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The lay of the land: how geography shapes national destiny

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Admiral John Aquilino, the US naval leader who is scheduled to take charge of America’s military forces in the Indo-Pacific, recently issued a stark warning about a possible future Chinese invasion of Taiwan. “This problem is much closer to us than most think,” he said during Congressional confirmation hearings, implying that President Xi Jinping of China could attempt to retake the East Asian island by force within the next five years. His words only served to underline rising alarm among western military thinkers that Taiwan could quickly be where the new cold war turns suddenly hot.

Xi has spent heavily on China’s military of late, but any invasion plan remains perilous. The Taiwan Strait are about 130km wide at their narrowest point, roughly three times the distance from Dover to Calais. Any invading force would then face inhospitable coastlines, unpredictable monsoons and muddy, tidal beaches. Beijing may decide in time that these are risks worth taking. But they act as a reminder that the basic facts of natural terrain still matter hugely in international affairs — a point driven home in a series of new books outlining how geography shapes national destiny.

Former Sky News diplomatic editor Tim Marshall makes this point most directly. His popular 2015 book Prisoners of Geography examined how the plans of national leaders are often shaped by their nation’s mountains, oceans and rivers. China’s obsession with the heights of the Tibetan plateau, to pick one example, stems largely from a deep-seated fear that India would otherwise seek to control it, leaving China’s lower-lying regions open to invasion. Now comes The Power of Geography, a follow-up featuring essays examining countries from Australia and Ethiopia to the UK. “The starting point of any country’s story is its location in relation to neighbours, sea routes and natural resources,” he writes.

Few would disagree with this premise, especially in a world marked by extensive Covid-19 travel restrictions and with former president Donald Trump’s plans for a Mexican border wall still echoing in the public consciousness. But Marshall backs up his thesis with two broad arguments, both of which are somewhat at odds with intellectual orthodoxy.

The first suggests that location matters to economic development. This also might seem obvious: similar insights underpin many important economic theories, not least Nobel Prize-winner Paul Krugman’s research on the way distance shapes global trade patterns. But development economists now more often point to strong political institutions or plentiful human capital when explaining why some countries thrive and others languish. Where a nation literally happens to be — and thus its climate, natural resources, and so on — matters less.

Marshall’s second focus is geopolitical. Here he joins a long line of thinkers who use the bare facts of location to analyse the world, dating back to English geographer Sir Halford Mackinder in the early 1900s. Mackinder’s essay The Geographical Pivot of History suggested that the secret to global power relied on controlling particular parts of the Eurasian land mass, which he dubbed the heartland: “whoever controls the heartland controls the world”, as he put it. Many contemporary international relations scholars, by contrast, tend to be critical of what they view as this kind of crude geographical determinism.

Even so, Marshall’s more contemporary arguments are a useful reminder of the value of consulting an atlas before blundering into world affairs, and especially so in times of rising geopolitical tensions. The reality of competition between the US and China, for instance, will clearly be shaped by the map the two nations share. Washington will find it hard to compete economically with China in most of Asia, for instance, given the simple fact of Beijing’s sheer proximity to its neighbours and its ongoing willingness to plough huge sums into improved infrastructure via its Belt and Road Initiative, something that in turn has prompted revived interest in thinkers like Mackinder and their theories of Eurasian domination.

Geographic reality also suggests that south-east Asia is destined to become a greater focus for competition not just between the US and China but eventually India as well, given the region’s economic importance and strategic position between the two Asian superpowers. What international relations scholar John Mearsheimer dubs the “stopping power of water” matters too, namely how difficult it is for even well-equipped militaries to stage invasions over large oceans — hence China’s dilemmas over Taiwan. Future geopolitical tussles in Asia more generally are likely to be defined by naval competition, rather than the European land-based conflicts that marked the original cold war. Meanwhile the economic importance of distance, rather than its death, is likely to be underlined by the unpicking and reshoring of global supply chains away from China.

Marshall’s book makes similar points in his profiles of individual nations, many of which contain interesting insights. His opening chapter on Australia underlines both how sheer size and distance from potential rivals helps to promote security. “We never think of China as being geographically close to Poland, but Beijing is as close to Warsaw as it is to Canberra,” he writes. Later he suggests Greece will become a more important geopolitical focus for Europe, in part because of its strategic position as an entry point for waves of migrants and refugees. Its location also suggests Athens as a more important future Mediterranean partner for the US, given Washington’s troubled relations with Turkey.

Marshall’s case studies, although often entertainingly written, add up to a less than complete whole, with facts and stories seemingly cobbled together almost at random. More satisfying therefore is Klaus Dodds’ impressive Border Wars, which focuses less on geography writ large and more on the thin lines that delineate one nation from another and could present a threat of future conflict. An academic at Royal Holloway in London, Dodds argues that the demarcation and defence of frontiers is likely to become evermore fraught as the world becomes far less “borderless” than globalisation’s enthusiasts once hoped.

Global borders are being constricted to make passage more difficult, Dodds suggests, and also defended to turn them into “hostile environments”. Legislation can have a similar effect, as when Prime Minister Narendra Modi introduced India’s recent citizenship law, designed to target Muslims who might have crossed over from the country’s frontier with Bangladesh. The future will be one of “walls, fences and barriers alongside digital surveillance,” while climate shifts move not just populations but also borders themselves. “In our new era of climate-change emergency and the Covid-19 pandemic, border shutdowns and even wars are all the more likely as states and communities seek competitive advantage while isolating themselves from ‘viral others’ and ‘invisible enemies’,” he suggests.

Such geography-first analysis is not entirely original. Robert Kaplan’s The Revenge of Geography staked out similar ground a decade ago. Last year, Ian Goldin of the University of Oxford and Robert Muggah, a Brazil-based policy analyst, also released Terra Incognita: 100 Maps to Survive the Next Hundred Years. Briskly written and handsomely illustrated, it has recently been updated to include new analysis on the coronavirus pandemic. Its many dozens of maps add up to a global picture in which “twenty-first century geopolitics look unstable from virtually every angle,” the authors argue, from chaotic mass urbanisation to disorderly climate migration.

How can such analysis help identify future tensions? Dodds is vexed about borderland conflict and militarisation in particular. “The myths of exclusive sovereignty and the fixed border are dangerous,” he writes. “We need to cultivate a radically different view of borders that is alive to the complex realities of earthly change and the likely mass migration of people in an era of intensifying climate change and conflicts.”

In truth such a nuanced approach looks unlikely. More useful is to think through the pressures that climate and technological change will bring. On the former, melting glaciers are likely to cause land grabs between rival powers, potentially worsening border disputes between countries such as China and India in the Himalayas. Similar issues are likely to affect border rivers, which could change course or even disappear after decades of climate stress.

Technological change is even more important. Marshall concludes with an entertaining but clear-eyed chapter on what he dubs “astropolitik”, or how hard it will be to “prevent space from becoming a theatre of war”. Dodd meanwhile discuses recent military investment both in drones to protect borders on land and unmanned underwater vehicles beneath the ocean. Just over a year ago Indonesia captured a Chinese underwater drone, while China itself in 2016 seized a similar US vehicle, accusing it of spying in the disputed South China Sea. In future it seems inevitable that both space and sea boundaries will become sources of conflict. “It is not inconceivable, then, that China and the United States will become engaged in underwater drone wars,” Dodds writes.

This focus on technological changes highlights an obvious tension with purely geographic accounts of international affairs, namely that geography only explains so much. Growing flows of digital trade, for example, will in time make geographic location less relevant in economic affairs. The rising importance of cyber power will do the same militarily. Nonetheless, as an era of globalisation and economic integration turns ever more quickly into one of geopolitical division and conflict, the raw realities of location are likely to retake centre stage. “The starting point of any country’s story is its location,” as Marshall writes. “Geography is not fate — humans get a vote in what happens — but it matters.”

The Power of Geography: Ten Maps that Reveal the Future of Our World by Tim Marshall, Elliot & Thompson, RRP£16.99, 272 pages

Border Wars: The Conflicts that will Define Our Future by Klaus Dodds, Ebury, RRP£20, 304 pages

Terra Incognita: 100 Maps to Survive the Next 100 Years by Ian Goldin and Robert Muggah, Century, RRP£30, 480 pages

James Crabtree is executive director of the International Institute for Strategic Studies-Asia



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Emerging Markets

Tech-heavy Taiwan stock index plunges on Covid outbreak

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Taiwan’s stock market, home to some of the world’s biggest tech companies, suffered one of the largest drops in its history as investors were rocked by a worsening Covid-19 outbreak.

The Taiex fell as much as 8.55 per cent on Wednesday, the index’s worst intraday fall since 1969, according to Bloomberg. It finished down 4.1 per cent.

Construction, rubber, automotive and financials — sectors retail investors had been shifting into from technology in recent months — were the worst hit in the sell-off.

The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Company, which has a 30 per cent weighting in the index, fell as much as 9.3 before recovering ground to be down 1.9, while Apple supplier Hon Hai Precision Industry, also known as Foxconn, dropped 9.8 per cent before paring losses to be down 4.7 per cent.

While Taiwan’s sell-off was related to domestic Covid-19 problems, it followed recent declines in global markets as investors worried about possible inflationary pressures.

The falls came as Taiwan’s government was expected to partially close down public life to contain a worsening coronavirus outbreak — something the country had managed to avoid for more than a year.

“The reason that triggered the escalated sell-off during the trading session is the new [Covid-19] cases to be reported this afternoon, and probably the raising of the pandemic alert level,” said Patrick Chen, head of Taiwan research at CLSA. “On top of that, the market before today was already at a point where the index was at an inflection point.”

Taiwan’s strict border controls and quarantine system and meticulous contact tracing measures had helped it avoid community spread of Covid-19 until recently.

That success, which allowed Taipei to forego lockdowns, helped boost the local economy, which grew about 3 per cent last year and 8.2 per cent in the first quarter of 2021.

But health authorities announced 16 locally transmitted confirmed cases on Wednesday, for three of which the infection source was unclear — a sign of widening spread in the community. Authorities had confirmed seven untraced cases on Tuesday, and domestic media reported that the government might introduce partial lockdown measures.

President Tsai Ing-wen called on the public to be vigilant but avoid panicking.

Taiwan’s stock market rose almost 80 per cent over the past year, peaking at a historical high late last month. It is now down 8.5 per cent from that mark.

Retail investors have increasingly moved out of technology stocks in recent weeks, reducing the sector’s weight in trading volume from almost 80 per cent at its height to just over 50 per cent.

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China factory gate prices climb on global commodities boom

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The price of goods leaving factories in China rose at the fastest pace in more than three years, on the back of a rally in commodities supported by the country’s economic recovery.

The producer price index rose 6.8 per cent in April year-on-year, beating economists’ expectations and surpassing March’s increase of 4.4 per cent.

The rate was driven in part by comparison with a low base last year in the early stages of the pandemic. But it also reflects a global surge in the prices of raw materials that was first stoked by China and now incorporates expectations of recovering global demand.

While PPI prices in China have leapt, economists suggested there was limited spillover into consumer prices and that the central bank was unlikely to react. China’s consumer price index added just 0.9 per cent in April, the National Bureau of Statistics said on Tuesday, although it touched a seven-month high.

“It tells us that demand at this moment is super strong,” said Larry Hu, head of greater China economics at Macquarie, of the PPI data, although he suggested policymakers would see the increase as “transitory” and “look through it”.

“We’re going to see some reflation trends,” he added.

Signs of tightening in China’s credit conditions have drawn scrutiny from global investors eyeing the prospect of higher inflation as the global economy recovers from the pandemic, especially in the US, which releases consumer price data on Wednesday.

China’s PPI index remained mired in negative territory for most of 2020 following the outbreak of coronavirus, but has started to gather momentum this year. Gross domestic product growth in China returned to pre-pandemic levels in the final quarter of 2020.

An industrial frenzy in China has stoked demand for commodities such as oil, copper and iron ore that make up a significant portion of the index and have helped to push it higher. 

Policymakers in China have moved to tighten credit conditions, as well as attempted to rein in the steel sector. Ting Lu, chief China economist at Nomura, said the relevant question now was “whether the rapid rise of raw materials prices will dent real demand, given pre-determined credit growth”.

Retail sales in China have lagged behind the growth rate of industrial production, putting downward pressure on CPI, which has also been weakened by lower pork prices that rose sharply on the back of African swine fever. Core CPI, which strips out food and energy, rose 0.7 per cent in April 

Julian Pritchard-Evans, senior China economist at Capital Economics, said that producer prices were feeding through into the rebound in consumer prices, but also suggested that pressures on the former were “likely to be mostly transient”.

He added that output prices for durable consumer goods were rising at their fastest level on record.

China’s rapid recovery has been driven by its industrial sector, which has churned out record quantities of steel and fed into a construction boom that policymakers are now trying to constrain. On Monday, iron ore prices hit their highest level on record, while copper prices also surged.



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Iron ore hits record high as commodities continue to boom

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The price of iron ore hit a record high on Monday in the latest sign of booming commodity markets, which have gone into overdrive in recent weeks as large economies recover from the pandemic.

The steelmaking ingredient, an important source of income for the mining industry, rose 8.5 per cent to a record high of almost $230 a tonne fuelled by strong demand from China where mills have cranked up production.

Other commodities also rose sharply, including copper, which hit a record high of $10,747 a tonne before paring gains. The increases are part of a broad surge in the cost of raw materials that has lasted more than a year and which is fanning talk of another supercycle — a prolonged period where prices remain significantly above their long term trend.

The price of timber has also hit a record high as US sawmills struggle to keep pace with demand in the run-up to peak homebuilding season in the summer.

“Commodity demand signals are firing on all cylinders amid a synchronised recovery across the world’s economic powerhouses,” said Bart Melek, head of commodity strategy at TD Securities.

Strong demand from China, the world’s biggest consumer of commodities, international spending on post-pandemic recovery programmes, supply disruptions and big bets on the green energy transition explain the surge in commodity prices.

Commodities have also been boosted by a weaker US dollar and moves by investors to stock up on assets that can act as a hedge against inflation.

The S&P GSCI spot index, which tracks price movements for 24 raw materials, is up 26 per cent this year.

Strong investor demand pushed commodity assets held by fund managers to a new record of $648bn in April, according to Citigroup. All sectors saw monthly gains with agriculture and precious metals leading the way, the bank said.

Agricultural commodities have had an especially strong run owing to rising Chinese demand and concerns of a drought in Brazil. Dryness in the US, where planting for this year is under way, is also adding to the upward rise in prices. Corn, which is trading at $7.60 a bushel and soyabeans at $16.22, are at levels not seen since 2013.

“From a macro economic environment to strong demand and production concerns, the ingredients are all there for the supercycle,” said Dave Whitcomb of commodity specialist Peak Trading Research.

Rising copper and iron ore prices are a boon for big miners, which are on course to record earnings that will surpass records set during the China-driven commodity boom of the early 2000s.

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JPMorgan reckons Rio Tinto and BHP will be the largest corporate dividend payers in Europe this year, paying out almost $40bn to shareholders. Shares in Rio, the world’s biggest iron ore producer, hit a record high above £67 on Monday.

Brent crude, the international oil benchmark, has crept back up
towards $70 a barrel, which it surpassed in March for the first time in
more than a year, recovering ground lost as the pandemic
slashed demand for crude and roiled markets.

Supply cuts by leading oil producers have helped to bolster the market
as consumption has begun to recover around the world.

While some Wall Street banks have hailed the start of a new supercycle, with some traders talking of a return to $100 a barrel oil, others are less convinced. The International Energy Agency said oil supplies still remain plentiful meaning any talk of a supercycle is premature.



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