Re: Recently though, fractures have occurred with the system. Rules are being changed or ignored for the worse regarding the Euro and Europe.
I could quite easily change my position to "Get out of Europe". It would take just....
...a USD 1.0 = EUR 2.0 exchange rate, would it not? It doesn't take an EU expert to notice that the only thing that holds the EU fabric together is the USD peg... So long as the euro will remain at parity with the US dollar, tensions within the EU will be easily ironed out --but that won't last forever.
Did you ever ask yourself how come the euro was allowed to be on a par with the USD in spite of the EU's mediocre macroeconomics compared to the US's? I'll tell you why: the USD/EUR peg suits corporate America --period. Just skim through the annual reports of Fortune 500 US companies and check out their revenues breakdown... you'll see that most of them reap between 30% to 45% of their revenues in the EU. A typical revenue breakdown is, 40% domestic (US/Canada), 40% Europe, 20% Asia (Japan/China). Of course, for energy/natural resources companies, the Middle East/oil factor casts a different picture. Hence US companies have no interest in a depreciated euro because it'd badly hurt their bottomline: suppose that the euro drops to EUR 1.0 = USD 0.5, then a typical US transnational will see its total revenues dwindling by 20%!! (40/40/20 >> 40/20/20)
Now, the big challenge to that current state of financial affairs is the rise of Transpacific trade and the increasing share of China in US companies' revenues. As Europe will represent an ever smaller slice of corporate America's global revenues, the demand for/ value of the euro will just fizzle away...
Yet, you might retort that a win-win triangular trade between the US, Asia and Europe is still workable, and that Eurasian trade will flourish as well, alongside the Transpacific one. Well, just don't bet the farm on it... Trade is a two-way street, be it Transatlantic, Transpacific or Eurasian. Therefore, for a thriving Eurasian trade to sustain a strong euro, the EU will have to open its markets to Asian/Chinese products --and that won't happen because Europe still is a producer/corporatist society, not a consumer-oriented one like the US. BTW, remember that such an analysis was implicitly acknowledged as early as 1999 when European finance ministers (D. Strauss-Khan from France, a.o.) went on a whistle-stopping tour throughout Asia to convince Asian central bankers to buy euros as a RESERVE currency vs a trade/commercial currency...
For that matter, the retailing business is a good case study. Here's the story about the contest between Carrefour and Wal-mart over the Chinese market:
Dow Jones Business News
Wal-Mart, China's Citic Sign Retail Joint-Venture Agreement
Thursday October 10, 3:01 am ET
SHANGHAI -- U.S. retail giant Wal-Mart Stores Inc. said Thursday that its wholly owned China unit signed a joint-venture agreement with the mainland's Citic Group to expand its retail business in China's eastern region.
Wal-Mart's 22 Chinese stores are mostly focused in the south and it has no stores in Shanghai, where rival French retailer Carrefour SA has a strong presence.
The East China Wal-Mart Stores Co. joint venture will expand in Shanghai and its neighboring cities, Wal-Mart said in a prepared statement.
As part of its commitment when it joined the World Trade Organization in December, China has promised to gradually open up its retail market to foreign competition.
Foreign retailers are currently required to partner local companies in joint ventures, with foreign ownership capped at 65%. They are also restricted geographically and the central government needs to approve the opening of new stores.
The statement said that the project will be submitted to the central government for approval. No details of the investment were provided.
Wal-Mart, the world's largest retailer, also said that it launched operations for its global procurement business in Shanghai.
Last year, Bentonville, Ark.-based Wal-Mart purchased more than $10 billion in goods from China directly and indirectly for sale in Wal-Mart stores worldwide. This year, it is expected to exceed $12 billion, Wal-Mart said.
Wal-Mart, which operates more than 4,500 stores internationally, entered China in 1996 in the southern city of Shenzhen.
Citic is the parent of Hong Kong-listed companies Citic Pacific Ltd. and Citic Ka Wah Bank Ltd., Shenzhen-listed Citic Guoan Information Industry Co., as well as unlisted units including Citic Industrial Bank and Citic Securities.
-By Jane Lanhee Lee, Dow Jones Newswires; (86-21) 6218-3268; jane.lee@ dowjones.com
biz.yahoo.com
The product purchased by Wal-Mart in 2001 were valued at 10.3 billion U.S. dollars, while Carrefour spent 3.5 billion U.S. dollars buying Chinese product in the same year.
Wal-Mart has moved its global procurement headquarters to Shenzhen, south China. Carrefour, taking China as its largest purchase base in Asia, plans to double the amount of purchased goods from China by 2003.
[...]
english.peopledaily.com.cn
Get the picture? Wal-mart is able to squeeze the French Carrefour out of key Chinese estates because of its ability to splurge on Chinese products and sell them in the US. Could Carrefour do the same? ROFL! French agro-luddites (José Bové and the likes) have ransacked local supermarkets because they used to sell Spanish fruits, or Moroccan sardines, or Argentine meat... and that doesn't bode well for an amiable ménage à trois between the US, the EU and the Chinese juggernaut.
Gus |
