Latest News Clips 2018.01.29

                       

1.      What Does France's President Want to Achieve in China?

On the eve of President Macron’s visit to China, the relationship is caught between expectations and frustrations.

The Diplomat  January 03, 2018

President Emmanuel Macron has chosen: He will go to China for his first visit to Asia. To those around him, who argue for a strengthening of ties between Paris and Beijing, it is an obvious choice. China is the second largest economy in the world; its overwhelming “Belt and Road” project seems to offer unlimited opportunities. And of course, for France, which has the ambition to play a global role on the international scene, China seems to be the right partner: a nuclear power and permanent member of the United Nations Security Council, with a veto right that weighs on all major decisions. Moreover, for a French president who wants to assert himself as the antithesis, if not the equal of U.S. President Donald Trump, “mighty China” offers the opportunity to play that role.

Beijing knows all this, and needs allies to face an American power that, contrary to the initial hopes of the Chinese leadership, might be unpredictable but has not given up its engagement in Asia. And not everyone in Paris appreciates the growing uneasiness and tensions in the region, far beyond the nuclear crisis in the Korean peninsula, around China’s future role. Confident in this lack of awareness, Chinese leaders look forward to a reception where flattering could win the support of a French president whose model is de Gaulle, and who hitherto has tended to focus — and know — much more about Europe and its environment than about faraway Asia.

The ambition of the Chinese leadership is to persuade the French president to position himself on issues like North Korea as a “go-between,” defending “dialogue” against the more “aggressive” posture of the United States, and to implicitly recognize by his choices the pre-eminence of China in the region. Macron may be all too ready to welcome that role.

Yet, everything might not be that simple in this first visit. Opportunities and commonalities do exist. However, mutual expectations are far from coinciding perfectly. And the frustrations that also characterize the Sino-French relationship have not disappeared.

For Beijing, France is never better than when it confines itself to its role of “old friend of China.” This role should be that of the constant supporter of “multipolarism,” against the “hyperpuissance” (a French concept) of the United States. This, without stressing the fact that, if China is favorable to the “democratization of international relations,” its only objectives are actually to increase its room for maneuver by driving a wedge between like-minded liberal democracies, and to establish itself as the uncontested leader of the Asian pole.

This ambition however, does not correspond to the evolution of the contemporary world. It cannot serve the interests of France in an area where the will to find support against a destabilizing and too assertive Chinese power is the common point of all of Beijing’s neighbors. In other words, for Paris, which indeed is not an irrelevant player in the region, the question of “siding” with or against China, and its strategic and economic consequences, cannot be avoided.

France is the only European country with direct territorial interests in the Asia-Pacific. By multiplying military cooperation deals, with Australia, Indonesia, or India for example, or maybe tomorrow with Japan, France also plays a major role in defense capacity building in the region. As such, and because of its position in a post-Brexit European Union, and at the UN, what France does is of interest to countries whose primary strategic objective is to balance a Chinese power obsessed by its own strategy of “rejuvenation” through assertiveness.

The second factor of frustration, of which the French president seems much more conscious as it directly relates to France socio-economic issues, is that of the persistent lack of balance in economic relations and trade. China may be perceived as an economic superpower; however, it still needs high growth to try to preserve political stability. Beijing is not ready to give up any export market, nor any strategy of division between individual members of the European Union to gain better access to benefits.

In terms of investments, the PRC, whose party-state has the capacity to act without checks – contrary to norms-abiding democratic governments – is also ready to seize all opportunities that can feed its own development, particularly in advanced technologies, at the fringe of the civilian and the military.

Faced with these undisguised ambitions, Macron is the first to plead with such clarity for more reciprocity, and France supports the strengthening of regulations for Chinese investments in sensitive sectors. Similarly, with regard to the Belt and Road Initiative, the flagship project of President Xi Jinping to achieve his “China dream,” France remains cautious and aware of its many financial and governance pitfalls.

Beijing – as with any other partners – would like the Franco-Chinese relationship to be entirely at the service of its own priorities. On the contrary, the strategic and economic interests of France in Asia are multiple and cannot be limited to an exclusive partnership with the People’s Republic of China. The successes of the new French presidency’s “Asian policy” will be appreciated only in light of the capacity that Paris will demonstrate — by concrete actions — to maintain a necessary balance between the powers of the region.

2.      Germany’s Bland Grand Coalition

Project Syndicate   Jan 24, 2018

In pursuit of another "grand coalition" government, Germany's Social Democrats and Christian Democrats have published a provisional agreement outlining their proposed agenda. But the program party leaders have devised seems to have been inspired by a wish not to offend rather than a desire to confront the country's challenges.

MUNICH – Germany’s Social Democrats (SPD), the Christian Democratic Union, and the CDU’s Bavarian sister party, the Christian Social Union (CSU), have agreed to pursue another “grand coalition” government, and have published a 28-page agreement outlining their proposed policy agenda.

The agreement comes months after an election in which the SPD and CDU/CSU advanced rather different economic-policy views. Whereas the SPD has focused on the need for more redistribution and public spending, the CDU/CSU has promised “tax cuts for all” and a more restrictive refugee policy. The question now is whether a coalition comprising such ideologically divergent forces can truly prepare Germany for the challenges that await it.

In the months and years ahead, German policymakers will need to manage the transition into the digital era, in order to preserve the country’s competitiveness. They must also stabilize the welfare state at a time of rapid population aging. And they must develop a rational migration policy. On top of this full domestic agenda, many are looking to Germany to keep the European Union together.

As many commentators have pointed out, Germany’s new government will benefit from a budget surplus, because the booming economy, coupled with peculiarities of the German tax code, has boosted government revenues over the last four years. Even by pursuing the balanced-budget policy described in its provisional coalition agreement, the government will have room either for more spending or tax cuts amounting to €46 billion ($56 billion) – around 0.3% of GDP – over four years.

According to the coalition agreement, €36 billion of the surplus will be allocated to various outlays such as transfers to families, higher agricultural and regional subsidies, housing-construction incentives, roads and related infrastructure, universities and school buildings, and even the military.

That leaves just €10 billion for tax cuts, which will take the form of reductions in the solidarity surcharge (Solidaritätszuschlag), a special income tax that was introduced in 1991 to finance German reunification. The grand coalition envisions abolishing this tax for everyone except the top 10% of earners, who generate more than half of the revenue from it.

But when one considers the effects of “bracket creep,” the outlook for taxpayers worsens. Unlike most other developed countries, Germany’s tax system lacks an automatic adjustment mechanism to prevent inflation from pushing households into higher tax brackets. And while discretionary adjustments do take place, they hardly provide full compensation to countless households that end up paying more tax than they should.

In fact, at the current rate of bracket creep, Germany’s tax revenues will increase by roughly €50 billion over the next four years. Halving the solidarity surcharge no earlier than 2021 will come nowhere close to offsetting that.

All told, nobody is particularly enthusiastic about the coalition agreement, including the SPD. Despite the coalition agreement’s emphasis on spending, the SPD fears that participating in another grand coalition will further damage its public standing, and drive more of its voters into the arms of the radical left or the far-right Alternative für Deutschland (AfD).

For others, the problem is not politics, but the agenda itself: for all of its specific provisions, it achieves very little. When spread over four years, an additional €2 billion spent on defense, €600 million on universities, and €4 billion on housing will make little difference.

3.      U.S. Tariffs, Aimed at China and South Korea, to Hit Targets Worldwide

The New York Times   JAN. 23, 2018

A solar panel project, at left, in Wuhan, China. The United States accuses China of swamping the market with cheap, subsidized solar panels. But those panels are increasingly made in other countries.CreditKevin Frayer/Getty Images

DAVOS, Switzerland — When the Trump administration unveiled tariffs on imports of solar panels and washing machines — industries dominated by Chinese and South Korean businesses — they deliberately applied them to products from around the world.

The move on Monday, in the eyes of United States trade officials, reflected the complexities of modern global trade. Though companies from just two countries account for the majority of both sectors, those firms have set up factories in multiple locations across national borders.

As a result, the tariffs will affect factories and workers in a variety of countries, reflecting the globalized supply chains and byzantine corporate ownership structures that are at the heart of many ubiquitous products.

The administration’s decision was followed on Tuesday by the announcement that a group of 11 countries would resurrect the Trans-Pacific Partnership, the pact that Mr. Trump pulled out of a year ago. The agreement, expected to be signed later this year, further complicates the president’s trade policies.

The solar panel case in particular has been a case study in the complexity of global trade. Suniva, one of the American solar companies that had sought the tariffs, filed for bankruptcy protection last year, citing the effects of Chinese imports. But the majority owner of Suniva is itself Chinese, and the company’s American bankruptcy trustee supported the trade litigation over the objections of the Chinese owners.

Here is a rundown of the wide-ranging impact the new tariffs may have.

Will there be a backlash?

Possibly — but not without costs for all the countries involved.

China and South Korea could take their complaints to the World Trade Organization, which arbitrates international trade disputes.

If the W.T.O. sided with those countries, the United States would be under considerable pressure to back down. If it did not, there would be two major sets of consequences. For one, the World Trade Organization could greenlight other countries’ setting similar trade limits. More broadly, it would raise the question of whether the United States accepts the organization’s decisions — Robert E. Lighthizer, the United States trade representative, has argued for years that such decisions should, essentially, be advisory.

The United States market has long been very attractive to foreign companies, and not just for its large and affluent set of consumers. Its tariffs on imports are much lower than those of most other countries, and it also has relatively low sales taxes. But President Trump has regularly questioned whether existing free trade agreements are in the best interests of the country, making it possible that such favorable terms may erode.

Still, China and South Korea have leverage of their own. They are big importers of American-made machinery and agricultural products, and China, in particular, has long been a big buyer of soybeans and other crops from states that supported Mr. Trump in the 2016 election.

Indeed, as an enormous consumer of all types of global goods, China could also easily punish American companies by opting to buy from international competitors. For instance, it could opt for Airbus planes over Boeing’s or crack down on General Motors while leaving Volkswagen alone.

A trade fight would, however, be painful. Both China and South Korea export a lot more to the United States than they import, meaning higher tariffs could hit their economies harder.

Who else could be affected?

The United States accuses China of swamping the market with artificially cheap, subsidized solar panels. But increasingly, those panels come from elsewhere. Steep tariffs imposed in 2012 on solar panels imported from China have made it cheaper for Chinese companies to assemble the panels in factories elsewhere before shipping them to the United States.

Countries like Malaysia and South Korea now account for most of the United States’ solar imports, according to data from Global Trade Atlas, a database maintained by the research firm IHS Markit.