Obama, Bernanke, Stimulus & American Brattiness

♠ Posted by Emmanuel in , at 6/30/2012 03:38:00 PM
The New Yorker has an interesting new take on one of my favourite research genres, the search for the behavioural pathologies which account for terminal American decline, be it in health, income, wealth, life satisfaction or what else have you. Why should a clearly regressive society influence so much of what goes on in the rest of the world? It is not exactly news to the rest of the world that American parenting is as crappy as it gets, hence the search for solutions from more parentally enlightened societies [1, 2]. Nor is it news that American stewardship of the world economy is nearly as bad. Ultimately, these two are likely interrelated: While Bart Simpson and that Yanqui brat they caned in Singapore were all the rage in the nineties, let's just say things have gone downhill since then Stateside. In time, individual pathologies snowball into something unfathomably huge alike $1,000,000,000,000+ annual deficits whose momentum can hardly be arrested.

Recent anthropological research suggests these pathologies have their roots in households throughout the Land of the Free Loader:
Often, the [L.A.] kids had to be begged to attempt the simplest tasks; often, they still refused. In one fairly typical encounter, a father asked his eight-year-old son five times to please go take a bath or a shower. After the fifth plea went unheeded, the father picked the boy up and carried him into the bathroom. A few minutes later, the kid, still unwashed, wandered into another room to play a video game.

In another representative encounter, an eight-year-old girl sat down at the dining table. Finding that no silverware had been laid out for her, she demanded, “How am I supposed to eat?” Although the girl clearly knew where the silverware was kept, her father got up to get it for her.

In a third episode captured on tape, a boy named Ben was supposed to leave the house with his parents. But he couldn’t get his feet into his sneakers, because the laces were tied. He handed one of the shoes to his father: “Untie it!” His father suggested that he ask nicely. “Can you untie it?” Ben replied. After more back-and-forth, his father untied Ben’s sneakers. Ben put them on, then asked his father to retie them. “You tie your shoes and let’s go,’’ his father finally exploded. Ben was unfazed. “I’m just asking,’’ he said.
These vignettes are awfully similar to what you get in modern America. With the economy tanking again despite untold trillions spent to--erm...I'm not sure if these guys have achieved anything in the way of sustained progress--the proposed solutions once more involve spending massive debt-fuelled sums to silence this society of whingers. "As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate" says the fawning brat appeaser Ben Bernanke. Meanwhile, Obama largely ignores somewhat better parenting suggestions from the Budget Supercommittee he himself convened in fear of offending the juvenile sensibilities of the American electorate.

Obama and Bernanke are perfect examples of really poor American parenting as they indulge bratty behaviour time and again. Instead of being leaders, they are led by those who don't know any better who demand instant gratification. Just throw more money at the problem and hope it goes away, nevermind that these exercises in fiscal and monetary irresponsibility are becoming increasingly unaffordable and ineffective besides. As the bankers at the height of the subprime era understood, the likes of Obama and Bernanke innately reason that they'll be gone anyway as things sink into further oblivion. In other words, they fit right into contemporary America. It's alright, son, deficits don't really matter because there's a global savings glut. It's not really my fault that deficits have ballooned during my term, they're all Dubya's fault. And so on and so forth.

As before, my suggestion for these folks and their innate preference for appeasers is to just grow up and deal with it. Stop running massive deficits you expect others to fund. The rest of the world does not have infinite patience dealing with your tantrums as you suck up the world's capital and throw it out the pram. In the end, perpetual childhood being programmed into American youth is symptomatic of wider pathologies indicative of all-too-evident societal decline:
Or adultesence might be just the opposite: not evidence of progress but another sign of a generalized regression. Letting things slide is always the easiest thing to do, in parenting no less than in banking, public education, and environmental protection. A lack of discipline is apparent these days in just about every aspect of American society. Why this should be is a much larger question, one to ponder as we take out the garbage and tie our kids’ shoes. 
As ghastly as it is, observing the US self-destruct is not only useful but necessary for two reasons. First, the rest of us need to figure out how to refashion global governance in a way that is less dependent on these people who haven't the slightest idea of how to run a nation, let alone the world. We can make it without these infantile American whingers and should be better of without them. Second, their bad example is precisely that which we should seek to avoid--unless you want to as progress-free as they are, that is.

No Jobs? Come to Germany, Young PIGS Citizens

♠ Posted by Emmanuel in ,, at 6/28/2012 07:20:00 AM

From station to station
Back to Dusseldorf City
Meet Iggy Pop and David Bowie
Trans-Europe Express 

Whew! We haven't had a video feature in a while, so here's a classic, Kraftwerk's Trans-Europe Express. Economic migration is often driven by differentials in economic opportunities, whether they be more job openings or higher pay. Whereas in the past the Poland to UK route used to be popular in Europe along with other Eastern to Western European migration corridors, times have changed. Poland for instance is faring rather better than the UK economically and so on.

The WSJ sifts through recent OECD data to find, unsurprisingly, that emigration is increasing from the likes of Portugal, Ireland, Greece and Spain. As a migration advocate, I see the positive side in being able to defray (hopefully temporary rather than structural) unemployment within the Eurozone through migration within it--just as the United States does with no real limits to movement across state boundaries. Not only does it help lessen unemployment benefits the troubled states pay out, but it also [shhh] helps rid them of angry young persons in the meantime. As Europe's troubles continue, these countries are returning to their former status as migrant-sending rather than migrant-receiving ones:
The OECD report shows how the contrast in economic fortunes between countries undergoing harsh austerity measures and those still showing robust growth may be starting to turn emigration trends on their head. Following the end of World War II, Greece, Ireland, Portugal, Spain and Italy all experienced "significant emigration," but in the years running up to the financial crisis they had become countries of immigration "hosting significant numbers of labor migrants," the OECD said. The economic and fiscal crisis appears to have turned them back into countries of emigration, although the OECD cautioned that reliable data aren't readily available for some.
Reuters, however, illustrates certain barriers to the free flow of migrants in Europe. Unlike say the United States where they all speak English (and share a national fondness for debts 'n' fats, but let me not get into that right now), linguistic and cultural differences are far more pronounced in Europe despite also having free movement of labour--at least in theory. That said, the Germans are like everyone else in trying to pick off other nations' best and brightest if they are to welcome migrants--no surprises there. Consider the plight of Spanish health care workers as an illustration:
After more than a decade working as doctors, Spaniards Elena Casillas and Esther Perea are back in the classroom, and it's not easy. Some of their classmates need dictionaries to compose basic sentences. Others need help with word order. For everyone, the biggest challenge is pronunciation. "When I first heard German, I thought, ‘My God, it's horrible,'" says 40-year old Casillas, one of a dozen medics recruited by a private German hospital group which is giving the pair free classes in Madrid with the promise of work at a German hospital if they come up to scratch.

Casillas' class is part of a German campaign to attract people who have skills in medicine and engineering. Germany can use up to 200,000 immigrant workers per year to maintain its economic potential, according to the Bundesbank, while Spain currently has the highest unemployment in Europe, more than 24 percent or around 5.6 million people.

Given that free movement of labor is one of the foundation stones of the European Union, you might think job-seekers from Spain would be filling Germany's gaps. A few are making the shift: in 2011, Spanish arrivals jumped 52 percent according to German data. But the overall numbers are still tiny. Between 16,000 and 21,000 came to Germany from Spain last year, compared with more than 100,000 immigrants from Poland. "Looking at the economic situation one might have expected a bit more outflows," said Thomas Liebig, an expert in international migration at the OECD.

Europe's relative lack of labor mobility can be pinned on cultural obstacles, as well as increasingly choosy employers and stiff competition from established migrants. For Spaniards, in particular, Europe is not working, and this highlights a structural trend just at the time the region needs to make the most of its single market for workers. "Where governments are able to manage the inflow they are becoming more selective," says John Salt, a professor at University College London who specializes in international European migration. "What they want are workers with high-level skills who can initiate new ideas or developments, or fill certain skill gaps."
It's the same old story heard around the world, although it plays out in interesting ways in Europe given the aforementioned cultural differences and the limited number of promising destinations (sad to say). Make no mistake: intra-EU migration is a buyer's market in this day and age. And do learn German fer cryin' out loud if you plan to take the "Trans-Europe Express" bound for Düsseldorf.

Geography Flunkies? Pakistan Wants to Join ASEAN

♠ Posted by Emmanuel in , at 6/26/2012 01:10:00 PM
Of the few opinions I share with George W. Bush, I have long argued that Turkey should be allowed to join the European Union. You know all of the counter-arguments: Turkey is a security risk because it shares borders with Iraq and Syria. Turkey is a dominantly Islamic country, whereas most European nations share a Judeo-Christian tradition. Turkey is a populous nation whose EU membership might see a tsunami of migrants heading for European states. And so on and so forth.

While many of these concerns can be legitimately discounted, I never thought that I would face a similar conundrum in our part of the world, Southeast Asia. Of all the darndest things I could possibly read, how about Pakistan wishing to join ASEAN? On the occasion of predominantly Islamic nations Indonesia and Pakistan signing a (rather limited) FTA, the head of Pakistan's largest chamber of commerce suggests his country is very much interested in this possibility:
Pakistan wants to join the Association of South East Asian Nations (Asean) and Indonesia should support it in its endeavour, Karachi Chamber of Commerce and Industry (KCCI) President Mian Abrar Ahmad said in a statement on Monday.
There are many difficulties here. Being a Citizen of the World, I of course have no objections to Muslim nations in ASEAN, for population-wise it is already predominantly composed of citizens of Islamic states. Aside from populous Indonesia, you also have Malaysia and Brunei in ASEAN. That said, consider the following impediments:
  1. Geographically speaking, Pakistan is in South Asia, not Southeast Asia. More specifically, it is on the Indian subcontinent. It certainly doesn't share borders with any Southeast Asian nation since it lies west of India;
  2. Pakistan is (logically) already involved in regional groupings in its part of the world, notably the South Asian Association for Regional Cooperation (SAARC) and the Economic Cooperation Organization (ECO) with lots of its neighbouring 'Stans and a smattering of Middle Eastern states. Both SAARC and ECO already have their own regional integration efforts, so I don't exactly see why joining ASEAN makes sense. While the latter's integration project may be further along in a number of respects, Pakistan's advantage with SAARC and ECO is that it's no Johnny-come-lately to them and thus has more leeway in determining the form of integration as they proceed.
  3. Counting on the support of your co-religionists is hardly a sure-fire thing in ASEAN. Recall that Timor Leste has long relied on the Philippines to get the predominantly Roman Catholic nation into ASEAN, but to no avail as of yet.
So, while I certainly don't have any grudges against our Pakistani friends, I would strongly suggest that they make the most out of the regional groupings they already belong to instead of reinventing geography as we know it.

UPDATE: Before I forget, there is precedent for Pakistan being (mis)classified in a Southeast Asian grouping. Witness the "Southeast Asia Treaty Organization," composed of, erm, the United States, France, Great Britain, New Zealand, Australia, the Philippines, Thailand and Pakistan. Originally intended to be a mutual defence arrangement alike NATO, it never really took off and was disbanded by 1977. Here is the US State Department explaining away the presence of extra-regional participants--including Pakistan:
Most of the SEATO member states were countries located elsewhere but with an interest in the region or the organization. Australia and New Zealand were interested in Asian affairs because of their geographic position in the Pacific. Great Britain and France had long maintained colonies in the region and were interested in developments in the greater Indochina region. For Pakistan, the appeal of the pact was the potential for receiving support in its struggles against India, in spite of the fact that neither country was located in the area under the organization's jurisdiction. Finally, U.S. officials believed Southeast Asia to be a crucial frontier in the fight against communist expansion, so it viewed SEATO as essential to its global Cold War policy of containment.
That was back when the US suspected India of having the potential to fall under the Soviet ambit given its then-closer ties to the USSR than the US. Note though how this was a security arrangement, not an economic one. Then again, it demonstrates the US is not exactly a stranger to convoluting geography for its pet projects even today.

Euro 2012 Beggar's Battle: Spain vs Portugal

♠ Posted by Emmanuel in , at 6/24/2012 03:54:00 PM
There was much made of the earlier Germany versus Greece Euro 2012 match and its symbolism for European integration. To no one's real surprise, Germany, erm, booted Greece out of the Euro by winning 4-2. Sure the Greek fans present at the match had their cheap thrills booing lustily whenever Angela Merkel's image was broadcast on the arena's screens, but still. If it's any consolation, remember that the Greeks scored the fluke of all flukes by winning the tournament in 2004 (and look how that euphoria has translated into economic gain). This year, though, there was no Cinderella story to be had since Greek fans hoped for the best but it turned out like always.

Now, however, we have an overlooked game between Iberian competitors Spain and Portugal. Although either may yet advance and face the financially (and nearly sportingly) indomitable Germans, we have an interesting battle on our hands in the meantime. To be sure, I find the Spanish game more attractive with its standard-setting, passing-and-possession oriented football. Some people think it's boring; I think it's representative of good teamwork and technical brilliance. Their opponents the Portugese, meanwhile, are buoyed by the brilliance of Cristiano Ronaldo in--he hopes, perhaps--the same way Diego Maradona could boost Argentina squads in the days of old.

Instead of underlining German dominance (again), even the Germans understand that perhaps it should let off the others to go easy on the symbolism. At any rate, who should you pull for if you could give the Spanish or Portugese people a psychic boost? In addition to Spain winning Euro 2008, they added icing to the cake by winning the 2010 World Cup. What have those famous victories done for the nation off the pitch? As Spain secures emergency funding from the EU, diddly-squat. I had hoped victory could save them from recession, but my hopes were all for naught and things went even more downhill from there.
Which leaves us with Portugal. It has never won the Euro tournament, let alone the World Cup. Portugese clubs Benfica and Porto have been European Cup / Champions League winners, but fans with their club loyalties seldom side with others even from their own country. Given that Spain experienced next to no economic boost from their victories, perhaps it's time to root for Portugal--no matter if Cristiano Ronaldo is not an endearing character. Moreover, Spain's woes are mitigated by certain things going for it alike a low total debt to GDP figure by developed world standards. Meanwhile, I am sorry to say that Portugal has nearly nothing going for it and is only outdone by Greece in the economies woes department.

So, with the home team Poland gone, is it "Vamos a Portugal!" for me?

So, When Will S&P Downgrade the US Again?

♠ Posted by Emmanuel in at 6/24/2012 07:14:00 AM
Friends, there are certain certainties in life: Germany will do well in whatever international football (soccer) competition it enters, Lucy will pull the football before Charlie Brown can kick it; and the United States will inevitably get fatter and more indebted. Unless you read too many Paul Krugman op-eds--or Dan Drezner USA#1 cheerleading blog posts for that matter--you probably get the idea that deficits do matter.

Recently, S&P--which famously did the first deed in downgrading the bedraggled US of A among the three major credit rating agencies--issued an updated outlook on its sovereign credit risk. You will be unsurprised to hear that it remains likely to be knocked down a further peg or four in the near future. This also takes into consideration that no fiscal consolidation takes place alike the discontinuance of the infamous Bush tax cuts (as if the country has done so much better with them). From S&P, then:
Instead, our current (and previous) base-case fiscal scenario assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place indefinitely and that the alternative minimum tax is indexed for inflation after 2011. On the expenditure side, our base case assumes Medicare's payment rates for physicians' services stay at their current level, although we also assume that BCA11 remains in force. (This includes both the original caps on discretionary appropriations and the automatic spending reductions applicable in light of the Supercommittee's failure to reach an agreement.) Our base-case fiscal scenario also assumes annual real GDP growth of 2%-3.5% and consumer price inflation near 2% through 2016. Finally, this fiscal scenario presumes near-zero (nominal) short-term Treasury borrowing rates until 2015, at which point the rates climb by just more than 100 basis points, as well as a slower rise of about the same magnitude in long-term Treasury yields from their 2011 level of just less than 3%.
I am highly distrustful of credit ratings in general, believing that they are no substitute for conducting independent evaluation. For instance, assuming that the country grows in the 2-3.5% range is a stretch--which in turn implies that a credit downgrade is more imminent if it fails to reach this range up to 2016 (which is absolutely certain IMHO). At any rate, we get to the dirty business of assigning probabilities:
The outlook on our 'AA+' long-term rating is negative, reflecting our view that the likelihood that we could lower our long-term rating on the U.S. within two years is at least one-in-three.

Pressure on the rating could build if, in our view, elected officials remain unable to agree on a credible, medium-term fiscal consolidation plan that represents significant (even if gradual) fiscal tightening beyond that envisaged in BCA11 [the deficit reduction supercommittee]. Pressure could also increase if real interest rates rise and result in a projected general government (net) interest expenditure of more than 5% of general government revenue.

On the other hand, the rating could stabilize at the current level with a medium-term fiscal consolidation plan, or if the U.S. government makes faster progress toward reducing the general government deficit than our base case currently presumes.
So here are the takeaway points for you: (1) To maintain its AA+, S&P requires that the US tighten its belt beyond the measures the deficit reduction supercommittee believes is necessary, which in any case are not being implemented due to partisan deadlock. (2) Growth assumptions of 2-3.5% are wildly optimistic IMHO based on recent growth figures Stateside, making debt-to-GDP figures look even worse going forward.

End result? Based on S&P's stated criteria compared to America's economic realities and political limitations, I would think that a credit downgrade in the next two years is an odds-on possibility. Even if the US is remarkably progress-free already, the momentum is on the downward path. And I believe that, given its fundamentals (or more accurately, the lack thereof), the pace of Americarnage should accelerate. Recall that as late as May 2010, Spain--yes, Spain--had a AAA rating.

It should be exciting to watch--as long as you fully divest yourself of Sammy's IOUs.

Putin's a Smart Guy: Worry About $, Not €

♠ Posted by Emmanuel in ,, at 6/20/2012 12:34:00 PM
Anglophone economic commentary about the euro usually veers towards the "I told you so" variety, nevermind that no one has actually wanted out of the EMU while many are still lining up to join it--including the most economically progressive economy that's still out of it. British Euroskeptic dyspeptics and their American wannabe counterparts aside, many recognize that the potential fallout from the US dollar is far greater given that it (unfortunately) is of more systemic consequence than the euro. Moreover, whoever said that being in a currency union absolves anyone of responsible economic stewardship? EMU members understood that they could no longer avail of devaluation strategies favoured by certain other countries (even though no one has ever devalued their way to prosperity).

So, it is refreshing to hear Vladimir Putin raise a concern many of us from the developing world have. Earlier on he was spot-on in describing the United States as a parasite on the world economy. Now he provides another good insight along similar lines: As far as we can tell, the Eurozone is getting serious about reining in fiscal deficits and whatnot...
"I am heartened by the approach of the European Commission, with whom we rarely agree, and of the key eurozone countries, to how they plan to resolve the problems they face," Putin said at a press conference at the end of the two-day summit of the Group of 20 powers in Los Cabos, Mexico. "We can expect the situation to change for the better, although institutional reasons of the crisis are still there," he said.
...whereas the United States is not, cannot, and will not...
But the Russian leader lamented the lack of clarity on the future of the US dollar, which makes for a sizeable share of Russia's reserves, after US elections in November. "If we keep (half of reserves) in dollars and US bonds, we would like to know what will happen with the dollar after the US presidential elections," the Russian leader said. "Their debt is 15 trillion!" he added with a bewildered pause. "What will happen with the world's main reserve currency? What should we prepare for? These are the questions that should be at the center of attention of the G20." 
For whatever character flaws you may ascribe to Putin, it makes eminent sense to rely less on the dollar as a reserve and vehicle currency when it is structurally biased towards devaluation (whereas the inflation-averse ECB's euro has always been biased towards revaluation). Hence the legitimacy of the earlier "parasite" claim wherein others are effectively being forced to hold detestable dollar-denominated detritus. The G20 or whomever should come to a sensible move to shift towards other alternatives: a basket of currencies or regional alternatives alike the yuan in the Asia-Pacific. Otherwise, we are all just waiting to go the way of progress-free America and its currency.

After all, the bigger they are, the harder they fall.

New(er) World Order: LDCs Give IMF Conditionalities

♠ Posted by Emmanuel at 6/19/2012 02:45:00 PM
It's a topsy-turvy world when you have poor countries (a) contributing emergency funds to help bail out rich countries and (b) placing loan conditionalities on the IMF instead of having conditionalities being placed on them by the IMF. However, these are not normal times. As Europe lurches from crisis to crisis at the whims of the Greek electorate and market forces among other things, the cost of containing European contagion keeps rising. In the past, LDCs have been understandably unwilling to contribute more to the IMF given that America and Europe have not moved the ball forward on reforming voting shares manifested in quotas in accordance with the new contributions being made by developing countries. In particular, many European nations remain overrepresented given their actual contributions as compared to the pledged contributions of major developing nations.

At the recent G20 summit in Mexico, however, these selfsame developing countries including previous repeat Latin American borrowers alike the host and Brazil have changed hats and are now lenders. The Latin debt crisis was a long, long time ago. That said, unlike the New Arrangements to Borrow (NAB) which were contributed by them but didn't raise their quota shares or voting rights in the institution, they are making these new contributions conditional on voting reform. So yes, it's my favourite metaphor of structurally adjusting the IMF once more--this time at the behest of countries that were previously its (reluctant) borrowers:
"These new contributions are being made in anticipation that all the reforms agreed upon in 2010 will be fully implemented in a timely manner, including a comprehensive reform of voting power and reform of quota shares," the BRICS leaders said in a joint statement. The BRICS sought to tie the loans to long-delayed reforms that would give the developing world more say at the Washington-based Fund by boosting their voting power as shareholders.

"If the quotas are not commensurate with the relative economic weight of the different countries then it has to be changed," said He Jianxiong, director general of the international department of the People's Bank of China. In their public remarks in Los Cabos, Chinese officials declined to discuss sums and stressed the need to implement IMF quota reforms agreed in 2010. Growth of the emerging countries, which has far outstripped that of the rich world in recent years, made it "only natural that the quotas should be shifted from developed economies to developing economies," he told reporters. 
Again it's the issues of fairness: Why should poor countries bail out rich countries? Also, isn't assisting their own people whose standards of living are much lower than those of crisis-hit European nations a better use of their foreign exchange?
The Chinese central bank's He indicated that Beijing still has to win over a skeptical public on the need for China, which still has hundreds of millions of poor people, to help bail out European countries with higher  standards of living. Emerging economies have long demanded more say at institutions like the IMF to reflect their growing clout. Their frustrations have grown with the likely delay in implementing the 2010 deal that would boost their voting power and make China the third-largest voting member of the IMF.
Indeed, the PBOC emphasized in an unusually detailed statement on its website later that such pledges would not necessarily be drawn down. The comments appeared aimed at addressing domestic criticism that China should not be helping out more prosperous countries.For instance, China had promised to buy $50 billion in IMF bills when the fund expanded in 2009, the central bank said, but to date had only actually purchased $5.7 billion worth.

So yes, these new contributors are likely to demand quota reform prior to them making available more emergency funds. They are tired of being shunted off to NAB where quota shares are not adjusted and will require immediate increases to their shares as befits their additional contributions.

Out Now: LSE IDEAS on PRC Geoeconomic Strategy

♠ Posted by Emmanuel at 6/18/2012 12:16:00 PM
As usual, I am somewhat late with the publications generated by our very own LSE IDEAS, but let me rectify that here since there should be something for everyone with an interest in Chinese geopolitics. Drawing upon our own not-insubstantial in-house expertise--our Co-Director Arne Westad is fluent in Mandarin--and our expanding Rolodex of contributors, we have a fine selection here.

Jonathan Fenby should be familiar as an old China hand among journalists, and he puts the question of whether China has a foreign policy at all given how, as I like to repeat, the Communist Party is hardly a monolithic entity given its competing interests. (Witness the downfall of Bo Xilai, for example.) Shaun Breslin over at Warwick University meanwhile is one of the leading British academic scholars studying China from an IPE perspective, and his contribution documents China's worldwide resource grab to fuel its mighty manufacturing machine.

My LSE IDEAS colleague Cherry Yu is particularly interested in how Chinese firms operate abroad. She begins by differentiating between the China Investment Corporation, state-owned enterprises (SOEs) and privately-owned firms. Although Westerners typically view all Chinese FDI as somehow being state-directed, this is not always the case and it depends much on the ownership structure of the firm in addition to more traditional factors alike which industries they are in and where they perceive South-South or South-North investment opportunities. Linda Yueh requires no introduction since she appears frequently on Bloomberg, CNBC and so forth. Here she ponders the global economic crisis and whether it has speeded up or slowed economic reform (although you probably can guess the answer to that). Lastly, Guy de Jonquieres is another journalist with consderable knowledge of China-related topics, and he questions the notion of there being a "power shift" altogether.

Once more, the individial PDFs are available from our website, although a print copy will cost you £7.50 to purchase from the university bookstore (including shipping and handling). Happy reading!

Executive Summary
Nicholas Kitchen, Editor, IDEAS Reports
China’s International Future
Odd Arne Westad
Does China have a Foreign Policy? Domestic Pressures and China’s Strategy
Jonathan Fenby 
Access: China’s Resource Foreign Policy
Shaun Breslin 
China as a Trading Superpower
Xiaojun Li 
Firms with Chinese Characteristics: The Role of Companies in Chinese Foreign Policy
Jie (Cherry) Yu
China’s Strategy towards the Financial Crisis and Economic Reform
Linda Yueh
China’s Approach to US debt and the Eurozone crisis
Nicola Casarini
What Power Shift to China?
Guy de Jonquières 

Like Attracts Like: Glazers Plan US Man U IPO [?!]

♠ Posted by Emmanuel in , at 6/14/2012 10:23:00 AM
I have been following the plight of the reviled Glazer clan, erstwhile owners of Manchester United Football Club, as they raise the ire of English football fans with their vile "Ameriscum" shenanigans, featuring the worst sort of financial chicanery their home nation has to offer. Their 2005 original sin of acquiring the storied club via leveraged buyout saddled it with onerous debt, all the while forcing supporters to pay inflated ticket prices. 

In August of last year we received news that the Glazers planned to improve the financial position of the debt-laden club by listing it in Singapore. Supposedly they would be able to capitalize on the large global Man U fanbase, especially in Asia. To which I said...
Are there really Singaporeans and other Asian investors dumb enough to fall for these Stupid Financial Tricks? Given the Glazers' track record, they may soon hire away Tim Geithner to tell investors how their investments in Man U are safe, all the while spouting obvious nonsense about "strong footballing finances" policy. I guess you can take the Ameriscum out of bankrupt America, but their capacity for financial foul play to paraphrase FIFA never changes. 
Well folks, score it IPE Zone 1, Ameriscum in Southeast Asia 0. (And Tim Geithner has indicated that he won't serve another term as Treasury secretary even if Obama is elected, so I've even found him a hot job prospect.) Apparently, the ever-devious Glazers didn't find the terms and conditions in the relatively freewheeling Lion City to their liking. Reuters has a useful recap of the extremely questionable reasoning behind the Glazers' retreat to the land where Stupid Financial Tricks are actually a source of pride in certain circles:

One of the sources said Manchester United had always planned to position itself as a global media business rather than a sports franchise, suggesting that a US listing would make more sense. The club's American owners, the Glazer family, are well known in the US as owners of American football team the Tampa Bay Buccaneers, as well as First Allied Corp, which owns and leases shopping centres. Conversely, they are extremely unpopular in the UK, which could have made a London listing difficult.
The Singaporean exchange authorities have not exactly been forthcoming with the idea of offering shares that give few to no voting rights to shareholders. In other words, it would have been another raw deal from these Yanks in the same way that they screw over Man U fans year in and year out with inflated ticket prices. So it's back to America where they hope to shaft folks in that genuine American fashion:
U.S. investors are also familiar with the dual-class share structure that was under discussion for Manchester United's Singapore listing, having seen it used by household names such as Google and Facebook. The Glazers are understood to have wanted to sell Class B shares with limited or no voting rights to maintain a level of control of 95-100 percent.

That structure was said to be one reason why they opted for Singapore in the first place, as, unlike Hong Kong, the exchange was happy to agree to the format, and for the club's Class A shares to be quoted but not traded. However, the issuer is understood to have become frustrated with long delays in approval from the SGX, even after it had indicated it would have no problems with a dual-class share issue.

Going back to the US homeland of Stupid Financial Tricks--the UK is obviously similar, but fan hatred precludes a Man U listing there--has its drawbacks. The most obvious of these is that few Yanks actually follow world football, preferring homegrown cornpone "sports" [yee-haw!] alike neo-primitivist NASCAR racing or, to mimic the Glazer's claim about being a global media conglomerate, "World Wrestling Entertainment." Fanbase numbers certainly aren't encouraging:

A U.S. listing might earn the company a better valuation as a media business, since it has contracts for broadcasting rights as well as its own television channel. However, it is unlikely to achieve the original goal of putting shares in the hands of a wide base of United fans. A source said the original aim of the Singapore listing was to create "a pan-regional platform for retail investors".

Singapore had seemed the ideal location, as it provided a way to reach retail investors in one of its biggest fan bases, Indonesia. When the Singapore listing was still under consideration, the importance of Asia to the company, with much of its growth coming from Asian merchandise sales, had been heavily emphasised during marketing to investors. The club claims to have 659 million supporters worldwide, of which 325 million are in Asia Pacific and 55 million in Indonesia. It counts just 34 million fans in North America, where soccer has yet to build a significant supporter base.

The sad thing for Man U fans is that while the Glazers have already brought their financial chicanery home where it belongs, they still retain the club. For that we will still have to wait. And oh yeah, Glazers go home.

It's All Greek to Me: Cyprus, Next on the EU Dole

♠ Posted by Emmanuel in , at 6/12/2012 09:03:00 AM
Erm, on second thought, let's not call it a "bailout" but a "bank recapitalization programme" to use the sort of euphemisms Spanish officials prefer as they too succumbed to the inevitable when you have overextended banks. To be sure, there are differences among [i] a balance-of-payments crisis (in which case the IMF would have been functioning in its more classic lender of last resort role), [ii] a fiscal crisis (in which case the government has taken on too much debt and cannot meet its repayment obligations) and [iii] a banking crisis (in which case your banks don't have enough spare cash to stay afloat after loans they've made that have gone bad). For the latter, it's to the EU you go such as with the case of Ireland or most recently Spain. True, BOP, fiscal and banking crises tend to occur simultaneously and cause confusion as to the underlying nature of the problem, but true connoisseurs of financial implosion such as readers of the IPE Zone should care about such differences. 

Today we line up another sucker of EU emergency funds in Cyprus. Based on the classification I have given above, its most pressing problem is [iii]. However, this occurrence is blowback from Greece's own woes which stem from [ii] during a period in which the Cyprus has been running large fiscal and current account deficits, too. Confusing, no? Remember that a lot of Cypriot's residents are of Greek descent. Plus, with a significant financial services industry by Eastern Mediterranean standards, it was only natural that its banks lent to many Greek concerns, all the while stocking up on Greek sovereign bonds. Having gorged its citizens on credit as well in that post-EMU accession euphoria alike many troubled economies doesn't help. The end result? Cyprus was made quite vulnerable to Greek default and its subsequent haircuts, the endgame of which is nearly upon us:
Cyprus said that it urgently needed European financial aid to boost its banks' capital, a step that would make it the fifth euro-zone economy to seek help from the region's bailout funds. Cyprus Finance Minister Vassos Shiarly said that the country's need for an international bailout was "exceptionally urgent" in order for it to recapitalize its banks, and that the issue would need to be resolved by the end of the month.

According to several European officials, the size of any bailout would be unlikely to exceed €3 billion to €4 billion ($3.8 billion to $5 billion), a sum that wouldn't strain the resources of the euro zone's bailout funds. The economy of Cyprus—an island of 800,000 people—is 1/60th the size of the economy of Spain, which said over the weekend that it would seek European funds to recapitalize its own banks.
What Cyprus will be seeking is a deal similar to that of Spain: as few as possible IMF-style conditionalities on how governments run their affairs but more EU discretion on restoring their banks' soundness--which again points to Cyprus' situation being a banking crisis first and foremost. Further, it will be interesting to see how this divided nation split between those of Greek and Turkish descent cope with resorting to the EU poorhouse. Clearly, many of the current woes stem a lot from the Greek faction, so finger-pointing naturally inflames longstanding tensions between Greek and Turkish Cypriots who still don't get along for the most part.

Pacquiao-Bradley, Stitched-Up Globalization Metaphor

♠ Posted by Emmanuel in ,, at 6/11/2012 12:59:00 PM
Preponderance can be interpreted in any number of ways, but here's a thought for you: What if the globalization game was biased to produce results favouring certain nations time and again? That would indeed be a form of (malign) influence insofar as someone sets the rules of the game a certain way. If it's tails they win, and if it's heads they win again.

Certainly there's good reason for some to think of globalization this way, where the rules of the game are indeed highly biased in favour of those who set the rules. In world trade for instance the United States has foisted many of its preferences for industrial policy, intellectual property, competition law, services, government procurement and so forth on others. There's no gainsaying that their development would have been faster had they ignored American preferences instead, but that their preferences are being made to conform to a singular vision of development which is certainly not a surefire recipe for success is cheeky to say the least.

Here's a sporting analogy for you. Think of modern US influence this way: Like "undefeated" Timothy Bradley, the United States would not win a straight fight with many of its contemporary challengers. (As an aside, the US is a lawyer-infested society precisely to keep such ill decisions valid. Pace its never-ending quest to make the world economy a microcosm of legalistic American culture.) Fortunately, with the WTO established in 1995, it long ago set the rules that raise the likelihood that it will get its way. Why, for instance, should Las Vegas host so many marquee boxing contests when China's special administrative region Macau surpassed it as the world's top gambling destination long ago?

Even if the sentiment of a far larger majority and the facts line up against you--CompuBox stats say "Manny outlanded Bradley 253-159 in total punches and had a 190-108 edge in power shots landed. Manny outlanded Bradley in 10 of 12 rounds," it is very easy to flip others off. In the trade realm, consider the US just ignoring Antigua's claims against America for blatantly violating its services trade commitments by banning offshore online gambling and decimating Antigua's economy in the process.

Globalization as represented by trade is thus seen as rigged not only by Antigua but by so many others. Just as online betting concerns in Europe refuse to honour this farce, witness the never-ending quest to complete the Doha Round of negotiations. If most of the others thought it was a good idea to sign on, then it would have been completed a long time ago. Message to America: did you ever consider that it is not only in boxing where you are unfair but in so many other things? Like for Manny Pacquiao in boxing or Antigua in gambling for that matter, why bother to even wake up when the White Man's Burden in the 21st century is simply to screw you over?

Simply put, some have a habit of not fighting fair whether in sports or in economic matters. And that's all she wrote for the "American" ideal of fair play.

UPDATE: This sort of horseplay is not confined to boxing. Consider the even less cerebral, er, sport of hotdog eating. You'd think the world's hotdog eating champion would be American given how incredibly fat they are, but no. Still, they have frozen out the great (and actually quite lean) Takeru Kobayashi from competing freely in America.

Stiglitz Recycles Marx (But Fails to Quote Beardy)

♠ Posted by Emmanuel in at 6/10/2012 04:08:00 PM
While Joe Stiglitz is pretty hirsute himself, he's certainly no match for Karl Marx when it comes to luxuriant facial hair. Esquire considers Herr Marx's to be one of the best beards in history, and who am I to disagree. However, it seems Stiglitz is not only aping Marx's grooming habits but also his argument on the economy-wide effects of rising inequality. Return to the classic argument about the internal contradiction of capitalism that when wealth is increasingly concentrated in fewer hands, demand for the goods and services made by the capitalists will eventually dissipate, eventually threatening the sustainability of the entire capitalist system.

With labour's share of income plummeting in a highly racialized and inequitable society like the United States, Stiglitz is not exactly the first to notice this trend. Other mainstream economists like Nouriel Roubini having noted the same. Anyway, Vanity Fair has an excerpt of his new book The Price of Inequality where he observes:
When too much money is concentrated at the top of society, spending by the average American is necessarily reduced—or at least it will be in the absence of some artificial prop. Moving money from the bottom to the top lowers consumption because higher-income individuals consume, as a fraction of their income, less than lower-income individuals do...
The relationship is straightforward and ironclad: as more money becomes concentrated at the top, aggregate demand goes into a decline. Unless something else happens by way of intervention, total demand in the economy will be less than what the economy is capable of supplying—and that means that there will be growing unemployment, which will dampen demand even further. In the 1990s that “something else” was the tech bubble. In the first dec­ade of the 21st century, it was the housing bubble. Today, the only recourse, amid deep recession, is government spending—which is exactly what those at the top are now hoping to curb.
While I appreciate the Marxist turn, I would have liked to have seen more numbers to back up this stock assertion. As far as I can tell, Americans are still spending their brains out with household savings rates still nowhere near double digit percentages and consumption accounting for 70% of the US GDP.

BTW, the rest appears to be a rehash of what I among several others have noted on why the "American Dream" is a sick joke on the aspirations of those who still believe in that downwardly-mobile place [1, 2, 3]. Elsewhere it's an anti-finance screed you've probably seen many, many times before.

The International Political Economy of Obesity

♠ Posted by Emmanuel in , at 6/09/2012 03:26:00 PM
To be honest, IPE is usually not quite on the leading edge of social science in many respects. Prior to the breakout of the subprime crisis, there were next to no scholars focusing on real estate for instance save for a few exceptions like Herman Schwartz and Len Seabrooke. It thus bothers me that a quick Google search for "the international political economy of obesity" yielded my blog posts in the top three spots. Aargh.

Make no mistake, however: I believe that this subject matter will be a topic of, ah, w-i-d-e-r interest as the globalization of American-style obesity gathers pace and its fiscal implications become more evident. It's the worst of both worlds as far as industrialized countries are concerned. Not only will many folks live longer but they will also require more (costly) health care given the myriad of obesity-related illnesses. It's just another thing USA#1 cheerleaders routinely overlook: the strain placed on the public purse by the gut-busting expansion of American waistlines that's being copied the world over.

Anyway, Yahoo! News has an interesting feature on how ultrafat Americans--over a third of them are now not just overweight but downright obese [oink, oink]--bolster add more crippling poundage to already soft-in-the-middle budget deficits. Based on the percentage of health care costs thought to be associated with obesity in 2003, they predict that by 2018 the godforsaken US federal budget will include a hefty $343 billion forking out for these rotund Americans AKA "the nearly average Joe." That's not all health care spending but just that related to obesity. Throw in things alike other health care, pensions, unemployment benefits (I am not betting the US will have recovered a decade after the subprime crisis and it's indicative how bad things are that few will disagree) and it's too scary to contemplate.

It will become literally the survival of the fittest among industrialized economies as they struggle to keep in passable fiscal shape. Who will succeed in slimming down health care costs by doing the same to the general population? I don't know about you, but I doubt whether Americans will succeed at all given their track record in which things just get progressively worse, with no significant improvements in sight.

Rogue Traders, or Le Grand Casino Francais

♠ Posted by Emmanuel in , at 6/07/2012 11:24:00 AM
I've long supported the claim that London, not New York, is the financial capital of the world [1, 2]. I guess it's a backhanded compliment to London's claim to be the world's financial capital that earthshaking events for US financial concerns more often than not emanate from there instead of New York. Think of AIG's disastrous credit default swaps (CDS) being written in London. Or, to be current, JP Morgan Chase's London Whale messing around with CDS indices.

However, this trail of casino capitalism lacks another element to the story: So London may in fact be laxer and thus more attractive than New York when it comes to freewheeling financial frivolity, but where exactly do these budding masters of the universe come from? To be sure, the "rogue trader" can be from anywhere: Think of "pioneers" such as Japan's Yasuo Hamanaka, England's Nick Leeson and so on. As of late, though, there has been a distinctly Francophone flavour to these questionable characters, most recently Bruno Iksil, the London Whale himself.

Christopher Dickey of Newsweek does us a favour by describing how France has been a hotbed for graduates in the dark arts of financial engineering. The French have always had a penchant for mathematics, thus it's no surprise that recent years have witnessed its application in fields where the profit motive is strong. That said, the country itself has (thankfully) cast a weary eye on laissez-faire banking practices and has limited the wiggle room for budding casino capitalists. So, while various French universities produce financial engineering graduates dreaming of fame and fortune, their skills are much more in demand in what Bonaparte once called a nation of shopkeepers:
London is a magnet for France’s young financial professionals. They often prefer to work in what they call “Anglo-Saxon” environments (New York is another). Job openings are more abundant, salaries and bonuses aren’t so heavily taxed, and the culture admires success rather than envies it, as often happens in France. And there’s one advantage New York can’t match: in London, French transplants are blessed with easy weekend commuting via the Eurostar, which now runs from the heart of Paris to the heart of London in two and a half hours. The young City of London veteran, an El Karoui [quant goddess] disciple who prefers not to have his name in print, recalls his years at a major British bank where his team eventually numbered roughly 40 members, at least 75 percent of whom were either French or had a French educational background. Among the elite schools they attended: Paris VI with El Karoui, the ESSEC international business school, and the Université de Paris Dauphine—three of the many French temples of financial learning where formal mathematics is emphasized.
Though I suspect the JP Morgan Chase incident was unique in being a known entity with formal backing from the heads in New York, there may be a grain of truth to those far more junior than the London Whale being made scapegoats characterized as villainous "rogue traders." It is not entirely obvious why large positions without sanction can so readily be amassed in the absence of an infrastructure designed to accommodate such large positions:
The traders, the structure guys, and the quants have all seen the numbers sort themselves out before, and they may be tempted to imagine they’ll see it happen again this time. The outside world hears only about the derivatives that go wrong, while careers are built on the ones that go right. That’s how things have gone in the past, anyway. At JPMorgan Chase, hundreds of billions of dollars were in play, and Iksil was part of a unit that had earned $5 billion in the last three years. Given the extent to which teams are involved in the work of refining and improving the products, the idea that a “rogue trader” can make billion-dollar bets all on his own is, to say the least, improbable. It’s worth noticing that other heads besides Iksil’s are rolling already at JPMorgan—and they’re not French.

Bremmer and Roubini's Faulty Russia Analysis

♠ Posted by Emmanuel in at 6/06/2012 10:26:00 AM
It's nice to find new blogging talent every once in a while, and boy this fellow is impressive. I had never heard of Mark Adomanis before coming across his neat riposte to famous political risk analyst Ian Bremmer and economist Nouriel Roubini on why the West should "blackball Russia." Partly it's because his The Russia Hand blog is country-specific and its host Forbes isn't quite the first name you think of in terms of geopolitics. But don't be fooled: his wide-ranging analysis that considers much beyond that goes on in Russia is spot-on and I find very little to disagree with in his commentary. Here, he takes exception to rather lazy characterizations of Russia as (a) exceptionally authoritarian, (b) having doomed demographics when authorities have actually succeeded in boosting its population as of late and (c) a development laggard compared to other BRICs.

To be honest, I find navigation of Forbes blogs leaves much to be desired. This is a real shame since Adomanis is a really prolific blogger who makes long, detailed posts nearly daily. I hope Forbes pays him well for this kind of output! Again, he's a real up-and-coming talent not afraid to take on much more ballyhooed figures.

On the basis of their FT article, I doubt whether many will be encouraged to solicit political risk analysis from Bremmer's Eurasia Group--or economic analysis from Roubini's RGE Monitor, for that matter. While conducting political risk analysis, your job is to tell clients about prevailing risks to investment and how to address them should they decide to enter Russia, not to increase such hazards by inviting a "blackball" of the nation. What an attitude. Meanwhile, misstating trends alike demographics isn't the sort of thing that produces top-notch economics monitoring.

It really is a devastating but spot-on critique. And no, I certainly don't think blindly applying standards of Western capitalist democracy to others is going to cut it in this day and age when most OECD nations are in varying stages of distress.

Egypt, Spain & Far Beyond: Youth Unemployment

♠ Posted by Emmanuel in ,,, at 6/05/2012 04:08:00 PM
As an educator, I believe there is a personal responsibility on my part to ensure that my students are able to find gainful employment. I am not paid so that those seeking work won't be...simple as that. While there are others in academia who see themselves as  "preparing people for life outside of work" instead of "preparing people for working life," I must disagree. The hoity-toity idea of a liberal education being removed from the humdrum existence of everyday life has deep roots starting from ancient Greece. But, the ubiquity of capitalism and democracy--both disliked by then Greeks way back when (and arguably even today[!])--necessitates a practical approach. That is, contemplating higher pursuits in life doesn't quite work if you don't have the means to support it. To get all structuralist on you, someone must have laboured to erect those ivory towers.

Unfortunate college-educated unemployed and underemployed aside, what does this have to do with IPE, you ask? Plenty. Egypt has been paralyzed by unemployed youth with nothing better to do than protest again and again. So they overthrew Mubarak, but things have gotten even worse economically. Some change, and certainly not the sort you'd expect to help land jobs for the youth. Same thing in Spain: With the unemployment rate for those aged 15-24 reportedly above 50%, headlines numbers like these are hardly inspiring. While the relationship between youth unemployment and economic crisis is complex, you can at the very least say that high rates of the former are indicative of the latter.

The International Labour Organization (ILO) has a neat publication from late last year that notes that these trends are not unique to certain troubled countries but are evident the world over. For another woeful statistic, consider that about 40% of those unemployed worldwide are the youth:
Of the world's estimated 207 million unemployed people in 2010, nearly 40 per cent – about 75 million – were between 15 and 24 years of age. In many countries, this grim unemployment picture is further aggravated by the large number of youth engaged in poor quality and low paid jobs, often in the informal economy. Many youth are poor or underemployed: some 228 million working poor youth in the world, live on less than the equivalent of US$ 2 per day.
The abstract does not hide the bleak global situation:
In August 2010, the ILO published the Global Employment Trends for Youth: Special issue on the impact of the global economic crisis on youth. The report presented an analysis of the latest available world and regional aggregates of key labour market indicators for young people aged 15 to 24 years, with a specific focus on how young people fared in the face of the recent global economic crisis. One year later, with an environment of growing uncertainty in the economic recovery and stalled recovery in the job market, the ILO revisits the much publicized youth labour market figures and draws the unfortunate conclusion that the situation facing youth in the labour market has not improved and that prospects for the future are not much better. Not only do youth unemployment rates continue to rise in developed economies, but also the increasing length of the job search is leading some young people to become discouraged and fall out of the labour force entirely. In developing regions, on the other hand, many young people continue to work while living in conditions of extreme poverty.
It is certainly worrisome in a number of senses. First, where has all the education gone? Despite massive increases in enrollment the world over, it has been noted that work opportunities remain scarce for supposedly better-educated people. The ILO publication makes for a very sobering read that suggests such employment for youth is often the exception rather than the rule--especially nowadays. Second, various nations being unable to accommodate their justifiably angry youngsters is a political-economic threat of the highest order. 

There is certainly no lack of poster children for dysfunctional education systems nowadays alike erstwhile models the Anglo-Saxons. While it may have few answers, the ILO report at least suggests where to start. Make no mistake, youth unemployment is no small issue, and it's certainly one with severe ramifications the world over if it continues unaddressed. Ask Tunisia, Egypt, Greece and Spain...I fear this list will run and run.

Why Japan Favours an FTA With China, Not the US

♠ Posted by Emmanuel at 6/03/2012 10:06:00 AM
I almost missed this, but better later than never: the Economist's Banyan has a perceptive entry into why a pan-Asian FTA incorporating the world's three largest economies US, China and Japan is unlikely. Not only do the US and China have competing regional interests, but their preferences differ as well. As I've written in the past, the US favours a "high-quality" FTA incorporating its pet issues of intellectual property, competition law, government procurement, the environment and labour. In other words, the US is trying to make its trade partners microcosms of itself, although trade theorists alike Jagdish Bhagwati have been especially wary of many of these as unnecessary add-ons that do not promote trade but merely assuage certain domestic US lobbies.

By contrast, China-led FTAs reflect China's preferences in dealing more with goods than services as well as not cross-linking various economic issues USTR-style. By not placing so many demands on FTA partners, there is in theory a better chance of inking deals. That said, FTAs are not merely about economics but about politics. In our region, some perceive that the US currently has an advantage since many see trade as a way to hedge security bets against an increasingly dominant and potentially belligerent China. 

Or so the story went. Recently, Japan has warmed up to China--it's recent vanquisher for second-largest economy status in the global league tables--instead of its nominal geopolitical ally the United States. Despite a fairly heavy full-court press by the US to include Japan in the Trans-Pacific Partnership (TPP) expansion talks, it hasn't really participated there. Instead, Japan has (again) been talking to the +3 in the ASEAN+3 of itself, China and South Korea. These three combined would dwarf the EU, but heaven knows we've been here before:
[A] first reaction to the announcement on May 13th that China, Japan and South Korea are to open talks on establishing a trilateral free-trade area is to shrug. The idea has been around for a decade. There are many obstacles to its realisation. And not so much as a date has been announced for the talks to begin...

There are a couple of shrug-worthy elements to the proposed free-trade area. The first is that it will be terribly hard to bring to fruition. In all three countries, important lobbies will resist the opening to free competition: Japanese farmers, Chinese state-owned enterprises, South Korean exporters hoping to steal a march over Japan through a bilateral free-trade agreement with China. Secondly, any agreement is likely to be a “shallow” one—allowing plenty of exemptions [especially in agriculture for Japan and South Korea]. South Korea has signed “deep” agreements with the European Union and America, though they have been fiercely controversial. But China’s trade agreements, such as that with the Association of South-East Asian Nations, ASEAN, tend to be sneered at by American and European trade negotiators as feeble substitutes for the real thing—FTA-lite. 
Once again demonstrating that security and economic concerns do not always coincide, Japan's reluctance to be invovled in the TPP talks signifies realism about what sort of deal it can sign (with many exemptions for agriculture possible) with China, as opposed to what the US wishes (that it be less beholden to certain lobbies alike agriculture). Besides, there's this undying fantasy about American carmakers gaining access to the Japanese market despite decades of unremitting failure. Anyway...
The biggest problem facing the TPP, however, is the failure so far of Japan to join the process. Without it, says Razeen Sally, an economist at the Lee Kuan Yew School in Singapore, the TPP “would look emasculated”. As Japan’s prime minister, Yoshihiko Noda, put it in March, it would be like The Beatles without Paul McCartney (America is John Lennon, he said). 
To be sure, both the +3 and TPP are going to be difficult endeavours to complete. Still, it's noteworthy that many Asian countries linked by defence pacts to the US alike Japan or for that matter the Philippines, South Korea and Thailand prefer not to participate in the US-led FTA shindig. Is it a sign of waning US influence or FTA fatigue after so much busywork over the past two decades? I believe it's a bit of both.