SDR as a reserve currency
JOSEPH E GAGNON, fellow at the Peterson Institute for International Economics argues that IMF’s Special Drawing Right (SDR) could serve as a solution to address the asymmetry of international reserve assets and enhance reserve diversity and reduce distortions caused by excessive reliance on the US dollar as the main reserve asset. In his article, “A Currency System for a Multi-Polar World”, he outlines his 2-step proposal for the IMF
- expand the SDR basket to include the currencies of all countries that have sound macroeconomic policies and whose bond markets meet minimum standards of openness and supervision;
- create synthetic SDR bonds backed by medium-term sovereign bonds denominated in the currencies of the SDR basket.
He states that several dozen countries would qualify for inclusion in the SDR, including almost all advanced countries and a number of developing countries, and the IMF had acknowledged the benefits of a broader SDR basket for reserve diversification and for financial development in emerging markets. He also states that synthetic SDR bonds could be backed by sovereign debt in the currencies of the SDR basket and tradable among investors like exchange-traded funds (ETF), providing investors with a standardized asset that provides both a high degree of diversification and a deep and liquid market.
Arctic as a ‘global common’
P K GAUTAM, fellow at the Institute for Defence Studies and Analyses advocates a stance on the Arctic region as a global ‘common’ and calls for protection of its unique ecology and calls upon New Delhi to play an increasingly active role in Arctic affairs through ad-hoc observer membership of the Arctic Council similar to its stance in global “commons” negotiations such as space and climate change.
In his IDSA issue brief, “The Arctic as a Global Common“, he states that the current discourse on the Arctic was dominated by the Arctic five and the Arctic Council with the focus more around territorial and economic claims, and resource exploitation rather than protection of the unique ecology of the Arctic.
He avers that Arctic and the preservation of its ecology could be positioned as a “common heritage of mankind”, the concept by which global ‘commons’ such as seabed, ocean floor, outer space, lunar minerals, geostationary orbit, solar energy, internet etc. are currently governed.
Blueprint for enhancing U.S.-India cooperation
ROBERT BLACKWILL and NARESH CHANDRA, co-chairs of the Joint Study Group sponsored by the Council on Foreign Relations and Aspen Institute India recommend Washington to express strong support New Delhi’s peaceful rise as a crucial component of Asian security and stability, and call for both countries to endorse a long term residual U.S. military presence in Afghanistan beyond 2014 and advocate a resumption of regular meetings of the Quad states (U.S., India, Japan and Australia) as well as periodic invitations to like-minded Asian nations.
Their report, “The United States and India: A Shared Strategic Future“, covers areas such as Pakistan, Afghanistan, China, Middle East, economic and defense co-operation, climate change, energy technology and makes the following key recommendations:
- Classified exchanges between U.S. and India on multiple Pakistan contingencies
- Conditioning U.S. military aid to Pakistan on concrete anti-terrorist measures by the Pakistan military against groups inimical to India and the U.S. in Afghanistan
- U.S. to provide technical assistance to Pakistan to protect its nuclear arsenal
- India to continue bilateral negotiations with Pakistan on issues including Kashmir and trilateral discussions with Afghanistan
- India to intensify multidimensional co-operation with Afghanistan.
- Determine usefulness of Indian training of Afghan security forces
On China and Asia:
- Jointly and individually enlist China’s cooperation on matters of global and regional concern and not desire confrontation with Beijing.
- Brief each other on their assessments of China and intensify consultations on Asian security.
On the Middle East:
- Collaborate on democratic transitions in the Middle East—with Arab interest and agreement.
- India to intensify discussions with Iran concerning the stability of Iraq and Afghanistan.
On economic cooperation:
- Enhance their Strategic Dialogue to include economics and trade.
- Begin discussions on a free trade agreement.
On climate change and energy technology, the collaboration should:
- Bridge disagreements and identify creative areas for collaboration.
- Conduct joint feasibility study on space-based solar power.
On defense cooperation, the United States should:
- Train and provide expertise to the Indian military in areas such as space and cyberspace operations where India’s defense establishment is currently weak, but its civil and private sector has strengths.
- The United States to help strengthen India’s indigenous defense industry.
CALESTOUS JUMA, professor at Harvard University advocates a reconstruction of Africa’s relations with the rest of the world through its long-term economic objectives of adding value to natural resources, expanding manufacturing and reinvestment of revenues in infrastructure and technical training. In his op-ed in Kenya’s The Nation, “Africa’s solution to Asian interests”, he states that a foreign policy that focused relationships with China and India on economic issues such as infrastructure, skills transfer and market access would ensure Africa developed enough to become a global economic actor. in the wake of significant expansion of the Sino-African and Indo-African bilateral economic relationship. He concludes with a call for tripartite consultations to create a transparent platform for economic diplomacy and diminish perceptions of Sino-Indian competition in Africa, in the wake of a significant and parallel expansion of Sino-African and Indo-African economic relationship.
Shifting industrial landscape
DONALD HEPBURN, fellow of International Economics at Chatham House traces the changes in the world’s industrial landscape over the past 25 years and states that globalization, lower trade barriers, transport costs and a surge in international capital flows were a powerful enabler of transformation of the industrial landscape. He states that manufacturing shifted from industrialized to developing countries with developing countries increasing their share from 20% in 1995 to 28% in 2008 while industry’s share of world value added fell from 35% in 1985 to 27% in 2008 driven by fragmentation of the operations followed by outsourcing
In his Chatham House article, “Mapping the World’s Changing Industrial Landscape“, he states that that while demand drivers such as demographic factors such as urbanization, ageing, income growth and elasticity, and changing tastes had the potential to transform large swathes of industries such as consumer durables, automobiles, aviation, and health services; supply drivers such as availability of skilled labour, capital, infrastructure and supportive business environment could determine growth of industries and services within the developing countries. He cautions that the shift of industry to developing countries could be slowed by increased transport costs, changes in exchange rates and a backlash against globalization in developed countries if growth proved elusive and unemployment stayed high.
MATTEO FERRAZZI of Unicredit Group and ANDREA GOLDSTEIN of the OECD analyze the transformation of the global car industry, a cornerstone of global manufacturing in terms of turnover, employment, trade and technology incubation. They state that global economic crisis had magnified pre-existing challenges, accelerated the rebalancing of global economic activity between industrial and emerging economies with a dramatic shift in the location of production with BRIC countries expanding their share from 10% to 33% in a period of 10 years. In their report for Chatham House’ World’s Industrial Transformation Series, “The New Geography of Automotive Manufacturing“, they conclude that the industry would continue to be global, with new players (from China and India) increasing their share of fast-growing emerging markets and gradually become capable of challenging the incumbents in Western markets.