Posts of August 2016

French Trade Minister: Call TTIP Off

♠ Posted by Emmanuel in Europe,Trade at 8/30/2016 06:15:00 PM

No translation required, eh?

The mood towards trade is well and truly souring among the United States' negotiation counterparts for the Transatlantic Trade and Investment Partnership (TTIP). Just a day or two ago, the German trade minister said that the negotiations should be halted already since nothing was happening. We made mention of the French as among those particularly opposed to it on the grounds that the ever-sensitive French agricultural sector would be hurt. All the while, the French would supposedly gain few reciprocal benefits in accessing the US market.

Well, here we have the French trade minister now calling for scrapping current negotiations as well:

French Trade Minister Matthias Fekl said he would request a halt to TTIP talks at next month's EU trade ministers' meeting in Bratislava after German Economy Minister Sigmar Gabriel declared at the weekend that talks were "de facto dead".

Observers say both are responding to public mistrust of a deal that critics say would lower environmental and food standards and allow foreign multinationals to challenge government policies.

The crux of the matter is that politicians in European countries are simply responding to trade-weary electorates--who are in imminent danger of being voted out of office should they be seen as more pro-trade than the public mood:

Ahead of elections in France and Germany next year, politicians are keenly aware that TTIP is not a vote winner. The Bertelsmann Foundation poll showed only 17 percent of Germans saw TTIP as a good thing in April, down from 55 percent two years earlier.

It may not yet be over for the TTIP, but like the TPP--and the WTO Doha Round which spawned both since due to its protracted nature--TTIP is looking quite unlikely.

After TPP Impasse, TTIP Failure is Close at Hand

♠ Posted by Emmanuel in Europe,Trade at 8/28/2016 05:55:00 PM

With US ratification of the Trans-Pacific Partnership in huge trouble, we receive word that things are even worse with the proposed US-EU Transatlantic Trade and Investment Partnership (TTIP). At least an international deal was hammered out with the TPP. With the TTIP, its negotiations have already stalled, leading German Vice-Chancellor Sigmar Gabriel frankly assessing that these negotiations have failed:

The free trade negotiations between the European Union and the United States have failed, but “nobody is really admitting it”, Germany's Vice-Chancellor Sigmar Gabriel has said. Talks over the so-called Transatlantic Trade and Investment Partnership, also known as TTIP, have made little progress in recent years. The 14th round of negotiations between American and EU officials took place in Brussels in July. It was the third round in six months.

As always, the French are wary of relenting on agricultural protectionism, all the while accusing TTIP of being too favorable to American multinationals (isn't that always the case with these American-led negotiations?) In contrast, the Europeans supposedly don't gain much access to US government procurement:

At the time, the talks were thought to be in trouble after a number of leading European politicians expressed concern about TTIP’s effects and the US’s reluctance to accept changes to the proposed deal. In May, cracks emerged when France threatened to block the deal. President Hollande said he would "never accept" the deal in its current guise because of the rules it enforces on France and the rest of Europe – particularly in relation to farming and culture – claiming they are too friendly to US businesses.

“We will never accept questioning essential principles for our agriculture, our culture and for the reciprocity of access to public [procurement] markets,” Mr Hollande is reported as saying at a meeting of left-wing politicians in Paris. “At this stage [of the talks] France says, ‘No'.” Speaking on Sunday, Mr Gabriel, who is also Germany’s Economy Minister, said: “In my opinion, the negotiations with the United States have de facto failed, even though nobody is really admitting it."

With regard to public procurement, the EU and US are each bragging that they are more open to buying foreign-made supplies. However, the EU points out the difficulties of those wishing to participate in American public contracts--especially at the sub-national level:

According to US Trade Representative Michael Froman, the Federal Government spends approximately $500 billion annually for a wide range of goods and services and the EU has guaranteed access to approximately $200 billion – or two-fifths of federal procurement. This $200 billion is not subject to restrictions like the Buy American Act, the Berry Amendment and the US SME programme.

But here is the [catch]. The EU says European firms face discrimination even on those two-fifths of accessible public procurement. A source in the European Commission’s trade directorate told EurActiv that even though some European companies have found a way to comply with the stringent domestic restrictions and win public contracts in the US, they have been obliged to change their supply chains and even establish their production in the US.

For example, the US procurement market for buses and public transportation is severely restricted for European suppliers, the EU official said. These restrictions are linked in particular to the Buy American Act, which requires that all steel and iron is produced in the US.

Things get even more complicated when going to the sub-federal procurement level, which stands at 60% of total public procurement in the US. While US officials say they provide guaranteed access to EU companies for $120 billion annually worth of contracts, the EU contends that the figure is overestimated.

American inability to ratify the TPP would further discourage its EU counterparts: Even if an international deal is struck, what are the chances of a trade-weary America signing on to TTIP after TPP has been shelved? Slim to none, and the US is becoming a less credible negotiation partner each day TPP is not ratified at home.

£4M Per Olympic Medal: UK's Cost of Success

♠ Posted by Emmanuel in Europe,Latin America,Sports at 8/26/2016 03:59:00 PM

The United Kingdom's unprecedented feat at the 2016 Rio Olympics--winning more medals [67] in the event following the one they hosted [65 at London 2012]--has not gone unnoticed. Far more populous China is contemptous, having been beaten into second place overall going by gold medals won. Near-neighbor and constant reference point France [in 7th place] regards the UK's performance with a mixture of disdain and envy (as usual). But what are factors went into it beating more populous competitors with presumably more talent to draw on and cash to spend--especially freed of democratic constraints on public expenditures like China and Russia?

1. The establishment of a national lottery to funnel cash to sports programs, whose funding has greatly increased as a result in the new millennium -

Former UK Prime Minister John Major is little remembered outside of the UK since he served between two much more globally-recognized figures: Margaret Thatcher and Tony Blair. However, his government's decision to launch the National Lottery right before Blair's New Labour era came into power may have set up the UK's run of successes at the Olympics.

Reportedly, the UK government spent just £5m per year funding Olympic sport before the 1996 Atlanta games. But UK Sport spent £54m on elite sports in the run-up to the Sydney games in 2000 - where Team GB won 28 medals and ranked 10th. By the time of London 2012 it was spending £264m, and Team GB came third in the medal table, with 65 medals.

2. Selectivity is funding sports programs -

It is, yes, performance-based funding. In the absence of a prevailing record, they went on forecasts targeting the overall medal haul (which the Chinese have practiced, of course):

Before the beginning of each funding cycle, all sports present to UK Sport a detailed, costed strategy and agree a range of medals which they will aim to achieve at the following Olympic or Paralympic Games. UK Sport scrutinises all the strategies and allocates funding on a "top-down basis". As a spokesperson puts it: "We start with the sports which are targeting the most medals and work downwards i.e. we do not 'salami slice' funding and give some to every sport." The level of funding in each sport is assessed annually and benchmarked against results at milestone target events in each year, to determine whether they are on track for the next Games.

3.Attention to detail -

Those working with the athletes sweat the details that may lend the Brits an advantage come competition time. Three examples are given:

In the build-up to these Olympics, a PhD student at the English Institute of Sport named Luke Gupta examined the sleep quality of more than 400 elite GB athletes, looking at the duration of their average sleep, issues around deprivation and then individual athletes' perception of their sleep quality. His findings resulted in an upgrading of the 'sleep environment' in the Team GB boxing training base in Sheffield - 37 single beds replaced by 33 double and four extra-long singles; sheets, duvets and pillows switched to breathable, quick drying fabrics; materials selected to create a hypo-allergenic barrier to allergens in each bedroom.

In track cycling, GB physio Phil Burt and team doctor Richard Freeman realised saddle sores were keeping some female riders out of training. Their response? To bring together a panel of experts - friction specialist, reconstructive surgeons, a consultant in vulval health - to advise on the waxing and shaving of pubic hair. In the six months before Rio not a single rider complained of saddle sores.

Then there is the lateral thinking of Danny Kerry, performance director to the Great Britain women's hockey team that won gold in such spectacular fashion on Friday. "Everyone puts a lot of time into the physiological effects of hockey, but what we've done in this Olympic cycle is put our players in an extremely fatigued state, and then ask them to think very hard at the same time," Kerry told BBC Sport. "We call that Thinking Thursday - forcing them to consistently make excellent decisions under that fatigue. We've done that every Thursday for a year."

So it's not just about the money. Although it undoubtedly helps, it needs to be spent in a way that maximizes medal chances based on realistic projections and delivering on real-world results if further funding is to be received. Plus, there is much attention paid to things which may give athletes a competitive advantage from suggestions from coaches and players to applying sports research. Actually, the GBP 4M per Olympic medal looks more affordable if divided per capita per year, upon which the tab comes to £1.09.

Let Team GB show us the way in cost-effective sporting expenditures which burnish national pride..

Remembering When Concordes Flew to Venezuela

♠ Posted by Emmanuel in Latin America,Travel at 8/21/2016 03:57:00 PM

Remembering when Venezuela wasn't a Chavista hellhole: Of Concordes and oil wealth.

The international humiliation of Venezuela illustrates how far it has fallen in the global pecking order in terms of economic significance. A few months ago, I wrote about how international airlines have begun dropping flights from Caracas paid for in local currency since the government is not exchanging (near worthless) bolivars into foreign exchange--namely, US dollars. Contrary to what is happening to the rest of the world, international flights to Venezuela are disappearing fast. Once a gateway to the region, it's now shunned by most of the world's airlines:

Perched on a coastal plain at the very northern tip of South America, Caracas’s Simón Bolívar International Airport was once the aviation gateway to the continent. Charles Lindbergh scouted the airport’s location in 1929, according to Venezuelan aviation lore, and by 1959, Pan Am was routing its New York-Buenos Aires flights with a stop in Caracas. By the late 1970s, Venezuela was so rich in oil wealth that Concorde jets were swooping in to whisk shoppers off to Paris.

These days, the Caracas airport is a depressing, lonely place, and Venezuelan air travel has shriveled. International carriers have about $4 billion stuck in virtually worthless Venezuelan bolivars that government banks won’t let them convert into hard currency, so they are cutting their losses and dropping Caracas flights. LATAM, the largest carrier in Latin America, took off down the runway this week and isn’t coming back.

By most accounts, Venezuela’s economy is the worst-performing in the world, with the International Monetary Fund predicting a 10 percent contraction this year[...]Since 2013, when the bolivar started its steep drop, the number of passengers traveling to and from Venezuela has fallen nearly 30 percent, according the International Air Transport Association, a leading airline trade group. That is an especially large drop, according to spokesman Jason Sinclair, given that commercial air travel is rapidly increasing almost everywhere else.

I was particularly intrigued by the Concorde stopping over in what has since become a pinko wasteland. Did the world's fastest passenger jets really go to Caracas once upon a time? It's true; they did. Adding to the exotica, the famously range-limited, fuel-hungry jets made stopovers in the Azores:

In 1976 BA launched the jet to Bahrain on a convoluted route down the Mediterranean, while Air France began with Rio – but not non-stop. Due to the distance and Concorde's commercially debilitating lack of range, it had to refuel at Dakar in Senegal. A few months later, the people of the Azores found themselves on the route map; the island of Ponta Delgada served as a pit stop between Paris and Caracas – which was in the middle of an oil boom.

Nowadays, of course, the country is reliant on forced labor in the absence of any real incentives to work. From Concordes to slavery--that doesn't seem like progress, but maybe that's just me.

How Brexit May Slow Global Overfishing

♠ Posted by Emmanuel in Environment,Europe at 8/16/2016 03:43:00 PM

The fish trade fell in 2015 for the first time in a long time. Will Brexit affect 2016 and beyond?

Here's another of those stories in which a global economic slowdown is helpful to the cause of environmental preservation. Like reduced global carbon emissions in the wake of the global financial crisis, Brexit may be aiding another environmental cause: slowing overfishing. You see, the UK is both a major consumer and exporter of fish--the world's most-traded food commodity. Brexit impacts not only consumer demand in the UK itself as Britons feel the impact of reduced incomes, but UK fish exports to the EU may be hit as well after losing tariff-free privileges for these agricultural products:

Brexit is likely to cast a shadow over the global trade in fish in 2016, as the fall in the pound depresses the UK’s purchasing power as well as the value of the country’s seafood exports, according to officials at the UN Food and Agricultural Organisation. The UK is a leading exporter of salmon as well as being a top 10 importer of fish and fishery products.

“Brexit could depress seafood trade, especially in the short term, but also in the longer term because of more difficult market access for UK exporters to the EU,” said Audun Lem, deputy director of the FAO’s fisheries policy division. His comments came as world seafood trade fell in 2015 for the first time since the financial crisis as economic weakness in emerging markets, particularly Brazil and Russia, hit consumption and fish prices.

If the FAO is right, then combining reduced demand for fish in LDCs like Brazil and Russia coupled with the aforementioned UK dislocations may be beneficial for fish stocks--especially in waters near the UK. Some research suggests the UK is the worst offender among (current) EU nations in overfishing.

That said, some environmental activists claim that, unshackled from the restraints of the EU's Common Fisheries Policy (CFP), there will be little to prevent the UK from overfishing even more after it leaves the EU:

That is not what the history of shared resources tells us, instead the result will be a tragedy of overfishing. The reformed Common Fisheries Policy represents the best solution to overfishing in Europe with many stocks already showing improvement. Leaving it would send us back to the drawing board and the likelihood is that the environment (and fishers’ livelihoods) would suffer during years of bureaucratic wrangling.

We'll see...

Financial Sensationalism + Mathlexia = 'Business Insider'

♠ Posted by Emmanuel in Nonsense at 8/15/2016 07:27:00 AM

Markets CRASHING daily! The B-i-e-b-s!! Olympic swimmer jillionaires!!! Welcome to Business Insider.

I try to avoid reading Business Insider as much as possible since its level of intellectual sophistication and journalistic integrity make it the Breitbart of financial reporting--about on par with Zero Hedge for a near-analogue. The founder of Business Insider, of course, is a known fabulist of near-Trumpian proportions, Henry Blodget, who is best known for flogging stocks he personally described as "crap" during the height of the dot-com bust. He was banned by the US Securities and Exchange Commission from the industry and hit with charges a total of $4 million in penalties.

Over the years, he's largely continued along the same path, founding Business Insider as a shrine to financial yellow journalism. Examples abound. The Columbia Journalism Review describes Blodget's creation quite accurately:

What business press readers always lacked but never really needed was a tabloid sensationalist to hype up mundane markets and business news. Who would have ever thought Henry Blodget would be the guy to fill this void?

There are a couple of things to expect when reading Business Insider or Blodget’s tweets: ALL CAPS. Words like “scariest,” “startling,” “doomed.” Headlines that tells you “Here’s why X is happening.” Stock photos. Lots and lots and lots of pithy posts, some of which stretch the truth.

CNBC doesn't fare too poorly on sensationalism, but Business Insider takes it to a new level. There's obviously a lot on non-business stuff in there as well that would fit well with the National Enquirer:

But the problem with sensationalism, of course, is that it feeds on itself. It’s hard to grab people’s attention when you’re always grabbing people’s attention. And you end up misleading people and undermining your credibility by saying stuff like “Horrible jobs report shocks market, stocks tank,” when stocks aren’t really tanking at all. There’s something about the ultra-Darwinian nature of the Web, with its brutal economics, that makes this stuff all the more tempting. When a click’s worth virtually nothing, you’ve got to get an awful lot of them to make ends meet. You do that by using superlatives, all caps, silly slideshows about “15 Ways Justin Bieber Is Taking Over The World , girlie pics, etc.

Aside from ever-increasing sensationalism, there's also the question of basic competence reporting on business-related matters. As the Olympics are ongoing, it was perhaps inevitable that it would cover the sporting event. Blogging about Singapore's Joseph Schooling defeating the legendary American swimmer Michael Phelps in the 100m butterfly event by winning gold, it notes that the nation awards a SGD 1,000,000 prize (Business Insider: that's the abbreviation for Singaporean dollars since most of your staff probably don't know that). Which is all well and good for Singaporean athletes if so. But how much is that in gool ol' US dollars according to the Business Insider?

As Stefanie Loh of Seattle Times Sports notes, Schooling just became a millionaire in Singapore. That's because Singapore tops the rest of the world in prize money for winning a gold medal. According to Fox Sports Australia, athletes who win Olympic gold medals get paid 1 million Singapore dollars for their achievements (roughly $983,000 American).

The accuracy of this claim is on par with the one about Ted Cruz's father being involved in the assassination of JFK. Going by the prevailing exchange rate from a more reliable source, the current USD/SGD rate is 1.346 Singaporean dollars to 1 US dollar as I write. So, what Schooling will receive in US dollar terms is actually 1,000,000/1.346 = USD 742,942. That's quite a difference from what the Business Insider claims, huh? A commenter noted over two days ago that the exchange rate used was wrong, but such is the ineptitude of this site that it has not been corrected.

Do people actually take Business Insider seriously? Its staff's limited understanding of finance--led by Blodget himself--is evident. Their already-limited understanding gets worse the farther away you get from the US to hardly obscure places like Singapore--one of Asia's centers of finance. Sure it has its readers, but so do Breitbart, Zero Hedge etc. in the same way Donald Trump has voters.

There are apparently lots of people who prefer their news laced with pandering and sensationalism--this is the Internet, after all. Business Insider worsens matters by lacking basic knowledge of what they write about. If you don't understand something as simple as exchange rates, then there is little else you should be writing about concerning "business."

UPDATE: The apparent source of confusion for the Business Insider blog post is from the article linked to, which the BI blogger cannot understand:

Those looking for a bigger payday might want to look into pledging allegiance to Singapore, which offers gold medal-winning athletes $1 million Singapore dollars ($A983,000) under its Multi-Million Dollar Awards Program.

This coming from [hint, hint] an Australian website, $A983,000 obviously does not mean US dollars but rather Australian dollars. While I am horrified by this level of financial illiteracy, I am utterly unsurprised to find it in the Business Insider. That's all she wrote for Blodget wanting his site to be taken seriously.

Fortress Brexit: PRC Asks UK to Honor $23B Nuke Plant Deal

♠ Posted by Emmanuel in China,Europe at 8/12/2016 12:53:00 PM

The best laid plans for the PRC to build nuke plants in the UK go astray after Brexit.

The United Kingdom's referendum outcome to separate itself from Europe may arguably portend a move towards greater economic isolationism from the rest of the world. While some Brexiteers portray the move as an opportunity to strike deals with non-Europeans unshackled from the fetters of having to move together with 27 other European states, we shall wait and see. Certainly, the early evidence is not altogether promising.

One of the supposed benefits of going it alone for the UK is to take advantage of closer ties with fast-growing Asian nations. However, in the aftermath of Brexit, its new Prime Minister Theresa May has put into question the building of a new nuclear power plant in the UK with Chinese (and French, actually) involvement. To this the PRC warns of strained ties:

China has a clear message for Britain: Dump a joint nuclear power project and you'll pay the price. A deal for a Chinese state-owned company to help build a nuclear plant in southwest England was announced amid much fanfare during a visit by President Xi Jinping last October. But the $23 billion Hinkley Point project is being reviewed by new British Prime Minister Theresa May, who succeeded David Cameron in the wake of the Brexit vote in June.

That's not sitting well with China. "Right now, the China-U.K. relationship is at a crucial historical juncture," China's ambassador to Britain, Liu Xiaoming, wrote in an article for the Financial Times. "I hope the U.K. will keep its door open to China and that the British government will continue to support Hinkley Point — and come to a decision as soon as possible so that the project can proceed smoothly," he added.

Actually, the preliminary project will be French-majority invested, with a second to follow that's China-majority invested. It's the latter that the PRC is eyeing more:

Under the deal announced in October, China General Nuclear Power Corporation (CGN) would have a 33.5% stake in the power plant. France's EDF (ECIFY) will hold the rest. The bigger prize for China, though, is a related deal to build another nuclear power plant some 60 miles northeast of London, using its own reactor technology. It would have 66.5% of that venture.

May hasn't given much away about her reasons for delaying the decision on Hinkley Point. But the deal was controversial from the start, with critics warning that giving China access to vital infrastructure could compromise national security. The plan has also come under fire for guaranteeing an electricity price way above market levels.

Ah, good ol' "national security" concerns--usually isolationism or protectionism masquerading as a threat to law and order. The broader point is that Theresa May was the home secretary of her predecessor David Cameron when the nuke deal was signed. Why didn't she object over "national security" concerns then? Certainly she had a right to do so as a cabinet member whose portfolio encompasses this matter. (For the PRC viewpoint, see its UK ambassador's Financial Times op-ed.)

Even if the terms of the deal were not good for the UK which many critics say, the overall impression is made that the UK is not engaging further with but rather withdrawing from international economic interaction. You can bet that isolationist Brexiteers are very happy about what's happening. Giving the French a kicking would be an added benefit for them.

UPDATE: Also note the US is investigating nuclear espionage involving the Chinese firm in question. Still, my belief is that the UK had all the time in the world to vet this deal. Not honoring it now post-Brexit vote doesn't exactly inspire confidence among the UK's would-be trade partners that it remains open for business.

Negativity's End: Japan & Central Bank 'Disarmament'

♠ Posted by Emmanuel in Europe,Japan at 8/07/2016 05:46:00 PM

The world may be out of the negative bond yield hole sooner than you think.

Just a few days ago, commentators were portraying the world economy's future as one of never-ending declines in interest rates as central banks the world over experimented with zero interest rate policies (ZIRP) or, if those didn't work, negative interest rate policies (ZIRP). To encourage lending, borrowing and investment--or depress the value of one's currency, it's been left largely unsaid--they had to resort to such extreme measures since, well, everyone else was doing it.

However, there has been an obvious problem with this argument: what if these negative interest rate policies didn't generate any appreciable additional economic activity, let alone sustained growth? This precisely has been the problem of the Bank of Japan (BoJ). Widely expected to take interest rates further into negative territory as its meeting concluded a few days ago, the BoJ instead stood pat and handed the baton to PM Abe and fiscal policy. While it is equally doubtful whether massive government spending can life Japan out of its moribund state:

The Bank of Japan (BoJ) Friday passed up the chance to increase its monetary stimulus, as many market observers had expected, and instead just tinkered around the edges with some token adjustments. Not only that, but it also called for a review of the impact of its extraordinary monetary policy on economy and said it will debate the issue at the next Monetary Policy Meeting (MPM) on 20-21 Sep. Is Japan, the first country in the world to adopt zero interest rates and quantitative easing, now signaling that monetary policy has reached its limits?

The fault according to the Japanese lies in not enough folks believing that inflation will happen. Absent such conviction, it doesn't happen as a self-fulfilling prophecy:

What is that transmission mechanism? The paper included the following flow chart. Note the central role of inflation expectations. This ties in with BoJ Gov. Kuroda’s “Peter Pan Principle,” which he stated in June 2015. “I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it,’” he told a BoJ conference. “Yes, what we need is a positive attitude and conviction.”

The line of reasoning is as follows: if people think that prices are headed higher, they will demand higher wages. Companies will pay higher wages and then raise their prices to cover those higher wages. Then more people will ask for wage hikes. Result: inflation!

Yes, well, that's how it should have worked out in theory. Given that hardly anything has gone Japan's way, the BoJ is conducting a "comprehensive assessment" to be released September 20-21. In the meantime, the knock-on effect worldwide is that if Japan does not drag everyone else further into NIRP territory to maintain competitiveness, then there is no reason to expect even lower interest rates going forward. While the Bank of England has cut rates to record lows in an effort to ward off a UK recession post-Brexit vote, it is not going into negative territory according to Governor Mark Carney:

One of the most controversial strategies has been to push interest rates below zero, a tactic deployed by the European Central Bank and the Bank of Japan. But on Thursday, Carney ruled out the possibility that the BoE would follow suit, putting the “lower bound” for rates as slightly above zero. In a news conference, Carney also dismissed questions about so-called helicopter money — in which the central bank directly finances government spending — as “flights of fancy.”

The evidence from Japan and Europe is that negative rates have not generated much economic activity since:

Savers are hurt by low rates of return, instead encouraging them to hoard more cash instead of spending it;
Investors do not necessarily borrow more when there are few opportunities despite lower borrowing costs; and
Financial institutions are hurt by compression in borrowing and lending spreads collapsing.

Who benefits? Maybe no one.

Having led us to this strange place, will Japan and Europe lead us out of it? If the evidence continues to point to ZIRP leading its main proponents nowhere, then there is little point for them to continue. What's more, their failed experiments will signal to other countries that this game is up. What will eventually happen is, yes, the return of positive rates even in these regions. In an interconnected world economy, that means higher yields the world over than what we have at the present--but not much higher unless economic growth is jump-started somehow. All we know is that ZIRP doesn't achieve this objective.

UPDATE: Also see this FT commentary on central banks beginning to admit defeat.

Asia Pivot? Singapore Warns US on TPP Non-Ratification

♠ Posted by Emmanuel in Economic Diplomacy,Trade at 8/03/2016 03:16:00 PM

You have been warned: Singaporean PM Lee puts Obama on notice regarding US TPP non-ratification.

The Trans-Pacific Partnership is in imminent danger of becoming a non-entity in a manner all too familiar to observers by now: The Yanks rope you into protracted and therefore expensive international negotiations held all around the world. After years and years of negotiations, a deal may even be inked. Then, when the time comes for signatories to these treaties or international trade deals to ratify them at home, the Americans are unable to deliver despite being those who thought up and championed them all along.

Exhibit A remains Democrat President Woodrow Wilson and the stillborn League of Nations which was his brainchild, yet floundered in the face of Republican opposition to ratification of US membership in 1918. Fast-forward a century and we have yet another Democrat in office Barack Obama, fighting for ratification of the Trans-Pacific Partnership (TPP)--this time largely in the face of opposition within his own party [more on this later].

After assiduously courting the likes of Japan and Malaysia to participate, the US-promoted TPP is in imminent danger of not being ratified by the US, LoN-style. Both US presidential front-runners express wariness about pushing for its ratification at home, leaving the lame duck Obama with ever fewer opportunities to work with his Republican counterparts before the window of opportunity closes and the new president assumes office.

Because of the wall-to-wall coverage of the US presidential elections, something important happened over the last few days which the media did not report on which is nonetheless of great significance--especially to us Asians. Singaporean Prime Minister Lee Shien Loong--son of the late Lee Kuan Yew, of course--told Barack Obama in no uncertain words that US credibility was on the line over its ratification of TPP (which was an American creation to begin with):

U.S. credibility is on the line over a Pacific trade pact that faces a tough approval process in Congress, Singapore’s Prime Minister said Monday, warning about risks to the U.S.’s reputation in Asia if the deal falls through.

As well as being an “economic game-changer,” the U.S.-led Trans-Pacific Partnership, which does not include China, could “add substance to America’s engagement in the Asia Pacific” region, Lee Hsien Loong said in a speech in Washington D.C. The pact has been signed by the 12 member nations but is yet to be ratified by most of them.

“For America’s friends and partners, ratifying the TPP is a litmus test of your credibility and seriousness of purpose,” Lee said. “Every one of the TPP signatories has had to make sacrifices in order to accept the TPP agreement, and jointly bring about this win-win outcome.”

As the U.S. presidential election draws closer, the TPP is at risk of being caught up in the wash of a growing anti-trade mood, which has seen both two candidates for the White House state publicly they oppose the pact. If ratified and implemented, it would cover around 40 percent of the global economy.

Singaporean PM Lee understands the dynamics of US politics, but insists on a tangible outcome nonetheless:

The Obama administration has said it’s committed to ratification and has highlighted a brief window after the election and before the new Congress takes effect as the best chance to get it through. The TPP is the centerpiece of President Barack Obama’s broader economic and military rebalancing to Asia as China’s clout grows. Lee is on a state visit to the U.S. and will meet Obama...

U.S. trade representative Michael Froman last week said tweaking the deal is not an option as it “is a carefully balanced agreement.” Lee reinforced the point that TPP must pass as it stands, saying that “nobody wants to reopen negotiations.”

“We know this has been politically difficult, it’s a very tough election year,” Lee said. “Economic uncertainty has led to concerns about jobs, worries about competition from overseas.” Those are “understandable, even valid concerns, but we hope all parties will focus on the longer term, bigger picture,” he said.

Lee's annoyance at this turn of events was evident:

Lee said that while he was wary of wading into domestic politics, the U.S. has "put your reputation on the line" with TPP. "Your partners, your friends who have come to the table and negotiated, each one of them has overcome some domestic political objection, some costs to come to the table to make this deal," Lee said.

"If at the end, waiting at the altar the bride doesn’t arrive, I think there are going to be people who are going to be very hurt not just emotionally but damaged for a long time to come," Lee said.

Edward Luce of the FT says the TPP is the last stand for "US-led globalism," but the same could have arguably been said for the League of Nations in 1918. For the Asian countries that participated, the possibility is very real that the US could not deliver on a trade agreement which they've been at since 2008.

If nothing it happens, it will have all been wasted time, money and effort negotiating an agreement that could not be ratified in the home nation of its main proponent. I would not necessarily be the end of "US-led globalism," but rather a major setback for the US in gaining the trust of Asian nations on economic and other issues. It almost goes without saying that China would instead benefit from a US loss of face in the Asia-Pacific.

Trump + Business Savvy + Political Craft = Bloomberg

♠ Posted by Emmanuel in Americana at 8/01/2016 05:11:00 PM

The guy in the middle has far more more stature than the one in the red cap.

What's the world coming to when one of the United States' main political parties has nominated a xenophobic, Islam-bashing failed businessman with four bankruptcies being his most notable entrepreneurial achievement? His lack of business savvy is only matched by his status as a political neophyte, having never held elected office before. Plain and simple, this guy is a loudmouth braggart with very little to show for in either business or politics.

And so it came to pass that one Michael Bloomberg made a speech at the Democratic National Convention hitting Trump exactly on these points. Unlike Trump, Bloomberg has wealth far in excess of what Trump (dubiously) claims. Bloomberg has also held office--successfully, by any reasonable evaluation--as the mayor of the United States' most economically important city in New York. If Trump would be envious of anyone, it would be Bloomberg:

In many ways, Bloomberg is what Donald Trump wants to be: a very rich guy who runs a media company and who converted that wealth into political power. Of all of the rich New Yorkers involved in the 2016 campaign, Bloomberg is the richest, worth some $40 billion, four times what Trump says he's worth and 13 times what Bloomberg (the media company) estimates Trump is actually worth. (Hillary Clinton, by contrast, is a lowly millionaire.)

Bloomberg is an ideological centrist in a way that now seems almost quaint, and his endorsement of Clinton on Wednesday night was more an anti-endorsement of Trump. He hammered Trump, questioning his actual wealth, calling him a con man and a hypocrite, and suggesting that Clinton deserved votes because she is "sane" and "mature."

Tweeter (the medium preferred by hucksters for obvious reasons) Trump thus struck back with fallacious put-downs of Bloomberg. But as many have pointed out, Trump used to have all sorts of compliments for Bloomberg when he was mayor of New York.

Trump's refusal to release his tax returns and provide evidence of all his wealth--casts his boastful claims into doubt:

The interest in Mr. Trump’s case is particularly high. He is running for the White House partly as a business wizard, but is he really as rich and talented as he boasts? Is he as philanthropic as he claims with his reputed billions? Has he truly no conflicts of interest in Russia, whose computer hackers he has bizarrely invited to spy on Hillary Clinton, his campaign rival?

These questions are of Mr. Trump’s own making, and a timely release of his tax returns would provide some answers. “There’s nothing to learn from them,” he tried to insist in May, arguing that he would not make the returns public until after an Internal Revenue Service audit is complete. But the I.R.S. says Mr. Trump is free to release the returns at any time and to defend their accuracy, just as President Richard Nixon did while he was undergoing an audit. In the past, Mr. Trump has not hesitated to attack the I.R.S. as “very unfair,” but now he stands before the voters using the agency as a shield against disclosure.

The bottom line is that Michael Bloomberg would have been a far better presidential candidate, harboring moderate, pro-enterprise views. Unfortunately, sane people holding such views do not necessarily do well in US presidential elections. (See Bloomberg's musings on this point.) Unlike Bloomberg, Trump is neither a business mogul nor a politician of stature.