In the US–China relationship, the only certainty for the past few years has been tension and aggression. American President Donald Trump took office in 2017 and immediately set about upending the diplomatic and economic ties between them.

America’s Moves Against China

Since then, Washington has managed to turn the world against Chinese technology giants Huawei and ZTE and to threaten Chinese social media apps WeChat and TikTok.

In short, the US approach toward China has been entirely, relentlessly opposed to all things Beijing. What began as a trade war with tariffs slung as ammunition, has devolved into a mission to cripple Beijing at every opportunity.

As the US election draws nearer, China could be hoping for a respite under a possible Biden administration. However, the presumptive Democratic nominee is more likely to continue Washington’s assault on Beijing.

Changed Mindset?

Although it was only last year that presidential candidate Joe Biden said the Chinese are “not bad folks … they’re not competition for us,” Biden has since come around to a more opposition-minded approach to China, however, as Foreign Policy reported. In a Democratic primary debate, he called Chinese President Xi Jinping a “thug.”Furthermore, an advisor said the candidate would maintain US sanctions that were leveraged as a response to Beijing’s takeover of Hong Kong.

In truth, the recent clampdown on democracy by Xi has likely altered Biden’s approach to China. Whereas Biden was a member of the first American delegation to Beijing in 1979 after the relationship was normalized, the status quo has changed considerably in the decades that have followed. 

The Fate of US Tariffs on China Under a Biden Presidency

As Trump has already taken the fall for introducing tariffs, which have been a staple of Trump’s economic policies, Biden could walk into office in January and leave them in place, Don Lee suggested for the Los Angeles Times. In doing so, the new president could use them as leverage to bring Beijing to the bargaining table. 

Biden, as a career politician and former vice president, would sport a more diplomatic tone than Trump. The change would be a welcome one for Beijing, which has been subject to the president’s bullying on issues ranging from 5G networks to the coronavirus.

“Their stylistic differences are so great. It will certainly seem different,” said James Mann, a China expert and fellow at Johns Hopkins University School of Advanced International Studies. “It will still be conflict-ridden, maybe at times confrontational, but certainly ridden with conflicts in ways that either weren’t there or were downplayed a decade ago.”

In the past, Biden has criticized Trump’s use of tariffs, complaining that they exacerbate the economic problem between the two states. However, even if he does roll them back — either in part or whole — Biden will certainly take China to task in other ways. 

One such way might be to renegotiate the Trans-Pacific Partnership. Devised by former President Barack Obama, the policy would have brought together 12 nations within the Pacific. At the time, it failed to come to fruition because Democrats wouldn’t support it. However, times are different and both parties are unilaterally opposed to Beijing on nearly every issue: security, democracy, and human rights, to name a few.

‘A Special Challenge’

In an editorial for Foreign Affairs, Biden specifically mentioned China as one of the greatest threats to the US and identified ways he would handle it.

“China represents a special challenge. I have spent many hours with its leaders, and I understand what we are up against. China is playing the long game by extending its global reach, promoting its own political model, and investing in the technologies of the future,” Biden wrote.

“The United States does need to get tough with China,” Biden noted, further adding that “if China has its way, it will keep robbing the United States and American companies of their technology and intellectual property.”

The best way to do that would be to “build a united front of US allies and partners” to take on Beijing, according to Biden. A new TPP would be a solid start in that direction. Trump has actually laid the footwork for coordinating allies against China by courting Australia and the UK to its cause. Adding global pressure to Washington’s rage could stir China to reverse its ways in terms of human rights, but economically, it will take more.

Focus on Supply Chain

While the Trump administration has been concentrated on cutting China off from the US, a Biden presidency would be more focused on building a supply chain independent of China, the Brookings Institution concluded in an analysis. That remains the missing piece from Trump’s plan for China. While some manufacturers have left China for other Asian states, there has not been a concerted effort to bring companies to the US.

Biden has made rebuilding US supply chains for critical products such as pharmaceuticals and personal protective gear a platform issue, Axios reported. While the COVID-19 pandemic has certainly highlighted the urgency for self-reliance in terms of medical products, Biden’s policy could translate to a long-term effort of shifting away from China.

Although Biden will undoubtedly reintroduce a more tactful voice to the Oval Office, his presidency would still need to maintain pressure on China. However, Biden would likely find other ways of doing that instead of tariffs and executive orders. By establishing meaningful relationships with allies and implementing domestic policies geared at increasing production, a Biden presidency could tackle the China issue more effectively than Trump.

L'articolo What Would a Biden Presidency Mean for China? proviene da InsideOver.

While the US has become a central focus during the coronavirus pandemic due to leading the world in number of cases and casualties, America’s southern neighbor is also struggling. Similar to the initial American response, Mexico is holding off on testing for COVID-19.

Leading the World in Cases, but Not Testing

In fact, the Mexican state averages one test per 100,000 people, according to John Hopkins University. That number pales in comparison to the US – which is hardly the gold standard – which has a testing rate of 168 per 100,000, as the Guardian reported.

As the world approaches the six-month anniversary of the global pandemic, testing supplies are not exactly elusive as manufacturers have risen to the occasion. Mexico’s refusal to embrace widespread testing is the result of the miserly fiscal policies of President Andrés Manuel López Obrador, commonly referred to as “Amlo.”

Saving Money at the Expense of Public Health

Amlo himself was only tested before he journeyed to Washington for a meeting with American President Donald Trump. Various members of his cabinet and other top Mexican officials have contracted the disease. On Sunday, it was announced that Mexico’s Dr. Jesus Grajeda, health minister for Chihuahua, died after a two-week battle against COVID-19, as Reuters reported.

Mexico ranks sixth in the world for number of cases, boasting 390,516 as of Monday morning, according to data compiled by Worldometers. In terms of fatalities, it is No. 4 with 43,680 behind only the US, Brazil, and the UK.

Amlo Refuses to Change Course

Yet despite these facts that suggest Amlo’s approach is not working, the Mexican leader maintains course.

“The WHO has said ‘test, test, test’ – but not even healthcare workers have access to tests,” said Rafael Soto, a nurse and spokesman for medical personnel protesting for healthcare improvements. “Many co-workers have died without ever having been tested.”

A lack of testing appears to be a decision made with the sole intention of reducing the government’s expenditures.

“It’s a strategy based on the idea of maximum savings – and it’s not producing results,” said Malaquías López-Cervantes, a public health professor at the National Autonomous University of Mexico (UNAM). 

Amlo’s Penny-Pinching Record

In truth, Amlo’s eccentric fiscal policies were his hallmark long before he assumed office. Now, in the time of COVID-19, Amlo’s stubbornness to loosen the state’s purse strings has contributed to dismal testing rates and minimal economic relief, according to reporting from the Los Angeles Times.

“His entire political career he has spoken out against [economic bailouts],” said Genaro Lozano, a political scientist at the Iberoamerican University in Mexico City. “One of the reasons he got to the presidency had to do with the fact that people were very angry about the use of public money for frivolities.”

Although a liberal politician, Amlo’s monetary ideals are decidedly conservative. During his presidential campaign, he argued “you can’t have a rich government and a poor people.”

To that end, Amlo walks his talk; when he cut government spending, he reduced his own salary by 60%, the Guardian reported. Some of those budget cuts came at the expensive of the state’s healthcare system, a decision that appears questionable in hindsight.

Amlo is Self-Sabotaging His Presidency

Furthermore, Amlo’s political future will likely be determined this year and may very well already be set in stone. Amlo is only halfway through the second year of a 6-year term, but his economic policies have eaten away his approval ratings.

Since taking office, Amlo’s approval rating has slid from 83% to 56% in June, the Yucatan Times reported. The negative economic effects of Amlo’s fiscal policies have begun to catch up with his ratings, particularly as the Mexican economy shed 700,000 in April and May, according to the Los Angeles Times.

The Mexican economy is down 10.5% for the year, the International Monetary Fund reported, contributing to Amlo’s 63% economic disapproval rating, according to Bloomberg.

Amlo continues to refuse to design an economic stimulus, not to save his polling numbers nor to rescue the Mexican economy. The maximum he is wiling to do is to transfer $25.6 billion from other areas of the government for social programs and infrastructure projects, according to Reuters. However, this will cause other aspects of Mexico City to suffer as Peter is robbed to pay Paul.

Leading Mexican Official: Testing is a ‘Waste of Time’

The central bank did announce a $31 billion stimulus, however the action will primarily help stabilise the financial system, not the unemployed Mexican worker. It is not enough to undo the damage from COVID-19 and two years of Amlo’s heavy spending cuts. 

Until COVID-19 is cured or suffocated out of existence through social distancing, lockdowns, and masks, the Mexican economy will continue to crumble as will Amlo’s presidency. Gangs and cartels have also capitalized on the economic downturn, putting Mexico on course for its most violent year ever, BBC News reported.

Corruption and crime coincide with the COVID-19 crisis, and amid it all, Amlo’s coronavirus tsar, Hugo López-Gatell called testing “a waste of time, effort and resources.”

Mexico City was in disrepair when Amlo assumed office and although he may have honest morals, his economic policies have gutted any hope of Mexico bettering itself in the near future. For Amlo, the leader who promised the creation of two million jobs somehow without government spending, any spending from the public coffers is inherently evil. Fighting a pandemic with that mentality is next to impossible.

L'articolo Amlo’s Penny-Pinching Policies Are Plunging Mexico Into Ruin proviene da InsideOver.

Sweden, typically a poster child for healthy living, has been forced to defend its coronavirus strategy as the state finally begins to see the curve flatten. The fact that Sweden — a state that was rated 8.5 for healthy by Organisation for Economic Co-operation and Development (OECD) —failed to control the disease for so long even as its neighbors managed to succeed gives reason to question the Swedish strategy, which was unconventional from the beginning.

Voluntary Measures

From the onset, Stockholm decided not to lockdown, a decision it maintained through the worst of the crisis in April. The Swedish strategy essentially boiled down to trusting its residents to do the right thing. Social distancing has been voluntary and the only hard rule issued by the government is a prohibition of gatherings with more than 50 people, BBC News reported.

Although the government did not explicitly declare herd immunity a goal, some health experts suggested Sweden could be a test bed for the theory. However, others have argued against such an approach and most agreed that for it to work properly, an average 60-85% of a state’s population would need to be infected, according to the New York Times.

Furthermore, vulnerable demographics such as the elderly are unlikely to mingle in public as frequently as a healthy individual, thereby decreasing the likelihood that they would obtain the antibodies. Finally, the jury is still out on whether an immunity can even be established against COVID-19. Even with a vaccine, it is possible that it may not be 100% and permanently effective with the first dose.

The Swedish Public Health Agency revealed a paltry 6% of its population has tested positive for COVID-19 antibodies, as BBC News reported, which is hardly a raving endorsement for herd immunity.

Astronomical Death Rate Among the Nordic States

For these reasons, Sweden stirred controversy when it decided that it would not shutdown with the rest of the world and it continued to pay a price in casualties. As of Friday, it ranked 27th with 5,676 deaths according to health data compiled by Worldometers.

Its neighbors boast far better results, however. Denmark has only 612 deaths, Norway 255, and Finland 328. Even when considering population differences (Sweden has roughly twice the population of each of its neighbors, the numbers are harrowing. So why then are Swedish health experts so resolute in defending their strategy and insistent upon declaring it a national success?

“The epidemic is now being slowed down, in a way that I think few of us would have believed a week or so ago,” said Anders Tegnell, Sweden’s chief epidemiologist.

‘No Strong Evidence’

It is true, the numbers are now looking incredibly favorable particularly when compared with the virus’ peak in April. Tegnell hailed recent statistics as vindication of the Swedish strategy saying, “We have managed to [slow the spread] with substantially less invasive measures.

Have daily deaths and cases fallen? Yes. Did resisting a nationwide lockdown keep the Swedish economy afloat? Yes. However if these are the only metrics, then what is the point of fighting the coronavirus at all, if we are to entirely ignore the lives sacrificed needlessly?

Tegnell conceded there may have been too many casualties, but he remained in stark denial that lockdown measures would have helped, declaring there was “no strong evidence that a lockdown would have made the much of a difference.”

Lofven Government Loses Support

Lives weren’t the only casualty as a result of the strategy—support for the government, including Prime Minister Stefan Lofven, plummeted. Although Lofven and his Swedish Social Democratic Party have enjoyed higher approval numbers since before the pandemic began, June marked a turning point as Lofven’s approval rating fell 10%, according to SBS News. Public faith in Lofven’s party similarly dropped 9%.

Swedes are now questioning whether or not Stockholm leaders made the right call. Estimates anticipate a 5% economic contraction this year, less than Sweden’s neighboring states. Consumer spending was higher, however, but an unemployment rate of 9% leads the Nordic states, BBC News reported.

“Sweden, like the other Nordic countries, is a small, open economy, very dependent on trade. So the Swedish economy tends to do poorly when the rest of the world is doing poorly,” said Prof. Karolina Ekholm, a former Deputy Governor of Sweden’s central bank.

It remains to be seen if Sweden’s strategy has further reciprocal effects, but for now the damage, aside from casualties, appears to be limited to its image. The state, usually a top-tier nation in terms of health and wellness, now is forced to defend the sacrificing of its citizens to preserve its economy. 

L'articolo Sweden Defends Coronavirus Strategy Despite High Casualty Rate proviene da InsideOver.

The Trump administration continuing its fight against China-based tech giant Huawei after taking a break during the coronavirus pandemic. Previously, Washington banned the company from deploying its 5G infrastructure in the US, using an executive order to label it a national security risk. On Friday, the Trump administration went a step further to prevent global chip manufacturers from supplying Huawei — a plan that had been previously considered — causing Huawei’s stock value to slide and risking retaliation from Beijing.

American Businesses in the Crosshairs

“The U.S. has utilized national power and used the so-called national security concern as an excuse, and abused export controls to continue to suppress some particular companies in other countries,” China’s commerce ministry said in a statement issued Sunday.

As a result, American companies including Apple Inc., Cisco Systems Inc., Qualcomm Inc., and Boeing Co. will likely be targeted. A report from China-based Global Times indicated Beijing will place them on an “unreliable entity list.” China has already paused new purchases of Boeing aircraft.

The new restrictions put in place Friday extend beyond US borders by requiring foreign companies who use America technology to be licensed before providing Huawei with computer chips. The regulation applies even to Huawei-designed chips if they are produced by companies that use American technology. 

The rule will also close a loophole that allowed Huawei to continue to profit off US technology, the US Department of Commerce said.

“There has been a very highly technical loophole through which Huawei has been in able, in effect, to use U.S. technology with foreign fab producers,” Commerce Secretary Wilbur Ross said in an interview with Fox Business Network on Friday.

New Requirements

Ross reiterated that the intention of banning Huawei centred on national security concerns.

“This is not how a responsible global corporate citizen behaves,” Ross said. “We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.”

HiSilicon, Huawei’s solution to skirt around its previous ban, allowed the company to source semiconductors from other manufacturers, the New York Times reported. However, those companies often used American technology to develop the chips that Huawei had designed. Under the new regulation, they would no longer be permitted to supply the company. 

After the rule goes into effect in September, companies that want to continue to do business with Huawei can apply for licenses. The US State Department said it would consider licenses on a case by case basis. 

“This is a licensing requirement. It does not necessarily mean that things are denied,” a senior State Department official said. “We tend to approach Huawei with some concern but this is a measure that gives the US government visibility into what is moving.”

Trump’s Favorite Target

The Trump administration’s fight against Huawei comes amid two larger US–China conflicts: a trade war that was approaching deescalation in January and the COVID-19 pandemic for which Washington blames on Beijing. Huawei offers a big name for the US to hit economically, a target to point at and show results when its hits land.

Huawei’s smartphone sales outside of china fell by 35% as a result of the administration’s policies against the company. As business success in China is strongly intertwined with relationships with Communist Party officials, hurting Huawei indirectly affects the government of Beijing, hence its quick rush to defend the tech giant.

US President Donald Trump has made his position on China and Huawei abundantly clear and if anything, he is more eager to attack it because of the coronavirus pandemic. As the new rule does not go into affect until September, a mere two months before the US elections, it’s quite possible that Democratic candidate Joe Biden will have to continue the battle. 

Biden’s close ties to China have raised eyebrows at times and he has a history of strongly supporting favorable relations with Beijing. As a senator in the 1990s, he advocated for it to be given the World Trade Organization’s most-favored-nation status. As vice president, he pushed for increased trade saying Americans “welcome this competition.” 

After the Phase 1 trade deal was announced in January, Biden downplayed concerns declaring, “What are we worried about?”

‘Strangle Huawei’

However, Biden may actually take a tougher stand on China through policies outside the scope of a trade war that Americans have to foot the bill for.

“The vice president intends to do two things: hold Trump accountable for a catastrophic set of failures in his approach to China, and a colossal gap between tough talk and weak action,” said Jake Sullivan, a senior advisor for Biden. Specifically, Biden will engage other states to coordinate a joint effort to pressure China, which would be “a hell of a lot better than just the United States choosing to try to fight a trade war with China all by ourselves.”

On the technology side, Biden would also  look to expand restrictions on technology that enabled China to commit genocide against its Uighur population. Against Huawei in particular, Biden said on a debate state in February that he supported a ban on the company using its network technology in the US, a rare point of a agreement between him and the president. 

‘Modern Wars are Fought With Semiconductors’

Biden will also find support in Congress. Actions against Huawei have never exactly been a partisan issue with both Republicans and Democrats supporting the measure.

“The United States needs to strangle Huawei,” said Sen. Ben Sasse, R–Neb. “Modern wars are fought with semiconductors, and we were letting Huawei use our American designs. This is pretty simple: Chip companies that depend on American technology can’t jump into bed with the Chinese Communist Party.”

Long-term economic prospects between the two states depend on resolving the trade war. For that, Biden may be better as he has shown more proclivity to consider other avenues for attacking Beijing. The US trade war is only the first problem to overcome, however, and Biden may bring aboard other nations to create a united front against China, something Trump has never shown an interest in doing.

With increased calls for Beijing to allow for an independent investigation of COVID-19, the world is slowing turning against China. As a unifying candidate, Biden would be America’s best shot at settling the score, as opposed to Trump’s lone wolf mentality.

The Huawei ban is only a small piece to the larger economic struggle between the US and China. Although Trump managed to hurt the company, Biden’s holistic approach may have a longer and more widespread effect. 

L'articolo Trump Administration Hits Huawei Again as Beijing Threatens Retaliation proviene da InsideOver.

While economies around the world continue to suffer from the coronavirus pandemic, the World Trade Organization faces the added difficult of replacing its director-general Roberto Azevêdo. He resigned on Thursday in a shock move. Azevêdo’s resignation will be effective Aug. 31, over a year before his second term was set to expire. 

Early Retirement

Azevêdo said his decision was based on personal reasons and not the result of any particular trouble within the WTO, the New York Times reported. He also said he would step down early to provide the organization more time time to hunt for a successor, but admitted the process of replacing him would most likely last into next year.

“The selection process would be a distraction from — or worse, a disruption to — our desired outcomes (rebuilding global markets),” he said during a virtual WTO meeting. “We would be spending valuable time on a politically charged process that has proved divisive in the past.”

Azevêdo, the former lead trade negotiator for Brazil, has been in Geneva since 1997, but recent years have brought increased pressure to his duties as head of the WTO. Specifically, US President Donald Trump’s trade war with China and general policy of applying tariffs on a number of states, created turmoil that rippled across industries worldwide.

Under Azevêdo, the WTO has been a bastion for free trade and liberal international economic policies. That mentality clashed with Trump, who decided to portray the WTO as an adversary that needed to go, much like the North Atlantic Treaty Organization.

China’s Status Questioned

The American president said he was “OK with” Azevêdo’s departure and took another chance to attack the organization. 

“We’ve been treated very badly… They treat China as a developing nation. Therefore China gets a lot of the benefits that the US doesn’t get,” Trump said.

He also blamed the WTO’s admittance of China in 2001 as a contributor to job losses in the US. 

“The WTO is BROKEN when the world’s RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment,” Trump said in July 2019. “NO more!!! Today I directed the U.S. Trade Representative to take action so that countries stop CHEATING the system at the expense of the USA!”

In retaliation, the Trump administration has refused to confirm appointments to the WTO’s Appellate Body — its supreme court — for two years. With only one member left since December, it is unable to rule on international disputes, as Reuters reported.

In lieu of judicial appointments, several members of the WTO including the EU and China were forced to hobble together a temporary dispute resolution body.

The US isn’t alone in criticizing the WTO; Japan and the EU have both urged for reforms, especially concerning the way the organisation treats China. Azevêdo’s early departure will give the body ample time to deliberate on whether to pursue a candidate who can introduce change at the global level.

A Tunnel with No Light at the End

First, it must continue to navigate the COVID-19 crisis, however and Azevêdo has taken umbrage with states refusing to cooperate. As economic leaders, the US, China, and European states should work together to combat the emergency. Instead, the world has divided, mostly against China.

“Either we shape up and begin to talk to each other and find common solutions or we are going to pay a heavy price,” Mr. Azevêdo said in April.

The outlook for 2020 remains grim according to WTO projections. On the lower end of the scale, merchandise trade could plummet 13% with gross domestic product sliding 2.5%, Bloomberg reported. The worst case scenario foretells a 32% drop in trade and GDP fallout of 8.8%.

“These numbers are ugly — there is no getting around that,” Azevêdo said. “But a rapid, vigorous rebound is possible. Decisions taken now will determine the future shape of the recovery and global growth prospects.”

Leaderless at the Worst Possible Time

Without Azevêdo, a WTO veteran at the helm, the organisation’s effectiveness will be limited at best. Prior to his announcement, the WTO was already managing conflict between the world’s largest economies, navigating criticism from Trump, and trying to develop a strategy to rebound from the coronavirus pandemic. Now it has to somehow accomplish these goals without its leader, and perhaps any leader, until the pandemic relents.

In leaving the WTO before his scheduled September 2021 exit date, Azevêdo has further crippled the organisation at the absolute worst possible time. The WTO warned the global economic collapse may be the worst in a generation and states look to it for answers.

“To lose the leader of the WTO is a serious blow. There is a broken global trading system, and it needs leadership to fix it,” remarked Josh Lipsky, director of the global business and economic program at the Washington-based Atlantic Council.

On a positive note, Azevêdo’s departure may allow a more progressive candidate to assume the mantle, which could satisfy criticisms from Trump, the EU, and Japan. How the WTO decides to handle China going forward will quite possibly determine the organization’s future. As the tide turns against Beijing over lack of COVID-19 cooperation and transparency, it is foreseeable that WTO members change their tune on China and begin to advocate for real changes, including some reforms Trump has pushed for.

L'articolo WTO Director-General Resigns Early, Leaving Organisation Adrift During Global Pandemic proviene da InsideOver.

Oil tariffs may soon be coming from the Trump administration. On Saturday, US President Donald Trump said tariffs are one of the options he is considering to rescue the American oil industry that has seen its revenues free-fall.

“I am a big believer in our great energy business, and we’re going to take care of our energy business,” Trump said at a press briefing on Saturday. “And if I have to do tariffs on oil coming from outside, or if I have to do something to protect — or thousands and tens of thousands of energy workers, and our great companies that produce all these jobs — I’ll do whatever I have to do.”

Tariffs are not the first option Trump has tried. According to his tweets, he spoke with Saudi Crown Prince Mohammed bin Salman (MbS) and felt confident they would negotiate a production and price truce. Trump also claimed MbS spoke with Russian President Vladimir Putin and he too was onboard with the idea. That was last week. The next day, both nations denied such a deal was in the works. However, Saudi Arabia called an OPEC meeting, which has since been postponed, in an attempt to mitigate the oil glut.

During Saturday’s press briefing, Trump railed not only against Saudi Arabia and Russia, who have directly pushed the global oil supply to an extreme amount of reserves, but OPEC as well.

Trump: ‘They Are Going to be Destroyed’

When asked about the situation, Trump said,” Well, OPEC can do whatever — look, I’ve been against OPEC all my life, because what is it?  It’s an illegal — you could call it a cartel, you could call it a monopoly.  You have a lot of different names for it.  But it broke down very violently.  Very violently.

“So I don’t care about OPEC. I really don’t. I couldn’t care less about OPEC.”

The problem, if OPEC doesn’t work it out as Trump said it would, would be resolved regardless. Trump believes the American oil industry can outlast Russia and Saudi Arabia who are “going to be destroyed” if they don’t find a solution.

Trump has a long history of criticizing OPEC’s role in determining global oil prices. In 2012, he said it was “robbing our country blind.” Since taking office, he has accused the cartel of manipulating supplies to artificially raise global prices. If Trump has a credible record of any merit by which to hang his hat on, it is that under his administration the American oil industry became the largest producer in the world. Although the feat was achieved with massive rollbacks in environmental protections, it established the US as a dominant player in the industry, one worthy of Russia sinking oil prices to take it down.

Another Tit-for-Tat Game?

Saudi Arabia and Russia can produce oil at lower production costs, however, and Middle Eastern crude is heavier, which American refineries need. Placing tariffs on imported oil may help some domestic producers, but it could hurt others.

The American Petroleum Institute and American Fuel & Petrochemical Manufacturers penned a letter to Trump on Wednesday to that effect. Furthermore, although low prices hurt American oil companies, they are great for buyers, including businesses abroad that prefer lighter American crude.

Although the worldwide demand has plummeted due to COVID-19, eventually the virus will run its course and the world will be back to needing oil, especially as Asian factories ramp up production once again. Low prices and high supply can be mitigated after the pandemic passes, but trade wars are much harder to overcome.

Consider the tit-for-tat trade war between Beijing and Washington. It still hasn’t officially ended, only on pause due to the coronavirus. While the comparison is not perfect, Saudi Arabia isn’t a major trading partner with America like China, it could have other consequences. The oil-rich kingdom can easily exert its will on OPEC in its entirety. If Trump leverages tariffs against it, the entire whole could take reactionary measures. These could include tariffs on American goods and diplomatic breakdowns.

Saudi Arabia is a strong military ally and one of the top-spenders on US weapons. These defense contracts would be prime targets for retaliation.

Tariff Talk

While Trump may be talking tariffs, that may be all it is: talk. In order to impose them without Congressional approval, he would need to justify them as a matter of national security. He has done this before with Canadian steel so it would not be unordinary for him to try it again with oil.

This year, 140 American energy producers are at risk of filing for bankruptcy, Rystad Energy reported, if the price remains at $20 a barrel. Another 260 would file in 2021. The condition of US energy markets has not been this dire since the Great Depression.

While Trump mentioned tariffs as an option, they are not universally desired and far from the only option. Saudi Arabia and Russia could cut their production levels and let prices float back up, as Trump hopes will happen. The US government could bail out oil companies as it is doing with other industries affected by Covid-19, although the average American may not support the idea of using tax dollars to do so. 

Trump met with industry executives on Friday, but no developments came from the meeting. With the OPEC+ emergency meeting postponed, Trump appears to be leaving the first move up to Saudi Arabia and Russia. 

L'articolo Could Oil Tariffs Save American Producers? proviene da InsideOver.

Saudi Arabia has introduced a stimulus plan to counter worsening economic conditions. On Friday, it announced a $32 billion two-part emergency plan necessitated by low oil prices and the Covid-19 coronavirus global health crisis. 

Details of the Saudi Stimulus Package

The first part of the stimulus package includes 50 billion riyals ($13.32 billion USD) which will be disbursed from the state’s central bank. The measure is designed to keep banks and businesses afloat, according to Reuters. Saudi Finance Minister Mohammed al-Jadaan also unveiled an additional 70-billion riyal stimulus component for businesses that will help them defer the payment of government fees and taxes.

Additionally, Saudi King Salman authorized his ministers to raise the debt ceiling to 50% of the state’s GDP, an increase from 30%. Riyadh will use the breathing room to borrow money to help offset a growing deficit. Originally, it was forecast to grow 6.4%, but recent events have caused Jadaan to revise his estimate to 7 to 9%.

“We have huge reserves and very large investments, but we don’t want to liquidate any of these so we will borrow,” said Jadaan. Even with the authorization to borrow more, he expects to borrow a maximum of 100 billion riyals in 2020 and reach the 50% debt ceiling in 2022.

Disastrous Plunge in Oil Prices

Oil prices have fallen 60% since the beginning of the year and despite introducing a tourist visa last year, Riyadh has not yet established another major source of income for its oil-dependent economy. Crown Prince Mohammad bin Salman (MbS) created the Saudi Vision 2030 plan four years ago in an effort to reshape the kingdom’s economy. Notably, it calls for an increase of non-oil trade, and the development of an entertainment industry. 

However, all those plans have been called into question due to global scale of the coronavirus and the oil price war with Russia. Although Vision 2030 will most certainly carry on as planned, the kingdom’s focus now is on stopping the free-fall of its economy before it is forced to dip into reserve funds.

Riyadh’s Additional Emergency Resources

The $32 billion stimulus is only one of the tools available to Riyadh, according to Jadaan. It could cut spending or, in the worst case, take from its reserve fund. In December, he announced that the reserves totaled 500 billion riyals ($133 billion), but the Sovereign Wealth Fund Institute estimated it could be as high as $320 billion and CEIC Data pegged its sum at $490 billion in January. 

Riyadh also introduced an emergency budget to cover any future costs that may arise due to Covid-19. 

“Some budget appropriations will be reviewed and reallocated to the sectors most in need in the current situation, including allocating additional funds to the health sector as needed,” Jadaan said.

Saudi Arabia currently heads the G20 forum and as such, requested an emergency meeting of its members next week. Together, it hopes the G20 can find a solution to the economic problems that continue to plague global markets. Riyadh is not alone in introducing economic stimulus measures. Germany is devoting €550 billion, the UK £330 billion, and Italy £340 billion, Arab News reported.

American-Saudi Cooperation

The US is also likely to pass a $1 trillion relief package on top of a previous $100 billion measure. Washington and Riyadh have other business together beside the pending G20 meeting, which will take place virtually to avoid transmission of Covid-19: oil. The US is dispatching a delegate to Riyadh, officials announced Friday, to negate an end to the oil price war.

Although Russia set off the dispute by refusing OPEC demands to reduce production, Saudi could be easier to negotiate with as it is considered a strong US ally. Trump administration officials praised the kingdom for keeping the global oil market stable for the past few decades and expressed optimism that they can restore it once more. 

One possible solution is for production cuts on the US side, said Ryan Sitton, a member of the Texas Railroad Commission, a regulatory body overseeing the state’s energy industry. Texas has not cut production since the 1970s, a fact that underscores the severity of the measure. Due to the federalist nature of the US government, Washington does not set limits, instead leaving that up to individual states. While Texas may see some sense in cutting a deal with OPEC to reduce production, other industry executives aren’t convinced that is the right choice. 

“Our view is simple. Quotas are bad,” said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute. “They’ve been proven ineffective and harmful. There’s no reason during this time to try to imitate OPEC.”

Saudi Arabia needs a price of $82 per barrel to keep its budget steady, the International Monetary Fund said. Brent crude was $28.28 on Friday. Until the oil price begins to swing upward once again, Riyadh faces a financial predicament it is unaccustomed to experiencing. While it can unleash stimulus spending to cover some of the coronavirus effects, the solution is not a long-term strategy. For its economy to rebound Riyadh needs oil to recover — Covid-19 or not.

L'articolo Saudi Arabia Unveils $32 Billion Stimulus proviene da InsideOver.

Petrostates — governments that largely depend on oil revenues to sustain themselves — could be in their twilight, Chris Miller wrote recently for Foreign Policy. The Covid-19 coronavirus global epidemic has seen oildemand tailspin. Russia’s rejection of OPEC+ demands to stifle production has also helped drive the price of crude down even further. Consequently, the short-term future for petrostates is bleak and their longterm prospects aren’t much better.

A Preview of What’s to Come

Coronavirus has illustrated the fragility of states relying too much on oil exports to fuel their economies. It may be a preview of another crisis on the horizon: clean energy. While countries like Saudi Arabia and Russia have accumulated vast wealth reserves to sustain themselves and invest in new technologies and industries, smaller producers will experience an entire economic collapse if they fail to fill the upcoming GDP void. 

Bloomberg New Energy Finance (BNEF) research organisation anticipates oil demand will begin to slow within five years before peaking in 2030. Fuel efficient cars and green energy policies will continue to reduce the world’s reliance on petrol. The forecast contradicts oil producer hopes that demand will continue to grow until 2050. 

The Paris Climate Agreement set the spark to phase out carbon emissions as it underscored the urgency of immediate action. However, it is dependent upon governments to enact policies that foster green energy growth. Some have been more proactive than others. Last year, Iceland passed a ban on registering new gasoline and diesel vehicles. Effective in 2030, all cars in the country must be electric.

Fifteen other states have instituted or discussed similar bans including France, the United Kingdom, and China.

China is also leading the world on clean energy investment. For 9 of the past 10 years, Beijing has topped every other nation in terms of investing in clean energy. It makes the most solar panels, wind turbines, batteries, and electric cars, according to TIME. China dwarfs other nations in oil imports at $239.2 billion in 2018 and is a steady customer for Middle East producers, but it is working quickly to change that.

A Damning Forecast

Although the International Energy Agency warned the transition to green energy is not happening fast enough, its concerns center more on staving off CO2 production, which it anticipates will continue to rise under current policies across the globe. Oil demand will still flatline, however, the IEA predicts. 

“Aggregate fossil fuel production falls precipitously by 2040 … Natural gas output rises by around 8% to 2030 before falling below today’s levels in 2040. Oil production peaks in the next few years and drops to 65 million barrels per day as the shift to alternative modes in the transport sector takes away its main demand base,” an IEA report said.

Petrostates: Between a Rock and a Hard Place

So where does this leave petrostates? Without vast cash reserves, they will continue to cut budgets as they are left struggling to find new sources of revenue. In many states, this will either lead to political problems or exacerbate those already there. Protests and mass migration may well become the theme in the coming decades as oil-dependent economies crumble.

In Nigeria, the government faces a political crisis that complicates its problem. As the price of oil continues to free fall, the government has imposed emergency measures to reduce the national budget. That will do little to help with the rise of clean energy, however, and technological revolutions seldom transpire during times of political upheaval. 

Algeria is also enduring protests as Prime Minister Abdelaziz Djerad warned of a “multi-dimensional crisis” for which the state is unprepared. The situation in Kazakhstan mirror Algeria as the government suppresses discontent among its people and cuts spending. Leaders like Kazakhstan President Kassym-Jomart Tokayev have already discovered the difficulty of maintaining power in a failed economy. 

Upcoming Currency Collapses

As oil is traded with the petrodollar, most states dependent on it have their currencies linked to the American dollar. Thus far, the Algerian, Nigerian, and Kazakhstan currencies are still stable with it, but that could soon change. Devaluing their currencies, like Oman is rumored to be considering, is perhaps inevitable at this point.

While the Covid-19 crisis is temporary, climate change and resulting shifts in energy production are here to stay. A currency devaluation would spell doom for many nations depending on oil. Look no further than Venezuela for an example of what the future holds for states when they encounter mass inflation.

Iran is another example of what happens when a state can’t sell oil. The nation, encumbered by new US sanctions, has witnessed the bottom fall out of its economy and protests against its leadership. 

While the sunset for oil demand is still decades in the future, investment in new industries will require immediate action to develop. Unfortunately, those states hurt the hardest are in unfavorable positions to pivot their economies as a result. 

L'articolo Sunset on the Horizon for Petrostates proviene da InsideOver.

Great Britain is leaving the European Union on January 31. However, the future relationship between the EU and the UK has yet to be negotiated. While many EU politicians consider the current schedule to be unrealistic, including EU Commission chief Ursula von der Leyen and chief negotiator Michel Barnier, the UK leadership continues to advance its plans diligently – particularly in terms of post-Brexit immigration.

Here, Boris Johnson has long-planned new restrictions on low-skilled immigrants, which ought to come into force just one day after the end of the Brexit transition phase at the end of December 2020. Home Secretary Priti Patel is expected to present corresponding proposals in the next few days as part of the new immigration regulations in the cabinet.

This plan would overturn Johnson’s commitment that his predecessor Theresa May had made to corporate groups and that after Brexit, there should have been a two-year deferral for new immigration regulations until 2023, however.

Johnson unveiled long-awaited details of his plans for an Australian-style points system a few days before his election victory. His three-tier system aims to accelerate the immigration of “highly skilled” workers and also allows a second tier of “skilled workers” to immigrate to the UK for employment.

The third tier of low-skilled workers could only obtain employment if either there were a shortage of staff or under an exception for sectors such as construction due to notorious high demands.

Already in December, Johnson had written on Twitter that the UK sought to encourage and welcome highly qualified immigrants in the UK while maintaining control in order to plan to pay for our public services accordingly.

Meanwhile, Labour described the Tories’ plan as ignorant and reactionary and warned that changes would affect the NHS and civil service staffing and key private-sector industries in particular.

Business associations, agriculture industry, the hospitality industry, construction and the care sector, in particular, have also criticized the government’s plans. All rely on workers from the EU.

No 10’s announcement was made after Chancellor of the Exchequer Javid had already indicated the Tories’ plan by advising companies to recant their call for continued close cooperation between the EU and England. Javid justified this by saying that the companies had already had three years to prepare for any Brexit labor consequences.

Javid said that “there will not be alignment, we will not be a rule-taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year.”

In order to stimulate the UK’s economy post Brexit, Javid has pledged the government’s commitment to making substantial investments, especially in the infrastructure of the economically dependent regions in the Midlands and the north of the country. In the future, significantly more money should also be invested in the qualification of specialists. For this, Javid seeks to increase taxes in the medium term, he indicated. Javid hopes that this will kickstart the recently weak economic growth, and the continued low productivity rate in the country – through employment remains at a record level.

The UK government has long been trying to reduce the immigration surplus. The previous year the figure was estimated at 226,000 people by the British Statistics Service ONS. However, the numbers have declined since the referendum of 2015, even though not as significantly as anticipated.

EU citizens have so far been allowed to live and work in Great Britain without any issues. With the Brexit deadline looming, this may change, particularly for individuals who have not lived in the country for at least five years and are thus not eligible for settled status.

Skilled workers from all over the world are still attracted to the UK, which in turn forces the UK to restrict the movement of unskilled and unemployed individuals. Due to the urgency, this will very now likely happen before December 2020.

L'articolo Tories to Implement New Immigration Regulations by the End of 2020 proviene da InsideOver.

Over the past weekend, Chancellor Merkel travelled to Russia for a conversation with President Putin about the current crises as well as future bilateral relations that would benefit both parties tremendously. For Germany, it comes with a high price tag, however.

Merkel’s last visit to the Kremlin is an almost distant memory; however, the current geopolitical developments made a meeting a necessity. On an increasingly unpredictable world stage and surrounded by, at times, erratic interlocutors, both Merkel and Putin did not forget what they have in each other. It was thus the reanimation of a relationship that has been through highs and lows, but more or less amicable on a personal level – even throughout the international outcry over the Crimea annexation and subsequent sanctions against Russia.

After a recent diplomatic dispute over an alleged contract killing in Berlin, however, the relationship appeared to deteriorate once again. Germany’s federal prosecutor suspects that government agencies in Russia or the Chechnya republic ordered the murder. In his first reaction, Putin referred to the killed individual as a “murderer” and “bandit.” Then Putin first accused the German government of not having extradited the man, despite continuous requests, something that has been confirmed as a downright falsehood by now.

Nonetheless, when Merkel arrived in Moscow last weekend, both sides made a noticeable effort to conduct the trip as amicably as possible. However, the personal relationship between the two is not the reason. Rather their respective plans for future cooperation and mutual benefits a stable relationship between Moscow and Berlin provides.

Putin, for one, communicated why Germany was so crucial for Russia, which is primarily based on trade. Germany remains Russia’s second most important trading partner behind China. Moreover, the overall German investment in Russia in the previous year recorded $20 billion.

Germany remains the economic powerhouse of Europe and the fourth most potent economy in the world in terms of nominal GDP. It is thus not a surprise that Russia seeks to not only benefit from it but participate in it. However, it is not merely Putin’s rhetoric that is proving his vision. It is his actions also. It was thus no coincidence that essential figures of Russian and German economic life participated in the meeting, such as Gazprom Deputy Chairman Miller, Russias Minister of Economic Affairs Oreshkin, and the head of the economic and financial department in the German Chancellery.

While the current economic cooperation between Germany and Russia is primarily about the completion of the Nord Stream 2 gas pipeline, even more, significant plans appear to be on the horizon, given the presence of these marquise names.

However, it is not only Russia, who hopes to be a beneficiary in this relationship and future projects. Though, for Germany, these benefits are primarily a part of foreign and security policies.

So far, Germany has appeared alongside France in the talks in Normandy format since 2014, attempting to facilitate lasting peace between Ukraine and Russia. Now, however, Germany is trying to facilitate peace in Libya. In the so-called “Berlin Process,” Germany seeks to mediate between the Libyan government under Prime Minister Fayiz as-Sarraj and the insurgent General Haftar.

At the meeting with Merkel last weekend, Putin assured her that he would support her initiative, which is crucial if any progress is anticipated. Putin possesses creed in the Middle East, a region in which Germany does hardly have an identity. With Putin stating the Berlin Process was a “good step in the right direction,” Merkel received a quasi blessing from the Kremlin to move to the next stage.

This next stage occurred when Merkel sent out official invites for a meeting in Berlin this Sunday, including high ranking names such as Mike Pompeo and Russia’s Foreign Minister Lavrov.

It is not the first time, however, that both have displayed unanimity. The same applied in 2015 regarding the Vienna Atomic Energy Agreement. With the issue being pressing right now, Merkel emphasized in Moscow that Germany seeks to keep the agreement with Iran alive. All diplomatic channels would have to be used for this as Iran should not get nuclear weapons. Putin occurred and pledged his commitment in favor of the continuation of the 2015 agreement.

All in all, the meeting of Merkel and Putin in Moscow displayed a surprising degree of unity. Merkel, who has openly stated that with the shift of US interests in the world, Germany had to become more self-reliant and explore new avenues. Whether Putin can be Germany’s best new bet must be doubted, however. The latter has shown that his geopolitical interests are purely governed by Russian advancement. A dependence on the Kremlin, particularly in terms of solving global crises, can thus not be the way forward for Germany.

L'articolo Merkel’s Visit in Moscow: Putin Opportunity and Germany’s Detriment? proviene da InsideOver.