US President Donald Trump’s promises of a “granddaddy of all trade deals” with China coincided with the release of IMF research that highlighted how vital trade integration has been in facilitating investment — the lifeblood of any economy wanting to expand — over the past three decades.
It also adds even more import to the US-China trade negotiations. The outcome — good, not as good as expected or bad — will set the tone for the rest of a world grappling with how to deal with slowing global economic growth, populism, and the fact that we have less monetary and fiscal policy firepower than we need to get economic momentum going sustainably again.
It is also in emerging markets’ best interests that the trade talks are seen through to their conclusion because they stand to benefit the most from an investment-friendly trade Sadly, South Africa caught up in its corruption scandals, SOE governance challenges and a private sector hesitant to invest, has not experienced the full benefit of this secular decline in capital goods prices. Since 2013, gross real fixed capital formation has moved sideways, and last year it contracted by 1.4% in 2018.
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