| | | | The Trade War Will Be Back | | After the recent "phase one" US-China trade deal, Bloomberg's Mohamed A. El-Erian writes that "both sides know it will be only a prelude to renewed tensions down the road." While President Trump needed a short-term win amid impeachment, El-Erian writes, China is biding time to strengthen its economy and limit outside dependence.
American businesses have objected to Beijing's propping up of Chinese companies with state funds, and that may not stop anytime soon. In a Foreign Affairs essay, Ely Ratner, Elizabeth Rosenberg, and Paul Scharre point out that Beijing's top negotiator "announced recently that China aims to make its public sector 'stronger, better and bigger'"; they suggest the US should increase its own public R&D spending on technology (the key field of US-China competition) and strengthen its alliances to gird for a long fight. | | Is Scotland Heading Toward Its Own Brexit? | | As Britain's Tories secured a landslide victory last week, things looked different in Scotland, where the Scottish National Party (SNP) won big. After voting Remain in 2016, Scotland voted en masse on Thursday for a party that seeks a new referendum on Scottish independence; since the victory, the SNP and its leader, Nicola Sturgeon, have said Scotland wants a different future from the rest of the Brexiting UK.
But in the latest issue of Chatham House's The World Today, John Lloyd writes that a Scottish exit from Britain might not be so easy: Estimates of the economic consequences have painted an unrealistically rosy picture, Lloyd writes, and a "vote for secession of 50 per cent plus a little more would cause turmoil within Scotland, and outside it. There is no possibility of a quick, painless break between two countries so deeply intertwined–economically, industrially, legally, in employment, in family, friendships and joint projects. Business and finance would be more disturbed by the decision than the City of London is over Brexit, and more inclined to move headquarters and operations, probably to England."
Scotland voted against independence 55% to 45% in 2014, but if it does move in that direction again—even if motivated, partly, by distaste for the UK's choice to leave the EU—Lloyd makes it sound as if Scotland will experience a debate reminiscent of the one all of Britain just had. | | Europe Is Back to Bailing Out Banks | | After the European Commission okayed a bailout of savings bank NordLB by two German states, and amid Italian expectations that the EU will approve €900 million in government funds for a state-owned bank to bail out the private Banca Popolare di Bari SCpa, Bloomberg's Ferdinando Giugliano writes that bailouts are back in style.
In the wake of 2008's financial crash, Europe enacted controls to make bailouts less likely—for instance, share and bondholders are supposed to take losses before taxpayers—but Giugliano writes that post-crash reforms evidently haven't succeeded, partly due to fragmented regulatory structures and a patchwork of rules for regional lenders. The problem can be fixed, but not "unless politicians and supervisors agree they're truly ready to impose losses on investors and let some banks go bust," Giugliano writes. "Bailouts wash away past sins. For all the post-crisis backlash, this explains their enduring appeal." | | Is Malta the EU's New Outlier? | | "Malta, the European Union's smallest member state, generally stays out of the headlines," Frank Hornig and Juan Moreno write for Der Spiegel. "Now, though, dubious links between Maltese business leaders, politicians and organized crime have become visible, and it increasingly looks as though Malta operates by a different rulebook than the rest of the EU." The murder of journalist Daphne Caruana Galizia drew headlines, but Hornig and Moreno write that Malta's problems go even deeper. "Bank accounts, casinos and cryptocurrencies: Hot-shot financial investors have apparently chosen Malta as their island of choice," they write, delving into Malta's alleged corruption, weak law enforcement, and status as a tax haven—which could be undermining the EU's standards.
"The murder of Caruana Galizia, it would seem, is no longer just a problem for Maltese politics," they write. "It is now emerging as an acute threat to European values, the rule of law, the freedom of the press and a rules-based market economy. Ultimately, it is about how many banana republics the EU can tolerate within its ranks." | | Globalization's Downside Has Arrived | | Expanding on an idea they've advanced before—that globalization has led to an era of "weaponized interdependence"—Henry Farrell and Abraham L. Newman argue in the current issue of Foreign Affairs that international supply chains, cross-border financial flows, digital networks, and the like "have proved to be less paths to freedom than new sets of chains." Countries are bound together for better or worse, and some of them exercise more power over such networks by hosting important hubs through which manufacturing, money, and data flow; US influence over global finance, thanks to the dollar's centrality, is a prime example.
"Much like nuclear command-and-control systems, those hubs let the states that control them exercise enormous offensive and defensive power," they write. "That is why China's efforts to use Huawei to topple the United States' control over global telecommunications are so provocative." To deal with this phenomenon, Farrell and Abraham suggest the US should consider economics and security as tied together. The US should devote new energy to screening economic relationships for national-security risks, they write, as supply chains and digital data flows become part of a global power struggle. | | | | | | |
