Lowy Institute

Istanbul is a city living under the shadow of the war in neighbouring Syria. A bomb blast in the heart of the historic tourist centre earlier this year killed several people including foreign visitors, causing the tourist dollar, which many rely on, to evaporate. Locals allege the Assad regime was behind the terrorist attack in retaliation for Turkey's support for anti-Assad forces.

Locals claim an influx of Syrian refugees has undercut local wages, driving resentment and exacerbating economic malaise. Young men are drafted into military service to fight the separatist Kurdish PKK or hold the line on the border with Syria, and then released, embittered and psychologically scarred by the death of friends and family.

Against this troubled backdrop, 10,000 delegates descended for the World Humanitarian Summit earlier this week. The Summit (held, paradoxically, in a subterranean convention complex buffered by rings of police, secret service with helicopters overhead) aimed high, to climb lofty peaks. Where it landed though was somewhere in the foothills.

The question at the heart of the Summit was how to revitalise and restore a failing international humanitarian system. The answers to this big question were either negative or positive in proportion to the degree of expectation the participants invested.

The sheer scale of the Syrian refugee crisis and other complex disasters globally – 60 million people displaced, and rising, coupled with an inexorable rise in climate-induced disasters – means the aid response is woefully inadequate to meet the scale of need.

The humanitarian system, created at the end of World War II and comprising five or so large donors, a cluster of UN agencies, the International Committee of the Red Cross and half a dozen international non-government organisations (INGOs), is sclerotic. Increasingly professional and rarefied, with principles that are being openly flouted by states, it is unable to meet demand and apparently unable to reform itself. What is to be done?

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The common view at the Summit was treatment is required, but there was divergence on the cure.

Antono Donini from the Feinstein Institute, a guru and sometime stirrer, argued persuasively that there were no humanitarian solutions to the crisis because the causes were political and lay with states. The humanitarian system was a buffer to the failure of states, he argued. Looking to states to fix the problem was to look in vain: 'You cannot dismantle the master's house using the master's tools,' he intoned. Better to build coalitions and garner public support to force politicians to change, he claimed.

But change what, and where to begin? At this point, as conference participants dropped down from the paralysing macro analysis to the mezzo and micro solutions, presenting a bewildering array of fascinating ideas and initiatives, as well as compelling advocacy prescriptions. This was where the real richness of the humanitarian endeavour was to be found, and was the major success of the Summit.

'Localisation' was all the rage, with the Network for Empowered Aid Response (NEAR) being launched by 20 southern INGOs. Driven by a sense of disempowerment and injustice arising from decades of lousy engagements with the 'system' of donors and northern INGOs, who purport to support but override and bypass Southern actors, the network claimed they were not getting mad but hoping to get even. 'Don't give us more capacity building in humanitarian response standards, give us 10 percent overheads to build our organisations in the same way as INGOs have grown fat over decades,' they demanded.

Backed by Gates and Rockefeller Foundations, NEAR is exploring new funding instruments that allow pooled donor funding. Their powerful call to donors to work directly with the South left INGOs forlornly claiming they were local because 'all their staff were nationals', or rather more defensively arguing that it wasn't about North and South but the outcomes.

A variety of new 'instruments' were presented. Insurance policies being trialed by the World Food Program in Africa promised to have states divert some resources into preparation instead of putting all into response, by buying premiums against disasters such as drought. Insurance risk assessment would be better able to predict the local impact of incipient disasters, and pre-payments can be made to help authorities respond early before the disaster became a crisis. The point was made that states needed to pay premiums over years as opposed to one-offs, and the prospected of multilateral donors augmenting and building state contributions generated interest with Government delegates.

Of the Sustainable Development Goals however, there was nary a sighting. Reflecting the decades-old separation of humanitarianism from development, and a wariness about being expansive in embracing new agendas, my colleague captured the humanitarians' mood, opining 'there's a reason you build silos: it keeps the (humanitarian) grain in'.

Away from the engaging side seminars, the formal sessions ground on in traditional UN format: behind time, full of short, monotone statements by state leaders and other actors. The wordsmithing skills of the hardworking team of DFAT officials was on display as Australia's Minister for Development, Concetta Fierravanti Wells, set a record for how many initiatives one could commit to in the minutes allotted to her in the plenary session. Caught in caretaker mode by the Australian election, no cash promises were made.

The official solution to what ails the humanitarian system, offered by UN humanitarian head and former UK politician Stephen O'Brien, were 'commitments' where states and humanitarian actors such as INGOs would all publicly pledge to improve and reform. Hundreds of commitments were made and covered important areas such as disability, for example. But the fact remains, no adequate mechanism to monitor the promises made, let alone hold anybody to account, was agreed at the Summit.

The Holy Grail of all the commitments made was to be the 'Grand Bargain' whereby states would increase funding in return for greater efficiency and effectiveness by humanitarian responders in the UN and INGOs.

The Bargain was already looking challenged, however, by the much reported absence of heads of G7 states beyond Germany's Angela Merkel. The Grand Bargain's high-powered session, featuring UNDP Administrator Helen Clark, UK Development Minister Justine Greening and 10 others, was startling for its lack of Asian participants and only one eloquent African from the International Committee for the Red Cross. Underscoring the Euro-centric/Anglosphere love-in audience, question time was led by state members from Denmark, Luxembourg, Sweden and others getting up to approve of the speakers' statements. If the Grand Bargain couldn't muster China, India or Indonesia to its plenary sales pitch, then it looks rather like the post-World-War-II humanitarian order will roll on, arthritis and all.

Except that it won't. Increasingly, it is being observed that new players like China, who delivered a huge but under-reported response to the earthquake in Nepal, will be responding on their own terms. What does this mean for the sanctity of 'humanitarian principles'? Well for Antonio Donini it marked the emergency of a 'pluri-versalist' humanitarian system: different folks, different strokes. Don't expect that new players are going to sign up to the old player's rules. A period of co-existence was predicted.

So at the end of the two days of the World Humanitarian Summit, I certainly feel more 'committed' to the humanitarian endeavour, alert to new ideas and improvements, and have immense respect for the ability of humanitarian responders. And the promise of a 'Grand Bargain' fixing the humanitarian system? Well, it is a bit like all advertising: caveat emptor.

Photo by Flickr user Pablo Cuneo.

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The G7 countries of the US, UK, Germany, France, Italy, Japan and Canada have met for the 42nd time in Japan to discuss the biggest risks to global security and the world economy. Here is their 32-page official statement.

The G7 is an interesting grouping, often seen as outdated with its heavy European influence. How much do Italy's policies affect the world these days? The group has waxed and waned — occasionally the G8 when patching things up with Russia — and has become dwarfed by the G20 since it became a leader-level forum in 2008. The pessimistic view was that the latest G7 meeting would be 'unlikely to result in any significant agreement for coordinated action on the range of issues on the agenda'.

The G20 prides itself on being the 'premier forum for international economic cooperation' and making up 86% of the global economy as measured by GDP. The G7's strength has always been its grouping of 'like-minded' countries, a much more subjective criterion to measure. President Obama used his press conference speech to talk about the international order and G7 as a group of 'like-minded countries who are committed to democracy and free markets, and international law and international norms'. Donald Tusk, President of the European Council, also brought up values – 'If we are to defend our common values, it is not enough these days to only believe in them. We also have to be ready to protect them.' 

Sheila Smith from the Council on Foreign Relations wrote a good overview of Japan's approach to the G7 and how Prime Minister Shinzo Abe 'would like to see the G7 reassert its role of global leadership'. It is not surprising therefore that China and Russia have been quick to heap scorn on the G7.

The tension between the G20 and G7 is even more acute this year given that Japan is hosting the G7 and China is hosting the G20. The Kremlin announced that Russia is more interested in cooperation with the G20 and China's Xinhua was keen to point out the domestic problems within G7 countries and blame Japan for bringing up the South China Sea.

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The G7 summit covered a lot of issues in two days: the global economy, trade agreements (Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership), maritime security, counter-terrorism, refugees, extremism, the regime in North Korea, Russia's actions in Ukraine and the 17 Sustainable Development Goals.

On the global economy, nothing is likely to change. Tom Bernes from the Centre for International Governance Innovation notes that 'the G7 is not the forum where significant progress on bolstering economic growth should be expected. It is not the right membership as over half of global growth comes from the emerging markets which are not represented'. The G7 also has the same problem of the G20 in being unable to bridge differences over how to stimulate growth. When G7 Finance Ministers met, Japan wanted coordinated fiscal stimulus, but Germany stuck by structural reforms.

Even in the world of international summits, all politics is local. President Obama brought up Donald Trump and his 'ignorance of world affairs'. Just as in the G20 Finance Ministers' meetings in Shanghai earlier this year, Brexit came up. The G7 communiqué warns of the economic consequences of a Brexit. But it was Chancellor Angela Merkel who won the day with a demonstration of her hallmark Merkel-Raute

The G7 leaders were talking about all the right things. But the stability of the liberal world order is dependent on more than seven countries. Effective multilateralism needs everybody who matters at the table.

Photo courtesy of Twitter user @g7.

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President Barack Obama’s visit to Vietnam (the first by a US president in nearly 10 years) came at a time of unusual political turmoil.

In mid-May I wrote on how the large 'fish kill drama' was the first test for the new government in Vietnam, and that until both the immediate problems were properly addressed and the deeper underlying public worries of food security and management of foreign investment taken into account, people would continue to 'choose fish’ over economic development. 

However, in the short term it turns out dead fish are not nearly as interesting as barbecued pork and rice noodles, provided the leader of the free world is eating them with a TV chef known for his love of Hanoi’s food. President Obama sitting down for a dinner of bun cha with Anthony Bourdain was well-covered by local and international news outlets, and there was a crowd of cheering fans outside the restaurant.

Much came of President Obama’s visit, most notably the full lifting of the arms embargo after a partial lifting on non-lethals in 2014. This has been described by the parties involved as just another step on the long road to a full normalisation of ties, rather than another large brick in an alliance-like encirclement of China. This is something even Beijing publicly agrees with, calling the embargo a leftover from the Cold War (Beijing also called Australia’s Defence White Paper Cold War-esque) and welcoming closer ties between the two nations. 

The Vietnam-US Comprehensive Partnership saw an update, with agreement for cooperation across a number of areas. President Obama also met with activists to discuss their concerns, though some (such as the 69-year-old activist Nguyen Quang A) were prevented from attending the meeting.

The deft soft power moments of the president eating dinner at a regular restaurant in Hanoi (even though that dish is typical lunchtime fare and hard to find after 12:30pm) and later listening to a performance from female rapper Su Boi captured the people’s attention and sent Vietnam’s social media into overdrive (for those with VPNs, at least, given that many have reported Facebook blocked again). 

The high esteem in which President Obama is held is made clear in Calvin Godfrey’s excellent  Asia Sentinel piece on waiting for the president in the rain outside Saigon’s DreamPlex where he addressed a large group of young entrepreneurs (full transcript here). President Obama responded to this adulation in kind, speaking often during his addresses of the bright future of Vietnam and the opportunities for partnership (particularly through the Trans-Pacific Partnership).

While he did meet with activists and noted that Washington was still concerned over Vietnam’s human rights record (noting that freedom of speech and assembly are, after all, actually enshrined in Vietnam’s own constitution), the message of the visit was of bright hopes for the future, more tight-knit cooperation and a generation of young entrepreneurs ready to do great things. 

However, the lead up to his visit has been a strange time in contemporary Vietnamese politics. As I noted in relation to the 'fish kill saga,' it is highly unusual for a government to announce a terrorist threat in the newspapers it oversees just days before the first US presidential visit in a decade. The potential for things to go wrong was large – possibly explaining why there were arrests before the president’s arrival. Facebook has been blocked at times, according to various anecdotal sources. The thousands-strong protests of early May, which saw arrests and violence, were blamed on Viet Tan, an overseas pro-democracy group that Hanoi still classes as a terrorist organisation (Viet Tan has condemned the lifting of the embargo). 

Elections for the National Assembly, the main legislative body in Vietnam, were held on Sunday. Citizens may vote for National Assembly candidates but as almost all are usually Communist Party members it is not typically a vibrant show of democracy. This year has been different, however, with musicians, comedians and other outsiders vying for National Assembly seats (Nguyen Quang A was another candidate). 

However there has been little mention of this by President Obama, despite many activists hoping he would bring up the government response to 100 tonnes of dead fish left on beaches after an apparent pollution accident from a Taiwanese steel mill. But the political and environmental crisis that swept up so many non-activists has seemingly been forgotten in favour of Obama-mania. If human rights and greater government transparency are important enough to mention in speeches, then wouldn’t a mention of their latest breaching be helpful? 

Vietnam does not like to be lectured by foreign powers. President Obama had to bring up human rights and freedom of speech, but alluding to the recent protests may have galvanised the citizenry, embarrassed the government and blocked that ‘road to normalisation’. As Vietnamese President Tran Dai Quang said, Obama’s trip has ‘deepened mutual understanding’ and that ... ‘relations on the basis of friendship, equality, cooperation and respect for each other’s political regimes and legitimate interests is the only path leading to a brighter and more prosperous future’.

There is something else to consider – what of Cam Ranh Bay, the tremendous deepwater port in the centre of the country? The US would like military access to it, but the only nation currently allowed much more than a visit has been Russia. No announcement has been made and access is a far bigger bargaining chip than a few dissidents released and sent off to the US as proof of good government behaviour.  

Keeping relations friendly and uniting against a more aggressive China are mutual goals for the US and Vietnam. As for the Vietnamese people? They’ve taken a break from choosing fish, but even a president can’t be a distraction forever. 

Photo: Getty Images/Linh Pham

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  • The Russian Government's use of the internet to spread disinformation, particularly in Germany, is prompting calls for a direct and visible response.
  • Why was a Q&A with the US Embassy in Beijing on 'discovering America' scrubbed from Chinese social media?
  • Earlier this month ISIS launched a social media campaign involving supporters from European cities, in response citizen-journalists tracked those supporters down
  • New research (pdf) has found China's 50-cent party is mostly public servants who are fabricating almost 490 million social media posts a year, primarily designed to distract the public and deter protests.
  • Drenched in hashtags, periscopes and vines, the Israeli Foreign Ministry is aiming for 'less propaganda, more deep and truthful discourse'.
  • DFAT is beginning to use social media to publicly advocate for LGBTI rights overseas (h/t Lucy).
  • China is doing cross-Straits damage control after a Xinhua op-ed attacked Taiwan's new president for being unmarried. After demanding it be deleted, local media were instructed: 'In the immediate future, all reports touching on the Cross-Straits issue must go through responsible media personnel before they are published'.
  • A new Future FCO report by former Ambassador Tom Fletcher contains 36 ideas for modernising British diplomacy, including accelerating digital diplomacy and ramping up open-source data use.
  • This NY Times Magazine piece on how Ben Rhodes, White House deputy national security advisor for strategic communications, rewrote the rules of diplomacy for the digital age sparked a storm of controversy (Rhodes, the NYT and the journalist respond).
  • An Australian Army officer blogs on counter intelligence threats in the age of social media, including a warning for the 4675 defence employees on LinkedIn.
  • The US Government created a stir by using Weibo to announce and share photos of the same-sex marriage of its Consul-General in Shanghai to his partner.
  • The UK's cyber intelligence agency @GCHQ has joined Twitter. It's not the first intelligence agency to join social media (CanadaSouth Africa & many in the US tweet) and it won't be the last. 

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Rising anger against a decision to change the route of a vital electricity supply line in Afghanistan is becoming more and more visible — both inside and outside the country.

Before the global Anti Corruption Summit in London earlier this month, British Prime Minister David Cameron was famously caught on camera telling the Queen that leaders of two 'fantastically corrupt' countries were attending the summit, namely Afghanistan and Nigeria.

Afghan president Ashraf Ghani came anyway, saying he had no hard feelings about Cameron's corruption remark because 'the first part of addressing a problem begins with acknowledgment'.

When hundreds of Afghan-British protesters demonstrated in front of the Summit venue, they gave Western audiences an insight into what Afghans think is a highly visible manifestation of that problem; Ghani's decision to change the route of TUTAP (Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan) electricity project, a multi-million dollar project funded by the Asian Development Bank. It had been slated to go through central provinces of Bamyan and Wardak, which are dominated by ethnic Hazaras, but the planned route has been switched to the northern provinces, passing from Pul-e-Khumri through Salang to Kabul.

The protesters accuse Ghani, an ethnic Pashtun, of discriminating against non-Pashtuns, particularly Hazaras. They point out German consultancy firm Fichtner's recommendation for the Bamyan route because, among other reasons, it would 'further generation by coal fired power plants along the route' and 'secure power supply of Kabul and south Afghanistan'.

The Bamyan-Wardak route is also judged to be less exposed to natural disasters. The central provinces believe the government's decision to change the route is due largely discrimination, especially as there is already a transmission line passing through Salang. This has deepened the sense of deprivation among the residents of central Afghanistan, who believe Kabul has intentionally kept development projects away from their provinces.

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Demonstrations have been held in various provinces to protest the route change, including the 'Million March' in Kabul last week, in which tens of thousands of people took part. But the protests have not been limited to Afghanistan, as seen by the demonstration by British-Afghans, mostly with roots in central Afghanistan.

The demonstrations followed Ahsraf Ghani around London. At one event organised by Royal United Services Institute, at least four protesters where expelled by Ghani's bodyguards after they confronted Ghani about the TUTAP project (see video).

'You are a liar. You lied to people of Afghanistan. And now you lie to the world.' Shouted Ahad Bahaduri from the audience while Ghani was speaking about his achievements. 'Listen to him but don't trust him' Bahaduri continued as he was forcefully removed from the event. 'One of Ghani's guards followed me outside to actually beat me but he was intercepted by a British security personnel in plain dress. The Afghan guard threatened me to death (in Dari). I am worried about my relatives back in Afghanistan now.' Ahad told me when interviewed by phone.

'Sit down like a dog, you idiot,' yelled President Ghani's chief security officer General Akhtar Mohammad Ibrahimi at protester Jafar Atai as he questioned the decision to reroute the TUTAP transmission line. 'He hates Hazaras', shouts the activist while pointing towards the President.

'At this point Ghani's personal guards rushed towards me. I asked them to let me talk. But they grabbed my tie, covered my mouth, pressed my neck, pulled me down and beat me up.' Jafar told me from London.

'We just wanted to raise our concerns about the change in TUTAP route. We had no intention of disruption or insulting the president. It was Ghani's guards who caused the heckling through abuse and violence.' Jafar explained. He had bruises on his face and has filed a complaint against the attackers to Metropolitan Police in London.

Siamak Harawi of Afghan Embassy in London told BBC Persian the activists were there to disrupt the President's speech and it was the actions that followed which led to physical clashes.

However, it appears there was never a physical threat to the president so there was no reason for his bodyguards to physically attack the demonstrators. One can't help thinking that if an ethnic Brit had been assaulted in the same way as Jafar Atai, it would have become a diplomatic incident.

After the massive demonstrations in Afghanistan, Ashraf Ghani suspended implementation of the cabinet decision about the rerouting of the transmission line and ordered formation of a commission to come up with new suggestions. The commission handed over its findings to the president who issued a new decree saying that a 220kW transmission line will be extended to Bamyan, which is claimed to be enough for the entire central province.

The demonstrations, however, will continue, says parliamentarian Ahmad Behzad, unless the Government implements the original master plan. 'It is hilarious that the government had earlier claimed the Salang route was a few millions cheaper. But now it says it will invest manifolds for a separate transmission line for Bamyan. It is nothing but a conspiracy,' Behzad claims.

A huge demonstration is already planned for today, 27 May, in Kabul.

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David Shambaugh's slim volume, China's Future, stands in stark contrast to the conventional wisdom on China. Indeed, it is hard to discuss 'China's future' without immediately speaking of 'China's rise.' The majority of contemporary literature on China focuses on its military modernisation and 'string of pearls' expansion into the South China Sea. The Interpreter devoted an entire debate series to unpredictability in China's maritime strategy in 2014.

Shambaugh touches on these concerns, but offers a sobering counter-narrative: China is in serious trouble. This conclusion is buttressed by extensive facts and figures — likely too much for the non-expert audience — which paint a picture of a country on a downward trajectory. If this is the case, then, why are experts so committed to seeing China as a rising power and future threat? It seems there's just something about China that fosters anxiety.

To demonstrate China's current path, Shambaugh uses the analogy of a car approaching a roundabout (China being the car, in case that isn't obvious). The car can opt for one of four exits: Neo-Totalitarianism, Hard Authoritarianism (stay the course), Soft Authoritarianism, or Semi-Democracy.

Shambaugh comes down strongly in favour of the last exit and his shameless embrace of liberalism and Democratic Peace Theory, which he explicitly acknowledges, is refreshingly honest. This results in the book's overall argument that, 'Without a return to a path of political reform, with a substantial liberalization and loosening of many aspects of the relationship between the party-state and society, there will continue to be very marginal economic reform and progress.' In short, on its current path, the China car will run out petrol.

As evidence of its demise, Shambaugh provides extensive evidence from a wide range of sources, including many colourful personal anecdotes. Here is a sample:

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  • China experiences 200,000 dispersed 'incidents of mass unrest' every year.
  • Over the next fifteen years, China's population aged 60 and above will grow from 200 million to over 300 million. This has implications not only on the labour force, but also for healthcare and pensions.
  • 70% of China's lakes and rivers are contaminated.
  • Plagiarism and lack of originality are rife in the Chinese education system. An analysis of President Xi Jingping's thesis, for example, reveals numerous instances of plagiarism.
  • 'The shadow banking industry in China has grown to the point where the volume of its total assets amounted to the RMB equivalent of $5.2 trillion or 51 percent of GDP.'
  • Between 2012 and 2014, China's national property market declined by 25 percent. This is particularly worrying as the property market accounts for 15-20 percent of national GDP.

Perhaps one of the greatest pressures on the leadership in Beijing will be the rising middle class, or what Shambaugh refers to as 'the revolution of rising expectations.' He cites a McKinsey study that found 'the upper middle class will swell to 54 percent of the urban population by 2022.' In yet another metaphor, Shambaugh compares Chinese society to a 'very dry forest or grassland in summer where multiple fires can break out at any time and then spread quickly.'

The government is quick to intervene to prevent economic collapse or public dissent, but, according to Shambaugh, this 'only exacerbates and deepens existing dependence on the state while further postponing much-needed reforms.' He, therefore, recommends political change towards Semi-Democracy and, in foreign affairs, 'competitive coexistence' with neighbours and the US. But there are at least three pieces missing from this map guiding China off the roundabout.

First, Shambaugh never identifies who is driving the car. More specifically, there is scant discussion about the individuals involved in Chinese decision-making, aside from a vignette on the modest reformer, Zeng Qinghong, and a short summary on Xi Jingping as a strong, confident leader who is unlikely to modernise unless forced to do so.

Second, the democratic exit on the roundabout could be a hazardous road. Democratic reform comes with risks, and the leadership's concerns with such reforms may not be unfounded in as diverse and complicated a society as China's. Shambaugh's recommendations do not offer enough detail for how to implement these reforms while minimising risks to the current leadership and system.

Lastly, rather than exiting, China may end up going around in circles on the roundabout for the foreseeable future. Given Xi's prioritisation of stability and his reluctance to change, it may be public protests, internal bureaucratic disputes, or economic pressures that eventually push China off the roundabout.

So what is it about China? Perhaps Shambaugh's most interesting contribution is on the importance of perception. He offers statistics demonstrating a consensus among experts that China will replace the US as world's leading power and from public polling that the US sees China as a competitor. China-watchers are likely to continue to see it as a threat, as it may well be. But China's Future comes with a reminder, one that should have been learned from the Soviet Union: no adversary is as perfect or secure as it appears from the outside.

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In the days leading up to last Friday's presidential inauguration ceremony in Taiwan, turtle eggs and pineapples hogged the front pages of the island nation's newspapers and airwaves. Chinese customs officials have become suddenly concerned about residual pesticides on pineapples exported by Taiwan . Buyers of Taiwanese turtle eggs are also dialling down their orders.

Given this fresh examples of the collateral damage caused by jittery cross-straits relations, its not surprising Taiwanese exporters, media commentators and politicians are increasingly worried that Beijing will use its considerable economic leverage to hurt the pro-independence, new Taiwanese government.

The country's new president is also clearly focused on matters economic. While much of the analysis on President Tsai Ying-wen's inauguration speech focused on how the new government will treat the '1992 Consensus', which stipulates both sides stick to the legal fiction of one China, the economic agenda was the subject of the first part of that speech. It is clearly the chief focus of the new administration.

This is in keeping with the views of the country's voters. According to a survey conducted by Taiwan Brain Trust, a pro-independence think tank with a close relationship to the new government, 62.9% of Taiwanese rank the economy as the top priority. Just 5.9% think managing the cross-Straits relationship should be the new government's main focus. Voters, particularly young Taiwanese, are concerned, like their counterparts elsewhere, about jobs and house prices. It seems the Clintonian maxim of 'it's the economy, stupid' also applies in Taiwan.

Dr Tsai's economic policy is centred on three themes: participating in regional economic free trade agreements; fostering more innovation; and encouraging more sustainable development. Like everything else in Taiwan, the one inescapable factor that will affect the success of all these laudable aims is China.

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Taiwan is arguably the world's most China-dependent economy. More than 40% of its exports go to the mainland. The island country is also one of the largest foreign investors in China while millions of Taiwanese work, study and invest in mainland China. The economic fabric of Taiwan and mainland China are closely interwoven.

The new government does not like this and worries about the over-reliance on China. Dr Tsai wants to strengthen 'the vitality and autonomy' of Taiwan's economy and 'bid farewell to our past over-reliance on a single market.'

Rong-I Wu, chairman of Taiwan Brain Trust and a former vice–premier in the Chen Shuibian government (in power from 2000–2008), says one of the key reasons behind Taiwan's recent economic struggles is the slowdown in China.

'Over-reliance on a single market is very dangerous. We want to strengthen our relations with other developed economies and we want to diversify our risk,' he said, 'Beijing's industrial policy is also aimed at substituting Taiwanese imports with domestically produced goods.'

So, how does the new government aim to reduce its exposure to China? The first priority is to join regional trade agreements such as the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP). Taipei will also promote a 'New Southbound Policy' that encourages Taiwanese businesses to expand their presence in Southeast Asia and India.

It is not clear whether Taiwan can easily join the TPP or RCEP. Chen-Sheng Ho, director of international affairs at Taiwan Institute Economic Research, says the 'China factor' looms large in Taiwan's ability to participate in global or regional economic trade regimes. Given the uncertain state of the cross-Straits relationship, we don't know if China will seek to frustrate Dr Tsai's ambition.

One should not, however, underestimate China's willingness to play hardball when it comes to Taiwan related issues. Past experience suggest Taiwan will face significant challenges in joining these regional trade agreements without China's implicit acquiescence. Dr Tsai also faces some resistance at home from the agricultural lobby, already unhappy with the new government's intention to relax import restrictions on American hogs.

Taiwan's pivot to Southeast Asia is also likely to result in competition with China's ambitious One Belt and One Road strategy. Senior Chinese officials are busy touring the region offering large cash sums to win over Southeast Asian countries, and China is already ASEAN's largest trading partner.

On the innovation front, Taiwan has been and still is an innovative economy with a large and vibrant small and medium enterprise sector. During my trip to attend President Tsai's inauguration ceremony, I also went to see two such firms: Singtex, a fabric firm that makes cloth from used coffee beans and recycled plastic bottles, and Gogoro, an electric scooter company that makes stylish and environmentally friendly scooters.

However, even when a good base exists, boosting innovation is much easier said than done. Rong-I Wu, a senior advisor close to the new government admits as much. He says the new government will allocate more money to research and development, education and training, and he believes it will make a difference.

The new government's decision to reduce its dependency on mainland China is sound. Past experience indicates Beijing has no qualms about using economic leverage to exert its influence. However, it is not clear whether it will be possible to reduce Taiwan's dependency on mainland China anytime soon. Despite China's sluggish growth, it is still the most important and fastest growing market for many companies, including those from the US and Japan.

It looks like the road to economic autonomy will be a bumpy one for Dr Tsai's new government.

Photo: Ashley Pon/Getty Images

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Looking for a universal, all-purpose hypothesis for the weirdness that is Trump, Sanders, Brexit, Austria's near-miss with a far-right presidency, and the worldwide decline in democracy? How about neoliberal globalisation?

The neofascist reaction, the force behind Trump, has come about because of the extreme disembeddedness of the economy from social relations. The neoliberal economy has become pure abstraction; as has the market, as has the state, there is no reality to any of these things the way we have classically understood them. Americans, like people everywhere rising up against neoliberal globalization (in Britain, for example, this takes the form of Brexit, or exit from the European Union), want a return of social relations, or embeddedness, to the economy.

Personally, I prefer this explanation from economist Tyler Cowen, though as others have noted, it is a highly speculative piece:

The contemporary world is not very well built for a large chunk of males.  The nature of current service jobs, coddled class time and homework-intensive schooling, a feminized culture allergic to most forms of violence, post-feminist gender relations, and egalitarian semi-cosmopolitanism just don’t sit well with many…what shall I call them?  Brutes?

Quite simply, there are many people who don’t like it when the world becomes nicer.  They do less well with nice.  And they respond by in turn behaving less nicely, if only in their voting behavior and perhaps their internet harassment as well.

Female median wages have been rising pretty consistently, but the male median wage, at least as measured, was higher back in 1969 than it is today (admittedly the deflator probably is off, but even that such a measure is possible speaks volumes).  A lot of men did better psychologically and maybe also economically in a world where America had a greater number of tough manufacturing jobs.  They thrived under brutish conditions, including a military draft to crack some of their heads into line.

Reminds me of the small torrent of articles produced in the US in 2009 on the so-called 'man-cession' or 'he-cession' because job losses in that downturn were felt so disproportionately among men. There were wider implications, argued Reihan Salam at the time:

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The great shift of power from males to females is likely to be dramatically accelerated by the economic crisis, as more people realize that the aggressive, risk-seeking behavior that has enabled men to entrench their power—the cult of macho—has now proven destructive and unsustainable in a globalized world.

Indeed, it’s now fair to say that the most enduring legacy of the Great Recession will not be the death of Wall Street. It will not be the death of finance. And it will not be the death of capitalism. These ideas and institutions will live on. What will not survive is macho. And the choice men will have to make, whether to accept or fight this new fact of history, will have seismic effects for all of humanity—women as well as men.

Photo by Flickr user Jason St Peter.

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Last weekend Tanya Plibersek, Labor Deputy Leader and Shadow Minister for Foreign Affairs and International Development, committed Labor to restoring the Coalition's latest round of cuts to Australia’s aid program and providing 'around $800 million more for overseas aid than the Liberals' over the next four years. The commitment has been near universally welcomed by the Australian development community that has had nothing but bad news about the budget for the past four years. In that context it is indeed worthy of praise. But, looking back at when the Rudd government came into power in 2007, it’s clear that Labor’s commitment to aid is not what it used to be.

So what does Labor’s commitment mean for the Australian aid budget?

An immediate restoration of $224 million in the 2016–17 budget would bring the total budget back to just over $4 billion, 5% more than the Coalition’s current plan. The extra $200 million per year in the three years thereafter, which roughly pegs the aid budget to forecast inflation, would leave the aid program at roughly $4.3 billion in 2019–20, about $200 million or 5% higher than the Coalition’s planned 2019–20 budget.

Labor's planned increase is substantial but it would only slightly nudge up our aid generosity. It would bump up aid as a proportion of Gross National Income from 0.21% under the Coalition’s budget to only 0.22%, a level that would still be the worst point of generosity in Australia's history and far below the OECD average of 0.3%. There is also the UN mandated goal of 0.7%, achieved a few years ago by the United Kingdom while it was the depths of austerity.

Plibersek’s statement also set out how a Labor government would spend almost all of the planned increase. The UNHCR would be allocated an additional $450 million over three years, a sensible commitment considering the strain the sector is under. Core funding to NGOs would be lifted by $40 million a year, a 30% increase on the current budget of $130 million that goes directly to Australian NGOs. To be clear, NGOs have proven to be effective implementing partners time and again, but there was no justification given as to why the sector, which had a heavy presence at the Labor announcement and is also the most vocal in the development community, was singled out for such a large increase in funding. Together these two commitments make up $600 million of the planned $800 million increase, leaving whatever is left to restore the cuts made in 2016–17. That doesn’t leave much room for any more bold funding commitments.

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Of course, Plibersek is right to argue that 'it is impossible to fix the aid program quickly' but we should also ask ask how much more Labor can and should reasonably commit to. The simplest way to answer that question is to look at what the last Labor government did.

Table 1: Labor then and now*

Note: I take a five-year horizon under Rudd and a four-year horizon under Shorten as the government has committed to restoring the $224 million in the 2016–17 cycle whereas, while Labor won the election in November 2007, its first budget wasn’t until 2008/09. Dataset here

Table 1 shows that, over a similar timespan the Rudd government delivered an increase to the aid budget double that to which Labor has promised under a Shorten government. While the previous scale-up wasn’t without its teething pains, and I doubt AusAID could have handled a scale-up at any faster rate, the comparison illustrates Labor position on foreign aid has softened significantly since it last waged an election campaign as an opposition. I would argue that this is driven by a few factors.

The first is that we simply don’t have a champion of the aid program with the weight and influence of Kevin Rudd in 2007. Rudd’s personal commitment to foreign aid is well known, and likely far outweighed the majority of his own party. The clearest reflection of this can be seen in the successive delays to the scale-up trajectory committed to by Rudd after he was removed from Cabinet in 2012.

The second is that there was a much clearer bipartisan commitment to foreign aid in the 2007 election. A sequence of high profile regional interventions and disasters (Timor-Leste, the Regional Assistance Mission to the Solomon Islands, and the Boxing Day tsunami being the most prominent) showed the Coalition how critical our aid program can be and resulted in our aid budget nearly doubling (in nominal terms) under the Howard government between 2000/01 and 2007/08. (ODA/GNI increased from 0.24% to 0.28% over the same period.) This led to a bipartisan commitment to increase the aid budget to 0.5% in the 2007 elections. Neither party has such a commitment this time around.

Finally, this election campaign contrasts starkly to that of Howard and Rudd nearly a decade ago. The hyperactive media cycle, devotion to polling, and instability on both sides of the aisle have left political leaders increasingly reluctant to try to lead and change public opinion in areas beyond the bread and butter issues of domestic politics. In this context, both sides of politics appear to have decided there are no votes in aid, and the domestic agenda will dominate this campaign more than most. In a period where the key determinants of Australia’s future are international, and the humanitarian needs that can only be served by a robust aid program are becoming even more acute, this is very unfortunate state of affairs. Labor has at least devoted time and thought to developing an aid policy but it is clear this opposition is not as internationalist in its approach and perhaps even philosophy than the Labor party that fought (and of course won) the 2007 election.

Tanya Plibersek will address the Lowy Institute on Tuesday 31 May. Details here. Greens leader Senator Richard Di Natale’s speech on foreign policy, delivered at the Lowy Institute on 17 May, can be found here.

Photo courtesy of Flickr user DFAT 

*Correction: This piece was edited on May 27. The author was mistaken in assuming Labor’s commitment to the aid budget in 2019/20 would be $800m higher than the Coalition’s. This is in fact a cumulative commitment over four years and the piece has been edited to reflect that.  We apologise for the error.

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Najib Razak's term as prime minister of Malaysia is now in its seventh year and there is every reason to believe he will continue to lead Malaysia for a long while yet.

Najib Razak withVladimir Putin at the Russia-ASEAN Summit on May 19 (Photo: Mikhail Svetlov/Getty Images)

Given his scandal-ridden tenure, this is a remarkable outlook, one enabled by the sidelining of opponents, an illiberal electoral system, a divided opposition, and civil leadership that took a wrong turn.

As unlikely as it seemed when the The Wall Street Journal reported investigations of corruption and malfeasance on a massive scale related to investment fund 1MDB, Najib, through the power of incumbency, has gone from strength to strength while his detractors have lost momentum.

Even if Najib wanted to resign he could not. Unlike former prime ministers, Abdullah Ahmad Badawi and Mahathir Mohamed, who were forced to quit by their party, the United Malays National Organisation (UMNO), the corruption allegations and supporting evidence against Najib are too serious, substantive and too public (everyone knows about them). A face-saving exit strategy could not be designed without compromising its designers.

All powerful individuals who were brave enough to oppose the prime minister have been cut down to size. As demonstrated through the sackings of then deputy prime minister Muhyiddin Yassin, and then minister for rural and regional development Shafie Apda, Najib has systematically separated his detractors from the power, patronage and machinery that would have been required to topple him.

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Mahathir Mohamed, Najib’s most vocal opponent, has also been diminished. This has been accomplished in two ways. Firstly, Mahathir's power and influence has been cut down. His son, Mukhriz Mohamed, was forced to resign as the chief minister of Kedah, Mahathir’s home state. Mahathir was compelled to resign as chair of Proton (Malaysia's national auto company) after earlier being fired as the chair of Petronas (the national oil company).

Most damaging however, was Najib’s suggestion that Mahathir had betrayed UMNO by working with the Chinese-dominated opposition. This resonated with UMNO supporters. Mahathir’s humiliation was complete when he lost the police escort accorded to former prime ministers.

On the institutional front, two of the four members of the high powered investigation team into the 1MDB are no longer there. Najib sacked the Attorney General Abdul Gani Patail while the Bank Negara (Central Bank) governor Zeti Akhtar Aziz retired. The Malaysian Anti-Corruption Commission Commissioner Abu Kassim Mohammed, appointed by the prime minister has not said much. The Inspector General of Police (IGP), Khalid Abu Bakar is the only top ranking civil servant from that high powered investigation still in favour with Najib.

Similarly, the Public Accounts Committee (PAC) that had been vigorously investigating the 1MDB issue was severely compromised through the promotion of four of its members to ministerial positions, and the appointment of a new chairperson.

Then there is the electoral system. Bridget Welsh, in her extensive analysis of the recent Sarawak elections, demonstrated the extent to which Najib can rely on the illiberal electoral system to keep him in power. (Read Welsh’s extensive analysis here, here, here, here and here).

Some have suggested the Sarawak electoral results would not be replicated on the peninsula. But domestic politics have once again aligned in Najib's favour as the opposition, civil society and the majority of the Rakyat, united in the general elections of 2008 and 2013, are now again fragmented.

The People’s Justice Party (PKR), which bridges the secular and the conservatives on the peninsula faces leadership transition uncertainty, both within the party itself and the opposition coalition. The party is split between those who support PKR deputy president Azmin Ali for leadership and those who don’t. Other possible candidates for the leadership include PKR vice president (and Anwar Ibrahim’s daughter) Nurrul Izzah, and PKR’s secretary general Rafizi Ramli.

Outside of the opposition coalition, Azmin Ali appears to have a good working relationship with the Islamic conservatives in the Pan-Malaysian Islamic Party (PAS) but this has alienated both the Parti Amanah Negara (PAN), PKR’s newly formed coalition partner (in the new coalition Pakatan Harapan), made up of moderates who were purged by the PAS, and some members of the Democratic Action Party (DAP).
 
The upshot of all of this is there is no longer a united opposition to UMNO and Najib. In fact, PAS (the largest opposition party by membership) is now actively being courted by UMNO, and its newly chosen conservative leader, Abdul Hadi Awang, has defended Najib on several occasions.
Civil society, in particular Bersih, had been in recent years the champion of principled politics through its efforts to reform Malaysia's flawed electoral system. However, the recent actions of its leading lights, Maria Chin Abdullah and Ambiga Sreenevasan, who have supported Mahathir Mohamed (albeit in their personal capacities) in his efforts to topple Najib, have sown confusion and discord.

Mahathir Mohamed has made it clear his 'Save Malaysia' campaign is primarily focused on toppling Najib and saving UMNO, and much less so on improving governance. One time supporters of the campaign, such as jailed former opposition leader Anwar Ibrahim, have come to see it primarily as a Mahathir vehicle rather than a genuine reform movement, as made clear in this scathing letter to PKR leaders. 

With these formidable challenges crippling the opposition and his detractors, it is difficult to see how Najib can be dislodged.

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For such a nondescript city in Iraq, Fallujah has name recognition beyond its importance. In Western military circles at least the name is synonymous with the 2004 battle that turned into the bloodiest urban assault undertaken by the US military since Vietnam.

Iraqi soldiers at Garma, part of the Fallujah operation (Photo: Ali Muhammed/Getty Images)

This time around, though the circumstances are different, it is once again a fight against Sunni insurgents who have had the benefit of long periods to establish defensive positions above and below ground. Regardless of the number of fighters inside the city, the urban environment offers the defenders many advantages, and diminishes the effectiveness of some of the attackers' advantages, particularly air power.

Much is riding on the outcome for the Iraqi government. The under-siege prime minister Haider al-Abadi, who announced the beginning of the assault on national television, seeks to shore up his position with a decisive victory. Of course the inevitable civilian casualties will be prime material for his enemies to use against him even if the assault goes to plan, and none other than Grand Ayatollah has called for restraint to be used during the battle. Videos of Iraqi forces assisting some civilians to flee have already begun to emerge and more of these should be expected as part of the political PR campaign.

Part of the difficulty for the Iraqi government is the confusing command and control arrangements between the various parties involved; the Iraqi army assaulting the city; the Iraqi police units providing support; the various Shi'a militias grouped under the Popular Mobilisation Units (some very loosely, if at all) who are supposed to conduct supporting attacks; and the Iraqi and coalition forces (including from the Australian Defence Force) who supply the air support and Joint Terminal Attack Controllers (JTAC). With the number of differing (and some potentially competing) agendas among those groups, it will take an impressive commander (and/or advisory staff) to effectively coordinate everyone's efforts.

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The Shi'a militias have so far satisfied themselves with conducting operations on the perimeter as part of the outer cordon. They have promised to leave the main assault to Iraqi government forces, but this has not stopped them from capitalising on their participation through selected photos circulated to the media including one allegedly featuring the scarlet pimpernel of the Iranian Revolutionary Guard Qassem Suleimani 'coordinating actions' in Fallujah.

It will be interesting to see the degree to which Islamic State is willing or able to commit resources to the battle. US–supported forces operating under the Syrian Democratic Forces banner (largely the Kurdish YPG) have commenced an advance south towards the outskirts of Raqqa. IS leadership in Raqqa will therefore have to deal with its more proximate threat while simultaneously addressing the assault on Fallujah. Defeat in Fallujah should be inevitable, and if the cordon built up over the past few weeks and months has been even partially effective it should have made IS's ability to move fighters in or out difficult but not impossible. IS has already attempted to position itself ideologically for the fall of Fallujah in its most recent audio recording in which spokesperson Abu Muhammad al-Adnani claims that the loss of cities does not mean they are defeated as long as they retain the will to fight. 

IS may well see strategic utility in suffering a defeat while imposing an enormous cost in civilian lives and damaged infrastructure. This could breed ongoing ill-well among the Sunni Iraqi population, laying the groundwork for a sympathetic Sunni environment into which some of its Iraqi members could continue to operate after IS loses its territory. In this scenario, it would make sense to retain a relatively significant force in Fallujah. But if IS has deemed the defence of Mosul and Raqqa to be its main effort, it may well have withdrawn fighters and perhaps left local IS members to die in place. Until the battle proper is joined we won't be any the wiser as to how IS views the defence of Fallujah.

What is certain is that the re-taking of Fallujah may lead to nought strategically if it is not re-built and administered effectively and efficiently. Only then can the Iraqi government have any hope of extending its writ into the Sunni heartland of western Iraq. But that is for the future. For the moment, re-taking Fallujah will maintain the momentum of the Iraqi Security Forces and allow them to switch the main effort to the main prize perhaps before year's end — Mosul. 

Ali Muhammed/Anadolu Agency/Getty Images

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US presidential race 2016

Lowy Institute Executive Director Michael Fullilove remembers the 2008 US presidential election campaign, when he was living in Washington, as a time of hope and promise. This year's race? Not so much.

Fresh from a trip to the US, in this quick comment Dr Fullilove compares the two election cycles, discusses the shock Donald Trump has given the opinion–forming class, ponders what a Trump presidency might mean for Australia, and muses on a might-have-been.

Photo: John Sommers/Getty Images

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  • Student protests across Papua New Guinea continue as Prime Minister O’Neill has refused  demands to step aside. Four weeks of protest has forced UPNG to suspend the teaching semester, with the Vice-Chancellor demanding students vacate the premises in 48 hours. Unitech remains hopeful that the Semester can still be salvaged. Meanwhile, students argue that they cannot back down.
  • Protests are also beginning to spread through the country, with a rally of over 6,000 people in Kundiawa, the capital city of the Simbu province in the PNG highlands, making similar demands to the students.
  • PNG’s opposition leader Don Polye has been reinstated to Parliament by the Supreme Court, which has ruled that several ballot boxes from the 2012 election must now be recounted to ensure he is the elected representative for the Kandep Open Electorate.
  • Elsewhere in PNG the InterOil board has approved a $US2.2 billion takeover by rival Oil Search. Hailed as yet another coup by Oil Search CEO Peter Botton, the deal has been slammed by a former InterOil CEO and is being questioned by the head of the ICCC, PNG’s corporate watchdog.
  • The date for the Bougainville referendum has also been set for June 15, 2019.
  • The Vanuatu government says it will pass a constitutional amendment to reserve seats in Parliament for women, months after a national election in which none of the nine female candidates were successful.
  • New reporting shows the Solomon Islands government set a record deficit of SBD$172 million (US $21.5 million), or 2% of GDP, largely driven by paying down domestic debt.
  • A new World Bank report argues that the business as usual approach to tourism in the Pacific will not result in substantial growth of the sector. With careful planning, however, the report argues that tourism in the region can generate 'as much as US$1.8 billion per year in additional revenues and create up to 128,000 additional jobs by 2040'.
  • And in case you missed our panel last week looking at new approaches to tackling gender based violence in PNG, the podcast is available here.
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The Brexit referendum

Boris Johnson, former London Lord Mayor, tilter for the next British prime ministership, and all round consummate public player, may not have expected to have Geert Wilders as a political bedfellow.

Wilders, the ultra–nationalist, anti–Islamic Dutch populist, has joined Johnson in harking back to 1940s Europe to make the case for the UK to leave the EU.

Wilders,  once banned from entering the UK because of his extremist views is now topping the polls in the Netherlands, reflecting the rise of so many reactionary parties across the EU including Marine Le Pen’s National Front in France, the Alternative for Deutschland led by Frauke Petry, and the Five Start alliance in Italy.

In an extensive interview with The Sunday Telegraph, Wilders said Britain would unleash a ‘patriotic spring’ if it voted to leave the EU and ‘liberate’ Europe for the second time in a century. 'Like in the 1940s once again Britain could help liberate Europe from another totalitarian monster, this time called Brussels', Wilders opined.

In Austria, on the same day as Wilders’ views were published, a party founded in the 1950s by former Nazis who espoused ‘teutonic nationalism’ saw its leader, Norbert Hofer, narrowly miss out on the presidency. Former Greens leader Alexander Van der Bellen won in a vote that was 50.3 per cent to 49.7 percent, or 30,000 votes in a country of 8.4 million people. Hofer is no mild centre-right public figure and the contest revealed how utterly the traditional Austrian centre right and centre left parties got whammed.

Wilders' support and the Austrian vote came after Johnson's critics described him as ‘crossing the line’ when he said the past 2000 years of European history had been characterised by repeated attempts to unify Europe under a single government in order to recover the continent’s lost ‘golden age’ under the Romans. In a now infamous interview (also with The Sunday Telegraph), Johnson said: 'Napoleon, Hitler, various other people tried this out and it ends tragically. The EU is an attempt to do this by other methods'.

It was, to say the least, a jarring comparison but, in this age of Donald Trump and far right voices across Europe, there is stiff competition for such posturing.

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Scare tactics from both sides

With less than a month to the Brexit referendum, the economic arguments to remain in the EU seem to have been won. The vision of an independent, fresh and new British innovative powerhouse freed from the shackles of the EU does not seem to have resonated.

This week the UK Treasury warned that in the first two years after leaving the EU, the UK could see GDP drop 3.6% and push the economy into recession. Inflation would rocket and house prices would fall. Some have suggested the Treasury was overly negative but, nevertheless, the economic case for the farewell to Brussels seems less and less convincing.

In response, the Leave campaign is revving up its anti–immigration arguments as well as threats of worse crime, jobs lost and an increased terrorism threat. The other side is also upping the ante.

Britain Prime Minister David Cameron, foremost advocate for the Remain campaign, might not have the flair of Johnson, However there was a nod to the BoJo style when Cameron said Russian President Vladimir Putin and ISIS would welcome the UK leaving the EU.

Dropping any residual niceties, the President of the European Commission, Jean-Claude Juncker, set the tone for the final run to the UK referendum saying: 'Deserters (from the EU) will not be welcomed back with open arms'.

Meanwhile as the rhetorical temperature rises and both sides befuddle the issues, polling gives some clue to voting intentions. Since Cameron announced the referendum, the Remain case has been in the majority although the level of support has ebbed and flowed. The latest Financial Times Poll of Polls, however, showed 47% in favour of staying, 40% wanting to leave, and 13% undecided.

But the most recent polling data, released a few days ago, suggests support for the Leave campaign is falling away. This ORB poll suggests 55% want to remain, 42% want to leave.

The Australian-born political strategist, Sir Lynton Crosby, who was given credit for the Conservative Party’s victory last year, reckons the Remain campaign has strengthened its position and the poll shows the Leave campaign has failed to quell economic concerns.

However polls are not infallable. Last year they failed to predict a Tory victory. The rise of anti-establishment feeling suggests the referendum result could be very close, a margin so slim that it leaves the UK politically divided and ripe for further populism.

Perhaps Boris Johnson is counting on that.

Photo Ian Forsyth/Getty Images

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None of the US presidential candidates is keen on the Trans-Pacific Partnership. Does this mean that the treaty — signed but unratified — is finished and all that debate, negotiation and angst will have been vain?

President Obama doesn’t see it that way. He’s still plugging away in the hope of presenting enabling legislation to Congress before it breaks in mid-July for the party conventions. It is at least technically possible that Congress could approve it before the presidential election, or even in the ‘lame-duck’ post-election period before the new president takes over. But this is a big ask.

Hillary Clinton has not only come out against the agreement in its current form, but has ruled out any action in the lame duck period if she is elected.  Donald Trump wouldn’t be supporting it. Thus the best chance — if a slim one — is that President Obama sees it as so important for his own legacy that he puts in the huge effort required to see this through in his term.

Unlikely though this seems, there are TPP advocates,  including powerful sectoral interests that would benefit from the agreement signed last February. They understand that if the TPP doesn’t get through this year, it will be on the back-burner for years to come. If it doesn’t go ahead, where does that leave Obama’s ‘pivot’ to Asia? For her part Clinton, if elected, might be content to have had the TPP resolved before she takes over responsibility. 

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Some of the necessary prior actions have been taken. The US International Trade Commission has examined the agreement and concluded that it will benefit the USA, even if the impact on GDP is tiny

Many members of Congress have a fixation with ‘currency manipulation’ and are still calling for counter-measures to be included in the TPP. But the compromise reached earlier was for the US Treasury to address this issue unilaterally, which it has done by spelling out more precisely what it would regard as ‘currency manipulation’.

The Treasury’s criteria illustrates the muddle that arises when bureaucrats attempt to placate public ignorance. Of the three criteria developed for identifying ‘manipulation’, only one makes any economic sense. Perhaps substantial official intervention in foreign-exchange markets might constitute ‘manipulation’ (although the Swiss authorities would regard their attempt to constrain their growth-sapping appreciation as being worth a try, even if it was ultimately unsuccessful).  But the second criterion — concern about large current account imbalances — is harder to justify. And the third — concern about bilateral imbalances (i.e the trade position between the US and its individual trading partners) — is not just nonsensical, but actually harmful. If all countries responded to large bilateral imbalances by imposing trade restrictions, global trade would shrink dramatically. A key advantage of free international trade is that a country can obtain imports from one trading partner and pay for them by exporting to another partner. The bilateral balance between individual trading partners is irrelevant.

Fortunately it is unlikely that all three criteria would be infringed simultaneously, and even if they were, the penalties imposed could be trivial. But this sop to Congressional misunderstandings illustrates the illogical compromises that arise in international rule-making.

What about the alternative set of inferior trade rules which President Obama fears China will put in place if the TPP doesn’t go ahead?

As we speak, China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk.

What he has in mind is the Regional Comprehensive Economic Partnership (RCEP), which is actually an ASEAN initiative, not a rival China ploy. The RCEP envisages a set of rules or reforms which are aimed principally at practical impediments to trade, rather than establishing high-level principles as the TPP aims to do. It won’t address some US concerns (the role of state-owned enterprises, intellectual property rights or industry/state dispute resolution), but some would argue that the TPP over-reaches on these issues. Sensibly enough, Australia regards the two trade deals as conceptually compatible and supports both.  In any case it seems most unlikely that RCEP will be completed on schedule by the end of the year (ASEAN schedules tend to slip, and the negotiating schedule seems open-ended).

Perhaps more seriously, the case for TPP (and the characterisation of RCEP as China’s rules) is increasingly looking like a ‘contain–China’ play. In the Washington Post article, President Obama said:

America should write the rules. America should call the shots. Other countries should play by the rules that America and our partners set, and not the other way around. 

A more nuanced approach might offer China both carrot and stick: cooperation in developing mutually beneficial global trading rules while at the same time pushing-back against China’s South China Sea territorial claims.

Photo courtesy of Flickr user Jens Schnott Knudsen

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