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Monthly Archives: July 2018

US – CHINA TRADE WAR – Why Trump will Win

US – CHINA TRADE WAR  – Why Trump will Win

 The rising trade tensions between the US and its major trading partners, particularly China and European Union have been making news for some time now. It may be recalled that the US imposed tariff on imports of Chinese goods worth $200 billion and had also threatened to impose tariffs on cars imported from EU.

But the European Commission led by Jean-Claude Juncker quickly visited Washington DC and appears to have successfully negotiated and resolved the trade issues, at least for now. The EU plans to buy more US liquefied natural gas (LNG) and soybeans and has agreed to work with the US “toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods”. Trump seems to have won hands down in the trade frictions with the EU.

But the trade war with China, on the other hand, seems to be following a different course with no resolution in sight yet. China too had imposed retaliatory sanctions on goods imported from the US. The US has further accused China of manipulating its currency and is now considering additional tariffs on goods worth $500 billion.

The consequences of this internecine tension could be severe and reverberate throughout the world. The IMF has warned that the current trade war could slow down world economic growth by 0.5% or cost the world $430 billion by 2020.  In its World Economic Outlook Update published in July 2018 IMF has warned that the global expansion that was witnessed over the last two years has plateaued and has become less balanced. It projects global growth to stay at 3.9% over the next two years. Translation – any trade tensions, particularly among key economies at this juncture may be injurious to all.

While the specter of a full blown trade war is never benign, a close examination of US-China trade data that is publicly available, courtesy US Dept. of Commerce, Census Bureau is indeed revealing. Data for the last eight years (i.e. 2010 through 2018 May) shows US exports to China has been   consistent at just over a US$100 billion. On the other hand, imports from China have steadily grown from US$ 365 billion in 2010 to US$505 billion in 2017. Imports for 2018 will probably be at the same level as 2017.  Please see chart.US China Data1

US imports are almost four times its exports to China thus giving rise to a yawning trade deficit that is undesirable for any county, and most certainly for the US. But President Trump, by imposing high tariffs, may have converted this liability into a powerful weapon. Given its four to one advantage, China is four times more vulnerable, in dollar terms, than the US. The current impact of Chinese tariffs on US farm sector has been stemmed by a $12 billion federal subsidy announced by the department of agriculture.  Hence, any retaliation – both current and proposed – from China will have minimal effect on the US. Trump seems to have the upper hand with China.

One of the key reasons for the imposition of additional tariffs on China – at least the stated objective of Trump – was bringing jobs, particularly manufacturing jobs, back to the US. On this count, however, Trump may have miscalculated. America must wake up to the reality that manufacturing jobs that were squirreled away to China over the decades will never come back.

The fact is that the US is a high cost economy and the final landed cost of manufacture is very high. Secondly the strong US dollar does not help either. Bringing back manufacturing jobs will only price its products out in a fiercely competitive export market. Most manufacturers may not take the bait.

The US government fully understands this. Consequently, over the decades, it has successfully encouraged the migration of the economy to a trade and economic culture that is largely dependent and sustained by innovations and cutting edge technologies. This has helped in the creation of new markets and orient them to where the US will continue to enjoy obvious advantages and hence dominate.

China too understands the nuances of this game and has been in an extraordinary hurry to acquire new technologies at any cost. Hence it is no surprise that China has been consistently accused, over the decades, of industrial espionage and theft of intellectual property (IP) by many countries including the US. It is no surprise that under the given circumstances, President Trump was left with limited options in dealing with an aggressive trading partner like China.

China has not played a good citizen of the world. At every opportunity, it has seized its neighbor’s land in its infamous ‘salami slicing’ strategy to fulfil its expansionists ideology. It has shown no respect for international law – be it the annexation of Tibet or in the blatant militarization of the Spratly Islands in South China Sea, despite the International Court of Justice (ICJ) verdict against it.

If today China has a negative residue of international goodwill, it has only itself to blame. Its emergence as a big economy and world player has not been peaceful.

The fact that China has used the BRICS forum to speak out for “free trade” only underscores its desperation. Further, recent reports have indicated that behind its brave façade of resisting US tariffs, China is deeply worried about the potential for many of its companies to file for bankruptcies.

It is indeed impossible to guess as to what is on President Trump’s mind in dealing with China. Is he playing hard ball to get China to the negotiating table for a better trade deal? Or is the US planning to bring China on its knees without firing a shot, given China’s flagrant violation of international law in the South China Sea? Or is it Trump’s larger game plan to cut unfriendly nations to size, given his recent experience in winning over North Korea without firing a shot.

Whichever way you look at it, China seems to be the obvious loser. It is only a matter of time before China will get to the negotiating table to work out a “reasonable agreement” very much in line with the EU example. Before long, normal trade will resume, albeit under circumstances that are lot more favorable to the US.

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The curious case of Justice Chelameswar

The curious case of Justice Chelameswar

The Supreme Court of India in its recent judgement on a public interest litigation (PIL)  filed by Shanti Bhushan (TOI July 7th 2018), has reiterated, for the third time in eight months that the Chief Justice of India (CJI) will have sole authority on allocating cases in the top court. The judgement although pertains to the internal administration of the apex Court, has huge implications, particularly with regards to the powers of the CJI. The judgement also firmly puts to rest the unseemly controversy raised by Justice Chelameswar and three other judges in their well-publicized press conference in January 2018.

It may be recalled that Mr. Chelameswar and three of his fellow judges had hurriedly convened a press conference in New Delhi to “inform the nation” about ‘happenings’ within the Supreme Court of India.  A startled nation watched the drama unfold, hoping to hear some radical steps to reform the judiciary or something to that effect.  Instead, the justices raised the banner of revolt. It turned out, much to the disappointment of millions of Indians, to be another case of washing dirty linen in public.

The anguish of the four judges was over the CJI’s powers to allocate cases to his subordinate judges. An eager opposition jumped onto this ‘rebellion’ that ultimately led to the tabling of the motion for the impeachment of the CJI in Parliament. That the motion was rightfully defeated is not the issue here. It certainly opened the doors to the ‘happenings’ within the Supreme Court. This power play or the quest for control over judge’s case load unabashedly played out in front of the nation, masquerading as concern for the ‘functioning’ of the highest judicial body of the land.

The press conference of Justice Chelameswar et al. or the failed move to impeach the Chief Justice cannot be a surprise if one looks into what is happenings within this high judicial body. That Justice Chelameswar later met with a communist leader and other opposition politicians and that the likes of Shanti Bhusan had filed a follow up PIL to wrest control of the muster from the CJI speaks volumes for itself.

That the said judges seem to be so oblivious of the humungous challenges and problems faced by the courts in the country is indeed hurting. It certainly shows that a section in the judiciary has consistently put personal career aspirations over and above the sacred function of delivering justice. No one can fault them for personal ambitions, but to cloak it as a concern for the judiciary does not lend them dignity at all.

In this context it is worth looking at the problems and challenges confounding the judiciary in India today. Take a look at the data presented by National Judicial Data Grid (NJDG). According to the NJDG the backlog of cases in the judicial system in India was approximately 3.3 crores including 43 lakh cases in High Courts and 58,000 cases in the Supreme Court. (Business Today, June 28 2018). In a related news report (The Pioneer 24th November 2017), it was pointed out that almost two thirds or 67% of the prisoners in Indian jails are under-trials. This is indeed shocking.

But amidst all the pendency, ironically, the Supreme Court, did find time to convene, in the middle of the night, to pass its considered views on the election outcome and the state Governor’s decision to give two weeks’ time for the BJP to prove its majority in the recently concluded elections in Karnataka. The apex court, it appears, can definitely find time and resources to hear cases of the mighty and powerful almost immediately while the average citizen may have to wait for years, if not decades to get justice.

I have not heard any statement or action plans to solve this heart rending problem of pending cases from Justice Chelameswar or his brother judges. Maybe I missed it. But their silence on the real problems of the judiciary is indeed deafening.

The huge backlog of cases also indirectly impacts the daily life as well as the long term economic well-being of the country. For example litigations relating to land acquisition delays new road and rail infrastructure. Putting corrupt politicians in jail too is impacted by these backlogs. It can thus be argued that the inefficiencies in the delivery of justice and other judicial services in India has contributed a great deal, albeit indirectly, to its economic backwardness.

Needless to say, the impact of the backlog of cases on India is huge and often not easily quantifiable and has the potential of even destroying the country’s democratic framework. Hence the need of the hour is a collective effort from all three branches of government – legislature, executive and the judiciary to quickly clear the backlog of cases. The government’s Digital India and other initiatives to use technology to enhance delivery of services is something the judiciary can learn from.

In this context it must be reminded that the Supreme Court is not just made up of its CJI and the other justices who sit on its benches. Any number eminent judges have occupied its high offices   as judges and Chief Justices. But as an institution, it is larger than all of them – the current and past incumbents put together. In fact it stands tall as the last and final beacon of hope in a democracy and India is no exception.

To trade its stature and importance for few minutes of national spotlight on television or media is nonetheless a sacrilege that most ordinary Indians cannot easily countenance. For them, the career fortunes of individual opportunistic judges is of no consequence when crores of cases are pending and every day unknown numbers of lives are lost or wither away in prisons just because justice could not delivered on time. If this is not rank opportunism, what else could be? Any amount of tall talk and no action will not cut ice in a resurgent India we are witnessing today. The writing on the wall is clear.

 
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Posted by on July 13, 2018 in India, Media

 

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