City of Londoners: PM Boris Johnson = Disaster

♠ Posted by Emmanuel in , at 5/28/2019 12:59:00 PM
Some fat white guy with weird "blonde" hair: from the US to the UK, it brings disaster.
This is a no-brainer: when the likely next prime minister of the United kingdom has said "f--k business" when asked about Brexit's fallout on British commerce, businesspersons are going to be concerned. With the recent resignation of Theresa May from that post, and Boris Johnson (former London mayor) being the front-runner, denizens of the City of London are antsy. Will he be the kryptonite of the financial services industry that plays an outsized role in UK commerce?

Folks in the City are pessimistic on the arch-Brexiteer Johnson, to say the least:
More than 80% of respondents to an FN poll believe the former foreign secretary is the wrong person to replace May and will be bad news for the Square Mile Financiers in the City have expressed deep concern at the prospect of Boris Johnson replacing Theresa May at Number 10, fearing the former mayor of London’s appointment would be very detrimental to the Square Mile.

Executives have baulked at the possibility of Johnson becoming the next prime minister, expressing fears his appointment would increase the likelihood of Britain crashing out of the EU without a deal and inflame the risks of a UK recession. According to a Financial News poll of 70 people working in the Square Mile, more than 80% said Johnson is the wrong person to replace May. A further 77% said his appointment would have a negative impact on the City.

“I can't think of a single good thing to say about Boris Johnson,” said one senior banker based in London. According to the latest betting odds, Johnson is the overwhelming favourite to become PM. William Hill, the bookmaker, is giving odds of 13/8 he will succeed, ahead of former Brexit secretary Dominic Raab at 4/1. May will quit as Conservative leader on June 7.
The forecasts are dire for a Johnson government despite it being seemingly hard to avoid installing the guy. You could say he's the sum of all Brexit fears:
Gina Miller, the fund manager and prominent anti-Brexit campaigner, told Financial News: “The qualities of honesty, integrity, strategic thinking, maturity, a work-ethic and acumen should all be the prerequisites of a leader. Boris possesses few of these.”

Executives are particularly troubled by the “f*ck business” comment Johnson was reported to have made in June last year when the then foreign secretary was asked about industry’s concerns over Brexit.

“Anyone who says ‘f*ck business’ is not good for the City,” said one director of a European bank. “A hard Brexit will be a disaster [for the Square Mile]. Just look at the sterling-dollar rate.” The chief executive of a London-based asset manager added: “Boris has done nothing to show he has any regard for the City.”

Big Biz: Helping Move Mfg Out of China

♠ Posted by Emmanuel in , at 5/23/2019 04:03:00 PM
Trade war or not, manufacturing in the lowest-cost sectors will inevitably move out of China to places like Vietnam.
How do you make money in China an export-oriented concern? Yes, this is a trick question whose answer should be obvious from the post title. Firms that help manufacturing concerns move their production facilities to lower-cost locations in the aftermath of Trump's trade war is the obvious answer here. Notably, while rising costs in China have already become plenty evident--higher wages and more stringent labor and environmental regulations--the forthcoming declaration of total tariffication of all Chinese exports to the United States seems to be the last straw:
However, plenty of on the ground accounts suggest that factories are being downsized or closed completely, with firms moving to Vietnam, Taiwan, Cambodia, Thailand and other parts of Southeast Asia. This is not solely due to the trade war, since the rising cost of labour and meeting environmental regulations in China have also led to companies seeking cheaper production hubs over recent years.

But the tariffs have accelerated the trend, and logistics companies with cross-border capability are milking the opportunities, moving the growing traffic of Chinese firms from China’s industrial heartlands and newly-built industrial parks in neighbouring countries.
“Since the second half of 2018, our company has helped 10 manufacturers – in sectors from jewellery, to electronics, to printing – relocate their entire plant. That is to say, these 10 enterprises have completely shifted and withdrawn from China,” said Eric Huang, who runs one of the leading logistics companies in Guangzhou, R&T Transportation.

“We have also helped at least 500 companies to transport their partial production lines, as well as raw materials and equipment, to their newly-built plants in Vietnam, Indonesia and Thailand,” he said. As the trade war escalated in recent weeks, the pace of the exodus has sped up too. On May 10, Trump increased tariffs on US$200 billion of Chinese goods from 10 per cent to 25 per cent.
And so ends China's turn as the factory to the world? At least it's status as the lowest-cost producer is certainly in question. Even if the trade war were to cease today, the transition to ever-lower cost locations will continue as China loses that status:
Even if the trade war were to end tomorrow, the logistics companies do not expect this trend to grind to a halt.

“We started logistics business between China and Southeast Asian countries in 2011, with about 30 million yuan (US$4.34 million) of annual turnover at the time. Our turnover was 150 million yuan in 2018. Though no one knows the final outcome of the trade war, the relocation trend is sure to increase. It is quite possible that the business will double to 300 million yuan this year,” Huang said.

How Gen. Franco Begat Spanish MotoGP Dominance

♠ Posted by Emmanuel in , at 5/19/2019 06:07:00 PM
A long-dead dictator set into motion the dominance of sporting figures like Marc Marquez and Jorge Lorenzo.
I've been paying more attention than usual to MotoGP, the top flight of motorcycle racing. Formerly, there were three classes--500cc, 250cc, and 125cc denoting different engine displacements. Eventually, these have been rebranded MotoGP, Moto2, and Moto3, respectively. Regardless, even a casual viewer like myself will notice that a lot of the top riders and teams in these competitions are Spanish. How did this happen? As it turns out, there is a potentially interesting history behind it all.

One of the most fascinating interpretations comes care of Motor Sports Magazine. it writes that Spanish obsession with these two-wheeled vehicles can be traced to the military dictatorship of Generalissimo Francisco Franco. Shunned by the rest of the world, local bike industries emerged, with sporting events being organized around these manufacturing concerns:
To understand why Spaniards race motorcycles better than anyone, you need to go back decades, all the way to the 1960s, because this is a tale of politics, protectionism, industry, media money and balmy Mediterranean weather.

During the 1960s Spain was still under the heel of dictator General Franco. Since the end of the Second World War, the country had been a pariah to the rest of Europe, which had fought off fascism at a terrifying cost, while Franco blithely remained neutral.

Spain was therefore isolated, so Franco prescribed an economy of self-sufficiency and protectionism. The nascent Spanish motorcycle industry was one of many protected from outside competition, most importantly from Japan. Companies like Bultaco, Derbi, Montesa and Ossa were able to flourish – to an extent – by manufacturing cheap little two-strokes that helped mobilise the nation. Inevitably, locals started using these bikes in street races, organised in towns and cities across the country.
Even if the dictator is long dead, Spanish national competitions now serve as feeders for those aspiring to international competition in the various Moto racing series. Even other Europeans come to compete in Spain for this very reason:
This is where the Spanish have been particularly effective. They succeed at world level because they laid strong foundations at home by creating highly competitive national championships and then taking their best riders through international series and into Grands Prix.

[Major Spanish organizer] Dorna took a while to get a real grip on motorcycle racing. But it got there in the end. As a result Spain has become the global centre of bike racing. The country’s multiple championships – from tiny minimotos through to the larger categories – offers a ladder to the big time. So much so that ambitious riders from around the world quit their national championships and head to Spain.

To underline how things have changed since the 1970s, Kenny Roberts took his eldest son Kenny Jnr away from the US racing scene to contest Spain’s Ducados Open series. He went on to win the 500cc world title in 2000.
Perhaps it wasn't the intention, but Franco may have set Spanish motorcycle racing domination into motion all those years ago. 

Trump on LDCs: Give Shitholes Food Aid

♠ Posted by Emmanuel in ,,, at 5/13/2019 04:37:00 PM
Feed Shithole Countries Program [FSCP]--a forthcoming American "gift" to the world?
Sometime ago, precisely zero people were surprised when US President Donald Trump characterized what were understood to be poor, migrant-sending countries as "shitholes." Rising to political prominence on a false, racist claim--the Obama "birther" conspiracy--displaying such verbal animus was to be expected. More recently, though, Trump has been toying with the idea that all the agricultural products which would have been sold to China can instead be purchased by the US government and distributed to these "shithole" countries as food aid. This action is to be done to help farmers who voted by and large for this obese racist (who probably doesn't need more food anywaygoing by his portly physique).

Leaving aside the intent here--Trump does not have a charitable or well-meaning bone in his body (remember that his "foundation" was a scam that's since been shut down)--there are several salient points which suggest it will help neither American farmers nor citizens of poor countries if Trump's latest harebrained idea was to be implemented. Bloomberg explains.

First, this idea has already been tried before during the Carter administration, and it didn't quite work as planned:
In the 1980s, crops expanded just as the export ban caused Soviet Union countries to start buying grain elsewhere. At the time, growers could deliver supplies to the Commodity Credit Corporation below certain loan rates...

The purchases aren’t a “very effective” way to deal with overhang, “and that’s what the government eventually realized," said Arlan Suderman, chief commodities economist at brokerage INTL FCStone Inc. “It does help support cash prices, but it limits rallies in the market because the market knows if it rallies too much, there are all those bushels still in the bin that will come out.”
Second, much of what China bought was not for human consumption but rather feed for livestock. What's more, LDCs are ill-positioned to receive a deluge of food anyway:
Aid programs are also too small. The U.S. government’s Food for Peace program usually buys and ships about $1.5 billion worth of goods a year to other countries. On top of that, the nations in need are usually seeking food-grade commodities, such as rice and wheat, said Joseph Glauber, former chief economist at the U.S. Department of Agriculture. The vast majority of U.S. corn and soy production is for use in animal feed or biofuel.

Many poor countries may also not have the facilities needed to process soybeans, which can also yield cooking oil. Some countries may also be opposed to large amounts of aid because it could hurt their farmers.
Third, dumping government-subsidized foodstuffs in the developing world would constitute a flagrant violation of WTO rules specifically meant to protect poor countries' farmers from such dumping:
Trump’s move could also generate disputes in the World Trade Organization as the measures can be seen as market distorting. The aid could send prices lower, hurting countries like Brazil and Argentina, which are also major corn and soybean exporters. “You can’t just dump grain at concessional prices,” Glauber said. “That would constitute an export subsidy. That is something the WTO members agreed not to do.”
Memo to Trump: the developing world doesn't need your racism or your country's food aid. 

US-China Trade Negos: The 'Rashomon' Effect

♠ Posted by Emmanuel in , at 5/09/2019 10:45:00 AM
This guy looks about as crazy as Trump, which is no mean feat. How Rashomon explains international economic diplomacy.
Blame in on Akira Kurosawa. The famed Japanese director's acclaimed film Rashomon featured the same event--a murder--as narrated by four different parties, to vastly different versions. Today, we have the same thing going on with trade negotiations that have been occurring between Chinese and American negotiators. The accounts are so vastly different that the rest of us aren't exactly sure whose version is accurate given that there is so little overlap. As the late film critic Roger Ebert keenly observed about Rashomon, there are four accounts offered, but no apparent solution. And so it is with the China-US trade negotiations. Let's begin with the more widely-publicized, American version of these events:
In a Reuters report published Wednesday and attributed principally to three U.S. government sources, the Chinese had been on the brink of an unconditional surrender before trying to wriggle out of it at the last minute. A nearly 150-page, seven-chapter draft had included binding legal language to change its legislation on intellectual property theft, forced technology transfers, competition policy, currency manipulation and access to financial services, Reuters reported, alongside an enforcement regime similar to those imposed on troublesome countries like North Korea and Iran. Beijing tried to reverse all that in a series of last-minute edits, according to the report.

That backs up an earlier report by Jenny Leonard, Saleha Mohsin and Jennifer Jacobs of Bloomberg News citing people familiar with the matter saying that the Chinese went back on promises to include changes to its laws in the text of the deal.
In short, "the Chinese reneged" is the Yankee take on events. How about for the Chinese?
An article in the Wall Street Journal, sourced to “people familiar with the thinking of the Chinese side,”  had a vastly different read. President Donald Trump’s tweets about his friendship with President Xi Jinping; praise of China’s economic stimulus; criticism of the U.S. Federal Reserve; and positive statements about planned Chinese purchases of U.S. soybeans – all were taken as evidence that Washington’s resolve was weakening along with its economy, according to the report. Beijing never had any intention of specifying which laws it was prepared to change to get a deal over the finish line, and didn’t take seriously hints from the U.S. that time was running out, it said.

The Chinese, on the other hand, never explicitly said that they would revise their national laws to comply with the Americans' wishes in their version of events.
Having studied and taught some material on cross-cultural communication, could it all have been a case of mutual misunderstanding?
Still, the risks of such misinterpretation are a familiar hazard of diplomacy, especially in discussions between negotiators with different languages and cultural contexts, so it’s somewhat astonishing to see such a gap still yawning between the two sides after all the talking that’s been done over the past year.
Maybe there should be experts in cross-cultural communication participating in these sorts of high-stakes discussions? It's only the fate of the world economy that hangs in the balance, after all. 

Paris Plays for Brexit’s Refugees

♠ Posted by Emmanuel in at 5/02/2019 12:00:00 PM
Paris' main financial district is La Defense. Nowadays, they aren't defending themselves from English speakers, apparently.
 When it comes to bourgeois world leaders, they don't come much posher than French President Emmanuel Macron. A former investment banker, there were fears before he ran for the highest office in the land that he'd be an easy target for being out of touch with the common man. And so it has proven: for months and months, he's had to endure endless protests from the "yellow vest" movement.

Interestingly enough, though, Macron is still intent on luring more of those like him from London to Paris in the run-up to the UK's impending exit from the European Union. Those investment bankers need to go...somewhere else. But how about those who aren't masters of the (financial) universe, those unwashed masses filled with Gallic pride? Well, they could offer services for the plethora of ex-London investment bankers Macron envisions will decamp to Paris:
On floors 24 to 27 of the Europlaza tower in La Defense, on the outskirts of Paris, workers hammer away as they prepare the offices of the European Banking Authority, unperturbed by the twists and turns of the seemingly never-ending Brexit negotiations.

The regulator in charge of setting standards for European lenders and conducting bank stress tests will be fully operational from Paris with a 200-strong staff on June 3, ending its eight-year existence in London regardless of when exactly the U.K. leaves the European Union.

“We will continue operating as we did from London,” Executive Director Adam Farkas said in an interview. “Staff members enjoyed the offerings of London. I’m pretty sure they’ll find a way to enjoy Paris soon.”

Winning the bid to host the body was a coup for the French capital after it competed with Frankfurt, Dublin, Madrid and Amsterdam to be known as the EU’s financial epicenter. Now, the butchers, hairdressers and schools of Paris, like its government, are going all out to ensure Brexit-driven movers are made to feel at home, bringing imperceptible changes to life in a city that hasn’t always been seen as welcoming.
How serious are they? the culturally and linguistically more insular Parisian merchants are--good heavens--learning how to speak that accursed English:
Unlike the Germans and the Dutch, for example, the French have been reluctant speakers of English in spite of the country’s ranking among the world’s top tourist destinations. That’s changing.

Laurent Dumont and his wife Nathalie, who run their family butcher’s shop, Boucherie des ArĂȘnes, on rue Monge in the fancy 5th arrondissement of Paris, roll their tongues around unfamiliar-sounding English words these days to describe their offerings of Porc Noir de Bigorre or Boeuf de race Parthenaise.

“We have an increasing number of English-speaking clients,” said Nathalie. “They don’t even try to speak French; they launch straight away into English and we’ve had to adapt. There are two of us speaking English in the butcher shop, which is obviously a good thing.” She’s now working on boosting her employees’ English skills.

Florence Charlet, a 46-year-old hairdresser at Thomas C Coiffure in Paris’s fashionable 8th arrondissement, has a similar tale to tell. “We’re having to speak English more and more,” she said. “The last hairdresser I hired had to speak English—it’s a required skill.”
It reminds me of that time my mum visited a Lancel boutique with me in 1994. Back then, having English and Mandarin speakers was a novelty, but there were already a few of them even back then. Now, you see an encroachment into other aspects of French (or more accurately Parisian) commercial life not necessarily geared towards tourists but French-challenged residents.

Times have changed when the French finally relent on speaking English as a commercial necessity, but apparently you don't even need Macron to convince more than a few.

Make no mistake: the British are coming to Paris.