IIFT 18th Dec 2022 Slot 1

Read the following Passage and Answer the questions given below:

Widespread currency manipulation, mainly in developing and newly industrialized economies, is the most important development of the past decade in international financial markets. In an attempt to hold-down the values of their currencies, governments are distorting capital flows by around $1.5 trillion per year. The result is a net drain on aggregate demand in the United States and the Euro area by an amount roughly equal to the large output gaps in the United States and the Euro area. In other words, millions more Americans and Europeans would be employed if other countries did not manipulate their currencies and instead achieved sustainable growth through higher domestic demand.

The United States has lost 1 million to 5 million jobs due to this foreign currency manipulation. More than 20 countries have increased their aggregate foreign exchange reserves and other official foreign assets by an annual average of nearly $1. 5 trillion in recent years. This build-up of official assets-mainly through intervention in the foreign exchange markets; keeps the currencies of the interveners substantially undervalued, thus boosting their international competitiveness and trade surpluses. The corresponding trade deficits are spread around the world, but the largest share of the loss centers on the United States, whose trade deficit has increased by $200 billion to $500 billion per year as a result.

The United States must tighten fiscal policy over the coming decade to bring its national debt under control. Monetary policy has already exhausted most of its expansionary potential. Hence the United States must eliminate or at least sharply reduce its large trade deficit to accelerate growth and restore full employment. The way to do so, at no cost to the US budget, is to insist that other countries stop manipulating their currencies and permit the dollar to regain a competitive level. This can be done through steps fully consistent with the international obligations of the United States that are indeed based on existing International Monetary Fund (IMF) guidelines.

Such a strategy should in fact attract considerable support from other countries that are adversely affected b the manipulation, including Australia, Canada, the euro area, Brazil, India, Mexico, and a number of other developing economies. The strategy would aim to fill a major gap in the existing international financial architecture: its inability to engage surplus countries, even when they blatantly violate the legal strictures against competitive currency undervaluation, in an equitable sharing of global rebalancing requirements.

The United States and its allies should first seek voluntary agreement from the manipulators to sharply reduce or eliminate their intervention. The United States should inform the manipulators that if they do not do so, the United States will adopt four new policy measures against their currency activities. First, it will undertake countervailing currency intervention (CCI) against countries with convertible currencies by buying amounts of their currencies equal to the amounts of dollars they are buying themselves, to neutralize the impact on exchange rates. Second, it will tax the earnings on, or restrict further purchases of, dollar assets acquired by intervening countries with inconvertible currencies (where CCI could therefore not be fully effective to penalize them for building up these positions. Third, it will hereafter treat manipulated exchange rates as export subsidies for purposes of levying countervailing import duties. Fourth, hopefully with a number of other adversely affected countries, it will bring a case against the manipulators in the World Trade Organization (WTO) that would authorize more wide-ranging trade retaliation.

Read the following Passage and Answer the questions given below:

The international economy almost certainly will continue to be characterized by various regional and national economies moving at significantly different speeds, a pattern reinforced by the 2008 global financial crisis. The contrasting speed across different regional economies are exacerbating global imbalances and straining governments and the international system. The key question is whether the divergences and increased volatility will result in a global breakdown and collapse or whether the development of multiple growth centres will lead to resiliency. The absence of a clear hegemonic economic power could add to the volatility. Some experts have compared the relative decline in the economic weight of the US to the late 19th century when economic dominance by one player, Britain; receded into multi-polarity.

During the next 15 - 20 years, as power becomes even more diffuse than today, a growing number of diverse state and non-state actors, as well as subnational actors, such as cities, will play important governance roles. The increasing number of players needed to solve major transnational challenges, and their discordant values, "will complicate decision-making. The lack of consensus between and among established and emerging powers suggests that multilateral governance to 2030 will be limited at best. The chronic deficit probably will reinforce the trend toward fragmentation. However, various developments, positive or negative; could push the world in different directions. Advances cannot be ruled out despite growing multi-polarity, increased regionalism, and possible economic slowdowns. Prospects for achieving progress on global issues will vary across issues.

The governance gap "will continue to be most pronounced at the domestic level and driven by rapid political and social changes. The advances during the past couple decades in health, education, and income-which we expect to continue, if not accelerate in some cases; will drive new governance structures. Transitions to democracy are much more stable and long-lasting when youth bulges begin to decline and incomes are higher. Currently about 50 countries are in the awkward stage between autocracy and democracy, with the greatest number concentrated in Sub-Saharan Africa, Southeast and Central Asia! and the Middle East and North Africa. Both social science theory and recent history, the Color Revolutions and the Arab Spring, support the idea that with maturing age structures and rising incomes, political liberalization and democracy "will advance. However, many countries "will still be zig-zagging their way through the complicated democratization process during the next 15-20 years. Countries moving from autocracy to democracy have a proven track record of instability.

Other countries will continue to suffer from a democratic deficit: in these cases a country's developmental level is more advanced than its level of governance. Gulf countries and China account for a large number in this category. China, for example, is slated to pass the threshold of US $15,000 per capita purchasing power parity (PPP) in the next five years, which is often a trigger for democratization. Chinese democratization could constitute an immense "wave," increasing pressure for change on other authoritarian states.

The widespread use of new communications technologies will become a double-edged sword for governance. On the one hand! social networking will enable citizens to coalesce and challenge governments, as we have already seen in Middle East. On the other hand such technologies will provide governments both authoritarian and democratic: an unprecedented ability to monitor their citizens. It is unclear how the balance will be struck between greater IT-enabled individuals and networks and traditional political structures. In our interactions, technologists and political scientists have offered divergent views. Both sides agree, however, that the characteristics of IT use; multiple and simultaneous action, near instantaneous responses, mass organization across geographic boundaries, and technological dependence; increase the potential for more frequent discontinuous change in the international system.

Read the following Passage and Answer the questions given below:

Nine years ago, when Japan was beating America's brains out in the auto industry, I wrote a column about playing the computer geography game Where in the World Is Carmen Sandiego? with my then nine-year-old daughter, Orly. I was trying to help her by giving her a clue suggesting that Carmen had gone to Detroit, so I asked her, "Where are cars made?" And without missing a beat she answered, "Japan."
Ouch!

Well, I was reminded of that story while visiting Global Edge, an Indian software design firm in Bangalore. The company's marketing manager, Rajesh Rao, told me that he had just made a cold call to the VP for engineering of a U.S. company, trying to drum up business. As soon as Mr. Rao introduced himself as calling from an Indian software firm, the U.S. executive said to him, "Namaste," a common Hindi greeting. Said Mr. Rao, "A few years ago nobody in America wanted to talk to us. Now they are eager." And a few even know how to say hello in proper Hindu fashion. So now I wonder: If I have a granddaughter one day, and I tell her I'm going to India, will she say, "Grandpa, is that where software comes from?"

No, not yet, honey. Every new product-from software to widgets - goes through a cycle that begins with basic research, then applied research, then incubation, then development, then testing, then manufacturing, then deployment, then support, then continuation engineering in order to add improvements. Each of these phases is specialized and unique, and neither India nor China nor Russia has a critical mass of talent that can handle the whole product cycle for a big American multinational. But these countries are steadily developing their research and development capabilities to handle more and more of these phases. As that continues, we really will see the beginning of what Satyam Cherukuri, of Sarnoff, an American research and development firm, has called "the globalization of innovation" and an end to the old model of a single American or European multinational handling all the elements of the product development cycle from its own resources. More and more American and European companies are outsourcing significant research and development tasks to India, Russia, and China.

According to the information technology office of the state government in Karnataka, where Bangalore is located, Indian units of Cisco Systems, Intel, IBM, Texas Instruments, and GE have already filed a thousand patent applications with the U.S. Patent Office. Texas Instruments alone has had 225 U.S. patents awarded to its Indian operation. "The Intel team in Bangalore is developing microprocessor chips for high-speed broadband wireless technology, to be launched in 2006," the Karnataka IT office said, in a statement issued at the end of 2004, and "at GE's John F. Welch Technology Centre in Bangalore, engineers are developing new ideas for aircraft engines, transport systems and plastics." Indeed, GE over the years has frequently transferred Indian engineers who worked for it in the United States back to India to integrate its whole global research effort. GE now even sends non-Indians to Bangalore. Vivek Paul is the president of Wipro Technologies, another of the elite Indian technology companies, but he is based in Silicon Valley to be close to Wipro's American customers. Before coming to Wipro, Paul managed GE's CAT scanner business out of Milwaukee. At the time he had a French colleague who managed GE's power generator business for the scanners out of France.

"I ran into him on an airplane recently," said Paul, "and he told me he had moved to India to head up GE's high-energy research there."

I told Vivek that I love hearing an Indian who used to head up GE's CT business in Milwaukee but now runs Wipro's consulting business in Silicon Valley tell me about his former French colleague who has moved to Bangalore to work for GE. That is a flat world.