U.S. Economy Losing Its Global Dominance

[Yoshie Furuhashi <critical.montages@xxxxxxxxx>]

<http://www.iht.com/articles/2006/09/24/bloomberg/bxecon.php>

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.
--
Yoshie
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