TOKYO — Security deals are important, but in Asia, money talks.
Australia, India, Japan and the United States wrapped their second Quad Leaders’ Summit on Tuesday in Tokyo, following a weekend visit by U.S. President Joe Biden to South Korea.
The Quad countries and others in Asia made clear over the last five days that while things like maritime defense are important, real security has to heed Asian countries’ economic wants and needs.
The Quad is an informal security alignment of four major democracies that came about in response to China’s rising strength in the Indo-Pacific region. As CNBC reported before the group’s first Leaders’ Summit last September, the Quad wants to branch into areas including tech, trade, the environment and pandemic response.
The Biden administration has tried to demonstrate that economic priorities can be addressed within the Quad, between countries one-on-one, or as part of new, multilateral arrangements — though the United States hasn’t gone as far as all of its Asian partners would like.
“The focus is now on establishing overlapping multilateral relationships that operate in meshwork,” said Jonathan Grady, founding principal of forecasting firm The Canary Group. “The players involved are often the same, however we see them participating in many different groupings from security to economic issues. There is strength in numbers.”
New South Korean President Yoon Seok-youl showed Biden around a Samsung semiconductor facility, and immediately afterward explained that in the eyes of South Korea, the concept of security is a broader topic than just the military.
“Mr. President, today we’re living in the era of economic security, where economy is security and vice versa,” Yoon said, according to a translation of his remarks.
From South Korea’s perspective — and from the perspective of much of Asia — the concept of defense and economic stability are intertwined, said Ali Wyne, a senior analyst with Eurasia Group’s Global Macro practice.
“President Yoon’s statement distills the painful experiences of the past two and a half years: the coronavirus pandemic and Russia’s invasion of Ukraine demonstrate how severely disruptions to the production and distribution of essential medicines, crude oil, and agricultural staples, among other goods, can undermine the global economy,” Wyne said. “It also affirms the need for the United States to enhance its economic competitiveness in the region.”
Indo-Pacific Economic Framework
Indeed, economic competitiveness is where the United States faces a potent challenge from China, which has bigger trade relationships with most Asian countries — including members of the Quad — than the United States does.
In part to try to address that shortfall, the United States and 12 Asian countries on Monday announced the Indo-Pacific Economic Framework, or IPEF, an agreement designed to lay the groundwork for rules around the digital economy and supply chains in the region.
The IPEF is not a trade deal, and it doesn’t include a security component. Significantly, it also doesn’t give any new level of access to U.S. markets for developing countries in the group, including Indonesia, Philippines and Vietnam.
In the longer term, that could be a problem. Asked by CNBC earlier this month what he most wanted from the IPEF, Arsjad Rasjid, chairman of the Indonesian Chamber of Commerce and Industry, did not mince words: “Number one is access to the U.S market.”
“What we want end of the day is … to collaborate to develop economic growth, improve trade,” Rasjid said. “What we see is that there is more we can do together. This is a positive sign. But I hope this is not just politics per se, but what is the action? That’s more important.”
Biden is threading a needle between trying to raise America’s relevance in Asia on the one hand, and trying to avoid upsetting U.S. voters who — both left and right — are averse to trade deals.
Official statements out of Washington indicate as much. National Security Advisor Jake Sullivan on Monday said the IPEF is “part of President Biden’s commitment to putting American families and workers at the center of our economic and foreign policy, while strengthening our ties with allies and partners for the purpose of increasing shared prosperity.”
Other countries that are in the IPEF include Quad members Australia, India and Japan, as well as Brunei, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam.
Pure security issues still matter in Asia.
Biden generated the biggest headlines of the summit — perhaps inadvertently — when he said that the United States would be willing to defend Taiwan militarily should China attack it.
Asked by a reporter if the United States would, in contrast to its approach to Ukraine, be willing use its military to help Taiwan, Biden said, “Yes.”
“That’s the commitment we made. We are not — look, here’s the situation. We agree with the One China policy. We signed on to it and all the attendant agreements made from there,” the president said. “But the idea that it can be taken by force, just taken by force, is just not appropriate. It will dislocate the entire region and be another action similar to what happened in Ukraine.”
Taiwan is a self-governing democracy, but Beijing regards the island as part of China. The official American position is that there is “one China.” The unofficial American policy is known as “strategic ambiguity,” where the U.S. avoids saying one way or another how far it would go to protect Taiwan.
Biden’s statement appeared to bring an end to a lot of the ambiguity, but U.S. officials said behind Biden that official policy hasn’t changed. U.S. Defense Secretary Lloyd Austin tried to clarify that Biden “reiterated that policy and our commitment to peace and stability across across the Taiwan Strait. He also highlighted our commitment under the Taiwan Relations Act to help provide Taiwan the means to defend itself.”
Beijing wasn’t having it.
“No one should underestimate the strong determination, firm will, and strong ability of the Chinese people to defend national sovereignty and territorial integrity, and do not stand against the 1.4 billion Chinese people,” China’s Foreign Ministry said.
Argentines Seek Hedging in Crypto After Economy Minister Resigns – BNN
(Bloomberg) — The cost of buying Tether with Argentine pesos surged Saturday after Economy Minister Martin Guzman resigned.
The resignation marked the biggest departure of President Alberto Fernandez’s government after infighting escalated within the ruling coalition. No replacement was immediately named.
The price of Tether measured in Argentine pesos jumped on major exchanges soon after the minister announced his resignation on Twitter, according to the CryptoYa website, which reports minute-by-minute prices. The coin fetched 257 Argentine pesos on the Binance exchange, up 6.6%. On the Lemon Cash exchange, prices jumped 11% to 279 pesos.
Crypto is the only market trading in Argentina on Saturday. While volumes are small, the moves could indicate unease, at least among some traders, over the growing rift within the ruling coalition and concern over the government’s ability to tackle rising inflation and other economic challenges.
Argentina is one of the nine countries with the highest adoption of cryptocurrencies, according to Chainalysis, a site specializing in crypto and blockchain. In a country with recurring currency crises and inflation running around 60% annually, two-thirds of Argentines who invest in crypto say they do so to protect their savings, according to a study by Buenos Aires-based Wunderman Thompson.
©2022 Bloomberg L.P.
Charting the Global Economy: Factories Slow Down From US to Asia – BNN
(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.
Manufacturing from the US to Asia is very much in a slowdown as factories continue to struggle with supply snarls, labor shortages and elevated materials costs.
A measure of US manufacturing activity weakened in June to a two-year low, and several regional Federal Reserve surveys indicated business activity shrank. Factory purchasing managers’ gauges across Asia eased, with South Korea, Thailand and India among those showing the biggest declines, according to S&P Global.
Similar indexes in Poland, Spain and Italy also showed weaker activity compared to May.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
Consumer spending fell in May for the first time this year and prior months were revised lower, suggesting an economy on somewhat weaker footing than previously thought amid rapid inflation and Fed interest-rate hikes.
Regional Fed manufacturing surveys have taken on a grimmer tone, with four of five indicating business activity shrank in June. Separately, a measure of overall manufacturing slid to a two-year low as new orders contracted, restrained by lingering supply constraints and some softening in demand.
The pandemic housing boom is careening to a halt as the fastest-rising mortgage rates in at least half a century upend affordability for homebuyers, catching many sellers wrong-footed with prices that are too high.
Confidence in the euro-area economy slipped as households become more pessimistic amid fears a Russian energy cutoff will spark a recession. At the same time, they’re less worried about inflation than they were a month ago, though there’s a split between core and peripheral euro-area countries.
After suffering from unprecedented shocks in recent years, the UK is succumbing to more intractable problems marked by plodding growth, surging inflation and a series of damaging strikes.
China’s economy showed some improvement in June as Covid restrictions were gradually eased, although the recovery remains muted. That’s the outlook based on Bloomberg’s aggregate index of eight early indicators for this month. The overall gauge returned to the neutral level after deteriorating for two straight months.
Japan’s factory output shrank at the fastest pace since the height of the pandemic as the lagged impact of China’s virus lockdowns continued to disrupt supply chains and economic activity in the region. The weakness in manufacturing extended across Asia, particularly in South Korea, Thailand, India and Taiwan.
Colombia’s central bank delivered its biggest interest rate increase in over two decades. Policy makers are bracing for another spike in annual inflation that’s already above 9%.
Two years after Argentina emerged from its latest default, a debt crisis in brewing once again. This time, the immediate trouble is in the local bond market, where creditors have become reluctant to roll over maturing government bonds.
Zambia’s inflation rate dropped below 10% for the first time in almost three years in June, bucking a global trend of record consumer-price growth. Optimism over the nation’s economy since the election of Hakainde Hichilema as president in August, a potential debt restructuring and a $1.4 billion bailout package from the International Monetary Fund has seen a rally in the local currency, which has helped contain prices.
Differences in underlying inflation trends call for different policy outlooks among the world’s top central banks, according to Bloomberg Economics. The Fed will have to go well into restrictive territory, the Bank of England may go a little above neutral and the European Central Bank might not even get that far.
©2022 Bloomberg L.P.
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