Wednesday, May 11, 2011
And just as Citigroup predicted, US imports surge even as US exports jump to a record $172.7 billion. But the story is once again in the GDP reducing imports which jump by a whopping $220.8 billion, a $10.4 billion jump M/M. The total deficit of $48.2 billion is the highest since the June 2010 spike which hit $49.9 billion. From the release: “Exports increased to $172.7 billion in March from $165.0 billion in February. Goods were $124.9 billion in March, up from $117.8 billion in February, and services were $47.7 billion in March, up from $47.2 billion in February. Imports increased to $220.8 billion in March from $210.4 billion in February. Goods were $187.0 billion in March, up from $176.9 billion in February, and services were $33.8 billion in March, up from $33.5 billion in February. For goods, the deficit was $62.1 billion in March, up from $59.1 billion in February. For services, the surplus was $13.9 billion, up from $13.7 billion in February.” Ah, financial innovation being exported as per usual. Look for another round of Q1 GDP downgrades as this number takes out a few basis points in growth. As we know from China that April exports to the US jumped even more, this import surge will likely carry over into Q2 and result in more GDP cuts.
And on the key relationship with China:
Which, as usual is quite funny, considering that from a Chinese perspective, exports to the US in March were $13 billion, and in April $15.1 billion. In other words, in March there was just a 30% discrepancy between the two most prevaricating economies.
More importantly, Tim Jeetner is on the job: the CNY parity was set at 6.4948 by the PBoC last night. A new record. And all is well, as now the US and China promise to play good in international trade. The following is the text of the framework for promoting strong, sustainable, and balanced growth and economic cooperation agreed to by U.S. Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan:
Following the consensus reached by President Hu Jintao and President Obama in Washington D.C. on January 20, 2011, the special representatives of President Barack H. Obama and President Hu Jintao, U.S. Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan, have elaborated a framework of comprehensive economic cooperation (the Framework) in the third round of S&ED in May 2011.
The United States and China affirm that both countries will, based on common interest, promote more extensive economic cooperation, from a strategic, long-term, and overarching perspective, to work together to build a comprehensive and mutually beneficial economic partnership, add to prosperity and welfare in the two countries, and achieve strong, sustainable, and balanced growth of the world economy.
1. The framework for comprehensive economic cooperation is based on the national interest of each country in strong, sustainable, and balanced economic growth and continued growth in employment. At the same time, the U.S.-China economic relationship is based on a wide range of common and overlapping interests. Each country recognizes that the health and continued growth of the other’s economy is indispensible to its own prosperity.
2. As the two largest economies in the world, economic outcomes and policy actions in the United States and China have a significant impact on the health of the global economy. The United States and China recognize and take into account the impact their policies have on the global economy, and cooperate to strengthen the international trade and financial institutions that support global growth and stability.
3. As a part of expanded, closer, and more extensive economic cooperation, China and the United States are increasing the extent of their consultation on policy actions that affect the interests of the other country.
4. The implementation of the U.S.-China Framework relies on existing mechanisms of dialogue and cooperation. The two countries reaffirm their pledge to implement commitments as set forth in the S&ED Economic Track Joint Fact Sheets.
II. Deepen Macroeconomic Cooperation
Both countries recognize the fundamental consistency between their goals to promote strong, sustainable, and balanced growth, and commit to further strengthen macroeconomic-policy communication and coordination.
5. The two countries are strengthening use of existing channels to deepen cooperation on macroeconomic, fiscal, financial, and structural issues relevant to our two economies and to the health of the global economy.
6. The two countries reiterate their support for the G-20 Framework for Strong, Sustainable, and Balanced Growth and reaffirm their commitments to improve the living standards of our citizens through strong economic and jobs growth, and to use the full range of policies to strengthen the global recovery and to reduce excessive external imbalances and maintain current account imbalances at sustainable levels. The United States and China affirm active support for the mutual assessment process of the G-20.
7. Both countries pledge to work together with other countries to maintain the stability of international monetary environment. The United States pledges to maintain vigilance against excess volatility in exchange rates, and China pledges to continue to enhance RMB exchange rate flexibility.
III. Develop a More Balanced Trade and Investment Relationship
The two countries recognize the importance of open trade and investment for promoting innovation, creating jobs, and boosting incomes and economic growth. The United States and China are committed to further expanding bilateral trade and investment, fostering more open trade and investment globally, and fighting against trade and investment protectionism.
8. Both countries commit to take comprehensive measures to promote more balanced trade between the United States and China.
9. The two countries are committed to working proactively to resolve bilateral trade and investment disputes in a constructive, cooperative, and mutually beneficial manner.
10. The two countries recognize the importance of the principle of nondiscrimination in government procurement and innovation policies, as jointly acknowledged in S&EDs I and II, and reaffirm their continued support for the strong protection of intellectual property rights.
11. The two countries are committed to fostering open and fair investment environments, and continuing to promote transparency and predictability for investors of both countries.
12. The two countries undertake to explore new cooperation opportunities in the process of transforming and restructuring their economies, including in infrastructure development.
13. Both countries commit to actively develop sub-national economic cooperation, and promote communication and exchange between enterprises, think tanks, and universities. The two countries undertake to improve on mechanisms including the U.S.-China Investment Forum, the U.S.-China Governors Forum, and the U.S.-China Initiative on City-level Economic Cooperation, and further promote the “second-track” dialogue between business leaders and academics in both countries.
IV. Deepen Cooperation in the Financial Sector
The two countries pledge to further deepen bilateral and multilateral cooperation on financial sector development, investment, regulation, and supervision, and cooperate to support flows of productive capital into, and the efficiency and stability of, financial markets of both countries.
14. The United States and China recognize the importance of fair and open investment environments and support an open environment for investment in financial services and cross-border portfolio investment, consistent with prudential and national security requirements.
15. China and the United States commit to deepen their cooperation to ensure financial sector stability and strengthened financial sector regulation and supervision, both bilaterally and in the G-20, the Financial Stability Board, and international standard-setting bodies.
V. Strengthen Regional and International Economic Cooperation
16. The United States welcomes China playing a bigger role in international economic affairs. China recognizes the important role the United States plays in the international economic system and in the Asia-Pacific region, and welcomes U.S. participation in and contribution to economic stability and prosperity in the region.
17. The two countries pledge to strengthen communication and coordination and to support a bigger role for the G-20 in international economic and financial affairs.
18. Both countries recognize the important role of APEC as a platform for economic cooperation in Asia and the Pacific, and pledge to enhance coordination and cooperation under the APEC framework.
19. The two countries pledge to work together to strengthen the global financial system and reform the international financial architecture. The two countries are continuing their strong cooperation to strengthen the legitimacy and improve the effectiveness of the International Monetary Fund, Multilateral Development Banks (MDBs), and other institutions involved in global economic governance.
20. The two countries intend to jointly promote efforts of the international community to assist developing countries, in particular the Least Developed Countries, to achieve the Millennium Development Goals (MDGs). Both sides, in partnership with the Multilateral Development Banks, undertake to explore cooperation that supports global poverty reduction and development, and regional integration to contribute to inclusive and sustainable economic growth.
Timothy F. Geithner Wang Qishan
Secretary of the Treasury Vice Premier
For the United States of America For the People’s Republic of China
This article was posted: Wednesday, May 11, 2011 at 7:50 am