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US and EU may struggle to unite on how to tackle China



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Hello from Washington, where the big news is that Bill Barr, US attorney-general and close ally of Donald Trump, has declared that he has not seen evidence of voter fraud that would affect the outcome of the presidential election.

Meanwhile, we’re still on the lookout for the next US Trade Representative. President-elect Joe Biden has already announced a string of nominations for top economic posts. He wants former Federal Reserve chair Janet Yellen as Treasury secretary. Wally Adeyemo, the president of the Obama Foundation and a former international economic official, is in line to become Yellen’s deputy. Neera Tanden, a former senior aide to Hillary Clinton, will be budget director.

With all that going on, today’s main piece asks whether China can be the unifying force for Europe and the US. Our person in the news is Australia’s trade minister Simon Birmingham.

Don’t forget to click here if you’d like to receive Trade Secrets every Monday to Thursday. And we want to hear from you. Send any thoughts to or email me at 

The devil is in the detail of any US-EU pact on China

Nothing brings warring parties together like a good villain. Diplomats, particularly American and European diplomats, know this. “If you bicker about certain things, let’s bring in China, or Russia, or whatever bad guys there are,” one told us recently.

Which is exactly what Europe is trying to do with the incoming Biden administration. There’s been talk of the importance of increasing co-operation on China policy from both European capitals and the Biden team for some time now, and the latest iteration of that is the European Commission’s flashy new plan to repair ties with Washington. (The transatlantic relationship, the commission says delicately in the document, is in need of some “maintenance and renewal”).

It’s certainly worth Europe pushing on the White House’s soon-to-be-ajar door. There are clearly areas where the US and Europe can co-operate. Competition from China is a major problem that both sides have. The Biden campaign has said it wants to strengthen co-ordination on screening foreign investments and improve the sharing of intelligence on commercial threats. Parties on both sides of the Atlantic also think there is more to be done to protect emerging technologies with national security implications.

But when it comes to trade policy there is only so far appealing to the sweepier ideas can take you. It’s like when politicians say they like liberty, but then come up with wildly different ideas on what it means and how to achieve it.

For all the talk of co-operation, there may well be some messiness when it comes to the fine print. So where will this messiness emerge?  

For starters, we suspect on tariffs. The US and Europe both want to pressure China into reforming the less capitalist aspects of its economy. But Brussels may not share Washington’s approach of going about it. It’s still unclear exactly what Biden might do here, but Democratic trade folk have talked up the need for Europe to be tougher on China, especially over aluminium and steel overcapacity and dumping. Washington could, therefore, ask Europe to impose more tariffs on Chinese steel and aluminium in return for a removal or weakening of American tariffs on European steel and aluminium. This was a suggested and discarded policy within the Trump White House, and could well be picked up by Biden. Many European states, meanwhile, will want to shy away from too much confrontation with Beijing, a big export partner for countries such as Germany. Nor will anyone want to be seen to be pushed about by Washington.

Another big problem facing both sides is that of the leadership and functioning of the World Trade Organization. If Washington and Brussels want to get serious about curbing China’s more anti-competitive economic practices, then they will need to fix the WTO. The Trump administration has argued that the Geneva-based body is not tough enough on China, but to toughen it up the WTO needs to have a director-general and a working dispute-settlement mechanism. The Biden team, however, has yet to commit to joining with consensus and backing Nigeria’s Ngozi Okonjo-Iweala to take the top job. Democrats on Capitol Hill all seem to think the new administration should take its time and do its own research on the candidates. The European assumption that Biden will sweep in and simply reverse the hold and let everyone move on might, therefore, not be correct. After that, there will need to be a solution on the appellate body, which remains hobbled and broken. 

Then, there’s the yawning gap China has exploited in the decades-long Airbus/Boeing dispute. While the US and Europe have been busy squabbling over subsidies and issuing tariffs and counter tariffs against cheese, wine, whiskey and everything in between, China has developed its own aircraft manufacturing capabilities through the state-owned Commercial Aircraft Corporation. If the US and Europe really want to contain China, ending this dispute between them and moving on is key.

And finally, as we covered last week, there are digital services taxes. This issue is not explicitly to do with China, but is likely to be the premier squabble between the US and Europe over the next few years. And like Airbus/Boeing, it might well distract diplomats and negotiators from their determination to maintain a good relationship.

It makes sense for Europe and the US to collaborate more when trying to come up with a China policy. But the details are tricky and the existing disputes thorny. Bringing in the bad guys might only get Brussels and Washington so far this time around. 

Charted waters

How much damage has the Trump presidency done to trade between China and the US? For all the headlines and rhetoric, it turns out not that much. This chart, based on data from the IMF’s Direction of Trade Statistics, shows that the worsening of relations between the world’s two mightiest economic superpowers has led to falls in the proportion of US imports originating in China and vice versa. The fall has been far from dramatic, however.

Line chart showing the Trump presidency led to some modest trade decoupling between the US and China

Person in the news

Simon Birmingham has suggested that Australia is ready to take a complaint against China to the WTO © Sam Mooy/Getty

Sino-Australian relations have worsened markedly in recent weeks to the point where Simon Birmingham, Australian trade minister, has suggested that Australia is ready to take a complaint against China to the WTO. This comes after Beijing imposed steep tariffs on Australian wine imports. The two sides are embroiled in an escalating trade war, with barley, beef and seafood all targeted by China.

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Emerging Markets

Polish women count cost of tough abortion curbs




Even before Poland all but outlawed abortion, Zofia has been thinking about moving abroad. But the near-ban that took effect earlier this year helped her make up her mind: this autumn she plans to move to Prague in the Czech Republic.

“I feel better there, freer, and being a woman there doesn’t make me feel weaker or worse,” she said. “I love my life in Warsaw. But when the [abortion ban was mooted], I thought, I don’t want to live here any more . . . And I don’t want my kids to live here.”

The 31-year-old artist is one of thousands of Polish women outraged by the tightening of the country’s abortion laws which, even before the overhaul, were among the strictest in the EU. Their anger centres on a ruling by the Constitutional Tribunal in October last year, which declared that a 1993 law allowing abortions in the case of severe foetal abnormalities was unconstitutional.

The ruling came into force in January, leaving only two grounds for an abortion in Poland: a threat to the mother’s health or if the pregnancy is a result of rape or incest. Such cases made up just 2.4 per cent of the 1,100 legal abortions in Poland in 2019.

Hundreds of thousands of Poles took to the streets when the ruling was announced in October, and activists have called for another round of protests on International Women’s Day this Monday. Polling suggests that a majority of Poles back some form of liberalisation.

Anti-abortion campaigners, often guided by their religion in what remains one of Europe’s most strongly Catholic countries, say the change was needed to protect the rights of unborn children.

“An unborn child is a separate person, which has its own body and its own rights. A child must not be deprived of the fundamental right of every human being — the right to life,” Kaja Godek, one of Poland’s most prominent anti-abortion campaigners, wrote on Facebook last month.

A pro-life poster in Krakow. Many Polish opponents of abortion are guided by faith in one of Europe’s most strongly Catholic countries
A pro-life poster in Krakow. Many Polish opponents of abortion are guided by religion in one of Europe’s most strongly Catholic countries © Omar Marques/Getty Images

But activists say the ruling will force women to give birth to babies with such severe abnormalities that they have no chance of survival. They also say the government has done too little to help the families of children born with disabilities, who receive only limited support.

“I’m terrified because for me as a woman in reproductive age, it means getting pregnant in Poland became dangerous. And I’m afraid for my sister, for my colleagues and friends, for my relatives and for many other women I meet every day as clients,” said Kamila Ferenc, a lawyer from the Federation for Women and Family Planning, a women’s rights group.

“They will be in a horrible position . . . they have lost the possibility to decide freely on their own, because it’s not so easy to have an abortion outside the system.”

In the past, Polish women who could afford it were able to seek abortions in neighbouring countries with more liberal laws, such as the Czech Republic or Slovakia. But with the pandemic limiting travel, experts say women are likely to turn to the internet to buy drugs from overseas that would allow them to carry out abortions at home. Women are not prosecuted for self-managed abortions carried out before the 22nd week of pregnancy.

“It used to be the case that illegal abortions were through surgical procedures by doctors and back-alley providers. Then abortion tourism rose in the early 2000s after Poland joined the EU. Now we are seeing an increase in self-managed abortions, which can be less of a financial and emotional burden,” said Maria Lewandowska, a researcher into reproductive health at the London School of Hygiene and Tropical Medicine.

Justyna Wydrzynska, from Abortion Dream Team, a group that helps women who want to terminate their pregnancies, said that since the abortion rules were tightened in January, the organisation had received three times the normal number of calls from women seeking help.

“We get around 600 to 700 phone calls a month. Around 100 of them need to go abroad [for an abortion], and for the rest, . . . these are mostly people in need of pills, assistance in taking pills or post-abortion care,” she said.

“Often they are human dramas. Some people approach it in a task-oriented way, others very emotionally. Sometimes it is very difficult.”

Despite the huge protests last year, women’s rights groups acknowledge that as long as Poland’s conservative-nationalist Law and Justice party remains in power, the prospect of the laws being loosened is minimal. But they hope that in the long run, the debate sparked by the ruling will lead to greater support for liberalisation.

“The factual situation of pregnant women is worse. But on the other hand I think we are now on a better track to change the situation than when [the previous government led by the centre-right] Civic Platform ruled and everybody thought everything was all right,” said Ferenc.

“There is more courage in society to speak about abortion. People educate themselves and each other. I think that we now have more solidarity and strength in society to fight for reproductive rights. ”

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Emerging Markets

Hong Kong dropped from economic freedom index after crackdown




Hong Kong has been dropped from a prominent index of the world’s freest economies, underlining growing concerns over Beijing’s tightening grip on the Asian financial centre after it introduced a national security law last year.

The announcement from the Heritage Foundation, a conservative US think-tank, came as the majority of a group of 47 pro-democracy politicians were refused bail in a case that critics say shows the rapid decline of civic freedoms in the city.

The Heritage Foundation also dropped the Chinese special autonomous region of Macau, a casino hub and former Portuguese colony, from the rankings.

The foundation in recent years has been aligned with the administration of former US president Donald Trump.

“No doubt both Hong Kong and Macau . . . enjoy economic policies that in many respects offer their citizens more economic freedom than is available to the average citizen of China,” the Heritage Foundation said. “But developments in recent years have demonstrated unambiguously that those policies are ultimately controlled from Beijing.”

Beijing imposed the national security law on Hong Kong last year in response to anti-government protests that engulfed the city in 2019.

The measures are part of a clampdown on civil and political freedoms guaranteed to the city for 50 years following its handover from the UK to China in 1997. Authorities are targeting anyone viewed as disloyal to the Chinese government in politics, education and the media.

The Hong Kong government has long taken pride in studies showing its economy to be one of the most liberal in the world, with the city marketing itself as an international business haven given its low tax rates and open port.

The Heritage Foundation last year replaced Hong Kong at the top of its “Index of Economic Freedom” with Singapore, toppling it from a position it had held for 25 years, but still included the territory in the rankings in second place.

The Hong Kong government said it was ‘dismayed’ by the Heritage Foundation’s decision and said it was “politically biased”.

The case against the 47 pro-democracy lawmakers and activists has been seen as a test of whether the city’s legal system can withstand pressure from Beijing.

Authorities charged the group with subversion, alleging they aimed to topple the government by staging an unofficial primary vote to select candidates to run for election to the city’s legislature. Subversion is punishable with up to life imprisonment under the national security law.

The bail hearings, presided over by a judge appointed to oversee national security cases, entered their fourth day on Thursday.

Victor So, the judge overseeing the case, only granted bail to 15 out of 47 defendants under harsh conditions, but the prosecution immediately appealed the ruling, returning them to custody until the appeal hearing takes place. 

On top of the usual bail conditions, the court ordered the defendants to not participate in elections or make any public political statements.

Sessions have often stretched late into the evening, including one that continued until 3am before the defendants were hauled back before the court the next day. At least one defendant collapsed inside the courtroom and six others were sent to hospital for treatment.

As they exited the court, some defendants shouted: “Political criminals are not guilty, Hong Kongers will not die!”

Simon Young, a law professor at the University of Hong Kong, said the treatment of the defendants was “most unsatisfactory”. Jerome Cohen, a Chinese law expert at New York University, said the way the hearing was conducted “makes a farce of procedural fairness”.

Some of the defendants have faced multiple trials simultaneously and were forced to shuffle between courtrooms.

The defendants’ lawyers said on Tuesday their clients had not bathed in three days, forcing the judge to delay the hearing to allow them to wash.

Hong Kong has tight restrictions on reporting the substance of bail hearings.

Hundreds of supporters have queued each day in an attempt to watch the proceedings in person. Many held placards and chanted banned political slogans, risking prosecution under the security law.

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Pakistan’s finance minister ousted in surprise defeat for Imran Khan




Pakistan’s prime minister Imran Khan suffered a major political setback on Wednesday, when his finance minister was defeated in a contest for a seat in the country’s senate.

Khan must now appoint a successor to the cabinet post by June 11 under Pakistani law. The surprise defeat of finance minister Abdul Hafeez Shaikh, a respected economist and former world bank official who led the country’s negotiations with the IMF for a $6bn loan, comes amid an escalating campaign by main opposition parties to have the prime minister removed from office.

Elected officials vote to fill vacated seats in the senate every three years. Following the result, the government announced it would “take a vote of confidence in parliament” to prove that the prime minister retained a majority of support.

Business leaders have warned that Shaikh’s departure creates uncertainty over the future of Pakistan’s fiscal policies as the country battles the pandemic’s fallout on the economy.

“Right now, it was essential to give a message of confidence to a range of stake holders within and outside Pakistan on the state of our economy. Now, people will be left asking questions,” the president of a private Pakistani bank told the Financial Times.

An 11-party opposition alliance, the Pakistan Democratic Movement (PDM), has accused Khan of using the powerful military to tip the 2018 election result in his favour — which leaders from the prime minister’s party have denied — and for failing to revive the moribund economy.

The PDM has announced a March 26 deadline for Khan to step down or face widespread opposition protests.

Though some opposition leaders have said they plan to follow up Wednesday’s defeat with a vote of no confidence against Khan, analysts said it was too early to predict his downfall ahead of the end of his five-year term in 2023.

“It’s a major upset for Imran Khan and his PTI (Pakistan Justice Party),” said Huma Baqai, a political commentator at the University of Karachi. “The government from hereon will face further pressure as the opposition continues to step up its campaign.”

The vote count suggested a break in Khan’s PTI party, with as many as 16 party members either voting for the finance minister’s opponent, former prime minister Yusuf Raza Gilani, or spoiling their ballots.

Shaikh’s defeat “will not automatically lead to the prime minister’s downfall. Some PTI members clearly changed sides [for this vote]. But it will be much harder for them to agree to removing the prime minister,” an opposition leader told the FT.

Faisal Javed, a PTI leader, claimed some representatives had been bribed by the opposition. “There has been a major corruption. There has been horse-trading. People have been sold,” he told the local ARY news channel on Wednesday. Opposition leaders have denied this.

The electoral college for the senate consists of members from legislatures of Pakistan’s four provinces as well as the lower house of parliament in Islamabad known as the national assembly.

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