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APEC summit: Donald Trump and Xi Jinping have differences over future of global trade

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US President Donald Trump and his Chinese counterpart Xi Jinping have set out starkly different visions for the future of global trade in speeches at a summit in Vietnam. In a defiant address, Trump told the Asia-Pacific Economic Co-operation (APEC) meeting that the US would no longer tolerate “chronic trade abuses”. In contrast, President Xi said globalization was irreversible.

APEC brings together 21 economies from the Pacific region – the equivalent of about 60% of the world’s GDP. Since taking office, President Trump has pursued his “America First” agenda and pulled the US out of the regional Trans-Pacific Partnership – a major trade deal with 12 APEC nations – arguing it would hurt US economic interests.

In a speech in the Vietnamese port city of Da Nang on Friday the 10th November, President Trump railed against the World Trade Organization, which sets global trade laws, and said it “cannot function properly” if all members do not respect the rules. He complained about trade imbalances, saying the USA had lowered market barriers and ended tariffs while other countries had not reciprocated. “Such practices hurt many people in our country,” he said, adding that free trade had cost millions of American jobs. But he did not lay the blame on APEC countries, and instead accused earlier US administrations of not acting earlier to reverse the trend. He said America would make bilateral agreements with “any Indo-Pacific partner here who abides by fair reciprocal trade”, but only “on a basis of mutual respect and mutual benefit”.

Speaking minutes after his American counterpart, Chinese President Xi Jinping took to the podium to espouse his country’s credentials as the new champion of world trade. Globalization, he said, was an “irreversible historical trend” but the philosophy behind free trade needed to be repurposed to be “more open, more balanced, more equitable and more beneficial to all”.

In contrast to President Trump, the Chinese leader defended multilateral trade deals, which he said helped poorer nations to benefit. “We should support the multilateral trading regime and practise open regionalism to allow developing members to benefit more from international trade and investment.”

The total trade relationship between the USA and China was worth $648bn last year, but trade was heavily skewed in China’s favour with the US amassing a nearly $310bn deficit.  Trump has in the past accused China of stealing American jobs and threatened to label it a currency manipulator, though he has since rowed back on such rhetoric.

During the US president’s visit, China announced it would further lower entry barriers in the banking, insurance, and finance sectors, and would gradually reduce vehicle tariffs. Deals worth $250bn (£190bn) were also announced, although it was unclear how much of that figure included past agreements or potential future deals.

Before the Beijing talks, Trump in Tokyo lashed out at Japan, saying it “has been winning” on trade in recent decades.  Japan had a $69bn (£52.8bn) trade surplus with the US in 2016, according to the US Treasury department.

Trump has repeatedly referred to the region as “Indo-Pacific”, a term used to define America’s new geopolitical view of Asia.

The US president had travelled to Da Nang from Beijing, where he had also discussed America’s huge trade imbalance with China. There too, he said he did not blame the country for “taking advantage”.

President Trump was clear – he wants bilateral trade deals and large, multilateral arrangements don’t work for him. This was a speech saying that America is open for business, but on America’s terms.

Contrast that with China’s Xi Jinping, who spoke about the digital economy, quantum science, artificial intelligence – presenting a vision of the future that is connected, and comprehensive.

Increasingly whenever you see  Xi on the international stage he is the poster child for free trade and globalization. Ironic, given that China itself has yet to become a fully free economy.

The US was the architect of many of the multilateral and free trade agreements for Asia. Under its tutelage, many of these countries opened up and reformed – playing by America’s rules.

But under Donald Trump, that role has gone into reverse which has left China with a gaping hole to fill – and one it is only more than happy to take on.

When the US president is served up soy sauce older than America itself, it makes you wonder what diplomatic messages Asian leaders were hiding in the stock when they fed Donald Trump. Japan’s PM Shinzo Abe has made no bones about becoming Trump’s best friend and when the pair shared an all-American hamburger lunch made with imported US beef (remember new India hates beef and kill those who eat beef or sell it because beef, according to the latest discovery of Hindutva, is god’s flesh), and accompanied by Heinz ketchup and mustard, the messaging was clear.

The US leader reportedly loves well-done steak and hates raw fish, so steak and a chocolate ice-cream sundae at a Tokyo teppanyaki restaurant was one of Trump’s first meals. But “Japanese style steak” was reportedly on the menu at the state dinner, as well as chawanmushi (steamed egg) with matsutake mushrooms, and he got a taste of local culture when he ate teriyaki chicken at a traditional Japanese restaurant.

In Seoul, politics was definitely on the table. A cooked prawn that was caught near the disputed Dokdo/Takeshima islands claimed by both South Korea and Japan was served up. And among the guests for the state dinner was Lee Yong-soo, a former “comfort woman” or wartime sex slave for Japanese soldiers – a contentious issue between South Korea and Japan. Trump was photographed giving her a warm hug

It might just be worth noting that Trump is not believed to share the same rapport with South Korean President Moon Jae-in as with Abe. Trump also used his dining choices to play politics with a calculated decision to eat with US and South Korean troops at Camp Humphreys, the largest overseas US military base, for “Taco Tuesday”.

It’s unclear whether Trump took a bite, but Japan was not pleased – a government spokesman later raised concerns about the significance of the prawn at a time when South Korea should unite with Japan to tackle North Korean issues

Beijing may have given Trump a lavish welcome, but dialled down the extravagance when it came to the state banquet, choosing instead to ease Trump into local cuisine with a classic Chinese dish familiar to many Americans – kung pao chicken.

The dish of chicken pieces stir fried with chillies originates from Sichuan province, as does another item on the menu, fish cooked in chilli oil.

Trump is currently on a five-nation Asia tour, with China one of his stops.

Trump also met Russian President Vladimir Putin at the summit. The two shook hands and exchanged a few words. Both were in blue shirt – similar or maybe made of the same cloth and maybe stitched by the same tailor.

After the summit, Trump pays a state visit to the Vietnamese capital Hanoi, before ending his 12-day Asian tour in the Philippines on 13 November.

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Economy

3 trends that can stimulate small business growth

MD Staff

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Small businesses are far more influential than most people may realize.

That influence is felt well beyond Main Street. Small businesses make up 99.7 percent of all businesses in the U.S., and these firms employ nearly half (48 percent) the workforce, according to the 2018 Small Business Profile compiled by the U.S. Small Business Administration.

In addition, take a look at recent trends and developments in technology. It’s clear that these changes can give entrepreneurs that extra leverage to scale up. Here are three to consider.

Big companies have big opportunities for small firms

Back in the 20th century, a large company would get things done in this very straightforward way. Wherever there was a need, they hired someone directly to perform that task, whether it was a driver or an accountant.

Under today’s leaner models, these big companies are finding it’s much more efficient to partner with other firms to fulfill certain needs. According to Deloitte, 31 percent of IT services have been outsourced, as well as 32 percent of human resources. This increasing acceptance of outsourcing is a huge growth opportunity for small businesses owners.

For example, Amazon recently announced it is actively seeking and helping entrepreneurs who are willing to deliver packages as their contractors. The mega retailer will even go as far as helping with startup costs so long as these smaller firms deliver their packages. Landing a contract with a big corporation is a significant milestone for any company, but starting out with that lucrative contract is sure to let these startups hit the ground running.

Better connections for greater flexibility

When today’s entrepreneur has a new role to fill, they’re not confined to the talent pool in their immediate community. Because we now have the tools and connectivity to work from anywhere, a business owner can expand the search across multiple states!

What’s more, these flexible, work from anywhere options can give business owners the inspiration to do things differently. Having greater collaboration means having access to more options to fit specific needs.

For example, what is the very nature of being a small business owner? It’s dealing with a fluctuating volume of work. Tapping into the talent pool of freelancers to work on these specific, short-term tasks and projects is easier than ever, because for a segment of workers, freelancing is increasingly becoming a way of life. Freelancers currently make up 36 percent of the workforce, according to a study from Upwork. And, if trends maintain, most Americans will be freelancers by 2027.

Thanks to remote options with easy access to talent, small businesses can easily set up temporary or ongoing as-needed work arrangements. When you partner with Dell for your computing needs, you’ll get the expert help and support so you can set up the perfect flexible workspace system.

More automation brings better efficiencies

Without a doubt, new technology works in favor of small businesses and entrepreneurs because they have many tools at their disposal to automate labor intensive processes, be more productive and cut costs. For example, entrepreneurs can use software to process client payments and even set up automated payments, saving hours and costs associated with collecting, processing and reconciling under the traditional paper check payment system. That translates into a more efficient billing department that can spend more time focused on complex issues.

Let Dell equip your small business with the right tech tools, tailor made for your venture and backed with support, so you can focus on running your business.

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Economy

Transitioning from least developed country status: Are countries better off?

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The Least Developed Countries (LDCs) are an internationally defined group of highly vulnerable and structurally constrained economies with extreme levels of poverty. Since the category was created in 1971, on the basis of selected vulnerability indicators, only five countries have graduated and the number of LDCs has doubled.  One would intuitively have thought that graduation from LDC status would be something that all LDCs would want to achieve since it seems to suggest that transitioning countries are likely to benefit from increased economic growth, improved human development and reduced susceptibility to natural disasters and trade shocks.

However, when countries graduate they lose international support measures (ISMs) provided by the international community. There is no established institutional mechanism for the phasing out of LDC country-specific benefits. As a result, entities such as the World Bank and the International Monetary Fund may not always be able to support a country’s smooth transition process.

Currently, 14 out of 53 members of the Commonwealth are classified as LDCs and the number is likely to reduce as Bangladesh, Solomon Islands and Vanuatu transition from LDC status by 2021. The three criteria used to assess LDC transition are: Economic Vulnerability Index (EVI), Human Assets Index (HAI) and Gross National Income per capita (GNI).  Many of the forthcoming LDC graduates will transition based only on their GNI.  This GNI level is normally set at US $ 1,230 but if the GNI reaches twice this level at US $ 2,460 a country can graduate.

So what’s the issue?  A recent Commonwealth – Trade Hot Topic publication confirms that most countries graduate only on the basis of their GNI, some of which have not attained significant improvements in human development (HAI) and even more of which fall below the graduation threshold for economic development due to persistent vulnerabilities (EVI).  This latter aspect raises the question as to whether transitioning countries will, actually, be better off after they graduate.

Given the loss of ISMs and the persistent economic vulnerabilities of many LDCs, it is no surprise that some countries are actually seeking to delay graduation, Kiribati and Tuvalu being two such Commonwealth countries despite easily surpassing twice the GNI threshold for graduation.

How is it possible that a country can achieve economic growth but not have appreciable improvements in resilience to economic vulnerability?  Based on a statistical analysis discussed in the Trade Hot Topic paper, a regression model, based on all forty-seven LDCs, was produced.  The model revealed that there was no statistically significant relationship between economic vulnerability and gross national income per capita.  The analysis was repeated just for Commonwealth countries and similar results were obtained.

Most importantly, analysis revealed that there was a positive relationship between GNI and EVI. In other words, increases in wealth (using GNI as a proxy) is likely to result in an increase in economic vulnerability.  This latter result is counterintuitive since one would expect more wealth to result in less economic vulnerability.

So what’s the take away?

The statistical results do not necessarily imply that improving the factors affecting economic vulnerability cannot result in improvements to economic prosperity.  It does suggest, however, that either insufficient efforts have gone into effecting such improvements or that there are natural limits to the extent to which such improvements can be effected.

One thing is clear, the multilateral lending agencies should revisit the removal of measures supporting climate change or other vulnerabilities for LDCs on graduation, since the empirical evidence suggests that countries could fall back into LDC status or stagnate and be unable to achieve sustainable development. Whilst transitioning from LDC status should be desirable, it should not be an end in itself. Rather than to transition and remain extremely vulnerable, countries should be resistant to such change or continue to receive more targeted support until vulnerabilities are reduced to more acceptable levels.

What are your thoughts?

Commonwealth

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Economy

U.S. policy and the Turkish Economic Crisis: Lessons for Pakistan

M Waqas Jan

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Over the last week, the Turkish Lira has been dominating headlines the world over as the currency continues to plunge against the US dollar. Currently at the dead center of a series of verbal ripostes between Presidents Donald Trump and Recep Tayyip Erdogan, the rapidly depreciating Lira has taken center stage amidst deteriorating US-Turkey relations that are wreaking havoc across international financial markets. Considering Pakistan’s current economic predicament, the events unfolding in Turkey offer important lessons to the dangers of unsustainable and unrealistic economic policies, within a dramatically changing international scenario. This holds particular importance for Pak-US relations within the context of the impending IMF bailout.

In his most recent statements, Mr. Erdogan has attributed his economy’s dire state of affairs as an ‘Economic War’ being waged against it by the United States. President Trump too has made it evident that the latest rounds of US sanctions that have been placed on Turkey are directly linked to its dissatisfaction with Ankara for detaining American Pastor Andrew Brunson. Mr Bruson along with dozens of others has been charged with terrorism and espionage for his purported links to the 2016 attempted coup against President Erdogan and his government.  There is thus a modicum of truth to Mr. Erdogan’s claims that the US sanctions are in fact, being used as leverage against the weakening Lira and the Turkish economy as part of a broader US policy.

However, to say that the latest US sanctions alone are the sole cause of Turkey’s economic woes is a gross understatement. The Lira has for some time remained the worst performing currency in the world; losing half of its value in a year, and dropping by another 20% in just the last week. Just to put the scale of this loss in to perspective, the embattled currency was trading at about 2 Liras to the dollar in mid-2014. The day before yesterday, it was trading at about 7 Liras to the dollar.

While the Pakistani Rupee has also depreciated quite considerably over the last few months, its recent drop (-17% against the dollar over the past 12 months) pales in comparison to the sustained and exponential downfall of the Lira. Yet, both the Turkish and Pakistani economies are at a point where they are experiencing an alarming dearth of foreign exchange reserves that have in turn dramatically increased their international debt obligations.

The ongoing financial crises in both Turkey and Pakistan are similar to the extent that both countries have pursued unsustainable economic policies for the last few years. These have been centered on increased borrowing on the back of overvalued currencies. While this approach had allowed both governments to finance a series of government investments in various projects, the long term implications of this accumulating debt has now caught up with them dramatically. As a result, both countries may soon desperately require IMF assistance; assistance, that in recent times, has become even more overtly conditional on meeting certain US foreign policy requirements.

In the case of Pakistan, these objectives may coincide with recent US pressures to ‘do more’ regarding the Haqqani network; or a deeper examination of the scale and viability of the China- Pakistan Economic Corridor. With regards to the latter, US Secretary of State Mike Pompeo has clearly stated that American Dollars, in the form of IMF funds, to Pakistan should not be used to bailout Chinese investors. The rationale being that a cash-strapped Pakistan is more likely to adversely affect Chinese interests as opposed to US interests in the region at the present. The politics behind the ongoing US-China trade war add even further relevance to this argument.

In the case of Turkey however, which is a major NATO ally, an important emerging market, and a deeply integrated part of the European financial system, there is a lot more at stake in terms of US interests. Turkey’s main lenders comprise largely of Spanish, French and Italian banks whose exposure to the Lira has caused a drastic knock on effect on the Euro. The ensuing uncertainty and volatility that has arisen is likely to prove detrimental to the US’s allies in the EU as well as in key emerging markets across South America, Africa and Asia. This marks the latest example of the US’s departure from maintaining and ensuring the health of the global financial system, as a leading economic power.

Yet, what’s even more unsettling is the fact that while the US is wholly cognizant of these wide-ranging impacts, it remains unfazed in pursuing its unilateral objectives. This is perhaps most evident in the diminishing sanctity of the NATO alliance as a direct outcome of these actions.  After the US, Turkey is the second biggest contributor of troops within the NATO framework. As relations between both members continue to deteriorate, Turkey has been more inclined to gravitate towards expanding Russian influence. In effect, contributing to the very anti-thesis of the NATO alliance. The recent dialogues between Presidents Erdogan and Putin, in the wake of US sanctions point markedly towards this dramatic shift.

Based on the above, it has become increasingly evident that US actions have come to stand in direct contrast to the Post-Cold War status quo, which it had itself help set up and maintain over the last three decades. It is rather, the US’s unilateral interests that have now taken increasing precedence over its commitments and leadership of major multilateral frameworks such as the NATO, and the Bretton Woods institutions. This approach while allowing greater flexibility to the US has however come at the cost of ceding space to a fast rising China and an increasingly assertive Russia. The acceleration of both Pak-China and Russo-Turkish cooperation present poignant examples of these developments.

However, while it remains unclear as to how much international influence US policy-makers are willing to cede to the likes of China and Russia over the long-term, their actions have made it clear that US policy and the pursuit of its unilateral objectives would no longer be made hostage to the Geo-Politics of key regions. These include key states at the cross-roads of the world’s potential flash-points such as Turkey and Pakistan.

Therefore, both Turkey and Pakistan would be well advised to factor in these reasons behind the US’s disinterest in their economic and financial predicaments. Especially since both Russia and China are still quite a way from being able to completely supplant the US’s financial and military influence across the world; perhaps a greater modicum of self-sufficiency and sustainability is in order to weather through these shifting dynamics.

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