Three U.S-based economists won the 2021 Nobel prize for economics on Monday for pioneering research on the labor market impacts of minimum wage, immigration and education, and for creating the scientific framework to allow conclusions to be drawn from such studies that can’t use traditional methodology.

Canadian-born David Card of the University of California at Berkeley was awarded one half of the prize, while the other half was shared by Joshua Angrist from the Massachusetts Institute of Technology and Dutch-born Guido Imbens, 58, from Stanford University.

The Royal Swedish Academy of Sciences said the three have “completely reshaped empirical work in the economic sciences.”

“Card’s studies of core questions for society and Angrist and Imbens’ methodological contributions have shown that natural experiments are a rich source of knowledge,” said Peter Fredriksson, chair of the Economic Sciences Committee. “Their research has substantially improved our ability to answer key causal questions, which has been of great benefit for society.” 

Card worked on research that used restaurants in New Jersey and in eastern Pennsylvania to measure the effects of increasing the minimum wage. He and his late research partner Alan Krueger found that an increase in the hourly minimum wage did not affect employment, challenging conventional wisdom which held that an increase in minimum wage will lead to less hiring.

Card’s work also challenged another commonly held idea, that immigrants depress wages for native-born workers. He found that incomes of the native-born can benefit from new immigration, while it is earlier immigrants who are at risk of being negatively affected.

Angrist and Imbens won their half of the award for working out the methodological issues that enable economists to draw solid conclusions about cause and effect even where they cannot carry out studies according to strict scientific methods.

Speaking by phone from his home in Massachusetts, Imbens told reporters gathered for the announcement that he had been asleep when the call came.

“The whole house was asleep, we had a busy weekend.” said Imbens. “I was absolutely thrilled to hear the news.”

He said he was especially thrilled for Angrist, who was best man at his wedding. 

Unlike the other Nobel prizes, the economics award wasn’t established in the will of Alfred Nobel but by the Swedish central bank in his memory in 1968, with the first winner selected a year later. It is the last prize announced each year. 

Last week, the 2021 Nobel Peace Prize was awarded to journalists Maria Ressa of the Philippines and Dmitry Muratov of Russia for their fight for freedom of expression in countries where reporters have faced persistent attacks, harassment and even murder. 

Ressa was the only woman honored this year in any category. 

The Nobel Prize for literature was awarded to U.K.-based Tanzanian writer Abdulrazak Gurnah, who was recognized for his “uncompromising and compassionate penetration of the effects of colonialism and the fate of the refugee.”

 The prize for physiology or medicine went to Americans David Julius and Ardem Patapoutian for their discoveries into how the human body perceives temperature and touch. 

Three scientists won the physics prize for work that found order in seeming disorder, helping to explain and predict complex forces of nature, including expanding our understanding of climate change. 

Benjamin List and David W.C. MacMillan won the chemistry prize for finding an easier and environmentally cleaner way to build molecules that can be used to make compounds, including medicines and pesticides. 
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A thaw in the Sino-U.S. trade dispute, as hinted in Washington this past week, would help restore global supply chains but thin the outflow of investment capital from China to Southeast Asian countries that are eager to receive it, experts say. 

Reductions in punitive import tariffs between the two powers, which have been locked in a trade dispute since early 2018, should revitalize the business of global parts providers, assemblers and sellers of high-value items such as consumer electronics, the analysts say. 

However, they say that Indonesia, the Philippines, Thailand and Vietnam, along with smaller Southeast Asian countries, should expect less investment by multinationals trying to sustain U.S.-bound exports without shipping from China. Southeast Asian countries look to that investment to build economies and lift people out of poverty. 

 

In addition, Taiwan gained from the trade dispute as investors moved production and capital back home from China.

“I think the nature of value chains and supply chains is interdependent, so you might get a bit more in your country as a result of people moving out of another, but at the end of the day you want a system that supports the whole chain and supports it well,” said Jayant Menon, a visiting senior fellow with the ISEAS Yusof Ishak Institute’s Regional Economic Studies Program in Singapore. “You don’t want this trade war interfering with it.” 

US to consider tariff exclusions 

U.S. Trade Representative Katherine Tai said October 5 that the United States would start a “targeted tariff exclusion process” for China.

Her announcement doesn’t end the trade dispute that flared under former President Donald Trump, who said China had committed years of “unfair trade practices,” but it may signal an eventual change under President Joe Biden. 

“The exclusions process is a key part of the Biden-Harris Administration’s deliberative, long-term vision for realigning the U.S.-China trade relationship around our priorities and making trade work for American workers and businesses,” the U.S. Trade Representative’s office said in the October 5 statement. 

China welcomed the move, the official Xinhua news agency said the same day. Xinhua quoted Ministry of Foreign Affairs spokesperson Hua Chunying as saying, “We hope the United States will … work with China to strive for healthy and steady development of China-U.S. trade and economic relations.” 

The dispute has hit $550 billion worth of goods, including $350 billion originating in China. 

Tai said the United States had yet to review its January 2020 “phase one agreement” with China over the trade dispute. The United States had agreed to reduce tariffs, while China said it would buy more U.S. agricultural products. 

‘A rising tide raises all boats’

A reduction in Sino-U.S. tariffs would jumpstart the manufacturing of electronics, machinery and transportation equipment, Menon said. 

China’s factories generated $3.7 trillion in “real manufacturing value added” in 2017, before the trade dispute, the Boston Consulting Group reported.  Goods such as machinery and electronics – compared to lower-value items including garments and shoes – represent “most of the action” in global trade, Menon said.  

China does a bit of everything, and the consultancy says its value-added factory output had surpassed every other country in 2017.

Specific value-added imports from China include televisions, smart speakers and consumer drones. Apple, to name just one known brand, has grappled with rising costs during the trade dispute as it contracts final assembly to two Taiwanese firms with factories in China. Apple sources parts to a list of companies in Taiwan, Japan and South Korea. 

 

“Of course, it would be better if things were better between these two countries,” said Jonathan Ravelas, chief market strategist with Banco de Oro UniBank in the Philippines. “A rising tide raises all boats, so if the U.S. and China are doing well, everybody benefits.”  

Limited impact on Southeast Asia, Taiwan 

Manufacturers that have steered investment out of China into Southeast Asia since 2018 are concentrated in footwear, garments and ordinary consumer goods, experts say. Those exporters have “fixed costs” and “divisible technology,” Menon said. Southeast Asian factory-heavy countries offer supportive government policies and infrastructure, as well. 

“If there’s going to be some difficulty in (Sino-U.S.) trade, then definitely peripheral countries like the Philippines would benefit,” Ravelas said. 

American companies favor Vietnam for its cheap labor especially if they lack automation, said Frederick Burke, Ho Chi Minh City-based partner with the law firm Baker McKenzie.

“We still have clients looking at Vietnam, they’re saying this is a long-term plan, the COVID-19 pandemic is going to be over before too long and they want to get in while they can,” Burke said. “Vietnam probably is still going to have some sort of a positive growth rate this year.” 

The country’s top retail, property and manufacturing conglomerate, Vingroup, declined to comment on shifts in Sino-U.S. trade, with a spokesperson saying it would “decide target markets later.”  

Manufacturers were exploring outside of China before the trade dispute as Chinese wages rose and environmental laws tightened, Menon noted. The offshoring trend will probably hold after the trade dispute, though with some tapering, he said. 

Taiwan would feel little pinch as a glut in demand for its most prized export, semiconductors, keeps growing, said Liang Kuo-yuan, president of the Taipei-based Yuanta-Polaris Research Institute.

“The demand for chips is still there and moreover there’s a natural growth following changes in the industry,” Liang said. “Perhaps in the end competitiveness will be impacted, but the issue is, it’s still early, so if you ask about next year, I’d say pretty sure Taiwan will still be very strong in semiconductors.”
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After water levels at a California dam fell to historic lows this summer, the main hydropower plant it feeds was shut down. At the Hoover Dam in Nevada — one of the country’s biggest hydropower generators — production is down by 25%. If extreme drought persists, federal officials say a dam in Arizona could stop producing electricity in coming years. 

Severe drought across the West drained reservoirs this year, slashing hydropower production and further stressing the region’s power grids. And as extreme weather becomes more common with climate change, grid operators are adapting to swings in hydropower generation.

“The challenge is finding the right resource, or mix of resources, that can provide the same energy and power outputs as hydro,” said Lindsay Buckley, a spokesperson for the California Energy Commission. 

U.S. hydropower generation is expected to decline 14% this year compared with 2020, according to a recent federal forecast. The projected drops are concentrated in western states that rely more heavily on hydropower, with California’s production expected to fall by nearly half.

The reductions complicate grid operations since hydropower is a relatively flexible renewable energy source that can be easily turned up or down, experts say, such as in the evenings when the sun goes down and solar energy generation drops.

“Hydro is a big part of the plan for making the whole system work together,” said Severin Borenstein, a renewable energy expert at the University of California, Berkeley and board member of the California Independent System Operator, which manages the state’s electric grid. 

Borenstein noted that hydropower is important as the state works to build out its electricity storage options, including by installing batteries that can dispatch energy when it is needed.

Ben Kujala of the Northwest Power and Conservation Council, which handles power planning for the Columbia River Basin, also noted that grid operators have adapted how they deploy hydropower in recent years to ensure that it complements solar and wind energy. 

Power grids linking western regions also offer some relief. While California can face multi-year stretches of dry weather, the Pacific Northwest usually gets enough precipitation in the winter to recover and produce hydropower to export.

But this year, the Northwest was also hit by extreme heat and less precipitation, according to Crystal Raymond, a climate change researcher at the University of Washington. While energy planners account for drought years, Raymond said climate change over the long term may further reduce the amounts of melting snow in mountains that fill reservoirs in the spring.

In August, California officials shut down the Edward Hyatt hydropower plant for the first time in its 60-year history after water levels at Lake Oroville sank to historic lows. The plant can produce enough power for up to 750,000 homes, but typically operates at lower levels. 

At Lake Powell on the Arizona-Utah border, federal officials recently said there is a 34% chance that the Glen Canyon Dam won’t be able to produce power at some point in 2023, up from a 3% chance for next year, if extreme drought persists.  

Declines in hydropower production in California this summer coincided with heat waves, forcing the state to buy extra power. To prevent outages in late September, state officials said they were deploying temporary emergency generators.

“The drought did compound the difficulty of meeting demand,” said Jordan Kern, an energy and water systems expert at North Carolina State University.

In some northwestern states, hydropower production has reverted closer to normal levels after dipping just below their 10-year ranges earlier this year. California’s hydropower levels remained at the bottom of the state’s 10-year range through June. Federal forecasts say much of the West is likely to continue to see drought conditions through the end of the year.

Declines in hydropower production mean production bumps for other energy sources. Natural gas power is expected to rise 7% in California and 6% in the Northwest this year over last, according to federal forecasts. Coal generation is forecast to rise 12% in the Northwest.

The California Air Resources Board says the state has been able to continue reducing the electricity sector’s greenhouse gas emissions despite swings in hydropower generation in recent years.
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Beekeepers Mustafa Alti and his son Fehmi were kept busy tending to their hives before wildfires tore through a bucolic region of Turkey that makes most of the world’s prized pine honey.

Now the Altis and generations of other honey farmers in Turkey’s Aegean province of Mugla are scrambling to find additional work and wondering how many decades it might take to get their old lives back on track.

“Our means of existence is from beekeeping, but when the forests burned, our source of income fell,” said Fehmi, 47, next to his mountainside beehives in the fire-ravaged village of Cokek. “I do side jobs, I do some tree felling, that way we manage to make do.”

Nearly 200,000 hectares of forests — more than five times the annual average — were scorched by fires across Turkey this year, turning luscious green coasts popular with tourists into ash.

The summer disaster and an accompanying series of deadly floods made the climate — already weighing heavily on the minds of younger voters — a major issue two years before the next scheduled election.

Signaling a political shift, Turkey’s parliament this week ended a five-year wait and ratified the Paris Agreement on cutting the greenhouse emissions that are blamed for global warming and abnormal weather events.

But the damage has already been done in Mugla, where 80 percent of Turkey’s pine honey is produced.

Turkey as a whole makes 92 percent of the world’s pine honey, meaning supplies of the thick, dark amber may be running low worldwide very soon.

Turkey’s pine honey harvests were already suffering from drought when the wildfires hit, destroying the delicate balance among bees, trees, and the little insects at the heart of the production process.

The honey is made by bees after they collect the sugary secretions of the tiny Basra beetle (Marchalina hellenica), which lives on the sap of pine trees. 

Fehmi hopes the beetles will adapt to younger trees after the fires. But he also accepts that “it will take at least five or 10 years to get our previous income back.”

His father Mustafa agrees, urging President Recep Tayyip Erdogan’s government to expand forested areas and plant young trees.

“There’s no fixing a burned house. Can you fix the dead? No. But new trees might come, a new generation,” Mustafa said.

For now, though, the beekeepers are counting their losses and figuring out what comes next.

The president of the Mugla Beekeepers’ Association, Veli Turk, expects his region’s honey production to plunge by up to 95 percent this year.

“There is pretty much no Marmaris honey left,” he said.

“This honey won’t come for another 60 years,” he predicted. “It’s not just Turkey. This honey would go everywhere in the world. It was a blessing. This is really a huge loss.”

Beekeeper Yasar Karayigit, 45, is thinking of switching to a different type of honey to keep his passion — and sole source of income — alive.

“I love beekeeping, but to continue, I’ll have to pursue alternatives,” Karayigit said, mentioning royal jelly (or “bee milk”) and sunflower honey, which involves additional costs.

“But if we love the bees, we have to do this,” the father of three said.

Ismail Atici, head of the Milas district Chamber of Agriculture in Mugla, said the price of pine honey has doubled from last year, threatening to make the popular breakfast food unaffordable for many Turks.

He expects price rises to continue and supplies to become ever scarcer.

“We will get to a point where even if you have money, you won’t be able to find those medicinal plants and medicinal honey,” Atici said.

“It’s going to be very hard to find 100 percent pine honey,” beekeeper Karayigit agreed. “We have had so much loss.”

Looking ahead, the president of the Turkey Beekeepers’ Association, Ziya Sahin, suggests selectively introducing the Basra beetle to new areas of Mugla, expanding coverage from the current 7% to 25% of local pine forests.

“If we conduct transplantation of the beetle from one area to another and continue this for two successive years, we can protect the region’s dominance in the sector,” Sahin said.

“There will be a serious drop in honey production if we don’t do this,” he added, calling this year the “worst” of his 50-year career.

Yet despite the pain and the troubled road ahead, the younger Alti has no plans to quit.

“This is my father’s trade. Because this is passed down from the family, we must continue it,” Fehmi said.
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Low rainfall plagues one of the world’s major agricultural producers. Brazil now faces a crisis of drying dams, forcing farmers to look to more expensive and less-eco-friendly sources of power. As VOA’s Arash Arabasadi reports, the climate change-driven issue threatens to make worse the effects of climate change
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U.S. Treasury chief Janet Yellen warned Sunday that it was “absolutely imperative” that Congress increase the country’s borrowing authority even as the immediate threat of a first-ever default on paying the government’s bills has been alleviated through early December.

“It would be a catastrophe” if the United States does not increase the ceiling on its current national debt of nearly $29 trillion, Yellen told ABC’s “This Week” show.

Yellen had said that the U.S. would run out of money to pay its bills on October 18, but Senate Republican and Democratic leaders agreed last week on an emergency $480 billion increase in the debt ceiling to pay the government’s bills through December 3, at which time the contentious political debate in Washington over an extension of the government’s borrowing authority could play out again.

Senate Republican leader Mitch McConnell and 10 other Republicans voted to clear the path for Democratic senators to increase the government’s borrowing authority on a 50-48 party-line vote last week, with the House of Representatives expected this week to assent to the temporary increase.

McConnell also said he would not cooperate with opposition Democrats in a further debt ceiling increase in December. He called on Democrats to raise it on their own through a legislative procedure known as reconciliation, in which Democrats could vote for a debt ceiling increase without the threat of Republicans blocking it with a filibuster.

Democrats so far have been reluctant to use the reconciliation process because they say it is cumbersome and time-consuming. They also say Republicans should join them in raising the debt ceiling because the country’s long-term debt has occurred under both Republican and Democratic control of the White House and Congress.

The U.S., virtually alone among the world’s countries, imposes a lid on its government spending. Yellen, however, said the figure has been increased about 70 times since 1965, either to a specific amount or suspended altogether for a year or two, since the U.S. government chronically spends more than it collects in taxes.

She has called for doing away with the debt ceiling, but that is unlikely since both Republican and Democratic lawmakers, thinking it is a winning political tactic in the U.S., repeatedly blame each other for what they contend is wasteful and unneeded spending by their opponents.

“It should be a shared responsibility (to increase the debt ceiling), not any one party,” Yellen said. “It is Congress’ responsibility.”

“We have to reassure the world that the United States is fiscally responsible,” she said, adding that if the borrowing authority is not increased before December 3, it would amount to “a self-inflicted crisis.” 

She said that if the debt ceiling is not increased, 50 million older Americans might not receive government pension benefits and that “our troops won’t know when or if they would be paid. The 30 million families that receive a child tax credit, those payments would be in jeopardy.”
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Australia’s Reserve Bank, the country’s central bank, has warned that the collapse of Chinese property giant Evergrande Group could cause chaos in China’s financial system.

In its semiannual “Financial Stability Review,” the Reserve Bank of Australia acknowledged that Evergrande Group, the heavily indebted Chinese real estate developer, faced a liquidity crisis, or a lack of cash or assets that can be converted easily to cash.

The reserve bank warned that if Evergrande, China’s second-biggest property developer, collapses, it could trigger broader problems in China’s financial and real estate sectors.

Evergrande is facing one of China’s largest-ever defaults, with billions of dollars in debt. Its businesses interests are vast, from wealth management and the manufacture of electric cars to the ownership of one of the country’s biggest soccer teams — Guangzhou FC.

Chinese authorities last year started to restrict the debts of big real estate companies.

Yun Jiang is the managing editor in the School of Regulation and Global Governance at the Australian National University. 

“The Chinese government does realize that [the] real estate sector is important to the economy, and, on top of that, it is important for the social stability of China because in China a lot of people’s savings, assets are tied up in real estate, more so than in many other countries,” she said.

China is Australia’s biggest trading partner and experts warn of serious implications for Australia should Evergrande default on its massive loans. 

The crisis has already hit the price of Australia’s main export, iron ore, a key ingredient in steelmaking. Analysts warn that China could cut steel production, which would further depress iron ore prices. Commodities have underpinned Australia’s recent prosperity. 

Analysts have also warned that Australia’s stock market, and skittish investors, would easily be unsettled if Evergrande went bust.

However, financial observers hope the Chinese government, which governs the world’s second-largest economy, will try to restructure Evergrande’s debt to prevent its collapse. They have stressed that China’s ability to contain a financial meltdown is about to be severely tested, and its success — or failure — would have global implications.
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A global deal to ensure big companies pay a minimum tax rate of 15% and make it harder for them to avoid taxation has been agreed upon by 136 countries, the Organization for Economic Cooperation and Development said Friday.

The OECD said four countries — Kenya, Nigeria, Pakistan and Sri Lanka — had not yet joined the agreement, but that the countries behind the accord together accounted for over 90% of the global economy.

Here are the main points of the accord:

Why a global minimum tax?

With budgets strained after the COVID-19 crisis, many governments want more than ever to discourage multinationals from shifting profits — and tax revenues — to low-tax countries regardless of where their sales are made.

Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.

The minimum tax and other provisions aim to end decades of tax competition between governments to attract foreign investment.

How would a deal work?

The global minimum tax rate would apply to overseas profits of multinational firms with 750 million euros ($868 million) in sales globally.

Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could “top up” their taxes to the 15% minimum, eliminating the advantage of shifting profits.

A second track of the overhaul would allow countries where revenues are earned to tax 25% of the largest multinationals’ so-called excess profit — defined as profit in excess of 10% of revenue.

What happens next?

Following Friday’s agreement on the technical details, the next step is for finance ministers from the Group of 20 economic powers to formally endorse the deal, paving the way for adoption by G-20 leaders at a summit at the end of this month.

Nonetheless, questions remain about the U.S. position, which hangs in part on a domestic tax reform the Biden administration wants to push through the U.S. Congress.

The agreement calls for countries to bring it into law in 2022 so that it can take effect by 2023, an extremely tight timeframe given that previous international tax deals took years to implement.

Countries that have in recent years created national digital services taxes will have to repeal them.

What will be the economic impact?

The OECD, which has steered the negotiations, estimates the minimum tax will generate $150 billion in additional global tax revenues annually.

Taxing rights on more than $125 billion of profit will be additionally shifted to the countries were they are earned from the low tax countries where they are currently booked.

Economists expect that the deal will encourage multinationals to repatriate capital to their country of headquarters, giving a boost to those economies.

However, various deductions and exceptions baked into the deal are at the same time designed to limit the impact on low tax countries like Ireland, where many U.S. groups base their European operations.
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China said on Saturday that it had pressed the United States to eliminate tariffs in talks between the countries’ top trade officials that Washington saw as a test of bilateral engagement between the world’s biggest economies.

The virtual talks between U.S. Trade Representative Katherine Tai and China’s Vice Premier Liu He followed Tai’s announcement on Monday that she would seek “frank” talks and hold China to its commitments under a “Phase 1” trade deal negotiated by former President Donald Trump.

“The Chinese side negotiated over the cancellation of tariffs and sanctions, and clarified its position on China’s economic development model and industrial policies,” China’s Xinhua state news agency said after the talks, held Friday Washington time.

Tai intended to use the call, the second between the two, to test whether bilateral engagement can address U.S. complaints about Beijing’s trade and subsidy practices, a USTR official said.

Resolution through consultation

“Ambassador Tai and Vice Premier Liu reviewed implementation of the U.S.-China Economic and Trade Agreement and agreed that the two sides would consult on certain outstanding issues,” USTR said in a statement.

Xinhua said the two sides “expressed their core concerns and agreed to resolve each other’s reasonable concerns through consultation.”

“Both sides agree to continue communicating with an equal approach and mutual respect, and to create the conditions for the healthy development of economic and trade relations between the two countries and the recovery of the world economy,” it said.

US cites China’s ‘authoritarian’ approach

In a briefing ahead of the call, a senior USTR official said Tai would give Liu an assessment of China’s performance in implementing the Phase 1 deal, including promised purchases of U.S. goods that are falling short of targets.

Asked about the shortfalls, China’s ambassador to the United States, Qin Gang, told China’s Phoenix TV in an interview on Friday that Beijing had always kept its promises in state-to-state relations, the embassy said in a summary released Saturday.

He said Beijing had sincerely and steadily implemented the agreement, despite serious challenges posed by the coronavirus pandemic, including what he called “tangible steps” on intellectual property protections and opening the financial sector.

He faulted Washington for acting at the same time to impose barriers and restrictions on Chinese firms in the United States.

Limits on ‘harmful practices’

Tai would raise concerns about China’s “non-market” economic practices, the U.S. official said.

“We recognize that Beijing is increasingly explicit that it is doubling down on its authoritarian state-centric approach and is resistant to addressing our structural concerns,” the official said, adding that, consequently, Washington would focus on improving U.S. competitiveness, diversifying markets and “limiting the impact of Beijing’s harmful practices.”

The Phase 1 deal in January eased a long-running tariff war between the world’s two largest economies. It focused largely on China’s promise to boost purchases of U.S. farm and manufactured goods, energy and services by $200 billion over two years, along with increased protections for copyright, trademarks and other forms of intellectual property.

The Trump administration envisioned a Phase 2 negotiation to tackle more difficult issues such as subsidies to state enterprises and China’s strategic industrial policies.

The official said Tai’s future engagement with China would depend on “how China responds to tonight’s call” and declined to discuss possible next steps, but added that Tai would not seek Phase 2 negotiations.
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