Inter Press ServiceMartin Khor – Inter Press Service http://www.ipsnews.net News and Views from the Global South Thu, 26 Apr 2018 20:46:34 +0000 en-US hourly 1 https://wordpress.org/?v=4.8.6 Has Trump Just Launched a Global Trade War?http://www.ipsnews.net/2018/03/trump-just-launched-global-trade-war/?utm_source=rss&utm_medium=rss&utm_campaign=trump-just-launched-global-trade-war http://www.ipsnews.net/2018/03/trump-just-launched-global-trade-war/#respond Wed, 14 Mar 2018 15:41:32 +0000 Martin Khor http://www.ipsnews.net/?p=154815 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

By Martin Khor
PENANG, Malaysia, Mar 14 2018 (IPS)

Last week’s action by President Donald Trump has ended the United States’ leadership on liberal trade and may trigger a global trade war with major damaging consequences.

On 8 March, Trump signed a proclamation to raise tariffs of steel by 25% and aluminium by 10%.

It sent shockwaves across the world not only because of the losses to metal exporters, but due to what it could well signify:  the start of a global trade war causing economic disruption in many countries, and that may also damage if not destroy the multilateral trade system.

The United States, joined by Europe, has been the anchor of the global free trade system, ever since the end of the Second World War.  In practice this rhetoric of free trade was hypocritical because the developed countries continue to practise very high protection of their agriculture sector which cannot compete with many developing countries if there really was “free trade”.

When a new global financial crisis strikes, the developing countries will be more damaged than in the last crisis as they have become less resilient and more vulnerable. They thus need to prepare from being overwhelmed, says Martin Khor

Martin Khor

Moreover, the developed countries introduced and continue to champion mandatory high intellectual property rights standards through an agreement in the World Trade Organisation (WTO), under which their companies create monopolies, set high prices and make excessive profits.  This is against the free competition touted by free-trade advocates.

In manufactures and metals, the developed countries have pressed the others to join them in cutting or removing tariffs and expand trade, through negotiations in the WTO and its predecessor the GATT (General Agreement on Tariffs and Trade).

They have argued that poorer countries can best grow richer by cutting their tariffs, which would benefit their consumers and force their producers to become more efficient.

Trump’s move upends the ideology of free trade.  If cheaper imports displace local steel and aluminium producers, they must be stopped because a country must make its own key products, according to the Trump philosophy of America First.

Since the United States has been the flag-bearer of the free-trade religion, this has profound effects on other countries.  If the leader has changed its mind and now believes in protecting its industries, so too can other countries.  The basis for liberal trade is destroyed and the old rationale for protectionism is revived.

...This rhetoric of free trade was hypocritical because the developed countries continue to practise very high protection of their agriculture sector, which cannot compete with many developing countries if there really was “free trade”

The WTO rules allow countries adversely affected by imports to take certain measures, but they have to prove that the producers of exporting countries unfairly receive subsidies, or that they set lower prices for their exports compared to the same goods sold domestically.  Or they can take “safeguard” measures of raising tariffs if they can show that domestic firms have been adversely affected, but only for a limited period to help affected local producers to adjust.

Trump however made use of a little-used national security clause (Section 232) in the U.S. trade laws to justify his big jump in steel and aluminium tariffs.  The clause allows the President to take trade action to defend national security.  The WTO also has a security exception in GATT Article XXI but it has also been rarely if ever used by countries to justify tariff increases.

What constitutes national security is not clearly spelt out either in the US or the WTO laws and because of the ambiguity and lack of clarity, this clause can be abused. The US and other countries can claim it is imposing higher import duties because it is necessary to protect their national security, but in reality this could be a disguise or excuse to protect their economies from other countries’ more efficient producers.

The Trump administration tried to justify invoking the security factor by saying steel and aluminium are needed to make tanks, fighter planes and other weapons of war.  But this was undercut by giving exemptions from the increased duties to Canada and Mexico due to their membership of NAFTA, a trade agreement that includes the United States. These exemptions for reasons unrelated to security exposes the security rationale as fake.

Other countries are angry and preparing to retaliate. The European Union has drawn up a list of American products on which its countries will raise tariffs.  China warned it would make an appropriate and necessary response.

At the WTO General Council on 8 March, the United States action was attacked. Many countries condemned the US measures being unilateral and for misusing the national security rationale.  Canada said the security issue “may be opening a Pandora’ Box we would not be able to close.”

Brazil expressed deep concern about an elastic or broad application of the national security exception.  India said the national security exception under GATT should not be misused and unilateral measures have no place in the trade system. China argued the over-protected domestic industry will never be able to serve its problems through protectionism.

Many WTO member states will most likely take the US to a dispute panel, and how it will rule will have strong consequences.   If it rules for the US, then other countries will view it as allowing all countries to take protectionist measures on the same ground of national security.

If it rules against the US, it will embolden the anti-liberal trade faction in the Trump administration and strengthen their argument that the US should ignore or even leave the WTO.  The US would then be much more unrestrained to undertake further protectionist measures.

In either case, there is a danger that the rest of the world, or significant parts of it, would also feel they should not be constrained by WTO’s generaltrade rules.  Over time, trade protectionism would gain ground.

The next big protectionist move from the US may come in a few weeks when Trump decides what action, if any, to take against China after considering a report on China’s trade and intellectual property practices issued by the Commerce Department.

If, as expected, big action against China is announced, China will almost certainly take equally strong retaliatory action.

That will escalate the trade war that is already on the way.

 

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Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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The New CPTPP Trade Pact is Much Like the Old TPPhttp://www.ipsnews.net/2018/03/the-new-cptpp-trade-pact-is-much-like-the-old-tpp/?utm_source=rss&utm_medium=rss&utm_campaign=the-new-cptpp-trade-pact-is-much-like-the-old-tpp http://www.ipsnews.net/2018/03/the-new-cptpp-trade-pact-is-much-like-the-old-tpp/#respond Wed, 07 Mar 2018 10:23:47 +0000 Martin Khor http://www.ipsnews.net/?p=154672 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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The new CPTPP trade pact is much like the old TPP - The 11 member countries, nicknamed the TPP11, are Chile, Peru, Mexico, Canada, Japan, Vietnam, Malaysia, Brunei, Singapore, Australia and New Zealand. Credit: Amantha Perera/IPS

The 11 member countries, nicknamed the TPP11, are Chile, Peru, Mexico, Canada, Japan, Vietnam, Malaysia, Brunei, Singapore, Australia and New Zealand. Credit: Amantha Perera/IPS

By Martin Khor
PENANG, Malaysia, Mar 7 2018 (IPS)

The new agreement that eleven countries are signing on 8 March in Chile in place of the Trans Pacific Partnership Agreement  (TPP) is like old wine in a new bottle — without the United States but retaining most of its controversial elements.

The TPP seemed to have died when President Donald Trump pulled the United States out of it early last year.

But the remaining 11 members have rescued it almost intact, giving it a new name, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Would it really be worthwhile for the developing countries in the CPTPP to lose so much policy space (i.e. the ability and freedom of a country to formulate its own policies in accordance with its own priorities and national goals), in order to gain new but limited export opportunities?

The 11 countries, nicknamed the TPP11, are Chile, Peru, Mexico, Canada, Japan, Vietnam, Malaysia, Brunei, Singapore, Australia and New Zealand.

The original TPP had been pushed along most adamantly by the US before Trump became President, with Japan as the next big advocate. They succeeded in getting into the lengthy text many controversial chapters and provisions, including on investment policy and protection, government procurement, state-owned enterprises, intellectual property (IP) and e-commerce.

For some developing countries in TPP, especially Vietnam and Malaysia which do not have bilateral trade agreements with the US, the attraction was to get more open markets for their exports, especially to the US, which has the biggest market in the world.  With the US now out, the main benefits for them in the CPTPP would be lost.

The developing countries generally dislike the other aspects, especially procurement, state owned enterprises and IP, as these intrude into their domestic arena and seriously restrict what policies they can retain or introduce.  But they were willing to accept these, though reluctantly, in exchange for more exports to the other TPP countries.

With the US out of the picture, the cost-benefit balance has shifted.  The benefits have reduced, but the costs remain as long as the controversial issues are retained.

The CPTPP text shows that 22 provisions (out of the over 1,000 total provisions) of the TPP have been “suspended”, rather than removed.   This is in anticipation that the US might return.  The chances of that are quite good, as Trump has announced the US may reconsider its decision to withdraw, if it got a better deal.

If the US re-joins, it is likely the eleven countries will lift the suspended provisions and the CPTPP would in effect become the TPP again.

The suspensions are mainly in the IP chapter.  Some of the extreme clauses which the US insisted on (but which many others were unhappy over) will not come into effect in the CPTPP.

Suspended are some provisions that adversely affect access to medicines, including obliging the TPP countries to allow patents for a second use of a medicine, and for new methods for using the medicine.  Also suspended is a clause to extend the normal patent term of 20 years if a country delays granting a patent for a new medicine.

But some other TPP provisions on IP remain.  In particular, countries must join an international treaty known as UPOV91 under which farmers will not be able to save and exchange seeds that are protected by big corporations, but have to buy the costly seeds in order to plant new crops.

Most other provisions that are suspended are of minor importance, and thus much of the original TPP remains.

The most problematic issues retained in the CPTPP include:

  • Investment liberalisation. Countries have to open up to other CPTPP members’ companies and investors to enter and invest in their territory.  They could take over the business of some domestic producers and service providers.
  • Investor protection. Foreign investors can bring host governments to an international tribunal for loss of present and future profits or reduced value of their assets if government introduces new economic, social or environmental policies that affect their business or even their business expectations.
  • Government procurement. Most governments in developing countries give preferential treatment to local companieswhen granting construction and other projects.  This preference is also provided when the government purchases materials and services.  Under the new agreement, these preferences will be ended as foreign firms from CPTPP countries will have to be given equal treatment as local firms in government procurement above a certain level. The aim is to enable foreign firms to obtain more business and revenue.  But the disadvantage to the host country is that their ability to provide a boost to local firms and the domestic economy (as under the original procurement policy)would be severely eroded.
  • State owned enterprises (SOEs). In many countries, SOEs play multiple significant economic and social roles.  Under the CPTPP, these roles will be much constrained and reduced by new rules that prohibit or make it more difficult for SOEs to obtain financing or preferential treatment from the government.  The rules also prevent SOEs from giving preferential treatment (for example in their procurement) to other local firms.  The aim is to enable foreign companies to better compete with the SOEs and obtain more market share.
  • Intellectual property. Despite some provisions being suspended, the CPTPP has remaining clauses that can have negative effects such as higher costs for medicines, educational materials and farm inputs.

Policy makers should have done new cost-benefit analyses of the CPTPP, especially since the main TPP benefit of US market openingis now lost in the new agreement.  But very few countries have done a new analysis, or they have not revealed the results.

Would it really be worthwhile for the developing countries in the CPTPP to lose so much policy space (i.e. the ability and freedom of a country to formulate its own policies in accordance with its own priorities and national goals), in order to gain new but limited export opportunities?

This question is made more pertinent because of two factors.  One, the new opportunities are limited because of the absence of the biggest player, the US.  Two, the extra exports are offset by the inflow of new imports, so that the trade gains may be meagre, or even negative if the extra imports exceed the extra exports.

But then, some decisions including whether to join a trade agreement are sometimes made without careful enough study.   Also, sometimes, decisions are taken based not only on economic costs and benefits, but on geo-political and other factors.

The post The New CPTPP Trade Pact is Much Like the Old TPP appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

The post The New CPTPP Trade Pact is Much Like the Old TPP appeared first on Inter Press Service.

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Stock Market Turmoil May Expose Flaws in Global Financehttp://www.ipsnews.net/2018/02/stock-market-turmoil-may-expose-flaws-global-finance/?utm_source=rss&utm_medium=rss&utm_campaign=stock-market-turmoil-may-expose-flaws-global-finance http://www.ipsnews.net/2018/02/stock-market-turmoil-may-expose-flaws-global-finance/#comments Mon, 12 Feb 2018 14:35:48 +0000 Martin Khor http://www.ipsnews.net/?p=154268 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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Stock market turmoil may expose flaws in global finance

By Martin Khor
PENANG, Malaysia, Feb 12 2018 (IPS)

Was last week’s global stock market sell-off only a “correction” or does it signify a new period of financial instability, caused by major flaws in the world financial system?

The stock market turmoil has sparked concerns that the relatively good economic times in the past couple of years, at least in the developed countries, could be ending.

It is too early yet to understand what has just taken place or predict what comes next.  It is widely agreed that a “correction” has taken place in the US stock market.   But whether this is just a blip, or will progress to a crash, remains to be seen.

Some analysts say there is nothing to worry about as such corrections to over-valued markets are normal and soon there will be business as usual. Others are more pessimistic, with a few even predicting it is the start of the worst bear market ever.

The immediate trigger was the positive news on US jobs, prompting fears of wage increases and higher inflation that would pressurise the Federal Reserve to raise interest rates more rapidly.  Higher interest has a negative effect on stock markets as they give an incentive to investors to put their money in alternatives, especially bonds.

In good times, a lot of short-term speculative funds flow from the developed countries to the developing countries in search of higher yield. But in times of global uncertainty, or if interest rates rise in the US thus providing higher returns to investors, the funds can rapidly flow back, often causing significant damage or even devastation to the host developing economies.

But the larger reason for the sell-off is the jump in equity prices to record levels, caused by  speculative investments not backed by fundamentals, and fuelled by the easy money policy that the US government pursued in the hope of stimulating economic growth.  Some of the trillions of dollars pumped into the banking system by “quantitative easing” contributed to the stock market bubble.

Even though quantitative easing has ended and is being reversed, US stock prices continued to rise rapidly in January. It was a matter of time before a downturn occurred.

The stock market sell-off, if it continues, can have large repercussions on developing countries.

There is the domestic effect. Affected investors feeling they have less wealth will decrease their spending, affecting demand for goods and reducing GDP growth. Those that borrowed to speculate in the stock market may have debt-repayment problems.  Companies may see their market capitalisation and asset values reduced as the prices of their shares go down.  If the sell-off becomes more prolonged, banks start worrying about non-performing loans.

Then there is a complex of issues related to the interaction between developing economies with the global financial markets.  The stock-market turbulence could affect global investor confidence in emerging economies, which are seen as riskier than the US.

In good times, a lot of short-term speculative funds flow from the developed countries to the developing countries in search of higher yield.  But in times of global uncertainty, or if interest rates rise in the US thus providing higher returns to investors, the funds can rapidly flow back, often causing significant damage or even devastation to the host developing economies.

This boom-bust cycle of capital flows has been played out several times over the years. The boom in funds going to developing countries in the 1970s ended in 1982 with the Latin American debt crisis.  The boom in the early 1990s ended in crises in East Asia, Brazil, Russia and Argentina.

The boom in the early 2000s temporarily stopped with the global crisis in 2008-9 but resumed and has continued to now, with some sharp outflows in 2016 and early 2017 and a return of inflows since then.

It remains to be seen what effect the current stock market turmoil will have on capital flows.

A quite balanced view was given by Tokyo-based Mitsubishi UFJ Kokusai Asset Management, which oversees US$119 bil in assets.  “We’re not going to see the type of euphoria we saw in emerging markets anymore,” said its chief fund manager Hideo Shimomura in an interview with Bloomberg agency. “We’re in a phase where investors are being given a reality check after a great run.  That’s not to say inflows to emerging markets will reverse completely.”

In recent years the developing economies have become more open to external capital flows.  This has resulted in new vulnerabilities and heightened their exposure to external financial shocks, according to several papers published by the South Centre and written by its chief economist Yilmaz Akyuz.

There has been a massive build-up of debt by their non-financial corporations since the 2008 crisis, reaching $25 trillion or 95 per cent of their GDP.  The dollar-denominated debt securities issued by emerging economies increased from some $500 billion in 2008 to $1.25 trillion in 2016, according to the Bank of International Settlements.

Moreover, the foreign presence in local financial markets has reached unprecedented levels, increasing their susceptibility to global financial boom-bust cycles. Foreigners now own a much larger share of government bonds and of the equities in the stock market of many developing economies.  For example, in Malaysia, foreigners own about a quarter to a third of the value of government bonds and about a quarter the value of equities in the Kuala Lumpur stock exchange.

Should there be net capital outflows from developing economies, their currencies may depreciate.  When this happens, or when there is anticipation of this, the capital outflows may increase, in a vicious cycle. The depreciation will also make it more costly to service debt, and add to inflationary pressures.

While their vulnerabilities have grown, the countries have less resilience or capacity to prevent or counter a crisis if it happens, due to two reasons, according to the South Centre.

First, many of the countries have seen a significant deterioration in their current account balances and net foreign asset positions since the 2008-9 crisis. In most countries international reserves built up in recent years came from capital inflows rather than current account surpluses. The reserves could decrease significantly if foreigners decide to take their funds back, and they could be  inadequate to meet large and sustained outflows of capital.

Second, the developing countries have limited economic policy options in responding to deflationary and destabilizing impulses from abroad.

Their fiscal space for countercyclical policy response to deflationary shocks is much more limited today than in 2009. There is also a significant loss of monetary policy autonomy and loss of control over interest rates as a result of their deepened global financial integration. Flexible exchange rate regimes adopted in many emerging economies since the last bouts of crises are no panacea in the face of severe and sustained financial shocks, particularly in view of currency risks assumed by their corporations.

“Most developing economies have not only lost their growth momentum but find themselves in a tenuous position with an uncanny similarity to the 1970s and 1980s when the combined booms in capital flows and commodity prices that had started in the second half of the 1970s ended with a debt crisis as a result of a sharp turnaround in the US monetary policy, costing them a decade in development,”  says a South Centre paper by Akyuz.

“It would now be difficult for some of them to avoid international liquidity crises and even debt crises and significant loss of growth in the event of severe financial and trade shocks.”

In light of the South Centre analysis, the stock market turbulence could only be the tip of an iceberg of financial instability and vulnerability, with the developing countries in danger of being trapped in the grip of the flawed global system.

Ironically, this instability increased in recent years due to efforts by the developed countries to counter the effects of the 2008-9 crisis through easy money policies that fuelled more debt and bigger financial bubbles.  These initiatives may have the unintended consequence of building up a new and perhaps bigger crisis.

The post Stock Market Turmoil May Expose Flaws in Global Finance appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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Create “Sponge Cities” to Tackle Worsening Floodshttp://www.ipsnews.net/2018/01/create-sponge-cities-tackle-worsening-floods/?utm_source=rss&utm_medium=rss&utm_campaign=create-sponge-cities-tackle-worsening-floods http://www.ipsnews.net/2018/01/create-sponge-cities-tackle-worsening-floods/#respond Wed, 31 Jan 2018 16:26:18 +0000 Martin Khor http://www.ipsnews.net/?p=154099 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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Create “sponge cities” to tackle worsening floods - Downpours flood the streets of Dhaka. Credit: Farid Ahmed/ IPS

Downpours flood the streets of Dhaka. Credit: Farid Ahmed/ IPS

By Martin Khor
PENANG, Malaysia, Jan 31 2018 (IPS)

With floods now causing more damage more frequently around the world, it is time to counter their effects by turning our towns into “Sponge Cities”, a recent trend popularised by China to absorb rainwater through permeable roads and pavements, parks, rooftop gardens and other green spaces.

Floods causing huge loss of lives, homes and other property have increased significantly in many parts of the world.  This is attributed to more intense rainfall resulting from climate change.  But manmade factors, especially urbanisation and the chopping of forests and trees are also to blame.

So far the Chinese cities have received over US$12 billion for sponge projects. The central government funds 15-20% of costs, the rest is funded by local governments and private developers. The expenses of the sponge city initiative is not insignificant. But it is less than the estimated US$100 billion of direct economic losses due to floods in China in 2011-2014, plus the human lives lost.

Scenes of the havoc caused by flooding, such as swollen rivers bursting their banks, and roads, houses, prominent buildings and motorcars submerged in water can now be seen frequently around the world.

Ordinary members of the public, who are the main victims, and policy makers alike, are now looking at the causes and searching for solutions to urban flash floods.

In Penang, Malaysia, flash floods have been occurring recently with unprecedented frequency and intensity, with three major incidents in seven months last year.

Recently I attended an interesting dialogue on the floods between civil society groups and local government officials.

At the same time, I came across several articles on the concept of “Sponge City.”   Most of them were on how China is turning 30 of its flood-prone urban areas into “sponge cities” in order to prevent floods and retain rain water.

The Chinese plan big and fast.  It launched the sponge city project only in 2015, but they target that 70% of rainwater will be retained in 80% of urban areas by 2020.

The “sponge city” concept will likely spread rapidly as key to the global efforts on climate change adaptation, with the goal of reducing the impact of increased rainfall and floods.

The sponge figured prominently at the NGO-government dialogue in Penang. Malaysian scientist Dr Kam Suan Pheng introduced it when explaining the causes of the recent months’ big floods.

She contrasted what happened previously with the present situation when rain falls.  In the past, 50% of the rain seeped through the natural ground cover (trees, grass, etc) into the ground, there is 10% water runoff (to rivers and drains) and 40% evapotranspiration (water goes back to the atmosphere).

The natural ground cover acts as a sponge to absorb the rainwater which infiltrates the soil, and prevents the water from becoming flash floods.

Presently, due to urbanisation, the green spaces have been paved over with concrete and only 15% of the rainwater infiltrates to the soil, while the runoff has expanded to 55% and evapotranspiration is 30% of the total. The sponge now absorbs only 15% of the rainwater compared to the previous 50%.

Dr Kam quoted the highly respected former Penang Water Authority general manager Kam U-Tee as saying that the October 2008 Penang floods were caused by conversion of the valleys into “concrete aprons that do not retain water which immediately flows into streams causing flash floods even with only moderate rainfall.”

 

Create “sponge cities” to tackle worsening floods

Drainage systems in Mozambique’s capital Maputo struggle to cope with rivers flowing into the city and high rainfall that leave streets flooded. Credit:Johannes Myburgh/IPS

 

Given this analysis, a key part of tackling flood woes is to reverse the loss of the sponge.  In recent decades, Malaysia, like most other developing countries, has seen the conversion of a lot of farms, parks, grass areas and trees into “concrete jungles” of roads, houses, commercial buildings and car-parks.

With urbanisation resulting in hotter temperatures, deforestation and floods, there should now be high sensitivity of policy makers and urban planners to the valuable environmental and economic roles of trees, gardens, parks, fields and grass-lands.

Having towns filled with trees and gardens, and integrating this as a priority in urban planning, should not be only be an aesthetic goal, but recognised as a vital part of economic and social development.

This is where the concept and practice of “sponge cities” comes in.  An internet search on this term will find many recent news reports applauding the Chinese initiative to counter its floods and increase its water security by building up the natural cover or sponge in its cities.

In 2010, landslides from flooding killed 700 people in three-quarters of China’s provinces and last year rains flooded Southern China, destroying homes and killing around 60 people.

In 2015, China launched the Sponge City initiative which now covers 30 cities, including Shanghai, Xiamen and Wuhan.  The target: by 2020, 80% of its urban areas will absorb and re-use 70% of rainwater.

The many types of projects include:

  • Constructing permeable roads that enable water to infiltrate into the ground;
  • Replacing totally concrete pavements on roads and parks to make them permeable;
  • Building wetlands to absorb and store rainwater;
  • Constructing rooftop gardens (for example, 4.3 mil square feet of these throughout Shanghai)
  • Plant trees along streets, in public squares and gardens
  • Build community gardens and parks to expand green spaces.
  • Construct manmade lakes and preserve agricultural land to hold water.

“In the natural environment, most precipitation infiltrates the ground or is received by surface water, but this is disrupted when there are large-scale hard pavements,”  said Wen Mdei Dubbelaar, water management director at China Arcadis, giving a rationale for the sponge city concept, in words similar to Dr. Kam’s.

“Now only about 20-30% of rainwater infiltrates the ground in urban areas so it breaks the natural water circulation and causes water logging and surface water pollution,” said Wen in an interview with The Guardian (London).

In Shanghai’s Lingang district, the streets are built with permeable pavements, there are rain gardens filled with soil and plants, buildings feature green rooftops and water tanks, and a manmade lake controls water flows, reports the Guardian.

Prof Hui Li at Tongji University said the first thing to do is to preserve or restore natural waterways as that is the natural way to reduce flooding risk.  In Wuhan, the problem is that a lot of small rivers were filled in during building.  But Lingang still has agriculture land and a lake to hold more water during heavy rain.

What about the cost factor?  So far the Chinese cities have received over US$12 billion for sponge projects. The central government funds 15-20% of costs, the rest is funded by local governments and private developers.

The expenses of the sponge city initiative is not insignificant.  But it is less than the estimated US$100 billion of direct economic losses due to floods in China in 2011-2014, plus the human lives lost.

Other countries besides China have also adopted the sponge city idea. For example, the German capital Berlin is also aiming to become a sponge city. It plans to build vertical forests of trees and plants attached to apartment blocks, among other projects.

Sponge cities are the way to go for the future.  They will be seen to make both environmental and economic sense, as well as improve social conditions, especially as floods get worse due to climate change.  Governments in developing countries should consider this option seriously.

The post Create “Sponge Cities” to Tackle Worsening Floods appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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Critical Issues to Watch in 2018http://www.ipsnews.net/2018/01/critical-issues-watch-2018/?utm_source=rss&utm_medium=rss&utm_campaign=critical-issues-watch-2018 http://www.ipsnews.net/2018/01/critical-issues-watch-2018/#comments Tue, 02 Jan 2018 11:27:44 +0000 Martin Khor http://www.ipsnews.net/?p=153698 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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More than 480 billion plastic bottles were sold in the world in 2016, in 2018 we can expect international cooperation to reduce the use of plastic and how to treat plastic waste. Credit: Athar Parvaiz/IPS

More than 480 billion plastic bottles were sold in the world in 2016, in 2018 we can expect international cooperation to reduce the use of plastic and how to treat plastic waste. Credit: Athar Parvaiz/IPS

By Martin Khor
PENANG, Malaysia, Jan 2 2018 (IPS)

Another new year has dawned, and on a world facing serious disruption on many fronts.  What are the trends and issues to watch out for in 2018?

One obvious answer is to anticipate how Donald Trump, the most unorthodox of American Presidents, will continue to upset the world order.  But more about that later.

Just as importantly as politics, we are now in the midst of several social and environmental trends that have important long-lasting effects.  Some are on the verge of reaching a tipping point, where a long-term trend produces critical and sometimes irreversible events. We may see some of that in 2018.

Who would have expected that 2017 would end with such an upsurge of the movement against sexual harassment? Like a tidal wave it swept away famous or important persons from their posts, including Hollywood producer Harvey Weinstein, film star Kevin Spacey, TV talk-show host Charlie Rose, US Senator Al Franken, and UK Minister Michael Fallon.

The #MeToo movement took years to gather steam, with the 1991 Anita Hill testimony against then US Supreme Court nominee Clarence Thomas being a trailblazer.  It paved the way over many years for other women to speak up until the tipping point was reached last year. In 2018, expect the momentum to continue and in more countries.

 

Clicktivism & Real Life Activism Potent Instruments Against Sexual Violence

Another issue that has been brewing is the rapid growth and effects of digital technology.  Those enjoying the benefits of the smartphone, Google search, Whatsapp, Uber and on-line shopping usually sing its praises and wonder what life would be like without them.

But the “Fourth Industrial Revolution” is like Dr Jekyll and Mr Hyde.  It has many benefits such as more convenience and choice for consumers and higher efficiency and reduced costs for businesses.  But it also has serious downsides, and the debate is now picking up.

First, automation with artificial intelligence can make many jobs redundant.  Uber displaced taxis, and has now booked thousands of driver-less cars which will soon displace its army of drivers.

The global alarm over job losses was sounded a few years ago and is gathering speed.  Scholarly studies warn that as many as half of jobs or work tasks in industries including electronics, automobiles and textiles, and professional services such as accountancy, law and healthcare, will be replaced by robots within one or two decades.

New country-based estimates are being produced. An estimated 44% of jobs in the United Kingdom could feasibly be automated, equating to 13.7 million people who together earn about 290 billion pounds sterling, according to a 28 December 2017 article in The Guardian (London), citing a new study by the UK  think tank IPPR.

In Malaysia, 54% of jobs is at high risk of being displaced by technology in the next 20 years according to a 2017 study by government-owned think-tank Khazanah Research Institute, citing a International Labour Office report.

The global alarm over job losses was sounded a few years ago and is gathering speed. Scholarly studies warn that as many as half of jobs or work tasks in industries including electronics, automobiles and textiles, and professional services such as accountancy, law and healthcare, will be replaced by robots within one or two decades.


Second is a recent chorus of warnings, including by some of digital technology’s creators, that addiction and frequent use of the smartphone are making humans less intelligent (as time and interest traditionally used to acquire broad and in-depth knowledge is now replaced by the narrow skills and short span attention required by social media) and socially deficient (as relations through social media replace direct human relationships).

Third is the loss of privacy, as personal data obtained from our internet use is collected by tech companies like Facebook and Google and sold to advertisers.  The companies have the data on personal details and preferences of millions or even billions of individuals which can be used for commercial, and possibly non-commercial, purposes.

Fourth is the threat of cyber-fraud, other cyber-crimes and cyber-warfare as data from hacked devices can be used to damage computers and websites; empty bank accounts; steal information from governments and companies;  send out false information; and engage in high-tech warfare.

Fifth is the worsening of inequality and the digital divide as those countries and people with little access to digital devices will be left behind or even lose their livelihoods.  The internet can be used by big companies or tech-savvy small and medium sized firms to establish growing markets for their products, which is one of the major attractions of the digital economy.

But firms, individual entrepreneurs and the self-employed that cannot adapt or keep pace with the new internet technologies, or that operate in places that do not even have access to the internet, are unable to take advantage of internet marketing and are also at increasing risk of their business being taken over by the big wave of on-line shopping.

The developing countries will be most badly hit by the inequities of the digital revolution; except for a few, they have much less capacity to gain.  Even in developed countries, the digital revolution will widen the rich-poor gap.  According to the IPPR study, low-paid job-related roles are in greatest danger as automation threatens jobs generating wages worth 290 billion pounds.

The usual response to these points is that people and governments must be prepared to take advantage of the benefits of the digital revolution and offset  the ill effects.  Suggestions include that laid-off workers should be retrained, companies be taught to use e-commerce, and a tax can be imposed on using robots (an idea supported by Microsoft founder Bill Gates).

But the technologies are moving ahead faster than policy makers’ capacity to understand or keep track of them, let alone come up with policies and regulations.

Expect this debate to move from conference rooms to the public arena in 2018, as more technologies are introduced and more effects become evident.

In 2018, the environmental crisis will continue to attract great public concern. On climate change, scientists frustrated by the lack of action, will continue to raise the alarm that the situation is far worse than earlier predicted.

In fact the tipping point may well be reached already.   On 20 December, the United Nations stated that the Arctic has been forever changed by rapidly warming climate.  The Arctic continued in 2017 to warm at double the rate of the global temperature increase, resulting in loss of sea ice, and other effects.  “The Arctic shows no sign of returning to the reliably frozen region it was decades ago,” said the Arctic Report Card authored by 85 scientists.

The Arctic phenomenon is only one of the signs of accelerating global warming.  Last year saw many extreme weather events including hurricanes, tropical storms, wild fires and drought which climate change likely exacerbated; and 2015-2017 have been the three warmest years on record.

The target of limiting global temperature rise to 2 degrees Celsius above pre-industrial levels, a benchmark just two years ago by the IPCC (the UN’s climate change scientific panel) and the Paris Agreement, now seems out of date and a new target of 1.5 degrees will be considered in 2018.

But it is much harder to meet this new target than the existing one, especially since the rise in average global temperature has already passed the 1 degree level.    Will political leaders and the public rise to the challenge, or will this coming year see a wider disconnect between what scientists say needs to be done, and a lack of response, and what will be the impact of the bad example of the US under President Trump?

And will the developing countries get the financial resources and technologies needed by them to take climate action, as pledged as commitments by the developed countries?

 

Credit: UNEP

 

Air pollution has now gained recognition as one of the world’s top killers.  With urban smog proliferating worldwide, including in the two big capital cities of New Delhi and Beijing, a tipping point may have been reached in public consciousness of its threat to human life and health. In 2018, there should be a big jump in policy measures to tackle this danger.

Plastic pollution in the world’s seas and oceans has also reached alarming proportions with the head of the UN environment programme Erik Solheim describing it as “Armageddon in the making” and predicting there will be the same weight of plastic as fish in the seas by 2050 if this continues.

Last year there was a lot of publicity given to this problem, including estimates there were 480 billion plastic bottles in the world in 2016, and we can expect international cooperation to reduce the use of plastic and how to treat plastic waste.

Another issue reaching tipping point is the continuing rise of antibiotic resistance, with bacteria mutating to render antibiotics increasingly ineffective to treat many diseases.   There are global and national efforts to contain this crisis, but these are only beginning in most countries, and far from adequate. Yet there is little time left to act before millions die from once-treatable ailments.

Finally, back to President Trump.  Since he showed last year that his style and policies are disrupting the domestic and global order, and he does seem to  care but even thrives on this, we can expect more of the same or even more shocking pronouncements and measures from him in 2018.

The opposition to his policies from foreign countries will mean little to him. But Trump has many enemies domestically who consider him a threat to the American system.   So long as the Republicans control both houses in the US Congress, the President may feel his position is secure.  But this may change if he commits what is perceived by his Party as a major blunder, or if the Democrats capture enough seats in the mid-term Congressional elections in November.

At this moment, it looks unlikely that a tipping point will be reached regarding Trump’s presidency and we will probably still be discussing what new policies he will unleash, this time next year.  But in politics today, as in other areas, nothing can be really reliably predicted.

The post Critical Issues to Watch in 2018 appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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Goodbye to 2017, a Trump-dominated Yearhttp://www.ipsnews.net/2017/12/goodbye-2017-trump-dominated-year/?utm_source=rss&utm_medium=rss&utm_campaign=goodbye-2017-trump-dominated-year http://www.ipsnews.net/2017/12/goodbye-2017-trump-dominated-year/#respond Thu, 21 Dec 2017 12:56:48 +0000 Martin Khor http://www.ipsnews.net/?p=153666 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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President Donald Trump prepares to address the general debate of the Assembly’s seventy-second session. Credit: UN Photo/Kim Haughton

President Donald Trump prepares to address the general debate of the Assembly’s seventy-second session. Credit: UN Photo/Kim Haughton

By Martin Khor
PENANG, Malaysia, Dec 21 2017 (IPS)

In 2017, Donald Trump dominated the year by using US clout to change many aspects of global relations, and not for the better.

What a year it has been!   As 2017 slips away, and 2018 dawns, many wonder if the world will ever be the same.

Credit or blame goes mainly to United States President Donald Trump for this radical change.  This time last year, after he won the presidential elections, it was a toss-up whether Trump would implement his campaign promises or become a more statesmanlike President.

After all, most election candidates are extreme on the campaign trail to win votes,  then become moderate on assuming office.  Not Trump.  For the past year, he has ruled as if he was catering to his extreme right voter base, with its narrow, anti-foreign and anti-internationalist views.

Trump’s policies have been in line with implementing his America First inauguration slogan, which really meant the America of his voter base, and with the accompanying sentiment, why should we bother about the rest of the world?  And he reached out directly to his base and the world public via a daily dose of tweets.

The new US leadership threatened NATO, paralysed the G7, pulled the US out of the Paris climate agreement, UNESCO and Global Compact on Migration, reduced funding for the United Nations and its agencies, and stopped all funding to the Green Climate Fund.
Many Americans (which increasingly include many Republicans) were aghast.  And the rest of the world received one policy pronouncement after another with a mixture of disappointment, incredulity and outrage.  The list includes insults to traditional allies (Australia, Germany, Canada, Mexico, United Kingdom) and traditional and new foes real or imagined (North Korea, Iran, several Muslim-majority countries whose citizens now can’t enter the US) and with threats to economic rivals especially China but also countries with trade surpluses with the US, whom he labelled “cheaters.”

The new US leadership threatened NATO, paralysed the G7, pulled the US out of the Paris climate agreement, UNESCO and Global Compact on Migration, reduced funding for the United Nations and its agencies, and stopped all funding to the Green Climate Fund.

Trump’s policies were especially worrying for developing countries on trade issues.   He pulled the US out from the TPPA (Trans Pacific Partnership Agreement) and initiated a re-negotiation of NAFTA (North America Free Trade Agreement).

These by themselves may not be a bad thing, if the changes the US want are for the good of all sides, since FTAs involving the US have many serious flaws.  But the evidence is that although most of these FTAs are already biased towards American interests, the Trump administration want to ensure that new US FTAs will have even more benefits going to the US, for example through opening markets even wider for US products and even more stringent intellectual property provisions that favour US corporations.

Trump at first threatened to impose a 30-45 per cent tariff on imports from China and Mexico, but this has not been done (at least not yet). Then the Republican Congress leaders put forward a border adjustment tax scheme (as part of tax reforms) that would place a 20% tax on all imports; this plan was eventually withdrawn after many US companies that rely on imports protested.

The Trump administration then revived its unilateral trade weapon, Section 301 of the US Trade Act 1974, which the US had hardly used since the World Trade Organisation was established.  In August, Trump initiated that an investigation be conducted to see if Section 301 tariff increases should be imposed on China for alleged violation of intellectual property and for requiring US companies to transfer technology.  The use of Section 301 is not in line with WTO rules;  if the US returns to its old bad habit of taking unilateral trade actions, it will open the door to a global trade war.

Just as worrying was the new US attitude towards multilateral trade relations and the WTO.  It showed its contempt for the WTO’s dispute settlement system by blocking replacements for retiring Appellate Body members, thus reducing the WTO’s capacity to arbitrate trade disputes.  It has refused to recognise the work done so far in the Doha work programme, giving the view that Doha is dead, and given notice it wants a revamp of the concept and use of the WTO’s special and differential treatment principle that is so important for developing countries.

 

Southern aerial view of the Temple Mount, Al-Aqsa in the Old City of Jerusalem. Al-Aqsa Mosque is considered to be the third holiest site in Islam after Mecca and Medina. Credit: Godot13. Attribution: Andrew Shiva / Wikipedia / CC BY-SA 4.0. Creative Commons Attribution-Share Alike 4.0 International license.

 

The year is ending with two more shocks. First, Trump announced the US recognises Jerusalem as the capital of Israel, going against the previous US policy, the official UN position and the status quo (where the city is presently shared between Palestine and Israel).  This move, planned by his son-in-law and not the State Department, has been opposed even by US allies.  And it has triggered outrage across the developing world, with protests held in many parts of Palestine (resulting in increasing numbers of deaths and injuries) and other countries.

The new US policy destroyed any remaining hopes, if any, of a solution to the Palestine-Israel conflict in the foreseeable future, and is likely to trigger another tragic round of bloody clashes in a region already fraught with wars.

Second, the US brought its antagonism to the present trading system to the Ministerial conference of the WTO held in the first half of December in Buenos Aires.  Its entrenched position refusing to recognise the WTO’s 16-year-old Doha agenda, or to honour a previous Ministerial commitment to create a permanent solution to a food security issue (known as public stockholding), or to acknowledge the principle and new proposals for special treatment of developing countries, was the main reason why the conference ended without the traditional Declaration and key decisions.  It also leaves the WTO in unchartered territory.

The Trump effect certainly dominated events and trends in 2017.  The biggest fear is that by design or accident or even an insulting tweet, conflict may break out between the US and North Korea, escalating into a nuclear war. If at least this can be avoided, we can thank our lucky stars.  So low have expectations of the world order fallen.

 

Rohingya refugees cross the border into Bangladesh. Credit: Olivia Headon/UN Migration Agency (IOM) 2017

 

The year will also be remembered for the depths of inhumanity inflicted on fellow humans.

Top of the list is the persecution of the Rohingya in Myanmar. Since end-August, about 650,000 Rohingya crossed to Bangladesh to find refuge, at least 6,700 had been killed in the first month (according to a Doctors Without Borders survey) and many of their houses and villages had been burnt.  Despite widespread condemnation, including the top UN human rights official terming this as “elements of genocide”, the future of the Rohingya is both uncertain and bleak.

Natural calamities continued unabated.  Many countries across the world suffered from storms, cyclones and  hurricanes that wreaked destruction (with some Caribbean islands recently experiencing almost total physical and economic wipe-out);   earthquakes caused damage in other countries; forest fires swept across parts of California and elsewhere, and drought affected millions of people in Africa.

We are more and more witnessing the effects of climate change. The warmer atmosphere holds more water vapour, with higher potential for rainfall, while the warming oceans affect weather patterns, resulting in more powerful tropical storms and hurricanes.

But during the year, efforts to counter global warming were still at much too slow a pace. According to a recent report, global Greenhouse Gas emissions are estimated to have risen again in 2017, after a few years of decline.  Details on how to share the burden of transition to a low-carbon world have still to be worked out, and this hampers the speed of environmental action.   The US pulling out of the Paris Agreement and the about-turn in its domestic climate change policies made things worse.

The UNFCCC Conference of Parties session in Bonn in November discussed the details of interpreting the global framework of how countries should implement aspects of the Paris Agreement.  There was some progress, but also evidence that major differences remain, especially on North-South lines.

The global economy performed moderately well in 2017.  The US, Europe and Japan had more positive economic growth, though they have yet to recover from the financial crisis that began in 2008.  China’s economy expanded by near to 7%.   Buoyed by exports, Asian developing countries will attain better-than-expected 6% growth in 2017, according to latest Asian Development Bank estimates.

Some experts are however warning about the massive build-up of debt and predict another bout of domestic and international financial instability, that will also manifest in volatility in capital flows and foreign exchange rates.  So whether the 2017 momentum can be sustained, or whether 2018 will witness a bursting of the economic bubble, is unclear.

But that’s not the only thing that is unclear.  As the year ends, and a new year begins, there is great uncertainty in many areas and issues in the world.

 

The post Goodbye to 2017, a Trump-dominated Year appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Action Needed to Avoid the End of Modern Medicinehttp://www.ipsnews.net/2017/12/action-needed-avoid-end-modern-medicine/?utm_source=rss&utm_medium=rss&utm_campaign=action-needed-avoid-end-modern-medicine http://www.ipsnews.net/2017/12/action-needed-avoid-end-modern-medicine/#respond Tue, 05 Dec 2017 18:19:25 +0000 Martin Khor http://www.ipsnews.net/?p=153332 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Antibiotic resistance is rising to dangerously high levels in all parts of the world, threatening our ability to treat common infectious diseases

Unregulated sales of antibiotics are contributing to growing resistance. Credit: Adil Siddiqi/IPS

By Martin Khor
PENANG, Malaysia, Dec 5 2017 (IPS)

The next time you have a bad cold and reach for the antibiotics left over from your last visit to the doctor, think again.

Firstly, the antibiotics won’t work as they only act against bacteria while the cold is caused by a virus.

Secondly, you will be contributing to the arguably the world’s gravest health threat – antibiotic resistance.

The wrong use and over-use of antibiotics is one of the main causes why they are becoming increasingly ineffective against many diseases, including pneumonia, tuberculosis, blood disorders, gonorrhoea and foodborne diseases.

While an effective antibiotic kills most of the targeted germs, a few may survive and develop resistance which can spread to other bacteria that cause the same infection or different infections.  The rate of resistance and its spread can increase if antibiotics are wrongly or over used, and they then become increasingly ineffective to treat bacterial infections.

When a new global financial crisis strikes, the developing countries will be more damaged than in the last crisis as they have become less resilient and more vulnerable. They thus need to prepare from being overwhelmed, says Martin Khor

Martin Khor, Executive Director of the South Centre

Global health leaders are now ringing the alarm bell.  “Antimicrobial resistance is a global health emergency,” warned the World Health Organisation’s Director-General Tedros Adhanom Ghebreyesus.   “The world is facing an antibiotic apocalypse,” said the United Kingdom’s Chief Medical Officer Dame Sally Davies.  “It may spell the end of modern medicine.”

Warns the WHO:  “Antibiotic resistance is rising to dangerously high levels in all parts of the world.  New resistance mechanisms are emerging and spreading globally, threatening our ability to treat common infectious diseases…Without urgent action, we are heading for a post-antibiotic era, in which common infections and minor injuries can once again kill.”  (WHO Fact Sheet on antibiotic resistance, Nov. 2017).

These warnings were highlighted on World Antibiotics Awareness Week on 13-19 November when activities were held in many countries.

Antibiotic resistance is part of the wider phenomenon of anti-microbial resistance (AMR), which includes resistance of bacteria, fungi, viruses and parasites to medicines.

About 700,000 people die annually due to antimicrobial resistant infections, and this is estimated to rise to 10 million deaths a year by 2050 if action is not taken, with a cumulative economic cost of US $100 trillion, according to a 2016 review on AMR sponsored by the UK government.

A key tipping point was reached recently when it was found that some bacteria had evolved to be resistant to colistin, the antibiotic of last resort which is used on a patient when all other antibiotics are found ineffective.

Antibiotic resistance is rising to dangerously high levels in all parts of the world. New resistance mechanisms are emerging and spreading globally, threatening our ability to treat common infectious diseases…Without urgent action, we are heading for a post-antibiotic era, in which common infections and minor injuries can once again kill.

WHO Fact Sheet on antibiotic resistance, Nov. 2017
In 2016, researchers in China found colistin-resistant E. coli bacteria in 20 per cent of animals, 15 per cent of raw meat and 1 per cent of hospital patients that were sampled.  The colistin resitance gene (mcr-1) could easily be transferred among different bacteria.

Malaysia was also one of the first countries where scientists found colistin-resistant bacteria.  “Since the publication of our findings, mcr-1 gene has been found in many other countries,” said Associate Professor Dr Chan Kok Gan of University Malaya.  “This is a frightening scenario and the whole world should sit up and take action to prevent further abuse of antibiotics.”

If this resistance continues to spread, colistin will become less and less effective and we will eventually lose the “antibiotic of last resort.”

The colistin story also carries another lesson.  It is widely thought that resistance is due to over-use of antibiotics by consumers or the spread of infections caused by resistant bacteria to patients in hospitals.

However resistance is also spread through the agriculture sector and the food chain, as shown in the study on colistin in China.

In many countries, much of the antibiotics used (80 per cent in the case of the United States) are fed in farms to animals as growth promoters, to make them grow fatter and faster, as well as to prevent or treat diseases.

Resistant bacteria build up in the animals and are present in raw meat.  Some of these bacteria are passed on to humans when they eat the meat.

In Malaysia, the Department of Veterinary Services in 2012  found that half of the domestic chickens tested had bacteria that were resistant to three types of antibiotics (ampicillin, sulphonamide, tetracycline), as cited in a memorandum by the Consumers’ Association of Penang.

The environment is another source of the spread of resistance.  Residues and wastes containing resistant bacteria flow from farms and hospitals and contaminate soils, drainage systems, rivers and seas.  Some of these bacteria find their way to humans.

The European Union banned the use of antibiotics as growth promoters in animal feed in January 2006 while the US started action to phase them out in December 2013.

In most developing countries, little action has so far been taken. Hopefully that will start to change.  In November 2017, the World Health Organisation issued its first ever guidelines on the use of antibiotics in food-producing animals.

“Scientific evidence demonstrates that overuse of antibiotics in animals can contribute to the emergence of antibiotic resistance,” said WHO’s Food Safety Director, Dr Kazuaki Miyagishima.

 

Antibiotic resistance is rising to dangerously high levels in all parts of the world, threatening our ability to treat common infectious diseases

Misuse of antibiotics and risks. Credit: WHO

 

A WHO-sponsored study published in The Lancet Planetary Health in November 2017 found that interventions that restrict antibiotic use in food-producing animals reduced antibiotic-resistant bacteria in these animals by up to 39%, according to a WHO press release.

The research paper (authored by William Ghali and 10 other scientists), reviewed thousands of studies, and selected 179 relevant ones, to find if there is an association between interventions that restrict antibiotic use and reduction in the prevalence of antibiotic-resistant bacteria in animals and in humans.

The key findings are that:

  • “Overall, reducing antibiotic use decreased prevalence of antibiotic-resistant bacteria in animals by about 15% and multidrug-resistant bacteria by 24-32%.”
  • The evidence of effect on human beings was more limited but showed similar results, “with a 24% absolute reduction in the prevalence of antibiotic-resistant bacteria in humans with interventions that reduce antibiotic use in animals.”

This study influenced the development of the WHO’s new  guidelines, which are aimed at influencing policy makers in the agriculture and health sectors.   According to a WHO press release, the guidelines include:

  • An overall reduction in the use of all classes of medically important antibiotics in food-producing animals.
  • Complete restriction of these antibiotics for growth promotion and for disease prevention without diagnosis.
  • Healthy animals should only receive antibiotics to prevent disease if it has been diagnosed in other animals in the same flock or herd or fish population.
  • Antibiotics used in animals should be from the WHO list as “least important” to human health and not from “highest priority critically important.”

In 2015, Health Ministers attending the World Health Assembly adopted a Global Plan of Action on anti-microbial resistance, and they agreed that each country should prepare national action plans by 2017.

Since there are many sources of antibiotic resistance, the national effort must include not only the health authorities but also those responsible for agriculture and the environment.

The health authorities should take action to control the spread of infections (including in hospitals), carry out surveillance of antibiotic resistance, introduce and implement regulations and guidelines on proper prescriptions, ethical marketing of drugs and rational drug use.

The agriculture authorities should phase out inappropriate use of antibiotics for animals, especially for growth promotion, while the environment authorities should prevent resistant bacteria and genes from contaminating soils, drainage systems, rivers and seas.

There should be campaigns to make the public aware of the dangers of wrongly using antibiotics and that they should not demand that doctors give them antibiotics unnecessarily.

The medical profession should adhere to guidelines on the proper use of antibiotics, while drug companies should not push for maximum sales but instead advocate prudent use of their antibiotics in both the health or animal sectors.

These are the more obvious actions that need to be taken and urgently if we are to succeed in slowing down the alarming rate of antibiotic resistance.   If we fail, it may well be “the end of modern medicine”, as the health leaders and the scientists have warned us.

The post Action Needed to Avoid the End of Modern Medicine appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Prepare Now for the Next Financial Crisishttp://www.ipsnews.net/2017/07/prepare-now-next-financial-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=prepare-now-next-financial-crisis http://www.ipsnews.net/2017/07/prepare-now-next-financial-crisis/#respond Sat, 22 Jul 2017 20:24:08 +0000 Martin Khor http://www.ipsnews.net/?p=151403 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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The developing countries went through the 2008 financial crisis without much harm, because of certain conditions, which no longer exist. Credit: Bigstock

The developing countries went through the 2008 financial crisis without much harm, because of certain conditions, which no longer exist. Credit: Bigstock

By Martin Khor
PENANG, Malaysia, Jul 22 2017 (IPS)

The Asian financial crisis started 20 years ago and the global financial crisis and recession 9 years back. When a new global financial crisis strikes, the developing countries will be more damaged than in the last crisis as they have become less resilient and more vulnerable.  They thus need to prepare from being overwhelmed.

A debate is taking place as to whether the time is now ripe for a new crisis.  Most economists and commentators think not, as an economic recovery, admittedly weak, appears to be taking place in developed economies.

On the surface, the present situation seems quite good.  The US stock market continues to hit new highs, and the head of the Federal Reserve recently testified the US economy is robust and job growth is good.

There has been a rebound of foreign capital flows to emerging economies in the first half of 2017, after two years of outflows.

The G20 leaders focused on climate change, trade and disagreements with the United States in their Hamburg summit, and seemed complacent about the world’s economic condition; they didn’t worry about any looming crisis.

But below the surface calm, the waters are boiling and churning.  As Shakespeare wrote in his play Hamlet:  “Something is rotten in the state of Denmark.”

Whether the deep-seated problems boil over shortly into full-blown crisis, or continue to fester for some time more, is hard to predict.  But the world economy is in trouble.

Amidst a weak global economy recovery, many serious risks remain, wrote  Martin Wolf, the Financial Times’ chief economics commentator, on 5 July.

“The possibly greatest danger is a collapse in global cooperation, perhaps even an outbreak of conflict,” he said.  “That would destroy the stability of the world economy on which all depend…

“We in the high-income countries allowed the financial system to destabilise our economies.  We then refused to use fiscal and monetary stimulus strongly enough to emerge swiftly from the post-crisis economic malaise.

When a new global financial crisis strikes, the developing countries will be more damaged than in the last crisis as they have become less resilient and more vulnerable. They thus need to prepare from being overwhelmed, says Martin Khor

Martin Khor

“We failed to respond to the divergences in economic fortunes of the successful and less successful.  These were huge mistakes.  Now, as economies recover, we face new challenges: to avoid blowing up the world economy, while ensuring widely shared and sustainable growth.  Alas, we seem likely to fail this set of challenges.”

The Star (Malaysia) on 12 July reported that the possibility of the US Federal Reserve raising interest rates and reducing its balance sheet of US$4.5 trillion is causing regional stock markets and currencies to fall and funds to flow out of the region.

Is this another blip that will be corrected soon, or the start of a turn of the boom-bust cycle in capital flows to and from emerging markets?

A comprehensive and in-depth analysis of the global economic situation and how it affects developing countries is given in a recent paper by the South Centre’s chief economist Yilmaz Akyuz, assisted by Vicente Yu.

The US and Europe have wrongly managed the aftermath of the 2008 crisis by policies that will have very adverse effects on most developing countries, according to the paper, “The financial crisis and the global South:  impact and prospects.”   (South Centre Research Paper 76;)

The developing countries went through the 2008 crisis without much harm, because of certain conditions, which no longer exist.

Meanwhile, these countries have recently built  up new and dangerous vulnerabilities which expose them to serious damage when the next crisis strikes.

It is thus imperative that the developing countries review their precarious situation and act to protect their economies to the extent possible to reduce the effects of the new turmoil.

It is thus imperative that the developing countries review their precarious situation and act to protect their economies to the extent possible to reduce the effects of the new turmoil.
Akyuz says the post-2018 crisis has moved in a third wave to several emerging economies after having swept from the US to Europe. A central reason is the wrong crisis response policies of the US and Europe.

“There are two major shortcomings:  the reluctance to remove the debt overhang through orderly restructuring, and fiscal orthodoxy,” adds Akyuz.

“These resulted in excessive reliance on monetary policy, with central banks going into uncharted waters including zero and negative interest rates and rapid liquidity expansion through large bond acquisitions.

“These policies not only failed to secure a rapid recovery but also aggravated the global demand gap by widening inequality and global financial fragility by producing a massive build-up of debt and speculative bubbles.  They have also generated strong deflationary and destabilising spillovers for developing economies.”

When a new crisis comes, developing countries will be harder hit than in 2008.  Their resilience to external shocks is now weak, due to three factors.

First, many developing economies deepened their integration into the international financial system, resulting in new vulnerabilities and high exposure to external shocks.

Their corporations built up massive debt since the crisis, reaching US$25 trillion (95% of their GDP);  and dollar-denominated debt securities issued by emerging economies jumped from $500 billion in 2008  to $1.25 trillion in 2016, carrying interest rate and currency risks.

Moreover, foreign presence in local financial markets reached unprecedented levels, increasing their susceptibility to global financial boom-bust cycles.

Second, the current account balance and net foreign asset positions of many developing countries have significantly deteriorated since the crisis.  In most countries, foreign reserves built up recently came from capital inflows rather than trade surpluses.  They are inadequate to meet large and sustained capital outflows.

Third, the countries now have limited economic policy options to respond to adverse developments from abroad.  Their “fiscal space” for counter-cyclical policy response to deflationary shocks is much more limited than in 2009;  they have significantly lost monetary policy autonomy and lost control over interest  rates due to their deepened global financial integration; and flexibile exchange rate regimes are no panacea in the face of financial shocks.

“Most developing economies are in a tenuous position similar to the 1970s and 1980s when the booms in capital flows and commodity prices ended with a debt crisis as a result of a sharp turnaround in US monetary policy, costing them a decade in development,”  warns Akyuz.

It would be hard for some of them to avoid international liquidity or even debt crises and loss of growth in the event of severe financial and trade shocks.

Unfortunately, the South has not been effective in reflecting on these problems nor in taking collective action.

Global reforms are required to prevent the major countries from transmitting the effects of their wrong policies to developing countries; and global mechanisms are needed to prevent and manage financial crises.

There have been many proposals for reform in the past but hardly any action taken due to opposition from developed countries.

“Now the stakes are too high for developing countries to leave the organisation of the global economy to one or two major economic powers and the multilateral institutions they control,” concludes Akyuz.

If his wide-ranging analysis is correct, then the crisis that started in 2008 will enter more dangerous territory due to new factors fanning the flames.

The underlying  causes are known, but what is yet unknown is the specific event that will trigger and ignite a new phase of the crisis, and when that will happen.

When the new crisis takes place, developing countries will in a less fortunate position to ride through it compared to 2008, so there is ever less reason for complacency.

Each country should analyse its own strong and weak spots, its vulnerabilities to external shocks, and prepare actions now to mitigate the crisis in advance, rather than wait for it to happen and overwhelm its economy.

The post Prepare Now for the Next Financial Crisis appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post Prepare Now for the Next Financial Crisis appeared first on Inter Press Service.

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The Asian Financial Crisis — 20 Years Laterhttp://www.ipsnews.net/2017/07/asian-financial-crisis-20-years-later/?utm_source=rss&utm_medium=rss&utm_campaign=asian-financial-crisis-20-years-later http://www.ipsnews.net/2017/07/asian-financial-crisis-20-years-later/#comments Wed, 05 Jul 2017 15:55:50 +0000 Martin Khor http://www.ipsnews.net/?p=151166 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

By Martin Khor
PENANG, Malaysia, Jul 5 2017 (IPS)

It’s been 20 years since the Asian financial crisis struck in July 1997.   Since then there has been an even bigger global financial crisis, centred in the United States starting in 2008.  Will there be another crisis in the near future?

The Asian crisis began when speculators brought down the Thai baht, making fortunes in the process.  Within months, the currencies of Indonesia, South Korea and Malaysia were also affected.  The crisis was to turn the East Asian Miracle into an Asian Financial Nightmare.

Despite all the accolades showered onto the East Asian emerging economies before the crisis, weaknesses had built up in the affected countries, including current account deficits, low foreign reserves and high external debt.

In particular, in a few years before the onset of the crisis, the countries liberalised their financial system, in line with the international advice provided at that time.  This enabled local private companies to freely borrow from abroad and in foreign currency, mainly US dollars.   Companies and banks in Korea, Indonesia and Thailand had rapidly accumulated over a hundred billion dollars of external loans in each country, prompted by these loans’ lower interest rates compared to the local rates.   This was the Achilles Heel that led their countries to crisis.

The Asian financial crisis began in July 1997 when speculators brought down the Thai baht, making fortunes in the process

Martin Khor

These weaknesses made the countries ripe for hedge funds and other speculators to bet against their currencies.  When the value of the local currency devalued very significantly against the US dollar, and when governments spent their already low reserves in a vain attempt to stem the currency fall, three of the countries ran out of foreign exchange to service their external loans.

They went to the International Monetary Fund for bail out loans that carried draconian conditions including high interest rates, drastic cuts in government spending, no bailouts of failing banks and companies, whilst allowing continued freedom for capital to exit.   These IMF policies worsened their economic situation, leading to recession, job retrenchments and bank and corporate bankruptcies, besides the loss of economic sovereignty. Protestors in Korea held signs:  “IMF equals I Am Fired!”

Malaysia was the fortunate country that did not have to seek IMF loans.  The country’s foreign reserves had gone to a dangerously low level but it was still adequate to finance imports and service foreign debt.  If the ringgit had been allowed to fall a bit further, the danger line would have been breached.

After a year of self-imposed austerity measures, Malaysia dramatically switched course and introduced a set of unorthodox policies.  These included pegging the ringgit to the dollar, selective capital controls to prevent short-term funds from exiting, lowering interest rates, boosting bank loans, increasing government spending and rescuing failing companies and banks.

This was opposite to the prevailing economic orthodoxy and the IMF policies imposed on the other three countries, and the global establishment predicted the sure collapse of the Malaysian economy.

But surprisingly the economy recovered, even faster and with less losses than the other countries.  In fact the IMF had to relax some of its conditions on the other countries to avoid their performance being poorly compared to Malaysia’s.  Today the Malaysian measures (or some of them at least) are cited as examples of a successful anti-crisis strategy.

The Asian crisis two decades ago taught the lesson that over-borrowing in foreign currency like the US dollar is dangerous for a country as it may face difficulties in servicing the debt if the local currency falls; more money in local currency would then have to be forked out to repay the same volume of US-dollar debt.
The IMF itself has changed, a little.  For example it now includes some capital controls as part of legitimate policy measures in certain situations.

The Asian countries, vowing never to have to go to the IMF again, built up strong current account surpluses and foreign reserves to protect against bad years and keep off speculators.   The economies recovered, but not back to the spectacular 7 to 10 per cent pre-crisis growth rates.

In 2008, the global financial crisis erupted, with the United States as its epicentre.  The tip of the iceberg was the collapse of Lehman Brothers and the massive loans given out to house-buyers that were not credit-worthy, thus the term “sub-prime crisis.”

The underlying cause was the deregulation of US finance and the freedom with which financial institutions could devise all kinds of shady “financial products” to draw in investors and unsuspecting customers.   They made many billions of dollars with all the layers of financial intermediation and manipulative schemes, but with the Lehman collapse the house of cards came tumbling down.

To fight the crisis, the United States, under President Barrack Obama, embarked first on expanding government spending and when that had its political limits he relied on financial policies of near-zero interest rates and “quantitative easing”, with the Federal Reserve pumping trillions of dollars into the US banking system.

It was hoped that the easy availability of huge and cheap credit would get consumer and businesses to spend and lift the economy.  But that only partly happened.   Instead, a significant portion of the trillions went via investors into speculative activities, including abroad to emerging economies.

Europe, on the verge of recession, followed the US with near zero (in some cases below zero) interest rates and large quantitative easing, with limited positive results.

The US-Europe financial crisis affected Asian countries too, but in only a limited way.  The main effect was on trade, with declines in export growth and commodity prices, as demand fell in Western markets.

The large foreign reserves built up after the Asian crisis plus the current account surplus situation acted as buffers against external debt problems and kept speculators at bay.

Just as important, hundreds of billions of dollars of funds annually poured from developed countries into emerging economies in Asia and other regions, in search of higher yield since interest rates in the originating countries were very low.

These massive capital inflows helped to give a boost to the Asian countries’ economic growth but have resulted in problems of their own.  First, they lead to asset bubbles, or rapid price increases of houses and the stock markets, and the bubbles may burst when they are over-ripe.

Second, the inflows may only cause short-term relief rather than being long-term solutions.  Much of the funds are short-term portfolio investors looking for quick profit, and they can be expected to leave when conditions change, such as a rise in interest rates in the US making that market now more attractive.

Third, the countries receiving capital inflows have thus built up new vulnerabilities to financial volatility and economic instability.  If and when investors pull some or a lot of their money out, there may be problems including price declines, inadequate replenishment of bonds, decline in currency and foreign reserves.   A few countries potentially face a new financial crisis.

A new vulnerability in many emerging economies is the rapid build-up of external debt in the form of bonds denominated in the local currency.

The Asian crisis two decades ago taught the lesson that over-borrowing in foreign currency like the US dollar is dangerous for a country as it may face difficulties in servicing the debt if the local currency falls; more money in local currency would then have to be forked out to repay the same volume of US-dollar debt.

To avoid this, many countries sold bonds denominated in the local currency to foreign investors, so that the repayment will be predictable and stable in terms of the local currency, thus avoiding the risk of a change in the foreign exchange.

However if the bonds held by foreigners are large in value, the country will still be vulnerable to the effects of a withdrawal when conditions change, such as a rise in US interest rates or a crisis in a major emerging country that changes investor perception of emerging-market risk.

As an example, almost half of Malaysian government securities, denominated in ringgit (the local currency) is held by foreigners, the result of the wave of capital inflows in recent years.  Though the country does not face the risk of having to pay more in ringgit if there is a fall in the local currency, it will may still face difficulties if foreigners suddenly withdraw a lot of their bonds.

What is the state of the world economy and what are the chances of a new financial crisis?  Big and relevant questions to ponder over, 20 years after the start of the Asian crisis and nine years after the global crisis.   But we will have to consider them in another article.

 

The post The Asian Financial Crisis — 20 Years Later appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post The Asian Financial Crisis — 20 Years Later appeared first on Inter Press Service.

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US Pull-out from Paris Deal: What it Meanshttp://www.ipsnews.net/2017/06/us-pull-out-from-paris-deal-what-it-means/?utm_source=rss&utm_medium=rss&utm_campaign=us-pull-out-from-paris-deal-what-it-means http://www.ipsnews.net/2017/06/us-pull-out-from-paris-deal-what-it-means/#comments Mon, 05 Jun 2017 10:42:40 +0000 Martin Khor http://www.ipsnews.net/?p=150737 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Trump indicated the US is open to re-negotiating the Paris agreement. But European leaders quickly responded there is no such possibility. Credit: Diego Arguedas Ortiz/IPS

Trump indicated the US is open to re-negotiating the Paris agreement. But European leaders quickly responded there is no such possibility. Credit: Diego Arguedas Ortiz/IPS

By Martin Khor
PENANG, Malaysia, Jun 5 2017 (IPS)

By withdrawing the United States from the Paris Agreement, President Donald Trump abdicated not only leadership but membership of the community of nations cooperating to tackle climate change, the most serious crisis facing humanity.

Trump’s announcement was shocking, even though it was not unexpected.

It was shocking for showing the extreme lengths to which the President would go to deny scientific opinion on climate change and defy the position of almost all other countries, on an issue that may well determine the fate of the Earth and human civilisation.

The decision was against the advice of most members of his inner-most circle of advisors, many corporate leaders, and the other G7 leaders who spent an entire frustrating day in Sicily trying to explain to him the critical importance of the Paris deal.

Just as disturbing as the withdrawal was Trump’s speech justifying it.  He never acknowledged the seriousness or even the existence of the climate change crisis, which poses the gravest threat to human survival.   He lamented that Paris would hinder US jobs, mentioning coal in particular while ignoring the jobs in renewable energy that would increase manifold if the US adopted an energy policy to counter global warming.

Martin Khor

Martin Khor

His main grouse was that the Paris agreement was “unfair” to the US vis-à-vis all other countries, as if it had been designed specifically to cheat the US.  And he grumbled that the US would have to pay billions of dollars to developing countries through the Green Climate Fund.

The speech was riddled with many misconceptions and factual errors, which many scientists, politicians and NGOs are now busy refuting.

Condemnation came fast and furious from within the US and around the world.  A notable comment came from John Kerry, former Secretary of State under Obama:  “He’s made us an environmental pariah in the world….It may be the most self-defeating action in American history.”

Trump indicated the US is open to re-negotiating the Paris agreement.   But European leaders quickly responded there is no such possibility.  The UNFCCC secretariat correctly pointed out that a single country cannot decide on a re-negotiation.

Indeed, it would require a consensus of its 195 members to make amendments to the Paris Agreement or even agree to a re-negotiation.

That will not happen, as the agreement is a delicately balanced outcome which took many years of long and complicated negotiations to achieve.  To re-negotiate it would in effect be kill it.

The best response to the Trump decision is for others to resolve to do even more to combat climate change.  In the US itself, many states and cities have announced they will form an alliance and continue with their climate actions.

Condemnation came fast and furious from within the US and around the world. A notable comment came from John Kerry, former Secretary of State under Obama: “He’s made us an environmental pariah in the world….It may be the most self-defeating action in American history.”
An increasing number of countries including China, India, Germany, France, Italy and Canada as well as the European Union leadership have announced they will honour their Paris commitments despite the US pull-out.   There are no signs, so far at least, that any other country intends to follow the US out of Paris.

Indeed the Trump decision to leave Paris will be a milestone marking a huge loss of international prestige, influence and power to the US.   In a world so divided by ideology, inequality and economic competition, the Paris agreement was one rare area of global consensus and cooperation, on climate change.

For the US to pull out of that hard-won consensus is a shocking abdication not only of leadership but of its membership of the community of nations in its joint effort to face up to perhaps its gravest challenge of survival.

The lack of appreciation of this great crisis facing humanity and the narrow-mindedness of his concerns was embarrassingly evident when Trump made his withdrawal speech.  He was more interested to revive the sunset coal sector than in the promise of the fast developing renewable energy industries.

He was convinced reducing emissions would cost millions of jobs, ignoring the record of many countries like Germany that have de-coupled emissions growth from economic growth.  He was miserly towards poor countries which are receiving only a fraction of what they were promised and what they need for climate mitigation and adaptation, while celebrating hundreds of billions of dollars worth of new deals for his armaments industry.

He complained that the US is asked to do more than others in the Paris agreement when in fact the US has the highest emissions per capita of any major country and its pledged rates of emissions reduction are significantly lower than Europe’s.   He saw the speck in everyone else’s eyes while totally oblivious to the beam in his own.

Just as alarming as withdrawing from Paris is Trump’s comprehensive dismantling of Obama’s climate change policies and measures.   This will make the US unable to meet the target it chose under the Paris agreement:  a cut in emissions by 26-28 per cent by 2025 compared to the 2005  level.   The gap between the US target (which is already unambitious compared to what the science requires and compared to the European Union) and the expected higher emissions levels influenced by Trump’s policies, will worsen the global shortfall in emission reduction.

What will now happen in the UN climate convention, home to the Paris agreement?   The negotiations to establish the guidelines for countries to implement of the agreement will continue in the years ahead.

A complication is that the US has to wait three years from November 2016 (when the agreement came into effect) before withdrawing from Paris and then wait another year for this to come into effect.

The US will thus still be a member of the Paris agreement for the rest of Trump’s present term, although he announced he will not implement the Paris target that Obama had committed to. This defiance will likely have a depressing impact on other countries.

By also being still a member, the US could play a non-cooperative or disruptive role during the negotiations on many topics.  We can anticipate that the US will challenge principles or actions that have already been accepted or that are to be transformed into actions,  such as common but differentiated responsibilities to be operationalized in all areas;  equal and balanced treatment for mitigation and adaptation;  providing adequate financial resources for developing countries;  transparency of actions and of finance; and technology transfer.

Since the Trump has already made clear the US wants to leave Paris, and no longer subscribes to its emissions pledges (nationally determined contributions) nor will it meet its US$3 billion pledge on the Green Climate Fund, it would be strange to enable the country to still behave in the negotiations with the same status as other members that remain committed to their pledges.   How to deal with this issue is important so that the UNFCCC negotiations are not disrupted in the four years ahead.

Finally, the Trump portrayal of developing countries like India and China as profiting from the US membership of the Paris Agreement is truly unfair.

China is the number one emitter of carbon dioxide in absolute terms, with the US second and India third.   But this is only because the two developing countries have huge populations of over a billion each.

In per capita terms, carbon dioxide emissions in 2015 were 16.1 tonnes for the US, 7.7 tonnes for China and 1.9 tonnes for India, according to one authoritative estimate.  It would be unfair to ask China and India to have the same mitigation target as the US, especially since the US has had the benefit of using or over-using more than their fair share of cheap fossil-fuel energy for over a century more than the other two countries.

A recent New York Times editorial (22 May 2017) compared the recent performance of India and China with the recent actions of the US under President Trump.  It states:  “Until recently, China and India have been cast as obstacles…in the battle against climate change.   That reputation looks very much out of date now that both countries have greatly accelerated their investments in cost-effective renewable energy sources — and reduced their reliance on fossil fuels.  It’s America – Donald Trump’s America – that now looks like the laggard.”

It cites recent research that China and India should easily exceed their Paris agreement targets, with China’s emissions appearing to have peaked more than 10 years sooner (than pledged) and India expected to obtain 40% of its electricity from non-fossil fuel sources by 2022, eight years ahead of schedule.   It criticises the Trump administration for destroying Obama’s initiatives based on his Paris pledge to reduce America’s greenhouse gases.

“China and India are finding that doing right by the planet need not carry a big economic cost and can actually be beneficial,” said the editorial.   “By investing heavily in solar and wind, they and other countries like Germany have helped drive down the cost of those technologies where in many places renewable energy can generate electricity more cheaply than dirtier sources like coal.

“China has reduced coal use for three years in a row and recently scrapped plans to build more than 100 coal power plants.  Indian officials have estimated that country might no longer need to build new coal plants beyond those already under construction….There are of course formidable challenges….Still, Beijing and New Delhi – not embarrassingly enough, Washington – are showing the way forward.”

By withdrawing from the Paris agreement and through his reversal of Obama’s climate change policies, President Trump has taken the US and the world many big steps backwards in the global fight against global warming.  It will take some time for the rest of the world to figure out how to carry on the race without or despite the US.  Hopefully the absence of the US will only be for a few years.

 

The post US Pull-out from Paris Deal: What it Means appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Global Climate Policy in an Uncertain State of Fluxhttp://www.ipsnews.net/2017/05/global-climate-policy-in-an-uncertain-state-of-flux/?utm_source=rss&utm_medium=rss&utm_campaign=global-climate-policy-in-an-uncertain-state-of-flux http://www.ipsnews.net/2017/05/global-climate-policy-in-an-uncertain-state-of-flux/#comments Mon, 08 May 2017 12:27:49 +0000 Martin Khor http://www.ipsnews.net/?p=150337 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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What would happen if the US leaves the Paris agreement? It would be a big blow to global cooperation, especially since the US is the top emitter after China, and is also by far a bigger emitter per capita than China and most other countries. Credit: Bigstock.

What would happen if the US leaves the Paris agreement? It would be a big blow to global cooperation, especially since the US is the top emitter after China, and is also by far a bigger emitter per capita than China and most other countries. Credit: Bigstock.

By Martin Khor
PENANG, Malaysia, May 8 2017 (IPS)

Global climate change policy is in a state of flux, with all other countries waiting for the United States to decide whether to leave or remain in the Paris Agreement.

That treaty, adopted by 195 countries with great fanfare in December 2015 and  came into force in November 2016, symbolizes the efforts of governments to cooperate to avert disastrous global warming that threatens human survival.

On 29 April, the 100th day of Donald Trump’s presidency, thousands marched in Washington and other cities in the US and around the world to protest against the administration’s about-turn in climate policy.

Trump signed an executive order at the end of March unraveling former President Barrack Obama’s clean power plan, the centerpiece of his policy to reduce emissions causing global warming.  The plan would have closed hundreds of coal-fired power plants and replaced them with new wind and solar farms.

Further reflecting the policy changes, the Environmental Protection Agency last week removed climate change information from its website, saying it would be undergoing changes to better reflect the administration’s priorities.

Martin Khor

Martin Khor

The UN Framework Convention on Climate Change is now meeting for two weeks in Bonn to discuss rules to follow up on the Paris Agreement. Uppermost in the minds of the thousands of delegates and NGOs will be the uncertainty caused by the new US position.

Trump is expected to soon announce if the US will exit the Paris Agreement.  The administration is split, with one camp (that includes EPA chief Scott Pruitt and Trump’s chief strategist Steve Bannon) wanting the US to quit while others (including Secretary of State Rex Tillerson, and Trump’s son-in-law and advisor Jared Kushner) advocate that the US remains.

The big change in US climate policy comes at a very bad time. Last month, the concentration of carbon dioxide in the atmosphere for the first time reached 410 ppm (parts per million) in the Mauna Loa observatory in Hawaii.

The level was 280 ppm in 1958 and passed 400ppm in 2013.  We are inching closer to the 450 ppm danger level at which there is only a 50% chance of keeping global temperature rise to 2 degrees celsius.

The year 2016 is the hottest on record.  Many recent signs of climate change effects include sea level rise; changes in rainfall; more flooding, storms, and drought in different parts of the world; and the melting of glaciers.

The hard-fought Paris Agreement has many flaws, but it is an important achievement. One drawback is that the mitigation pledges made by countries fall far short of limiting warming to 1.5 or 2 degrees.  Instead they would bring about 2.7 to near 4 degree temperature rise, according to various estimates, and the effects would be catastrophic.

The agreement also does not contain concrete commitments or plans by developed countries to assist developing countries to tackle climate change.  There remains the old promise to jack up climate finance to $100 billion a year by 2020, but no road map on how to get there, nor even an agreed definition of what constitutes North-to-South climate financing.

There is also little left of the old commitment to transfer climate technology to developing countries.  And while there is interest to help developing countries to curb their emissions (which is known as mitigation), there is less appetite to help them cope with the effects of climate change (which is termed adaptation and loss and damage).

Despite these deficiencies, the Paris Agreement has positive aspects which make it an important treaty. Almost all countries made pledges to take concrete actions. While participation is thus widespread, differences in obligations as between developed and developing countries remain in the Paris agreement, in line with the Climate Convention.

The agreement mandates that developed countries make greater efforts than developing countries on mitigation, and they are also obliged to provide climate funds to developing countries.

Most important, the Paris agreement is a symbol and manifestation of international cooperation to tackle the climate crisis. Although the overall level of ambition is too low, the agreement has mechanisms to urge members to increase the ambition in both mitigation and in assistance to developing countries in future.

There might however be a situation of the worst of both worlds: The US announces it is quitting, thus already damaging global cooperation, then plays a spoiler’s game inside, since it will still be a member for four more years.
Without a Paris agreement, there would be no global framework or action plan for the coming decades. The world would be adrift even as the crisis worsens.

What would happen if the US leaves the Paris agreement?  It would be a big blow to global cooperation, especially since the US is the top emitter after China, and is also by far a bigger emitter per capita than China and most other countries.

There is also a fear of a contagion effect. Some other countries may follow the US and quit the agreement too.

In an opinion article, former UN Secretary General Ban Ki moon and Harvard University professor Robert Stavins have strongly argued that the US must stay inside the Paris agreement, for the sake of the world and for its own interests.

They also point out that even if Trump decides the pull the US out, this withdrawal will only take effect after four years, due to the rules of the agreement.

They add that if the US wants a quicker exit, it can quit the Climate Convention, under which the Paris agreement is established. This exit will take effect after a year. But if it leaves the Convention, the US would really become a “pariah” and thus it is unlikely to do so.

In any case, the US will still be a member of the Paris agreement during the rest of Trump’s present term.

It is unlikely to be a passive member, whether or not it gives notice to exit from Paris.  There is a growing consensus among Trump’s advisers that the US can’t stay in the Paris agreement unless it negotiates new terms, according to a report in Politico.

While it it is impossible to renegotiate the Paris deal, Trump’s officials are ‘discussing leveraging the uncertainty over the U.S. position to boost the White House’s policy priorities in future discussions,’ said the article.

If this happens, the effect may be really adverse.  Since the US will be in the Paris agreement for the next four years at least, it may use this period to weaken further the already low level of ambition of its own actions as well as those of other countries.

The US will also try to weaken or eliminate the commitments of developed countries to support the developing countries. Trump has already made clear there will be no more US contributions to the Green Climate Fund.

It will also dampen any discussions on how climate financing can be jacked up in the years ahead towards the promised $100 billion by 2020.

Some people have argued it may better if the US leaves the Paris agreement and that prevents it from discouraging all the others that remain from taking action.

There might however be a situation of the worst of both worlds: The US announces it is quitting, thus already damaging global cooperation, then plays a spoiler’s game inside, since it will still be a member for four more years.

It was thus heartening that US citizens are protesting against their government’s climate change policies.

It is also important for people and governments in the rest of the world to strengthen their resolve to fight climate change, rather than to relax now that the US leadership is refusing to do its part.

The best solution would be for the US to remain in the Paris agreement, and go along with other countries to meet and improve on their pledges and enable international cooperation to thrive.

That is not going to happen. So we may have to wait at least four years before another US administration rejoins the rest of the world to tackle climate change.  Let’s hope it will not be really too late by then to save the world.

 

The post Global Climate Policy in an Uncertain State of Flux appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Trump’s First 100 Days: a Serious Cause for Concernhttp://www.ipsnews.net/2017/04/trumps-first-100-days-a-serious-cause-for-concern/?utm_source=rss&utm_medium=rss&utm_campaign=trumps-first-100-days-a-serious-cause-for-concern http://www.ipsnews.net/2017/04/trumps-first-100-days-a-serious-cause-for-concern/#comments Mon, 24 Apr 2017 10:37:56 +0000 Martin Khor http://www.ipsnews.net/?p=150108 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post Trump’s First 100 Days: a Serious Cause for Concern appeared first on Inter Press Service.

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With one of the world’s largest emitters of greenhouse gases becoming a disbeliever that climate change is man-made and could devastate the Earth, and no longer committing to take action domestically and helping others to do so, other countries may be tempted or encouraged to do likewise. Credit: Cam McGrath/IPS

With one of the world’s largest emitters of greenhouse gases becoming a disbeliever that climate change is man-made and could devastate the Earth, and no longer committing to take action domestically and helping others to do so, other countries may be tempted or encouraged to do likewise. Credit: Cam McGrath/IPS

By Martin Khor
PENANG, Apr 24 2017 (IPS)

This week, Donald Trump will mark his first hundred days as US President.  It’s time to assess his impact on the world, especially the developing countries.

It’s too early to form firm conclusions.  But much of what we have seen so far is of serious concern.

Recently there have been many U-turns from Trump. Trump had indicated the US should not be dragged into foreign wars but on 6 April he attacked Syria with missiles, even though there was no clear evidence to back the charge that the Assad regime was responsible for using chemical weapons.

Then his military dropped what is described as the biggest ever non-nuclear bomb in a quite highly-populated district in Afghanistan.

Critics explain that this flexing of military might be aimed at the domestic constituency, as nothing is more guaranteed to boost a President’s popularity and prove his muscular credentials than bombing an enemy.

Perhaps the actions were also meant to create fear in the leaders of North Korea.  But North Korea threatens to counterattack by conventional or nuclear bombs if it is attacked by the US, and it could mean what it says.

Martin Khor

Martin Khor

Trump himself threatens to bomb North Korea’s nuclear facilities.  With two leaders being so unpredictable, we might unbelievably be on a verge of a nuclear war.

As the Financial Times’ commentator Gideon Rachman remarked, there is the danger that Trump has concluded that military action is the key to the “winning” image he promised his voters.

“There are members of the president’s inner circle who do indeed believe that the Trump administration is seriously contemplating a ‘first strike’ on North Korea.  But if Kim Jong Un has drawn the same conclusion, he may reach for the nuclear trigger first.”

The New York Times columnist Nicholas Kristof says the most frightening nightmare is of Trump blundering into a new Korean war.  It could happen when Trump destroys a test missile that North Korea is about to launch, and the country might respond by firing artillery at Seoul (population: 25 million).

He cites Gen. Gary Luck, a former commander of American forces in South Korea, as estimating that a new Korean war could cause one million casualties and $1 trillion in damage.

Let us all hope and pray that this nightmare scenario does not become reality.

This may be the most unfortunate trend of the Trump presidency.  Far from the expectation that he would retreat from being the world policeman and turn inward to work for “America First”, the new President may find that fighting wars or at least unleashing missiles and bombs in third world countries may “make America great again”.

This may be easier than winning domestic battles like replacing former President Obama’s health care policy or banning visitors or refugees from seven Muslim-majority countries, an order that has been countered by the courts.

But the message that people from certain groups or countries are not welcome in the US is having effect: recent reports indicate a decline in tourism and foreign student applications to the US.

Another flip-flop was on NATO.  Trump condemned it for being obsolete, but recently hailed it for being “no longer obsolete”, to his Western allies’ great relief.

Another note-worthy but welcome about-turn was when the US President conceded that China is after all not a currency manipulator.  On the campaign trail, he had vowed to name China such a manipulator on day 1 of his presidency, to be followed up with imposing a 45% tariff on Chinese products.

Trump continues to be obsessed by the US trade deficit, and to him China is the main culprit, with a $347 billion trade surplus versus the US.

The US-China summit in Florida on 7-8 April cooled relations between the two big powers. “I believe lots of very potentially bad problems will be going away,” Trump said at the summit’s end.

The two countries agreed to a proposal by Chinese President Xi Jinping to have a 100-day plan to increase US exports to China and reduce the US trade deficit.

For the time being the much anticipated US-China trade war is off the radar.  But it is by no means off altogether.

Trump has moved to shred Obama’s climate change policy. He proposed to cut the budget of the Environmental Protection Agency (EPA) by 31% and eliminate climate change research and prevention programmes throughout the federal government. The EPA, now led by a climate change skeptic, was ordered to revise its standards on tailpipe pollution from vehicles and review the Clean Power Plan, which was the centrepiece of Obama’s policy to reduce carbon dioxide emissions.
Trump has asked his Commerce Secretary Wilbur Ross to prepare a report within 90 days on the US’ bilateral trade deficits with its trading partners, and whether any of them is caused by dumping, cheating, subsidies, free trade agreements, currency misalignment and even unfair WTO rules.

Once Trump has the analysis, he will be able to take action to correct any anomalies, said Ross.

We can thus expect the Trump administration to have a blueprint on how to deal with each country with a significant trade surplus with the US.

If carried out, this would be an unprecedented exercise by an economic super-power to pressurise and intimidate its trade partners to curb their exports to and expand their imports from the US, or else face action.

During the 100-day period, Trump did not carry out his threats to impose extra tariffs on Mexico and China.  He did fulfil his promise to pull the US out of the TPPA but he has yet to show seriousness about revamping NAFTA.

A threat to the trade system could come from a tax reform bill being prepared by Republican Congress leaders.  The original paper contains a “trade adjustment” system with the effect of taxing US imports by 20% while exempting US exports from corporate tax.

If such a bill is passed, we can expect a torrent of criticism from the rest of the world, many cases against the US at the WTO and retaliatory action by several countries.   Due to opposition from several business sectors in the US, it is possible that this trade-adjustment aspect could eventually be dropped or at least modified considerably.

In any case, as the new US trade policy finds its shape, the first 100 days of Trump has spread a cold protectionist wind around the world.

On another issue, the icy winds have quickly turned into action, and caused international consternation.

Trump has moved to shred Obama’s climate change policy.  He proposed to cut the budget of the Environmental Protection Agency (EPA) by 31% and eliminate climate change research and prevention programmes throughout the federal government.

The EPA, now led by a climate change skeptic, was ordered to revise its standards on tailpipe pollution from vehicles and review the Clean Power Plan, which was the centrepiece of Obama’s policy to reduce carbon dioxide emissions.

The plan would have shut down hundreds of coal-fired power plants, stop new coal plants and replace them with wind and solar farms.

“The policy reversals also signal that Mr Trump has no intention of following through on Mr Obama’s formal pledges under the Paris accord,” said Coral Davenport in the New York Times.

Under the Paris agreement, the US pledged to reduce its greenhouse gases by about 26% from 2005 levels by 2025.  “That can be achieved only if the US not only implements the Clean Power Plan and tailpipe pollution rules but also tightens them or adds more policies in future years,” says Davenport.

She quotes Mario Molina, a Nobel prize-winning scientist from Mexico, as saying:  “The message clearly is, we won’t do what the United States has promised to do…They don’t believe climate change is serious.  It is shocking to see such a degree of ignorance from the US.”

Will the US pull out of the Paris Agreement?  An internal debate is reportedly taking place within the administration.  If the country cannot meet and has no intention of meeting its Paris pledge, then it may find a convenient excuse to leave.

Even if it stays on, the new US delegation can be expected to discourage or stop other countries from moving ahead with new measures and actions.

There is widespread dismay about Trump’s intention to stop honouring the US pledge to contribute $3 billion initially to the Green Climate Fund, which assists developing countries take climate actions.

Obama had transferred the first billion, but there will be no more forthcoming from the Trump administration unless Congress over-rules the President (which is very unlikely).

Another adverse development, especially for developing countries, is Trump’s intention to downgrade the importance of international and development cooperation.

In March Trump announced his proposed budget with a big cut of 28% or $10.9 billion for the UN and other international organisations, the State Department and the US agency for international development, while by contrast the proposed military budget was increased by $54 billion.

For the time being the much anticipated US-China trade war is off the radar.  But it is by no means off altogether. Credit: Bigstock

For the time being the much anticipated US-China trade war is off the radar. But it is by no means off altogether. Credit: Bigstock

At about the same time, the UN humanitarian chief Stephen O’Brien urgently requested a big injection of donor funds to address the worst global humanitarian crisis since the end of the second world war, with drought affecting 38 million people in 17 African countries.

The US has for long been a leading contributor to humanitarian programmes such as the World Food program.  In future, other countries will have to provide a greater share of disaster assistance, said Secretary of State Rex Tillerson.

“The US is turning inward at a time when we are facing these unprecedented crises that require increasing US assistance,” according to Bernice Romero of Save the Children, as quoted in the Los Angeles Times.  “In 2016 the US contributed $6.4 billion in humanitarian assistance, the largest in the world.  Cutting its funding at a time of looming famine and the world’s largest displacement crisis since World War II is really unconscionable and could really have devastating consequences.”

Trump also proposed to cut the US contribution to the UN budget by an as yet unknown amount and pay at most 25% of UN peacekeeping costs.  The US has been paying 22% of the UN’s core budget of $5.4 billion and 28.5% of the UN peacekeeping budget of $7.9 billion.  Trump also proposed a cut of $650 million over three years to the World Bank and other multilateral development banks.

The foreign affairs community in the US itself is shocked by the short-sightedness of the Trump measures and 121 retired US generals and admirals urged Congress to fully fund diplomacy and foreign aid as these were critical to preventing conflict.

The proposed Trump budget will likely be challenged at the Congress which has many supporters for both diplomacy and humanitarian concerns.  We will have to wait to see the final outcome.

Nevertheless the intention of the President and his administration is clear and depressing.   And instead of other countries stepping in to make up for the United States’ decrease in aid, some may be tempted to likewise reduce their contributions.

For example, the United Kingdom Prime Minister Teresa May in answer to journalists’ questions refused to confirm that the UK would continue its tradition of providing 0.7% of GNP as foreign aid.

This has led the billionaire and philanthropist Bill Gates to warn that a cut in UK aid, which currently is at 12 billion pounds, would mean more lives lost in Africa.

Besides the reduction in funding, the Trump foreign policy approach is also dampening the spirit and substance of international cooperation.

For example, the President’s sceptical attitude towards global cooperation on climate change will adversely affect the overall global efforts to reduce greenhouse gas emissions and build resilience to global warming.

With one of the world’s largest emitters of greenhouse gases becoming a disbeliever that climate change is man-made and could devastate the Earth, and no longer committing to take action domestically and helping others to do so, other countries may be tempted or encouraged to do likewise.

The world would be deprived of the cooperation it urgently requires to save itself from catastrophic global warming.

The post Trump’s First 100 Days: a Serious Cause for Concern appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post Trump’s First 100 Days: a Serious Cause for Concern appeared first on Inter Press Service.

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Reflections on World Health Dayhttp://www.ipsnews.net/2017/04/reflections-on-world-health-day/?utm_source=rss&utm_medium=rss&utm_campaign=reflections-on-world-health-day http://www.ipsnews.net/2017/04/reflections-on-world-health-day/#respond Thu, 13 Apr 2017 16:04:27 +0000 Martin Khor http://www.ipsnews.net/?p=149952 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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The tension between monopoly for patent holders (usually the big drug companies) and access to medicines for all has become acute and there are social movements around the world, both in developing and developed countries, that are fighting for patient’s rights and against excessive monopolies by companies. Credit: Bigstock

The tension between monopoly for patent holders (usually the big drug companies) and access to medicines for all has become acute and there are social movements around the world, both in developing and developed countries, that are fighting for patient’s rights and against excessive monopolies by companies. Credit: Bigstock

By Martin Khor
PENANG, Apr 13 2017 (IPS)

What’s the most precious thing in the world which unfortunately we take for granted and realise it true value when it is impaired? Good health, of course.

That’s something many people must have reminded themselves as they celebrated World Health Day on 7 April.

Attaining good health and well-being may be a top priority goal, but achieving it is elusive for almost everyone, and next to impossible for the poor.

In the 1980s, the World Health Organisation’s Director-General Halfdan Mahler steered through a declaration with the popular slogan ‘Health for All by the year 2000’.

We crossed into the 21st century without realising that noble goal. Although health has improved in most countries, due mainly to cleaner water and sanitation, but also due to better treatment, much remains to be done.

In recent years, the slogan ‘Health for All’ has been strengthened by the recognition in the United Nations of health as a human right.  It has been further boosted by the adoption of the principle of universal healthcare.

This means that no one should be deprived of health care even they are too poor to afford it.  Unfortunately, while the prices of old medicines whose patents have expired have gone down, there are many newer medicines which are too expensive for the ordinary person to afford.

That’s because a company that owns the patent has a monopoly over the production and sale of the medicine. Since there are no competitors, the price can be skyrocketed to high or to even astronomical levels.  The patent normally lasts 20 years.

Martin Khor

Martin Khor

For example, the prices of medicines for HIV AIDs had been at the level of US$15,000 per person per year in the United States.  For most AIDS patients in Africa and other developing countries this meant they could just not afford them.

Since those medicines were not yet patented in India, because India had until 2005 to implement the TRIPs Agreement of the World Trade Organisation, an Indian drug company CIPLA, was able to sell and distribute a three-in-one combination drug for about US$300 per person per year. Later, the price levels of the generic producers fell further to about US$60.

Millions of lives around the world were saved by competitor generic companies which could sell the medicines at a more affordable price. Health agencies like the Global Fund for AIDS, TB and Malaria were set up to and took advantage of the falling prices to make AIDS medicines available to poor countries.

In recent years a similar storm has been brewing over the prices of new drugs for Hepatitis C, a life-threatening disease which millions around the world suffer from. One of the drugs is Sofosbuvir, which has an efficacy rate of 95% and with fewer side effects, but is being sold in the US for about US$85,000.

Some generic companies in India have been allowed by the patent-holding company to produce and sell it at their own price level, which is currently around US$200-400 per patient for a course of treatment. They sell these drugs in India and in lower income countries at these much cheaper prices.

But they are not allowed by the patent holder to sell in most middle income countries, so almost two billion people in developing countries cannot have the medicine at the affordable price.

 

What can be done?

Whist the TRIPs Agreement mandates that patents have to be granted for genuine inventions, countries are also allowed to issue a compulsory licence or a government use licence to import or manufacture generic versions of the patented drug, if the original medicine is found to be too expensive.  Thus those countries taking this action can access affordable generic drugs.

The patent owner will receive a remuneration (usually a percentage of sales revenue) from the generic company or the government that is selling the generic product.

Countries can also carefully examine companies’ application for patents and reject those that are not genuine inventions, for example if a new patent is applied for a product with just a different dosage or the use of the same drug for another disease.

The prices of medicines for HIV-AIDS had been at the level of US$15,000 per person per year in the United States. For most AIDS patients in Africa and other developing countries this meant they could just not afford them

In reality, there are many new medicines already in existence or coming on stream that are patented and therefore out of reach of most patients. This tension between monopoly for patent holders (usually the big drug companies) and access to medicines for all has become acute and there are social movements around the world, both in developing and developed countries, that are fighting for patient’s rights and against excessive monopolies by companies.

Another interesting recent development is the recognition that too much sugar consumed can lead to and has led to an epidemic of many ailments, such as obesity, heart problems, diabetes. The authorities in more and more countries are taking action to limit the sugar content for example of soft drinks. The WHO has guidelines on sugar consumption and on how to avoid excessive sugar in many foods, especially those taken by children.

For world health day, consumers should resolve to cut down on sugar in their drinks and food.

An emerging threat that endangers human life is the resistance of bacteria and other pathogens to antibiotics and other antimicrobials.

Many antibiotics can no longer work on an increasing number of patients in a wide range of ailments, including TB, malaria, gonorrhoea and stomach ailments. Diseases that were once easily cured are now developing resistance, meaning the drugs don’t work anymore.

We have stark warnings from top public health offices like the WHO Director General Margaret Chan and the United Kingdom’s Chief Medical Office Dame Sally Davies, that we are approaching a post antibiotic era. In the future, even a simple scratch on a child’s knee or infection during surgery could lead to death, according to these officials.

Last September, political leaders meeting at the UN General Assembly pledged to take serious action to deal with antibiotic resistance. A coordinating group from UN agencies and selected individuals has been formed to review the situation and to recommend further action.

Finally, the World Health Assembly May this year will be electing a new Director General for the WHO. There are three candidates from Pakistan, Ethiopia and the United Kingdom. May the successful candidate do a superb job in addressing all the ailments, diseases and problems in world health.

 

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The post Reflections on World Health Day appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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The Robots are Coming, your Job is at Riskhttp://www.ipsnews.net/2017/03/the-robots-are-coming-your-job-is-at-risk/?utm_source=rss&utm_medium=rss&utm_campaign=the-robots-are-coming-your-job-is-at-risk http://www.ipsnews.net/2017/03/the-robots-are-coming-your-job-is-at-risk/#respond Wed, 15 Mar 2017 11:23:54 +0000 Martin Khor http://www.ipsnews.net/?p=149421 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Credit: John Greenfield/Flickr

Credit: John Greenfield/Flickr

By Martin Khor
PENANG, Mar 15 2017 (IPS)

Last year Uber started testing driver-less cars, with humans inside to make corrections in case something goes wrong. If the tests go well, Uber will presumably replace their present army of drivers with fleets of the new cars.

Some personally owned cars can already do automatic parking.   Is it a matter of time before Uber, taxi and personal vehicles will all be smart enough to bring us from A to B without our having to do anything ourselves?

But in this application of “artificial intelligence”, in which machines can have human cognitive functions built into them, what will happen to jobs?   It is estimated that in the US alone, 4 to 5 million drivers of trucks and taxis could be rendered unemployed.

The driver-less vehicle is just one example of the technological revolution that is going to drastically transform the world of work and living.

The risk of automation to jobs in developing countries is estimated to range from 55 to 85 per cent, according to a study in 2016 by Oxford University’s Martin School and Citi. Major emerging economies will be at high risk, including China (77%) and India (69%), higher than the OECD developed countries’ average risk of 57%.
There is concern that the march of automation tied with digital technology will cause dislocation in many factories and offices, and eventually lead to mass unemployment.

Just a day before he left office, former US President Barrack Obama warned in a farewell interview that “jobs are going away because of automation and that’s going to accelerate,” pointing to “driverless Uber” and “displacement that’s going to take place in office buildings across the country.”

Also voicing concern about the social impact of automation, Microsoft founder Bill Gates recently proposed that governments should impose a tax on robots.  Companies using robots should have to pay taxes on the incomes attributed to the use of robotics.

That proposal has caused an uproar, with mainstream economists like Lawrence Summers, a former US treasury secretary, condemning it for putting brakes on technological advancement.  One critic suggested that the first company to pay taxes for causing automation should be Microsoft.

However, the tax on robots idea is one response to growing fears that the automation revolution will increase inequality as many lose their jobs while a few reap the benefits of increased productivity and profitability.

The new technologies will cause uncontrollable disruption and add to the social discontent and political upheaval in the West which had fuelled the anti-establishment votes for Brexit and Donald Trump.

Recent studies are showing that deepening use of automation will cause widespread disruption in many sectors and even whole economies.  Worse, it is the developing countries that are estimated to lose the most, and this will exacerbate the already great global inequalities.

The risk of automation to jobs in developing countries is estimated to range from 55 to 85 per cent, according to a study in 2016 by Oxford University’s Martin School and Citi.  Major emerging economies will be at high risk, including China (77%) and India (69%), higher than the OECD developed countries’ average risk of 57%.

The Oxford-Citi report, “The future is not what it used to be”, provides many reasons why the automation revolution will be particularly disruptive in the developing countries.

First, there is “premature deindustrialisation” taking place as manufacturing is becoming less labour-intensive and many developing countries have reached the peak of their manufacturing jobs.  Manufacturing processes are more automated today, also in low and middle income developing countries.

Martin Khor

Martin Khor

Second, while 20th century technologies allowed companies to shift production abroad to take advantage of cheap labour, recent developments in robotics and additive manufacturing now enable firms to locate production closer to domestic markets in automated factories.

Seventy per cent of clients surveyed believe automation and 3D printing developments will encourage companies to move their manufacturing close to home.  China, ASEAN and Latin America have the most to lose from this relocation, while North America, Europe and Japan are the main winners.

Thirdly, “the impact of automation may be more disruptive for developing countries, due to lower levels of consumer demand and limited social safety nets” as compared to the developed countries, according to a summary of the Oxford Martin School report.

The report warns that developing countries may even have to rethink their overall development models as the old ones that were successful in generating growth in the past will not work anymore.

“In the light of these technological developments, industrialization is likely to yield substantially less manufacturing employment in the next generation of emerging economies than in the countries preceding them.  Hence it will be increasingly difficult for African and South American manufacturing firms to create jobs in the same numbers that Asian countries have done.  In other words, today’s low-income countries will not have the same possibility of achieving rapid growth by shifting workers from farms to higher-paying factory jobs.”

Instead of export-led manufacturing growth, developing countries will need to search for new growth models, said the report.  “Service-led growth constitutes one option, but many low-skill services are now becoming equally automatable.”

It cites a World Bank report showing developing countries are highly susceptible to their workforce being affected by increasing automation, even relative to advanced economies where labour costs are high.

Moreover, countries with lower levels of GDP per capita typically have a higher share of their workforce “at risk”.   “Thus there are reasons to be concerned about the future of income convergence, as low income countries are relatively vulnerable to automation,” concludes the report.

Another series of reports, by McKinsey Global Institute, found that 49% of present work activities can be automated with currently demonstrated technology, and this translates into US$15.8 trillion in wages and 1.1 billion jobs globally.

About 60% of all occupations could see 30% or more of their activities automated and 5% of jobs can be entirely automated.  But more reassuringly an author of the report James Manyika says the changes will take decades.   How automation affects jobs will not be decided simply by what is technically feasible.   Other factors include economics, labour markets, regulations and social attitudes.

Which jobs are most susceptible to be affected?  While most people think they would be in manufacturing, in fact many jobs in services will also be disrupted.   The McKinsey study lists accommodations and food services as the most vulnerable sector in the US, followed by manufacturing and retail business.

In accommodations and food, 73% of activities workers perform can be automated, including preparing, cooking or serving food; cleaning food-preparation areas, preparing beverages and collecting dirty dishes.

In manufacturing, 59% of all activities can be automated, especially physical activities or operating machinery in a predictable environment.  Activities range from packaging products to loading materials on production equipment to welding to maintaining equipment.

For retailing, 53% of activities are automatable.  They include stock management, packing objects, maintaining sales records, gathering customer and product information, and accounting.

A technology specialist writer and consultant, Shelly Palmer, has also listed elite white-collar jobs that are at risk from “robots” which she defines as technologies, such as machine learning algorithms running on purpose-built computer platforms, that have been trained to perform tasks that currently require humans to perform.

Those she assessed would be displaced include middle managers, salespersons, report writers, journalists and announcers, accountants, bookkeepers and doctors.

While some analysts are enthusiastic about the positive effects of the automation revolution, others are alarmed by its adverse effects.

Certainly, the technological trend will improve productivity per worker that remains, and increase the profitability of companies that survive.

While there are benefits at the micro level for those companies and individuals that thrive in the new environment, there are adverse effects at macro level, especially retrenchment for those whose jobs are no longer needed.

What can be done to slow down automation or at least to cope with its adverse effects?

The Bill Gates proposal to tax robots is one of the most radical.   The tax could slow down the technological changes and the funds generated by the tax could be used to mitigate the social effects.

Another radical idea which is generating a lot of debate is to provide “universal income” to everyone irrespective of whether they are working.  The high productivity will allow everybody to be paid a comfortable income, and thus there is no need to worry that automation will displace jobs.

Governments can also take the attitude of “join them if you can’t beat them.”  For example, China is seeing major opportunities in joining the technological revolution and has drawn up plans to invest in robotics and artificial intelligence.

Other more conventional proposals include upgrading the education of students and present employees to take on the new jobs required in managing or working with the automated production process, and training workers to be made redundant with the new skills needed to work in the new environment.

Overall, however, there is likely to be a net loss of employment, at least in the short term, and thus the potential for social discontent.

As for the developing countries in general, there will have to be much thinking of the implications of the new technologies for their immediate and long-term economic prospects, and a major rethinking of economic and development strategies is also called for.

The post The Robots are Coming, your Job is at Risk appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Avoid Patent Clauses in Trade Treaties that can Kill Millionshttp://www.ipsnews.net/2017/02/avoid-patent-clauses-in-trade-treaties-that-can-kill-millions/?utm_source=rss&utm_medium=rss&utm_campaign=avoid-patent-clauses-in-trade-treaties-that-can-kill-millions http://www.ipsnews.net/2017/02/avoid-patent-clauses-in-trade-treaties-that-can-kill-millions/#comments Mon, 27 Feb 2017 14:12:29 +0000 Martin Khor http://www.ipsnews.net/?p=149133 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Credit: Bigstock

Credit: Bigstock

By Martin Khor
PENANG, Feb 27 2017 (IPS)

Recently a very interesting article on why there are inequalities in access to health care and how  medicine prices are beyond the reach of many people was published in The Lancet, one of the most prestigious medical journals in the world.

The authors, who are eminent experts in development and public health, pinpointed trade and investment agreements for being one of the greatest health threats.

Reading their powerful commentary leads one to think:  What’s the point of having wonderful medicines if most people on Earth cannot get to use them?   And isn’t it immoral that medicines that can save your life can’t be given to you because the cost is so high?

The article picks on the Trans-Pacific Partnership (TPP), together with the Transatlantic Trade and Investment Partnership (TTIP) as the worst culprits.  It says the TPP’s chapter on intellectual property is “particularly intrusive to health and restricts access to the latest advances in medicines, diagnostic tools and other life-saving medical technologies.”

Martin Khor

Martin Khor

This agreement, say the authors, contains many provisions that “strengthen patent protection that provides monopolies and inevitably leads to high prices.”   They mention provisions that extend the patent terms beyond 20 years required by the WTO; lower the criteria of what can be granted  patents; and “data exclusivity” provisions that put up barriers to generic manufacturers entering markets after the expiry of patents.

This viewpoint article was co-authored by Prof Desmond McNeill (University of Oslo), Dr Carolyn Deere (Oxford University); Prof Sakiko Fukuda-Parr (The New School, New York, and formerly the main author of the UNDP’s Human Development Report for many years), Anand Grover (Lawyers Collective India and formerly the Human Rights Council’s Special Rapporteur for the Right to Health); Prof Ted Schrecker (Durham University, UK) and Prof David Stuckler (Oxford University).

They said that growing evidence suggests that the agreements “will have major and largely negative consequences for health that go far beyond earlier trade agreements.  This situation is particularly disturbing since the agreements have created blueprints for future trade agreements.”

The Nobel Peace Prize winning medical group, Medecins Sands Frontieres (MSF), is even more scathing in its criticism.  “The TPP represents the most far-reaching attempt to date to impose aggressive intellectual property standards that further tip the balance towards commercial interests and away from public health….  In developing countries, high prices keep lifesaving medicines out of reach and are often a matter of life and death.”

This condemnation is just as relevant despite President Donald Trump withdrawing the United States from the TPP. There are efforts underway for the remaining 11 countries to put the TPP into effect without the US.

Moreover, these countries have prepared changes to their laws and policies to comply with the TPP’s provisions, and may implement these even if the TPP actually never comes into effect.

This would be an immense tragedy for public health, because most of these countries did understand that the chapter on intellectual property would have negative effects, but they accepted it as part of a bargain for getting better market access, especially to the US.

Since the TPP is now in suspension, it does not make any sense for the countries to change their patent laws when the benefit of market access is no longer available.

During the TPP negotiations, the other countries managed to dilute some of the very extreme demands of the US, but only to a small extent.  The final intellectual rights chapter still reflects the extreme proposals of the US.

With the TPP in limbo and perhaps in perpetual suspension, there is really no reason why the provisions that have adverse effects should be implemented in the countries that had negotiated the TPP, when there are no benefits to be obtained to offset them.
Moreover, the major developed countries can be expected to make use of the TPP’s intellectual property chapter to inject into negotiations for new trade agreements, for example the RCEP, the Asian regional agreement.

Negotiators, especially from developing countries, and civil society groups should thus be vigilant that the TPP’s provisions that have adverse effects on health are not reproduced in other trade agreements.

Members of the World Trade Organisation are required to implement its intellectual property agreement, known as TRIPS, but they are not obliged to take on any additional obligations.

There are many provisions in TRIPS that allow a country to choose policies that are pro-health.  The TPP has clauses that prevent a country from making use of many of these options because they are “TRIPS-plus”, going beyond what the TRIPS obligations.

First, there is a TPP provision that lowers the standards a country can adopt to grant a patent.  Some patent applications are not for genuine inventions but are only made to “evergreen” a patent, to enable its term to continue after it expires.  Under TRIPS, a country can choose not to grant secondary patents for modifications of existing medicines.

The TPP (Article 18.3) requires countries to grant patents for at least one of the following modifications:  new uses of a known product, new methods for using a known product or new processes for using a known product.  Examples include a drug used for treating AIDS is now granted a new patent for treating hepatitis, or a drug in injection form is given a new patent in capsule form.

Second, a provision that enables extending the patent term beyond the 20 years required by TRIPS.   Most countries now count this 20 years from the date of filing the patent application.

The TPP requires the patent term to be extended beyond that if there are “unreasonable” delays in issuing the patents (Article 18.46) or if a delay is caused by the marketing approval process.”  (Article 18.48).     Extending the patent term means delaying affordable treatment for patients for so many more years.

Third, a provision (Article 18.50)  to create “data exclusivity” or “market exclusivity”, that prevents drug safety regulators from using existing clinical trial data to give market approval to generic drugs or biosimilar drugs and vaccines.   Under TRIPS, the clinical test data of a company can be used by a country’s drug regulatory authority as a basis to give safety or efficacy approval for generic drugs with similar characteristics, thus facilitating the growth and use of generic drugs.

Under the TPP, the data of the original company is “protected” and approval of similar drugs on the basis of such data is not allowed.  The period of “exclusivity” is at least 5 years for products containing a new chemical entity, or 3 years for modifications (a new indication, new formulation or new method of administration) of existing medicines.

Fourth, a provision on Biologics (Article 18.51).  For the first time in a trade agreement, the TPP  obliges its members to undertake data protection obligations for “biologics”, a category of products for treating and preventing cancer, diabetes and other conditions.  They are very expensive, some priced above $100,000 for a treatment course, and the clause will enable the prices to remain high for longer periods.   The exclusivity for biologics is for at least 8 years, or 5 years if other measures are also taken.

These provisions on exclusivity give drug companies extra protection, even if the product is not patented or if the patent has expired.  The drugs will be out of reach except for the very wealthy for longer periods.

Fifth, a provision (Article 18.76) that requires TRIPS-plus extra enforcement of intellectual property.  Countries are obliged to provide that the right holder can apply to detain any imported product that is suspected to be  counterfeit or having “confusingly similar trademark”.

This can block legitimate generic medicines from entering the country.   There have already been many cases of drugs being detained and later released when no infringement was found, thus needlessly delaying treatment to patients. The provision will increase the incidence.

All in all, these TRIPS-Plus TPP obligations would make it more difficult for patients to obtain cheaper generics. If these clauses are widely adopted in other trade agreements and made into national laws, this would shorten the lives of millions of people who would be denied treatment.

For example, many millions of people worldwide are afflicted with Hepatitis C, which can lead to liver failure and death. They need the new medicines that have nearly 100% cure rates close but the prices are over $80,000  for a 12-week treatment course.  Even with discounts, very few can afford this.

Some developing countries, making use of TRIPS flexibilities, are able to provide treatment with generic drugs at around $500 per patient, a very small fraction of the original drug’s price. But if the TPP clauses are translated into domestic law, this access could be blocked.

People in the developing countries are the most affected by patent over-protection, but patients in developed countries are not spared. The mainstream Time magazine in October 2016 listed the need to “Reform the Patent Process” as one of the issues the US Presidential election should address.

The Time article commented that many people believe drug companies are “gaming” the system.  “Instead of focusing on developing new cures, they are spending millions tweaking the way existing drugs are administered or changing their inactive ingredients.  Those moves have the effect of extending a drug’s patent and upping the amount of time it can be sold at monopoly prices, but they don’t necessarily help consumers.”

It is high time for a re-think to the system of drug patents.  At the least the situation should not be allowed to worsen further, which would happen if TRIPS-Plus measures are adopted.

The lives and health of millions are at stake.  Sometimes this is forgotten or put as a low priority when pitted against the promise of getting more exports in a free trade agreement.

But with the TPP in limbo and perhaps in perpetual suspension, there is really no reason why the provisions that have adverse effects should be implemented in the countries that had negotiated the TPP, when there are no benefits to be obtained to offset them.

More generally, in all countries, policy makers and people should be on guard not to agree to TRIPS-plus clauses in the trade agreements that they negotiate or sign.

The post Avoid Patent Clauses in Trade Treaties that can Kill Millions appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post Avoid Patent Clauses in Trade Treaties that can Kill Millions appeared first on Inter Press Service.

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The Planned US Border Tax Would Most Likely Violate WTO Rules – Part 2http://www.ipsnews.net/2017/02/the-planned-us-border-tax-would-most-likely-violate-wto-rules-part-2/?utm_source=rss&utm_medium=rss&utm_campaign=the-planned-us-border-tax-would-most-likely-violate-wto-rules-part-2 http://www.ipsnews.net/2017/02/the-planned-us-border-tax-would-most-likely-violate-wto-rules-part-2/#respond Fri, 17 Feb 2017 15:52:20 +0000 Martin Khor http://www.ipsnews.net/?p=148999 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post The Planned US Border Tax Would Most Likely Violate WTO Rules – Part 2 appeared first on Inter Press Service.

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The tax on US imports, without the same being applied to US-made products, discriminates against foreign products, and US exports being exempted from taxes is tantamount to being an export subsidy. How will this be taken at the WTO, the guardian of the multilateral trading system? Credit: Amantha Perera/IPS

The tax on US imports, without the same being applied to US-made products, discriminates against foreign products, and US exports being exempted from taxes is tantamount to being an export subsidy. How will this be taken at the WTO, the guardian of the multilateral trading system? Credit: Amantha Perera/IPS

By Martin Khor
PENANG, Feb 17 2017 (IPS)

As American lawmakers and the Trump administration prepare the ground for introducing a border adjustment tax, many controversial issues have emerged, including whether they go against the rules of the World Trade Organisation (WTO).

The border tax is part of the overhaul of the US corporate tax system proposed by Republican Congress leaders and appears to have the support of President Donald Trump.

If adopted, the tax measure is sure to attract the opposition of the United States’ trading partners, as their exports to the US will have the equivalent of a 20% tax imposed on them, whereas the exports from the US will be exempted from a 20% corporate tax.

The tax on US imports, without the same being applied to US-made products, discriminates against foreign products, and US exports being exempted from taxes is tantamount to being an export subsidy.

How will this be taken at the WTO, the guardian of the multilateral trading system?

US Congressman Kevin Brady, chairman of the House Ways and Means Committee, and the plan’s main advocate, is convinced the plan is WTO-consistent, but has yet to explain why.

On the other hand, many trade and legal experts think the plan violates the principles and rules of the WTO, although they caution that a final opinion is possible only when the language of the law is known.

Their general view is as follows: Firstly, the inability to deduct import expenses from a company’s tax (while allowing deductions for locally sourced products and services and wages) discriminates against imports vis-à-vis domestic products, and violates the national treatment principle of the WTO and the rules of the General Agreement on Tariffs and Trade (GATT) which specify that imports must be treated no less favourably than similar locally produced goods.

Secondly, the exemption of export revenues from the taxable income would be most likely assessed as a prohibited export subsidy under the WTO’s subsidies agreement.

The renowned international trade expert, Bhagirath Lal Das, says that there are two separate issues to be considered:  the differential treatment of domestic and imported materials, and the differential tax treatment of income based on whether the product is domestically consumed or exported.

Martin Khor

Martin Khor

Says Das:   “It appears that the proposal is to deduct the cost of domestic input (product) from a company’s income while computing the tax, whereas there is no such deduction if a like imported input is used in the production.

“If this be the case, such a provision will clearly violate the principle of national treatment contained in Article III of the GATT 1994.”     Under that article, imported products must be accorded treatment no less favourable than that given to similar domestic products in respect of laws and regulations.

Added Das:  “If the use of the domestic product results in tax reduction whereas the use of the like imported product does not get similar treatment, clearly the imported product will get “less favourable” treatment. And that will violate the principle of national treatment, and it can be successfully challenged in the WTO on this ground.”

On the second issue, the proposal is to differentiate between the earning from domestic sale and that from export in the matter of taxation in respect of a product.

Commented Das:  “Here it would appear that the exemption of the tax is conditional on export. This practice will clearly qualify for being categorised as export subsidy which is prohibited under Article 3 of the WTO’s Subsidy Agreement.”

Das cites a case of an American company, the Domestic International Sales Corporation (DISC).  A portion of its profit which was engaged in export was tax free.  The EEC, the predecessor of EC, raised a dispute in the GATT in 1973. The matter was delayed for a long time until in 1999 a panel at the WTO ruled that the US practice was in fact an export subsidy and was prohibited.

“This case may not be exactly the same as the currently anticipated proposal, but it does point to the fallibility of providing government benefit contingent on export,” says Das.

Das was formerly Chairman of the General Council of GATT,  Indian Ambassador to GATT, and subsequently Director of Trade in the UN Conference on Trade and Development, and has written many books on the WTO and its agreements.

According to another eminent expert on the WTO, Chakravarthi Raghavan, whether the US law is considered “legal” depends on the language of the law and its actual effects.

“There is little doubt that the “pith and substance” of the Republican border tax proposal or ideas will be in violation of Articles II and III of GATT and Article 3.1 of the Subsidies Agreement.”

Raghavan, Chief Editor Emeritus of the South-North Development Monitor, followed and analysed the negotiations of the Uruguay Round and of the WTO on a daily basis ever since.

There are many shortcomings with the WTO dispute system. Few countries have the courage or financial resources to take up cases against the US.
Countries can challenge the US at the WTO and if they succeed the US has to change its law or face retaliatory action.  The winning party can block US exports to it equivalent in value to the loss of its exports to the US.

However, there are many shortcomings with the WTO dispute system.  Few countries have the courage or financial resources to take up cases against the US.

If some countries do take up cases, it takes as long as three to four years for a case in the WTO to wind its way through panel hearings and to a final verdict at the Appellate Body, and for the winning Party to get the go-ahead to take retaliatory action.  During that period, the US can continue with its laws and practices.

If the US loses, it need not pay any compensation to the successful Party for having suffered losses.   Moreover, in the past, when it loses cases at the WTO, the US has typically not complied with the orders made on it.  Even if it does comply, it needs to do so only in respect of the Parties that brought the action against it; it need not do so for other Parties.

If it does not comply, the complainant countries are allowed to take retaliatory action by blocking US goods and services from entering their markets up to an amount equivalent to the losses they have suffered.  This retaliatory action can only be taken by those countries that successfully took up the cases.

Thus, the US may decide to implement the border adjustment taxes and wait two to four years before a final judgment is made at the WTO, and for retaliatory action to be allowed by the WTO.   It can meanwhile reap the benefits of its border tax measures.

Another possibility is that Trump may make good his threat to leave the WTO, if important cases go against it.  That would cause a major crisis for the WTO and for international trade.

With regard to the WTO process, Raghavan said:   “Apart from the difficulties of taking up cases in the WTO, including costs, the lengthy process and no retrospective damages when any WTO member, raises a dispute, the onus of proving the violation is on them.

“To the best of my knowledge, in none of the rulings against US, requiring changes in law or regulations, has the US implemented them, and even major trading partners have been chary of taking retaliation action.

“Countries that are affected, could act to unilaterally deny the US some rights; but they cannot justify that this is retaliation, until there is a ruling in their favour.”

American advocates of the border adjustment tax plan have claimed that it is similar to a value added tax (VAT) which is considered by the WTO to be a legitimate measure;  and thus that the border adjustment tax would also be compatible with the WTO.

Almost all major developed countries have instituted the VAT system, with the notable exception of the US.  The Republican Congress leaders and Trump have argued  that this places the US at a disadvantage in its trade relations because the VAT system imposes a tax on imports, whilst allowing companies to obtain a refund for taxes paid on their exports.

They claim the border tax would correct this disadvantage that the WTO should similarly recognise the border tax as legitimate.

However, several well-known economists and lawyers are of the opinion that there are important differences between the VAT and the border tax.

There are two parts of their arguments.  Firstly, the VAT imposes taxes on both imports and locally produced goods and services and therefore does not discriminate against imports;  whereas the border tax system imposes a tax on imports whilst excluding domestic inputs and wages from tax, which therefore discriminates against imports.  Secondly, the VAT system does not subsidise exports, whereas the border tax system does.

In a 1990 paper, Martin Feldstein and Paul Krugman found that the VAT does not improved the trade competitiveness of countries using it.  They said:  “The point that VATs do not inherently affect international trade flows has been well recognised in the international tax literature…A VAT Is not a protectionist measure.”

Krugman, in a recent blog, reiterated that “a VAT does not give a nation any kind of competitive advantage, period.”  But a destination-based cash flow tax like the border adjustment tax has a subsidy element that “would lead to expanded domestic production.”

In another paper, Reeven Avi-Yonah and Kimberly Clausing  from Michigan Law School and Reed College respectively analyse the difference between the VAT and the proposed border adjustment tax and why the former is WTO-consistent whereas the latter would violate WTO rules.

They said:   “U.S. trading partners are likely to be hurt in several ways. The effects of the wage deduction render the corporate cashflow tax different from a VAT, and these differences have the net effect of increasing the incentive to operate in the United States

“In addition, such a tax system would exacerbate the profit shifting problems of our trading partners, since the United States will appear like a tax haven from their perspective.”

Economists also agree that the border tax will raise the value of the US dollar but there is a debate as to how long this will take and by how much it will rise. If the dollar appreciation is significant, this may have an adverse effect on countries that hold debt in US dollars, as they would have to pay out more in their domestic currency to service their loans. This would include many developing countries with substantial dollar-denominated debts of the public or private sectors, and some of them may tip into new debt and financial crises.    According to former US Treasury Secretary Lawrence Summers:  “Proponents of the plan anticipate a rise in the dollar by an amount equal to the 15 to 20 per cent tax rate.  This would do huge damage to dollar debtors all over the world and provoke financial crises in some emerging markets.”           

This article is the second in a two-part series on the border adjustment tax, which would have the effect of taxing imports of goods and services that enter the United States, while also providing a subsidy for US exports which would be exempted from the tax. You can find Part 1 here

The post The Planned US Border Tax Would Most Likely Violate WTO Rules – Part 2 appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post The Planned US Border Tax Would Most Likely Violate WTO Rules – Part 2 appeared first on Inter Press Service.

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Beware of the New US Protectionist Plan, the Border Adjustment Tax – Part 1http://www.ipsnews.net/2017/02/beware-of-the-new-us-protectionist-plan-the-border-adjustment-tax/?utm_source=rss&utm_medium=rss&utm_campaign=beware-of-the-new-us-protectionist-plan-the-border-adjustment-tax http://www.ipsnews.net/2017/02/beware-of-the-new-us-protectionist-plan-the-border-adjustment-tax/#comments Fri, 17 Feb 2017 12:37:51 +0000 Martin Khor http://www.ipsnews.net/?p=148990 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post Beware of the New US Protectionist Plan, the Border Adjustment Tax – Part 1 appeared first on Inter Press Service.

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For the time being the much anticipated US-China trade war is off the radar. But it is by no means off altogether. Credit: Bigstock

For the time being the much anticipated US-China trade war is off the radar. But it is by no means off altogether. Credit: Bigstock

By Martin Khor
PENANG, Feb 17 2017 (IPS)

A new and deadly form of protectionism is being considered by Congress leaders and the President of the United States that could have devastating effect on the exports and investments of American trading partners, especially the developing countries.

The plan, known as a border adjustment tax, would have the effect of taxing imports of goods and services that enter the United States, while also providing a subsidy for US exports which would be exempted from the tax.

The aim is to improve the competitiveness of US products, drastically reduce the country’s imports while promoting its exports, and thus reduce the huge US trade deficit.

On the other hand, if adopted, it would significantly reduce the competitiveness or viability of goods and services of countries presently exporting to the US.  The prices of these exports will have to rise due to the tax effect, depressing their demand and in some cases make them unsalable.

And companies from the US or other countries that have invested in developing countries because of cheaper costs and then export their products to the US will be adversely affected because of the new US import tax.

Some firms will relocate to the US.   Potential investors will be discouraged from opening new factories in the developing countries.  In fact this is one of the main aims of the plan – to get companies return to the US.

The plan is a key part of the America First strategy of US President Donald Trump, with his subsidiary policies of “Buy American” and “Hire Americans.”

The border adjustment tax is part of a tax reform blueprint “A Better Way” whose chief advocates are Republican leaders Paul Ryan, speaker of the House of Representatives and Kevin Brady, Chairman of the House Ways and Means Committee.

President Trump originally called the plan “too complicated” but is now considering it seriously.  In a recent address to congressional Republicans, Trump said:  “We’re working on a tax reform bill that will reduce our trade deficits, increase American exports and will generate revenue from Mexico that will pay for the (border) wall.”

Martin Khor

Martin Khor

The proposal has however generated a tremendous controversy in the US, with opposition coming from some Congress members (including Republicans), many economists and American companies whose business is import-intensive.

It however has the strong support of Republican Congress leaders and some version of it could be tabled as a bill.

Trump had earlier threatened to impose high tariffs on imports from countries having a trade surplus with the US, especially China and Mexico.

This might be a more simple measure, but is so blatantly protectionist that it would be sure to trigger swift retaliation, and would also almost certainly be found to violate the rules of the World Trade Organisation (WTO).

The tax adjustment plan may have a similar effect in discouraging imports and moreover would promote exports, but it is more complex and thus difficult to understand.

The advocates hope that because of the complexity and confusion, the measure may not attract such a strong response from US trading partners.  Moreover they claim it is permitted by the WTO are presumably willing to put it to the test.

In the tax reform plan, the corporate tax rate would be reduced from the present 35% to 20%.   The border adjustment aspect of the plan has two main components. Firstly, the expenses of a company on imported goods and services can no longer be deducted from a company’s taxable income.  Wages and domestically produced inputs purchased by the company can be deducted.

The effect is that a 20% tax would be applied to the companies’ imports.

This would especially hit companies that rely on imports such as automobiles, electronic products, clothing, toys and the retail and oil refining sectors.

The Wall Street Journal gives the example of a firm with a revenue of $10,000 and with $5,000 imports, $2 000 wage costs and $3,000 profit.  Under the present system, where the $5,000 imports plus the $2,000 wages can be deducted, and with a 35% tax rate, the company’s taxable total would be $3,000, tax would be $1,050 and after-tax profit would be $1,950.

Under the new plan, the $5,000 imports cannot be deducted and would form part of the new taxable total of $8,000.  With a 20% tax rate, the tax would be $1,600 and the after-tax profit $1,400.

Given this scenario, if the company wants to retain his profit margin, it would have to raise its price and revenue significantly, but this in turn would reduce the volume of demand for the imported goods.

For firms that are more import-dependent, or with lower profit margin, the situation may be even more dire, as some may not be financially viable anymore.

Take the example of a company with $10,000 revenue, $7,000 imports, $2,000 wages and $1,000 profit.   With the new plan, the taxable total is $8,000 and the tax is $1,600, so after tax it has a loss of $600 instead of a profit of $1,000.

The company, to stay alive, would have to raise its prices very significantly, but that might make its imported product much less competitive.  In the worst case, it would close, and the imports would cease.

The economist Larry Summers, a former Treasury Secretary, gives a similar example of a retailer who imports goods for 60 cents, incurs 30 cents in labour and interest costs and then earns a 5 cent margin.  With 20% tax, and no ability to deduct import or interest costs, the taxes will substantially exceed 100% of profits even if there is some offset from a stronger dollar.

On the other hand, the new plan allows a firm to deduct revenue from its exports from its taxable income.  This would allow the firm to increase its after-tax profit.

The Wall Street Journal article gives the example of a firm which presently has export sales of $10,000, cost of inputs $5,000, wages $2,000 and profit $3,000.  With the 35% corporate tax rate, the tax is $1,050 and after-tax profit is $1,950.

Perhaps the most vulnerable country is Mexico, where many factories were established to take advantage of tariff-free entry to the US market under the North American Free Trade Agreement. President Trump has warned American as well as German and Japanese auto companies that if they make new investments in Mexico, their products would face high taxes or tariffs on entry, and called on them to invest in the US instead.
Under the new plan, the export sales of $10,000 is exempt from tax, so the company has zero tax.  Its profit after tax is thus $3,000.   The company can cut its export prices, demand for its product increases and the company can expand its sales and export revenues.

At the macro level, with imports reduced and exports increased, the US can cut its trade deficit, which is a major aim of the plan.

On the other hand, the US is a major export market for many developing countries, so the tax plan if implemented will have serious adverse effects on them.

The countries range from China and Mexico, which sell hundreds of billions of dollars of manufactured products to the US; to Brazil and Argentina which are major agricultural exporters; to Malaysia, Indonesia and Vietnam which sell commodities like palm oil and timber and also manufactured goods such as electronic products and components and textiles, Arab countries that export oil, and African countries that export oil, minerals and other commodities, and countries like India which provide services such as call services and accountancy services to US companies.

American industrial companies are also investors in many developing countries. The tax plan if implemented would reduce the incentives for some of these companies to be located abroad as the low-cost advantage of the foreign countries would be offset by the inability of the parent company to claim tax deductions for the goods imported from their subsidiary companies abroad.

Perhaps the most vulnerable country is Mexico, where many factories were established to take advantage of tariff-free entry to the US market under the North American Free Trade Agreement.  President Trump has warned American as well as German and Japanese auto companies that if they make new investments in Mexico, their products would face high taxes or tariffs on entry, and called on them to invest in the US instead.

After the implications of the border adjustment plan are understood, it is bound to generate concern and outrage from the United States’ trading partners, in both South and North, if implemented.  They can be expected to consider immediate retaliatory measures.

A former undersecretary for international business negotiations of Mexico (2000-2006), Luis de la Calle, said  in a media interview:  “If the US wants to move to this new border tax approach, Mexico and Canada would have to do the same….We have to prepare for that scenario.”

In any case, it can be expected that countries will take up complaints against the US at the WTO.   The proponents claim the tax plan will be designed in a way that is compatible with the WTO rules.

But many international trade law experts believe the tax plan’s measures will violate several of the WTO’s principles and agreements, and that the US will lose if other countries take up cases against it in the WTO dispute settlement system.

This prospect may however not decisively deter Trump from championing the Republicans’ tax blueprint and signing it into law, should Congress decide to adopt it.

The President and some of his trade advisors have criticised the WTO’s rules and have mentioned the option of leaving the organisation if it prevents or impedes the new America First strategy from being implemented.  If the US leaves the WTO, it would of course cause a major crisis for international trade and trade relations.

There are many critics of the plan.  Lawrence Summers, a former US Treasury Secretary, warns that the tax change will worsen inequality, place punitive burdens on import-intensive sectors and companies, and harm the global economy.

The tax plan is expected to cause a 15-20% rise in the US dollar.  “This would do huge damage to dollar debtors all over the world and provoke financial crises in some emerging markets,” according to Summers.

While export-oriented US companies are supporters, other US companies including giants Walmart and Apple are strongly against the border tax plan, and an influential Republican, Steven Forbes, owner of Forbes magazine, has called the plan “insane.”

It is not yet clear what Trump’s final position will be. If he finds it too difficult to use the proposed border tax, because of the effect on some American companies and sectors, he might opt for the simpler use of tariffs.

In any case, whether tariffs or border taxes, policy makers and companies and employees especially in developing countries should pay attention to the trade policies being cooked up in Washington, and to voice their opinions.

Otherwise they may wake up to a world where their products are blocked from the US, the world’s largest market, and where the companies that were once so happy to make money in their countries suddenly pack up and return home.

This article is the first in a two-part series on the border adjustment tax, which would have the effect of taxing imports of goods and services that enter the United States, while also providing a subsidy for US exports which would be exempted from the tax. You can find Part 2 here

The post Beware of the New US Protectionist Plan, the Border Adjustment Tax – Part 1 appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post Beware of the New US Protectionist Plan, the Border Adjustment Tax – Part 1 appeared first on Inter Press Service.

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Shocks for Developing Countries from President Trump’s First Dayshttp://www.ipsnews.net/2017/01/shocks-for-developing-countries-from-president-trumps-first-days/?utm_source=rss&utm_medium=rss&utm_campaign=shocks-for-developing-countries-from-president-trumps-first-days http://www.ipsnews.net/2017/01/shocks-for-developing-countries-from-president-trumps-first-days/#comments Mon, 30 Jan 2017 12:12:16 +0000 Martin Khor http://www.ipsnews.net/?p=148712 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post Shocks for Developing Countries from President Trump’s First Days appeared first on Inter Press Service.

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General Assembly Holds High-level Dialogue on Building Sustainable Peace for All. Two executive orders are being prepared to reduce the US’ role in in the United Nations and other international organisations. Credit: UN Photo/Manuel Elias.

General Assembly Holds High-level Dialogue on Building Sustainable Peace for All. Two executive orders are being prepared to reduce the US’ role in in the United Nations and other international organisations. Credit: UN Photo/Manuel Elias.

By Martin Khor
PENANG, Jan 30 2017 (IPS)

His first days in office indicate that President Donald Trump intends to implement what he promised, with serious consequences for the future of the United Nations, trade, the environment and international cooperation, and developing countries will be most affected.

Those who hoped Trump would be more statesman-like in style and middle-of-the-road in policy matters after his inauguration had their illusions dashed when the new United States President moved straight into action to fulfil his election pledges.

The world and the world order have to prepare for more major shocks.  It will be far from business as usual.  And while other powerful countries can prepare tit-for-tat counter-moves when President Trump strikes, most developing countries won’t have the means, and may suffer the most.

Even close friends are not spared.  Trump signed an order fast-starting building a wall at the US border with Mexico. To add insult to injury, he asked Mexico to pay for the wall and threatened to impose a 20% tax on Mexican products to finance it.  He has also discouraged US companies from moving to Mexico.

Mexicans are understandably outraged and the Mexican President cancelled his planned trip to Washington.  Mexico has been one of America’s strongest allies. If it can be treated in this manner, is there hope for others to avoid being targeted?

The Trump order to ban the entry of citizens from seven Muslim-majority countries, even those holding a Green card or are working in the US, on the ground that they could pose a security threat, has caused not only anger in the affected countries but also uncertainty among people in other developing countries who fear they may also be targeted in future.

The executive order also suspended the admission of all refugees into the US.  If made permanent, this measure signals the end of a long tradition of the US (in line with many other Western countries) to welcome a limited number of people escaping from troubled countries. In some of these countries, the troubles that prompted them to leave resulted from interventions or interference by the US and its Western allies.

The world and the world order have to prepare for more major shocks. It will be far from business as usual. And while other powerful countries can prepare tit-for-tat counter-moves when President Trump strikes, most developing countries won’t have the means, and may suffer the most
Very troubling are the signs that the US is revamping its approach to international cooperation. Two executive orders are being prepared to reduce the US’ role in in the United Nations and other international organisations, according to a New York Times report.

One of the draft orders calls for at least a 40% cut in US funding toward international organisations and terminating funds for any international body that fit certain criteria.

The other order calls for a review of all current and pending treaties, and recommendations on which negotiations or treaties the US should leave.

The New York Times says that if Trump signs the orders, the cuts could severely curtail the work of UN agencies which rely on billions of dollars in annual US contributions.   “Taken together, the orders suggest that Mr Trump intends to pursue his campaign promises of withdrawing the US from international organisations.  He has expressed heavy scepticism of multilateral agreements such as the Paris climate agreement and the UN.”

The US has been the major creator of the post-Second World War system of international relations, with the United Nations at its centre.  The UN has served as a crucial universal forum for international discussion and cooperation, including on peace-keeping and economic and social issues.

It convenes leaders and representatives of almost all countries for meetings and conferences, with resolutions and declarations, on a wide range of current affairs.  Its agencies have supported global and national policy making and actions on economic development, health, food, the environment, human rights, culture and education, natural disasters and refugees.

The UN has been playing a critical positive role in providing a venue for developing countries to voice their opinions and take part in decision-making on global affairs.  The UN agencies have provided resources and support to developing countries to build their national capacities for economic and social development, and in preventing and managing political conflicts.

Of course the UN needs to be improved, including in democratisation of the Security Council and in giving more say to developing countries, especially on global economic and financial issues on which decisions are usually taken by a few powerful countries and outside the UN.

But denigrating the UN’s role and reducing funds for its operations would severely weaken the spirit and substance of international cooperation, to the detriment especially of developing countries.

Another looming problem is that President Trump looks intent on doing a complete turnaround on the present US environmental policies.  This will have a grave effect on the world, both in terms of the physical environment itself and in turning back the clock on global efforts to tackle multiple environmental crises.

Within a day of Trump’s inauguration, pages and references to climate change were removed from the White House website. The Environmental Protection Agency was reportedly told to remove its web section on climate change, though that order was later countered.   Staff at the EPA were forbidden to issue media statements or new scientific studies and research grants were suspended.

Two major projects cancelled during Obama’s presidency on environmental and social grounds, the Keystone XL pipeline and the Dakota access pipeline, are being revived.   The Clean Power Act, a centrepiece of the Obama effort to address climate change, has been under attack.

And all these even before the assumption of office of Trump’s nominee for the new EPA chief, the Oklahoma attorney-general Scott Pruitt, who is well known for having sued the EPA 14 times.  His selection by Trump was described by the New York Times as signalling Mr Trump’s determination to dismantle President Obama’s efforts to counter climate change – and much of the EPA itself.”

This policy turnaround will negatively affect international efforts to combat the global environmental crisis.  In particular, the many years of collective work to get agreed action on climate change will be seriously impeded since the US is looked up to show an example that developed countries take domestic climate actions seriously and are also committed to provide climate-related financial assistance to developing countries.

At this point it is not certain whether the US will remain in the Paris Agreement or even the UN Framework Convention on Climate Change; its withdrawal from either or both would be disastrous.

It can however be expected that under Trump, the US will stop its funding to the Green Climate Fund, to which the Obama administration had pledged $3 billion in its initial period and delivered $1 billion.  If the US withdraws, will other countries increase their funding to make up for the loss of US, or will they also reduce their share, thereby plunging the GCF into an uncertain future?

Another major action was Trump’s move to withdraw the US from the Trans Pacific Partnership (TPP) agreement. He had pledged to do so but when he acted, on his first working day, it still came as a shock.

Initially Australia and New Zealand tried to get the remaining 11 TPP countries to pledge they would continue to get the TPP to enter into force.  But this has not gained traction, with Japan and Canada bluntly stating that the TPP is meaningless and cannot continue without the US.

Thus, the TPP has been killed. Even if in future Trump or his successor has a change of heart, the public mood is such that the US Congress would be unlikely to approve.

More important than Trump’s action itself is what it represents in terms of the new US approach towards trade.   The TPP was loaded to favour US interests in many ways.  On the trade aspect, the US has lower tariffs than the developing country partners with which it did not yet have a trade agreement, and thus stood to gain in terms of trade balance.

On the non-trade aspects of the TPP, which the US under Obama had insisted upon, American companies would have gained in the areas of intellectual property, investment, government procurement and state-owned enterprises.

Yet the TPP was unpopular with the American public, because it perceived that whatever gains the US would have would flow to the corporations and the elites, leaving the working and middle classes to face problems such as possible job losses from cheaper imports and relocation of factories abroad.

With the demise of the TPP, developing countries which are its members regret the loss of their opportunity to gain greater access to the US market.  But they are also spared from having to take on heavy obligations on investment, intellectual property and state-owned enterprises, and other issues.

Martin Khor

Martin Khor

The Trump move on the TPP is a prelude to other trade policies to rolled out soon, in pursuance of his America First strategy, which includes the subsidiary slogans Buy American and Hire Americans.

Policies being considered include higher tariffs or else “border adjusting taxes” on products from countries with which the US has trade deficits, starting with China and Mexico; tax incentives for companies that export; taxes to punish US companies located abroad that export to the US; and requirements that companies that win government infrastructure and other contracts have to make use of American-made goods.

Many developing countries which depend on the US for their exports, and that presently host US companies or hope to attract new US investments, will be adversely affected by these policies, which together spell a new era of US protectionism.  It will end the US-championed policies of liberalisation of trade and investment.

Trump also announced he plans to initiate new one-to-one bilateral trade agreements, in place of regional or plurilateral trade agreements. If his aim is to promote the US companies’ interests even more strongly than in previous FTAs, this may mean a negotiating stance of maximising US exports to while minimising imports from the bilateral partners, and pressurising them to accept provisions on investment, services, intellectual property, procurement, state-owned enterprises and other issues that are even stronger than what the TPP had.

Other developed countries like Japan and the post-Brexit United Kingdom may be interested in starting negotiations with the US with its new template, in an attempt to get mutual benefits.  It remains to be seen whether there would be developing countries willing to be new partners in what for them would likely be very one-sided bilateral agreements.

Another question is whether the rules of the multilateral trading system will act to constrain the new US administration.  Many of the new policies announced by Trump or his team (such as higher taxes and tariffs on Chinese and Mexican goods, or taxes on American companies exporting to the US) are probably against one or another of the agreements under the World Trade Organisation.

Even if the Trump administration fine-tunes its policy measures in an attempt to fit within the WTO’s rules, they will most likely be challenged by other WTO members.   If the WTO panels rule against the US, will it comply with the decisions, or will Trump turn his fire against the WTO and its system instead?

Meanwhile, the WTO members are waiting to see what positions the new US trade team will take in the on-going WTO negotiations in Geneva.

Given that Trump ran on the promise to upend the establishment, and it looks as if he intends to keep to his word, leaders and people around the world, and especially in the developing countries since they are more vulnerable, should prepare themselves to respond to more and bigger shocks ahead.

 

The post Shocks for Developing Countries from President Trump’s First Days appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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2017 — A Thunderous Clash of Politics, Economies and Policieshttp://www.ipsnews.net/2017/01/2017-a-thunderous-clash-of-politics-economies-and-policies/?utm_source=rss&utm_medium=rss&utm_campaign=2017-a-thunderous-clash-of-politics-economies-and-policies http://www.ipsnews.net/2017/01/2017-a-thunderous-clash-of-politics-economies-and-policies/#respond Mon, 02 Jan 2017 12:24:49 +0000 Martin Khor http://www.ipsnews.net/?p=148380 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post 2017 — A Thunderous Clash of Politics, Economies and Policies appeared first on Inter Press Service.

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The Paris agreement, which was adopted in December 2015 and which came into force in record time in October 2016 as a demonstration of international concern over climate change, may face a major test and even an existential challenge in 2017, if Trump fulfils his election promise to pull the US out. Credit: Diego Arguedas Ortiz/IPS.

The Paris agreement, which was adopted in December 2015 and which came into force in record time in October 2016 as a demonstration of international concern over climate change, may face a major test and even an existential challenge in 2017, if Trump fulfils his election promise to pull the US out. Credit: Diego Arguedas Ortiz/IPS.

By Martin Khor
PENANG, Jan 2 2017 (IPS)

Yet another new year has dawned.   But 2017 will be a year like no other.

There will be a thunderous clash of policies, economies and politics worldwide.   We will therefore be on a roller-coaster ride, and we should prepare for it and not only be spectators on the side-lines in danger of being swept away by the waves.

With his extreme views and bulldozing style, Donald Trump is set to create an upheaval if not revolution in the United States and the world.

He is installing an oil company chief as the Secretary of State, investment bankers in key finance positions, climate sceptics and anti-environmentalists in environmental and energy agencies and an extreme rightwing internet media mogul as his chief strategist

US-China relations, the most important for global stability, could change from big-power co-existence with a careful combination of competition and cooperation, to outright crisis.

Trump, through a phone call with Taiwan’s leader and subsequent remarks, signalled he could withdraw the longstanding US adherence to the One China policy and instead use Taiwan as a bargaining card when negotiating economic policies with China.  The Chinese perceive this as an extreme provocation.

He has appointed as head of the new National Trade Council an economist known for his books demonising China, including “Death by China: Confronting the Dragon”.

Trump seems intent on doing an about-turn on US trade and investment policies, starting with ditching the Trans Pacific Partnership Agreement and re-negotiating the North American Free Trade Agreement.

Other measures being considered include a 45% duty on Chinese products, extra duties and taxes on American companies located abroad, and even a 10% tariff on all imports.

Martin Khor

Martin Khor

Thus 2017 will see a rise in protectionism in the US, the extent still unknown.  That is bad news for those developing countries whose economies have grown on the back of exports and international investments.

Europe in 2017 will also be preoccupied with its own regional problems.  The Brexit shock of 2016 will continue to reverberate and several European countries facing elections will see challenges to their traditional values and established order from xenophobic and narrow nationalist parties.

As Western societies become less open to the world and more inward looking, developing countries should revise their development strategies and rely more on domestic and regional demand and investments.

As North-South economic relations decline, this should also be the moment for expanding South-South cooperation, spurred as much by necessity as by principles.

2017 may be the year when resource-rich China, with its huge Road and Belt initiative and its immense financing capacity, fills in the economic void created by western trade and investment protectionism.

But this may not be sufficient to prevent a finance shock in many developing countries now beginning to suffer a reversal of capital flowing back to the US, attracted by the prospect of higher interest rates and economic growth.

Several emerging economies which together received many hundreds of billions of dollars of hot money in recent years are now vulnerable to the latest downturn phase of the boom-bust cycle of capital flows.

Some of these countries opened up their capital markets to foreign funds which now own large portions of government bonds denominated in the domestic currency, as well as shares in the equity market.

As the tide turns, foreign investors are expected to sell off and transfer back a significant part of the bonds and shares they bought, and this new vulnerability is in addition to the traditional external debt contracted by the developing countries in foreign currencies.

Some countries will be hit by a terrible combination of capital outflow, reduced export earnings, currency depreciation and an increased debt servicing burden caused by higher US interest rates.

As the local currency depreciates further, the affected countries’ companies will have to pay more for servicing loans contracted in foreign currencies and imported machinery and parts, while consumers suffer from a rapid rise in the prices of imports.

On the positive side, the currency depreciation will make exporters more competitive and make tourism more attractive, but for many countries this will not be enough to offset the negative effects.

Thus 2017 will not be kind to the economy, business and the pockets of the common man and woman.  It might even spark a new global financial crisis.

The old year ended with mixed blessings for Palestinians. On one hand they won a significant victory when the outgoing President Obama allowed the adoption of a UN Security Council resolution condemning Israeli settlements in occupied Palestinian territories by not exercising a veto.

The resolution will spur international actions against the expansion of settlements which have become a big obstacle to peace talks.

On the other hand the Israeli leadership, which responded defiantly with plans for more settlements, will find in Trump a much more sympathetic President.  He is appointing a pro-Israel hawk who has cheered the expansion of settlements as the new US ambassador to Israel.

With Trump also indicating he will tear up the nuclear power deal with Iran, the Middle East will have an even more tumultuous time in 2017.

Some countries will be hit by a terrible combination of capital outflow, reduced export earnings, currency depreciation and an increased debt servicing burden caused by higher US interest rates.
In the area of health care, the battle for affordable access to medicines will continue, as public frustration grows over the high and often astronomical prices of patented medicines including for the treatment of HIV AIDS, hepatitis C, tuberculosis and cancers.

There will be more powerful calls for governments to curb the excesses of drug companies, as well as more extensive use of the flexibilities in the patent laws to counter the high cost of medicines.

Momentum will also increase to deal with antibiotic resistance which in 2016 was recognised by political leaders meeting at the United Nations to be perhaps the gravest threat to global health.

All countries pledged to come up with national action plans to counter antibiotic and anti-microbial resistance by May 2017 and the challenge will then be to review the adequacy of these plans and to finance and implement them.

The new year will also see its fair share of natural disasters and a continued decline in the state of the environment.  Both will continue to be major issues in 2017, just as the worsening of air pollution and the many earthquakes, big storms and heat-waves marked the previous few years.

Unfortunately low priority is given to the environment.  Hundreds of billions of dollars are allocated for highways, railways and urban buildings but only a trickle for conservation and rehabilitation of hills, watersheds, forests, mangroves, coastal areas, biodiversity or for serious climate change actions.

2017 should be the year when priorities change, that when people talk about infrastructure or development, they put actions to protect and promote the environment as the first items for allocation of funds.

This new year will also be make or break for climate change.  The momentum for action painfully built up in recent years will find a roadblock in the US as the new President dismantles Obama-initiated policies and measures.

The Paris agreement, which was adopted in December 2015 and which came into force in record time in October 2016 as a demonstration of international concern over climate change, may face a major test and even an existential challenge in 2017, if Trump fulfils his election promise to pull the US out.

But Trump and his team will face resistance domestically including from state governments and municipalities which have their own climate plans, and from other countries determined to carry on without the US on board.

Indeed if 2017 will bring big changes initiated by the new US administration, it will also generate many counter actions to fill in the void left in the world by a withdrawing US or to counter its new unsettling actions.

Many people around the world, from politicians and policy makers to citizen groups and community organisers are already bracing themselves to come up with responses and actions.

Indeed 2017 will be characterised by the Trump effect but also the consequent counter-effects.

There are opportunities to think through, alternatives to chart and reforms to carry out that are anyway needed on the global and national economies, on the environment, and on geo-politics.

Most of the main levers of power and decision-making are still in the hands of a few countries and a few people, but there has also been the emergence of many new centres of economic, environmental and intellectual capabilities and community-based organising.

2017 will be a year in which ideas, policies, economies and politics will all clash, thunderously, and we should be prepared to meet the challenges ahead and not only be spectators.

The post 2017 — A Thunderous Clash of Politics, Economies and Policies appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

The post 2017 — A Thunderous Clash of Politics, Economies and Policies appeared first on Inter Press Service.

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Rethinking trade policy and protectionism in the Trump erahttp://www.ipsnews.net/2016/12/rethinking-trade-policy-and-protectionism-in-the-trump-era/?utm_source=rss&utm_medium=rss&utm_campaign=rethinking-trade-policy-and-protectionism-in-the-trump-era http://www.ipsnews.net/2016/12/rethinking-trade-policy-and-protectionism-in-the-trump-era/#comments Mon, 05 Dec 2016 15:58:43 +0000 Martin Khor http://www.ipsnews.net/?p=148087 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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Credit: Amantha Perera/IPS

Credit: Amantha Perera/IPS

By Martin Khor
PENANG, Dec 5 2016 (IPS)

What kind of trade policy will the United States have under President Donald Trump? This is a hot issue, as Trump has made unorthodox pronouncements on trade issues during and after the election campaign. If he acts on even some of the positions he took, it will create a sea change in trade policy in the US and possibly the world.

Trump has recently emphasised that he will take the US out of the Trans Pacific Partnership  Agreement (TPPA) on his first day of office, and renegotiate the North American Free Trade Agreement (NAFTA).

He called them a disaster for the US.   He was probably referring to the claim that many of manufacturing jobs lost in the US in recent years were due to free trade agreements (FTAs) and the overseas relocation of US companies.  He is also probably blaming trade agreements for the US’ huge trade deficits.

Most economists however have a different view.  They attribute US job losses mainly to technological change.

There are legitimate fears that Trump’s “Put America First” slogan, when applied to trade, will lead to an increase in trade protectionism.

Trump has threatened to raise tariffs on products from China and Mexico by as much as 45%.   Trump in his campaign accused China of being a “currency manipulator”.    If a country is so labelled by the Treasury Department it could be grounds under US law to slap extra tariffs on its products.

President Obama came under pressure from many Congress members and economists to do just that, but he smartly resisted as he realised it would trigger a very nasty trade war with China.

Martin Khor. Credit: Nic Paget-Clarke

Martin Khor. Credit: Nic Paget-Clarke

It is possible Trump will also climb down from this populist stance once he is President.  For a start, China’s currency is not under-valued and currently its government is trying to prevent (not encourage) its currency from further sliding.

Secondly, taking trade action against China on currency grounds would be against the rules of WTO, and China should be able to successfully take a WTO case against the US for any such action.

Finally, China has warned it will retaliate if the US were to take protectionist actions.  An article in the Beijing-based Global Times spelled out how the  country would cancel its orders of Boeing aircraft, restrict US auto and I-phone sales in China and halt US soybean and maize imports, while a number of US industries would be impaired.

But if an across-the-board tariff hike is out of the question, the Trump administration is likely to consider taking more trade-remedy action on a range of products from China and other countries by claiming they are being dumped or unfairly subsidised.

There are loopholes in the WTO rules on trade remedies which have made these a favourite protectionist tool.  A country can slap on high tariffs against an imported good from another country by claiming its price is artificially low because it has been “dumped” (exported at a price lower than the domestic price) or unfairly subsidised by the state.

But if the exporting country complains and a WTO panel rules that the actions were wrongly taken, there is no penalty imposed against the offending country which is only asked to lift the tariff.  Meanwhile the aggrieved country has lost many years of export earnings.  Moreover, the same actions can again be taken against the same country, thus perpetuating the protection.

We may see a rise in such trade-remedy actions under President Trump, especially if he is counselled against taking the more blatant route of imposing an all-out tariff wall.

But we can also expect tit-for-tat counter-action of the same type by the affected countries, in a global spiral of protectionism.  That will be in nobody’s interest.

The new Trump presidency is also expected to usher in a major change in how the US (and eventually many other countries) will perceive free trade agreements.   Trump’s objection to the TTPA and NAFTA seems to be based on the issue of goods trade, that the template of these agreements seems to favour the exports of the partner countries at the expense of the US.

Trump said he would instead “negotiate fair bilateral deals that bring jobs and industry back.”  This appears to be neo-mercantilist and against the free-trade principle, but it is this kind of “America-first” populism that helped propel him to power.

If the new US policy moves in this direction, what is to prevent other countries from doing likewise?   “Free trade” or “fair trade” will be interpreted by each country in ways that favour it, and many of the present rules will have to be set aside.

However the FTAs are much more than trade, and they became unpopular with the public in the US and elsewhere not only because of the threat of cheap imports taking over the market of local producers, but also because of the non-trade issues that are embedded in most recent FTAs, including FTAs between developed countries, and those between developed and developing countries.

If the new US policy moves in this direction, what is to prevent other countries from doing likewise? “Free trade” or “fair trade” will be interpreted by each country in ways that favour it, and many of the present rules will have to be set aside.


One of these issues include investment rules aimed at liberalising foreign investment and financial flows, with an especially controversial section that gives rights to foreign investors to take cases and make claims against the host government in an international tribunal.

Another issue is the strengthening of intellectual property rules that favour multinational companies at the expense of local consumers.  A most unpopular effect is a tremendous rise in the cost of some patented medicines through the additional curbing of competition from cheaper generic drugs.

Other issues include the opening up government procurement to foreign firms on a national-treatment basis, thus reducing the share of local businesses in this huge sector;  the liberalisation of the services sectors, which for some countries may affect the cost of basic services that are normally performed by the public sector;  and, in the most recent FTAs, the establishment of new rules overseeing the policies and behaviour of state-owned enterprises.

The structure of this kind of North-South FTAs is mainly unfavourable to developing countries in general.  While a developing country can get some benefits on the trade component through better market access to the developed country, the non-trade issues are usually against their interests as the developed countries are far stronger and have the upper hand in the areas of investment, intellectual property, services and procurement.

However, civil society groups in the developed countries also find the non-trade issues against the public interest.  For example, the investor-state dispute system undermines the ability of these countries to set their own environmental or health policies, and the tighter intellectual property rules impede access to medicines and knowledge in these advanced countries as well.

Through the recent FTAs, sensitive areas and issues that were previously under the purview of the national government are now subjected to new and intrusive rules that cramp the space that countries (whether in the South or North) normally have to set their own policies.

Both the trade and non-trade issues have made the “trade agreements” highly controversial.  Civil society groups in developing countries have been expressing their concerns that the public interest and national sovereignty are being undermined.

At the same time, the public in developed countries, including in the US, Europe, Canada, Australia, New Zealand and Japan, have become disillusioned and even outraged by the effects of the FTAs their governments signed or proposed.

The anti-FTA movement became so strong in the US that it helped boost the unexpectedly good showing by Bernie Sanders in the Democratic primaries, pressurised Hillary Clinton to pledge her  opposition to the TPP, and enabled Trump to ride on and add to the “anti-trade” emotions in his  campaign.

The heightened focus on trade policy during and after the US elections is a good time to review what works and what does not work for the public interest in trade agreements.

It is becoming clear that trade agreements have become overloaded with many issues that do not  belong to an agreement originally designed for trade in goods.

For example, there is a history and logic to the “non-discrimination” and “national treatment” principles established for trade in goods among countries, and even then there is a debate on the conditions under which the  application of these principles bring about mutual benefits  in trade.

The same principles and template are often inappropriate when applied to non-trade issues for which they were not designed.  Creating rules based on these principles and including them in trade agreements can lead to imbalances and unequal outcomes among the partners, and even adverse consequences for all the partners.

However in recent years the scope of trade agreements has grown to include more and more issues, to which the original trade principles have been applied, leading to more and more contention and unpopularity.

The overloaded agenda in FTAs gives trade a bad name, with people being confused between trade, trade policy and trade agreements.  Many people who are disgruntled with trade agreements also become unhappy with trade per se, and the benefits that trade can bring get mixed up with and overwhelmed by the contentious non-trade issues, and trade ends up being condemned as well.

It is important, at this moment of an imminent Trump presidency, to clarify the difference between trade and trade agreements, and to review the whole issue of trade policy.

A good outcome would be to design new agreements that are mutually beneficial in the trade aspect to all partners, whilst removing the controversial non-trade issues from the agenda.   And this could be part of a broader pro-development trade agenda.

But this is not likely to be the new agreements being envisaged by the Trump team. The danger is that these may be even worse than the existing ones.

We risk entering a new era where the US, and maybe some other developed countries as well,  are tempted to promote extreme trade protectionism, whilst retaining or expanding the unpopular non-trade issues in the trade agenda because it is in the interest of their corporations.

We might end up with a new type of “America first” agreements, in which a Trump administration  ensures that the US can curb imports whilst championing its exports, thus reducing the trade benefits to its  partners;  while at  the same time strengthening the rules in non-trade issues like intellectual property and liberalising financial services that favour US corporations but are against the partners’ interests.

That would be the worst of both worlds, at least for developing countries.

It is thus crucial for policy makers and thinkers in developing countries  to rethink what kind of trade is good for their economies, what kind of trade policy would correspond to that positive trade performance, and what kind of trade agreements would be good to have and which types should be avoided.

It is also time to rethink the role of the World Trade Organisation and reaffirm the priority of developing a balanced and pro-development multilateral trading system.  If (and that is a big if) the WTO could evolve into such an ideal system, there would be no need or less need for bilateral trade agreements.

 

The post Rethinking trade policy and protectionism in the Trump era appeared first on Inter Press Service.

Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva.

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