21/1/2015: Global Trade Indicators Flashing Red

Two very interesting charts reflecting upon the same macroeconomic reality: world trade is slowing down. Big time…

First, IMF revisions of the global trade growth rates forecasts for 2015 - now at their lowest in 12 months (chart courtesy of the @zerohedge):

And next, Baltic Dry Index series printing 753,000 currently, a level consistent with depths of 2009 crisis and 2012-2013 slump (chart courtesy of @Schuldensuehner) :

All in, the above highlights the powerless nature of large scale advanced economies' QE measures when it comes to reigniting global demand.

1/10/2014: That Exports-Led Recovery... in Germany

And a Scary Chart of the Day prize goes to @IanTalley who produced this gem:

That's right, Germany is now officially producing more stuff that its people can't afford than China...

But its a good thing, for it means that people in countries like Italy, Spain, Greece, Portugal, Cyprus etc who owe Germany money can buy more stuff from Germany they can't quite afford either, except for the credit supplied from Germany funded by the credit they take from Germany... Confused? Try confused.edu for some academic analysis... or just look at KfW bank latest foray into Ireland (apparently it took months of planning to get us to this absurdity http://www.independent.ie/business/irish/kfw-deal-to-fund-irish-firms-was-months-in-the-planning-29896868.html).

23/1/2014: Remember that 'upbeat' IMF Growth Outlook?..

A quick note on the IMF update to the World Economic Outlook, released earlier this week. Here are some charts showing core forecasts progressions for growth and other global economy's performance metrics, with brief comments from myself.

The core point in the below is where does one exactly find the 'good news' relating to the IMF upgrading growth conditions expectations? The answer is that, contrary to media reports, the upgrades evaporate when once compares January 2013 forecasts against January 2014 ones, although there are some improvements in comparative for October 2013 against January 2014 forecasts. Materially, however, the upgrades are minor.

First for Advanced Economies:

The above chart shows evolution of real GDP growth for 2013 from the most recent forecast (January 2013) to the latest estimate (January 2014). The notable feature of this is the deterioration in underlying economic conditions over 2013, with forecast from January 2013 overestimating expected outrun for Global Economy growth and for all major advanced economies, save Spain, Japan and the UK. In case of Spain, forecast and outrun differ in terms of shallower expected decline in real GDP now expected for Spanish economy, compared to January 2013 forecast. In the case of Japan and the UK, the difference in higher estimated growth rates compared to forecast.

Moving on to 2014 forecasts for real GDP growth:

Much has been said in the media on foot of the IMF upgrade of its forecasts for global growth for 2014. This analysis is solely based on the comparing IMF outlook published in October 2013 against the forecast published this month. However, looking at January 2013 forecast against January 2014 forecast shows that the IMF outlook for the global economy has deteriorated since a year ago, from 2014 real GDP growth forecast of 4.1% to 3.7%. The same applies to all major advanced economies, save Germany, Italy, Japan and the UK.

Another important note here is that in the case of Italy and Germany, the difference between January 2013 and January 2014 forecasts is well within the margin of error. And that for the Advanced Economies as a whole, the forecast between two dates has not moved at all.

Thus, overall, the news analysis of 'greater optimism' from the IMF with respect to growth is really unwarranted - there is very little significant change to the upside in the IMF latest outlook.

Things are a little better for 2015 outlook:

However, we only have two points for comparing these forecasts: October 2013 and January 2014, so the above analysis (12 months span between forecasts) is not really available. Nonetheless, there is a significant marking up of global growth expectations between two forecast dates (from 2.9% to 3.9%), and  small downgrade in Advanced Economies growth forecast from 2.5% to 2.3%.

In addition, only Spain and the UK received a significant (statistically) growth upgrade, with the Euro area, Germany and Italy upgrades being within the margin of error.

The matters are actually far worse for the Emerging and Developing economies. 2014 forecasts are shown below:

With exception of Sub-Saharan Africa, all other major emerging and developing economies and regions have been downgraded in January 2014 forecast compared to January 2013 forecast.

When it comes to 2015 forecasts: there are more upgrades to growth forecasts:

But none - save for Developing Asia, China and MENA - are within statistically meaningful range.

The really devastating - the thesis of 'improved IMF outlook' - evidence comes from looking at the IMF forecast for Global Growth (controlling for FX rates):

Summary of the above chart is simple and ugly:

• Lower growth estimates for 2013
• Lower growth forecast in 2014, compared to the forecast published a year ago
• Lower growth forecast in 2015

And now, recall the 'salvation by trade' argument for Europe and Ireland? The 'exports-led recovery' story? Here are IMF latest forecasts for global trade volumes growth, and for imports by the advanced economies (AE) and emerging and developing markets (EM & developing):

Summary of the above chart is also simple and ugly:

• Lower trade growth in 2014 and 2015
• Lower imports growth in Advanced Economies in 2014 and 2015
• Lower imports growth in EMs in 2014 and 2015

So basic question is: Who will be buying all the exports that are supposed to grow across all European states?.. Martians?

16/7/2013: Doing Good By Altering Trade Flows & Incentives? Not so fast...

An interesting paper on commodities prices and policy responses to these based on actual experience with food prices inflation in 2008.


CEPR DP9555, titled "Food Price Spikes, Price Insulation, and Poverty" by Kym Anderson, Maros Ivanic, and Will Martin, published this month "considers the impact on world food prices of the changes in restrictions on trade in staple foods during the 2008 world food price crisis".

Those changes ranged from reductions in import protection (allowing for more imports to flow into the countries heavily dependent on imports of food) to increases in export restraints (aimed at reducing exports of food from the countries experiencing rising domestic prices).

The changes "were meant to partially insulate domestic markets from the spike in international prices. We find that this insulation added substantially to the spike in international prices for rice, wheat, maize and oilseeds". In other words, domestic measures to ease prices by distorting international trade flows resulted in higher international prices for these foodstuffs.

"As a result, while domestic prices rose less than they would have without insulation in some developing countries, in many other countries they rose more than in the absence of such insulation." Thus, domestic measures to combat food inflation have been beggar-thy-neighbour in their effect on other markets.

The study also estimates "the combined impact of such insulating behavior on poverty in various developing countries and globally." The study found "that the actual poverty-reducing impact of insulation is much less than its apparent impact, and that its net effect was to increase global poverty in 2008 by8 million, although this increase was not significantly different from zero." Doing good, it turns out, can cause harm. Or alternatively, you might think global trade regime in food is evil, but try telling that to 8 million people impoverished by altering that regime to superficially re-direct flows of food away from established trade patterns in just one (single and short-lived) episode.

Authors point of view on policies? "Since there are domestic policy instruments such as conditional cash transfers that could now provide social protection for the poor far more efficiently and equitably than variations in border restrictions, we suggest it is time to seek a multilateral agreement to desist from changing restrictions on trade when international food prices spike." No knee-jerk reactions, please...

15/4/2013: Advanced economies exports: converging in growth trends?

Quite an interesting new trend that emerged since the late 2000s and is reaching well into 2012-2013 so far is the trend of convergence in the rates of growth in exports of goods and services between euro area, the US and Japan.

Here are few charts:

 Note, the above correlations convergence is also confirmed on a 20 year rolling basis.

One thing is pretty clear from the above: while prior to 2004-2005 the US exports dynamics remained relatively weak compared to those of the euro area, since 2005, the picture has changed dramatically, with the US exports dynamics falling pretty much in line with those of the euro area.

Here are some interesting facts:

• On a cumulated basis, from 1981-2012, volume of exports has expanded from index reading of 100 in 1981 to 406 in 2012 for Japan, 352 for the UK, 505 for the US, 812 for the Advanced Economies and 715 in the euro area, highlighting the fact that the euro area overall cumulatively outperformed all other economies in the comparison group.
• Similarly, on cumulated basis, from 2000 (index=100) through 2012, volume of exports index rose to 156 in the case of Japan, 137 in the case of the UK, 156 in the case of the US, 227 in the case of the Advanced Economies and 237 in the case of the euro area, once again confirming euro area outperformance over the period.
• In contrast, on cumulated basis, from 2004 (index=100) through 2012, volume of exports index rose to 124.5 in the case of Japan, 122.1 in the case of the UK, 151.6 in the case of the US, 166.4 in the case of the Advanced Economies and 154.8 in the case of the euro area, showing closing gap in euro area outperformance compared to the US over the period.

The drivers for these changes are most likely a combination of factors including:

• Technological and supply chains convergence in traditional sectors;
• Increased openness in the euro area to trade;
• Changes in currency valuations with the introduction of the euro and the effects of the current crisis on currency valuations;
• Improving energy component of the total cost basis in the US, and
• Shift in exports growth toward services sectors (composition effects).

Economics 27/06/2010: G20 - real stats and real issues

As G20 leaders undertake another attempt at injecting some balance into global economic order - with last meeting in Pittsburgh focused on stimulus strategies, while the current one in Toronto focusing on austerity - it is worth taking a look at the stakes.

Bank of Canada estimates that disorderly (or uncoordinated) exit from global stimulus phase of the recession can lead to a loss of up to USD7 trillion worth of output, primarily concentrated in the advanced economies.

However, the story is more complex than the simple issue of whether G20 nations should opt for a fiscal solvency or for a continued monetary and fiscal priming of the pump. Here are the key stats on the leading global economic blocks, revealing the structural imbalances that suggest the real problem faced by the advanced economies is the debt-driven nature of their fiscal and private sector financing.
First chart above shows Current Accounts for the main blocks, including the G20. Two things are self-evident from the chart. Firstly, the crises had a crippling effect on the overall trade flows from the emerging economies to the advanced economies, though this came about mostly at the expense of countries outside Asia Pacific. Second, crisis notwithstanding, IMF forecasts (data is from IMF April 2010 update to WEO database) the trend remains for unsustainable trade deficits for the Advanced Economies. European (read: German) surpluses of the last two decades are going to be wiped out in the post-crisis scenario, but it is clear that the US, as well as other advanced economies, will have to face a much more severe adjustment toward more balanced current account policies in years to come.

These adjustments will have to involve government finances:
Chart above shows government deficits, highlighting the gargantuan size of the fiscal measures deployed by the US and European countries, as well as a massive stimuli used in some 'Tiger' economies and China, over the latest crisis. This puts into perspective the size of the austerity effort that has to be undertaken to bring fiscal policies back to their more sustainable path. You can also see the relative distribution of these adjustments - the gap between the red line and the blue line. This gap is accounted for, primarily, by the UK, Japan and US and is much smaller than the overall Euro area contribution to G7 deficits.

But there is more to the deficits picture than what is shown above. Expressed in terms of percentages of GDP, the figure above obscures the true extent of the problem. So let's look at it in absolute dollar terms:
Now you can clearly see the mountain of debt (deficit financing) deployed in the crisis. Someone, someday will have to pay for this. It will be you, me, our children and grandchildren. Can anyone imagine that things will get back to pre-crisis 'normal' any time soon with this level of deficit overhang on the side of Governments alone?

What is even more disturbing in the picture is the position of Advanced Economies in the period between the two recessions. It is absolutely clear that Advanced Economies have lived beyond their fiscal means, even at the times of plenty, running up massive deficits in the years of the boom.

This puts to the test our leaders (EU and US) claims that the banking system reckless lending was a problem. The banks were not shoving cash at the Clinton-Bush-Obama administrations, or at European Governments. Instead, just as the banks were hosing their domestic economies down with cheap cash, courtesy of low interest rates, Western governments were hosing down their friends and cronies with deficit financing. The two crises might have been inter-related, but both fiscal profligacy and banks reckless risk-taking are to be blamed for our current woes.

Irony has it, neither the banks, nor the political profligates have paid the price for this recklessness.
Hence, the dire state of the governments' structural balances. As chart above shows, in the entire period of 20 years there was not a single year in which advanced economies (G7 or G20 or the Euro zone) have managed to post a structural surplus. Living beyond ones means is the real modus operandi for the advanced economies' sovereigns. Expressed in pure dollar terms:

Now, on to the levels of economic activity:
As I remarked on a number of occasions before, the whole idea of the Advanced Economies decoupling from the world is really a problem for the Euro area first and foremost. want to see this a bit more clearly?
Look at G7 plotted above against the Euro area and ask yourself the following question. G7 includes Japan - a country that is shrinking in its overall importance in the global economy. This contributes significantly to the widening gap between the world income and G7 income. But the region in real trouble is the Euro zone. Again, this puts Euro area problems into perspective:

• Anemic growth
• Poor relative performance in terms of absolute levels of activity

In short - decay? or put more mildly - Japanese-styled obsolescence? Whatever you might call it, the likelihood of the Euro area being able to cover its debts and reduce its deficits is low. Much lower than that for the US and the rest of G7 (ex-Japan).

Some revealing stats on savings and investment:
Clearly, chart above shows the opening of the gap between the need for demographically-driven savings growth in the advanced economies, where ageing population is desperately trying to secure some sort of living for the future, and the lack of real savings achieved. It also shows the downward convergence trend in rapidly developing economies, where younger population is finally starting to demand better standard of living in exchange for years of breaking their backs in exports-focused factories.

Yet, as savings rose during the peak in advanced economies (pre-crisis), investment was much less robust and it even declined in rapidly developing economies:
Why? Because of two things: much of domestic savings in Advanced Economies, especially in Europe, was nothing more than the Government revenue uplift during the boom. In other words, instead of European citizens keeping their cash to finance future pensions, Governments were able to increase expenditure out of booming tax revenues and borrowing against the booming savings rates. Ditto in the USofA (although to a smaller extent). In the mean time, Asia Pacific Tigers started to finance increasingly larger proportion of fiscal imbalances in Advanced Economies, driving down their domestic investment pools and shifting their domestic savings into foreign assets. Which, of course, is an exact replica of the Japanese global investment shopping spree of the 1980s - and we know where that has led Japan in the end...

So the scary chart for the last:
The big question for G20 this time around will be not the stated in official press conferences and statements - but will remain unspoken, although evident to all involved: Given that over the last 20 years, advanced economies financed their purchases of exports from the rapidly developing countries by issuing debt monetized through savings of the developing countries, what can be done about the current twin threat of excessive debt burdens in advanced economies and the shrinking savings in emerging economies?

This is a far bigger question that the USD7 trillion one posited by the Bank of Canada. It is a question that will either see some drastic changes in the ways world economy develops into the next 20 years, or the permanent decline of the advanced economies into Japan-styled economic and geo-political obsolescence.

Economics 12/04/2010: The next incoming train has left its first station

My current article on the longer term prospects for global economy, published in the current issue of Business & Finance magazine. This is an unedited version.

Forget the circus of the Euro zone Government’s bickering about Greece’s bailout package and the escapist idea of setting up the EU-own EMF. The real crisis in the Euroland is now quietly unfolding behind he scenes.

Finally, after nearly 15 years of denial, courtesy of the severe pain inflicted by the bonds markets, Brussels and the core member states are forced to face the music of their own making. The current crisis affecting Euro area economy is, in the end, the outcome of a severely unbalanced economic development model that rests on the assumption that exports-led economic expansions in some countries can be financed through a continued massive build up in financial liabilities by their importing partners.

Put more simply, the problem for the world going forward is that in order to sustain this economic Ponzi game, net importers must continue to finance their purchases of goods and services from net exporters by issuing new debt. The debt that eventually settles in the accounts of the net exporters.

One does not have to be versed in the fine arts of macroeconomics to see that something is wrong with this picture. And one does not have to be a forecasting genius to understand that after some 40 years of rising debts on the balance sheet of importing nations, the game is finally up. I wrote for years about the sick nature of the EU economy - aggregate and individual countries alike.

Last week, Lombard Street Research's Charles Dumas offered yet another clear x-ray of of the problem.


Source: Lombard Street Research, March 2010

As Dumas' chart shows, core Euro area economies are sick. More importantly, this sickness is structural. With exception of the bubble-driven catch-up kids, like Spain, Ireland and Greece, the Euro area has managed to miss the growth boat since the beginning of the last expansion cycle.

The three global leaders in exports-led growth: Germany, Japan and Italy have been stuck in a quagmire of excessive savings and static growth. Forget about jobs creation – were these economies populations expanding, not shrinking, the last 10 years would have seen the overall wealth of these nations sinking in per capita terms. Only the Malthusian dream of childless households can allow these export engines of the world to stay afloat. And even then, the demographic decline will have to be sustained through disposal of accumulated national assets. So much for the great hope of the exports-led growth pulling us out of a recession. It couldn’t even get us through the last expansion!

Over the last decade, the Sick Man of Europe, Italy has managed to post no growth at all, crushed, as Dumas’ put it, by the weight of the overvalued and mismanaged common currency. The Sick Man of the World, Japan has managed to expand by less than 0.8% annually despite running up massive trade surpluses. Germany’s ‘pathetic advance over eight years’ adds up to a sickly 3½% in total, or just over 0.3% a year. France, and the UK, have managed roughly 0.98% annualized growth over the same time. Comparing this to the US at 1.27% puts the exports-led growth fallacy into a clear perspective.

I wrote in these pages before that the real global divergence over the last 10 years has been driven not by the emerging economies decoupling from the US, but by Europe and Japan decoupling from the rest of the world. The chart above shows this, as the gap between European 'social' economies wealth and income and the US is still growing. But the chart also shows that Europe is having, once again, a much more pronounced recession than the US.

Europe's failure to keep up with the US during the last cycle is made even more spectacular by the political realities of the block. Unlike any other developed democracy in the world, EU has manged to produce numerous centralized plans for growth. Since the late 1990s, aping Nikita Khruschev's 'We will bury you!' address to the US, Brussels has managed to publish weighty tomes of lofty programmes - all explicitly aimed at overtaking the US in economic performance.

These invariably promised some new 'alternative' ways to growth nirvana. The Lisbon Agenda hodge-podge of “exporting out of the long stagnation” ideas was followed by the Social Economy theory that pushed the view that somehow, if Europeans ‘invest’ money they did not have on things that make life nicer and more pleasant for their ageing populations growth will happen. Brussels folks forgot to notice that ageing population doesn’t want more work, it wants more ‘free’ stuff like healthcare, public transport, social benefits, clean streets, museums and theatres. All the nice things that actually work only when the real economy is working to pay for them.

As if driven by the idea that economic development can be totally divorced from real businesses, investors and entrepreneurs, the wise men of Europe replaced the unworkable idea of Social Economy with an artificial construct labelled ‘Knowledge Economy’. This promised an exports-led growth fuelled by sales of goods and services in which we, the Europeans, are supposedly still competitive compared to our younger counterparts elsewhere around the world. No one in Brussels has bothered to check: are we really that good at knowledge to compete globally? We simply assumed that Asians, Americans, Latin Americans and the rest of the world are inferior to us in generating, commercializing, and monetizing knowledge. Exactly where we got this idea, remains unclear to me and to the majority of economists around the world.

The latest instalment in this mad carousel of economic programmes is this year's Agenda 2020 – a mash of all three previous strategies that failed individually and are now being served as an economically noxious cocktail of policy confusion, apathy and sloganeering.

But numbers do not lie. The real source of Euro area's crisis is a deeply rooted structural collapse of growth in real human capital and Total Factor productivities. And this collapse was triggered by decades of high taxation of productive economy to pay for various follies that have left European growth engines nearly completely dependent on exports. No amount of waterboarding of the real economy with cheap ECB cash, state bailouts and public deficits financing will get us out of this corner.

The real problem, of course, is bigger than the Eurozone itself. Exports-led economies can sustain long-run expansions only on the back of a borrowing boom in their trading partners. It is that simple, folks. Every time a Mercedes leaves Germany, somewhere else around the world, someone who intends to buy it will either have to draw down their savings or get a loan against future savings. Up until now, the two were inexorably linked through the global debt markets: as American consumers took out loans to buy German-made goods, Chinese savers bought US debt to gain security of their savings.

This debt-for-imports game is now on the verge of collapse. Not because the credit crunch dried out the supply of debt, but because the global debt mountain has now reached unsustainably high levels. The demand for more debt is no longer holding up. Global economic imbalances remain at unsustainable levels even through this crisis and even with the aggressive deleveraging in the banking systems outside the EU.

Take a look at the global debt situation as highlighted by the latest data on global debt levels. The first chart below shows the ratio of net importing countries’ gross external debt liabilities (combining all debts accumulated in public and private sectors, including financial institutions and monetary authorities) to that of their net exporting counterparts. The sample covers 20 largest importers and the same number of largest exporters.

Source: IMF/BIS/World Bank joint data base and author own calculations

As this figure illustrates, since mid-point of the last bubble at the end of 2005, the total external debt burden carried by the world’s importing countries has remained remarkably stable. In fact, as of Q3 2009, this ratio is just 0.3 percentage points below where it stood in the end of 2005. Compared to the peak of the bubble, the entire process of global deleveraging has cut the relative debt burden of the importing states by just 9.8%.

To put this number into perspective, while assets base of the world’s leading economies has fallen by approximately 35% during the crisis, their liabilities side has declined by less than 10%. If 2007 marked the moment when the world finally caved in under the weight of unsustainable debt piled on during the last credit boom, then at the end of 2009 the global economy looked only sicker in terms of long-run sustainability.

The picture is more mixed for the world’s most indebted economies.
Plotting the same ratio for the US and UK clearly shows that Obamanomics is not working – the US economy, despite massive writedowns of financial assets and spectacular bankruptcies of the last two years remains leveraged to the breaking point. The UK is fairing only marginally better.

Of course, Ireland is in the league of its own, as the country has managed to actually increase its overall share of global financial debt during this crisis courtesy of an out-of-control public expenditure and the lack of private sector deleveraging. Take an alternative look at the same data. Ireland’s gross external debt (liabilities) stood at a whooping USD 2.397 trillion in Q3 2009, up 10.8% on Q3 2007. Of these, roughly 45% accrue to the domestic economy (ex-IFSC), implying that Irish debt mountain stands at around USD 1.1 trillion or more than 6 times the amount of our annual national income.

Chart below shows gross external debt of a number of countries as a share of the world’s total debt mountain.
Source: IMF/BIS/World Bank joint data base and author own calculations

And this brings us to the singularly most unfavourable forecast this column has ever made in its 7 years-long history. Far from showing the signs of abating, the global crisis is now appearing to be at or near a new acceleration point. Given the long-running and deepening imbalances between growth-less net exporting states, like Germany, Japan and Italy and the net importers, like the US, we are now facing a distinct possibility of a worldwide economic depression, triggered by massive debt build up worldwide. No amount of competitive devaluations and cost deflation will get us out of this quagmire. And neither a Social Economy, nor Knowledge Economics are of any help here.

Paraphraisng Cypher in the original Matrix: “It means fasten your seat belt, Dorothy, ‘cause Kansas of debt-financed global trade flows is going bye-bye”.

Economics 17/02/2010: Baltic Dry Index & trade recovery

Some interesting reading from the BDI – Baltic Dry Index – that tells us the cost of hiring a bulk commodity shipping cargo. The BDI is a good indicator of concurrent trade and industrial activities globally – rising BDI means tighter supply of shipping capacity and thus increased shipping volumes – spot. Back in 2008 is was at a record high of 11,793.

Now, January 2009 saw BDI falling to 772 low, it then recovered with some tremendous volatility through the year before setting annual 2009 average of 2658. As of today it is at 2598 – below the 2009 average and at only 22% of the 2008 peak.

Not much of a sign of a global recovery here.

Global trade protectionism: politics at its worst

To start with, here is a great quote from Jagdish Bhagwati - courtesy of the Cato Institute's Center for Trade Policy Studies:

"[L]abour union lobbies and their political friends have decided that the ideal defence against competition from the poor countries is to raise their cost of production by forcing their standards up, claiming that competition with countries with lower standards is “unfair”. “Free but fair trade” becomes an exercise in insidious protectionism that few recognise as such."
"Obama and Trade: An Alarm Sounds," Financial Times. January 9, 2009.


Lest anyone thought that one party controlling the Congress and the White House is such a handy idea, there is a welcome package for the EU's exporters being prepared by the Democrats.

According to the reports in today's press, President Obama's much-awaited $825bn stimulus package will include a “Buy America” clause - the American Steel First Act. The act will ensure that only US-made steel will be used in $64 billion of federally financed infrastructure projects.

Clearly, Anyone-but-the-Republicans EU leadership is going to see some nasty surprises from the new Administration - if not courtesy of Mr Obama himself, then certainly thanks to the good old protectionist traditional Democrats that Europeans love so much.

The initiative has already secured the House of Representatives Appropriations Committee blessing and is about to trigger a new Steel War with Europe. The EU Commission is already making noises about taking the US to WTO. The US, of course, signed and ratified the WTO's Government Procurement Agreement which requires it to grant fair access to its federally financed projects to all competitors.

If course, some EU states themselves are toying with 'Buy Domestic' types of rescue packages. France, usually the leader of the protectionist pack despite being economically open when it comes to French sales and investments abroad has squeezed in a €6bn aid package for its automakers that includes a commitment for them to purchase on French-made components.

In the UK, plans to give state aid to car makers are also reportedly to include assurances from the comapnies not to use funds outside the country.

A similar €4bn package of aid to Saab and Volvo in Sweden also came with the same strings attached.

And then there is a decision to reintroduce dairy export subsidies by the EU's Agricultural Commissioner, Mariann Fischer Boel. The measure is not only protectionist, but came despite the EU commitment in November 2008 not to introduce new trade barriers in order to allow the troubled Doha Round of global trade talks to be finalised with some face-saving dignity for the WTO.

So maybe in the end Mr Obama is an EU-like President?

Of course, the developing nations are also moving in quickly to shut some of their markets to foreign competition, but this is hardly a reasonable ground for EU and US to start erecting their own trade barriers. History offers a somber reminder: passage of the 1930 Smoot-Hawley Tariff Act in the US triggered a wave of tariff increases across the world. Within a year, average foodstuffs tariffs went up 53% in France, 60% in Austria, 66% in Italy, 75% in Yugoslavia, 80% plus in Czechoslovakia, Germany, Romania and Spain and more than doubled in Bulgaria, Finland and Poland. We all know what that led the world...