Something glaring has been lost in the media’s headlines and in the carefully detailed analysis by many of my fellow trade economists in the wake of the White House announcement in December 2019 that China and the U.S. have come to an agreement on “Phase One” of a hoped for grand trade détente between the world’s two largest economies.
It is the recognition that under the Trump Administration, American policy toward international commerce has pivoted markedly toward a greater role for the U.S. government, rather than businesses, to engage directly in commercial cross-border transactions.
The centerpiece and seemingly the most tangible component of the Phase One agreement—at least as much as anyone can tell, since as 2019 comes to a close neither side has yet to issue a formal text—is a commitment by the Chinese government, through its state owned enterprises, to procure perhaps as much as $50bn worth of agricultural products from the U.S. over several years.
The irony that the President Trump’s trade team is relying heavily on state-to-state procurement transactions to ease trade frictions has not been lost on Xi Jinping according to friends of mine very well placed in Beijing.
Indeed, that the U.S. has become more like China rather than the other way around—at least in terms of respecting the WTO rules-of-the road regarding disciplines on non-market economies—is exactly what Mr. Xi has been hoping for as his Christmas gift all year long.
As long as Trump stays in power, Xi can count on this as the gift that will keep on giving. Given imperiled economy Mr. Xi oversees—if not feverishly trying to resuscitate—Trump’s gift is welcome indeed.
There is a plausible reason why Mr. Xi understands very well what drives the U.S. president. Trump emulates Mr. Xi’s ability to give the state the paramount role in the functioning of the economy.
The same can be said for Trump’s simpatico rapport with Russia’s Vladimir Putin, Turkey’s Recep Tayyip Erdoğan, and even North Korea’s Kim Jong-un, among other strongmen today across the globe.
Beyond the arranged agricultural deals with China, other actions reflect Trump’s longing for state control of the U.S. economy. Here are three that the president or his team have been contemplating or have begun to execute during his term in office so far.
The first is the starkest example. It was Trump’s attempt to order U.S. firms to leave China. Recall his Tweet earlier in 2019: “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
Second, Trump and his Treasury Secretary, Steven Mnuchin, have been working with allies in Congress to force a de-listing of Chinese firms from U.S. stock exchanges.
Ironically, portfolio investments in these businesses by American individuals and institutions might help those groups attain greater oversight of—or at least a better window on—the activities and performance of those Chinese firms, something one would think would be of value to the U.S. government.
And, third, Mr. Trump’s Secretary of Education, Betsy Devos, has launched a new program to penalize U.S. universities that inadequately disclose funding received from certain foreign governments.
These are resources that significantly help finance the operations of U.S. universities’ overseas campuses (which are highly profitable activities); fund cutting edge research activities taking place within U.S. universities by U.S. scholars; and plug a hole in cash-strapped U.S. universities, especially publicly funded schools.
These three initiatives are a few of the components of Mr. Trump’s overarching drive for a forced “decoupling” of the U.S. from China. If such a decoupling were successful, it would be the ultimate example of Trump’s exercise of a state-directed economy.
Fortunately, as I have written earlier in this space, any meaningful form of artificial decoupling is not only unwise public policy but it simply will not take root easily in a global economy whose supply chains, including the assembly of various components sourced from numerous geographies into final products, are truly multinational.
In short, no matter how forceful a government’s policy might be to try and sharply re-orient the current worldwide constellation of the location of production and consumption, as well as both the flows of technological advances and their geographic diffusion, it will unlikely counter in the short-run powerful forces engendered by inertia.
Why do I say that?
First, enacting and implementing new U.S. policies to bring about changes in taxes, tariffs and wage rates—among other factors—in order to alter global supply chains will not be easy tasks to accomplish. Even if the same party controlled both the executive and legislative branches, do not underestimate the power of U.S. businesses, labor and other interest groups to weigh in heavily.
Second, corporations with large fixed investments abroad will—for good reasons—not reconfigure their supply chain configurations on a dime. They will want to hedge their bets that any policy changes are durable.
Third, countries compete against each other to attract investment. A move by the U.S. to, say, make China a less desirable location for American firms to operate, will beget compensatory changes not only by Beijing but other countries in the region, for example, the ASEAN states. The world marketplace operates like a dynamic game.
Finally, the notion that the world will operate according to bifurcated technology standards for very long—say a duopoly of Western and Chinese technological regimes—is hard to digest.
The power of global economies of scale and scope will likely disrupt any semblance of a stable competitive equilibrium in this regard. One does not have think back very long to remember the race between Betamax, VHS, and DVDs.
Mr. Trump surely envies Mr. Xi’s sweeping governmental powers and his hold over the Chinese economy, which—for better or worse—has become the “world’s factory” of today.
In an ever-changing global marketplace, however, nothing guarantees such a configuration will not migrate to elsewhere on the globe in a few decades time. Indeed, this could be hastened by Xi’s reluctance to reform a moribund economic system.
In this regard, Trump would do well to recognize that strongmen economies do come to end, and often their demise is not a pretty sight, particularly for those at the very top.
Report: Women, diversity are key to rebuilding Canada's economy – Wealth Professional
Climbing the ladder
Women and diverse groups are also facing struggles to climb the corporate ladder to senior leadership roles.
“While we are making some progress with women on corporate Boards, reported at 25.3% of directors, the study highlights this doesn’t hold true for racialized women, reported at just 1.2% of directors,” said Zabeen Hirji, Executive Advisor, Future of Work, Deloitte. “White women out-numbering racialized women on corporate boards in Toronto by 12 to 1. The talent is there, it is policies and practices that need to evolve. We need to cast a wider net.”
The challenges are particularly evident in science and technology sectors (STEM).
Occupations within some of the high-growth and high-income sectors reveal the disparity of women trying to advance in STEM fields, generally filling lower-level jobs compared to their higher-level male counterparts.
However, women have made inroads into highly paid professions such as medicine and law.
Gautam Adani debunks GDP rhetoric, says India will be 2nd largest economy by 2050 – Deccan Herald
Billionaire Gautam Adani has debunked the narrow fixation on GDP numbers, saying fundamentals are intact and India will be the second-largest economy by 2050 and has an edge over global peers in terms of business opportunities.
Speaking at the JP Morgan India Summit – Future in Focus, the Adani Group chairman said the AatmaNirbhar Bharat programme will be a game-changer.
“I will state without any hesitation – that – in my view – over the next three decades, India is the world’s greatest business opportunity,” he said.
India’s geostrategic position and massive market size give it an edge over its global peers amid the fundamental political realignment of nations taking shape, he said adding opportunities for India are likely to accelerate on the other side of the pandemic.
“For the sake of the fans of the GDP metric, let’s look at some statistics. The global GDP in 1990 was $38 trillion. Today, 30 years later, this number is $90 trillion. Projecting for another 30 years, in 2050 the global GDP is expected to be about $170 trillion with India becoming the second-largest economy in the world,” he said.
The Indian economy shrank by a record 23.9 per cent in the April-June quarter because of the Covid-19 pandemic and the lockdown that followed. The economy is projected to contract for the first time in four decades, in the full year to March 2021.
But Adani said short-term setbacks due to a global crisis cannot be used to write off the country as its fundamentals remain intact.
“The current focus on standardised GDP predictions as against truly understanding what a nation could look like over a decade has unfortunately become one of the primary elements for measuring the health of an economy. In my view, patience and long-term planning and most importantly, an alignment with the government’s business agenda are what creates the greatest value,” he said.
Speaking of challenges holding back India, Adani said that India needs $1.5 to 2 trillion of capital over the next decade but despite key structural reforms such as the National Investment and Infrastructure Fund and Credit Enhancement Fund, capital structure challenges, and lack of empowered and independent regulators remain bottlenecks to nation-building and investment opportunities.
The first generation entrepreneur, who built India’s biggest infrastructure group with interests spanning from seaports to airports and energy, coaxed the audience to look at opportunities through his ‘optimist’ lenses.
“As an entrepreneur, I am an optimist, and therefore the lenses through which I see opportunities may be different than some of yours. I recognise that the view that you cannot build a long-term future on short-term thinking, may not be in alignment with the objectives of certain priorities of the investment community,” he said.
He told the forum to stop viewing all nations through old Western growth metrics.
“Democracy cannot take a cookie-cutter approach and we should accept that different nations will have their own flavour of democracy and capitalism.”
Stating that the AatmaNirbhar Bharat or self-reliant India programme will be a game-changer, he said India building a crumbling supply chain infrastructure that stood exposed to Covid-19, as also a strong head start in digital transformation will help re-build the economy.
India's central bank to keep rates on hold, provide economic forecasts – The Journal Pioneer
By Swati Bhat
MUMBAI (Reuters) – The Reserve Bank of India is expected to keep key rates unchanged this week, but may for the first time since February provide guidance on how the economy is performing amid the coronavirus pandemic.
All 66 respondents in a Reuters poll expect the repo rate to remain unchanged at 4.0% after its policy review on Thursday, and a large majority see no cuts until the January-March quarter. The RBI will then likely stay on hold until the end of 2021.
The central bank must manage high retail inflation while keeping policy accommodative to support an economy which nosedived 23.9% last quarter, the weakest performance on record.
It has so far slashed rates by 115 basis points in response to the COVID-19 pandemic since late March.
“India’s inflation-constrained central bank is unlikely to deliver a rate cut, and we expect all policy rates to stay unchanged,” said Rahul Bajoria, economist with Barclays adding that the RBI will however provide economic projections.
India is gradually reopening its economy from a lockdown but economic activity remains depressed as coronavirus cases top six million, the second-highest globally.
The South Asian country was already facing a cyclical downturn before the pandemic struck and is now expected to mark its first full-year contraction since 1979 this year as millions are left unemployed in the world’s second-most populous country.
The RBI has so far refrained from providing any forecasts on growth or inflation due to the heightened uncertainty and risk of projections having to be revised frequently.
However, the central bank is required by law to provide economic forecasts once every six months.
“Data projections from the central bank will be critical, as it would lay out the RBI’s assessment of the extent of the current slowdown and the medium-term implications of the current crisis,” Bajoria said.
The RBI has maintained that it sees the current rise in inflation as transitional and expects to see prices come down, giving it room to reduce rates to support growth.
August inflation, at 6.69%, held above the top end of the RBI’s medium-term target range of 2-6% for the fifth consecutive month amid supply disruptions.
(Editing by Jacqueline Wong)
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