America’s past and future collide on a single day in Europe


May 26, 2017

Today's WorldView

America’s past and future collide on a single day in Europe

 By Ishaan Tharoor

Call it a tale of two Presidents. On the same day that President Trump visits the gleaming new NATO headquarters in Brussels, his predecessor will give a high-profile speech in Berlin.

Former President Barack Obama is expected to return to the Brandenburg Gate on Thursday, basking in the admiration of his many European admirers while speaking alongside German Chancellor Angela Merkel, a leader with whom he has a famous friendship. Obama will be participating in the celebrations of the 500th anniversary of the Protestant church. That it coincides with Trump’s tour of the Belgian capital is a scheduling quirk, but it’s a coincidence that feels fraught with symbolism.

On Wednesday, Trump entered the den of the proverbial globalists. Brussels is not just the headquarters of the West’s preeminent military alliance, but also the heart of the European Union and home to the sort of technocratic elites that Trump and the continent’s far right frequently rage against. Before he entered the White House, Trump deemed NATO “obsolete” and seemed to suggest that he would welcome the further dissolution of the European Union after Brexit.

“The mere fact that Trump has agreed to visit a city filled with international organizations he once called ‘obsolete’ is a victory,” The Washington Post’s Michael Birnbaum and Anthony Faiola wrote.  And although a few months in office appear to have moderated Trump’s message, Obama’s star turn in Berlin will only deepen the sense of dissonance surrounding his successor.

An editorial in the Leipziger Zeitung newspaper said Obama’s presence in Germany would be that of a “healer.” Obama, the newspaper declared, “is a painfully missed ex-president,” an “eloquent, charismatic preacher.” These are qualities, it claimed, that Trump entirely lacks.

No matter the polarization that seems to define American politics, Obama remains an incredibly well-regarded figure in Europe. An estimated 200,000 Germans rallied around Obama in Berlin before his first election in 2008, and that enthusiasm endured. A Pew Research Center survey last June found that 77 percent of Europeans had confidence in Obama, while only 9 percent felt the same way about Trump.

Obama’s popularity was even greater in Germany, where 86 percent of respondents said they had confidence in him. His Thursday appearance at the Brandenburg Gate, where Ronald Reagan famously upbraided the Soviet Union’s final leader, may reaffirm the spirit of American friendship — or at least spark some nostalgia for a cuddlier past.

“The choice of the location seems like a staging for the ‘good American’ Germans would have liked to have seen in office,” Thomas Jäger, Professor of international politics and foreign policy at Cologne University, said to my colleagues. “Trump, on the other hand, in the German perception embodies every negative American stereotype … a grandstander, too loud, successful in a way that one doesn’t like at all.”

The expectations surrounding Trump’s time in Brussels are not particularly high. At NATO he will stick to a familiar and safe script, urging the United States’ partners to share more of the burden in maintaining international security and emphasizing the need to focus on the war against Islamist extremism — two issues where he will find no resistance among NATO’s member states. Conspicuously, serious discussion about the challenge of Russia is not on the agenda. Trump will also meet several European leaders, including recently elected French President Emmanuel Macron, who campaigned with Obama’s blessing from afar and at times seemed to point to the perils of Trump’s presidency as a reason to vote against his own right-wing opponents.

 

But now that the sitting U.S. president is in Europe, his interlocutors on the continent will hope he can be persuaded to embrace the institutions and the wider liberal order he railed against just months ago.

“There’s still a high degree of uncertainty when it comes to the aims and objectives of the Americans,” Cornelius Adebahr, an associate fellow at the German Council on Foreign Relations, said to The Post. “One of the main objectives is to convince the Americans of the value of these formats.”

Trump is “someone who doesn’t believe in the whole idea of engaging with European allies,” Tomas Valasek, head of the Carnegie Europe think tank, said to my colleagues. “At least part of the European countries’ strategy for dealing with Trump is essentially to hunker down and wait until he goes away.”

Ahead of the Group of Seven meeting in Sicily, where Trump will be in attendance, Merkel called for unity in the fight against global warming. The move was seen in part as a bid to push back against the Trump administration’s apparent desire to pull out of the Paris climate accords — a pact championed by Obama. There is hope among European officialdom that the “grown-ups” in the White House will coax Trump away from extreme positions and keep his foreign policy more in line with that of a traditional Republican president. Others caution against such complacency.

“European policymakers hope that [Trump] will listen to his team, live up to their promises, and not destroy the NATO alliance or the European Union in a fit of pique,” wrote Jeremy Shapiro of the European Council on Foreign Relations. “They would be wiser to hedge against his predictable unpredictability and seek their own means of securing their position in the world.”

 






The End of the Left/Right Divide?


May 13, 2017

The End of the Left/Right Divide?

by Ian Buruma*

http://www.project-syndicate.org

*Professor of Democracy, Human Rights, and Journalism at Bard College. He is the author of numerous books, including Murder in Amsterdam: The Death of Theo Van Gogh and the Limits of Tolerance and Year Zero: A History of 1945.

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Marine Le Pen defeated by Ensemble,la France

After the French Revolution of 1789, deputies in the National Assembly who supported the revolutionary gains sat on the left, while those who opposed them and hankered after the old order of monarchy and church congregated on the right. Hence the political terms “left” and “right.” Many commentators on the French presidential election have pointed out that these categories no longer fit contemporary politics in France – or, indeed, anywhere else. Emmanuel Macron prides himself on being neither right nor left.

Marine Le Pen, whose National Front is associated with the far right, disagrees: to her, Macron, who was a minister in a Socialist government, is a leftist. But, like Donald Trump, it was Le Pen who ran as the “voice of the people,” whereas Macron, like Hillary Clinton, was depicted as a puppet of bankers, cultural elites, and international plutocrats.

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So what do left and right still mean, if anything at all? There is little doubt that something shifted in the last decades of the twentieth century. Left-wing parties began to lose – in some countries more quickly than others – their base in the industrial working class. Redistribution of wealth became gradually less important than the social emancipation of ethnic and sexual minorities. The old alliance between intellectual idealists and trade unions gave way to rainbow coalitions of intellectuals, non-whites, feminists, and gays.

Meanwhile, right-wing parties, like the Republicans in the United States, paid lip service to the social conservatism, and sometimes outright bigotry, of less privileged voters in rural and provincial areas, while doing what was best for big business once they were in power.

What was good for big business – international cooperation, pan-national institutions, and openness to immigration – was not always against the interests of the evolving left-of-center parties. Big business benefited from cheap labor, and the left favored multiculturalism.

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The EU gets a reprieve from France’s Emmanuel Macron

It made some sense, then, that European social democrats frequently ended up in coalition governments with moderate pro-business conservatives or Christian Democrats. This trend was boosted by the collapse of the Soviet empire, because Western liberal democracies no longer had the same pressing need to counter the Communist model with egalitarian arrangements of their own. The electoral successes of Bill Clinton in the US and Tony Blair in the United Kingdom had much to do with their deliberate tilts towards the pragmatic, neoliberal, business-friendly center.

In this respect, distinctions between left and right have indeed collapsed. The old idea of a left representing the downtrodden proletariat against the interests of big business and the bourgeoisie is gone. One reason why the British Labour Party is in such disarray is that it is led by a man, Jeremy Corbyn, whose politics haven’t changed since the 1970s.

But the traditional distinction between left and right is not simply economic. There has been a deeper divide within the National Assembly in France, defined by that between the Dreyfusards and the anti-Dreyfusards in the 1890s, or Léon Blum’s Popular Front and the Action Française in the 1930s. This division still holds in the age of Macron and Le Pen.

Defenders of the French Republic, who took Liberty, Equality, and Fraternity seriously, thought of citizenship as a legal concept, not one based on blood and soil. They believed in institutions more than in hallowed traditions, and in internationalism rather than chauvinism. Captain Alfred Dreyfus, the Jewish officer falsely accused of treason in 1894, was such a polarizing figure in France because his opponents saw him as symbol of national decadence, of a nation whose sacred identity was being diluted by alien blood.

Anti-Semites, and others with a blood-and-soil view of society, invariably see “cold-hearted bankers” (Le Pen’s term for her opponent in the presidential debate) as the enemy of “the real people…the ordinary, decent people” (Nigel Farage’s words at a campaign rally for Donald Trump in Mississippi). In this sense, Macron, who was indeed once a banker for Rothschild, and who believes in open borders and international institutions, is a man of the left. And Le Pen, the champion of La France profonde, the “real France” of rural Christians and angry white people who believe that to be French and Muslim is a contradiction in terms, is a true descendant of the anti-Dreyfusards and the Action Française.

Macron managed to defeat Le Pen this time around. But the social-democratic left is still in a state of crisis. The UK Labour Party is moribund. The Dutch Social Democrats were wiped out. And Trump, an ignorant narcissist with no political experience, managed to become President of the US by whipping up popular resentment against educated elites, bankers, foreigners, immigrants, and international institutions.

The problem for social democrats nowadays is how to survive if large numbers of underprivileged people turn right instead of left. Is it possible for a new alignment to be forged? Can the growing gap between rich and poor bring at least some of the white working class back into the same tent as immigrants and other minorities? Is another New Deal feasible? How might this be reconciled with the interests of internationalist businessmen and bankers?

The crisis on the right, however, is no less serious. Trump may have surrounded himself with Goldman Sachs alumni and corporate titans, even as he claims to serve the interests of the common people. And many Republicans still cling to him in the hope of achieving their policy goals. But he has effectively hijacked the old conservative party of business and internationalism. Will his brand of chauvinistic, nativist populism be able to coexist with the kind of capitalism that thrives on continued immigration, freedom of movement, and global institutions?

While France has dodged the xenophobic bullet this time, the dust has not yet settled. Left and right may be in flux, but the old divisions that emerged after 1789 are still there, perhaps more than ever. Macron is full of good intentions. But if his politics fail, the latter-day anti-Dreyfusards will be back with a vengeance.

France rejects Le Pen


May 10, 2017

France rejects Le Pen in favour of Euro-centric Macron–Huge Challenges Ahead

by John Cassidy

http://www.newyorker.com/news/john-cassidy/the-huge-challenges-facing-emmanuel-macron-frances-new-president?mbid=nl_170508_Daily&CNDID=49438257&spMailingID=10976418&spUserID=MTg4MDU2MzU5MDA5S0&spJobID=1160695595&spReportId=MTE2MDY5NTU5NQS2

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As Emmanuel Macron and his supporters celebrated his big victory in the French Presidential election outside the Louvre on Sunday night, you could almost hear the sighs of relief from other parts of Europe, and also from this country. After a long and fractious campaign, which saw the two parties that have run France for decades humiliated, and the far-right National Front enjoying record levels of support, the center ultimately held. Which is good news all around.

Last November, it looked as if Donald Trump’s election, which followed the Brexit vote in Britain, might herald a wave of successes for far-right nationalist parties across Europe. That hasn’t happened. First in Austria, then in the Netherlands, and now in France, the spiritual home of European democracy, the extremists have been defeated in national elections. For now, at least, it looks as if Trump’s success may have marked the crest of a right-wing wave, rather than the upsurge.

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Victory for the Macronites as Europe sighs in relief–Ensemble, La France

In Sunday’s election, Marine Le Pen, the leader of the National Front, virtually doubled the share of the vote that her father, Jean-Marie, received in the 2002 Presidential election. But she didn’t get close to the forty per cent that she had breached in some opinion polls. Surveys taken in the past couple of weeks indicated that Macron would win by somewhere between twenty and twenty-five percentage points. In the event, his margin of victory was about thirty-one percentage points—65.5 per cent to 34.5 per cent. (This according to the French exit poll, which is much more reliable than its American counterpart.)

The endorsements Macron received from politicians of the center-right and center-left after he came out on top in the first round of voting helped his cause a lot, as did the critical coverage that almost all of the French media meted out to Le Pen. But, even allowing for these factors, the final result represented a stirring victory for a thirty-nine-year-old former technocrat and investment banker who had never run for office, and who only founded his independent political movement, En Marche!, last April.

In an address at his campaign headquarters, in the Fifteenth Arrondissement, shortly after the result was announced, Macron sought to project an image of himself as a sober and mature leader, someone fully prepared to enter the Élysée Palace. He also recapitulated some of the themes of his campaign, including his defense of liberal values, his support for the European Union, and his embrace of hope and optimism. “I will protect and defend France’s vital interests. I will protect and defend Europe,” he declared. He added, “It is a new page in our long history, and I want that page to be a page of trust and hope recovered.”

After thanking the outgoing President, François Hollande, for his services to the country, Macron said he would seek to overcome the divisions in French society that the campaign had highlighted. His main goal, he said, was to “calm people’s fears, restore France’s confidence, and gather all its people together to face the immense challenges that face us.” He went on, “I will fight against the division . . . With humility but with total devotion and total determination, I am going to serve on your behalf. Long live the Republic, and long live France.”

As this speech indicated, Macron is stronger on generalizations and appeals for unity than specific policy proposals. During the campaign, he pledged to cut government spending, reform the tax code, and loosen up France’s rigid labor markets—all this in an effort to make the French economy more dynamic. But he didn’t spell out many details.

On the French left, he is widely seen as the Gallic equivalent of Tony Blair, a youthful figure intent on forcing trade unions and workers to submit to the rigors of the global market. Skeptical conservative politicians point out that he served in Hollande’s Socialist government for four years, and that he promised not to scrap two pillars of the French welfare state: the thirty-five-hour work week and the retirement age, sixty-two.

It is unclear what sort of mandate Macron will have for carrying out his reform program. To a large extent, his first-place finish in the first round of the election represented a rejection of the traditional parties rather than a vigorous endorsement of his agenda. Hollande didn’t even enter the race because he is so unpopular. The candidate of the center-right Republican party, François Fillon, saw his campaign undone by a corruption scandal.

Similarly, Macron’s victory in Sunday’s runoff may have largely represented a rejection of Le Pen and the National Front, with its record of racism, anti-Semitism, and apologies for Vichyism. According to the exit poll, forty-three per cent of Macron’s voters cast their ballots primarily to keep out Le Pen. Although Macron’s margin was large, turnout was low by French standards, and many ballots were left blank. Clearly, lots of voters didn’t like either of the choices.

Much now depends on next month’s parliamentary elections, which will determine how much support Macron has in the National Assembly, which makes legislation. At the moment, the Socialists and their allies have a sizable majority. Macron’s En Marche! party is planning to field candidates in all five hundred and seventy-seven constituencies, but it’s far from clear how they will fare. Despite his personal victory, his centrist political movement is still young and untested.

Untitled (5)Through Inclusivity, Collaboration and Cooperartion

There is also a great deal of uncertainty about what impact Sunday’s result will have on the future of the E.U. By removing the possibility of a Le Pen Presidency, Macron’s victory lifted the gravest immediate threat to the union: a deeply Euro-skeptic government taking office in Paris, to go along with the one in London. Even before Macron arrived at the Louvre, Angela Merkel, the German Chancellor, had called and congratulated him. “She praised him for championing a united European Union that is open to the world,” Merkel’s spokesman said.

But one election result doesn’t mean that the E.U., which has just suffered through a lost decade in economic terms, can now mobilize enough popular support to survive and prosper. Macron supports open borders, free trade, free movement of labor, and greater efforts to accommodate refugees and assimilate Muslim minorities—all of which are under threat. His big idea is that, by showing that France is capable of serious internal reforms, the country will be able to persuade Germany to shift the E.U. toward a less austere economic policy, one more favorable to growth. Previous French Presidents have harbored similar ambitions that went nowhere in the face of Teutonic resistance. Can Macron do better?

But these are challenges for the future. Right now, it is enough to celebrate the defeat of right-wing extremism and to salute the victor. “What we have done, there is no comparison, there is no equivalent for that,” Macron told the cheering crowd outside the Louvre. “Everyone was saying it was impossible, but they didn’t know anything about France.” After he had finished speaking, the President-elect clutched his hand to his heart, closed his eyes, and led the crowd in a spirited rendition of “La Marseillaise.” Even from afar, it was hard not to join in.

Macron beats Le Pen for the Presidency of France


May 8, 2017

Macron beats Le Pen for the Presidency of France

by Angelique Chrisafis

Congratulations to the People of  France for a successful and peaceful  Presidential Election. They have chosen to stay in the EU and rejected populism and far right politics of Marine Le Pen.  A strong,  and inclusive France is good for the European Union. A united prosperous Europe will also be a boon for the world.

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Vive La France

Working with Germany and others including Asia, France can counter-balance Trumpism (America First) and Theresa May’s inward looking post BREXIT Britain,  and resist the tide of isolationism and economic protectionism.

In globalised interdependent world, we need cooperation, commitment to peace, stability and prosperity, and strategic partnerships to tackle economic nationalism, terrorism,  environmental  degradation, climate change, and poverty. –Din Merican

The pro-EU centrist Emmanuel Macron has won the French presidency in a decisive victory over the far-right Front National leader, Marine Le Pen, and vowed to unite a divided and fractured France.

Macron, 39, a former Economy Minister who ran as a “neither left nor right” independent promising to shake up the French political system, took 65.1% to Le Pen’s 34.9%, according to initial projections from early counts.

His victory was hailed by his supporters as holding back a tide of populism after the Brexit vote and Donald Trump’s victory in the US election.

In a solemn first speech from his campaign headquarters, he vowed to “defend France and Europe”. He promised to “unite” a divided and fractured France that had led people to vote for “extremes”. He said that he would “fight with all my strength against the division that undermines and destroys us”.

He promised to “guarantee the unity of the nation” and “fight against all forms of inequality and discrimination”.

Despite the wide margin of the final result, Le Pen’s score nonetheless marked a historic high for the French far right. Even after a lacklustre campaign that ended with a calamitous performance in the final TV debate, she was projected to have taken almost 11 million votes, double that of her father, Jean-Marie Le Pen, when he reached the presidential run-off in 2002. The anti-immigration, anti-EU Front National’s supporters asserted that the party has a central place as an opposition force in France.

Turnout was the lowest in more than 40 years. Almost one-third of voters chose neither Macron nor Le Pen, with 12 million abstaining and 4.2 million spoiling ballot papers.

Macron, who has never held elected office and was unknown until three years ago, is France’s youngest president. Next Sunday he will take over a country under a state of emergency, still facing a major terrorism threat and struggling with a stagnant economy after decades of mass unemployment. France is also divided after an election campaign in which anti-establishment anger saw the traditional left and right ruling parties ejected from the race in the first round for the first time since the period after the second world war.

François Bayrou, an ex-minister and Macron’s centrist ally, said: “He is the youngest head of state on the planet [which] sends an incredible message of hope.” He added: “Macron is giving hope to people who had no hope. Hope that maybe we can do something, go beyond the [left-right] divide that no longer makes sense.”

Le Pen swiftly conceded defeat. She said she had won a “historic and massive” score which made her leader of “the biggest opposition force” in France and vowed to radically overhaul her Front National party. Her promise to “transform” the far-right movement left open the possibility that the party could be expanded and renamed in an attempt to boost its electoral chances. It was a major step in the political normalisation of her movement.

The outgoing Socialist President, François Hollande, who was once Macron’s mentor and had appointed him economy minister, said: “His large victory confirms that a very great majority of our citizens wanted to unite around the values of the Republic and show their attachment to the European Union and show France is open to the world.”

Macron’s supporters gathered, waving French flags, in the grand courtyard of the Louvre, the vast Paris palace-turned-museum.

Macron’s victory came not only because voters supported his policy platform for free market, pro-business reform, and his promises to energise the EU, coupled with a leftwing approach to social issues. Some of his voters came from other parties across the political spectrum and turned out not in complete support of his programme but to stop the Front National.

In a political landscape with a strong hard left and far right, Macron faces the challenge of trying to win a parliamentary majority for his fledgling political movement En Marche! (On the Move) in legislative elections next month. Without a majority he will not be able to carry out his manifesto promises.

After the Brexit vote and the election of Trump as US president, the race for the Élysée was the latest election to shake up establishment politics by kicking out the figures that stood for the status quo, ejecting the mainstream parties that have dominated French politics for 50 years and leaving the political novice Macron to do battle with the far right.

His victory comes after a bitter campaign with Le Pen in which she accused him of being part of an elite that did not understand ordinary people and he said Le Pen represented the “party of hatred” that wanted a “civil war” in France. The runoff pitted France’s most Europhile candidate against its most Europhobe.

In Brussels and Berlin there was relief that Le Pen’s anti-EU, anti-globalisation programme has been defeated.

A spokesman for the German chancellor, Angela Merkel, said it was a “victory for a strong and united Europe” while the European commission president, Jean-Claude Juncker, said French voters had chosen a “European future”.

The office of the British prime minister, Theresa May, said she “warmly congratulates” Macron on his victory and “we look forward to working with the new president on a wide range of shared priorities”.

Trump, who will meet Macron on 25 May at the Nato summit in Brussels, tweeted: “Congratulations to Emmanuel Macron on his big win today as the next president of France. I look very much forward to working with him!” Earlier in the campaign he had declared Le Pen the strongest candidate.

Hours before the end of campaigning on Friday night, Macron’s campaign was hacked, which Paris prosecutors are investigating. Hundreds of thousands of emails and documents were dumped online and spread by WikiLeaks in what his campaign called an attempt at “democratic destabilisation”.

Macron, a former investment banker and senior civil servant who grew up in a bourgeois family in Amiens, served as deputy chief of staff to Hollande but was not at that time part of the Socialist party.

In 2014 Hollande appointed him Economy Minister but he left government in 2016, complaining that pro-business reforms were not going far enough. A year ago he formed En Marche!, promising to shake up France’s “vacuous” and discredited political class.

Macron campaigned on pledges to ease labour laws, improve education in deprived areas and extend protections for self-employed people.

The election race was full of extraordinary twists and turns. Hollande became the first president since the war to decide not to run again for office after slumping to record unpopularity with a satisfaction rating of 4%.

His troubled five-year term left France still struggling with a sluggish economy and a mood of disillusionment with the political class. The country is more divided than ever before. More than 230 people have been killed in terrorist attacks in little more than two years, the political class is questioning Islam’s place in French society and more than 3 million people are unemployed.

The right wing candidate, François Fillon, once seen as favourite, was badly damaged by a judicial investigation into a string of corruption allegations, including that he had paid his wife and children generous salaries from public funds for fake parliamentary assistant jobs.

The ruling Socialist party, under its candidate Benoît Hamon, saw its score plunge to 6%, while the hard-left Jean-Luc Mélenchon finished fourth.

The final round marks a redrawing of the political landscape, away from the old left-right divide towards a contest between a liberal, pro-globalisation stance and “close the borders” nationalism. Le Pen has styled the election as being between her party’s “patriots” and the “globalists” whom she says Macron represents.

America first, geo-economic logic last


April 27, 2017

America first, geo-economic logic last

by Gary Hawke, Victoria University of Wellington

http://www.eastasiaforum.org

Image result for tomahawk over syriaTrumponomics–Military Power over Geo-Economics

The Trump Administration has introduced a new set of challenges to the international economy. It has profoundly changed the role of the United States in international economic diplomacy, ceasing to be a champion of multilateralism.

Within the first 100 days of the Trump administration, reality has overwhelmed a good deal of campaign rhetoric, and individuals experienced and skilled in conventional public management have prevailed over some who epitomised revolt against elites. But ideas that challenge longstanding US positions on the world economy and international integration remain at the core of the Trump administration.

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Get the Message, Theresa May?

Bilateral trade balances have long been known to be an inappropriate policy objective. Yet the Trump administration is pursuing this without any sound argument. Its belief is that only bilaterally balanced trade (or an excess of US exports) is ‘fair trade’. This nonsense is reinforced by concentrating on trade in goods, ignoring surpluses on services trade. And the capital account is ignored entirely.

Trump expands the idea of bilateral balance to the trading relationship with every other country. He insists on what Gary Hufbauer has called ‘mirror-image reciprocity’. Every component of a deal, every individual tariff rate, any provision about rules of origin for specific products, and any condition for foreign investment must be no less favourable for US exporters than the corresponding rule applied to the United States. This is misplaced concreteness has gone mad.

The idea of a win-win overall deal is rejected. The very idea of complementarities between economies is ignored. That this is endorsed by the chair of the newly established National Trade Council Peter Navarro, who holds a Harvard PhD in economics, is a conclusive argument for an enquiry into Harvard standards.

Two of Trump’s executive orders on trade deficits and trade laws would both fail the most elementary of economics examinations.

Under the Trump Administration, history is no more respected than economics. It has been argued that the WTO and its predecessor GATT were intended to apply only to developed economies. Those who were at the Havana conference in the 1940s and those who negotiated with developing economies in the Uruguay Round saw no such belief among their US colleagues.

This is a thin disguise for wishing to continue using subterfuge rather than economic logic in consideration of so-called ‘countervailing duties’ and ‘anti-dumping penalties’ against China. The idea that there is an indisputable definition of a ‘market economy’ is absurd, but then so is the underlying idea of dumping. Artificial lowering of prices with the intention of raising them after forcing a competitor out of business should be countered — if it were ever properly detected.

Even more absurd is the notion that ‘over capacity’ is something that requires government intervention. Consumers gain from cheap products. When producers cannot sustain output levels at such low prices, the appropriate response is for the least efficient producers to exit. In the case of steel, ‘least efficient’ is probably not the same as ‘Chinese’.

Most concerning is an attack on the WTO dispute resolution system. US opposition to it predated the Trump administration. The Obama administration vetoed the reappointment of a judge to the Appellate Body for the little-disguised reason that his decisions were uncongenial.

US resistance to the dispute resolution system has never been far from the surface. It is often rationalised by a constitutional principle that only the US Congress can create laws which bind US citizens. Some US judges can nevertheless make positive use of international reasoning, and previous administrations have recognised that membership of international institutions could require them to persuade Congress to amend US law or to compensate a foreign party.

The language in the final statement of the WTO dispute resolution system is in no way an exemption of the United States from the dispute resolution system. The words of the dispute settlement understanding that a ruling can’t ‘add to or diminish the rights or obligations’ of a member country — relate to member countries’ commitments, not US law, and their interpretation is not a US prerogative.

Rhetoric about a ‘rules-based international order’ or the ‘modern liberal international order’ is now entirely empty when set beside the declared intentions of the Trump administration. Again, the problem is deeper than Trump. No country can be an effective advocate of the rule of law when its partisan politics dominates the choice of its most senior judges. Fundamentally, the United States has to adjust to no longer being able to dominate global affairs.

Economic integration now has to be led by countries other than the United States. But successful integration elsewhere will cause responses within the United States as businesses miss profitable opportunities and as voters see that they are missing out on consumption and employment gains.

Gary Hawke is retired Head of the School of Government and Professor of Economic History, Victoria University of Wellington.

The Renminbi and the Rise of China in Global Trade and Finance


April 10, 2017

The Renminbi and the Rise of China in Global Trade and Finance

by Paola Subacchi, Chatham House

http://www.eastasiaforum.org

“…any suggestion that the renminbi may one day rival the dollar and seriously threaten the greenback’s dominance within the international monetary system remains wishful thinking. The renminbi is moving in the right direction, but much more needs to be done to make it into a pillar of this multi-currency system.”–Paola Subacchi

At times of big turmoil, currencies take the hit, but economic transformation can also create currency winners. Nowhere is this more apparent than when we compare the prospects of British sterling and China’s renminbi.

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Between February 2016 — when the referendum on the UK’s membership of the European Union (EU) was announced — and the end of January 2017, the sterling fell by 14 per cent against the US dollar. Then, at the beginning of October, when the UK government appeared to signal a preference for a clear break with the EU — a ‘hard Brexit’ — the sterling dropped again by 6 per cent.

As the British government is serving notice on the membership of the EU, it is not yet clear what the future relationship will look like. Will Britain remain a member of Europe’s single market? Or will it embrace a totally independent trade policy to maintain control at its borders?

Currencies not only reflect geopolitical dynamics, but also patterns of trade and debt. A weak currency is not much help for an economy that imports more than it exports. The UK has a significant deficit in its current account — roughly, it consumes more than it produces — at almost 6 per cent of GDP. Of course, a weak currency would lower the prices of exports, but only if these goods are produced with limited inputs from imports.

In a world of global supply chains this is questionable. Even assuming that a weak sterling would help shift the UK model of growth from domestic demand to exports, this adjustment will take time and is unlikely to cushion the adverse impact of Brexit on real GDP growth in the next few years.

The ‘hard Brexit’ option, by reducing market openness, will affect investors’ confidence, have an adverse impact on capital inflows and undermine growth. If the UK becomes less attractive as an investment destination, and stricter immigration policies cause the labour force to shrink, then Britain may find it difficult to attract the quantity of foreign capital and labour necessary to sustain a domestic demand-driven economy.

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The sterling remains in the IMF’s Special Drawing Rights (SDR) basket of international reserve currencies. To some extent the sterling has been a proxy of British global influence: on the way down, but still ‘punching above its weight’. But the sterling’s protracted weakness coupled with the inclusion of the Chinese renminbi in the SDR basket — in effect from the beginning of October 2017 — may result in downgrading the pound when the composition of the basket is reassessed in 2020.

If currencies are an expression of national sovereignty, they also epitomise the limits of such sovereignty in an open economy. Exchange rate dynamics tend to reflect divergences between domestic politics and global markets. Thinking that domestic policy making can be insulated from the rest of the world, so that no coordination or cooperation is needed, is deeply fallacious. The sterling’s troubles are a reminder that foreign investors have an indirect say — and interest — in how a country is managed.

The inclusion of the renminbi among the currencies that compose the SDRs — the US dollar, the euro, the yen and the sterling — is a ‘milestone’ for China, as International Monetary Fund Managing Director Christine Lagarde said when she presented the IMF executive board’s decision on 30 November 2016.

The renminbi’s inclusion recognises the work that China’s monetary authorities have done in the last five years to push the renminbi’s transformation into an international currency — a currency that can be used to invoice and settle international trade and that is traded in international capital markets. The outcome of this process has been remarkable: approximately 25 per cent of China’s trade is now settled in renminbi — it was less than 1 per cent in 2009.

In addition, the inclusion somehow addresses the contradiction that China has faced for years: being the world’s second largest economy and the largest exporter without a currency that reflects that role. For years the dollar has been the currency used in China’s trade and investments, and this is still largely the case. This has suited China well throughout its transformation from a poor and isolated nation into an industrial powerhouse that is well integrated in regional and international supply chains.

But China’s dollar dependence no longer reflects Beijing’s ambitions for playing a more engaging and assertive role in international economic and financial affairs and governance. If ‘great nations have great currencies’, to paraphrase Nobel laureate Robert Mundell, then it is understandable that the Chinese leadership would push to turn the renminbi into a ‘great currency’.

Finally, and even more critically, being part of the SDR basket implicitly recognises the role that the renminbi, going forward, can play in the international monetary system. The hype that has surrounded the IMF decision — the SDR made headlines beyond the financial press, perhaps for the first time since its creation in 1969 — should not obscure the fact that the development of the renminbi is not a linear process, even if it is heavily policy-driven, and there is no guarantee that progress will continue at the same remarkable pace. The renminbi remains a currency with limited international circulation because of obstacles that are still in place to constrain capital flows into and from China’s domestic market.

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This is not the case for trade transactions, where the renminbi has been fully convertible since 2001 when China joined the World Trade Organisation. But what is the incentive for foreign businesses to hold renminbi if liquidity is constrained and therefore so are investment opportunities?

To make the renminbi into an international currency that foreigners want to hold as a store of value the Chinese leadership needs to continue the pace of reforms. Top of the list is the exchange rate and the abandonment of the system where the central bank intervenes every time the value of the renminbi moves outside a pre-determined range. Until foreign investors believe that the renminbi is liquid and trustworthy, any suggestion that the renminbi may one day rival the dollar and seriously threaten the greenback’s dominance within the international monetary system remains wishful thinking. The renminbi is moving in the right direction, but much more needs to be done to make it into a pillar of this multi-currency system.

Paola Subacchi is Director of Economic Research at Chatham House, London, and the author of The People’s Money: How China Is Building a Global Currency (Columbia University Press, 2017).