The discovery of mineral deposits in Afghanistan is of immense political importance
By Raza Khan
While the US and Afghanistan focus on the new peace initiatives with the Taliban, a development of immense politico-economic significance has taken place in Afghanistan. It is the discovery of huge untapped mineral deposits in the war-ravaged country. The discovery by the US is approximately $1 trillion of worth and is said to be far beyond any previously known reserves.
The discovered mineral deposits include iron, copper, cobalt, gold, and industrial metals like lithium. The deposits are said to be so huge and include so many minerals that experts are foreseeing the tapping of the deposits would transform Afghanistan into one of the most important mining centres in the world.
So far, the biggest mineral deposits discovered are of iron and copper. Their estimated quantities are large enough to make Afghanistan a major world producer of both. Large deposits of niobium, a soft metal used in producing superconducting steel, and large gold deposits in Pashtun areas of southern Afghanistan have been discovered.
Ground surveys by American geologists and Pentagon officials reveal that at one location in Ghazni province the potential for lithium deposits is as large as that of Bolivia, which now has the world's largest known lithium reserves. The newly discovered mineral resources would fundamentally alter the policies of different countries towards Afghanistan, in particular the policies of leading powers in global politics and economy as well as regional players that have had stakes in Afghanistan.
"The discovery of minerals and their subsequent use is going to change the entire geo-political and geo-strategic importance of Afghanistan besides the interests of different traditional stakeholders, particularly Pakistan. Hitherto, Afghanistan had to offer a negative attraction (that is merely strategic) for the international community. After the said discovery now the World would have a positive interest in Afghanistan," says Dr. Ijaz Khan, Chairman Department of International Relations, University of Peshawar, and an expert on Afghanistan while talking to TNS.
"The pressure would now be on the US, UK, Pakistan, Iran, and India besides other stakeholders in Afghanistan to bring peace to the country. Now peace would be in everyone's interest in Afghanistan which has never been the case previously," he adds.
"Pakistan can gain a lot out of the discovery of minerals in Afghanistan while at the same time it could lose a lot if it does not act rationally now. However, if Pakistan continues with its traditional policy of attempts to control Afghanistan and to deny other countries' stakes in Afghanistan that is no longer to be tolerated by the international community," says Dr Ijaz, who is authored the book titled, Pakistan Strategic Culture and Foreign Policy Making: A Case Study of Pakistan's Post 9/11 Afghan Policy Change.
The tapping of mineral deposits is going to make Afghanistan richer thus changing the country's traditional mindset and policy towards Pakistan. It would also reduce the burden of Afghan population on Pakistan. In the long run, this is definitely going to have good effects on both the countries irrespective of the official policies as interaction of people has their own dynamics.
Iran, another regional stakeholder in Afghanistan, wanted Afghanistan to support all its policies, still considering it as part of the centuries-old Persian Empire of which Afghanistan was once a part. India has also tried to court Afghanistan so that it could not make an alliance with its Muslim neighbour, Pakistan, and pose a critical threat to the Indian security.
Since the dismemberment of the Soviet Union, the emergence of CARs, India tried to capture CARs' markets, hoping to use Afghanistan's territory for the purpose. CARs have also seen Afghanistan as territory to sell their natural resources to the world. The policies of all international and regional players regarding Afghanistan have largely been influenced by geopolitics for the important geographical location of Afghanistan. The political vacuum that existed in Afghanistan lingered on and got so profound that a moment arrived when it lost its very statehood. Afghan monarchs and regimes are themselves to be blamed for inviting global and regional players' policies of using its territory to pursue their interests directly in conflict with Afghan state interests.
One of the mistakes Afghan rulers made was that they did not try to develop Afghanistan's economy so that the state could become self-sufficient and politically independent. The present volume of a mere $12 billion Afghan economy speaks volumes of the inefficiency of Afghan rulers. It is important to note that this figure includes the drug economy.
In this backdrop, the discovery of mineral deposits in Afghanistan is of immense political importance. For the first time the world would take economic interest in Afghanistan. However, to get economic benefits from the discovery of mineral deposits the global and regional actors have to shun military-specific policies in Afghanistan and invest in the development of Afghanistan instead of destroying it.
The writer is a political analyst, writing his doctoral thesis titled, Extremism-Terrorism in Pakistan: Causes and Counter Strategy
Jul 11, 2010
Frozen in time
Pakhtuns' manipulation by the state has left a chaotic region along the Pak-Afghan border
By Aasim Sajjad Akhtar
In early 1948, the Pakistani state, not yet equipped with a fully functioning army, incited Waziristani tribesmen to occupy Kashmir, thus triggering the first Indo-Pakistan war. From the outset then, the Pakistani state made clear that it viewed the tribes as a political tool that was to be used when the need arose. And just like the British before them, Pakistani administrators did not feel the need to reward these tribes with welfare and development schemes in Fata.
The first meaningful public investment in Fata took place in the 1970s under the populist government of Zulfikar Ali Bhutto. Among other initiatives, roads were constructed, abandoned cantonments were once again inhabited, old forts such as Datta Khel Ladha and Tiarza were renovated and made functional, and extensive power and electrification schemes were begun. Not all of these schemes necessarily benefited local communities. Forts, for example, became the exclusive preserve of the Political Agent (PA) and his retainers. In any case, it was not till almost three decades after the departure of the British that the state recognised the need to dedicate resources to the uplift of Fata's people. Even today, Fata's development indices are shamefully poor. There are, for instance, only 33 hospitals in Fata and the road density in Fata is 0.17 km per square km of area against a national average of 0.26.
By and large, Pakistan has continued with colonial practices for governing the region. The political-economic structure still revolves around the political agent, the maliki system, and the khassadars. Perhaps, most damningly Fata is subject to an explicitly colonial legal regime by the name of the Frontier Crimes Regulations (FCR). The FCR empowers the PA to fine, blockade and detain individuals or even entire tribes. PAs are further entitled to confiscate or demolish property under the guise of maintaining the public peace.
While Fata has been accorded representation in the Pakistani parliament, adult franchise was not granted until 1996. For the most part, the maliks continued to be viewed as 'representatives' of Fata's people. Between 1947 to 1954, Fata was represented in Pakistan's first constituent assembly by only one member. In 1973, for a total of 37,000 maliks, eight seats were reserved in the National Assembly. Even after the granting of adult franchise, political parties remain prohibited by law to operate in Fata. In recent times, there has been much hyperbole about the need to repeal the FCR, allowing political parties to function in Fata and integrating the tribes into the social mainstream. For the time being, however, there is little evidence to suggest that any substantive steps will be taken in this regard.
If the 1970s marked the first attempt of the Pakistani state to invest (nominally) in social infrastructure in the tribal areas then it was also in this period that a revised strategic policy was initiated. In retrospect, it may be argued that the engagement of the state with the tribes prior to the 1970s did not give rise to dislocation and upheaval which was to characterize the new strategic dispensation.
Following the secession of the East Pakistan in 1971, the truncated and insecure Pakistani state was traumatised by the calls of Afghanistan's King Daud for Pakhtuns to unite and (re)establish their historic homeland. In response to this perceived threat to the state's territorial integrity, the military establishment began to patronize Islamists such as Gulbuddin Hekmatyar and Burhanuddin Rabbani. Meanwhile, the state started investing in religious seminaries in settled and tribal Pakhtun areas. In Pakistan's calculation, the appeal of secular Pakhtun nationalism could only be countered by the propagation of Islamic ideology which was, as will be discussed presently, an important component part of the Pakhtun worldview.
It is important to bear in mind that there is a long history of Pakhtun militancy in which "jihad" has been invoked against outside aggressors. However, for the most part, jihad in the past did not represent any challenge to either cultural structures built around the Pakhtun code of honour called Pakhtunwali or to the political structures that were developed by the British in which the tribal elite and maliks were dominant.
The new strategic policy, however, shook both cultural and political structures. The "political mullah" became increasingly powerful, patronised by the PA whilst also becoming a symbol of a new economic regime in which guns and drugs flowed freely throughout the Pak-Afghan border region. The 'traditional' elite was conveniently sidelined; maliks either accepted the new dispensation and sought a place within it or faced a complete loss of power and prestige.
Even after the end of the Afghan jihad, there was to be no reversion to the old political, economic and cultural structures. This is not to suggest that the state's basic perception of the tribal areas and the people that inhabited had become less functional, but only to point out that the tremendous upheavals associated with the Afghan jihad had resulted in an immutable transformation of society.
It is now well-documented that Afghanistan was subject to the whims of warlords throughout the period preceding the emergence of the Taliban regime. Thus, when the Taliban managed to secure a majority of the country's territory and establish a nominal peace, the Afghan people acceded to the new government because they had not known even the semblance of peace for the best part of two decades.
However, this 'peace' was based on a perpetual war economy featuring smuggling of weapons, contraband, and all sorts of consumer goods, even while the majority of Afghans were not able to meet their basic needs. Pakhtun war contractors on both sides of the Pak-Afghan border created linkages between legal and illegal economic activities. For example, city transport services in the metropolitan centre of Karachi are controlled by Pakhtuns, and these transporters are heavily implicated in much of the illicit business that takes place in the permanent war economy.
After the invasion and occupation of Afghanistan, this permanent war economy has actually been further consolidated. Not only has heroin production and trade expanded, it is now increasingly well-documented that large sums of 'development aid' are ending up in the hands of war contractors, a perverse fact which is not unknown to American administrators.
In Fata, the Pakistani state claims to be fighting an epic war with the extremists just like the Western forces claim to be doing within Afghanistan. In truth, however, ordinary people remain at the whims of cynical protagonists in a war which many contractors would prefer to prolong rather than end.
Meanwhile, Pakistan's military establishment has clearly not made a complete break with its jihadi protégés, preferring to selectively conduct military operations under the guise of fighting terror rather than reorienting foreign and strategic policy decisively. Most recently, a high-profile military operation took place in the South Waziristan tribal agency. There is no conclusive evidence, aside from what the corporate media reports, that these operations serve any genuine welfare function. In fact, the state's engagement with the Pakhtun people remains a function of strategic objectives.
In the final analysis, little has changed in terms of the state's perception of the Pakhtun tribes in the 150 years since the British established their hegemony in India. It is important to note here that the western powers and the United States in particular have viewed Pakistan as a 'garrison state' much like the British conceived of the 'frontier' as a 'buffer zone'. Through the cold war this confluence of international and the Pakistani establishment's interests was depicted in heroic terms by the media and experts alike. However, in the post-2001 period, the major fallouts of the historic engagement of the state (and international powers) with Pakhtuns in the Pak-Afghan border area have become painfully clear.
By Aasim Sajjad Akhtar
In early 1948, the Pakistani state, not yet equipped with a fully functioning army, incited Waziristani tribesmen to occupy Kashmir, thus triggering the first Indo-Pakistan war. From the outset then, the Pakistani state made clear that it viewed the tribes as a political tool that was to be used when the need arose. And just like the British before them, Pakistani administrators did not feel the need to reward these tribes with welfare and development schemes in Fata.
The first meaningful public investment in Fata took place in the 1970s under the populist government of Zulfikar Ali Bhutto. Among other initiatives, roads were constructed, abandoned cantonments were once again inhabited, old forts such as Datta Khel Ladha and Tiarza were renovated and made functional, and extensive power and electrification schemes were begun. Not all of these schemes necessarily benefited local communities. Forts, for example, became the exclusive preserve of the Political Agent (PA) and his retainers. In any case, it was not till almost three decades after the departure of the British that the state recognised the need to dedicate resources to the uplift of Fata's people. Even today, Fata's development indices are shamefully poor. There are, for instance, only 33 hospitals in Fata and the road density in Fata is 0.17 km per square km of area against a national average of 0.26.
By and large, Pakistan has continued with colonial practices for governing the region. The political-economic structure still revolves around the political agent, the maliki system, and the khassadars. Perhaps, most damningly Fata is subject to an explicitly colonial legal regime by the name of the Frontier Crimes Regulations (FCR). The FCR empowers the PA to fine, blockade and detain individuals or even entire tribes. PAs are further entitled to confiscate or demolish property under the guise of maintaining the public peace.
While Fata has been accorded representation in the Pakistani parliament, adult franchise was not granted until 1996. For the most part, the maliks continued to be viewed as 'representatives' of Fata's people. Between 1947 to 1954, Fata was represented in Pakistan's first constituent assembly by only one member. In 1973, for a total of 37,000 maliks, eight seats were reserved in the National Assembly. Even after the granting of adult franchise, political parties remain prohibited by law to operate in Fata. In recent times, there has been much hyperbole about the need to repeal the FCR, allowing political parties to function in Fata and integrating the tribes into the social mainstream. For the time being, however, there is little evidence to suggest that any substantive steps will be taken in this regard.
If the 1970s marked the first attempt of the Pakistani state to invest (nominally) in social infrastructure in the tribal areas then it was also in this period that a revised strategic policy was initiated. In retrospect, it may be argued that the engagement of the state with the tribes prior to the 1970s did not give rise to dislocation and upheaval which was to characterize the new strategic dispensation.
Following the secession of the East Pakistan in 1971, the truncated and insecure Pakistani state was traumatised by the calls of Afghanistan's King Daud for Pakhtuns to unite and (re)establish their historic homeland. In response to this perceived threat to the state's territorial integrity, the military establishment began to patronize Islamists such as Gulbuddin Hekmatyar and Burhanuddin Rabbani. Meanwhile, the state started investing in religious seminaries in settled and tribal Pakhtun areas. In Pakistan's calculation, the appeal of secular Pakhtun nationalism could only be countered by the propagation of Islamic ideology which was, as will be discussed presently, an important component part of the Pakhtun worldview.
It is important to bear in mind that there is a long history of Pakhtun militancy in which "jihad" has been invoked against outside aggressors. However, for the most part, jihad in the past did not represent any challenge to either cultural structures built around the Pakhtun code of honour called Pakhtunwali or to the political structures that were developed by the British in which the tribal elite and maliks were dominant.
The new strategic policy, however, shook both cultural and political structures. The "political mullah" became increasingly powerful, patronised by the PA whilst also becoming a symbol of a new economic regime in which guns and drugs flowed freely throughout the Pak-Afghan border region. The 'traditional' elite was conveniently sidelined; maliks either accepted the new dispensation and sought a place within it or faced a complete loss of power and prestige.
Even after the end of the Afghan jihad, there was to be no reversion to the old political, economic and cultural structures. This is not to suggest that the state's basic perception of the tribal areas and the people that inhabited had become less functional, but only to point out that the tremendous upheavals associated with the Afghan jihad had resulted in an immutable transformation of society.
It is now well-documented that Afghanistan was subject to the whims of warlords throughout the period preceding the emergence of the Taliban regime. Thus, when the Taliban managed to secure a majority of the country's territory and establish a nominal peace, the Afghan people acceded to the new government because they had not known even the semblance of peace for the best part of two decades.
However, this 'peace' was based on a perpetual war economy featuring smuggling of weapons, contraband, and all sorts of consumer goods, even while the majority of Afghans were not able to meet their basic needs. Pakhtun war contractors on both sides of the Pak-Afghan border created linkages between legal and illegal economic activities. For example, city transport services in the metropolitan centre of Karachi are controlled by Pakhtuns, and these transporters are heavily implicated in much of the illicit business that takes place in the permanent war economy.
After the invasion and occupation of Afghanistan, this permanent war economy has actually been further consolidated. Not only has heroin production and trade expanded, it is now increasingly well-documented that large sums of 'development aid' are ending up in the hands of war contractors, a perverse fact which is not unknown to American administrators.
In Fata, the Pakistani state claims to be fighting an epic war with the extremists just like the Western forces claim to be doing within Afghanistan. In truth, however, ordinary people remain at the whims of cynical protagonists in a war which many contractors would prefer to prolong rather than end.
Meanwhile, Pakistan's military establishment has clearly not made a complete break with its jihadi protégés, preferring to selectively conduct military operations under the guise of fighting terror rather than reorienting foreign and strategic policy decisively. Most recently, a high-profile military operation took place in the South Waziristan tribal agency. There is no conclusive evidence, aside from what the corporate media reports, that these operations serve any genuine welfare function. In fact, the state's engagement with the Pakhtun people remains a function of strategic objectives.
In the final analysis, little has changed in terms of the state's perception of the Pakhtun tribes in the 150 years since the British established their hegemony in India. It is important to note here that the western powers and the United States in particular have viewed Pakistan as a 'garrison state' much like the British conceived of the 'frontier' as a 'buffer zone'. Through the cold war this confluence of international and the Pakistani establishment's interests was depicted in heroic terms by the media and experts alike. However, in the post-2001 period, the major fallouts of the historic engagement of the state (and international powers) with Pakhtuns in the Pak-Afghan border area have become painfully clear.
May 30, 2010
Damned if they do, damned if they don’t
The spectre of economic crisis still haunts the US economy, which is charaterised by high rates of deflation and unemployment
By Pradeep S Mehta and Anurag Srivastan
The US treasury report ostensibly aimed at decreeing China a currency manipulator, has not been released as was scheduled for the 15th of April this year. The repeated postponement of the release is to avoid the tumult that may follow the US assuming an explicit stance on the currency issue and imposing tariffs on Chinese imports. Such tumult would be a natural outcome given that the Chinese are likely to retaliate with an escalation of tariff walls with adverse implications for the Americans.
The delay may be good for the US, China and even the rest of the world since it buys all parties some time to reflect on a way out of the delicate imbalance in regard to ‘balance of payments’ involving the Americans and Chinese. Even if the mentioned report never sees the light of day, it is time for a serious rethink on global currency regimes and their regulation, as explained below.
The spectre of the economic crisis still haunts the US economy, which is charaterised by high rates of deflation and unemployment, low asset values and economic stagnation. With Congressional elections round the corner, bashing the Chinese is obviously a sound strategy. Several members of the US congress have been blaming the undervalued yuan, pegged to the US dollar for the last two years, for America’s economic difficulties. However, this might not be the complete picture.
Over time, an imbalance between the real and the financial side of the economy has emerged in the US with financial values of assets assuming magnitudes not based on values of underlying real assets. In turn, this has meant that traditional linkages such as that between productivity and wage have been broken. This has led to distortions in the economic structure with adverse ramifications.
One major outcome is the reliance of recent American growth on creation of demand through debt and asset price inflation. This in turn has also resulted in external imbalances. It deserves mention in this regard that US consumers consume and invest more than they produce and the associated deficits have to be financed by surpluses generated by other countries.
The American financial markets chased these surpluses which favoured formation of speculative bubbles. Asset prices rose to unrealistic levels and as the money flowed, people were willing to make even riskier investments. Finally, there was an implosion in the US securities market that precipitated the global economic crisis.
There is tangible pressure to correct this anomaly by the US Congress which is of the opinion that the Chinese policy of foreign reserve accumulation for influencing its currency valuation is a form of manipulation which makes its exports cheaper and imports expensive. The Congress contends that this has created a trade deficit in recent years and has been a major factor behind the loss of manufacturing jobs in the USA.
Although there is some truth to what the Congress is crying foul over, it is equally true that the US consumers and corporations have for years gained from the supply of low cost Chinese goods and material inputs, with the latter providing US a global competitive advantage in the market for certain high end products. The Chinese have in turn accumulated dollar reserves and benefited from unprecedented growth, high employment and the status of having ‘arrived’ in the global economic power club.
The Chinese yuan, pegged to the dollar was modestly reformed in 2005 though the US Congress does not consider it enough. The Chinese dilemma emerges from the fact that a strong and stable US economy is in China’s interests as its largest export market. Hence it is willing to continue funding the US debt though aware of the possibility of inflationary ramifications for the US and the depressing effect on China’s holding of US securities caused by the associated depreciation of the dollar. On the other hand, if China stops buying US debt or sells it off significantly the same economic destabilisation of the US from a weakening dollar could result.
Even if China accedes to the US demand to raise the value of its currency or make it float, it might not help either country: US inflation and market based interest rates will go up and Chinese goods would suddenly become more expensive for Americans, necessitating a reduction in profit margins associated with Chinese exports, which according to their vice commerce minister Zhong are less than 2 percent. A Chinese slowdown characterised by income losses, reduced employment and social instability is likely under this scenario.
To summarise, the US and China can neither do with nor do without each other. Tradeoffs are inevitable, regardless of whether the yuan has a stable and low dollar value or appreciates. Even if the Chinese give shape to the latter possibility, the approach has to be gradual. The US Congress’s demands for coercion to fix a certain high exchange rate is anything but sound economic reasoning especially as it has implications for other economies whose fortunes are governed by a sparsely regulated global currency system based on a diversity of currency regimes and systems.
The issue of Chinese appreciation of its currency and possible imbalances is thus a global issue requiring multilateral discussions instead of a simple bilateral approach. The lack of an appropriate forum for such discussions is a stumbling block in this regard, given a weakened IMF and doubts raised about its neutrality by the South. A potential forum might be the WTO as undervalued exchanged rates are often construed as smacking of protectionism, an area covered by the WTO mandate. However, its ability to broker effective rules and agreements in this regard needs further examination.
The current currency spat between US and China raises several issues for global economic stability and welfare. It begs raising the salutary influence of multilateralism in the trade and currency markets to the pedestal it was idealized to be. From a development perspective, the world community must get assertive on assessing how the current imbalance between US and China would impact their own economic welfare and initiate discussions on the ‘institutions’ which will ensure economic security in the context of present financial fragility.
By Pradeep S Mehta and Anurag Srivastan
The US treasury report ostensibly aimed at decreeing China a currency manipulator, has not been released as was scheduled for the 15th of April this year. The repeated postponement of the release is to avoid the tumult that may follow the US assuming an explicit stance on the currency issue and imposing tariffs on Chinese imports. Such tumult would be a natural outcome given that the Chinese are likely to retaliate with an escalation of tariff walls with adverse implications for the Americans.
The delay may be good for the US, China and even the rest of the world since it buys all parties some time to reflect on a way out of the delicate imbalance in regard to ‘balance of payments’ involving the Americans and Chinese. Even if the mentioned report never sees the light of day, it is time for a serious rethink on global currency regimes and their regulation, as explained below.
The spectre of the economic crisis still haunts the US economy, which is charaterised by high rates of deflation and unemployment, low asset values and economic stagnation. With Congressional elections round the corner, bashing the Chinese is obviously a sound strategy. Several members of the US congress have been blaming the undervalued yuan, pegged to the US dollar for the last two years, for America’s economic difficulties. However, this might not be the complete picture.
Over time, an imbalance between the real and the financial side of the economy has emerged in the US with financial values of assets assuming magnitudes not based on values of underlying real assets. In turn, this has meant that traditional linkages such as that between productivity and wage have been broken. This has led to distortions in the economic structure with adverse ramifications.
One major outcome is the reliance of recent American growth on creation of demand through debt and asset price inflation. This in turn has also resulted in external imbalances. It deserves mention in this regard that US consumers consume and invest more than they produce and the associated deficits have to be financed by surpluses generated by other countries.
The American financial markets chased these surpluses which favoured formation of speculative bubbles. Asset prices rose to unrealistic levels and as the money flowed, people were willing to make even riskier investments. Finally, there was an implosion in the US securities market that precipitated the global economic crisis.
There is tangible pressure to correct this anomaly by the US Congress which is of the opinion that the Chinese policy of foreign reserve accumulation for influencing its currency valuation is a form of manipulation which makes its exports cheaper and imports expensive. The Congress contends that this has created a trade deficit in recent years and has been a major factor behind the loss of manufacturing jobs in the USA.
Although there is some truth to what the Congress is crying foul over, it is equally true that the US consumers and corporations have for years gained from the supply of low cost Chinese goods and material inputs, with the latter providing US a global competitive advantage in the market for certain high end products. The Chinese have in turn accumulated dollar reserves and benefited from unprecedented growth, high employment and the status of having ‘arrived’ in the global economic power club.
The Chinese yuan, pegged to the dollar was modestly reformed in 2005 though the US Congress does not consider it enough. The Chinese dilemma emerges from the fact that a strong and stable US economy is in China’s interests as its largest export market. Hence it is willing to continue funding the US debt though aware of the possibility of inflationary ramifications for the US and the depressing effect on China’s holding of US securities caused by the associated depreciation of the dollar. On the other hand, if China stops buying US debt or sells it off significantly the same economic destabilisation of the US from a weakening dollar could result.
Even if China accedes to the US demand to raise the value of its currency or make it float, it might not help either country: US inflation and market based interest rates will go up and Chinese goods would suddenly become more expensive for Americans, necessitating a reduction in profit margins associated with Chinese exports, which according to their vice commerce minister Zhong are less than 2 percent. A Chinese slowdown characterised by income losses, reduced employment and social instability is likely under this scenario.
To summarise, the US and China can neither do with nor do without each other. Tradeoffs are inevitable, regardless of whether the yuan has a stable and low dollar value or appreciates. Even if the Chinese give shape to the latter possibility, the approach has to be gradual. The US Congress’s demands for coercion to fix a certain high exchange rate is anything but sound economic reasoning especially as it has implications for other economies whose fortunes are governed by a sparsely regulated global currency system based on a diversity of currency regimes and systems.
The issue of Chinese appreciation of its currency and possible imbalances is thus a global issue requiring multilateral discussions instead of a simple bilateral approach. The lack of an appropriate forum for such discussions is a stumbling block in this regard, given a weakened IMF and doubts raised about its neutrality by the South. A potential forum might be the WTO as undervalued exchanged rates are often construed as smacking of protectionism, an area covered by the WTO mandate. However, its ability to broker effective rules and agreements in this regard needs further examination.
The current currency spat between US and China raises several issues for global economic stability and welfare. It begs raising the salutary influence of multilateralism in the trade and currency markets to the pedestal it was idealized to be. From a development perspective, the world community must get assertive on assessing how the current imbalance between US and China would impact their own economic welfare and initiate discussions on the ‘institutions’ which will ensure economic security in the context of present financial fragility.
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