Global trade deals, the US dollar and eurozone inflation

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    Ian McMaster

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    to allow sb. sth.hier: jmdm. etw. ermöglichenTranscript: Global trade deals, the US dollar and eurozone inflation

    Erin Perry: So, Ian, you said the first topicThematopic was global trade deals? What’s the debate here?

    Ian McMaster: The question is very simple: do we need global trade deals? That’s the discussion in our latest Head-to-Head section in Business Spotlight. Over the past year, we’ve seen heated debates on this topic, for example, in relation to the proposed trade deal TTIP, between the EU and the US, or CETA, between the US and Canada. The European single market(EU-)Binnenmarktsingle market is also an example of a cross-countryhier: länderübergreifendcross-country trade deal and, of course, there’s currently a lot of discussion about what the UK’s relationship with the single market should be after Britain leaves the EU.

    proponentBefürworter(in)Proponents of multi-country trade deals, and free trade more generally, to argueden Standpunkt vertretenargue quite plausiblyüberzeugendplausibly that international trade over hundreds of years has been a key driverhier: treibende Kraftdriver of increased income and living standards worldwide. And history has shown where barriers to trade can lead: for example, into an economic depression, as in the 1930s. So, there’s a strong casehier: Argument(e)case for deals that promote freer international trade.

    The problem, and this is where opponents of such trade deals have good arguments, is that free trade often produces losers as well as winners, even when the overall impactAuswirkung(en)impact is positive. So, there are concerns about the impact of trade deals on living and environmental standards, and also concerns that they give too much power to multinational corporationUnternehmencorporations vis-à-vis national governments. For example, allowing such corporations to to take legal actiongerichtlich vorgehentake legal action against governments that implement, sayzum Beispielsay, environmental measures that might hit their profits. Anyway, you can read more about this fascinating debate in our latest magazine.

    Perry: For your next topic, you said you were going to look at the rise in the value of the US dollar. That sounds good to me. Does this have something to do with the new president, Donald Trump?

    McMaster: Well, partly. Certainly, one reason why the dollar rose to a 14-year high following the US elections in November 2016 is that Donald Trump has promised a more expansionaryexpansivexpansionary economic policy. This would tend to to push sth. upetw. in die Höhe treibenpush up interest rateZinssatzinterest rates in the US. And higher interest rates attract money from abroad, which tends to push up the dollar. But it’s not just about Trump. Interest rates in the US were going to rise in 2017 anyway, because the economy has been growing strongly recently.
    The problem with exchange rateWechselkursexchange rates, however, is that one never really knows where they are going next. Some analysts see the dollar rising to the point where it is worth as much as a euro, or even more than a euro. Others see the value of the dollar falling back again this year, to the point where the euro could be worth as much as $1.15 by the end of the year. So for people like myself, who are planning to go on holiday to the US later this year, it’s hard to know whether we should buy dollars now, before they rise further, or wait in case the dollar falls back.

    Perry: And finally, you mentioned inflation in the eurozone? What’s going on? I thought inflation had more or less disappeared.

    McMaster: Well, it’s certainly true that inflation in the eurozone has been extremely low in recent times. Now, that sounds like good news because price inflation means that the value of our money is falling. But inflation has been well below the European Central Bank’s targetZiel(vorgabe)target of close to, but below, two per cent. That’s why the ECB has been pumping money into the eurozone, in an attempt to to revive sth.etw. neuen Schwung gebenrevive the economy. So that’s the background. But we have seen an uptick (US)Aufwärtstrend, leichter Anstieguptick in inflation recently — from 0.6 per cent at an annual rateauf Jahresbasis gerechnetat an annual rate in November 2016 to 1.1 per cent in December, the highest level since 2013. And in Germany, as opposed to the eurozone as a whole, inflation went up to 1.7 per cent in December. But there’s no need to panic! This is not a return to hyperinflation, which many Germans (and their policymakerpolitische(r) Entscheidungsträger(in)policymakers) seem to be paranoid about. Rather, it is a step towards normality. Another step, of course, would be for eurozone interest rates to rise from their current abnormally low level. Because the combination of rising prices and zero interest means that the value of people’s savings is being to erode sth.etw. aufzehreneroded. And that is a dangerous situation to have in Germany in an election year.

    Perry: OK, thanks very much, Ian. We to look forward to sth.sich darauf freuen, etw. zu tunlook forward to hearing from you again next time.

    McMaster: my pleasurees war mir ein VergnügenMy pleasure.

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