Hong Kong, London Vie to Fund One Belt, One Road

♠ Posted by Emmanuel in ,, at 5/17/2017 04:12:00 PM
Xi Jinping hawks OBOR to Filipino flunkies. Apparently, there are many of these sorts all over the world.
So we may have expressed some doubts about the now-legendary PRC "One Belt, One Road" project--otherwise known as the "New Silk Road"--coming true. However, there is an interesting corollary to the story. What if China's erstwhile economic rivals buy into the hype? The Americans, for instance, are comparing the decrepit state of US infrastructure and the beleaguered Donald Trump's ever-doubtful intentions to fix it with such a massive-scale, global effort:
China excels at spectacle, and the Belt & Road Forum was as much PR stunt as anything. But the vast scale of the plan and the national ambition behind it dwarfs anything leaders are contemplating in Washington, or European capitals. “If you compare this to what the United States is doing—trying to rescue the steel and aluminum sectors and open a few markets for its goods—we’re pretty small potatoes,” says Scott Kennedy, an expert on the Chinese economy at the Center for Strategic and International Studies. “China is more organized and they’re planning more strategically than the United States.”
Apparently, there is some kind of nascent Western inferiority complex when it comes to infrastructure. The Americans aside, the British want in on a piece of the action. However, they will have to duke it out with the PRC's erstwhile Hong Konger compatriots to help finance the enormous project if a South China Morning Post article is to be believed:
Hong Kong and London have locked horns at a two-day high-level forum in Beijing over which city is best placed to act as the ­finance hub for China’s global trade and commerce strategy. At the first day of the Belt and Road Forum for International ­Cooperation, Hong Kong Chief Executive Leung Chun-ying ­insisted the city was “the preferred destination” for capital flows from the mainland. Leung cited the city’s status as the largest offshore settlement centre for yuan trade and its title as the world’s No 1 stock market for new listings in 2016.
C.Y. Leung may not exactly be an authoritative source on the matter at this point in time since he's the lame duck chief executive of Hong Kong. His British counterpart's place in the political space may be more secure since his Conservatives look set to win an overwhelming majority against the decrepit Labour Party:
However, [Leung's] bid was swiftly challenged by British Chancellor of the Exchequer, Philip Hammond. Referring to the sheer scale of funding required for China’s “Belt and Road Initiative”, which promises to be in the trillions of US ­dollars and would require mobilising the world’s capital markets, Hammond said Leung’s pitch was “elegantly made”, but “London is not an alternative to Hong Kong”.
Aside from the question of whether OBOR will be realized anywhere close to the scale of the PRC vision, it is amusing to find financial centers vying to be locales for where the fundraising will be conducted. That is, OBOR may be more smoke and mirrors  and vaporware more than anything, ah, concrete, but that's not stopping folks from bending over backwards to court the favor of the Chinese Communist Party.
At the very least, then, consider it a well-done PR job. 

One Belt, One Baloney? PRC's Silk Road Revival Doubts

♠ Posted by Emmanuel in ,,, at 5/14/2017 04:15:00 PM

Over the weekend, Chinese President Xi Jinping hosted an elaborate event in Beijing concerning the PRC's idea of reviving the historical Silk Road. Spanning much of Asia and the Middle East besides, this trade route epitomized many of the things China wants to be today: (1) at the center of world trade, (2) involved in infrastructure, and (3) a prime mover of international relations. This, of course, stands in contrast to the retrograde "America First" stylings of the racist-protectionist-isolationist American president, Donald Trump.

Some hackles were raised about the invitation being extended to North Korea, of all nations, but certainly we'd rather have it peacefully trading with the rest of us than firing missiles to draw attention to itself?

More to the point, though, how realistic is this plan? A few months ago, an op-ed appeared in the Hong Kong-based South China Morning Post (usually a Communist Party-friendly outlet) placing the "One Belt, One Road" project's viability in question by way of Japan's example from only a few years back of doing something similar: using infrastructural might to extend not only diplomacy but also trade with its neighbors:
Facing a deep slowdown after years of investment-fuelled growth that culminated in a huge property and stock market bubble, the leaders of Asia’s largest economy [China] come up with a cunning plan. By launching an initiative to fund and construct infrastructure projects across Asia, they will kill four birds with one stone.

They will generate enough demand abroad to keep their excess steel mills, cement plants and construction companies in business, so preserving jobs at home. They will tie neighbouring countries more closely into their own economic orbit, so enhancing both their hard and soft power around the region. They will further their long term plan to promote their own currency as an international alternative to the US dollar. And to finance it all, they will set up a new multi-lateral infrastructure bank, which will undermine the influence of the existing Washington-based institutions, with all their tedious insistence on transparency and best practice, by making more “culturally sensitive” soft loans. The result will be the regional hegemony they regard as their right as Asia’s leading economic and political power.
However, the author Tom Holland delivers the punch line that, actually, the Japanese tried all this stuff before and failed:
[I]t’s actually a description of a strikingly similar plan rolled out by Japanese prime minister Keizo Obuchi in the 1990s. That too promised to provide work for Japan’s recession-hit construction sector by building Japanese-funded infrastructure projects around Asia. And it even included a proposal – never realised – to establish an Asian Monetary Fund to lend to regional governments on easier terms than either the IMF or World Bank.
Unfortunately for Beijing, the precedent is hardly encouraging. From the start the scheme was plagued by bickering over conditions and allegations of corruption. A handful of infrastructure projects did get built, but the reality fell woefully short of Tokyo’s grandiose dreams. Far from cementing Japan’s economic ascendancy across Asia, the project left a legacy of bad blood, and marked the beginning of a financial retreat from around the region that Japan has only recently begun to reverse.
The rest of the editorial notes that rampant corruption elsewhere siphoned funds away from projects, and those bits that actually did get built ended up as "white elephant" projects: transport initiatives that cost so much to maintain that they could not be sustained and were eventually shelved. Certainly, the OBOR and New Silk Road tags characterize some grandiose initiative. (See the map pabove.) Whether the Chinese have the actual sense to scale these to reality-based bits is another question since linking the Middle East all the way to the Far East is not a vision based on modesty. 

Scaling it appropriately to meet local needs of the countries involved is key. That is, participating countries will plump for maintaining infrastructure built (with Chinese support) insofar as they can benefit from it going forward. However, if benefits are not evident--or mainly serve the purpose of transit through a country instead of serving the citizens of the countries in question first and foremost--the Japanese example provides ample cautions.

UPDATE: A warning is that investment in OBOR countries has, actually, dropped off in recent times, though there are caveats associated with this as a gauge:
Foreign direct investment from China to countries identified as part of the BRI fell 2 per cent in 2016 year on year and has dropped an additional 18 per cent so far in 2017, according to commerce ministry data. Non-financial FDI to 53 BRI countries totalled $14.5bn last year, comprising only 9 per cent of overall outbound FDI...
Chinese experts counter that published figures do not paint a complete story. Jia Jinjing, chief researcher at the Renmin University’s Chongyang Institute for Financial Studies in Beijing, said much outbound FDI passes from China through an intermediate country before reaching its final destination, making the commerce data an unreliable gauge of total BRI investment.

Post-Brexit, Will the EU Stop Speaking English?

♠ Posted by Emmanuel in at 5/12/2017 07:23:00 PM
"We don't need no pidgin English!" The Academie Francaise may be ascendant with the UK leaving the EU.
I've talked about how English has become entrenched in global use--most often as a widely-spoken second language--because of its more "open source" nature [1. 2]. That is, people come up with new words to fit novel situations, and these become part of the global lexicon. Think about "Grexit" and "Brexit", which would have been unintelligent gibberish only a few years ago. The Internet has certainly played its part in establishing a common language as well. 

It is apropos that we make use of those examples drawn from the trials and tribulations of the European Union since the self-ejection of the UK from the EU may have significant consequences for the use of English in that institution. Just as English is widely used as a second language worldwide, accounting for its ubiquity, so has it functioned within the EU. In short, most participants from the 28 (shortly 27?) member states have at least some familiarity with English.

However, European Commission President Juncker seems to be warning us that, with the UK leaving the EU, it becomes harder to justify using the language of the leavers. Cut it out, English speakers, in so many words:
European Commission President Jean-Claude Juncker has told a conference in Italy on the EU that "English is losing importance in Europe". Amid tensions with the UK over looming Brexit negotiations, he said he was delivering his speech in French. "Slowly but surely English is losing importance in Europe and also because France has an election," he said, explaining his choice of language.

He called the UK decision to leave the EU "a tragedy". Laughter and applause greeted his comment about the English language, and he could be seen smiling wryly. "We will negotiate fairly with our British friends, but let's not forget that it is not the EU that is abandoning the UK - it is the UK that's abandoning the EU, and that makes a difference," he said.
Luxembourg where Juncker hails from is partly French and partly Germany speaking. What we need to figure out here is whether English will be retained from a practical standpoint. Just because the UK is leaving the EU, it doesn't mean that fewer EU nations' citizens will be less familiar with it anytime soon. That much is obvious.

Of course, there may nonetheless be a political backlash against speaking English. After all, it is the language of the leavers.

After decades and decades of getting its teeth kicked in because of French authorities at the Academie Francaise decreeing what the language is, French may again be the language of (European) diplomacy. An improbable comeback for French may be on the cards, then, at the EU--just as Brexit was in itself rather improbable.

Can California Save the US From Trump's Stone Age?

♠ Posted by Emmanuel in at 5/03/2017 06:01:00 PM
Californians don't dig coal.
Yes it can! Or, at least if you listen to New York Times columnist and bestselling author Tom Friedman. Although Friedman meanders a bit getting to the point--blasting Trump for advocating environmentally and socially backward policies along the way--he ultimately ends up there. In his version of events, the "California effect" in which most companies choosing to operate in that state have to meet higher environmental and social standards, usually meaning that they adopt similar standards nationwide, saves the rest of America from Trump's degeneracy:
I believe California’s market size, aspirational goals and ability to legislate make it the most powerful opposition party to Trump in America today. How so? Trump wants to scrap Obama-era standards requiring passenger cars to average about 51 miles a gallon by 2025; today it’s just under 37 miles a gallon. But as The Los Angeles Times recently noted, under the Clean Air Act, California “can impose emissions standards stronger than those set by the federal government, and a dozen other states have embraced the California rules.”
Overall, California is said to show that a better America is possible that is economically, socially and environmentally progressive:
Also, notes Energy Innovation founder Hal Harvey: “California has a renewable portfolio standard requiring that 50 percent of all electricity come from wind, solar and other renewables by 2030. Another 15 percent already comes from existing nuclear and hydro — so our grid will be 65 percent decarbonized in 13 years...”

As Kevin de León, leader of the California State Senate, told me: California has far more clean energy jobs than there are coal jobs in all of America, and California’s now nation-leading growth rate in jobs gives the lie to everything Trump says: You can have gradually rising clean energy standards, innovation, job creation and G.D.P. growth — all at the same time...

California is also leading the resistance to Trump’s draconian immigration policies, with a web of initiatives embracing tighter border controls while also creating health care, education and work opportunities for illegal immigrants who have been living here responsibly and productively.
Another thing I would point out is that California was in very sorry shape--especially financially--at the start of the millennium. The legendary Governor Jerry Brown deserves a lot of credit from getting the state going again.

If the US had elected Jerry Brown--it's had many chances--instead of Donald Trump, I think the rest of the world would be much less worried about being dragged back into the Stone Age. We can only hope Friedman is right about the present. I'd only that Brown is actually the opposite of Trump in being fiscally conservative instead of trying to super-size budget deficits:
Brown knows better than anyone, presiding over a state that proudly adheres to the popular stereotype of California social liberalism, but not to the more damaging one of Democratic profligacy. Brown is the rare progressive who can balance the books, who can sell fiscal restraint to Bay Area liberals and gay marriage to Orange County evangelicals.

World's Loneliest ATM Machines...in North Korea

♠ Posted by Emmanuel in at 5/01/2017 01:06:00 PM
"Those are just props, right?" The ATM at North Korea's brand-new "international airport".
A recent New York Times article claims that, actually, North Korea is experimenting with economic liberalization on a controlled basis. That is, small markets featuring wares made by local traders are popping up all over the country. What's more, it claims that the totalitarian dominance of the Kim regime is lessened as more of these merchants pop up and become more affluent.

Unless you're a communist diehard, you'd probably agree that something that could really spur this nascent turn towards entrepreneurship is international economic integration. Unfortunately, however, that appears to be something that is well beyond what is allowable by the Kim regime. What evidence do we have to back up this statement? Consider the world's loneliest ATM machines...at North Korea's airport. Apparently, these devices were not meant for local consumption but by Chinese tourists. With North Korea in China's doghouse at the moment for nuclear tests and (comically failed) missile launches, these ATMs do not look to become operational anytime soon. From the Associated Press:
ATMs are an alien enough concept in North Korea that those in the capital's shiny new Sunan International Airport have a video screen near the top showing how they work and how to set up an account to use them. The explanatory video is in Korean, but the machines, which are meant primarily for Chinese businesspeople and tourists, don't give out cash in the North Korean currency. ATMs are not entirely new to the North.

Years ago, the Ryugyong Commercial Bank installed one in a midrange tourist hotel in central Pyongyang frequented by Chinese. Another ATM was spotted at the airport last year, but it never appeared to be turned on. Additionally, customers who flash the bank's gold or silver ATM cards at two upscale stores that sell a wide array of imported foods and luxury items qualify for discounts. How much North Korea's ATMs have actually been used is a matter of debate.

Booking office employees said the ATMs at the airport's international terminal were installed a few months ago but are still in a "test phase." According to tellers at the bank's small office in the hotel where it has its other ATM, none of the machines are working because of Chinese sanctions that they said kicked in last month.
So North Korea is experimenting with accoutrements of the running dogs of capitalism...but ATMs are still too much of a step into the unknown at this point in time.

Trump Supposedly [Hearts] an FTA...With Europe

♠ Posted by Emmanuel in , at 4/24/2017 12:11:00 PM
Most nations have an inferiority complex relative to Germany. Why should the US be any different?
Has the maximally unpredictable Donald Trump, who you'd think sees any sort of multilateral FTA as a giveaway to foreigners (who steal jobs through unfair trade practices), changed his mind? Remember, this guy actually kept one of few campaign vows in extricating the US from the Trans-Pacific Partnership enlargement negotiations. However, a brace of news reports now suggest that he is willing to negotiate an FTA...with the European Union.

Yes, that very same EU he encourages its members to leave from the UK to France he now wants his country to sign a trade deal with if reports are to be believed. The way the current story goes, Trump originally wanted an FTA with Germany during Chancellor Merkel's recent trip to Washington, DC. However, she rebuffed him by saying that any US-Germany deal must involve the whole EU. (Being an A1-ignoramus, Trump likely does not recognize that trade deals negotiations involving EU members have been assigned to the European Commission.) To this Trump supposedly said he will consider it.

What's more, Trump is said to be putting the EU next in the queue ahead of the UK European Union leavers:
A source close to the White House was quoted as saying that there had been a "realisation" in the Trump administration that a trade deal with the EU - allowing the tariff-free exchange of goods and services - was more important to U.S. interests than a post-Brexit deal with Britain.


"Ten times Trump asked her (Merkel) if he could negotiate a trade deal with Germany," the newspaper quoted a senior German politician as saying.

"Every time she replied, 'You can't do a trade deal with Germany, only the EU'," the politician said. "On the eleventh refusal, Trump finally got the message, 'Oh, we'll do a deal with Europe then.'"
Trump, who has repeatedly criticised the EU, had welcomed Britain's 2016 vote to leave the bloc and said he would work hard to get a quick bilateral trade deal done.
But wait, it gets more interesting. Chancellor Merkel is tacitly going along with this version of events by encouraging it to play out:
German Chancellor Angela Merkel fueled expectations of a future EU-U.S trade deal on Sunday, saying she was "very encouraged" talks were being looked at after her recent trip to Washington.
Merkel, speaking at the opening of the 70th annual Hannover Messe trade fair, said Germany was opposed to protectionism and trade barriers, and would continue to work for trade agreements like the one signed between the European Union and Canada.

"I also feel very encouraged by my visit to the United States that negotiations between the EU and the United States on a free trade agreement ... are also being looked at," she said.
The inconsistency is puzzling but not unexpected since this is Trump after all: Being the unabashed white supremacist that he is, Trump likely thinks Germany and other Europeans come from "superior" racial stock worthy of signing an FTA with instead of Asians. So Germany runs a huge trade surplus with the US, but hey, they can better be trusted since they aren't coloreds! Plus, Germany today with its strong manufacturing base and export machine is exactly the sort of country he wishes the United States was. Voila! As Dick Cheney would say, trade deficits don't matter in this case since enhanced German market access to the US may result in an even larger bilateral German trade surplus given Deutschland's already-elevated competitiveness. 

Another thing an EU-US FTA would be is multilateral instead of bilateral. Trump prefers bilateral deals since they would be easier to strong-arm the other party given the sheer economic might of the US. Plus, it's easier to extricate the US from deals involving just one other party instead of many by putting in many conditions regarding currency manipulation, export surges to the US and so forth.

I suppose that if even Trump doesn't know what Trump will do next that it's quite pointless to speculate what may happen. Still, even by his standards, going all-out on an FTA with the EU would alienate the racist/protectionist/isolationist elements who elected him. (They have many Muslims in Europe besides, right?)

I leave you with this food for thought: whereas the US Trade Representative's website has already declared the Trans-Pacific Partnership dead at the hands of Trump, the EU-US Transatlantic Trade and Investment Partnership negotiations are still described in detail there.

Beat-Up Travelers: Estimating Trump's Hit to US Tourism

♠ Posted by Emmanuel in at 4/17/2017 04:00:00 PM
(White) natives-only policy: Trump repels legions of foreigners from US travel, AKA self-inflicted torture.
It won't be long now until we have a reasonably accurate read on how much travel to the US has been affected so far by the rampant xenophobia incited by Donald Trump. At month's end, GDP for first-quarter 2017 should indicate the hit to tourism-related trade: food services, accommodations, recreation/entertainment/shopping, and transportation.  What's there to like about traveling to the US unless you're a masochist? You've got Muslim Ban 1.0 and 2.0, extreme vetting, being forced to give up device passwords (or get waterboarded?), invasive pat-downs, Indian nationals being shot and killed, Vietnamese migrants being forcibly dragged off planes...the list goes on and on.

Foreigners being sensible people who don't appreciate being discriminated against, shot, dragged, detained, having their private parts fondled and so forth, it's no surprise that news reports about falling tourist arrivals in the US have been plentiful. Here are two more guesstimates on the negative impact as we await the month-end GDP figure. First, the Washington Post:
Demand for flights to the United States has fallen in nearly every country since January, ­according to Hopper, a travel-booking app that analyzes more than 10 billion daily airfare price quotes to derive its data. Searches for U.S. flights from China and Iraq have dropped 40 percent since Trump’s inauguration, while demand in Ireland and New Zealand is down about 35 percent.

The result could be an estimated 4.3 million fewer people coming to the United States this year, resulting in $7.4 billion in lost revenue, according to Tourism Economics, a Philadelphia-based analytics firm. Next year, the fallout is expected to be even larger, with 6.3 million fewer tourists and $10.8 billion in losses. Miami is expected to be hit hardest, followed by San Francisco and New York, the firm said.       
It may be 9/11 all over again for an industry just recently recovered from the United States' initial foray into enhanced foreign traveler harassment:
The result could be an estimated 4.3 million fewer people coming to the United States this year, resulting in $7.4 billion in lost revenue, according to Tourism Economics, a Philadelphia-based analytics firm. Next year, the fallout is expected to be even larger, with 6.3 million fewer tourists and $10.8 billion in losses. Miami is expected to be hit hardest, followed by San Francisco and New York, the firm said.       

The administration’s travel ban deals a blow to an industry that has only recently recovered from a $600 billion loss following the Sept. 11, 2001, attacks.

“In the aftermath of 9/11, at first people didn’t feel safe coming here, and then they didn’t feel welcome,” said Jonathan Grella, an executive vice president at the U.S. Travel Association. “Our industry still refers to that as ‘the lost decade.’ There is a very real risk that that could happen again.”
Good job, Trumpy, good job. Meanwhile, the World Travel and Tourism Council predicts declining tourism activity, partly due to the stronger dollar:
The WTTC’s annual report forecast that the travel and tourism sector, which contributed $1.5tn to the US economy, or 8.1 per cent of its GDP, will grow at 2.3 per cent in 2017 — a contraction of 0.5 percentage points compared with last year. Spending by foreign visitors in the US is predicted to fall 0.6 per cent, mainly due to the strength of the dollar that is making the country a less attractive spending destination. The WTTC said that travellers would seek alternative travel destinations, with “the most likely beneficiaries” being Canada, Mexico, the Caribbean and Mediterranean.
Unless your idea of a good time is getting molested at a US airport, I think us foreigners have better things to do. Roll on the US Q1 GDP figures; with travel constituting 8.1% of the US economy, I don't think it's going to look very good for the first quarter. Or the rest of Trump's term for that matter unless he realizes that, hey, US travel is often discretionary for the rest of us and can be put off indefinitely.

UPDATE: Perhaps due to Trump's election, travel in the last quarter of 2016 already slumped. More of the same to come? I think so.

See? Even Trump Recognizes Ex-Im Bank's Worth

♠ Posted by Emmanuel in , at 4/15/2017 04:46:00 PM
Back in business thanks to Trump...of all people.
When you think of a person of no conviction, the name "Donald Trump" comes to mind. Mind you, the lack of core beliefs is not always a drawback when you are (rather regrettably) [a] the most powerful person in the world and [b] have a fondness for conspiracy theories and extremist ideologies. So it was perhaps inevitable that the reality of actually governing would lead him to recognize that many of his views are, well, economically untenable. Think of it: in the past few days...
President Donald Trump’s declaration that he won’t label China a currency manipulator stands as the clearest example of the difficulty he’s having delivering on big campaign promises.

The currency decision is one among many instances of Trump reversing course since taking office a little less than three months ago. Within the space of a few hours on Wednesday, Trump changed previously critical stances on the U.S. Export-Import Bank, the value of NATO, interest rates, and Federal Reserve Chair Janet Yellen. 
For this post, the item of interest is the US Export-Import Bank. For a number of months, it's been unable to provide credit to foreign buyers of US-made goods since the Republican-dominated Congress has slowed down the process of fully appointing its membership. The absence of a full slate has meant it has limits on how much in loans it can disburse. But wonders of wonders, Trump of all people has now restored it to full functioning. To be sure, his picks will need congressional approval, but it's unlikely that he will be waylaid by fellow Republicans on this at least:
President Donald Trump nominated former Republican lawmaker Scott Garrett as president of the Export-Import Bank of the United States on Friday, completing an about-face over an institution he had denounced as "featherbedding" for big business.
A White House statement also named Spencer Bachus, another Republican former congressman, to be a member of the board of directors of the bank. Both were named for four-year terms.

Trump told the Wall Street Journal on Wednesday he would fill the two vacancies on the bank's five-member board that have prevented it from having a quorum and being able to act on loans over $10 million.
His picks must gain approval from the Senate, which blocked nominees by former President Barack Obama.
When it comes to sheer economic ignorance, you will probably find it very hard to beat Donald Trump. In this case, however, you will have to give that designation to Congressional "small government" nutters who think that Ex-Im Bank is a little more than a subsidy provider. Those guys have both blocked efforts to get Ex-Im Bank from being fully functional and have delayed Obama's efforts to get it going despite bipartisan consensus to do so:
The bank has become a popular target for conservatives, who worked in Congress to kill the institution, arguing that it perpetuates cronyism and does little to create American jobs.

Trump's backing of the bank represents a victory for manufacturers like Boeing and General Electric Co (GE.N), which have overseas customers that use the agency's government-backed loans to purchase their products.

Trump told the Journal the bank benefits small businesses and creates jobs, a reversal of his earlier criticism of the bank as being "featherbedding" for wealthy corporations.
The truth of the matter is that most other countries--especially major exporters of manufactures like China (China Exim Bank) and Japan (Nippon Export and Investment Insurance) have export credit providers. Virtually all OECD nations have such institutions. So what the right-wing nutters were effectively doing was uniquely handicapping US exports in the face of international competition. The whole point is that the financial systems of many prospective buyers--especially in developing countries--may be unable to provide [a] larger-sized loans at [b] reasonable enough rates for [c] a long enough time. Those risks--amount, repayment and duration--usually entail official international credit.

As such, credit provided by export-import entities can be "developmental" in enabling purchases of capital equipment useful to fostering economic growth--especially in poorer countries whose financial systems are less sophisticated by definition. 

If even Trump can recognize that, what does it says about those who don't?

UPDATE: It is fair to reiterate that among the nominees of Trump, the putative president Scott Garrett was an Ex-Im Bank doubter who used to vote down re-authorization while a congressperson. However, it's counterbalanced by the other person proposed as a director, Spencer Bachus, being a proponent of getting it going again.

They cancel each other out, IMHO, and the bank will be back in business. After all, why activate it if you're not going to grant any financing to help US firms?

UK Delusions of Becoming Singapore 2.0 Post-Brexit

♠ Posted by Emmanuel in , at 4/11/2017 04:00:00 PM
By leaving the EU, the UK is making itself less--not more--like Singapore.
It strikes me as very odd that the architects of Brexit--which many voters supported to do away with economic integration in the first place--see an opportunity to remake the UK as Singapore. The story of its former colony becoming wealthier than it on a per capita basis is certainly something to admire. That said, Singapore is firmly entrenched in a regional integration of its own in the 1993 ASEAN Free Trade Area or AFTA. That ASEAN itself and AFTA were modeled to an extent on the EU, well...let's say people see what they want to see. It's called "confirmation bias."

Justin Fox shares his bemusement, Maybe part of the point of MNCs locating in the UK or Singapore for that matter was to be in an English-speaking gateway to a wider region--Europe or Southeast Asia? Through point is lost by the Brexiteers who've killed the regional golden goose:
The New Singapore idea seems to be mainly that leaving the EU will allow the U.K. to cut taxes and roll back regulations, positioning itself as a free-market oasis just off the coast of Europe.

Now, the U.K. already has a lower tax burden and a less-regulated labor market than most of the countries across the Channel, and London has been playing a role in Europe similar to that of Singapore in Asia for decades now. Global corporations, especially financial ones, have chosen Singapore and London as operations bases where the language is more familiar and the rules more amenable than in other countries in those regions. So far, most of the attention has been focused on the risk that Brexit, by restricting access to European markets, will harm London's status as a financial hub. But there's enough uncertainty about this that I guess it's impossible to dismiss the opposite argument entirely.
Kiwi economics commentator David Skilling who's written extensively about Singapore's virtues actually thinks smallish Scotland, if it gains independence, would be better placed to replicate Singapore than the biggish UK:
Cutting loose from the European Union could give the U.K. more room to maneuver. But the U.K. is a relatively large country that would be hard-pressed to maneuver like a Singapore -- and it may be shooting itself in the foot by walling itself off from its neighbors. There is a part of the U.K., though, that Skilling thinks shows promise. An independent Scotland, he wrote in his weekly note on Sunday, might just be small and cohesive and agile enough to make a go of it as a cold, windy Singapore on the moors.
In a separate article, Skilling underlines the point that ASEAN and AFTA are the bedrocks of Singapore's success:
But the foundation for Singapore's international economic and political engagement is Asean, and Asia more broadly. This regional engagement is a complement to, not a substitute for, Singapore's global network of trading and investing relationships.

Over 60 per cent of Singapore's exports and outward direct investment is focused on Asian markets. And Singapore's success in attracting inward investment - remarkably Singapore receives more foreign direct investment from the US than China does - is largely because Singapore serves as a hub for companies operating in the region. This regional bias in Singapore's economic engagement is likely to remain, supported by ongoing Asean economic integration.
So, a far more sensible argument is that, by leaving the EU, the UK has dismantled the scaffolding that would have enabled it to be the Singapore of Europe.

Some people need to be disabused of their Brexit senselessness. Economically speaking, it has definitely shot itself in the foot.

British Rat: EU Wants to Exclude UK From Trade Negos

♠ Posted by Emmanuel in , at 4/08/2017 04:18:00 PM

So the UK is hellbent on implementing its death wish of going it alone in the international trade arena. So be it. Not only will the UK be frozen out of the world's largest tariff-free area real soon, but it will have to renegotiate all its trade deals with countries it formerly had preferential agreements with as part of the European Union.

To add insult to injury, the EU is now thinking of sidelining the UK from fora for discussing ongoing negotiations with other non-European countries. (Having left the European Union, it would be hard to characterize the British as "real" Europeans.) The point of this exercise in sidetracking Britain is to ensure that it does not gain an unfair advantage when it comes time to negotiate an (admittedly far off) EU-UK trade deal:
Brussels is eyeing the exclusion of Britain from updates on EU trade talks amid concerns that the UK could take advantage of sensitive information in its own post-Brexit trade negotiations.

After a briefing last month by Michel Barnier, the EU’s chief Brexit negotiator, the European Commission warned that there needed to be a “discussion about the treatment of sensitive information in the context of certain trade negotiations, to which the UK would continue to have access to while it remained a full member of the union”. 

The warning, in an official account of the meeting, came as the EU prepared to initiate trade talks with Australia, a country which with the UK hopes to strike its own post-Brexit free-trade deal. All EU member states, including the UK, participate in a trade policy committee that meets weekly in Brussels to discuss the EU’s trade dealings. Representatives of member states also meet regularly with EU trade negotiators to discuss strategies and aims. 
Unsurprisingly, the remainers smell a British rat:
Many EU leaders are worried that allowing the UK to continue to receive the routine updates until it leaves the bloc in 2019 will strengthen Britain’s bargaining position in post-Brexit trade talks and potentially enable it to outbid the EU in future negotiations.

“The question is to what extent Britain should be involved or informed or have access to ongoing negotiations when they are leaving because then they will proceed to conclude their own deals,” said a senior figure briefed on discussions within the European Commission. 
That said, it will not be straightforward to freeze out the UK at just this moment:
In theory, the UK remains a full-fledged member of the EU until its separation and is entitled to participate fully in trade-related matters. In practice, however, there may be an arrangement arrived at in which the UK does not participate in trade-related EU matters in exchange for it being to negotiate FTAs with other countries prior to the 2019 anticipated breakup date.
I'd kick the British bums out now in trade-related matters, but it seems the rules-based EU will have to compensate the UK if it really is serious about removing it from the loop as early as now.

As with the real thing, there is no such thing as "amicable divorce" in customs unions.