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New world disorder

From Mexico to Canada to China to South Korea, the new world of complex, linked economies suddenly seems a troubled and even scary place.
It was supposed to be otherwise. With the fall of the Soviet Union and its command-economy clones, followed by the juggernaut of agreements to liberalize trade, the era of global opportunity appeared to be dawning.
It still is.
The recent Mexican currency meltdown and the slower but relentless decline of the Canadian dollar over the last three years offer one lesson about the ways of this new world. The skirmishing between U.S. trade officials and their counterparts in China and South Korea presents another.
Both are sobering, but should not be too discouraging.
Similar factors underlie the currency woes in Mexico and Canada. Both countries are beset with large debt burdens–with foreign investors holding substantial shares–and political uncertainty. At the same time, both nations enjoy sound economic fundamentals.
The problem is, money moves with the speed of lightning these days, and it doesn’t take much to engage the hair-trigger of financial-market reaction. In Mexico, it was the December flare-up in the rebel stronghold of Chiapas; in Canada, it could be the federal budget plan for the next fiscal year.
The U.S. trade imbroglio with China and failure to resolve similar disputes with South Korea are conflicts of a kind the new General Agreement on Tariffs and Trade was designed to make a thing of the past. This country slapped 100 percent tariffs on Chinese exports; China retaliated with sanctions of its own.
Talks between U.S. and South Korean officials, meanwhile, are at a standstill.
Canada and Mexico are two of the biggest markets for Rochester-area exporters; China and the Pacific Rim offer the greatest potential for growth in trade.
The last thing exporters here want is storms on all these fronts.
But who said it would be only smooth sailing on the waters of the new world economy? When has opportunity ever come without risk?
Expect plenty of both in the future.
–Rochester Business Journal


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