Greed is Good: UK COVID-19 Vaccine Edition

♠ Posted by Emmanuel in , at 3/24/2021 01:31:00 PM

Is the UK topping this table due to "greed" at the EU's expense?
 

The height of 80s money worship is symbolized by the 1987 film Wall Street whereGordon Gekko, Michael Douglas' memorable character, reasoned that "greed is good." As a person who came of age during that decade, all I can say those were the days, my friends, even if I do not necessarily agree with the sentiment. Or has "greed is good" logic been consigned to the dustbin of history? Of all the darndest places, we are now being refamiliarized with the phrase in the age of COVID-19. Supposedly we're in this enlightened age where getting everyone vaccinated is in everyone's interests. Given the increased global interconnections we have nowadays, not suppressing the virus in one part of the Earth means that all of us remain vulnerable. Or so that logic goes. 

Now we have reports that UK Prime Minister Boris Johnson argued in private that "greed is good" when it comes to COVID-19 vaccinations. That is, the UK would not have controlled the spread of the virus in recent weeks had it not been greedier with allowing foreigners access to the vaccine:

Capitalism and greed gave Britain its success in vaccinating its population, Prime Minister Boris Johnson told lawmakers in a closed meeting, a remark that could rile up Brussels at a time when Britain faces an EU threat to block vaccine imports. “The reason we have the vaccine success is because of capitalism, because of greed my friends,” The Sun newspaper quoted Johnson as telling Conservative lawmakers on a Zoom meeting on Tuesday evening. Johnson then tried to row back and said: “Actually I regret saying it” and asked lawmakers repeatedly to “forget I said that”.

Needless to say, that statement is not playing well with other Europeans who are considered behind the UK in vaccinating their citizens. Witness the AstraZeneca vs. EU row over allowing vaccines made in the Netherlands to be exported to the UK (AstraZeneca has joint Swedish-British ownership). Fun times:

Britain has so far mounted the fastest COVID-19 vaccine programme of any big country. But it now finds its programme threatened by the EU, which has been far slower in rolling out vaccines and faces a third wave of infections. The European Commission is expected on Wednesday to extend powers to block exports, a move that could hit supply of doses bound for Britain. Johnson’s remarks come after a week in which British ministers have tried to calm the row.

Downing Street declined to comment on Johnson’s remarks when contacted by Reuters, but unidentified sources gave the BBC a bizarre array of explanations.The greed comment, according to the BBC’s political editor Laura Kuenssberg, was apparently a joke about one of his cabinet colleagues, Chief Whip Mark Spencer, who was gobbling a cheese and pickle sandwich while the prime minister spoke.

Cheese and pickle sandwiches, Gordon Gekko... and COVID-19 vaccines. These are interesting times. 

Hong Kong Booted From 'Economic Freedom' Rankings

♠ Posted by Emmanuel in at 3/09/2021 04:19:00 PM

Is Hong Kong circa 2021 ideologically closer to Mao Zedong than Milton Friedman?

Hong Kong used to be regarded as the world's shining example of the merits of free markets. No less than Milton Friedman--the most prominent libertarian thinker of his generation--lauded Hong Kong for its economic success due to following laissez-faire policies. Once upon a time, and for quite a long time, Hong Kong led the world in the ease of setting up and closing a business, allowing entrepreneurs manifold opportunities to come up with a formula to make it big. Government rarely made its presence felt back in the day.

Like all good things, however, this success story had to come to an end. It used to be that Hong Kong routinely topped or ranked near the top of the arch-conservative Heritage Foundation's annual Index of Economic Freedom. To be sure, Hong Kong remains a gateway to Asia due to its proximity to mainland China. But, with respect to economic freedom, recent encroachments by the PRC into its running have given us this strange result: Hong Kong isn't even being considered here anymore thanks to seemingly endless PRC meddling in its political economy. Hong Kong is now regarded as a PRC satellite instead of an independent entity worthy of separate consideration:

Hong Kong has been removed from an annual index of the world's freest economies because the think-tank that compiles the league table said the city was now directly controlled by Beijing. The announcement is a reputational blow for Hong Kong and comes as Beijing ramps up its bid to quash dissent after huge and sometimes violent pro-democracy demonstrations in 2019.

The Heritage Foundation, a conservative US think-tank, publishes an annual Index of Economic Freedom ranking countries and territories for how business-friendly their regulations and laws are. Over the last 26 years Hong Kong topped the table for all but one year - a source of pride to the city's government which often used the accolade in its official press releases and investment brochures.

But when the 2021 ranking is released later on Thursday, Hong Kong will not appear because the report's authors believe the city is no longer independent enough of Beijing to justify separate inclusion. "The loss of political freedom and autonomy suffered by Hong Kong over the past two years has made that city almost indistinguishable in many respects from other major Chinese commercial centres like Shanghai and Beijing," Edwin J Feulner, the founder of the Heritage Foundation, wrote in the Wall Street Journal on Wednesday. 

And that's all she wrote.

After Qatar, Belligerent Saudi Takes on the UAE

♠ Posted by Emmanuel in , at 2/17/2021 10:07:00 AM

Will the world go to Riyadh if coerced to do so by the Saudi government?
 

With friends like Saudi Arabia, who needs enemies? Upon taking power, Crown Prince Mohammed bin Salman was seen as a reformist, market-friendly leader able to take Saudi Arabia forward into a post-fossil fuel future. This impression has taken a big hit in recent years with the 2017 embargo on Qatar as well as the still-unresolved 2018 murder of journalist Jamal Khashoggi at Saudi Arabia's Turkish consulate. Taking endless potshots at its fellow Gulf Cooperation Council (GCC) members doesn't seem to be the way to signal that Saudi Arabia is open for business. 

More recently, Saudi Arabia has come up with its most outlandish power play yet: It has cautioned multinationals that, unless they place their regional (read: Middle East) headquarters in Saudi Arabia, they will not be able to ink government contracts. Obviously aimed at Dubai in the UAE which vastly outstrips Saudi Arabia in "ease of doing business" indicators that you would naturally think companies would gravitate to when siting regional headquarters, the outcry has been understandably strong:

Saudi Arabia, in a bold and unexpected move, announced late Monday that by 2024 its government would cease doing business with any international companies whose regional headquarters were not based within the kingdom.  

The news has investors, bankers and expat workers buzzing — and scratching their heads.  

Saudi Arabia in recent years has pitched itself as a location for HQ offices in its campaign to create private sector jobs and diversify its economy as part of Crown Prince Mohammed bin Salman’s Vision 2030.

But what began as a pitch to global head offices has now become an ultimatum for some: either relocate your headquarters to the kingdom, or lose out on lucrative government contracts. And the move, Middle East analysts and finance professionals say, appears to be targeted at the region’s current headquarters hub: Dubai.  

Mind you, the UAE joined Saudi Arabia in the embargo on Qatar. Although regional economic rivalry is expected, punching below the belt in this way over restricting government procurement lest they headquarter in Saudi Arabia is widely perceived as unfair, especially since they are all supposedly part of a customs union in the GCC:

The Saudis are “trying to lure companies out of Dubai, I expect, and elsewhere,” Ryan Bohl, a Middle East analyst at risk consulting firm Stratfor, told CNBC. One UAE-based financier, who spoke anonymously due to having business operations in Saudi Arabia, described the move as “clearly targeting the UAE” and a “jab in the face” to Dubai.

“It’s a terrible decision,” the financier, a longtime veteran of the region, added. “It’s anti-common market, it’s anti-competition, and it’s essentially corporate bullying.”

The truth of the matter is that Saudi Arabia is a less attractive place to site your regional HQ with its more restrictive environment--economically and socially. The latter is of particular concern to Western expats:

The government aims to significantly increase Saudi Arabia’s current share of less than 5% of the region’s HQ offices...

But will that be enough to lure expats out of Dubai, where they can drink, wear bikinis on the beach and enjoy a far more liberal lifestyle, comparable on many levels to the West?

“The lifestyle in Saudi is not comparable,” said one Dubai-based venture capitalist, speaking anonymously due to professional restrictions. “You don’t have the same freedoms you have here — here I can go on a public beach and hang out ... Dubai is a global city, Riyadh is far from that. It lacks the diversity that Dubai has. That’s a big deal for me.”

Indeed, one of Dubai’s allures for foreigners is its majority expat population — 90% across the UAE as a whole. The success of Dubai’s global openness model manifests itself in numbers as well: according to the U.N.’s trade database, the UAE in 2019 received 300% more foreign direct investment than Saudi Arabia, despite its economy being about half the size.

And the UAE ranked 16th on the World Bank’s 2020 Ease of Doing Business Index, while Saudi Arabia ranked 63rd.

Speaking of government contracts, the lure is unmistakable: a supposed $220 billion that Saudi Arabia states it will spend to make Riyadh a global city (comparable to *gulp* Dubai). What's more, there are those who say Saudi Arabia is actually coming on in leaps and bounds:

The Saudi government is investing $220 billion in projects aimed at putting Riyadh in the world’s top 10 city economies, and is offering competitive tax-free salaries to employees willing to relocate there...

 Still, many expats who’ve worked in the kingdom feel differently. “There’s no doubt that Saudi will compete with Dubai,” said Alex Nasr, a consultant with several years of experience working around the country, adding that it’s already competing on the salary front.

“Now with Vision 2030 and the radical changes the nation is pushing through, it will begin catching up on the quality of life front … as soon as the veil is lifted on the lifestyle restrictions, the expats will begin to pour in.”

The West's WTO Hypocrisy on COVID-19 Meds?

♠ Posted by Emmanuel in ,, at 2/16/2021 12:37:00 PM

Should intellectual property laws upheld by the WTO be waived during a COVID-19 pandemic?

I almost forgot to post this one, but it's better late than never, I guess. There have been endless allusions to the idea that, rich or poor, the countries of the world are all in this fight against COVID-19 together. However, when push comes to shove, it appears the reality of the matter is rather different: A few weeks ago, large developing countries put forth the idea at the WTO that intellectual property rights on COVID-19 medicines should be abrogated while a global pandemic is going on. 

Perhaps unsurprisingly if regrettably, European and American countries indicated not being willing to go along. Since a consensus would have been required for an IP waiver on COVID-19 medicines to come into effect at the WTO, this effort was admittedly a long shot from the start:

Wealthy nations [...] reiterated their opposition to a proposal to waive intellectual property rules for COVID-19 drugs, three trade sources said, despite pressure to make an exception to improve access to drugs for poorer countries. Supporters of the waiver say existing intellectual property (IP) rules create barriers on access to affordable medicines and vaccines and they want restrictions to be eased, as they were during the AIDS epidemic.

But opposition from the European Union, the United States and some other wealthy nations at a meeting on Friday, means the proposal set to go before the World Trade Organization’s (WTO) General Council next month is likely to fail.

“If rich countries prefer profits to life, they will kill it by tying it down in technicalities.” said a delegate supporting the motion who attended the closed-door meeting. The 164-member WTO body usually has to agree by consensus unless members agree to proceed to a vote, which is exceptional.

Populous developing countries India and later China pushed for lifting IP restrictions on COVID-19 medicines, although you have to wonder if they have competing commercial interests since they too have production capabilities in making these medicines should IP be waived. Then again, the current WTO head Ngozi Okonjo-Iweala (this article was written before she became its Director-General) also supported the initiative:

The proposal was first raised by India and South Africa in October. Since then, China, which has five COVID-19 vaccine candidates in late-stage trials, has voiced its support, as have dozens of other WTO members, mostly from developing countries.

The World Health Organization says it supports tackling barriers to access to COVID-19 medicines, as does Nigeria’s Ngozi Okonjo-Iweala, selected by a panel to be the WTO’s next director-general.

You have to wonder though if some developing countries might want to declare medical emergencies that compel them to waive such IP on COVID-19 medicines under "compulsory licensing" procedures allowed by the WTO:

In 2001 — at the height of the AIDS crisis and under pressure from governments whose citizens were dying because they could not afford life-saving medicines — the World Trade Organization waded into the battle between intellectual property and public health. The resulting Doha Declaration ruled that the Agreement on Trade-Related Aspects of Intellectual Property Rights “should not prevent members from taking measures to protect public health.”

It confirmed that governments retained several mechanisms for guaranteeing affordable access to medicines, including issuing compulsory licenses, which allow them to use an invention without the patent holder’s consent in extraordinary circumstances. This applies not only to new drugs but also to existing medications whose patents have been extended because pharmaceutical companies made minor changes to formulations or discovered a new use for the medication.

Given the uncertainty over access to treatments for COVID-19, several countries have been laying the legislative groundwork to issue compulsory licenses for products that patent holders refuse to make accessible.

I think developing countries will first observe whether they can avail of more COVID-19 medicines they believe they need under the COVAX initiative. If that avenue proves unfruitful, then don't be surprised to see "compulsory licensing" claims start appearing. Make no mistake that our world remains riven by North-South divides even amidst a global pandemic. 

Biden's War on Coal @ World Bank

♠ Posted by Emmanuel in ,, at 2/14/2021 11:00:00 AM

There's an interesting article on Politico about how the Biden administration's pledge to limit emissions from fossil fuels will be implemented on the global stage. Sure, reducing subsidies for fossil fuel extraction and consumption at home to set an example for the rest of the world is one thing. However, there are also things the United States can do internationally to help ensure fossil fuels are kept in the ground. 

In an executive order issued last month, Biden tasked the United States' agencies involved in foreign assistance and development financing--the International Development Finance Corporation (formed in 2019 by combining the Overseas Private Investment Corporation and the Development Credit Authority), Treasury, USAID, and the Millennium Challenge Corporation among others--with devising emissions-reducing financing. 

This executive order also extends to the multilateral organizations the US is a member of, including the World Bank. It states:

[The Treasury Secretary shall] develop a strategy for how the voice and vote of the United States can be used in international financial institutions, including the World Bank Group and the International Monetary Fund, to promote financing programs, economic stimulus packages, and debt relief initiatives that are aligned with and support the goals of the Paris Agreement.

In doing so, the Biden administration wants to contrast clean, green American with dirty energy China. However, there is a danger that developing countries not as green-minded as Biden may instead be pushed to deal more with China:

President Joe Biden’s plan to halt U.S. funding for overseas fossil fuel projects will turn the global spotlight on China for bankrolling coal projects around the globe. But it could also push poor countries closer to Beijing — and risk ceding the United States’ position as a leading financier for developing economies...

Biden's directive last month to move toward withholding money from international institutions like the World Bank that help poor nations build fossil fuel power plants stands in stark contrast to Beijing's flow of cash under its Belt and Road Initiative, which supplies 70 percent of the financing for the world's new coal-fired plants. The White House is betting its move will paint China as hypocritical as that country — the world's top greenhouse gas emitter — aims to take a leading role in international climate change efforts.

To be sure, there will need to be a (sorry for the public administration jargon) whole-of-government approach for the US to get its message across in a way that resonates with developing countries deciding between clean energy and fossil fuels:

But the plan will require the Biden team to closely coordinate its foreign policy, trade and clean energy initiatives, because the absence of U.S. money for coal projects won't on its own sway other nations’ energy plans. And the U.S. cannot unilaterally offer sweet enough financial terms for clean energy to lure countries away from China's coal finance.

It's fair to say the US has its work cut out for it in a world which has not forsworn fossil fuels. It is worth pointing out that the Obama administration which Biden was a part of already started encouraging similar measures at the World Bank that have impacted the amount of fossil fuel-based energy projects it funded:

But the U.S. could immediately start shifting billions of dollars away from fossil energy if [Treasury Secretary] Yellen directs U.S. representatives at the World Bank and other multilateral funders to vote against coal, said Joe Thwaites, an associate with the World Resources Institute’s Sustainable Finance Center.

The number of coal projects funded by those institutions has already dwindled, due in part to efforts under the Obama administration, though multilateral development banks in which the U.S. is a shareholder accounted for $69.5 billion of fossil fuel finance between 2008 and 2019, according to environmental group Oil Change International.

Buy American: Biden More Protectionist Than Trump?

♠ Posted by Emmanuel in , at 1/25/2021 01:18:00 PM

Is Biden a worse protectionist than Trump? Prove it isn't so, Joe.

I've been engaged with a lot of real-world work, so I haven't been able to post that much as of late (apologies). Still, here's my initial take on events of 2021 with Joe Biden assuming the US presidency. Although the rest of the world breathed a sigh of relief that the isolationist Donald Trump has literally departed the White House with little fanfare, the question remains: How much of an improvement will Biden be for international economic relations? 

A new article makes me question whether he will be much of an improvement since Biden is indicating more "Buy American" provisos for government procurement are in store to shore up US industry during these challenging times: 

President Joe Biden will take steps Monday to encourage the federal government to buy more American-made products, a move the new administration argues will protect U.S. jobs and juice an economy severely hobbled by the deadly coronavirus pandemic.

Biden, who pushed a $700 billion Buy American campaign as a candidate for president, is set to sign an executive order that will advance several policies to boost the federal government’s purchase of U.S.-manufactured goods and services, administration officials said Sunday.

Federal law requires government agencies to give preference to American firms when possible, but critics say those requirements haven't always been implemented consistently or effectively. Some have not been substantially updated since the 1950s.

The federal government spends nearly $600 billion a year on contracts, which is money the administration says can spur a revitalization of the nation’s industrial strength and create new markets for new technologies.

To that end, Biden’s order will increase the domestic content threshold, which is the amount of a product that must be made in the U.S. before it can be purchased by the federal government.

Right now, loopholes in federal law allow products to be stamped "made in America" for purposes of federal procurement even if barely 51% of the materials used to produce them are domestically made. Administration officials did not say how much Biden intends to increase that threshold.

It remains to be seen how Biden will tiptoe around the United States' WTO GPA commitments without offending other member countries. Still, the question remains: Is Biden really going to be more internationalist in outlook than Trump? This episode gives us reasons to doubt whether Biden's actions will match his rhetoric (which is admittedly better to listen to).

PRC Cities Go Dark Without Aussie Coal

♠ Posted by Emmanuel in ,, at 1/05/2021 04:42:00 AM

While the US-China trade war occupies most of the headlines for obvious reasons--it's the geopolitical rivalry that matters--don't assume there are any number of others going on. Arguably the most notable among these is the deterioration in almost all respects of Australia-China trade relations, which have been accelerated by the Morrison government wanting to investigate China's role in the spread of COVID-19 worldwide seemingly at the outgoing Trump administration's behest.

This not-so-genius move is precisely biting the hand that feeds in terms of Australia losing significant access to its largest export market:

Australia’s economy has been badly hit by escalating trade tensions with China — and it’s possible growth might “never return” to its pre-virus levels even when the pandemic is over, according to research firm Capital Economics.

China is by far Australia’s largest trading partner, accounting for 39.4% of goods exports and 17.6% of services exports between 2019 and 2020, the firm said. But Beijing has for months been targeting a growing list of imported products from Down Under — putting tariffs on wine and barley, and suspending beef imports.

Gross domestic product (GDP) in Australia could contract even more if Beijing continues to pile tariffs on more Australian imports, said its senior economist Marcel Thieliant in a note last week. Goods and services that are already “in the firing line” are worth almost a quarter of Australia’s exports to China — forming 1.8% of its economic output, the research firm said.

The list of affected traded goods grows longer all the time. Exemplifying the current fashion for lose-lose, though, the Chinese are not exactly finding what they need from other countries so easily. Consider coal. Absent affordable and plentiful supplies from Oz, many PRC cities are now reportedly having power outages:

Several major Chinese cities have reportedly gone dark as authorities limit power usage, citing a shortage of coal. Analysts said prices of the commodity in the country have shot up due to the reported crunch. The reports also follow rising trade tensions between Beijing and Canberra, leading some analysts to tie the coal shortages and blackouts to the unofficial ban on Australian coal.

Relations between the two nations soured last year after Australia supported an international inquiry into China’s handling of the coronavirus pandemic. Coal is just one in a growing list of Australian goods that China is targeting, as a result of their escalating row.

Last year, China told its power plants to limit the amount of coal imports from other countries to keep a lid on prices. Beijing reportedly lifted those restrictions later, but didn’t remove curbs on coal imports from Australia. China also reportedly gave state-owned utilities and steel mills verbal notice to stop importing Australian coal.

The case for trade was nevermore evident than it is here. Both governments have done their people a welfare-reducing disservice by engaging in a pointless spat over COVID-19 that neither has an obvious benefit from engaging in.