This month, Euromoney seeks to debunk two of the great myths of the international financial markets.
This month, Euromoney seeks to debunk two of the great myths of the international financial markets. The first relates to Europe. As Euromoney went to press in late August, a trade row had erupted between the European Union and China about the import of textiles from the People's Republic.
The interventionist leanings of the EU had persuaded its trade commissioner, Peter Mandelson, to impose a limit on the amount of textile goods that could be imported from China. What Mandelson and his advisers hadn't reckoned with was that Chinese textiles exports to Europe were of such a magnitude that enforcing the quota would lead to shortages throughout the EU's retail outlets.
By the end of August one option being considered was to maintain the quota system but allow some of next year's quota to be used up this year.
This is a typical EU fudge – set a rule and, when it doesn't quite work out as expected, obfuscate, wriggle and negotiate until no rules are broken but the situation is mended for the short term.
You might wonder what Chinese-made bras and T-shirts have got to do with global finance. Well, something similar has been happening in Europe's bond markets for a long time, but on an vastly larger scale, and it is about time people started to consider the implications.