U.S. economy losing its global dominance
By Shobhana Chandra and Matthew Benjamin Bloomberg News
Published: September 25, 2006
WASHINGTON Europe, Japan and emerging economies around the world are weaning themselves from dependence on the American consumer, and economists say it is just in time.
Demand in the U.S. economy is slowing as the housing market falters, a development that the International Monetary Fund on Sept. 14 called a key risk to global expansion.
If so, it is a risk that the biggest exporting nations are better prepared to weather now than five years ago.
"Domestic demand in so many other parts of the world is picking up," said Jim O'Neill, head of global economic research at Goldman Sachs Group in London. "If there ever was a good time for the U.S. to slow, this is it."
The share of global exports purchased by U.S. consumers and businesses fell to 17.9 percent in 2005 from 21.8 percent in 2000 as demand increased in the European Union, Japan and emerging markets in Asia and Eastern Europe. Exporting nations in Europe and Asia are poised to grab a larger share of world markets with trade agreements that do not include the United States.
The European Union said this month it would seek bilateral trade deals with China and South Korea. In August, Japan proposed a 16-nation economic bloc, including 10 Southeast Asian nations, China, Japan, South Korea, India, Australia and New Zealand.
"That will expand trade amongst these countries at the expense of trade with the U.S.," said Michael Mussa, a former chief economist of the International Monetary Fund who is now with the Institute for International Economics in Washington.
Of course, the world is far from becoming immune to the ups and downs of the U.S. economy, said Jay Bryson, global economist at Wachovia in Charlotte, North Carolina. "The U.S. is still one of the largest drivers of growth," Bryson said. "We're probably decades away from people saying the U.S. won't matter."
The United States remains the biggest importer by far, buying $1.7 trillion in goods and services from the rest of the world last year, more than double the amount that second-place Germany took in, according to the Economist Intelligence Unit, a London-based research company.
Still, said Joseph Stiglitz, a Nobel laureate economist who teaches at Columbia University in New York, "the U.S. is no longer the single pivotal player to world trade that it was, because China and India and other nations have become a major part of the engine of global growth the past five years."
The 2001 U.S. recession struck a blow to the rest of the world. The economy in Taiwan contracted 2.2 percent that year, its worst slump on record, as exports tumbled. The economies of Japan, Singapore, Malaysia and Thailand were hurt, too. Recessions in Argentina and Mexico deepened, while growth in Germany and Italy slowed.
Now, as the U.S. economy decelerates, other economies are expanding.
U.S. economic growth is expected to slow to 2.6 percent in the final three months of 2006 from 5.6 percent in the first quarter, according to a Bloomberg News survey of economists. Growth in consumer spending - representing more than two-thirds of the U.S. economy - will slow to 2.7 percent from the first quarter's 4.8 percent gain.
The euro region is on track this year for the fastest growth since 2000, led by Germany, the largest economy in Europe. Domestic demand in Japan is reviving after seven years of deflation, and the Chinese economy grew in the second quarter at the fastest rate in more than a decade.
"It is better for the U.S. not to be in a dominating position, and to have other countries rising faster," said Robert Kuhn, a senior adviser to Citigroup in New York and the author of "The Man Who Changed China: The Life and Legacy of Jiang Zemin." "Diversification will make the system more robust."
China including Hong Kong has in the last three years overtaken the United States to become the biggest trading partner to Japan and South Korea. The share of Japanese exports purchased by the United States dropped to 22.9 percent last year from 30.1 percent in 2000. Some Japanese shipments to China, though, were unfinished goods ultimately destined for U.S. consumption.
Similarly, the proportion of European Union exports going to the United States declined to 7.9 percent last year from 9.1 percent in 2000. While important to trade for the 25-nation EU, the United States has lost its preeminence there, said the European Central Bank president, Jean-Claude Trichet.
"As regards trade links, the United Kingdom is more important for the euro area than the United States," Trichet said in an Aug. 31 interview.
WASHINGTON Europe, Japan and emerging economies around the world are weaning themselves from dependence on the American consumer, and economists say it is just in time.
Demand in the U.S. economy is slowing as the housing market falters, a development that the International Monetary Fund on Sept. 14 called a key risk to global expansion.
If so, it is a risk that the biggest exporting nations are better prepared to weather now than five years ago.
"Domestic demand in so many other parts of the world is picking up," said Jim O'Neill, head of global economic research at Goldman Sachs Group in London. "If there ever was a good time for the U.S. to slow, this is it."
The share of global exports purchased by U.S. consumers and businesses fell to 17.9 percent in 2005 from 21.8 percent in 2000 as demand increased in the European Union, Japan and emerging markets in Asia and Eastern Europe. Exporting nations in Europe and Asia are poised to grab a larger share of world markets with trade agreements that do not include the United States.
The European Union said this month it would seek bilateral trade deals with China and South Korea. In August, Japan proposed a 16-nation economic bloc, including 10 Southeast Asian nations, China, Japan, South Korea, India, Australia and New Zealand.
"That will expand trade amongst these countries at the expense of trade with the U.S.," said Michael Mussa, a former chief economist of the International Monetary Fund who is now with the Institute for International Economics in Washington.
Of course, the world is far from becoming immune to the ups and downs of the U.S. economy, said Jay Bryson, global economist at Wachovia in Charlotte, North Carolina. "The U.S. is still one of the largest drivers of growth," Bryson said. "We're probably decades away from people saying the U.S. won't matter."
The United States remains the biggest importer by far, buying $1.7 trillion in goods and services from the rest of the world last year, more than double the amount that second-place Germany took in, according to the Economist Intelligence Unit, a London-based research company.
Still, said Joseph Stiglitz, a Nobel laureate economist who teaches at Columbia University in New York, "the U.S. is no longer the single pivotal player to world trade that it was, because China and India and other nations have become a major part of the engine of global growth the past five years."
The 2001 U.S. recession struck a blow to the rest of the world. The economy in Taiwan contracted 2.2 percent that year, its worst slump on record, as exports tumbled. The economies of Japan, Singapore, Malaysia and Thailand were hurt, too. Recessions in Argentina and Mexico deepened, while growth in Germany and Italy slowed.
Now, as the U.S. economy decelerates, other economies are expanding.
U.S. economic growth is expected to slow to 2.6 percent in the final three months of 2006 from 5.6 percent in the first quarter, according to a Bloomberg News survey of economists. Growth in consumer spending - representing more than two-thirds of the U.S. economy - will slow to 2.7 percent from the first quarter's 4.8 percent gain.
The euro region is on track this year for the fastest growth since 2000, led by Germany, the largest economy in Europe. Domestic demand in Japan is reviving after seven years of deflation, and the Chinese economy grew in the second quarter at the fastest rate in more than a decade.
"It is better for the U.S. not to be in a dominating position, and to have other countries rising faster," said Robert Kuhn, a senior adviser to Citigroup in New York and the author of "The Man Who Changed China: The Life and Legacy of Jiang Zemin." "Diversification will make the system more robust."
China including Hong Kong has in the last three years overtaken the United States to become the biggest trading partner to Japan and South Korea. The share of Japanese exports purchased by the United States dropped to 22.9 percent last year from 30.1 percent in 2000. Some Japanese shipments to China, though, were unfinished goods ultimately destined for U.S. consumption.
Similarly, the proportion of European Union exports going to the United States declined to 7.9 percent last year from 9.1 percent in 2000. While important to trade for the 25-nation EU, the United States has lost its preeminence there, said the European Central Bank president, Jean-Claude Trichet.
"As regards trade links, the United Kingdom is more important for the euro area than the United States," Trichet said in an Aug. 31 interview.
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