” the North American Free Trade Agreement (NAFTA) and lifts a cloud of uncertainty that has lingered over the past several months, according to Earl Anthony Wayne, a nonresident senior fellow with the Atlantic Council’s Global Business and Economics Program.

In negotiations that went down to the wire, Canada agreed on September 30 to join the United States and Mexico in a revised version of NAFTA. The new agreement will be referred to as the United State-Mexico-Canada Agreement (USMCA).

“Overall, each of the three countries showed flexibility, can claim wins from the new agreement, and gave up preferred positions to reach agreement,” said Wayne, who served as the US ambassador to Mexico from 2011 to 2015.
Canada agreed, moments before the clock ran out on a September 30 deadline, to sign on to a trade agreement between the United States and Mexico that would replace the North American Free Trade Agreement (NAFTA). The new agreement will be known as the United States-Mexico-Canada Agreement or USMCA.

US President Donald J. Trump announced the deal at the White House on October 1 describing it as a “brand new deal to terminate and replace NAFTA.” With this breakthrough, Trump has fulfilled his campaign promise to rewrite NAFTA, which he has called “the worst trade deal in history.” The new agreement was negotiated “on the principle of fairness and reciprocity,” said Trump.
On September 24, Mauricio Macri shared a dinner table (some laughs and an animated conversation) with Christine Lagarde in New York City. The Argentine president told guests at the Atlantic Council’s Global Citizen Awards dinner about the great relationship he had with the managing director of the International Monetary Fund (IMF).

Two days after President Macri was honored with a Global Citizen Award from the Atlantic Council, two days later he received even more good news: the IMF had agreed to increase its support to Argentina to $57.1 billion, the largest loan in the Fund’s history, to be disbursed over three years.
US President Donald J. Trump accused China of attempting to interfere in the US midterm elections in November at a meeting of the United Nations Security Council (UNSC) in New York on September 26.

China does “not want me or [the Republicans] to win,” he said. His remarks came as he chaired the UNSC meeting on nonproliferation of weapons of mass destruction. This is the first UNSC session chaired by Trump and only the third time a US president has led a session.

Trump offered no specific evidence of China’s purported “meddling” during his speech, but tied it directly to the trade issue, saying Beijing wants him to lose “because I am the first president ever to challenge China on trade and we are winning on trade.”
US President Donald J. Trump on September 25 used his second address to the United Nations General Assembly to reaffirm his commitment to an America First approach to foreign policy.

“America will always choose independence and cooperation over global governance, control, and domination,” Trump told the gathering of world leaders at the opening of the 73rd session of the United Nations General Assembly in New York. He laid out his vision for US foreign policy, with an emphasis on protecting US sovereignty from global governance and rising globalization.


    

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