Baffin Island in Canada’s far north is the site for a biennial summit meeting of the Artic Council

Kemal Davis writes: It is impossible to deny that trade and exchange rates are closely linked. But does that mean that international trade agreements should include provisions governing national policies that affect currency values?

Some economists certainly think so. Simon Johnson, for example, recently argued that mega-regional agreements like the Trans-Pacific Partnership should be used to discourage countries from intervening in the currency market to prevent exchange-rate appreciation;

As it stands, the relevant international institutions — the World Trade Organization and the International Monetary Fund — are not organized to respond effectively to possible currency manipulation on their own. Incorporating macroeconomic policies affecting exchange rates into trade negotiations would require either that the WTO acquire the technical capacity (and mandate) to analyze and adjudicate relevant national policies or that the IMF join the dispute-settlement mechanisms that accompany trade treaties.

The most direct method is purchases of foreign assets. But, in a world of large short-term capital flows, central-banks’ policy interest rates – or even just announcements about likely future rates — also have a major impact. Moreover, quantitative easing affects exchange rates and trade, even if central banks purchase only domestic assets, as demonstrated by recent movements in the exchange rates of the dollar, the euro, and the yen.

Consider the problem that would be posed by the eurozone.  Most eurozone countries have lately been forced to tighten fiscal policy, thereby reducing or eliminating their current-account deficits.  As a result, the total eurozone trade surplus is now massive. Because individual eurozone members have no monetary-policy tools at their disposal, the only way that Germany can reduce its surplus while remaining in the eurozone is to conduct expansionary fiscal policy. The economist Stefan Kawalec has explicitly referred to the current policy mix in the eurozone as “currency manipulation.”

None of this means that macroeconomic policies that affect exchange rates are not problematic. They are. But trade negotiations are not the right forum for discussing the causes and consequences of current-account imbalances.

A better approach would include strengthening the IMF’s multilateral surveillance role. Doing so would broaden discussions of macroeconomic policy to include employment issues — specifically, the potential impact of large foreign-trade surpluses on domestic jobs. And it would give trade negotiations a chance to succeed.

Andrew Winston writes in the Harvard Business Review:   The NGO Ceres has gotten an impressive array of companies to sign onto the Climate Declaration, which states that climate change is both a threat and a major economic opportunity. But this year, a smaller Ceres group, BICEP, which is calling for more aggressive policies like a tax on carbon, added some very mainstream companies such as General Mills, Kellogg’s, and Nestle (perhaps not coincidentally, General Mills announced early this year that its earnings were reduced by extreme weather).

In the wonky, trendy vocabulary of working together, “collaboration” isn’t exciting enough without the now-hot modifier of “pre-competitive” (meaning: stuff fierce rivals can do collectively that doesn’t diminish their ability to compete). Walmart and Target demonstrated how this works by convening a Personal Care Products Sustainability Summit. All the major players in the personal care product value chain — the giants of consumer products, chemicals, and fragrances — were there (as was I). The general topic was how this group could reduce the physical and chemical impacts of all those gels and liquids we use on our bodies, and the group will continue to work together and convene to tackle thorny issues in the value chain.  Sustainability

Joseph Seigliz writes: The International Monetary Fund and the World Bank are poised to hold their annual meetings, but the big news in global economic governance will not be made in Washington DC in the coming days. Indeed, that news was made last month, when the United Kingdom, Germany, France, and Italy joined more than 30 other countries as founding members of the Asian Infrastructure Investment Bank (AIIB). The $50 billion AIIB, launched by China, will help meet Asia’s enormous infrastructure needs, which are well beyond the capacity of today’s institutional arrangements to finance.

One would have thought that the AIIB’s launch, and the decision of so many governments to support it, would be a cause for universal celebration. And for the IMF, the World Bank, and many others, it was. But, puzzlingly, wealthy European countries’ decision to join provoked the ire of American officials.

America’s opposition to the AIIB is inconsistent with its stated economic priorities in Asia. Sadly, it seems to be another case of America’s insecurity  undermining an important opportunity to strengthen Asia’s developing economies.

China itself is a testament to the extent to which infrastructure investment can contribute to development.

The AIIB would bring similar benefits to other parts of Asia, which deepens the irony of US opposition.

There is a further major global advantage to a fund like the AIIB: right now, the world suffers from insufficient aggregate demand. Financial markets have proven unequal to the task of recycling savings from places where incomes exceed consumption to places where investment is needed.

When he was Chair of the US Federal Reserve, Ben Bernanke mistakenly described the problem as a “global saving glut.” But in a world with such huge infrastructure needs, the problem is not a surplus of savings or a deficiency of good investment opportunities. The problem is a financial system that has excelled at enabling market manipulation, speculation, and insider trading, but has failed at its core task: intermediating savings and investment on a global scale.

The World Bank’s assistance was sometimes overburdened by prevailing ideology; for example, the free-market Washington Consensus policies foisted on recipients actually led to deindustrialization and declining income in Sub-Saharan Africa. Nonetheless, US assistance was, overall, far more effective than it would have been had it not been multilateralized.

New attempts to multilateralize flows of assistance are similarly likely to contribute significantly to global development. The AIIB offers a chance to test that idea in development finance itself.

Perhaps America’s opposition to the AIIB is an example of an economic phenomenon that I have often observed: firms want greater competition everywhere except in their own industry. This position has already exacted a heavy price: had there been a more competitive marketplace of ideas, the flawed Washington Consensus might never have become a consensus at all.

US opposition to the AIIB is hard to fathom, given that infrastructure policy is much less subject to the influence of ideology and special interests than other policymaking areas, such as those dominated by the US at the World Bank. Moreover, the need for environmental and social safeguards in infrastructure investment is more likely to be addressed effectively within a multilateral framework.

The UK, France, Italy, Germany, and the others who have decided to join the AIIB should be congratulated.

Does Europe need to save Greece:

Anders Borg writes:  The fundamental problem underlying Greece’s economic crisis is a Greek problem: the country’s deep-rooted unwillingness to modernize. Greece was subject to a long period of domination by the Ottoman Empire. Its entrenched political and economic networks are deeply corrupt. A meritocratic bureaucracy has not emerged. Even as trust in government institutions has eroded, a culture of dependency has taken hold.

The Greeks, it can be argued, have not earned the right to be saved. And yet a Greek exit from the euro is not the best option for either Greece or for the European Union. Whether or not the Greeks are deserving of assistance, it is in Europe’s interest to help them.

The OECD, the European Commission, the International Monetary Fund, and the World Bank have emphasized, in report after report, the fundamental inability of Greece’s economy to produce long-term sustainable growth. The country’s education system is sub-par and underfunded. Its investments in research and development are inadequate. Its export sector is small. Productivity growth has been slow.

Greece’s economy struggles to reallocate resources, including workers, given the rigidity of the labor market.

After Greece was allowed to enter the eurozone, interest-rate convergence, combined with inflated property prices, fueled an increase in household debt and caused the construction sector to overheat, placing the economy on an unsustainable path.

In the eight years that I served on the EU’s Economic and Financial Affairs Council, I worked alongside seven Greek ministers, every one of whom at some point admitted that the country’s deficit numbers had to be revised upward.

And yet, as bad as Greece’s economy and political culture may be, the consequences of the country’s exit from the euro are simply too dire to consider.  European values at stake in that decision trump any economic considerations.

For starters, a Greek exit from the euro would be a devastating blow to Greece. Without the support of the European Central Bank, the country’s banking system would be shut off from international markets.

To make matters worse, the economic crisis could lead to a political meltdown, making it impossible to enact the structural reforms that Greece desperately needs.

Europe also needs to consider the geopolitical environment. Increased tension caused by the conflict in Ukraine risks destabilizing other parts of the continent. Expelling Greece into such an unstable international environment would leave the region more vulnerable to those – particularly Russia’s current leaders – who believe they would benefit from a weaker, less unified Europe.

There are more important questions raised by the crisis in Greece than whether the country deserves to be rescued by European taxpayers. At stake are fundamental values and strategic considerations that are central to the European project. Europe is simply more European with a stable partner in Athens.