China’s President Xi Jinping has been walking a very delicate tightrope since the inauguration of the new President of the USA who has threatened to launch an economic war with China. One of candidate Donald Trump’s promises to his nation was to declare China as a currency manipulator on day one of taking his oath of office. Fortunately for China, President Trump is busy with other more pressing problems and has missed his self-imposed deadline by more than a month already. It is a fair guess that President Xi Jinping is counting days before his US counterpart will succumb to the calls by Democrats to implement one of his campaign promises and declare China a currency manipulator. The top Democrat in the Senate, Chuck Schumer, called out to President Trump, “Mr. President: if you really want to put America first, label China a currency manipulator.”

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Empowered by this legislation, every six months, the Treasury department puts countries in a blacklist known as “Monitoring List” on the basis of three tests:

* The country must have a significant trade surplus with the US.

* The country has a “material” current account surplus.

* The country is engaged in persistent one-sided intervention in the foreign exchange market.

In the past, China has met at least two of these criteria and has been on the “list” on and off since 1994. China’s image in the US took a hit on the chin when Donald Trump declared his candidacy for the president’s position in 2015. On November 9, 2015, Donald Trump wrote in the Wall Street Journal’s opinion page a harsh critique of China’s currency practices. The article, “Ending China’s Currency Manipulation”, Trump did not mince words when he proclaimed that “China’s de facto tariff on imported goods has cost the US billions of dollars and millions of jobs.” Rightly or wrongly, he has kept up this barrage of attacks on China’s economic policy throughout 2016, regardless of the evidence that China had moved away from deliberately undervaluing the yuan.

As a matter of fact, the yuan’s value against the dollar has been declining since 2014 and it is at a six-year low. China, either to prevent yuan from sliding further or to forestall any accusation from US that the devaluation is a result of covert government manipulation and hurting US exports anyway, has spent more than USD 1.3 trillion of its reserves to buy its currency to shore up its value. In other words, China is attempting to raise the value of yuan not to cheapen its value in the foreign exchange market. However, in an interview with the Wall Street Journal last month, Trump is not convinced and ridiculed Jinping’s administration’s claim about supporting their currency “because they don’t want us to get angry”.

To compound the situation, Donald Trump has been continuously saber-rattling, off and on since winning the elections. In mid-December he said on Fox News that “We’re being hurt very badly by China with devaluation; with taxing us heavy at the borders when we don’t tax them; with building a massive fortress in the middle of the South China Sea, which they shouldn’t be doing; and, frankly, with not helping us at all with North Korea.”

He now appears to be leaning towards a multi-pronged attack, along the economic front as well as in the geopolitical sphere. While it is not clear which economic measures the new Administration will finally take, the outline is pretty clear. The US wants China to step away from flooding the US market with cheap Chinese goods while keeping out US exports, thus causing US to run a trade deficit with China to the tune of USD 300 billion annually. More directly, President Trump has been singling out US companies that have outsourced their manufacturing to China and taken away jobs from US workers. He has also been threatening China with a 45 percent tariff on Chinese exports, similar to the 20 percent tax on Mexican imports to pay for the border wall. China and other countries are not powerless, though, against these threats since any form of tax on imports could be challenged in international courts as violation of WTO rules.

China could face other types of sanctions too. It has been reported that President Xi Jinping’s counterpart in the White House is exploring a new plan under which “the US Commerce Secretary would designate the practice of currency manipulation as an unfair subsidy when employed by any country, instead of singling out China”, allowing US companies to bring anti-subsidy actions themselves to the US Commerce Department against China or other countries.

All this uncertainty is throwing the Chinese leadership in turmoil since these challenges are coming on the eve of China’s 19th National Congress scheduled for next autumn. 2017 is a big year for the Communist Party of China and its President. “The Chinese leadership will likely face significant political uncertainty both internally and externally, and in response they will likely place social and economic stability as a top priority throughout 2017,” a Credit Suisse research team led by Vincent Chan wrote in a note.

President Xi Jinping, however, is not a pushover. Aware of the danger that Donald Trump faces if he carries his anti-China stance too far, Trump spoke with the Chinese president on the phone and reaffirmed US commitment to “One China” policy, which recognises Beijing’s sovereignty over Taiwan. Trump’s action to cancel TPP was also seen as a positive signal by China. And, Xi Jinping holds the ultimate trump card: China has more than USD 1 trillion in US bonds, notes and bills and Mr. Trump is aware that any move by China to sell these will cause major disturbances in US financial markets.

The writer is an economist and author of several books on economics.

This story was originally published by The Daily Star, Bangladesh

By Dr. Abdullah Shibli
Aug 17 2016 (The Daily Star, Bangladesh)

The ink has hardly dried on the Paris climate agreement (PA) document, and it appears that global attention has moved on to other urgent matters: terrorism, election politics, Brexit, and what have you. But, the Agreement marks only the beginning of a long process to address multiple issues relating to climate change. What are the tasks before us now?

Well, for a start, the signatories have to ratify the treaty, work on a mechanism to motivate as well as monitor carbon reductions, and to find ways to fulfill all the other commitments. The ambiguities inherent in PA and how different stakeholders are interpreting it are big challenges. Like the elephant for a blind man. At the recent UN gathering of signatories, Joseph Kabila Kabinga of Congo voiced this aptly. “The Paris Agreement created many challenges and opportunities for economies. To reach many of the goals it set out, predictable and significantly increased financial flows and other resources would have to be put in place to enable robust action,” Mr. Kabinga said.

I do not intend here to comment on the shortcomings of the Paris Agreement or the various provisions which have inherent weaknesses. It is my intent to point out why we all need to be vigilant as the signatories backslide or try to wriggle out of their commitments. I also offer some ideas for strengthening the process of implementation at the national level, both in the developed and the less developed countries.

First and foremost, all countries must work with each other and independently to ratify the agreement. As of August 3, 2016, while there are 180 signatories to PA, only 22 states have also ratified it accounting for only 1.08 percent of the total global greenhouse gas emissions! That’s an important statistic, since it is well known that the Agreement “shall enter into force on the thirtieth day after the date on which at least 55 Parties to the Convention accounting in total for at least an estimated 55 percent of the total global greenhouse gas emissions have deposited their instruments of ratification, acceptance, approval or accession.” While there is still a long way to go until the year 2020 when the accord is supposed to enter into force, there are already signs of grumbling from some of the major polluters. In the US, the Republican candidate for the President has indicated that he plans to ask for a “better” deal. According to the Washington-based World Resource Institute’s PA Tracker model, “Even if every other country in the world ratifies the Agreement, it cannot go into force without at least one of the four biggest emitters (China, United States, EU and Russia) doing so as well.”

Among the emerging countries, India, Arab oil exporting countries, and a group of countries banding together as “Third World Network” have voiced their own reservations. India has indicated that coal will be its main source of power for years to come, and its power minister Piyush Goyal even mocked the “treaty-mongers”, as he calls them. “It is very easy to be evangelists in homes enjoying 24 hours’ power. For that power, somewhere down the line you had to cut a forest to get the coal.” The Third World Network is asking developing countries to wait before ratifying PA in order to,

-Secure the leverage needed in the negotiations

-Ensure the fulfillment by developed countries of existing commitments

-Wait for roadmap on the provision of the $100 billion annually in climate finance by 2020

-Assess progress on new ‘loss and damage’ mechanism

-Assess effectiveness of technology transfer efforts

It is known that Third World Network has close links to “Like Minded Developing Group of Developing Countries” which includes China, India, Saudi Arabia, Venezuela, Iran and Ecuador.

Other areas of concern relate to” 1. Lack of adequate funding for mitigation and adaptation; 2. Confusion and contradiction on the status of “loss and damage” provision; 3. Absence of any effective mechanism to ensure that commitments made are enforced; and 4. General lack of public support. Let me address each of these issues briefly below.

As of August 3, 2016, while there are 180 signatories to PA, only 22 states have also ratified it accounting for only 1.08 percent of the total global greenhouse gas emissions
Funding for climate change projects has been woefully inadequate. The Global Climate Fund (GCF) is designated to mobilise US$100 billion a year to fund mitigation and adaptation efforts but current commitments are less than half, or even only a fraction, of that goal according to some accounts. Meanwhile, the US Congress has already voiced its reservations and indicated that any future administration is not bound by any PA targets. A group of 37 US senators has accused President Obama of acting “unilaterally” when the government announced that it had deposited $500 million into GCF, as part of the $3 billion it committed in 2014.

Loss and Damage” which refers to negative residual impacts of climate change and not addressed by mitigation and adaptation got short shrift in PA. While Article 8 addresses Loss and Damage, it “does not involve or provide any basis for any liability or compensation.”  Island nations and LDCs need to continue their push to have Loss and Damage recognised as a third category, in addition to mitigation and adaptation, of financing necessary for countries to cope with the effects of climate change. It is now well known that PA skirted this issue to buy in the support of developed countries, and some critics have also voiced alarm that total elimination of any reference to liability and compensation in Article 8 has “diluted” the mechanism. To boot, Article 9, which contains the finance provisions of PA, has made an effort to sweep “Loss and Damage” under the rug of mitigation and adaptation. Even Bianca Jagger, who is an otherwise strong supporter of Third World causes, has managed to lump these together. “The Agreement provides $100 bn in financing to compensate poorer countries’ for ‘loss and damage,’ mitigation and adaptation,” she said.

Thirdly, compliance technicalities will need to be fleshed out at the next meeting of the climate change super-body, Conference of Parties (COP), to be held in the city of Marrakech, Morocco. While all countries agreed to report their progress in reducing GHG emissions, there aren’t any mechanisms to ensure uniformity or compliance. None other than the US Secretary of State John Kerry pointed out that PA “doesn’t have a mandatory scheme and it doesn’t have a compliance enforcement mechanism”. A recent Congressional report has raised the possibility that EU and USA will miss their respective target INDCs since the Agreement is not binding. A number of Arab countries including Kuwait, Saudi Arabia, Egypt, Qatar, Bahrain, and the United Arab Emirates have “indicated that they would incorporate clean energy and sustainable priorities into infrastructure investments to varying degrees, but they did not establish targets to reduce emissions or set carbon intensity reduction goals.”

Last but not least, there is a need to build up public support in each signatory country, and to convey the seriousness and urgency at the grassroots level. Why should the average Joe be bothered about climate change? Countries, rich or poor, will soon discover that it will be tough to formulate “draconian regulations with no public support”. To address these concerns, we need a massive grassroots initiative.

In Bangladesh, during the National Environmental Management Action Plan (NEMAP) process many years ago, with funding from international organisations, activists brought together (at the union level) representatives from the various local government agencies and categories of civil society to a gathering under the same tent and hashed out the ideas. They negotiated and came up with some policy recommendations. And, most importantly, it raised public awareness.

The writer is an economist and the author of a recent book Economics is Fun: Essays for the Masses. 

This story was originally published by The Daily Star, Bangladesh

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