Twin Peaks Revival and Critiquing Anti-Globalization

♠ Posted by Emmanuel in at 7/18/2017 05:26:00 PM
Dr. Amp throws the finger [x2!] at global capitalism.
After embarking on a fairly lengthy discussion of how Donald Trump should be a hero and not a hate figure of the anti-globalization movement amid violent protests at the recently-concluded G-20 meeting in Hambug, here is something a bit more lighthearted. I've been watching the return of the seminal show Twin Peaks to television after a 25+ year hiatus. Its off-kilter blend of melodrama, tragicomedy, horror, and science fiction has always been appealing to me.

However, what caught my attention in the context of anti-globalization was Dr. Jacoby--he of the different colored glasses--sliding further into madness in the revival. He's turned into some sort of crazed conspiracy theorist who goes by the name of Dr. Amp, selling sh_t shovels to dig ourselves out of the filth of modern life:


Instead of having to listen to the likes of Naomi Klein repeat the same old global corporate takeover shtick, why not have essentially the same message delivered in an entertaining way? I'd rather hear the Dr. Jacoby version any day...at least it's amusing in a self-deprecating (instead of self-important) manner. All the same, this satire points out the shortcomings of this genre of foolishness:
  1. Conspiracy - there are vast, unseen forces working against us in so many ways. Once more, the level of coordination implied usually is not demonstrable that there are several actors out just to get the rest of us.
  2. Logical inconsistency - going back to the point about Trump, anti-globalization arguments do not usually benefit from having parts that fit together. For instance, if globalization is providing employment to workers in poorer countries "stealing jobs", would they be "better off" if there were no global economic integration and everything consumed in rich countries was made in the US/Europe/Japan/ANZ, etc.? If anti-globalization activists are presumably concerned about the welfare of poor people (especially workers) elsewhere, then why deny them a living wage by "Making America Great Again" and reshoring virtually all manufacturing operations?
  3. Profit motive - Selling $29.99 "sh_t shovels" is the entire point of Dr. Jacoby's operations. Yes, he is interested in making money. If you were, say, Naomi Klein, and believed that your work contained the wisdom to right the wrongs caused by capitalism, then why not distribute it for free instead of charging us money and enriching some multi-billionaire like Amazon's Jeff Bezos?
Bottom line: As I've said before, most of these anti-globalization types are in it for the money too. The only difference between them and most of those whom they criticize is that they simply don't admit doing so by adopting self-righteous rhetoric.

Go ask Dr Amp.

Shouldn't Anti-Globalization Activists [Heart] Trump?

♠ Posted by Emmanuel in at 7/07/2017 01:07:00 PM
G-20 Hamburg protests: why the hate for anti-globalization champion Trump?
For years, anti-globalization protesters have gone out to all sorts of notable economically-related gatherings worldwide, be they G-7, G-8 or G-20 summits; World Economic Forum gatherings; World Bank and IMF meetings; WTO ministerial conferences, and so on and so forth. The boilerplate accusation is that world leaders betray the interests of the common people in favor of a faceless global capitalist class. To this, the common people must stand up for what they believe in. So far, nothing is new here.

What's interesting with the emergence of Donald Trump in world politics is that he espouses much of the same rhetoric: the [American] working class has been hurt by globalization, and therefore globalization should be rolled back to protect the common people from the ravages of world trade. As such, it's always struck me how vehemently opposed anti-globalization campaigners are to Trump when he's actually done much more to stop further economic integration than all of them combined. From single-handedly dooming the Trans-Pacific Partnership to oblivion to refusing to agree that trade protectionism is to be avoided during economic summits, he should be the man of anti-globalization writer Naomi Klein's dreams. But alas, he is not. This Canadian who likes meddling in Yanks' affairs just cannot stop blathering about how awful Trump is. (It's a form of globalization I don't appreciate when some foreigner thinks she's "active" in US domestic politics.)

There are, of course, all sorts of wrinkles here. Coming from the left, the anti-globalization vision of eliminating world trade is complemented by replacing it with folks being self-sufficient in small, sustainable communities. Meanwhile, the Trumpian vision is instead a triumph of American industry making everything that those in the United States wish for and more--to the exclusion of considering everyone else's welfare. Another line of argument is that Trump is only masquerading as a champion of the working class and is actually globalizer in disguise.

Then you also have a panoply of leftist causes that are the exact opposite of what Trump champions. These include climate change, racial tolerance, and so on. But, if you really think about it, Trump may be the one who is *really* anti-globalization in outlook here if the criteria is sheer isolationism. Consider:
  • You don't want international cooperation on climate change since, well, it involves representatives of different nations discussing things. A global elite should not be dictating what the free peoples of the world do to their piece of the planet;
  • You don't want tolerance of other people with different creeds, colors, or races. If the opposite of "globalist" is "nationalist," then you cannot have a nation-state which when it is largely indistinguishable from all others.
Abhorrent as those ideas may be, they're arguably more consistent with extricating ourselves from the rest of the world. In this sense Trump is the true anti-globalist, whereas those championing all sorts of progressive causes are not, really.

If anti-globalization means going it alone no matter what everyone else thinks, Trump is its best representative.

Anti-globalization activists should therefore celebrate Trump's arrival, full stop, wherever in the world he shows up. The attention he brings to the cause is unrivaled--especially compared to a ragtag group of anarchists and flunky writers like Klein.

After Trump Killed TPP, is Japan-EU FTA Imminent?

♠ Posted by Emmanuel in ,, at 7/05/2017 04:03:00 PM
EU Trade Commissioner Cecilia Malmstrom and Japanese Foreign Minister Fumio Kishida may have an FTA soon.
Given its recent efforts to join the ill-fated Trans-Pacific Partnership (TPP), Japan actually has an effective grand total of zero [0] FTAs involving more than one country. Yes, it does have one with ASEAN, but it's actually on top of a series of bilateral "economic partnership agreements" with each Southeast Asian member country (except for later accession countries Cambodia, Laos and Myanmar). TPP was to be Japan's first real foray into a plutilateral FTA, but Trump put paid to that.

Yet, emboldened by its adventure negotiating TPP and wanting more than the status quo, Japan is contemplating a deal with the EU. In fact, it may be inked as soon as tomorrow at a Japan-EU summit prior to the Hamburg G-20 gathering on Friday. The largest bugaboo with Japan and multilateral deals has always been agriculture. Why does Japan have so many bilateral deals with ASEAN member countries? It was largely to devise agricultural protections specific to each trading partner.

What's interesting about the mooted Japan-EU FTA are twofold: Once more, it would be Japan's first honest-to-goodness plutilateral FTA. Second, this deal would involve another entity known for agricultural protectionism in the EU. Is the latter an insurmountable obstacle? We will soon find out...
The European Union and Japan expect to commit to signing a free trade deal on Thursday, the EU said, in what both see as a push back against a feared U.S. turn toward protectionism under President Donald Trump.
Confirming on Tuesday that Japanese Prime Minister Shinzo Abe would meet heads of EU institutions in Brussels on the eve of a G20 summit with Trump and other world leaders in Germany, the European Council said: "Leaders are expected to announce a political agreement on the EU-Japan free trade agreement."
That would be short of a final accord ironing out all the commercial intricacies between two of the world's biggest economies and EU officials said on Tuesday that some key issues still needed to be settled before Thursday's EU-Japan summit.

However, confirming Abe's attendance is a sign of confidence that a deal will be ready for his signature and also puts pressure on trade negotiators to secure at least outline agreements on opening up each other's markets, including in the trickiest areas such as Japanese cars and European farm produce.
This Eurasian activity contrasts with the proclivities of a certain American stinker:
Both sides, having seen Trump pull back from free trade relationships, are keen to show they remain committed to removing barriers they say hamper growth.

"It is important for us to wave the flag of free trade in response to global moves toward protectionism by quickly concluding the free trade agreement with Europe," Abe told ministers at a meeting on Tuesday about the EU negotiations.

"This agreement is also important for our growth strategy. We will negotiate with all our energy until the very end to achieve the best deal for Japan."

Abe will meet European Council President Donald Tusk, who speaks for the 28 EU national leaders, and European Commission President Jean-Claude Juncker, the bloc's executive head.

Juncker's Trade Commissioner Cecilia Malmstrom was in Japan at the weekend and said after her talks that she was "quite confident" that a broad agreement could be announced on Thursday. EU officials had said that Abe would only visit Brussels if both sides were certain that the political agreement would be signed.

Malmstrom said: "You can do good, fair, transparent and sustainable trade agreements where you win and I win, and not the American view, which seems to be, 'You lose and I win'."
Abe, Tusk and Juncker will go on to Hamburg on Friday for the G20 summit
Take that, Trumpie! Europeans and Japanese do not take the trade realm as a winner-takes-all arena. As I mentioned, agriculture has been a sticking point for the Japanese negotiators:
European officials have been pushing for a reduction in Japanese tariffs on cheese and agriculture imports that are as high as 30 percent in return for phasing out tariffs on Japanese autos and auto parts.

This tradeoff initially met strong resistance, because some politicians want to protect Japan's dwindling dairy industry. However, Malmstrom expressed confidence that both sides have overcome this problem and can reach a deal.

"We've made meaningful progress, but there are still important points remaining," Kishida told reporters.
Some perspective is useful here. Actually, the Japan-EU deal has been under negotiation for nearly half a decade. My guess is that Trumpism was a spur to it. While the US has begun looking inward, many other countries still see free trade as beneficial. Although there are of course longstanding sticking points like the ever-bothersome agriculture, those committed will find a way to work around such obstacles. In order not to foster a wider climate of protectionism, some gesture was necessary.

So, here we are. By contrast, the Trump administration may announce steel tariffs hitting several G-20 countries in time for the Hamburg meeting. Same gathering; entirely different messages.

Can Ivanka Trump Stop Pop From Cutting US Aid?

♠ Posted by Emmanuel in ,, at 6/28/2017 04:47:00 PM
Would Ivanka Trump be complicit if tens of thousands died due to starvation arising from US foreign aid cuts?
To say Donald Trump hates poor foreigners is an understatement. He's definitely bigoted, but apparently it matters less if you're a Muslim [a] from a wealthy nation with [b] Trump-linked business interests. After all, the 9/11 attackers were mostly from Saudi Arabia and the UAE, but they go off scot-free in a world where, well, money talks. Although the world is fixated on the fate of his travel ban on folks from Iran, Libya, Somalia, Sudan, Syria and Yemen (countries which account for a grand total of zero terrorist fatalities in the US) less is said about the ongoing famines in many of these countries and their near-neighbors.

You see, the Trump administration has been mulling drastic cuts to US foreign aid going to all these poor, ungrateful, Trump-hating coloreds (or is their hatred partly due to the US planning to cut so much aid?) to spend on things like a multi-billion military expansion and a Great Wall of Trump on the US-Mexico border. However, note that Congress ultimately decides what to spend on the US federal budget and not the president.

Meanwhile, some hope that his moderate[-ish] daughter/adviser Ivanka Trump will persuade The Donald to not make such drastic aid cuts--at least that's what some aid agency officials think in the face of massive ongoing famines elsewhere:
The head of the UN World Food Programme has said he is hopeful Ivanka Trump will lobby her father into a U-turn on cuts to humanitarian aid in the face of an urgent cash crisis that is imperilling hundreds of thousands of lives.

David Beasley, a former Republican governor of South Carolina who supported Donald Trump’s campaign for the presidency, said Congress and the Senate had already defied the new president to ringfence $980m (£764m) for famine relief this year.

Beasley said he believed Trump would now rethink his policy of stripping down funding of peacekeeping and humanitarian aid for 2018, due in part to the president’s “savvy” daughter, with whom he posed for photographs following a meeting earlier this month.
Even now, the US is the biggest UN contributor, even if its aid contribution is among the least in GDP percentage terms for OECD nations:
The US is the biggest contributor to the UN, paying 22% of its $5.4bn core budget and 28.5% of the $7.9bn dedicated to peacekeeping. Trump has said that such contributions are unfair, and has been seeking to cut spending on US diplomatic and humanitarian efforts by a third...

In relative terms the US is one of the least generous countries when it comes to foreign aid: spending for 2015 stood at just 0.17% of gross national income, compared with Britain’s 0.7%.
The projected aid requirements this year are certainly staggering:
Speaking on a visit to Brussels, where he met leaders of the EU and the Belgian government, Beasley said he needed an injection of $1bn in the coming months to save the lives of 600,000 children. “While the European Union and Belgium have been tremendous supporters, the needs at this time are just extraordinary,” he said. “We are facing the worst humanitarian crisis since the second world war.

“Some 30 million people don’t know where their next meal is going to come from in just four of the countries facing famine, and 1.4 million are literally on the brink of starvation as we speak. “If we do not receive the resources, the food that we need in the next few months we are talking about the possibility of 600,000 dying. If we receive the funds, we can avert famine and minimise the chance of death.”
What does Trump care? More to the point, why would Trump care about colored people unable to afford Trump-branded gold courses or hotels who hate his guts? My guess is that aid proponents are wasting their time lobbying Trump. Besides, Trump can propose the most vicious cuts to US foreign aid, but it's ultimately the congress that decides how much to allocate in the federal budget. Given that fact, I'd be lobbying congresspersons instead of this guy. It's a waste of time IMHO.

And yes, Ivanka Trump does not escape responsibility, try as she might to portray herself as a "non-political" actor.

UPDATE: Don't forget her futile attempt to get The Donald to stay in the Paris Agreement. Progressive causes are lost on him...even if his daughter tries to persuade him.

Hong Kong Expat Banker, Endangered Species

♠ Posted by Emmanuel in at 6/25/2017 05:51:00 PM
I remember when most Lan Kwai Fong bar hoppers were Westerners. No more.
A brace of articles came out recently reflecting the changes wrought on employment in Hong Kong's financial services industry. Once upon a time, it was fairly common to come across Westerners plying their trade in the Far East. In particular, the self-deprecating acronym FILTH was used by British expatriates meaning Failed in London, Try Hongkong. The underlying assumption here, of course, was that it was easier to find a job in the less competitive environs of Hong Kong than in the City of London.

With the world's economic center of gravity shifting towards Asia, the inferiority complex of bankers working in Asia is increasingly becoming less warranted. There is more business to be drummed up in Asia today than in, say, post-Brexit UK. So while Hong Kong remains a financial gateway to still-burgeoning mainland China and beyond, London is primed to become a gateway to...nowhere in particular:
For years, the territory’s Chinese, and even its China-savvy expatriates, derisively called indulged Brits FILTH, which stands for Failed In London, Try Hong Kong. Expats who might have never worked in the City, Europe’s financial hub, could walk into good jobs and cut deals in the soft-carpeted confines of the Hong Kong Club or over a pint at the Captain’s Bar in the Mandarin Oriental.

Now FILTH is in terminal decline, its fate seemingly sealed by cost-cutting throughout the financial industry. John Mullally, an executive recruiter, said that as recently as 2010, expatriates from Britain and the rest of Europe, plus those from the U.S. and Australia, landed 40 percent of his finance job placements. Today, that figure is 15 percent. “On a weekly basis I get quite a few senior bankers that 15 years ago would have picked up a job straightaway, but today they’re really struggling,” said Mullally, who runs Robert Walters Plc’s banking practice in Hong Kong.
Moreover, why should banks and insurers pay extra to hire Westerners--relocation costs, housing costs, living costs, and the rest of it--when they are increasingly unsuited to the China-influenced business climate? Having neither the ability to speak Mandarin nor the connections (guanxi) to Asian business networks, what justifies the added expense? You might as well hire the folks from around Asia and groom them for the future:
At Citigroup Inc., Chinese students will account for the majority of university graduates the firm intends to hire full time in Hong Kong next year, according to James Mendes, the U.S. bank’s Asia-Pacific head of recruitment. For the past two years, JPMorgan Chase has hired more than 40 percent of its full-time graduates and interns for Hong Kong from local universities, a number the bank expects to increase as it ramps up business in the region.

Private banks are also looking for China-skilled staff to help them capture a slice of the country’s burgeoning wealth. Bank of Singapore Ltd., a unit of Oversea-Chinese Banking Corp., for example, hired 20 Mandarin-speaking relationship managers in Hong Kong this year.

Scarce, too, for expats are perks like generous housing allowances and memberships to such elite clubs as the Royal Hong Kong Yacht Club, which, unlike most Hong Kong institutions, has retained its “royal” association -- or, for Americans, the American Club. The value of a typical expatriate middle-manager package in Hong Kong fell to a five-year low in 2016, according to a recent survey by consultancy firm ECA International. Still, that’s $265,500.
The new breed is the Western-educated Asian banker with his or her feet in both worlds:
“Young junior bankers without language skills are so rare these days,” said Quinlan, 33, who now runs his own financial consulting firm.

Most global banks have tried to bring in Chinese power brokers. Many of these bankers are not only bilingual but also bicultural -- products of elite Western universities who can move seamlessly between China and the global Wall Street. Many also bring deep connections to China’s leadership and state-owned enterprises. Now mostly in their 40s and 50s, they include Morgan Stanley’s Wei Sun Christianson and Credit Suisse Group AG’s Janice Hu.
Reuters chimes in that the ongoing changes reflect that more and more of the share of business--initial public offerings and the like--coming from the mainland. So, hiring more bankers from the mainland is also a predictable trend:
A flood of Chinese bankers is changing the social fabric of Hong Kong, as they rapidly expand their footprint in one of the world's premier financial centers, even as Beijing struggles to tame the former British colony politically. Twenty years after Hong Kong's handover to Chinese rule, scores of mainland professionals are filling the elite financial ranks of Hong Kong, while a series of lay-offs at Western banks has led to an exodus of expatriates.
The largest increase in mainland staff over the past decade has come in investment banks, with 80 percent seeing an increase of at least 20 percent, according to a 2015 Financial Services Development Council survey. It has a much better environment than Beijing where I used to work," said Hong Hao, a managing director at BOCOM International, who has lived in Hong Kong for five years. "The food is good, and the tax rate is also good." Tax rates in Hong Kong are around 15-17 percent, while they can be as much as 45 percent in mainland China.

Chinese initial public offerings (IPO) dominate the Hong Kong market, the world's largest IPO market in 2016 when mainland offerings represented 80 percent of all new listings, according to Thomson Reuters data.
Hong Kong's financial services industry accounts for 18 percent of the territory's economy, compared with just 10.4 percent in 1997 when the city returned to Chinese rule.
If Asia butters Hong Kong's bread more and more these days, then the days of FILTH becoming ever more numbered is to be expected.

Will Automation End Asia's 'Old' Development Path?

♠ Posted by Emmanuel in at 6/22/2017 12:33:00 PM
Is this an endangered scene for countries like Bangladesh? What would its consequences be?
There is much hand-wringing going on about automation lessening the need for human workers and the unemployment that may occur as a result. In the West, scare stories about robots making humans redundant in any number of industries are all the rage as even skilled work that relies on think power becomes vulnerable to the rise of machines. This may or may not occur in the future, but whatever it holds for us, it's a narrative that's helping sell scare stories in the meantime.

Now, a Bloomberg article argues that it's not just folks in rich countries who should be worried, but also those in developing countries such as those in Asia. Given the rate at which automation is progressing, it may not be very long until even those at the bottom of the wage ladder will become increasingly redundant too. That is, previous technological advances were not so great as to overturn what we will call the 'Asian development model' here of gradually progressing the value-added ladder by starting with the manufacture of the most labor-intensive goods. In short, machines (capital) could not compete with lowest-paid labor in generating cost efficiencies...until now.

Take, they say, the example of the newest Chinese factories relying more on automation than on sweat:
Jinsheng’s factory covers almost 15 million square feet, more than five times the floor area of the Empire State Building, but it needs only a few hundred production workers for each shift. “Textiles used to be a labor-intensive industry,” said Pan Xueping, the chairman and chief executive officer, in a September speech in Urumqi, Xinjiang’s capital. “We are at a turning point.” Instead of moving production to whatever nearby country has the lowest wages, he added in an interview a day after the speech, “the industry can achieve a human-free factory.”

Pan’s company is at the vanguard of a trend that could have devastating consequences for Asia’s poorest nations. Low-cost manufacturing of clothes, shoes, and the like was the first rung on the economic ladder that Japan, South Korea, China, and other countries used to climb out of poverty after World War II. For decades that process followed a familiar pattern...
Even the nuances of garment manufacture requiring a human eye and touch may no longer forestall the move to more automation, with potentially dire political-economic consequences for Asia's developing countries at the bottom rung of progress:
The transformation looks like it will happen fast. The International Labor Organization (ILO) estimates that mass replacement of less-skilled workers by robots could be only two years away. Overall, more than 80 percent of garment industry workers in Southeast Asia face a high risk of losing their jobs to automation, according to Chang Jaehee, an ILO researcher who studies advanced manufacturing. Chang recalls presenting her findings to a government official in a country in the region that she declines to name. The official’s response? If she’s right, the result could be civil unrest.
If this story is true, then why stop at setting up highly automated factories in Asia? Why not move them back to the West or 'reshore' in contemporary parlance if labor costs become an insignificant factor?
As automation accelerates, it’s not just Asia that could see its industrial trajectory affected. If the cost of labor is no longer a major factor, there’s no reason manufacturers can’t relocate production to where the bulk of their customers are: North America and Europe, where wages for decades have been too high to support textile production. Remove most of the workers from the equation, along with the costs and delays of round-the-world shipping, and making clothes or shoes in Dallas or Düsseldorf instead of Dhaka starts to look like a compelling idea.
I don't necessarily buy this story since automation has been in progress for centuries. Do we expect a quantum leap in the near future? The real (narrower) question here is whether technological advances can overcome advantages of low-cost labor combined with human intuition in garments manufacture.The answer will have significant implications, obviously.

Pointless Trip? UK Trade Minister Seeks FTA in US

♠ Posted by Emmanuel in , at 6/18/2017 04:03:00 PM
Why send a Brexiteer (code word for isolationist) to negotiate a bilateral FTA with Trump's America?
Things are smacking of desperation in the UK as Prime Minister (as of this moment) Theresa May is not only vulnerable for calling an election when her party's majority was squandered, but also for coming into Brexit negotiations with a weakened position as a result. It is thus quizzical that she recently dispatched her trade minister to the United States. Recall that this is a new position after the UK left negotiating trade deals to the EU for decades.

It's being reported as a mission to scope the level of support for a UK-US FTA in the future:
Britain's International Trade Secretary Liam Fox said he would meet U.S. trade leaders in Washington on Sunday to talk about the possibility of signing a free trade deal between the two countries soon after Britain leaves the European Union... 


Britain starts formal Brexit talks with the other 27 EU countries on Monday, and is due to leave the bloc in March 2019.

Fox will meet U.S. Trade Representative Robert Lighthizer, as well as the U.S. Chamber of Commerce, trade policy organizations and business representatives.
The mission may be as described, but its viability has certainly been undermined by the current political turmoil in the UK. What's more, the Trump-era US trade stance isn't exactly very promising given the aforementioned lout's conviction that trade is a zero-sum game. Consider, then:
  1. For how much longer will the May government survive? Even if she is replaced by another Conservative politician, there is no guarantee s/he will retain the services of Fox or pursue an FTA with the US as a priority;
  2. Given Fox's precarious position as trade minister, what confidence will his American counterparts have in him representing UK interests even in the medium term?;
  3. How palatable will deliberately lopsided bilateral trade deals favoring the US be for others? The UK will be an early test case for others contemplating one with the US. It's the guinea pig;
  4. Given that Brexit isn't even a sure-fire thing given the amount of paperwork that the now-weakened May government needs to push through parliament over a protracted period of time, why would Fox's American counterparts be comfortable assuming that March 2019 is an appropriate target date?
  5. If the UK has been complaining about the EU's bullying ways all these years, how favorably will it respond to an even more demanding counterparty in the US--the world's largest economy (with its greater political-economic clout)?
None of these five questions have clear answers, leading me to believe that the trip was very, very exploratory and nothing more. 

EU: Ensuring Theresa "Trump Lite" May Can't Brexit

♠ Posted by Emmanuel in at 6/10/2017 03:12:00 PM
Before her boneheaded, majority-killing snap election, May was sending self-deportation vans around the UK as home secretary.
Before getting into more detail, let me be clear that the main characters in this story are not "protagonists" to any Remain advocate: Theresa May calling a snap election to improve her negotiating position for Brexit by increasing the Tories' majority instead resulted in the loss of her party's majority. Good for her. Meanwhile, her opponent, Labour's Jeremy Corbyn, is an old-style socialist / Communist sympathizer who reflexively favors nationalization and state control. It's as if Tony Blair's Third Way never came along. Both May and Corbyn are closet Brexiteers [1, 2].

However, the unexpected loss of the Conservative Party's majority for any number of reasons, including calling a snap election when she said one wasn't needed (she's a liar, liar), brings up a whole host of limitations to what she can now do. Essentially, they make the task of extricating the UK from the EU much harder instead of easier as she had intended by calling the snap election.
Theresa May’s electoral humiliation has raised hopes among pro-Europeans that she will be forced to abandon her plan for a “hard Brexit”, or that the process of Britain leaving the EU could grind to a halt completely.
George Osborne, former chancellor, said that her aim of leaving the EU single market and customs union could now be impossible: “I don’t think that hard Brexit has a majority in the House of Commons any more,” he said.

Some in Mrs May’s team even believe that her position is now so precarious that she will be unable to deliver Brexit, because of her vanishing authority and the problems of pushing a mountain of legislation through parliament. “How can you deliver Brexit when you don’t have any negotiating authority and no majority in the House of Commons?” asked one pro-European minister. “In practical terms, Brexit is a dead duck.”
Her position in parliament has become very tenuous when several bits of legislation must be passed in support of Brexit. Many are betting she simply cannot get these passed now:
Several things have changed. Firstly Mrs May’s slender majority in the House of Commons has vanished just at the point where she has to start the massive task of legislating for Brexit, including introducing the sprawling “Great Repeal Bill” that will transfer EU laws to the UK statute book.

Not only does Mrs May have to legislate for the detail of Brexit but there will also be an estimated seven major bills, including measures changing the law on immigration, customs and agriculture that will have to pass through the Commons and the House of Lords. Mrs May also has to pass contingency laws to allow her to leave the EU without a deal — even if they are never needed.
Lacking a majority, she's looking to partner with the Democratic Unionist Party (DUP), the loyal-to-the-queen Protestants in Northern Ireland. While the DUP shares a pro-Brexit stance, it wants to keep trade and transportation access privileges to Ireland proper. Which, I suspect, means preferring to stay in the EU if leaving it means losing such access:
The second complication for Mrs May is that her arrangement with Northern Ireland’s Democratic Unionist party: while the DUP is pro-Brexit it wants to avoid checks at the border with Ireland, which could be required if the UK leaves the EU customs union.
Arlene Foster, DUP leader, has said: “No one wants to see a ‘hard’ Brexit, what we want to see is a workable plan to leave the European Union, and that’s what the national vote was about — therefore we need to get on with that.

“However, we need to do it in a way that respects the specific circumstances of Northern Ireland, and, of course, our shared history and geography with the Republic of Ireland.”
On top of all that--and this hasn't been pointed out a lot--the Conservatives' representation among pro-Remain Scots has increased, thereby lessening the viability of all sorts of Leave legislation:
A third factor weighing on Mrs May is that her parliamentary party now includes 12 new MPs from Scotland, a country that is strongly pro-EU and where the Scottish National party is arguing for Britain to stay in the single market.

One pro-European Conservative MP said the prime minister would be wise to change course. “The country has turned against Brexit. There has been a youthquake. We are not in touch with younger voters.”

Another minister who backed Remain said there was scope for a “more nuanced” approach to Brexit, but John Redwood, the veteran Eurosceptic, pointed out that both Labour and Conservatives had ruled out staying in the single market.
If I were the EU, I would be even more encouraged to play the hardest of hardball with May--assuming she remains prime minister over the course of exit negotiations, which is hardly a sure thing given her precarious position. Because UK constituencies would balk at a deal stacked heavily against Britain, I'd make sure that it was. With May having no clear mandate to make a clear or "hard" Brexit, the end result is likely the status quo. EU anti-Brexit measures to ensure this result should include:
  • Hit the UK with a "divorce bill" in the hundreds of billions of Euros;
  • Do not negotiate an FTA alongside Brexit talks;
  • Make Brexit mean Northern Ireland loses near-total trade and transport preferential access to Ireland; 
  • Generally make the UK negotiators' lives as hellish as humanly possible by seeking next to no concessions on anything they wish
Can you fathom the idiocy these Conservatives have put their country and this world through via self-inflicted wounds? Former PM David Cameron called for an in-out referendum when there was absolutely no need for one and the general public didn't exactly clamor for it. Now May squanders Cameron's electoral majority, putting Brexit into question.

Oftentimes busybodying makes no sense. At any rate, here's hoping the EU offers May the worst possible deal to ensure the alternative of remaining looks far more palatable to the UK parliament. She can no longer make the threat of pulling out unilaterally, so take advantage of it, EU. Apparently May's homegrown brand of Trumpian, isolationist bigotry isn't too popular even in the UK.

Investors Decide UK Isn't Part of "Europe"

♠ Posted by Emmanuel in at 6/06/2017 11:12:00 AM
There are several ways to signify membership in a particular geographical region. The most straightforward one is that you share [duh] roughly the same real-estate on the world map. Others may, of course, include being part of a regional cooperation organization--or any number of such organizations. Into this picture we have this strange bastard entity called the "United Kingdom." Not only is it physically detached from continental Europe, but it has also chosen to forsake many of the signature institutions of Europe.

The UK is not part of the Schengen Agreement for continent-wide travel. The UK has never been part of the Eurozone using the Euro as a common currency. Now, it has also declared that it doesn't want to be part of the European Union. While geography and international institutional cooperation may be significant markers of belonging, what are subtler manifestations? How about investors--undoubtedly important stakeholders--treating you as part of a particular region? As the UK leaders act like the Trump-o-philes of Europe with their isolationist leanings, folks are starting to get the message that the UK really *isn't* European:
Global investors are distinguishing between the UK and the rest of Europe as part of a fundamental reassessment of what investing in the region means, reflecting growing enthusiasm for Europe's broad economic prospects and nervousness about thorny and possibly protracted Brexit negotiations.
That has meant the forceful emergence this year of "Europe ex-UK" as an investment class, as offshore investors actively seek to avoid lumping British stocks into any Europe-bound investments.
Like their namesake, these Euro-Trumps are being shunned, bigly:
With Brexit, and the future of many of those links uncertain, there is a growing realization that the UK and EU financial markets will develop their own nuances and drivers which require old assumptions to be challenged.

Data from Lipper - a Thomson Reuters company - on year-to-date flows in and out of exchange traded funds (ETF), a proxy for broader investments, shows that this is well under way.

ETFs that track European stocks excluding the UK are the ones seeing the strongest demand and the largest of these, the iShares MSCI Eurozone ETF, has seen a net $3.9 billion pumped into it this year.
Meanwhile, regional ETFs which include UK stocks have bled money, suggesting investors looking only for European exposure are actively seeking to avoid British stocks.

"Europe ex-UK" is not a new investment concept, and the size and scope of products available to investors is small compared to those available on a pan-European basis.
It's another sign of continental drift for the isolationist UK. With fortunes looking up on the continent, it may be a case of "See ya, and the EU wouldn't want to be ya." It's not as if the UK can do anything that continental Europeans cannot by offering something unique. Go ask the investor class.

Linking Depopulation and Debt in Puerto Rico, Illinois

♠ Posted by Emmanuel in at 6/02/2017 05:49:00 PM
Accumulating debt is the American way...even in a protectorate.
The role of demographics in economics is often overlooked. However, there are any number of examples you can bring up that illustrate its substantial role. First, consider Puerto Rico. To say that the US protectorate is in dire economic straits is an understatement. With its ballooning debt, it has the disadvantage of being a mere protectorate instead of a full-fledged part of the USA. Besides defaulting on its debt, poor prospects there are causing an exodus as folks seek work where it is to be found. Namely, somewhere else other than Puerto Rico:
The population drop is astonishing. The island has lost 2 percent of its people in each of the past three years. A comparable departure from the 50 states would mean 18 million people moving out since 2013. About 400,000 fewer Puerto Ricans live on an island of 3.4 million today compared with a decade ago, when its economy began contracting.

The departures have trapped Puerto Rico in a downward spiral. A grinding recession, with joblessness at 11.5 percent, and $74 billion mountain of debt that pushed the island to insolvency has made collecting taxes key to an economic rebound. At the same time, more Puerto Ricans from all walks of life are moving away to better their lives, meaning government revenue is dwindling.
The interesting thing is that economic scenarios for Puerto Rico to begin reducing its massive debts largely underestimates the drag from depopulation. Simply put, what happens when there are not enough folks to pay off these debts? Things look pretty bad on the demographic front:
The government doesn’t seem to have come to grips with the outflow. Puerto Rico’s turnaround plan -- a path to sustainability approved by a U.S. oversight board -- assumes the population will shrink just 0.2 percent each year for the next decade. It uses that number as the basis for its projections of tax receipts and economic growth.

“Most people believe that those forecasts in the fiscal plan are really, really optimistic and probably would have to be revised at some point,’’ said Sergio Marxuach, public policy director at the Center for the New Economy in San Juan.
The rate, as mentioned above, is closer to 2% annually than 0.2%. If you think, "hey, what's the big deal with a US protectorate?" then you're not looking hard enough. Illinois has lost the most residents of any US state for three year running:
For the third consecutive year, Illinois has lost more residents than any other state, losing 37,508 people in 2016, which puts its population at the lowest it has been in nearly a decade, according to U.S. census data released Tuesday.

Illinois is among just eight states to lose residents, putting its population at 12,801,539 people, its lowest since about 2009. Illinois' population first began to drop in 2014, when the state lost 11,961 people. That number more than doubled in 2015, with a loss of 28,497 people, and further multiplied in 2016.
While cause-and-effect is challenging to establish with the cases of either Puerto Rico or Illinois, you see the same pattern of depopulation accompanying debt woes in Illinois as well:
Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. state, as the long-running political stalemate over the budget shows no signs of ending.

S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget.

“Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance,” Ted Hampton, Moody’s analyst, said in a statement. “During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached.”
Same banana in Illinois, then. Folks should really research the depopulation-debt link there better, too.

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?