Export Import Bank debate in the US

Export Import Bank debate in the US
Ex-Im Bank of the USA is a federal government backed institution which specialises in trade finance. It is similar in functions to India's Exim bank except that Indian Exim bank doesn't get into trade insurance, which is handled by another body called Export Credit Guarantee corporation of India. In fact, India's Exim bank copies most of the functions of US Ex-Im bank given that US institution predates Indian one by more than five decades. 

US Ex-Im bank is under threat of being de-authorized, unless the US congress re-authorizes it shortly. 

The bank's critics, mainly the republicans, bank on the argument that such subsidising banks lead to market distortion and help private sector players, and therefore, they are a form of corporate welfare scheme. They choose the winners in the private sector by choosing whom to help by providing easy access to credit for international trade. It is nothing but crony capitalism in another form, subsidising the rich. 
The bank's supporters argue that closing down Ex-Im bank would put American manufacturers at a disadvantage in the global market as there are competing banks being run by other countries, notably China, which support the domestic manufacturers to capture global market. This would lead to job losses, and loss of access to global market. 

Most of Indian Exim bank's trade finance is directed in such a way that the buyer in the global market uses it to procure Indian goods. Such finance is directed through lines of credit mechanism, project finance, long term overseas investment finance etc. The Exim banks across the world usually step in to fill a void that is not filled by the conventional banking and regular trade finance. And most of the Exim banks are sponsored by the governments. China is currently the biggest user of Exim bank mechanism for international trade finance.  

It is interesting to note that the US is even debating on the existence of such an important institution. Such important institutions should not be given expiring charter, like what the US has done. It should be enacted by an act of parliament, like what India has done. Exam banks do not just give packing credit or trade insurance, they are the source of stability for long term international trade finance, and are extension of trade and commercial diplomacy. Losing Ex-Im bank for the US might have long term implications which might not be easily quantifiable today in terms of loss of jobs or dollars earned. 

Will It Get More Worse In USA

The USA is a great nation for entrepreneurship and innovation, it has the best science in the world, the most creativity in the arts, it is the number one economy in the world, it has an energy unrivaled by other nations and we have chosen to move to this great nation with our family.  So everything that follows must be seen as friendly criticism from a person who loves this country.

Now most of my friends in the USA agree on what is great about this nation. But when I speak to some American friends they seem to be unaware of the shortcomings of the USA compared to others, and this is what I would like to focus on. Here are some quick examples.

The USA ranks 38th in life expectancy which is shocking considering that it has the best medical science in the world.  And this generation is the first one that will live less than the previous generation. The average American is expected to live two years less than, say, the average Spaniard. This is partly because the USA has a medical system that leaves 50 million people uninsured and many others under-insured or worried about losing their insurance (my wife Nina, for example, can’t get medical insurance to have our next baby because pregnancy is considered a pre-existing condition and we moved to USA when she was already pregnant).  It is also partly because the USA is the nation with the highest percentage of its population obese, over 30%.  The WHO studied overall level of health and concluded that Americans rank 72 in the world. Family structure is also weak as the USA has the highest divorce rates in the world. Moreover inequality is on the rise: as this Wikipedia article argues, the top earning 1 percent of households gained about 275% over a period between 1979 and 2007, compared to a gain of just under 40% for the 60 percent in the middle of America's income distribution.

The USA has a legal system that is extremely expensive and unreliable and tends to favor those with resources to pay for it. The USA spends almost half of what the whole world spends in the military and since WWII (in which the USA did an amazing job), other military interventions have been of dubious value for such a huge investment, especially Iraq and Afghanistan. The USA leads all developed countries in executions by death penalty, it has a love for guns that makes its murder rate unusually high for a developed nation, it has the highest incarceration rates of the developed world mostly focused on one ethnic group, African Americans. The USA has more people in jail or parole than Madrid has people.   And while the USA has most of the best ranked universities in the world, according to PISA scores the USA ranks very poorly compared to other developed nations. The USA is also the largest polluter in the world together with China but a leader on a per capita basis. The American lifestyle is great but not scalable to the world as a whole.  Replicating this lifestyle on a global basis will lead to extreme competition over resources and high environmental damage.

Yes, the USA is great nation. I am happy to be here teaching at Columbia-- this country probably has the most educated elite in the entire world. It has incredible business creativity and it is home to the Apples and Googles of this world and in this sense, they are an example for the whole world to follow. It also has individuals who are among the most driven in the world and who want to succeed and do as much as they can.  But it has a number of very important issues to address, many of which were not part of the recent presidential debates (climate change for example) and which seem to rarely be part of the conversation with many of my American friends.

Source: Linkedin.com



Your 401(k) could sink again. A plummeting euro may make it harder for American companies to sell goods overseas. Credit could be tightened.Skip to next paragraph
These are all potential complications of a European debt crisis that risks spiraling out of control. And in today's interconnected global economy, Greece's troubles could over time become a headache for all of Europe and by extension the rest of the world.
That includes President Barack Obama as he faces an already difficult re-election bid, and voters as well, from machine tool makers in Michigan to chemical plant workers on the Gulf coast. Pensioners and home buyers also could be affected.
All this because Greece is at a crossroads, unable to form a government and decide whether it will continue on a path of harsh austerity measures or walk away from its debts and give up on the euro. That would leave many European countries holding their debts and shake the foundations of a currency used by 331 million people.
Here's what a Greek debt default and exit from the 17-nation eurozone might mean for people in the United States:
The short-term financial consequences of Greece defaulting may be limited across the Atlantic. American banks already have sharply reduced their exposure to Greece by more than 40 percent to $5.8 billion, according to the government, and Cornell University economist Eswar Prasad said he foresees little immediate blowback for the U.S. financial sector.
But the concern is that market speculation would then fall on the far larger economies of Spain and Italy. Both are deep in the red and heavily dependent on credit markets to stay afloat. And their debts are held by Europe's big banks.
Economists call this threat contagion. Scared investors sell off their assets in Europe's most troubled economies and the governments struggle to access credit while falling into deeper recession. A crisis as bad as Greece's in a bigger nation would have severe global implications.
"Greece is peanuts as far as the United States is concerned," said Uri Dadush, former economic policy chief at the World Bank. "But if Greece leads to the contagion of Spain and Italy, the euro could implode. This is big business for the U.S. We're talking trillions of dollars in direct and indirect exposure to the European banking sector."
Economists cite the example of Lehman Brothers' collapse in 2008 and the financial turmoil that followed. A repeat scenario could see credit lines dry up as banks short of funds limit their risks, making it harder to secure loans for business expansion and home mortgages.
Lending and credit growth remain especially weak in Europe, where over $1 trillion in cheap, three-year loans to financial institutions by the European Central Bank helped stave off a complete credit cutoff. A massive bailout fund has been set aside in case Spain or Italy fails, too, but a default by either country could spell disaster for German, French and other heavily exposed banks. They, in turn, deal extensively with American banks.
"It's a question I don't want to find out the answer to, honestly," Dadush said. "There is a real danger of global depression."
Many pension funds, insurance companies and other big investors have dumped or written off investments in Greece such as government bonds. But there's no telling how the markets will respond to a default.
For investors who have already faced a half-decade of turbulence, this weekend's failure in Greece to form a new government led Monday to steep market drops across Europe. Britain's FTSE slipped 2 percent, while Germany's DAX was off 1.9 percent and France's CAC 40 fell 2.3 percent. In the U.S., the Dow Jones industrial index was down 0.8 percent at 12,714.
Each round of bad news from Europe raises uncertainty. No one knows how a Greek exit from the euro would work and the financial swings have added to the stress on Europe's economy. And every time stocks plunge and the borrowing costs for troubled countries rise, businesses and consumers grow more cautious. This makes them more reluctant to expand companies or buy more property.
Europe's turmoil "does not bode well for the fledgling U.S. recovery," Prasad said. He predicted that uncertainty in Europe will rattle U.S. financial markets, as happened last year, shaking fragile consumer and business confidence.
Individual American investors should be concerned as well, even if most have little direct exposure to southern Europe. Market declines across Europe could drag down Asia and the United States, hitting portfolios and retirement funds. And when people feel poorer, economies shrink.
Exports have been a bright spot for the U.S. economy, and Europe has played a big role. More than half of U.S. foreign investment and a fifth of all American exports go to the European Union. A significant slowdown there could mean less revenue for U.S. companies, less expansion at home and lost jobs for American workers.
"Right now, the best case scenario in Europe is a recession," said Chad Moutray, economist at the Washington-based National Association of Manufacturers. "Any of the worst case scenarios threaten our growth strategy."
U.S. manufacturers have added 167,000 jobs over the last five months, but a European economic collapse would hamper growth in two ways. It would weaken Europe's general demand for goods. And if investors flee Europe for safer bets elsewhere, the value of the euro would sink and make American products more expensive.
Many major U.S. companies not only export but have large operations in Europe. General Motors and Ford both make cars there and have faced slack sales in a competitive market that offers manufacturers little pricing power.
Unemployment rates of over 50 percent for people under 25 in Spain and Greece have undermined the market for first-time car buyers in those countries. Unemployment across the eurozone is already at 10.9 percent, a record since the common currency was introduced in 1999. If that figure worsens still, it would further dampen American sales.
Any new economic crisis presents a problem for Obama, even if Europe's problems are largely beyond his control.
Higher unemployment, a surge in gas prices or collapsing stock portfolios in the United States would undermine the president's argument that he has slowly but surely guided the U.S. out of its worst downturn since the Great Depression. His November showdown against Republican candidate Mitt Romney is still too close to call and will hinge on the economy.
"He's put us on a road to become more like Greece," Romney said last month, hammering away at a campaign message that has focused on debt, unemployment and the lackluster state of the American economy.
Even if a Greek default may also undermine the harsh austerity tactics championed by some Republicans, Obama would face a severe backlash if Europe's ills were to cause the U.S. to slip into a double-dip recession. That seems unlikely for now, but Obama is already challenged by unemployment hovering around 8 percent and an economy only expected to grow by about 2.5 percent this year, still slow for an economic recovery.
Yet Obama can do little about Europe's ills. His administration insists that Europeans should fix their own problems without U.S. assistance — a stance it must take because there is no appetite for U.S. taxpayers to help bail out Greeks or anyone else in Europe. Washington has pressed Europe to stimulate their economies more.
But Obama can't even control the U.S. economy, after pushing through a $787 billion stimulus package in 2009 that critics charged with not doing enough to create jobs and spur economic recovery.
"As has happened several times before, when our economy gets going, events elsewhere can intervene and throw a monkey wrench in the works," Obama senior campaign adviser David Axelrod recently said. "We're not hoisting a 'Mission Accomplished' banner. We know there is a lot of work left to be done and the headwinds are part of that equation."


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Should we extend the definition of marriage to encompass same-sex partnerships (Civil Partnerships)?

It is impossible to provide a single definition of marriage. However, one thing is for certain, and that is marriage is not a union between two people of the same sex (at list for now). Even though lack of a single definition of marriage has been said to be a reflection of religious, cultural and ethnic diversity , however regardless of how far we have advanced socially, marriage still is and arguably should be one of the most important institutions in the society . With this in mind, in the course of this essay it will be argued that extending marriage to homosexual couple is to infringe religious concepts of marriage upon which sanctity of marriage is enrooted , and this might lead to a political turmoil more profound than imaginable. On the other hand, it will be appreciated that if marriage was to be extended to homosexual couples that would undoubtedly achieve greater equality and uniformity. Nonetheless, the costs of such an extension outweigh its advantages.
In Ghaidan v Mendoza , Lord Millet following Hyde v Hyde defined marriage as a union of a man and a woman. However, such a blanket exclusion of same couple was argued to be unjustifiable. Baroness Hale in the same case suggested that instead of focusing on sexuality, marriage should have a defacto meaning based on its essential quality in light of intimacy, stability, social and financial dependency. Nonetheless, English law still holds that for a marriage to be valid its content should be that of a man and a woman .

Such a stringent condition of marriage was thought to be denying homosexual couples with equal rights as heterosexual couples . To address this problem in 2004 the Government enacted the Civil Partnership Act 2004 which aimed at achieving a degree of equality between same-sex couples and heterosexual couples. The Act enables homosexual couples to enter into a civil partnership which eventually as stated by Baroness Hale in SSWP v M, grants them same legal recognition that the law grants to heterosexual couples. As voiced by Anderson the Act is a generous invention with loud political and social message. He argues that by giving homosexual couples the same legal status as married couples the government has made it possible for homosexual couples to obtain full social recognition.

Nonetheless, the argument that civil partnership is nothing but second rate marriage is somewhat incorrect and undermines the significance of CPA. Baroness Hale writing extra-judicially unequivocally suggested that civil partnerships ‘are marriage in all but name’ . This idea of equality between civil partnership and marriage was echoed in Wilkinson v Kitzinger . In Wilson v Kitzinger it was explicitly voiced that civil partnership and marriage are almost equal save the name. This argument can be supported by the fact that the CPA accords to same-sex relationships effectively all the rights, responsibilities, benefits and advantages of civil marriage save the name. However, despite all the glimpse of equality between civil partnership and marriage, one can still argue that civil partnership is inferior to marriage. As pointed by( ) couples in civil partnership do not enjoy the same universal recognition as married couple. This is evident in Kitizinger case where a Canadian married homosexual couple was failed to be recognised as husband and wife in the UK. However, that reluctance to equate civil partnership with marriage is justified on religious, sociological and cultural factors to be discussed later.

Nonetheless, the question remains whether we should extend marriage to same-sex couples. Without sounding homophobic this part of the essay will focus on pressing arguments against such a call.

Marriage is sacred and regardless of the religious beliefs, for decades British have largely agreed on the sanctity of marriage. Since the ancient times, marriage has always been viewed as a union between one man and one woman to the exclusion of all others . This union is important not only to the parties themselves but to the society at large . On one hand the union brings rights and responsibilities to the parties but on the other-hand, it is important for reproduction, and child rearing . Therefore extending marriage to gay partners will undermine the everlasting portrayal of marriage and this can be said to cause ‘cultural genocide’

However, the above concerns are somehow obsolete. First, to equate a legal meaning of marriage to a religious one is dangerous considering the disparities in religious beliefs, and also the fact that some religious groups support gay marriages . Further, the argument on heterosexual marriage as a mechanism for reproduction and child rearing is outdated. In the modern society, homosexual couples are as well equipped to engage in child reproduction due to advances in technology, notably assisted reproductive technology and the emergence of surrogate mothers. However, my biggest concern still is whether these technological advances uphold and conform to our laws of nature?

Although, many among being Baroness O’Cathain are of the view that it is just wrong to ‘create a parody of marriage for homosexual couples’ , it can however be argued that extending civil partnership to marriage can achieve greater equality. I am of the view that homophobia, male dominance and gender imbalances are not legal but sociological and psychological problems whose remedies lie in the society itself. Unless we challenge the traditional views that a man should marry a woman and in most cases live in a subordinate relationship, we can never eradicate these problems. It is about time we shape the notion of marriage not on sexuality but on commitment, love, equality, and respect. Thus, by according same sex couple with the right to marry, we shall be moving a step closer to a society where sexuality does not dictate authority in the family, and gay people are to be regarded as not two men/two women doing immoral acts but rather be viewed in the same perception as heterosexual couples, that is ‘two people who love, and respect each other, and who have committed their lives to each other, till death do them part’.

Nonetheless, my question is, should we really throw all that our society has forever embraced- that is marriage is a respectable union between a man and a woman responsible for reproduction and child rearing, so that a few minorities can claim equality and uniformity? Or we should rather uphold to our strongest values, but yet respect the privacy of others (homosexual couples) as well as granting them equal rights as heterosexual couples?

Undoubtedly, equality has already been achieved by CPA. The Act has created the best of both worlds for Government in appeasing both the gay and anti gay lobbies. To extend this situation might lead to political problems more profound than imaginable. We should always remember, as argued by Lynn Wardle, the union of two persons of different gender creates a union of unique potential strengths and inimitable value to society. As such, as poignant as it may sound, such gender difference is still prevalent in today’s world, and cannot be masqueraded by equating a union of two people of the same sex with a civil marriage between a man and a woman.

EURO Downfall

The euro touched the lowest level in five weeks against the dollar and the yen on speculationEurope’s spreading debt crisis will curb economic growth and pressure the region’s central bank to ease monetary policy.

The 17-nation currency maintained this week’s slide versus the greenback before Spain auctions up to 4 billion euros ($5.4 billion) of bonds today and France sells as much as 8.2 billion euros of debt. European Central Bank President Mario Draghispeaks in Frankfurt tomorrow. The Dollar Index reached the highest since October as economists forecast a U.S. report today will show manufacturing activity increased.

“We are seeing diverging trends with the U.S. economypicking up and the European economy headed for recession,” saidRichard Grace, Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia.“Those diverging economic trends and the likelihood of further ECB rate cuts are going to gradually weigh on the euro.”

The euro fell to $1.3422, the lowest since Oct. 10, before trading at $1.3475 as of 1:07 p.m. in Tokyo from $1.3463 in New York yesterday. The common currency declined to 103.41 yen, matching the lowest level since Oct. 10, before trading little changed from yesterday at 103.78. The yen was at 77.02 per dollar from 77.06.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, reached 78.467, the highest since Oct. 10 before falling 0.2 percent to 78.228.

European Debt Sales

Spain will auction bonds maturing in 2022 and France will sell as much as 7 billion euros of notes and 1.2 billion euros of inflation-linked debt today.

Italian 10-year bond yields fell six basis points to 7 percent yesterday. The ECB purchased larger-than-usual sizes and quantities of the nation’s debt under its Securities Market Program, according to two people with knowledge of the trades. An ECB spokesman in Frankfurt declined to comment.

U.S. banks face a “serious risk” that their creditworthiness will deteriorate if Europe’s debt crisis deepens and spreads beyond the five most-troubled nations, Fitch Ratings said yesterday.

Rising bond yields from the Netherlands to Finland and Austria suggest European officials are struggling to convince investors they can stem the crisis. The euro-area economy is heading toward a “mild recession” by the end of the year, Draghi said on Nov. 3.

Downward Trend

“The euro is in a clear downward trend,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency margin company. “Europe’s situation hasn’t changed at all and its crisis has yet to be behind us.” The euro may fall below 100 yen by year-end, he said.

Europe’s shared currency slid 1.6 percent over the past six months versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The yen gained 8.9 percent and the dollar rose 4.1 percent, the best performers.

The yen tends to strengthen during periods of financial stress because Japan’s export-reliant economy doesn’t need foreign capital to balance current accounts -- the broadest measure of trade. The dollar benefits due to its status as the world’s reserve currency.

“The bottom line would be to stay defensive,” said Bilal Hafeez, global head of foreign-exchange research in Singapore at Deutsche Bank AG. “The best currency for me is the yen.”

Hafeez expects the yen to appreciate toward 70 per dollar in the next three to six months, strengthening past its postwar record of 75.35 set on Oct. 31.

Japanese Intervention

Japan has sold yen in the foreign-exchange market three times this year as a strong local currency reduces the competitiveness of its exporters.

Japan’s “approach over the last year or so has been to do periodic one-day interventions, often extremely large, and I think they may continue with that,” said Hafeez. That method of market operation “isn’t really the type of intervention that will turn the currency trend around.”

Demand for the dollar increased before a report forecast to show manufacturing in the Philadelphia region expanded in November at the fastest pace in seven months, a sign U.S. factories may provide more support for the recovery.

The Federal Reserve Bank of Philadelphia’s general economic index increased to 9 from 8.7 last month, according to the median estimate of economists surveyed by Bloomberg News. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

The pound touched the lowest level in four weeks against the dollar after the Nationwide Building Society said its index of U.K. consumer confidence fell to a record low in October as Europe’s crisis and the unemployment outlook worsened. Retail sales including fuel slid 0.2 percent in October, following a 0.6 percent gain the previous month, a separate report is projected to show today according to economist estimates.

“The U.K. economy continues to struggle,” said Commonwealth Bank’s Grace. “The pound is probably going to underperform. The Bank of England has made it clear that they’ve got an easing bias.”
The currency was little changed from yesterday at $1.5730 and earlier touched $1.5691, the lowest since Oct. 20.

Valuation of Used Motor Vehicles -TANZANIA

Abbreviations used
·        CIF – Cost Insurance Freight (Taxable Value)
·        I/D – Import Duty
·        EXA – Excise duty for vehicles aged more than 10 years
·        EX – Excise Duty
·        VAT – Value Added Tax
·        CV – Cost of Vehicle
·        CRP- Current Retail Price
·        PM- Profit Margin
·        P – Profit
·        VBD – Value Before Depreciation
2001 and above

Pick ups
Trucks ( 5tons-18.5tons)
Trucks ( above 18.5tons)
Tractors(trucks for pulling semi trailers)
Buses (carrying from 10 passengers )
Land cruiser Hard tops carrying from 10 passengers
·        P = CV*25%=CV*0.25=0.25CV
·        CRP=CV+P
·        CRP=CV+0.25CV
·        CRP=1.25CV
·        CRP/1.25=CV
We remove the tax element from Cost Value
·        VBD = CV/1.25/1.18 for vehicles with less than 1000cc
·        VBD = CV/1.25/1.05/1.18 for vehicles with more than 1000cc but not exceeding 2000cc
·        VBD = CV/1.25/1.05/1.18 for vehicles exceeding 2000cc
0to <1 year
1 to < 2 years
2 to < 3 years
3 to < 4 years
4 to < 5 years
5 to < 6 years
6 to < 7 years
7 to < 8 years
8 to < 9 years
9 to ≤ 10 years
above 10 years
Depending age of the motor vehicle and basing on the given depreciation rates in the table above the depreciated value will be calculated as follows
a) Motovehicles with Import duty and VAT only
·        I/D = CIF * 25%
·        VAT = (CIF+I/D) * 18%
b) Motovehicles with Import duty and VAT but aged more than 10 years
·        I/D = CIF * 25%
·        EXA = (CIF+I/D) * 20%
·        VAT = (CIF+I/D+EXA) * 18%
c) Motovehicles with Import duty ,Excise Duty and VAT
Vehicles with more than 1000cc but not exceeding 2000cc rate is 5% Excise duty, and those with more than 2000cc rate is 10%
·        I/D = CIF * 25%
·        EX = (CIF+I/D) * 5%
·        VAT = (CIF+I/D+EX) * 18%
d) Motor vehicles with Import duty ,Excise Duty and VAT but aged more than 10 years
Vehicles with more than 1000cc but not exceeding 2000cc rate is 5% Excise duty, and those with more than 2000cc rate is 10%
·        I/D = CIF * 25%
·        EXA = (CIF+I/D) * 20%
·        EX = (CIF+I/D) * 5%
·        VAT = (CIF+I/D+EXA+EX)*18%