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Countries should resist the protectionist urge after COVID-19

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Authors: Nicholas Ross Smith andZbigniew Dumienski*

One of the most worrying trends in the global response to the COVID-19 pandemic has been the retreat of countries from participating in the so-called “international community”. Certainly, the threat of COVID-19 has resulted in extreme measures like the closing of borders and increasing centralization of politics at the country-level. However, these measures have also been accompanied by enveloping anxiety and paranoia, both of which significantly inhibit a truly cooperative international response to the crisis.

Troublingly, isolation, it seems, is not just a strategy for defeating COVID-19 but also the default mode countries are adopting with regards to international relations at this moment. 

This ‘protectionist turn’ is hardly surprising. Dissatisfaction with globalization has been rising exponentially in over the last two decades, most notably stoked by the global financial crisis. Even in the United States, a country which benefited tremendously from the deepening of global trade and finance, protectionist tones were arguably a key element of Donald Trump’s election victory in 2016. And Trump, to an extent, followed through with this protectionist bent in his policymaking since, notably the trade war the United States has been engaging in against China.

At first glance, it may seem odd that globalization, or trade liberalisation more broadly, has been attracting so much criticism because this era of globalization – often referred to as the third wave of globalization – has brought with it incredible material benefits to developed and developing countries. For instance, the percentage of people worldwide living in absolute poverty has dropped from 37% in 1990 to under 10% in 2020, while at the same time, the global population has increased by roughly 2.4 billion in the same period. 

But, simply evaluating globalization in broad metrics ignores the more important question of power, both domestically and internationally. While it is true that free trade in goods and services between willing parties can be beneficial to everyone, this recent era of globalization arguably has relatively little to do with such genuinely free exchanges.

Far from simply allowing all people to trade freely, the current set of international regimes and treaties, which govern international trade, is of primary benefit to those entities that are large enough to be able to afford to adhere to them. Likewise, domestic rules and regulations create conditions in which large companies are preoccupied more with cutting the cost of labour (heavily taxed in the West), than with reducing the pollution that is the inevitable cost of transporting goods across the world.

Furthermore, this era of globalization has not just resulted in a proliferation of free trade in goods and services globally but, more insidiously, the acquisition of all sorts of monopoly privileges by the most powerful entities and individuals, with land ownership arguably being the most significant and glaring example.

Labour products wean out, but privileges are forever. The idea that free trade enriches people in both countries do not consider trade that turns one country into tenants of another country, person or corporation.

We must, therefore, remember that globalization is not a natural phenomenon, but a phenomenon that is influenced by both domestic and international power struggles. Not surprisingly, a crisis of this magnitude is bound to affect the power dynamics that have shaped how our world has become globalized.

With regards to COVID-19, globalization has been cited as a major contributing factor to the difficulty countries have had in initially fighting the pandemic. One glaring example of this has been the global reliance on China for the key medical supplies needed to reduce the contagiousness of COVID-19, such as masks and sanitizer chemicals. Once COVID-19 forced China into lockdown, global supply chains were halted, leaving numerous countries unable to access the supplies needed in combatting the outbreaks they were experiencing.

Even after China managed to contain the spread of COVID-19 by late February which enabled them to significantly increase the production of the medical supplies needed in the frontline fight against the pandemic, issues have remained. Although China’s humanitarianism in places like Italy and Spain deserves praise, some issues have arisen such as some Chinese producers have been accused of auctioning off supplies to the highest bidder. Furthermore, the quality of the products China is providing has come under the microscope, with numerous examples of faulty medical supplies being returned.  

Globalization is painted as the underlying problem in all of this, but the reality is that much of the problem stems from a mutated version of globalization – examined above – that has come to dominate the international community, not globalization itself. But, the two are so intertwined in dominant discourses that protectionist responses to the crisis become attractive, especially to those that have suffered the most from globalization over the years. 

If globalization is bad, then what is good? Well, protectionism seems to be a popular answer being touted now. Protectionism has always been appealing to populations because, on the surface, it seems like a positive case of a government using its power to “protect” the most vulnerable within a country. But, as Henry George stated: “What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war”.

The surging protectionist sentiment after COVID-19 is spiralling out of control in some areas. And while, in the short-term, countries will certainly be forced to fend for themselves by becoming somewhat insular, they cannot be sucked into to thinking this is a viable model for the long-term.

One only has to look at Albania during the Cold War to see the folly out of control protectionism can breed. Partly due to the anxiety and paranoia of the Cold War, the Albanian Communist leader Enver Hoxha took the desire to be “self-sufficient” to the extreme, attempting to completely disengage Albania from the international community and pursue a policy tantamount to autarky. This was not simply symbolic posturing as by the mid-1980s, foreign trade accounted for merely 6% of GDP and Albania received zero foreign assistance (Albania had been previously heavily dependent on the Soviet Union and then the People’s Republic of China).

Despite nearly implanting a complete autarky, this policy was disastrous for Albania. One of the big problems was that Albania was a largely agricultural society and had not experienced significant industrialization. Albania barely produced any machinery and the capital goods they had were mostly Soviet-made from the 1950s. As a result, Albania was left to wallow for decades in poverty without any improvement of economy or life, representing, by far, Europe’s poorest country at that time. 

Communist Albania is an extreme example, but it is still a useful warning to countries which are facing increased pressure from within due to COVID-19 to become more “self-sufficient”. And while it is understandable that the COVID-19 pandemic necessitates a temporary restriction on the movement of people, it does not also have to result in the restriction of the global trade of goods and services.

Unlike in the case of past epidemics, there is now the technological capabilities to purchase goods and services directly from suppliers across the globe from within the comfort of our home. The fact that we still buy so many goods in brick and mortar shops is mostly a matter of habit than necessity. And the fact we still require countries to facilitate trade is also not a necessity.

In this context, COVID-19 could represent a critical juncture where newer, more appropriate and efficient forms of trade are established. Given the potential economic fallout that might occur due to the pandemic, radical ideas are surely needed to kickstart economic exchange. For that to occur, however, we need responsible leadership that sees trade as being an activity between people and companies, rather than perpetuate this dated idea of trade being some that should be predominately managed country-to-country.

COVID-19 also shows us that we need far more meaningful global cooperation and burden-sharing. Even the wealthiest countries with the best healthcare suffer if one country cannot contain an illness (because of poverty or incompetence). We are used to this argument in military terms. A failed state is a threat to all neighbours due to refugees, violence etc. But now maybe this thinking can extend to other areas. The real challenge is though how to boost global collaboration in a democratic and accountable way?

Protectionism is not the answer.

However, giving the growing centralization of countries and the growing protectionist sentiment in many populations, it is likely that the opportunity to reinvigorate globalization will be lost, and an era of growing protectionism and mercantilism will be upon us in no short time.  This will only compound the pain of COVID-19 in the short-term while further muddying the long-term forecasts of international relations, most notably the looming US-China great power competition.

*Zbigniew Dumienski, PhD graduate in International Political Economy from the University of Auckland, New Zealand

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Economy

The Blazing Revival of Bitcoin: BITO ETF Debuts as the Second-Highest Traded Fund

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It seems like bitcoin is as resilient as a relentless pandemic: persistent and refusing to stay down. Not long ago, the crypto-giant lost more than half of its valuation in the aftermath of a brutal crackdown by China. Coupled with pessimism reflected by influencers like Elon Musk, the bitcoin plummeted from the all-time high valuation of $64,888.99 to flirt around the $30,000 mark in mere weeks. However, over the course of the last four months, the behemoth of the crypto-market gradually climbed to reclaim its supremacy. Today, weaving through national acceptance to market recognition, bitcoin could be the gateway to normalizing the elusive crypto-world in the traditional global markets: particularly the United States.

The recent bullish development is the launch of the ProShares Bitcoin Strategy ETF – the first Bitcoin-linked exchange-traded fund – on the New York Stock Exchange. Trading under the ticker BITO, the Bitcoin ETF welcomed a robust trading day: rising 4.9% to $41.94. According to the data compiled by Bloomberg, BITO’s debut marked it as the second-highest traded fund, behind BlackRock’s Carbon fund, for the first day of trading. With a turnover of almost $1 billion, the listing of BITO highlighted the demand for reliable investment in bitcoin in the US market. According to estimates on Tuesday, More than 24 million shares changed hands while BITO was one of the most-bought assets on Fidelity’s platform with more than 8,800 buy orders.

The bitcoin continued to rally, cruising over the lucrative launch of BITO. The digital currency rose to $64,309.33 on Tuesday: less than 1% below the all-time high valuation. In hindsight, the recovery seems commendable. The growing acceptance, albeit, has far more consequential attributes. The cardinal benefit is apparent: evidence of gradual acceptance by regulators. “The launch of ProShares’ bitcoin ETF on the NYSE provides the validation that some investors need to consider adding BTC to their portfolio,” stated Hong Fang, CEO of Okcoin. In simpler terms, not only would the listing allow relief to the crypto loyalists (solidifying their belief in the currency), but it would also embolden investors on the sidelines who have long been deterred by regulatory uncertainty. Thus, bringing larger, more rooted institutional investors into the crypto market: along with a surge of capital.

However, the surging acceptance may be diluting the rudimentary phenomenon of bitcoin. While retail investors would continue to participate in the notorious game of speculation via trading bitcoin, the opportunity to gain indirect exposure to bitcoin could divert the risk-averse investors. It means many loyalists could retract and direct towards BITO and other imminent bitcoin-linked ETFs instead of setting up a digital custodianship. Ultimately, it boils down to Bitcoin ETFs being managed by third parties instead of the investor: relenting control to a centralized figure. Moreover, with growing scrutiny under the eye of SECP, the steps vaguely intimate a transition to harness the market instead of liberalizing it: quiet oxymoronic to the entire decentralized model of cryptocurrencies.

Nonetheless, the listing of BITO is an optimistic development that would draw skeptics to at least observe the rampant popularity of the asset class. While the options on BITO are expected to begin trading on the NYSE Arca Options and NYSE American Options exchanges on Wednesday, other futures-based Bitcoin ETFs are on the cards. The surging popularity (and reluctant acceptance) amid tightening regulation could prove a turn of an era for the US capital markets. However, as some critics have cited, BITO is not a spot-based ETF and is instead linked to futures contracts. Thus, the restrain is still present as the regulators do not want a repeat of the financial crisis. Nevertheless, bitcoin has proved its deterrence in the face of skepticism. And if the BITO launch is to be marveled at, then the regulations are bound to adapt to the revolution that is unraveling in the modern financial reality.

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Is Myanmar an ethical minefield for multinational corporations?

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Business at a crossroads

Political reforms in Myanmar started in November 2010 followed by the release of the opposition leader, Aung San Suu Kyi, and ended by the coup d’état in February 2021. Business empire run by the military generals thanks to the fruitful benefits of democratic transition during the last decade will come to an end with the return of trade and diplomatic sanctions from the western countries – United States (US) and members of European Union (EU).  US and EU align with other major international partners quickly responded and imposed sanctions over the military’s takeover and subsequent repression in Myanmar. These measures targeted not only the conglomerates of the military generals  but also the individuals who have been appointed in the authority positions and supporting the military regime.

However, the generals and their cronies own the majority of economic power both in strategic sectors ranging from telecommunication to oil & gas and in non-strategic commodity sectors such as food and beverages, construction materials, and the list goes on. It is a tall order for the investors to do business by avoiding this lucrative network of the military across the country. After the coup, it raises the most puzzling issue to investors and corporate giants in this natural resource-rich country, “Should I stay or Should I go?”

Crimes against humanity

For most of the people in the country, war crimes and atrocities committed by the military are nothing new. For instances, in 1988, student activists led a political movement and tried to bring an end to the military regime of the general Ne Win. This movement sparked a fire and grew into a nationwide uprising in a very short period but the military used lethal force and slaughtered thousands of civilian protestors including medical doctors, religious figures, student leaders, etc. A few months later, the public had no better options than being silenced under barbaric torture and lawless killings of the regime.

In 2007, there was another major protest called ‘Saffron Uprising’ against the military regime led by the Buddhist monks. It was actually the biggest pro-democracy movement since 1988 and the atmosphere of the demonstration was rather peaceful and non-violent before the military opened live ammunitions towards the crowd full of monks. Everything was in chaos for a couple of months but it ended as usual.

In 2017, the entire world witnessed one of the most tragic events in Myanmar – Again!. The reports published by the UN stated that hundreds of civilians were killed, dozens of villages were burnt down, and over 700,000 people including the majority of Rohingya were displaced to neighboring countries because of the atrocities committed by the military in the western border of the country. After four years passed, the repatriation process and the safety return of these refugees to their places of origin are yet unknown. Most importantly, there is no legal punishment for those who committed and there is no transitional justice for those who suffered in the aforementioned examples of brutalities.

The vicious circle repeated in 2021. With the economy in free fall and the deadliest virus at doorsteps, the people are still unbowed by the oppression of the junta and continue demanding the restoration of democracy and justice. To date, Assistant Association for Political Prisoner (AAPP) reported that due to practicing the rights to expression, 1178 civilians were killed and 7355 were arrested, charged or sentenced by the military junta. Unfortunately, the numbers are still increasing.

Call for economic disengagement

In 2019, the economic interests of the military were disclosed by the report of UN Fact-Finding Mission in which Myanmar Economic Corporation (MEC) and Myanmar Economic Holding Limited (MEHL) were described as the prominent entities controlled by the military profitable through the almost-monopoly market in real estate, insurance, health care, manufacturing, extractive industry and telecommunication. It also mentioned the list of foreign businesses in partnership with the military-linked activities which includes Adani (India), Kirin Holdings (Japan), Posco Steel (South Korea), Infosys (India) and Universal Apparel (Hong Kong).

Moreover, Justice for Myanmar, a non-profit watchdog organization, revealed the specific facts and figures on how the billions of revenues has been pouring into the pockets of the high-ranked officers in the military in 2021. Myanmar Oil & Gas Enterprise (MOGE), an another military-controlled authority body, is the key player handling the financial transactions, profit sharing, and contractual agreements with the international counterparts including Total (France), Chevron (US), PTTEP (Thailand), Petronas (Malaysia), and Posco (South Korea) in natural gas projects. It is also estimated that the military will enjoy 1.5 billion USD from these energy giants in 2022.

Additionally, data shows that the corporate businesses currently operating in Myanmar has been enriching the conglomerates of the generals and their cronies as a proof to the ongoing debate among the public and scholars, “Do sanctions actually work?” Some critics stressed that sanctions alone might be difficult to pressure the junta without any collaborative actions from Moscow and Beijing, the longstanding allies of the military. Recent bilateral visits and arm deals between Nay Pyi Taw and Moscow dimmed the hope of the people in Myanmar. It is now crystal clear that the Burmese military never had an intention to use the money from multinational corporations for benefits of its citizens, but instead for buying weapons, building up military academies, and sending scholars to Russia to learn about military technology. In March 2021, the International Fact Finding Mission to Myanmar reiterated its recommendation for the complete economic disengagement as a response to the coup, “No business enterprise active in Myanmar or trading with or investing in businesses in Myanmar should enter into an economic or financial relationship with the security forces of Myanmar, in particular the Tatmadaw [the military], or any enterprise owned or controlled by them or their individual members…”

Blood money and ethical dilemma

In the previous military regime until 2009, the US, UK and other democratic champion countries imposed strict economic and diplomatic sanctions on Myanmar while maintaining ‘carrot and stick’ approach against the geopolitical dominance of China. Even so, energy giants such as Total (France) and Chevron (US), and other ‘low-profile’ companies from ASEAN succeeded in running their operations in Myanmar, let alone the nakedly abuses of its natural resources by China. Doing business in this country at the time of injustice is an ethical question to corporate businesses but most of them seems to prefer maximizing the wealth of their shareholders to the freedom of its bottom millions in poverty.

But there are also companies not hesitating to do something right by showing their willingness not to be a part of human right violations of the regime. For example, Australian mining company, Woodside, decided not to proceed further operations, and ‘get off the fence’ on Myanmar by mentioning that the possibility of complete economical disengagement has been under review. A breaking news in July, 2021  that surprised everyone was the exit of Telenor Myanmar – one of four current telecom operators in the country. The CEO of the Norwegian company announced that the business had been sold to M1 Group, a Lebanese investment firm, due to the declining sales and ongoing political situations compromising its basic principles of human rights and workplace safety.

In fact, cutting off the economic ties with the junta and introducing a unified, complete economic disengagement become a matter of necessity to end the consistent suffering of the people of Myanmar. Otherwise, no one can blame the people for presuming that international community is just taking a moral high ground without any genuine desire to support the fight for freedom and pro-democracy movement.

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The Covid After-Effects and the Looming Skills Shortage

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coronavirus people

The shock of the pandemic is changing the ways in which we think about the world and in which we analyze the future trajectories of development. The persistence of the Covid pandemic will likely accentuate this transformation and the prominence of the “green agenda” this year is just one of the facets of these changes. Market research as well as the numerous think-tanks will be accordingly re-calibrating the time horizons and the main themes of analysis. Greater attention to longer risks and fragilities is likely to take on greater prominence, with particular scrutiny being accorded to high-impact risk factors that have a non-negligible probability of materializing in the medium- to long-term. Apart from the risks of global warming other key risk factors involve the rising labour shortages, most notably in areas pertaining to human capital development.

The impact of the Covid pandemic on the labour market will have long-term implications, with “hysteresis effects” observed in both highly skilled and low-income tiers of the labour market. One of the most significant factors affecting the global labour market was the reduction in migration flows, which resulted in the exacerbation of labour shortages across the major migrant recipient countries, such as Russia. There was also a notable blow delivered by the pandemic to the spheres of human capital development such as education and healthcare, which in turn exacerbated the imbalances and shortages in these areas. In particular, according to the estimates of the World Health Organization (WHO) shortages can mount up to 9.9 million physicians, nurses and midwives globally by 2030.

In Europe, although the number of physicians and nurses has increased in general in the region by approximately 10% over the past 10 years, this increase appears to be insufficient to cover the needs of ageing populations. At the same time the WHO points to sizeable inequalities in the availability of physicians and nurses between countries, whereby there are 5 times more doctors in some countries than in others. The situation with regard to nurses is even more acute, as data show that some countries have 9 times fewer nurses than others.

In the US substantial labour shortages in the healthcare sector are also expected, with anti-crisis measures falling short of substantially reversing the ailments in the national healthcare system. In particular, data published by the AAMC (Association of American Medical Colleges), suggests that the United States could see an estimated shortage of between 37,800 and 124,000 physicians by 2034, including shortfalls in both primary and specialty care.

The blows sustained by global education from the pandemic were no less formidable. These affected first and foremost the youngest generation of the globe – according to UNESCO, “more than 1.5 billion students and youth across the planet are or have been affected by school and university closures due to the COVID-19 pandemic”. On top of the adverse effects on the younger generation (see Box 1), there is also the widening “teachers gap”, namely a worldwide shortage of well-trained teachers. According to the UNESCO Institute for Statistics (UIS), “69 million teachers must be recruited to achieve universal primary and secondary education by 2030”.

From our partner RIAC

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