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A Historic Day for India Farmers, the US-China Conflict Continues and the Week in Review

Blog / Weekly Review

A Historic Day for India Farmers, the US-China Conflict Continues and the Week in Review

A reminder to check out the “The Perch Pod,” our biweekly podcast on important developments and the future of international politics. We published our latest episode, a conversation with Farmlink’s Chief Market Analyst Neil Townsend on how COVID-19 has disrupted food supply chains, on Monday. You can listen by clicking here or by searching for “The Perch Pod” on every major streaming platform. Please also feel free to share the podcast and this newsletter widely with anyone you think would be interested, and don’t hesitate to be in touch if we can be of service in any way. – The Perch Perspectives Team

A “historic day” for India’s farmers. India’s Union Cabinet approved three key measures on Wednesday that together represent a significant step towards large-scale reform of India’s entire food system. The cabinet approved an amendment to the 1955 Essential Commodities Act and also approved two ordinances with far too many words: “The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020” and “The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020.” Before Wednesday’s moves, Indian farmers had to sell their produce to state-licensed Agricultural Produce Market Committee (APMC) “mandis,” or markets. Now, Indian farmers can buy and sell to whoever they choose. The government’s ordinances also aim to eliminate barriers to agricultural trade between Indian states. Agriculture Minister Narendra Singh Tomar called it a “historic day for agriculture.”

What it means: This is an ambitious step forward for the Modi government and will no doubt run into legal challenges from Indian states and push-back from stakeholders of the current system. In theory the APMCs were designed to protect Indian farmers, but in reality, mandis were often located too far away from farmers, APMC agents would often collude to set lower prices for farmers and then selling to retailers at higher prices, and the cost of supply chain inefficiencies were born by India’s farmers. India still has major infrastructural hurdles to overcome for the promise of these reforms to be realized, and Modi’s government will earn the ire of mandi managers who possess significant political and financial power, but Modi’s government has taken a necessary first step, and is in effect attempting to use the COVID-19 crisis to increase the central government’s control over arguably the most unwieldy and entrenched status-quo system in India today and to empower Indian farmers. The sheer size of India’s overall market means these changes will create global ripples in agricultural markets.

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Moving closer to a Cold War. On Wednesday, the U.S. Transportation Department announced it was suspending passenger flights on Chinese carriers to and from the United States, effective June 16th, or earlier if President Trump so desired. The move is in response to China dragging its feet on allowing U.S. carriers to resume flights to and from China as a result of COVID-19 concerns. China’s civil aviation regulator subsequently announced that foreign airlines – including U.S. carriers could select one Chinese city from an approved list and begin operating one flight a week beginning on June 8th. Earlier in the week, China’s government reportedly instructed state-run agricultural companies to halt purchases of American farm goods though at least a few Chinese firms were eager to get a few more cargoes in under the gun. Meanwhile, on Tuesday, Philippine President Rodrigo Duterte said he had decided not to terminate his country’s Visiting Forces Agreement (VFA) with the US, and two major Canadian telecom companies, BCE Inc. and Telus Corp, announced they would use Nokia and Ericsson to build out their 5G networks – not Huawei.

What it means: Let’s go in reverse order. Canada’s government has been unclear so far on its position on Huawei, but BCE Inc. and Telus Corp.’s decisions obviate the need for Canada to come down particularly hard one way or another. It is an especially notable about-face for Telus, which as recently as February said it would be enlisting Huawei’s services. Duterte’s about-face is even more surprising, although he has proven himself a mercurial enough leader at this point that the move is hardly surprising. The Philippines is an incredibly important part of U.S. decision-making when it comes to China. Manilla has tried to play the US and China off of each other but ultimately feels more threatened by China’s ambitions in the region than by the US and its main goal is not to ditch the relationship with the US but to encourage the US to do more to protect Philippine interests. As for the passenger flight situation – China seems to be attempting to defuse the situation, though it remains to be seen if its compromise goes far enough. When government positions harden, as they currently are between the US and China, person-to-person interaction becomes an important conduit to build trust and limit fear and suspicion. The less Chinese and American citizens are interacting with each other, the more their governments have a free hand to oppose one another. We have been hesitant to describe the U.S.-China relationship as a budding Cold War but it is becoming harder to deny that is what it is, and harder to see a way for either side to deescalate the overall situation.

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South Korea and Japan are still not friends. South Korea is reopening a World Trade Organization complaint against Japan for imposing export controls last July. Japan described the decision as “not helpful.” Meanwhile, a South Korean local court took another step towards enforcing a ruling last year involving the seizure of Korean assets of Nippon Steel & Sumitomo Metal Corp. Previously South Korea’s Supreme Court ordered the Japanese steelmaker to pay compensation to four South Koreans for forced labor and unpaid work during World War II, when South Korea was under Japanese imperial rule. Foreign Ministers of both countries attempted to bridge their differences on Wednesday to no avail. Japan’s chief cabinet secretary said on Thursday that Japan would “use every option on the table” to protect Japan’s investments.

What it means: South Korea-Japan relations have been on a downward trajectory since July, and while South Korea granted the bilateral relationship a reprieve in November when it decided not to terminate an intelligence sharing agreement and to pause WTO proceedings against Japan in favor of direct negotiations with Tokyo, the situation remains unstable. Historically, South Korea is friendlier to China than to Japan, as its historical experience with Japan leaves much to be desired, and even though Chinese power is arguably more of a threat to South Korea than Japanese power at this point, those historical animosities and a mutual distrust are still very much alive. The heavy-handed approach of the US towards its security relationship with South Korea may also be playing a role in South Korea’s overall frustration.

Honorable Mention

The European Central Bank said it would increase the scale of its bond-purchase program from 750 billion euros to 1.35 trillion euros.

The United States deployed soldiers to Washington, D.C. amid confusing signals from the government about whether they would be used to quell unrest, including non-violent protests and riots, in the nation’s capital. If you missed our take earlier this week, you can find it by clicking here.

Saudi Arabia and Russia agreed to extend a deal on oil output cuts by one month even as frustration over some countries not fulfilling the cuts required under the existing agreement.

The International Monetary Fund said that Argentina’s latest proposal to restructure its debt would restore debt sustainability – and also assessed that “there is only limited scope to increase payments to private creditors and still meet the debt service thresholds.”

Russia declared a state of emergency after 20,000 metric tons of diesel fuel spilled into a river inside the Arctic Circle; Russian President Vladimir Putin was so angry about learning about the situation from social media that he reportedly asked the head of the company that owns the power plant responsible for the spill, “Are you quite healthy over there?”

Venezuela said it would enforce a limit on state subsidies for fuel effective June 1; individuals will pay international prices for fuel above 120 liters a month for gasoline and 60 liters for motorbikes.

The Indian city of Mumbai averted a potential catastrophe when a cyclone that had looked like it was going to make landfall in the city turned south due to a change in wind direction.

Taiwan’s government said it is hoping to attract roughly $1.3 billion in investment from foreign tech companies in research and development in 5G, artificial intelligence, and semiconductors.

The Democratic Republic of Congo recorded new cases of Ebola in the western city of Mbandaka; the country’s Health Minister described it as “a new Ebola epidemic.” As if 2020 couldn’t get any worse.

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