Central bankers face political shocks, and hope to avoid the worst

A man walks past the Federal Reserve Bank in Washington. (Reuters/File)
Updated 26 August 2019
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Central bankers face political shocks, and hope to avoid the worst

  • During Fed conference, ‘some seemed intent on steering the wheel toward trouble’

JACKSON HOLE, WYOMING: Global central bank chiefs know their job is to keep the economy out of the ditch. What became clear at the US Federal Reserve’s central banking conference in Jackson Hole, Wyoming, over the past couple of days is that not only do other people hold the wheel, some seem intent on steering toward trouble.
“We are experiencing a series of major political shocks; we saw another example of that yesterday,” Reserve Bank of Australia Gov. Philip Lowe said on Saturday, a day after China and the US slapped more tariffs on each other’s goods and US President Donald Trump called on American companies to shut down their operations in the Asian nation.
As those political shocks slow growth, Lowe said in a panel discussion, “there is a strongly held view that the central bank should just fix the problem ... The reality is much more complicated,” and not something monetary policy can likely repair.
His comments spoke to an uncomfortable truth that hovered over an annual symposium where the mountain backdrop and two days of technical debate often seem distant from the world of realpolitik. Even as central bankers and economists referred to the deep connections that now tie the world’s economies together, a US-driven trade war seemed to be driving them apart and raising the specter of a broad global downturn.
Worse, it’s a downturn none of the central bankers seemed confident about how to fight — coming not from a business- or financial-cycle meltdown that they have a playbook to combat, but from political choices that threaten to crater business confidence.

HIGHLIGHTS

• Even as central bankers and economists referred to the deep connections that now tie the world’s economies together, a US-driven trade war seemed to be driving them apart and raising the specter of a broad global downturn.

• It’s a downturn none of the central bankers seemed confident about how to fight — coming not from a business — or financial-cycle meltdown that they have a playbook to combat, but from political choices that threaten to crater business confidence.

If that’s the problem, Lowe and others said, lower interest rates — something demanded by Trump to get an upper hand in the trade war with China — will do little to help.
“The problem is in the president of the United States,” former Fed Vice Chair Stanley Fischer said at a lunch event on Friday. “How the system is going to get around some of the sorts of things that have been done lately, including trying to destroy the global trading system, is very unclear. I have no idea how to deal with this.”
It was a rare calling out of Trump, though his presence infused other remarks. Fed Chair Jerome Powell, handpicked by Trump to run the central bank but now an object of the president’s ire, noted in his opening speech that the Fed had no chartbook for building a new global trading system.
‘Last moment’
Central banks have asked politicians for years to use fiscal policy more constructively and address structural problems plaguing economies.
What they’ve gotten instead is a fast multiplying set of risks, with the US-China trade war at the epicenter but also including the possibility of a disruptive British exit from the EU, an economic slowdown in Germany, a political collapse in Italy, rising political tensions in Hong Kong, and longstanding international institutions and agreements under pressure.
European Council President Donald Tusk described this weekend’s G7 leaders summit in Biarritz as a “last moment” for its members — the US, Britain, Germany, Japan, France, Italy and Canada — to restore unity.
Amidst all the tumult, and with interest rates across the globe already lower than they’ve been historically, monetary policy may be no match.
“There is not that much policy space and there are material risks at the moment that we all are trying to manage,” Bank of England Gov. Mark Carney said on Friday.


Where’s the beef? Argentine cattle ranchers hope it’s heading to China

Updated 18 September 2019

Where’s the beef? Argentine cattle ranchers hope it’s heading to China

  • Surging sales to Beijing shake up global meat trade and deliver tasty windfall for Latin American giant

BUENOS AIRES: Cattle ranchers in Argentina, which recently edged out neighbor Brazil as the top exporter of beef to China, are hoping to build on that status by getting more local meatpacking plants approved by Beijing, industry officials and other sources told Reuters.

An Argentine industry group is currently in China looking to promote the South American country’s famed T-bone steaks and sirloins, while Chinese teams have recently inspected Argentine local meat plants, the sources said.

The push, after a massive spike in Argentine beef exports to the world’s No. 2 economy this year, underscores how China is looking to diversify its protein supply, shaking up the global meat trade as African swine fever hammers its domestic hog herd.

It is also an important windfall for Latin America’s third-biggest economy, which is battling to get out of a deep recession and facing a swirling debt crisis ahead of elections in October that will likely usher in a new government.

Argentina, which traditionally exports cheaper cuts to China, saw its beef sales to the country more than double to $870 million in the first seven months of the year, data from its official INDEC statistics agency shows.

Chinese customs data show that amounted to around 185,604 tons of Argentine beef, giving it the top share of the Chinese import market with 21.7 percent, slightly ahead of Brazil’s 21.03 percent. That volume was a jump of 129 percent against the year before.

Santiago del Solar, chief of staff to Argentina’s agriculture minister, told Reuters there were many slaughterhouses up for approval and that China was working closely with Argentine food safety body Senasa.

“We will have news in the coming months about more pork, poultry and beef slaughterhouses being approved for China,” he said, adding Senasa was doing some inspections on behalf of China using an “honor system.”

Argentina’s ranchers are now looking for more. A trade delegation is currently in China meeting with potential buyers of the country’s meat, an industry official with knowledge of the meetings said.

The person added that a Chinese team had also recently traveled to Argentina to visit local meat plants.

“The Chinese were there last week in Buenos Aires, they were doing inspections and made good progress. The plants issue is pretty good, but with China they make approvals when they want to do it,” he said.

“We are optimistic with the results. It seems they didn’t find anomalies, but yes, it depends on the time frame of the Chinese.”

The progress comes after China granted export licenses to 25 Brazilian meatpacking plants earlier this month. Brazil has also seen a surge in meat demand from China.

China’s General Administration of Customs, which approves new imports, also recently gave the green light to imports of soymeal from Argentina, following decades of talks between the two countries.

The customs body did not immediately respond to a faxed request for comment from Reuters asking about new Chinese approvals for Argentine meat plants.

A second person, a manager at a state-owned Chinese trading house, said he had met with an Argentine firm last week during the delegation’s visit. He declined to name the firm, which had met with China customs officials, but said it had already been approved for exports and was seeking further plant approvals.

Miguel Schiariti, president of the CICCRA meat industry chamber, said a Chinese team had also recently done a video-conference inspection of an Argentine plant alongside Senasa, with the aim of approving the facility for export.

“There are 11 meat plants ready to be approved and (the Chinese) are doing it one by one. But approval is taking a long time,” he said.

“These places would meet the criteria for approval, but the Chinese have always been very cautious, despite the problems they have with pork. It seems to me that plants won’t get approved before November.”