Europe Emerging? RIP WTO? Welcome to Xinjiang? and the Week in Review
Happy Friday comrades. A reminder to check out our latest podcast with Rory Medcalf. Rory is Head of the National Security College (NSC) at the Australian National University and we spoke about his new book – it’s well worth a listen! If you want even more podcasts in your life, Jacob appeared on the National Security Podcast last week and talked about geopolitical issues flying under the radar. You can listen to that by clicking here. If you’re here for the Middle East content, have no fear, we’ll be taking a closer look at the so-called “Abraham Accords” for next week’s deep dive. In the meantime, take care, wear your masks, and on to the week in review.
Europe emerging? Responding to critics of 5G telecom roll-outs, French President Emmanuel Macron said France would not embrace the “Amish model” as a nation but would press forward as a country of innovation. Macron also said that France had “lost” the battle for global cloud computing but vowed to return to the fight. In Macron’s words, “If we want our ecosystem to be sustainable, it has to be sovereign.” In Macron’s view, Europe should not rely “on any non-European power” for data security and 5G. European Commission President von der Leyen gave a rousing speech at the European Parliament plenary this week and reiterated many of the same themes. Von der Leyen vowed to create a “European Health Union” and for the EU to take a global leadership role in addressing climate change. Von der Leyen asked quite frankly, “What holds us back? Why are even simple statements on EU values delayed, watered down or held hostage for other motives?” Her answer was that the only thing holding the EU back is itself – and that it was time for the EU to move forward and be a more proactive and assertive global player.
What it means: It is important to remember that these are words, not deeds. It is one thing for some of Europe’s most important leaders to articulate distinctly European goals and strategies. It is quite another thing for European institutions to be reformed, for the people of Europe’s diverse nations to share a common vision of what the EU should stand for, and to implement that vision in a way that is fair and equitable for all. It would be equally foolish, however, to pretend that these statements are meaningless. France and Germany are the two most important and powerful countries in the European Union, and the fact that Paris and Berlin are more aligned than almost ever before means there is significant momentum for some of the lofty goals and ideals politicians like Macron and von der Leyen are speaking about. Lost in the U.S.-China strategic confrontation is the fact that a multipolar world is emerging and that the balance of power in that world will be profoundly affected by how Europe evolves or doesn’t evolve. Notice in particular how both Macron and von der Leyen are obsessed with the idea of European sovereignty – of European companies providing data security and telecoms gear, of European sanctions on Russia, on European reshoring and supply chains. France’s support of Greece in its spat with Turkey – which Turkey is now slowly backing away from – is indicative of a much different kind of EU than the one that almost led to Grexit less than a decade ago.
RIP WTO? The World Trade Organization (WTO) ruled that U.S. tariffs on Chinese goods levied under Section 301 of the U.S. Trade Act of 1974 were “inconsistent” with articles I and II of the General Agreement on Tariffs and Trade (GATT). U.S. Trade Representative (USTR) Robert Lighthizer said the ruling showed the WTO was “inadequate” to stop China’s “harmful technology practices” and that the U.S. would “defend itself.” U.S. President Donald Trump said he would “have to do something about the WTO.” Meanwhile, the U.S. will reduce the 2020 quota for semi-finished steel imports from Brazil into the United States to 60,000 metric tons from 350,000 tons. In return, the U.S. will refrain from 25 percent national security tariffs on Brazilian steel. Mexico agreed to consultations to establish a monitoring system on steel exports to the U.S. after recent surges in steel pipe, mechanical steel tubing and semi-finished steel. The U.S. decided to cancel 10 percent tariffs on Canadian aluminum exports after “consultations” with the Canadian government for the rest of the year.
What it means: OK, it’s a little melodramatic to start preparing for the WTO’s funeral just yet. But only a little. The WTO is an imperfect organization. Any global multilateral organization charged with regulating global trade and possessing no independent enforcement mechanism was bound to be imperfect. But even so, the fact remains that the WTO was designed to help defend and extend a global rules-based trading order. The WTO may have made a mistake by allowing China into the organization in 2001, and there can be no argument that China has not used the global trading system to its own benefit, at times in obvious breaching of WTO rules. Even so, it makes no sense to throw the baby out with the bathwater. The U.S. should be strengthening the WTO, not delegitimizing and obstructing it at every turn. And if the U.S. really does think China is such a grave strategic threat, the U.S. should be partnering with countries like Mexico, Brazil, and Canada, all of which have either become dependent on the Chinese consumer market or have suffered from Chinese trade practices plenty themselves. Instead, the U.S. is going at it alone and tariff-ing everyone in sight…except, of course, when tariffs don’t align perfectly with the incumbent President’s campaign priorities.
At this point, that might already be too much digital ink expended over spilled milk. How does the WTO come back from this, even if the U.S. decides to reverse course and strengthen global trade institutions? India is becoming more protectionist by the week. As we saw in the previous item, European leaders are thinking in terms of relying strictly on European powers when it comes to things like food, data, and security. We are in the midst of a global pandemic, and rather than countries pooling resources into producing a global solution to get us out of this mess, different countries and companies are vying to create different vaccines across different supply chains in different countries. The secret of the WTO’s power was that enough countries agreed to play by enough of the rules and to empower institutions like the WTO in order to grease the wheels of global trade. No one was going to invade you if you didn’t follow WTO rules…you were just going to miss out on all the benefits that came with membership. In the absence of consensus on the basic principles governing the global trading system, the WTO becomes obsolete because it cannot compel the U.S. or China or anyone else for that matter to abide by its rulings. The WTO isn’t going to disappear, but if a tree makes a legal ruling on the legality of tariffs in a forest, did it really make a ruling at all?
Welcome to Xinjiang? China said it would welcome independent EU observers to visit Xinjiang province so as to “truly understand” the situation of Uighurs in the province.
What it means: About a month ago, we were working on a project and had to make a call on China’s possible future behavior on allegations of repression and even genocide in Xinjiang. One possibility we considered was that China would get sick of being accused of being a genocidal deviant and would open Xinjiang up to independent observers. We ultimately decided that this was a bridge too far for China. For one thing, we did not think this Chinese government would consent to such an inspection for simple reasons of pride. Beijing would think it demeaning to have to substantiate its claims by opening up its borders to foreign (read: Western) observers. There was also the highly likely possibility based on the available evidence that China would not open Xinjiang up to inspection for the same reason Americans can plead the 5th in court: China did not want to incriminate itself. Better to have at least some ambiguity about what is happening in Xinjiang than remove all doubt and harden global attitudes against China even more.
We have to caveat what is happening in Xinjiang as mere “allegations” because it is difficult to get reliable information on what is actually going on there. China does not want to let anyone in and insists that its Uighurs are living lovely lives supporting by China’s generous and beneficent government. Numerous anecdotes from Uighurs who have managed to leave China, as well as satellite imagery and leaks from the Chinese government, seem to confirm otherwise. Based on the available evidence, it has always seemed to us that something terrible is happening in Xinjiang but we cannot prove it, nor can anyone else. That is why China opening up the possibility of an independent inspection is so potentially important. This would have to be a real independent inspection with unfiltered access to Xinjiang to be meaningful – it can’t be one of the guided tours at a Huawei plant China likes to take foreign journalists on to show them how great China is. That may already be more than China is willing to offer. But if the reports about Chinese repression of Uighurs really just is the propaganda China claims it is, this is the only way for Beijing to put an end to it.
For all we know this is just a foreign ministry spokesperson throw-away line. But if it really does reflect a Chinese desire to heed global criticism and open Xinjiang up for inspection, it’s the sort of development we’d be happy to have been wrong about.
Japanese tech conglomerate SoftBank is selling British chip designer Arm Holdings to U.S. graphics processing units (GPUs) maker Nvidia in an overall deal worth approximately $40 billion.
Japan, China, and South Korea banned imports of German pork after a dead wild boar in Germany tested positive for African Swine Fever (ASF).
Argentina increased currency controls, levying a 35 percent tax on U.S. dollars used to pay off foreign credit card debt or saving in a foreign currency. The Argentine central bank also tightened controls on buying dollars in the foreign exchange market.
President Andrés Manuel López Obrador said he had collected over 800,000 signatures that support prosecuting previous Mexican presidents for crimes like corruption.
China suspended poultry imports from a U.S. poultry plant due to COVID-19 concerns.
Peru’s Congress initiated impeachment proceedings against President Martín Vizcarra by a 65-36 vote.
Moody’s downgraded Turkish government debt ratings from to B2 from B1 and pointed to a “multidecade low” in its foreign currency reserves as the reason for maintaining its overall negative outlook.
Uganda and Tanzania have finally agreed to construction of a roughly 900-mile oil pipeline that will cost roughly $3.5 billion.