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Despite Truce, No End in Sight for the US-China Trade War

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As the trade war between the US and China moves into truce, but not yet comprehensive agreement, uncertainly still rules, agreed panellists at a CNBC debate on the first day of the World Economic Forum’s Annual Meeting of the New Champions.

“The implication of the trade war is going to be so much broader than whatever impact it may have on business in the US and China,” said Charles Li, Chief Executive of Hong Kong Exchanges and Clearing. “This will be a long, long process before it’s over.”

Li compared the trade war to two runners, with the second runner closing distance in a manner that the race leader thinks is unfair. “Either you run faster to create the distance again, or you find a way to slow the other runner down.”

For the time being, there is no immediate end to the race in sight. None of the panellists predicted that there would be a resolution between the US and China on trade by the end of the year.

“The business community is very pleased that they are going back to the negotiating table … and that additional tariffs are going to be postponed for the time being,” said Timothy P. Stratford, Managing Partner, Beijing, at Covington & Burling. “What we are most concerned about is all the remaining uncertainty.”

“National security and trade policy are different fields,” he added, “with different rationales and goals they are trying to achieve.” He warned: “Mixing them together can really complicate things. They both need to be addressed in parallel, because they impact each other, but you have to keep them separate.”

“It’s a temporary truce,” reminded Mari Elka Pangestu, Professor of International Economics at the University of Indonesia, “but the issues behind the trade tariffs and deficit go deeper, into the perception of unfair trade practices, intellectual property and technology. I’m not sure it can be resolved anytime soon.”

Pangestu stressed the need for a multilateral rather than a bilateral resolution, so that all stakeholders can participate. “When two elephants fight,” she said, “countries like Indonesia don’t want to be trampled; we need to be agile.”

China’s loss can also be South-East Asia’s and ASEAN’s gain, as US firms seek alternative supply chains and manufacturing bases. But these could only be short-term gains, Pangestu warned, emphasizing that, for Indonesia in the long term, “it’s better that we go back to a rules-based system and more certainty.”

“We are very happy to hear that both the US and China have agreed to come back to the negotiating table,” said Yi Xiaozhun, Deputy Director-General of the World Trade Organization. However, he voiced the hope that multilateral arbitrage can help the US and China to resolve their differences.

“The WTO is a rules-based organization,” Yi stressed. “If some members feel their business opportunities are jeopardized by other members, they should come to the WTO to raise their concerns.”

“A lot of smaller economies are also affected by this trade war,” added Yi. “The current economic situation in the world does not look good. Uncertainty has reduced the confidence of investment, and global supply chains are disrupted. We hope that uncertainty can be reduced … and the WTO can move forward to more liberalization rather than moving back to managing trade.”

“Uncertainty is causing a lot of delay in investment decisions,” concurred Pangestu. “At the end of the day, it’s consumers who have to pay.”

Repercussions run deeper than rising prices. “Americans are concerned that the Chinese government will find other ways to show its displeasure,” warned Stratford, citing different types of retaliation including audits, investigations and the inability to get business licences.

Stratford noted: “One possibility is that the Government of China might decide it would be easier to deal with another president, and wants to see the results of the [2020] election. Although I agree that, whether you have a Republican or a Democrat in the White House, the US will never go back to what their China policy was before.”

“Both sides are suffering pain,” Stratford said, and seek a solution. But the resolution will not come easily or swiftly. “We’re moving into a process that might take three or four years.”

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Kenyan students learn about environmental law

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photo: UN Environment

In our globalized world, environmental threats require effective responses that promote peace, justice, development and the fulfilment of environmental and human rights. This is the responsibility of everyone; and we all have the right to be involved. We are all the leadership that the planet needs.

That’s what a group of Kenyan students were told in October 2019 when they participated in a lecture at the UN Environment Programme (UNEP) on international environmental law.

UNEP promotes a shared sense of environmental governance by building the capacity of those who affect the rules, policies and institutions that shape how humans interact with the environment.

UNEP experts spoke to students on basic governance and enforcement of international environmental law. International environmental law can involve many countries, as it does with the Paris Agreement, or a few countries, such as a regional environmental treaty. Sources of international environmental law can cover varied goals, such as the Convention on Biological Diversity, or be specific to a certain issue, such as the Agreement on the Conservation of Albatrosses and Petrels. We need international environmental law because many environmental problems are transboundary, regional or global in scope, and solutions require international cooperation and the adoption of common standards.

The students and UNEP experts deliberated over the weaknesses and strengths of international environmental laws and discussed how students could get more involved in tackling the issues. Students described the lecture as very useful and said that they were challenged to think of new and different aspects of environmental law.

Topics discussed included the divergent responsibilities of various groups regarding environmental governance and biotechnology, the principle of common but differentiated responsibility, and plastic pollution and lessons from the plastic ban in Kenya.

To ensure that this learning continues outside the lecture theatre, the UNEP team shared learning resources with the students.

James Nyaro, a lecturer at the Kenyatta University, said on behalf of the institution: “You let us ask you questions… and responded to them comprehensively… and we cannot thank you enough.”

What should I know about international environmental law?

When states work together to create and implement international environmental law, great things can be achieved. The ozone layer is currently on track to heal completely in our lifetime and this will save two million people each year by 2030 from skin cancer. This success is due to international environmental law through the Montreal Protocol: an environmental treaty.

As everyone has the right to be involved in environmental management, we should all have a basic understanding of the laws that govern us. Countries are individually responsible for deciding and applying international environmental laws, yet the average citizen can be far removed from the processes involved in their development and implementation. As citizens, we should influence the progression and enforcement of international environmental law to ensure that it effectively tackles the issues we face. UNEP encourages everyone to learn what international environmental laws apply to their states through InforMEA. Knowledge is the first step towards creating environmental laws that work for us.

On 23 October 2019, postgraduate students from the School of Security, Diplomacy and Peace Studies at Kenyatta University were introduced to international environmental law by UNEP experts.

UN Environment

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ADB Project to Improve Fiscal Management, Develop Capital Markets in Armenia

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The Asian Development Bank (ADB) has approved a $40 million-equivalent policy-based loan attached to reforms that help strengthen fiscal sustainability and develop the financial and capital markets in Armenia. These are crucial enablers of private sector development.

Armenia’s economic growth over the last few years has been hampered by low levels of investment, both foreign and domestic, given the high costs of local currency finance and related constraints in the financial system. Efficiency-promoting upgrades in public investment and fiscal management are also needed to ensure sustained improvements in fiscal outlook and sovereign risk pricing.

“Financial markets remain nascent in Armenia, which limits the development of the country’s private sector and the banking industry,” said ADB Senior Financial Sector Economist for Central and West Asia Mr. João Farinha Fernandes. “This also constrains public finance and fiscal management, while exposing the economy to financial stability risks. ADB’s assistance is intended to help ensure that Armenia develops a conducive fiscal and financial intermediation environment where private sector players, both big and small, can contribute to growth and development.”

ADB approved a $50 million policy-based loan in November 2018 as part of an ongoing programmatic engagement on financial reforms to strengthen public debt and fiscal risk management, and to develop financial markets in Armenia.

The Second Public Efficiency and Financial Markets Program continues these reforms by strengthening the effectiveness of the government’s fiscal risk management function; promoting the development of fiscally responsible public–private partnerships; and enhancing market transparency and predictability in public debt management. The program will also improve the infrastructure of the government securities market and money market infrastructure, enhancing the sustainability and resilience of Armenia’s finance sector.

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Bangladesh Can Boost its Exports with Better Logistics

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To meet the needs of its growing economy and to boost export growth, Bangladesh needs to improve its transport and logistics systems, says a new World Bank report launched today. 

The report Moving Forward: Connectivity and Logistics to Sustain Bangladesh’s Success, finds that by making logistics more efficient, Bangladesh can significantly boost export growth, maintain its position as a leading ready-made-garments and textile producer, and create more jobs. The report notes that congestion on roads and in seaports, high logistics costs, inadequate infrastructure, distorted logistics service markets, and fragmented governance hamper manufacturing and freight, further eroding Bangladesh’s competitive edge and putting its robust growth path at risk. 

“Bangladesh’s congested transportation and often unsophisticated logistics systems impose high costs to the economy,” said Mercy Tembon, World Bank Country Director for Bangladesh and Bhutan. “By making its logistics more efficient, Bangladesh can significantly optimize its connectivity, business environment, and competitiveness, putting the country on the right path to become a dynamic upper-middle-income country.”

Efficient logistics, the report argues, has become one of the main drivers for global trade competitiveness and export growth and diversification. For Bangladesh, improving its logistics performance provides an opportunity to increase its world market share in garments and textiles, which account for 84 percent of its total exports, expand into new markets, and diversify its manufacturing and agriculture into high-value products. 

The report notes that improving Bangladesh’s logistics requires a system-wide approach based on greater coordination among all public institutions involved in logistics and with the private sector, increasing the effective capacity of core infrastructure, and removing distortions in logistics service markets to reduce costs and improve quality. At a regional level, harmonizing its logistics systems and aligning its customs with that of its neighbors could turn Bangladesh into an important node for regional freight flows and further boost its trade. 

“There’s no doubt that reforms and investments for better transport and logistics will yield Bangladesh substantial economic benefits and strengthen its competitive advantage,” said Matías Herrera Dappe, Senior Economist at the World Bank and author of the report. “But the solution to logistics is not just to invest more but to invest better, by focusing on the service gap, and creating the incentives for high quality and competitive logistics services.”

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