Saturday, 11 May 2019

Donald Trump's hostile takeover of the Chinese economy continues

Eternity in a grain of sand, heaven in a wild flower ... and revelation of character in a golf ball.

"People who cheat at golf also cheat at life."

Donald Trump cheats and Vladimir Putin stumbles. If you think playing hockey against Vladimir Putin is taking your life into your own hands, try playing golf with Donald Trump. MSNBC

Donald Trump's attempted hostile takeover of China's economy continues apace. The Chinese walked into an ambush when they presented their latest round of changes last week thinking they were still negotiating. Kicked off by Reuters' "exclusive" briefing by "three U.S. government sources and three private sector sources", the media then fell in with Trump and trade representative Lighthizer's narrative that the Chinese "reneged" on a deal that was already sewn up.

With two tweets on Sunday (provocatively, the 20th anniversary of the US bombing the Chinese embassy in Belgrade which killed three journalists) stating he was raising current tariffs on China from 10% to 25%, and planning the same for an additional $300 billion of Chinese trade, the President snapped his fingers and wiped $1.36 trillion from the world economy.
The Economist gives a more nuanced analysis, suggesting that there's more democracy in China's system than you'd think with a politburo that has to sign off on the final agreement. It may be Trump's Thanos dream to snap his fingers and make half the world disappear, but Xi can't do that. He has his own domestic audience to please.
Complicating matters, negotiations have been conducted in English, with the draft agreement (reportedly seven chapters and 150 pages) also in English. As it is translated into Chinese and circulated among more officials, changes are inevitable. “You can’t really renege on something that is a non-binding work in progress,” says James Zimmerman, a partner in the Beijing office of Perkins Coie, a law firm.
So why would China baulk at signing the deal as dictated by the US? They have been making rapid (for China) inroads on outright theft and copyright issues, as they should. But, having once been awash with dosh and not needing foreign capital, they used a barter practise of allowing American firms access in exchange for knowledge in the form of intellectual property (IP) transfer  – which is completely different and smeared as "theft" when these were terms negotiated by the companies in the course of business, and not a government requirement. Looks like The Art of the Deal only goes in one direction.

A major sticking point seems to be the demand that China should undermine its own economic model and no longer subsidise some of its industries, in the same way that, say, the US subsidises its own military or farming industries, for example. What do we think Trump's tax breaks did in allowing US companies to buy back their own stock?

So, double standards aside, China's economic basis is a matter of sovereignty on which China is not going to budge. Trump's China hawks know that. Trump now says he gave US business in China a year's notice to get out, so he knows where this is going and that it was never going to be sincerely resolved. The objective: smash open China's economy, a variant on the "kick their ass and take their gas" that destroyed Iraq and threatens Venezuela, Iran and others.

And do you really want your national wealth subject to a takeover by the same chancers who brought you the 1MDB scandal?

Perhaps this is why we need a World Trade Organisation with teeth so that the rule of law applies to all parties without the biggest one acting as plaintiff, judge, jury and executioner. No wonder he hobbled the WTO; a rule of law that applies to all may not be the kind of level playing field (or golf course) that Donald wants. How can China trust Trump, with his decades-long history of reneging on deals both private and public? Not even Mexico and Canada have escaped the Donald treatment and all his broken promises to remove tariffs.

Trump's subsequent twitterstorm of socialist pledges to use the hundreds of billions that China would pay through his new 'n' improved tariffs to make farmers rich as Croesus and give their produce to the poor was met with 360 degree incredulity. Americans know China doesn't pay Trump's tariffs and this means effectively a tax on their purchases, pushing up the cost for middle America by an estimated $767 per household. That's on top of the swelling national debt burden, up $9 TRILLION to $29 trillion since he took office.

Meanwhile, although an estimated 2% drop in China's GDP from 6 to 4% due to maximised tariffs will hurt, China has the resilience and scale to withstand the assault. It raised 800 million out of poverty and created a huge growing middle class of over 500 million, bigger than the entire population of the USA. No wonder some desperados want it all.

Now all the populists are getting in on the act. Not only Democrat Chuck Schumer, who originally signed off on Trump's trade war tariffs, but, disappointingly, Senator Bernie Sanders. Sanders wants China named as a currency manipulator. This may have been apt a decade or more ago, but anyone who's been paying attention knows that for years China has been depleting its own currency reserves in order to prop UP the yuan. Slipping to 7 or more renminbi to the dollar would lead to capital flight, and is not very sensible for an economy trying to shift to domestic sales and imports rather than exports. If you want to discuss currency manipulation, what do you think Quantitive Easing is? Market forces?

The Democrats have to play ball (but not golf!) in order to stay in the game at the 2020 elections. You'd better get onside, Bernie, because if you challenge Don Caligula's right to China's wealth like Joe Biden has, you too might find Rudy Giuliani travelling to Ukraine to dig up the dirt. Or, even worse, he might sic Attorney General William Barr onto you.

Good golfing.

[Edit: Collective amnesia alert ... For decades we've known that the 1% and 0.1% sucked the wealth out of the US and failed to re-invest, hollowing out vast swathes of the country. The top 1% in America own as much as the bottom 90% with the 42 richest individuals in the world owning as much as the bottom 50% of humanity, but you never hear about the 1% any more. China represents a juicy prize as well as a handy scapegoat and a political diversion, all reminiscent of the 19th century Opium Wars and the American downturn in the 1870s which led to the US Exclusion Act of 1882.]

[A final thought ... Motivation, m'lud? China will account for 21% of global trade this year while the US is 7%. China owns $1.13 trillion of America's $6 trillion foreign-owned debt.]

Trump rumoured to be love-child of Captain Queeg and Thanos ... More news as it comes in ...

CNBC Ex-Reagan advisor John Rutledge: Trying to get China to change its economic policy in trade deal is ‘just nuts’. ... "This is not China reneging on the trade deal the last week. This is the hawks taking control, getting Trump’s ear and pushing the trade war off the edge of a table. This is not going to go away.”

China finally gets to defend itself in the FT. "Beijing says Washington changed terms on deal to buy more goods midway through discussions."

BUSINESS INSIDER China made 3 demands to end the trade war, only one of them is legit (sic): Mafia Don's shakedown. Exactly same set up as the 19thC Opium Wars. The US demands China buys stuff they don't need or can't afford, demands to smash open China market for US takeovers. There was no meaningful negotiation. This is why we need a World Trade Organisation to adjudicate.

FT Why China’s role as the world’s shock absorber is changing: How China put the brakes on the 2008 crash. "... despite softening exports, Beijing tolerated continuous currency appreciation. In effect, the rest of the world devalued against the renminbi. Put another way, the combination of an ever-strengthening renminbi and, by international standards, a relatively high inflation rate left China nursing significant competitiveness losses even as others made competitive gains. Had China not performed this role, the world would have faced a far greater crisis. ... China has been the shock absorber for the global economy, a punch bag seemingly able to soak up the recessionary blows that would otherwise have derailed global growth."

TALKING POLITICS PODCAST: Adam Tooze ( ) and Helen Thompson () on the US vs China. Calm and insightful but still buys in to the narrative that China changed a done deal at the last minute, which I think The Economist has put to bed. The question remains - Cui bono?

GUARDIAN editorial 10th May 2019: The Guardian view on US-China trade wars: don’t let them get started. The time has come to rewrite the rules so that the world’s largest economies are able to trade peacefully

Sunday, 3 February 2019

How's it hanging in Brexitland? Politicians fiddle while Brits stare catastrophe in the face

With mere weeks to go before Britain crashes deal-less out of the European Union, where are we now?

Britain is leaving the EU just as Japan's ground-breaking trade pact with the EU kicks in, making those combined forces the world's largest trading body and one in which we still (for a nanosecond or two) have a major say.

The rest of the world's trade is blowing up under US tariffs, trade wars and imminent hot wars, while the WTO, which is supposed to be our life-raft after Brexit, has been marked for death by Trump.

Theresa May's principle-free efforts to push through Brexit at all costs are so unpopular that there were suggestions she might even have to call upon the Queen to overrule Parliament and force it through by royal decree ... until 25 Labour rebels helped her out by abstaining or voting against Yvette Cooper's attempt to extend Article 50. If the Queen had done so, it would have been the first use of the royal prerogative of prorogation (shutting down Parliament) in 300 years.

Someone's taking back control, but it isn't us.

Meanwhile, facial recognition technology is forced on UK citizens in expectation of riots on a No Deal Brexit, with one guy in Romford fined on the spot £90 for not complying. Cold War plans are being revived to evacuate the Queen and the royals to "safety" and away from the civil unrest (in other words, legitimate protest) that the rest of us will be coping with.

Goodbye NHS, already eyed up by Farage et al for privatisation, the 80 per cent of our fresh food that comes from Europe, libraries, anything that gave some bare bones to the nation's infrastructure for working class people.  It was already being clawed back. Brexit accelerates the process.

Perhaps Jeremy Corbyn's Brexit-supporting coterie is co-operating with the Tories because they hope that in the ensuing chaos, they will win power. Triggering Article 50 and then doing the bare minimum in the Remain campaign to the extent that swathes of the population have no idea where Labour stands on Brexit, against a legally questionable Leave campaign, may have seemed like a good idea to Lexiteers stuck in the 1970s. However, I have news for them: this is the right's revolution. Not the left's.

Despite John McDonnell's touching faith that Labour MPs will never accept Theresa May's bribes, there are some like John Mann ("Show me the money!") willing to take the Tory shilling when much of the problem was created by Tory austerity in the first place. I am even more doubtful about good faith on offer after Corbyn took no disciplinary action against the 25 pro-Brexit Labour MPs — including 8 front-benchers — who refrained from voting or voted against Yvette Cooper's attempt to extend Article 50, a chance for a second referendum. As every good tailor knows, you have to measure twice and cut once to make sure. So what gives?

How will Labour play the post-Brexit unrest when the state rolls out its repression? Will Corbyn weep for the youth protesting against the very measures he helped usher in? If he gets voted in, he'll be the one wielding the power of the state. The squirmy squaring of that contradiction will be fascinating to watch.

The three-quarters of the population who did NOT vote for the permanent Brexit change to the constitution in the ADVISORY referendum, including the youth generation who weren't allowed to vote in 2016, have had their future ripped from them by charlatans who have already moved their money offshore, and applied for French/Irish/other European passports for themselves and their children. At least the wealthy will avoid the EU tax avoidance laws and get to buy up UK assets at firesale prices. After all, it's an ill wind that blows nobody any good.