New Zealand Needs Skilled, e.g., Sex Workers

♠ Posted by Emmanuel in at 4/26/2018 11:46:00 AM
Me love you long time in Kiwi-land.
Believe me, I was looking for something else when I found this rather amusing news story from the New Zealand Herald. Prostitution being legal in New Zealand, it turns out that their immigration authorities recognize sex workers and escorts as "skilled workers" going by the Australian and New Zealand Standard Classification of Occupations (ANZSCO). It determines who gets how many points. That is, they use a point-based system for determining immigration:
Would-be migrants can claim valuable points as skilled sex workers or escorts, according to information on Immigration NZ's (INZ) website. But an immigration expert say it would be difficult for any applicant to succeed. The agency confirmed sex work/escort is on the skilled employment list, despite it not being on the skill-shortage list. A sex worker or escort is defined as someone as providing clients with sexual services or social companionship.
That said, it's unlikely that someone in this line of work can easily move to Hobbit-ville given the practical impediments to applying:
"The list itself comes from the Australian and New Zealand Standard Classification of Occupations (ANZSCO) list and not INZ," an agency spokeswoman said. According to information on INZ's website, sex worker or escort is listed as an ANZSCO level 5 skilled employment, and applicants could claim points if they were paid at or above $36.44 per hour, which is $75,795 based on a 40-hour week [my emphasis; the reporter was having fun with math given the nature of the mentioned trade]. The applicant would also have to be qualified in ways that include having a recognised qualification or have at least three years of relevant work experience.
How do these points-based systems work? Consider the Aussie one on which the Kiwi one is based:
Australia's points system was instituted in 1989 as a departure from the country's previous racial- and ethnic-based policy. To gain entry, applicants must accrue 60 points for such attributes as English proficiency, skilled employment, educational background and ties to Australia. Australia awards the greatest number of points (30) to people of prime working age. Applicants must also pass a medical exam and character test.
Hmm, that part about medical exams and character tests may prove problematic for folks in this profession. Again, while it is conceivable that a sex worker could obtain an NZ work permit based on being a skilled worker, it is unlikely. In fact, I can only think of one at the moment who qualifies having well and truly cleared the NZD75K mark, and she [although it can be a he, I presume] had the benefit of extra-curricular legal entanglements.

Will a US points-based system mean America won't run a trade deficit with other countries in this valuable service? Thinking of it, those Kiwis may be running unfair trade practices here. Maybe it's time to sic Peter "Death by China" Navarro on them. David Dennison, eat your heart out.

70s Redux: Stagflation, Trade Wars & More

♠ Posted by Emmanuel in , at 4/20/2018 09:27:00 PM
US spars with Russia and China, oil spikes, stagflation returns...whaddya mean we're not in the 70s?
The Trump administration's combative attitude towards China and Russia make it seem as though the 70s never really went away. The Chinese stand accused of using nefarious means to enhance state capabilities--by undermining pillars of Western capitalism like technology to their own benefit. Meanwhile, the Russians are accused of engaging in all sorts of underhanded actions to destabilize countries aligned with the United States. You sure it's not 1979? While Russia is a shadow of its former Soviet self, China is set to overtake the United States as the world's largest economy on current trends by mid-century.

For more of that 1970s feel,  add in oil crisis-style price increases due to OPEC reducing production as well as geopolitical troubles in the Middle East. Israel figures large in 1973 as in 2018, as does Iran via the fall of the Shah in 1979 and the imminent US-Iran quarrel over Trump reneging on a multilateral deal over Iran's nuclear programs.

All these bring the reappearance of another bugaboo from the past which is appearing a lot in today's financial headlines: the [imminent] return of stagflation. In normal times, inflation results from having a robust economy creating demand for various goods, thus pulling up prices for these them. With stagflation, however, you have the unwanted combination of a stagnant economy and rising prices. It's essentially the difference between "demand-pull" and "cost-push" inflation.

What's pushing up prices nowadays? With regard to Russia, aluminum prices have been rising--as have those for other industrial metals--as the US has applied sanctions on Russian producer Rusal (Russia + aluminum) due to its close ties with Russia's globally meddling government. The end result has been the spike in prices:
They’ve gone crazy, jumping more than 30 percent since April 5 -- the day before the sanctions were announced -- and reaching the highest since 2011. Goldman Sachs Group Inc. said the metal could spike to $3,000 a metric ton, which would be almost 50 percent above the price before the curbs. And it’s not just the final metal: Alumina prices surged to a record, with at least one cargo selling for $800 a ton, almost $200 higher than the previous top price set more than a decade ago.
Trump's stated intentions to hit $150B worth of Chinese imports with 25% tariffs has folks worried about inflation Stateside emanating from a potential action of such magnitude:
US consumers would bear the brunt of the immediate damage in the form of inflation, as the prices of China-sourced consumer products and components would be expected to rise sharply. “The shelves of your average US retail outlet are filled with clothing, footwear, toys, appliances and other goods produced mainly in China,” says Mr Capri.

“US consumers would feel considerable pain from any kind of retaliatory tariff war between the two countries.” In this scenario we estimate US consumer price inflation overall to be 0.9% higher in 2017, and 1.5% higher in 2018, compared with our baseline US forecast. Private consumption growth out to 2021 would be well below that forecast in the baseline scenario.
Topping it all off are OPEC efforts to buoy oil prices combined with potential security-related supply disruptions if American-led sanctions of Iranian oil are resumed. Lisa Abramowicz of Bloomberg shares this chart showing the relation between breakeven rates on 10-year Treasuries--a measure of inflation expectations--and the price of WTI crude oil.

Bring out the disco ball and bell bottom pants from the basement; we're groovy 70s like in the financial world, too.

Should the World Bank Still Lend to China?

♠ Posted by Emmanuel in , at 4/16/2018 01:17:00 PM
There's an interesting behind-the-scenes discussion going on at the World Bank about the Chinese still receiving loans from the development lender. Not only is a country well on its way to becoming the world's largest economy still borrowing, but it's actually the largest borrower at its International Bank for Reconstruction and Development (IBRD) arm, which charges at market rates plus a relatively small spread. From the Financial Times:
China was the IBRD’s top borrower last year, according to the World Bank, with $2.4bn in funds committed. That was 11 per cent of the IBRD’s lending and more than it committed to education and health programmes worldwide.
Things get a more interesting when politics enter the fray. While the US wants to involve China in the workings of the World Bank, it does not want China to begin rivaling American influence at the development lender at a time when the World Bank requires more funding to become self-sustaining in its lending activities. Hence, Americans have to juggle four hard-to-reconcile objectives:
  • Maintain Chinese interest in participating at the World Bank as a contributor
  • Limit Chinese borrowing at the World Bank as an IBRD borrower
  • Keep American influence at the World Bank despite Trump's "America First" (isolationist) inclinations
  • Encourage lending to truly lower-income countries, not middle-income ones like China
The compromise being worked on to meet these disparate objectives is somewhat elaborate:
The increase in paid-in capital will be split into two with $7.5bn going to the International Bank for Reconstruction and Development, the bank’s main arm, and $5.5bn to the International Finance Corporation, its private sector lender, the official confirmed. The US is set to provide $1.3bn to the IBRD capital increase, the official added, but has not yet decided whether it will inject new capital into the IFC.
As part of the deal China will see its voting power in the IBRD rise from 4.45 per cent to around 5.7 per cent, people familiar with the matter said. The deal is expected to be endorsed in principle by World Bank shareholders at the spring meetings, according to people familiar with the discussions. Final approval is expected before this year’s autumn meetings. 
Then there is the US love-hate relationship with China:
The US has been concerned about the World Bank lending to a rival power that has been sitting on trillions of dollars in foreign currency reserves since Barack Obama was president. But Mr Kim has long argued that lending to a rising China helps to solidify a future for the World Bank and gives it a voice in Chinese economic reforms.

The Trump administration’s push to get the World Bank to stop lending to countries such as China is likely to take time to take effect. Some people familiar with the discussions said Beijing’s cost of capital at the bank would not rise immediately, as the new band for countries in its situation was established. Instead, they said, the interest charged to countries such as India in lower bands could be reduced. 
It's a fine line to thread in dealing with China that the Americans face, divided as they are among themselves to begin with. The Obama-era appointee Kim wants to engage with China, while the Trump administration alternately wants to leave the World Bank alone or limit China's role if it does choose to engage with the development lender. Why a country with historically unprecedented foreign exchange reserves [China] needs to borrow from the World Bank is also puzzling: Maybe it's more for gathering technical assistance-style knowledge than funding per se.

Mad Donald and 'Rejoining' Trans-Pacific Partnership

♠ Posted by Emmanuel in at 4/13/2018 12:54:00 PM
Why would CPTPP members bother aggravating themselves with Trumpified FTA negotiations all over again?
In an earlier post discussing the "renegotiated" Korea-US free trade agreement, I told you that you're better off following Trump's various dalliances with card-carrying members of the adult entertainment industry in search of something substantial. We now receive news that, during a talk with lawmakers from rural states worried about an American trade war with China, Trump sought to calm them by not only claiming that one is not inevitable but also that he's looking into rejoining the Trans-Pacific Partnership (TPP). In my humble opinion, Trump's relations with porn stars still has more actual policy implications. Allow me to explain.

What has transpired since the US left the TPP-12 is this: The remaining TPP-11 countries understood that the deal could not meet ratification conditions without the United States (who came up with the idea in the first place). From the Vietnam Investment Review:
According to the TPP, the agreement would take effect if the total GDP of the member countries captured 85 per cent of total GDP of the 12 signing countries in 2013. With the withdrawal of the US, which made up 60 per cent of the total GDP of the whole TPP, the eleven remaining countries had to change this. Therefore, if at least six nations approve the CPTPP, it may easily take effect 60 days after signing. Additionally, the new agreement also adds regulations related to the process of withdrawal, participation, and flexible reviewing of the CPTPP in the future.
So, if they were to continue with a deal without the Americans, losing the world's largest consumer market meant that the bar for participation had to be lowered as well given the reduced attractions. This task was accomplished by removing exactly the sort of intellectual property rights agreements the United States has been banging on about with regard to alleged Chinese theft of it. Ditto for patent protections caused by "unreasonable" delays originally meant to placate American MNCs:
[A]round 20 articles of the CPTPP have been temporarily postponed, including the strong commitments on intellectual property that the US raised before. Specifically, 11 of the 20 articles are on intellectual property [my emphasis]. The CPTPP will delay requirements for member countries to change their laws and practices. The CPTPP also suspends the time term of a copyright in case of unreasonable delays in licensing. Members of the agreement will not have to extend protection terms from 50 to 70 years [my emphasis].

The remaining postponed articles are on investment. For the dispute solution mechanism between governments and investors (ISDS), the CPTPP has narrowed the mechanisms availability for foreign investors to sue the host member state. Besides, the CPTPP states that one member of the ISDS Arbitration Panel will be appointed by the government and the plaintiff each, and one by both.
What Trump would in effect ask for is to put back in the IP-related articles in exchange for the US re-joining the agreement...and then some. While the attraction of better access to the world's largest consumer market is great for certain parties--think of up-and-coming exporter Vietnam--this possibility is outweighed by seriously huge inconveniences for the rest. Trump alludes to not wanting to re-enter unless the deal is somehow made better (read: America-friendly) than the original TPP. So, tack on more US-pleasing bits others find hard to swallow and likely more years of negotiation to remake CPTPP into TPP+ or whatever Trump would call it.

There's also the matter of Trump as a reliable negotiator, and he has demonstrated neither reliability nor trustworthiness in his entire existence. Why would the others choose to upend the whole process again to accommodate someone proven to be so fickle? It's not going to happen. My belief remains the same as before: the others are allowing for the possibility for the US re-entering TPP, just not with Trump. For this reason the IP articles and so forth have not been jettisoned altogether but are held in abeyance.

That task may be up to pro-trade Vice-President Mike Pence after Trump is removed or resigns from office, or the next American president. For now, contemplating a Trump-led TPP return is actually of lesser substance than the consequences of Trump attempting to suppress damaging disclosure of his porn star-loving ways.

From US-China to World Trade War, Auto Edn

♠ Posted by Emmanuel in , at 4/07/2018 03:25:00 PM
If you want yourself beaten up in world trade, the Trump administration has the best automobile trade.
Apparently not done after baiting China--supposedly, Trump now wants to apply 25% tariffs on $150B instead of "only" $50B worth of PRC-sourced goods--we receive news that the Great American Leader now wants to punish the Europeans, too. The circumstances of this forthcoming trade bust-up are even more unbelievable if you think about them. Let me explain.

Recently, the Trump administration has proposed rolling back environmental regulations the previous Obama administration set on automobiles to benefit American automakers:
The Trump administration on Monday rejected an Obama-era plan to make automobiles more fuel efficient, opening up a long process to weaken current standards and putting California and the federal government on a collision course over vehicle emissions.

Scott Pruitt, administrator of the Environmental Protection Agency, said in a statement that the standards on model year 2022 to 2025 vehicles were not appropriate and should be revised. The Obama administration set the average fleet-wide fuel efficiency standards “too high” and “made assumptions about the standards that didn’t comport with reality,” Pruitt said. He did not offer specifics on revising them.

The standards called for roughly doubling by 2025 the average fuel efficiency of new vehicles sold in the United States to about 50 miles (80 km) per gallon. Proponents said they could help spur innovation in clean technologies.
Yeah, screw the Earth! There's no such thing as global warming! Drill, baby, drill! You're with me right? Well, um, er, apparently, the Trump administration is not even with itself.  In its quest to bash those cheating foreigners--this time the Europeans--it appears they're seeking restrictions on cars imported from the European Union because of...I am not making this stuff up...environmental violations:
The Trump administration is considering ways to require imported automobiles to meet stricter environmental standards in order to protect U.S. carmakers, according to two sources familiar with the administration’s thinking.

White House spokeswoman Sarah Sanders said President Donald Trump “will promote free, fair and reciprocal trade practices to grow the U.S. economy and continue to (bring) jobs and manufacturers back to the U.S.”

Two U.S. automotive executives said Friday they believed the idea had been floated in White House talks last week by Commerce Secretary Wilbur Ross, but said the auto industry had not asked for the changes or backed them.
Aside from rolling back environmental regulations for domestic firms while seeking to raise them for foreign ones, it's doubly rich insofar as American automakers have long complained about other countries' "non-tariff barriers" [NTBs] like environmental regulations. The Europeans will be hit harder insofar as brands which sell their wares Stateside have a smaller US manufacturing footprint:
U.S. automakers have long urged removal of non-tariff barriers in Japan, South Korea and other markets that they believe unfairly hinder U.S. exports. There are also concerns that any new non-tariff U.S. barriers could violate WTO rules.

Citing unnamed senior administration and industry officials, the Journal said Trump had asked several agencies to pursue plans to use existing laws to subject foreign-made cars to stiff emission standards.

It appears such non-tariff barriers could have a greater potential effect proportionately on European automakers, which collectively import a greater percentage of cars from plants outside the United States, according to sales figures from Autodata.

In comparison, Japanese and Korean brands made about 70 percent of the vehicles they sold last year in the United States at North American plants. European brands built only 30 percent in North America.
Assuming the United States remains in the World Trade Organization, something we're unsure of these days, this idiocy would be the most open-and-shut case of discrimination against foreign producers you could possibly find. That they are willing to do something so blatantly discriminatory is either the product of unimaginable foolhardiness or an all-out attitude of not caring anymore what other countries believe. It's every country out for itself. With climate change denier Scott "Lifestyles of the Rich and Famous" Pruitt as your environmental regulator, these sorts of inconsistencies were perhaps bound to happen since he's more concerned with living the good life than any semblance of coherent policy.

These are the times we find ourselves in.

From US-China to World Trade War, Farm Edn

♠ Posted by Emmanuel in , at 4/07/2018 03:01:00 PM
Trump may start a chain of events wherein soybeans become the casus belli for world trade war.
The usually-reliable trade commentator Chad Bown, currently of the Petersen Institute of International Economics, has identified the way an American-Chinese tit-for-tat trade spat can become a wider conflict involving the rest of the world. It is no big secret that the PRC is now taking aim at constituencies very loyal to Trump. Namely, agricultural regions of the United States. In my most uncharitable moments, I'd simply say "you get what you deserve" for voting for Trump and leave it at that. However, there are additional nuances here involving the fate of world trade.

Rich-country agricultural subsidies have long been a bugaboo for developing nations in export competition with them. A trade negotiation round has never, ever been completed at the WTO since developing countries have expressed dissatisfaction at these developed countries' reluctance to lessen agricultural subsidies. Why should poor countries bear the brunt of rich countries subsidizing their agricultural sectors, artificially increasing their import competitiveness? As we gather nowadays, developed-world farmers are very important constituencies. This is so much so that Trump is contemplating extending even more subsidies than they currently enjoy to offset possible retaliatory Chinese tariffs on soybeans and other US agricultural exports:
President Donald Trump, wanting to protect U.S. farmers from China's threatened tariffs, may end up pitting his country against many more nations in a trade spat that has hit global markets and worried the international business community, experts said Friday.

If the Trump administration chooses to subsidize American farmers further, that could trigger retaliatory tariffs and subsidies in major exporters of agricultural products such as the European Union and Brazil, the experts added.
Chad Bown lays out how this will play out in a Twitter message, of all things:
How THIS escalates beyond US-China:
• Trump slaps tariffs on China
• China retaliates on US agriculture
• Trump subsidizes US agriculture to pay them off
• Farmers in EU, CAN, AUS, BRA, ARG, etc - now suffering because of Trump subsidies - demand retaliatory tariffs/subsidies
Instead of being a North-South spat as it's played out at the WTO during the Doha Round, what we have here is a potential free-for-all as assorted agricultural exporters pile in regardless of their development status. Just as it is in "real" wars, a localized conflict often can spark wider conflagrations.

US-China Trade War: Ready, Aim

♠ Posted by Emmanuel in at 4/04/2018 03:40:00 PM
Dragging the world economy into his idiocy: Trump unleashed in the international political economy.
I'll offer short commentary here since it's been largely anticipated. Yesterday, the United States Trade Representative lifted some of the fog of trade war I talked about earlier by unveiling a list of China-originated products targeted for 25% tariffs in line with its Section 301 findings. The USTR originally suggested $50B worth of goods to be targeted; Trump himself increased the amount to $50B. There was some (false) hope before that the US and China could pre-negotiate a less extensive list, but the equity markets were proven to show quite a lot of wishful thinking.

Shortly thereafter, the Chinese government unveiled its own tit-for-tat list of $50B worth of US-sourced exports to the PRC. Again, I believe that there was some wishful thinking that just as the PRC restrained itself in response to steel tariffs to $3B worth of goods, it would not make such an extensive targeted list of products. Not so.

In effect, then, the US and Chinese have established what they would target: The US wants to slow Chinese plans (namely, "Made In China 2025") to enhance its development by focusing on high-technology industries (which are allegedly benefiting from widespread PRC-sponsored intellectual property theft). Yet, the US wants to have its cake and eat it too by slapping tariffs on non-consumer goods. If it did, it would raise the ire of price-sensitive consumers--especially Republican constituents. Meanwhile, China seeks to hit America where it hurts most politically--those very same Republican constituents like folks in the Rust Belt who voted for Trump or soybean farmers and other agricultural producers who by and large voted for the orange-colored  buffoon.

Over the next two months, the USTR will subject its list to "consultations" with affected constituents, their lobbyists, and other stakeholders. So the next move is largely in America's court as it finalizes what products to hit with 25% tariffs. The Chinese will simply match what the amount the US applies tariffs to with identical 25% tariffs. That is the very definition of tit-for-tat. We're at the "aim" stage of ready, aim, fire. The "fire" stage happens when tariffs are finally applied.

As a parting note, Trump believes the US will "win" a trade war easily because the trade balance is so heavily in favor of China. Figures show a $337B trade deficit the US is running with China; Trump says $500B (or $800B even after accounting for IP theft). Where he gets these numbers is anyone's guess. Like most other things, he just makes this stuff up, probably. The fallacy here is regarding trade as a zero-sum game: the size of the trade balance shows who is "winning" or "losing." Hence, a trade war is "easy" to win since if US-China trade comes to a full stop, the US would be "winning" back $375B annually.

If US-China trade comes to a full stop, I somehow believe that we will have far greater problems for the world economy than Trump gloating about how he "defeated" China or other such nonsense. Still, these are the times we find ourselves in that such a scenario is not entirely implausible.

Visit USA? You Must Be Joking Pt I

♠ Posted by Emmanuel in at 4/03/2018 04:53:00 PM
Avast ye coloreds! You're not wanted in Trumpland...go back to your s__thole country, etc.

There's good stuff over at Politico on how the number of visas to the United States--including the tourist visas I am emphasizing here--has fallen significantly since Trump became president.  No real explanation is required about why this is happening since his bigotry knows few bounds--against people of dissimilar color, creed, gender, gender identity, or other non-Trumpian elements. In short, if you're not a white male, you're not wanted in Trump's America.

I will have more on the reduction of tourism to the United States--its largest export sector, mind you. It's always struck me as novel that someone who supposedly made a fortune (or at least purports to have made one--we can't tell as Trump famously won't release his tax records) has done more than any American president in living memory to make others unwelcome.

Suffice to say for now that the number of those eligible to visit America are dwindling. Not that many necessarily want to nowadays but...
It’s unclear whether the drop is due to fewer people applying or more rejections of [visa] applications. The cause is likely some combination of both. The State Department furnishes data on how many visitor visas are granted per country, but releases only limited information on how many applications are received or refused.
The timing is informative though as Trump's hateful bigotry has escalated:
But the decline comes as Trump is once again underscoring his hard-line views on immigration. Over the weekend, the president used Twitter to blame Democrats and the Mexican government for a “dangerous” flow of migrants over the border. The Republican president blasted America’s “dumb immigration laws” and threatened to abandon legislative talks on how to deal with undocumented immigrants brought to the United States as children.

Evidence plainly indicates that Trump’s desire to restrict foreigners’ access to the U.S. has become a reality. Critics say that, by imposing new procedural and security hurdles, Trump and his aides are building a figurative wall to keep people out of America, even those who just want to come for a brief visit. The critics fear the drop in visas could damage industries, ranging from tourism to higher education. 
Is there an exchange-traded fund [ETF] for the American tourism sector? Given current trends, betting against it is a no-brainer in the age of Trump. Believe it or not, and Trump supporters may have difficulty believing this, white supremacist policies are not quite welcoming.