Tag Archives: China

REUTERS – No ties? No problem as China courts Taiwan’s remaining allies

By Lucy Hornby and Luc Cohen

BEIJING/MEXICO CITY | Tue Aug 6, 2013 5:00pm EDT

Aug 7 (Reuters) – Taiwan’s last remaining diplomatic allies are developing increasingly tight economic ties with China, in a trend that could increase Taiwan’s diplomatic isolation if the current detente between Beijing and Taipei fails.

The world’s second-largest economy is gaining soft power with a series of investment commitments in Central America, home to the last significant bloc of countries that still maintain formal ties with Taiwan.

But instead of jumping on the chance to make new allies, China is stalling on Central American requests to establish diplomatic relations. The goal is to avoid galling Taiwanese voters, as Beijing is also courting the administration of the island’s president, Ma Ying-jeou.

That leaves China with a trump card if cross-straits relations turn cooler under future administrations. It could then pull the diplomatic rug out from under Taiwan by engineering a mass defection of its remaining friends, analysts say.

“The economics are hot although the politics are still cold,” said Zhang Zhexin, who studies Taiwan policy at the Shanghai Institute for International Studies. He estimates China has rebuffed at least five countries’ requests to switch diplomatic recognition to Beijing.

“If it weren’t for the desire to support Ma, we would have let them switch already. But now we are not as much in a rush as before.”

Costa Rica was the most recent nation to recognise Beijing in 2007, leaving Taiwan with 23 allies ranging in size from Paraguay to the tiny Pacific island nation of Nauru.

A U.S. State Department cable released by Wikileaks indicates that Panama sought to recognise Beijing in 2009, but was rebuffed.

“It doesn’t make any sense anymore economically speaking to be affiliated with Taiwan,” said Margaret Myers, director of the China and Latin America programme at the Interamerican Dialogue.

Beijing became more conciliatory towards Ma’s ruling Nationalist Party under China’s previous president, Hu Jintao, and tried to woo Taiwan’s people with carrots rather than sticks.

China and Taiwan have signed a series of landmark trade and economic deals since the China-friendly Ma was elected in 2008, and the two sides have since observed an unofficial truce in the competition to lure diplomatic recognition with expensive investment deals.

Nonetheless, Beijing – the People’s Republic of China (PRC) – regards separately ruled Taiwan as a renegade province, to be reunited with force if necessary. The two have been governed separately since the Communist Party won the Chinese civil war in 1949, and the Nationalists fled to Taiwan.

“The PRC now wants to be in a position without violating the truce of effectively being able to say … ‘we are essentially in a position where we can take away the last remaining pieces of your diplomatic legitimacy’,” said Evan Ellis, assistant professor at the William J. Perry Center for Hemispheric Defense Studies in Washington, D.C.

 

BUSINESS TIES THAT BIND

A number of Central American “dream” projects might have strategic interest for China as it seeks cheaper shipping routes for gas, ore and soybeans from the Caribbean or the Atlantic ports. But the greater allure seems to be for Central American politicians, who envision Chinese funding for their grand plans.

Daniel Ortega, president of Nicaragua, which has ties with Taiwan, has granted a 50-year concession to a Chinese telecoms businessman with no experience in infrastructure projects, to build a canal from the Caribbean to the Pacific Ocean that would challenge the Panama Canal’s dominance. The price tag for this project, long desired by Nicaragua, is about $40 billion.

Not to be outdone, the president of Honduras, which also has ties with Taiwan, announced that China Harbour Engineering Corp (CHEC) was conducting a feasibility study for a $20 billion port and rail project, also to cross the isthmus. China Harbour executives said they agreed to do the study, but have not yet received a contract.

Meanwhile, plans for China Railway Group to build a trans-isthmus rail and port project in Colombia, which recognises Beijing, have seen little progress since they were announced by President Juan Manuel Santos in 2010, diplomats say.

And Guatemala is trying to tap Taiwan to finance the revival of its national train system, which has not operated for several years. Taiwan, which has ties with Guatemala, has agreed to develop a blueprint.

Beijing’s single Central American ally, Costa Rica, has asked for help developing a special economic zone in impoverished port regions.

Still, in practice, Chinese firms prefer to take less risky roles as cost-effective contractors on projects that range from American-backed power plants in Guatemala to Panamanian port projects.

“In terms of our business development, we can participate in a project regardless of whether there is diplomatic recognition,” said CHEC vice president Shi Yingtao. His company has worked on Panamanian port projects for Taiwanese shipping firm Evergreen Marine Corp.

While Chinese money might threaten Taiwan’s diplomatic standing, Taiwan’s vibrant business community has not lost out. They continue to operate export-oriented factories in Southeast Asia – despite a lack of diplomatic recognition – and in mainland China, where their investments were a major driving force for the spectacular growth of the past three decades.

In fact, politically driven overseas projects by the Taiwan government have in the past failed to attract significant interest from Taiwan businesses, to Taipei’s embarrassment.

“They spent a lot of money over the years competing for recognition but without much result. There was a very low return on investment,” said Chin-Ming Lin of the Graduate Institute of the Americas at Tamkang University in Taiwan.

(Additional reporting by Mike McDonald in Guatemala City, Gustavo Palencia in Tegucigalpa, Ivan Castro in Managua, Isabella Cota in San Jose and Lomi Kriel in Panama City; Editing by Robert Birsel)

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FP – Ten Questions for the New BRICS Bank

The great emerging markets want to start their own bank. But it doesn’t seem like they’ve really thought it through.

BY ISOBEL COLEMAN | APRIL 9, 2013

 

The recent BRICS summit in Durban, South Africa concluded with its first tangible outcome since the countries began meeting formally five years ago: The commitment to create a new BRICS development bank. What more do we know about this ambitious project? Not much. So below are ten questions to consider as the bank takes shape.

1. Is the BRICS Development Bank a done deal?

Not necessarily. The joint statement from the BRICS leaders announcing that they “have agreed to establish the New Development Bank” sounded pretty definite, but then there seemed to be some hedging going on too. President of South Africa Jacob Zuma struck a cautious note, saying only that “…we have decided to enter formal negotiations” on the BRICS bank, while Russian officials muttered about the devil being in the details. Newspaper headlines reflected the ambiguity, with the Financial Times declaring “BRICS agree to create development bank [sic],” while on the same day, Voice of America led with the more cautious “BRICS Summit Ends Without Development Bank Deal.” Obviously, there’s still a lot of work to do and a lot can happen.

2. Do the BRICS have enough in common to sustain a shared institution?

Maybe. Maybe not. Some lack of consensus is undoubtedly behind the hedging. The BRICS encompass very different political systems — from thriving democracy in Brazil to entrenched oligarchy in Russia — and their economies are little integrated, inherently competitive, and are different in size by orders of magnitude. In 2011, China’s GDP was over $7.3 trillion, about eighteen times larger than South Africa’s economy, the smallest of the BRICS, and three times larger than Brazil’s economy, the second biggest of the BRICS. It’s also unclear to what extent the BRICS share a vision with respect to economic development, other than not being “the West.” Still, while such differences create challenges, success is not impossible.  Remember, the economy of the United States dwarfed those of its allies when it created the Bretton Woods institutions in the postwar years. And there was no lack of disagreement about the postwar order among the European powers and Washington, but somehow the Bretton Woods system survived.

3. What will the new development bank focus on?

Infrastructure, it seems. The BRICS themselves have an estimated $4.5 trillion in infrastructure needs over the next five years, and coincidently, have about the same amount in foreign exchange reserves. A safe bet is that the new BRICS bank won’t be doing the governance and democratization work that is popular at the World Bank these days, such as the “open data” project to make information about international development easily accessible to anyone. It is similarly difficult to imagine that the BRICS, which are not known for their transparency, would share the World Bank’s enthusiasm for anticorruption efforts.

4. Will developing countries welcome the BRICS development bank?

Probably. China is known for extending loans and resources without conditionality around touchy subjects like governance, and if the BRICS development bank follows suit, it’s hard to imagine many countries saying no to easy money. Still, there’s likely to be some skepticism, in no small part because of China’s inevitably outsized role in the new bank and also because of the mixed reviews China gets from its global south trading partners. Across Africa, various leaders have criticized China’s export of labor to the continent, and bemoaned the onslaught of cheap Chinese manufactured goods that undercut local production. In a particularly pointed criticism, Nigeria’s central bank governor Lamido Sanusi, lambasted China as “a significant contributor to Africa’s de-industrialization and under-development.”  Nevertheless, if the BRICS bank offers economic assistance, most countries are likely to be interested. Money talks, and can even produce changes of heart. Look at the turnaround in attitude of Zambian president Michael Sata, who went from making scathing comments about China in 2006 to encouraging Chinese investment in his country in 2011.

5. Will the Bank be dominated by China?

Pretty likely, given China’s relative economic weight. And that prospect is unlikely to delight the other BRICS. Some speculate that South Africa wants to host the bank and that an African seat for the bank could be one way to reduce China’s influence. But that’s wishful thinking. Even if the bank is physically located on another continent, China will hold the purse strings, and with that comes privilege. Look how the United States, nearly seventy years after the creation of the World Bank, still gets to pick the institution’s president.

6. How will the bank be capitalized?

Not clear. There is talk of each country putting in $10 billion for an out-of-the-gate capitalization of$50 billion. But $10 billion would be an enormous commitment for South Africa. Presumably the other countries — notably China — would have to lend South Africa the money to meet its share. And this gets tricky quickly. China lending South Africa money to lend to Mozambique? In any event, $50 billion doesn’t go very far in the world of global economic development. The World Bankcommitted $52.6 billion in “loans, grants, equity investments, and guarantees” in 2012 alone.

7. What currency will the new bank use?

Very possibly the Yuan. China will no doubt want to make loans denominated in yuans, a borrowing option it extended to other BRICS countries in 2012. It has already pushed for lending in its own currency to protect it against currency risk in Africa’s enticing but volatile emerging markets. But making the Yuan the currency of the new development bank might only deepen unease about China’s outsized role.

8. Aren’t the BRICS “doing development” already?

Yes, a lot of it, by some measures, which is surprising given the high levels of poverty that persist across the BRICS. China is the big player; in recent years, it has substantially grown its activities abroad, particularly in Africa.  However, traditional metrics of development aid are difficult, if not impossible, to apply to what China is doing, and estimates of its aid vary hugely, from $1.5 billion to $25 billion. Brazil is also emerging as a more active donor, giving more than $1 billion in various forms of aid to more to sixty-five countries in 2012. Russia, too, is a re-emerging as donor. During the Cold War, the Soviet Union competed with the United States for influence by giving away wads of cash and assistance — in 1986, it gave away a whopping $26 billion. But after the country fell apart in the 1990s, Russia became a net recipient of aid. Today, it is once again a donor, distributing $514 million in Official Development Assistance in 2011 (compared with around $5.3 billion from Canada and $30.7 billion from the United States). India is just beginning to establish itself as a foreign donor. In 2012, it collected its aid programs into the Development Partnership Administration, which has a five-year coffer of some $15 billion. South Africa, meanwhile, is supposed to put an aid agency into action in 2013. How a BRICS bank would interact with these unilateral efforts is not clear.

9. Do the BRICS already invest in each other?

Not much. In 2011, only 2.5 percent of FDI from BRICS countries went to other BRICS, whereas over 40 percent of their FDI went to developed countries. Presumably, one of the purposes of a BRICS development bank is to change this, but such a change would require a considerable shift in current priorities. Meanwhile, the World Bank has recent projects of some kind or another in all the BRICS countries, such as financing for sustainable rural development in Brazil.

10. Will a new development bank pose a challenge to the World Bank?

Perhaps. It is certainly intended by its creators as an alternative to the World Bank, although it’s still a long way from meeting that challenge. Comments from BRICS leaders don’t do much to hide a sense of schadenfreude over the declining economic circumstances of the West versus the rising fortunes of their own countries, and a deepening level of frustration that the rules of the game have not changed to reflect that reality. “We still have a situation where certain parts of the world are over-represented,” declared South African finance minister Pravin Gordhan. Despite years of promises to give the global South more say in both the IMF and the World Bank, no big structural changes have happened. And stagnating aid budgets among OECD countries only create more openings for the BRICS. So if a BRICS bank does emerge as a challenge, the West has no one to blame but itself.

China’s exploitation of Latin American natural resources raises concern | EurActiv

China’s exploitation of Latin American natural resources raises concern | EurActiv.

BBC – China and Brazil sign $30bn currency swap agreement

China and Brazil have signed a currency swap deal, designed to safeguard against future global financial crises.

The pact, first announced last year, will allow their central banks to swap local currencies worth up to 190bn yuan or 60bn reais ($30bn; £20bn).

Officials said this will ensure smooth bilateral trade, regardless of global financial conditions.

Along with being the world’s second-largest economy, China is also Brazil’s biggest trading partner.

“If there were shocks to the global financial market, with credit running short, we’d have credit from our biggest international partner, so there would be no interruption of trade,” said Guido Mantega, Brazil’s economy minister.

The agreement was signed on the sidelines of the fifth Brics (Brazil, Russia, India, China and South Africa) summit being held in Durban, South Africa.

‘Guarantee normal trade’

Trade between China and Brazil has grown robustly over the past few years, with volumes rising from $6.7bn in 2003 to nearly $75bn in 2012.

A large chunk of this growth has been driven by growing Chinese demand for Brazil’s resources, such as iron ore and soy products.

Meanwhile, Brazil has also become a key export market for goods manufactured in China.

Brazil’s Central Bank governor Alexandre Tombini said the swap agreement would ensure that trade volumes between the two nations did not suffer if a financial crisis in the future hurt global liquidity.

“The purpose of this swap is that, independent of the conditions prevailing in the international financial market, we will have $30bn available which would represent eight months of exports from Brazil to China and 10 months of imports to Brazil from China,” he said.

“This is sufficiently large to guarantee normal trade operations.”

Bigger yuan role

China has been pushing for a more international role for its currency, the yuan. It has been trying to promote the yuan as an alternative to the US dollar as a global reserve currency.

As part of that push, it has signed a series of swap deals with some of its key trading partners.

Such agreements not only allow central banks to swap currencies, but can also be used by firms to settle trade in local currencies rather than in US dollars, as happens now, since China’s currency is not fully convertible to other currencies.

Earlier this year, the Bank of England said that it was in negotiations with its Chinese counterpart to finalise a three-year swap agreement.

Last year, China signed a swap deal with Australia worth up to A$30bn ($31bn; £20bn) to promote bi-lateral trade and investment.

It is also looking at currency pacts with Hong Kong and Japan.

AS/COA – Interview: BRICLab Co-Director Marcos Troyjo on the 2013 Outlook for the BRICs

December 13, 2012

 

After a decade of copying and adapting, [the BRICs] have to move on to a new decade of designing, formulating, and innovating.

Marcos TroyjoMarcos Troyjo serves as an adjunct professor of international affairs and as co-director of Columbia University’s BRICLab, a forum dedicated to the rise of the BRIC countries (Brazil, Russia, India, and China). AS/COA Online’s Rachel Glickhouse spoke to Troyjo about how the BRICs will fare next year in terms of technology and innovation, energy, and economic policies.

AS/COA Online: You’ve mentioned before that the BRICs need to change their DNA in terms of policies. What do you mean by that? 

Marcos Troyjo: One of the reasons the BRICs were considered rising countries back in 2001 is because they were capable of adapting creatively to the global economy. That is, their rise has more to do with adapting and copying practices and benchmarks from other economies instead of coming up with something of their own. So I think that the main way to explain the rise of BRICs from 2001 to 2011 was creative adaptation.

Creative adaption meant different things for Brazil, Russia, India, and China. For China, creative adaptation meant reorganizing their productive capacities to become an export-led country. So China received Most Favored Nation status in its trade with the United States. China devised a very intelligent program of public-private partnerships that allowed for the necessary capital to expand infrastructure. It capped wages and other factors of production, including the exchange rate, to provide for this competitive image.

Brazil’s creative adaption meant a policy of import substitution 2.0. Brazil was using the surpluses it acquired from commodities, particularly agriculture and mineral commodities trade with China. Brazil discovered rich deepwater offshore oil reserves, and was also able to devise one of the most advanced biofuels programs in the world. So these three characteristics created the necessary resources to allow for import substitution.

India adapted creatively in the past 25 years by providing cheaper alternatives in areas such as information technology, pharmaceuticals, and textiles. It also developed services such as call centers that could be outsourced from other countries.

Now, the traditional markets of the United States and Europe are stalled. Therefore, BRIC countries have to change their DNA in the sense that they have to grow not because of creative adaptation, but because of creative destruction. BRIC countries have to direct resources towards innovation. After a decade of copying and adapting, they have to move on to a new decade of designing, formulating, and innovating. If the BRICs are able to perform that DNA change, I think that they will continue to be some of the most dynamic growth markets in the world. If they’re not able to change their DNA, then they face a bumpy road ahead.

AS/COA Online: Local content policies require companies to purchase or produce a certain percentage of goods or services domestically in order to operate in a given country. In your opinion, how do local content policies impact the BRIC economies and trade strategies? Do you foresee any changes to these policies in the coming year?    

Troyjo: Local content is essential for the BRIC countries, although each of the BRIC countries approaches local content in different ways.

China, for example, is now implementing a number of countercyclical measures that have local content at the core. If you are an aircraft manufacturer and you want to sell your product to the most important client in China, which today is the Chinese government, you have to produce essentially 70 percent of those aircraft in China—therefore generating local taxes and local jobs. China has foreign exchange reserves at around $3.7 trillion as a countercyclical measure in order for companies to divert their production capacities to China and to have China as the final destination for their products. So China is operating a DNA change from export-led growth to growth that will also be fostered by domestic consumption.

Brazil’s local content policies are important in the sense that it has an industry to protect. Brazil has been deindustrializing very rapidly due to global competition, particularly Asia. One of the ways the Brazilian government came up with to reindustrialize is local content policies, especially by the so-called Brazilian champions: the large multinational corporations in which the Brazilian government owns the golden share. That is the case of Petrobras, Embraer, and Vale. Many of these companies play the role of the leading local content implementers.

Petrobras, for example, has to buy approximately 20 big oil tankers a year. If Petrobras were to buy these tankers in South Korea, China, or Singapore, the average price tag would be $65 million. Petrobras is prepared to pay $125 million for each of those ships if 65 percent of the ships are produced in Brazil. What’s the logic behind paying a $50 million premium on each ship? It’s that Brazil believes that there is a learning curve for the entire production chain in this particular sector—engineers, welders, technicians—that will allow for a 50 percent reduction in production costs over a period of 10 years. The remainder of the premium has to do with labor and fiscal regulation reforms to make the country’s companies more competitive.

Do I see any changes in how these countries will approach local content in the next few years? I don’t think so, because when it comes to international trade and investment, I think we’re about to see a much more de-globalized set of agreements and institutions in the next couple of years. That’s because countries are very much turned inward with insular policies.

AS/COA Online: You’ve discussed innovation and technology as key areas for the BRICs to invest in. How does Brazil compare to the other BRICs in terms of innovation and technology?

Troyjo: I think innovation is the result of the interplay of four factors: a stock of knowledge, a stock of capital, a stock of entrepreneurship, and the atmosphere that you have to create in order for these three to operate efficiently.

In this sense, Brazil did very well, as in the case of biofuels or aircraft. Look at Embraer, for example; it’s one of the top three air manufacturers in the world. In biofuels, when research was applied to industrial ends, Brazil fared very well. Today, eight out of 10 Brazilian automobiles run on flex fuel, which uses biofuel. Look at the case of agriculture. Brazil has a great research and development company called Embapra, which is responsible for raising the competitive advantages of seeds and of shortening the maturation process of some crops.

But when it comes to overall science and technology investments directed toward innovation, I am less optimistic. Brazil is only investing 1 percent of its GDP in research and development, whereas a country like South Korea—which many acknowledge as one of the top examples of growth through innovation—is investing in excess of 3 percent of its GDP in R&D. Ten years ago, China directed only 0.6 percent of its GDP to R&D. Now, it invests 1.5 percent, and by the time China overtakes the United States as the world’s largest economy between 2022 and 2025, China will be investing 2.5 percent of its GDP in research and development.

In India, we have a very uneven situation. When it comes to IT, biotechnology, and pharmaceuticals, it is very advanced, with a great deal of investment from the private sector. Multinational corporations do their research in India because of the relatively low cost of production and high level of intellectual human capital there. But throughout society, you will not find the same enthusiasm for R&D investment, and this is one of the reasons why you find such disparities. Today in India, there are more cell phones than toilets. There are more billionaires than in the UK and France put together. But it’s also a country where there are more poor people than on the entire African continent. I think that’s all a result of the many disparities that you have in research, development, and innovation investments.

Russia is one of the classic examples of the distance between pure research and research applied to markets. In the late 1970s, four out of 10 scientists in the world were working in the Soviet Union. This country was able to perform things that were really remarkable, like sending a man to outer space, but it couldn’t produce an alarm clock that would ring on time. So Russia’s problem is transforming its great level of science that it has into a market. Many of the market mechanisms that are so common in the United States—start-up capital, projects financed by companies, individual entrepreneurship—are not present in Russia. These are the bottlenecks that keep Russia from playing an even more important role in terms of innovation. Some of the more democracy-oriented characteristics of society that are so important for technological entrepreneurship are still missing in Russia.

AS/COA Online: President Dilma Rousseff is making efforts to reduce the so-called “Brazil cost,” a combination of insufficient infrastructure, high taxes, and bureaucracy that hinder businesses in Brazil. What legislation or reforms under consideration could have an impact on the Brazil cost next year? 

Troyjo: To be very honest, I see tactical movements by the Brazilian authorities, but I do not see anything that is either essential or structural. But I think that’s understandable.

Let me give the example of fiscal reform. In Brazil, the overall tax burden on society is about 37 percent of GDP, whereas in South Korea, for example, it’s only 26 percent. Why is Brazil’s tax burden so high? The Brazilian government is too big and this is a choice by society. Brazil keeps saying that it has achieved near full employment with one of the lowest unemployment rates in the Western Hemisphere. But if you analyze the organic composition of employment, you realize too many people are employed either by the city, state, or federal branches of government or in state companies and activities.

Not only is the government too big, but it’s too inefficient and too expensive. One structural reform to be enacted would be to reorganize Brazilian administration to allow for a decrease in the fiscal burden. It could happen, but it takes a lot of political will. The Brazilian government would have to sacrifice in the short term for the benefit of the long run. Because we have an electoral cycle every four years in a democracy, that’s a difficult bet to make. That’s true especially in Dilma’s case, where in terms of economic growth, the first two years of her administration have been nearly lost. Brazil only grew 2.7 percent last year and this year it’s only going to grow around 1 percent.

Labor reform would also be important. Labor costs are enormous in Brazil right now. The minimum wage is three times the minimum wage base in countries like Indonesia or Vietnam. If you’re a company establishing yourself in Brazil, you’re probably going to hire someone and pay one salary to the employee and the equivalent of another salary to government due to the absurd medieval requirements when it comes to labor protection and pensions. Once again, the government could enact reform in that area. It would have to pick a fight with the labor unions. Does it want to do so in the long term? I don’t think so.

But I do not see these two reforms on the radar in any way, shape or form in the next couple of years.  Whatever the government comes up with in terms of reforms is only tactical and short-term.

AS/COA Online: One of the Brazilian industries to watch in coming year is in oil and gas, as the first round of concessions in five years is due to take place in 2013. What are some of the opportunities and challenges in Brazil’s energy sector that will be important next year?

Troyjo: Well, I think there are three dimensions. One is the challenge related to the deepwater, pre-salt oil, so immense in scope that Petrobras will probably leave some of the onshore exploration opportunities to foreign companies or companies that could partner with other Brazilian players. So I see a lot of things coming from onshore, which is really not the tradition in Brazil and is really not where most of the attention is. But because Petrobras’ challenges in pre-salt oil are so huge, something is going to be left behind as far as onshore oil.

When it comes to pre-salt oil, it’s obvious that the technological challenge is huge. Think about the kind of remote robotics you have to have, the chemicals used in taking oil and gas out of a depth of about 7,000 meters (22,965 feet). Technological partnerships are key. The companies that are able to understand the workings of Petrobras, the requirements of local content, and mapping the area of technological demands can be very successful.

The third area of opportunity is biofuels. More and more countries are interested in the Brazilian model of flex fuel engines. Countries in Scandinavia are very interested; Sweden, for example, is already the top destination for Brazilian ethanol in Europe. The companies that want to partner in Brazil with biofuels will be able to join the Brazilian locomotive that may be destined to make ethanol a global commodity. If that happens, all of those companies that partnered with Brazilian companies in extending the global outreach of biofuels—particularly sugar cane-based biofuels—will have a lot to profit from.

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NYT – Foreign Policy Debate’s Omissions Highlight Skewed Worldview

 

By 
Published: October 23, 2012

PARIS — Debates are more about scoring points than elucidating problems, just as presidential elections turn more on perceptions of character than on policy promises. But even so, Monday night’s American presidential debate on foreign policy presented a skewed vision of the world, even one defined by American national interests.

Iran was mentioned more than 45 times, Israel and China more than 30 times each, Afghanistan 29 times andMali at least four times. NATO was not uttered, and Europe was referred to only once — in a list of allies reeled off by President Obama — and the euro and its crisis were not mentioned at all.

Mitt Romney did, however, state twice that he would not let the United States and its domestic debt go the way of Greece.

Issues that Mr. Obama highlighted earlier in his term, like nuclear nonproliferation and the problems of climate change, were barely mentioned. In fact, the word climate was not to be found. Mexico was not mentioned, either, and it is pretty close to home. There was no discussion of the progressive decline of the West in terms of global trade or of the rise of competing ideologies, like China’s autocratic capitalism, that challenge Western ideas of liberalism, human rights and the power of the individual.

Even Russia and the success or failure of Mr. Obama’s “reset” policy and the administration’s failed bet on former President Dmitri A. Medvedev barely got a mention. And there seemed to be a general denial, suggested Barthélémy Courmont, a political scientist, of what is a common analysis, which is the inexorable weakening of American global influence, as countries like China, Brazil and India begin to wield greater regional and economic power. “At a time when a growing number of analysts ponder the decline of the United States,” he wrote in the French newspaper Le Monde, the candidates engaged in “self-persuasion, to insist on the ‘necessary’ character of American power.”

In general, there was a sense among analysts and observers outside the United States that these were two intelligent, competent candidates who do not differ overly much on the central issues of foreign policy and were actually debating with domestic constituencies in swing states foremost in mind.

The debate over Iran and Israel was really about Jewish voters in Florida, while the debate over China was really about jobs in Ohio and the Midwest, noted François Heisbourg, a special adviser at the Foundation for Strategic Research, based in Paris. And that makes perfect sense in a tight American presidential election, where most voters do not consider foreign policy a priority, Mr. Heisbourg said.

“The balance was more toward 9/11 than the pivot to Asia,” Mr. Heisbourg said. “There was more about risks and threats than friends and allies. Both spoke in a Hobbesian world as tough characters willing to deal with monsters out there, not as people spreading the gospel of working with friends and allies to make the world a better place or spreading U.S. influence to help people get along.”

Le Monde said on its Web site, “For each question, the two candidates came back to the economic situation of the country, proof that this is the electorate’s main preoccupation.”

Mr. Obama even spoke of China as an “adversary,” although he said it was also “a potential partner in the international community if it’s following the rules.” Mr. Romney said essentially the same thing, speaking of confrontation over trade and not about working with China on issues like North Korea, Pakistan and Iran. For Mr. Heisbourg, “Both were wrong on China, portraying it as an adversary, but each got the message across about defending jobs in Ohio.”

Not surprisingly, the attack that killed Ambassador J. Christopher Stevens and three other Americans last month in Libya was an important topic, leading to an essentially roundabout discussion of Syria, where Mr. Romney’s sole difference with Mr. Obama was his willingness to provide arms to the rebels. But both agreed that no American troops should be used against Syria.

But given all the praise of the successful intervention in Libya (the vital — even leading — roles of France and Britain went unmentioned), there was no discussion of why what was a powerful motivation for American intervention in Libya is not relevant in Syria, where many more people have been killed by another “dictator.” That is a question that absorbs many in the Middle East and Europe, however complicated the responses.

There was hand-wringing about the progress of radical Islam, both in chaotic countries and through the ballot box, as a result of the turmoil of the “Arab awakening.” But there was little specificity about causes or cures.

There was no mention, let alone discussion, of the role of Turkey or its dilemma as a Muslim nation sharing a border with Syria, no discussion of the aging royal family ofSaudi Arabia and its sponsorship of radical and conservative Islam, no mention of Somalia or Islamist threats to allies like Jordan and Morocco. There was a glancing reference to thePalestinians, but no discussion of their divisions, of the role of Hamas, of the separate status of Gaza, of the weakening grip of Mahmoud Abbas and his Fatah movement, of what might happen if and when Mr. Abbas, the Palestinian president and leader of the Palestine Liberation Organization, leaves the scene.

And there was no criticism of Israel, its settlements or its occupation of the West Bank. Mr. Romney did say that Mr. Obama had not visited Israel as president even after his 2009 visit to Cairo in which he pledged a new era in relations with the Muslim world.

Mr. Obama responded with descriptions of an earlier visit as a legislator, but Mr. Romney missed an opportunity to respond tartly, for even top Obama aides concede that failing to go quickly to Israel after Cairo to make a similar speech and then calling for a “settlement freeze” in East Jerusalem, instead of in the larger West Bank, were errors.

Even on the question of American military strength, there was little debate other than numbers. Mr. Obama is right that the United States has more aircraft carriers than any other nation, and got off a good line about bayonets and horses and the game Battleship. But the United States is reported to have only 11 carriers, and carriers are increasingly vulnerable to more sophisticated longer-range missile attacks.

As for Europe, the lack of attention made perfect sense. Europe is an ally, not a policy dilemma, and the crisis of the euro zone has been technical, lengthy and tedious, and seems to be losing steam. America’s own debt problems dwarf those of Europe.

But the French daily Libération asked: “And what about Europe? It isn’t far from Australia in the competition for the status of the most forgotten continent.” But silence was good for Europe, the paper said. “At least the euro crisis isn’t brandished by Obama as a major source of economic trouble for America, and Romney has stopped making ‘European socialism’ his campaign scarecrow.”

On the Internet and on Twitter there were thousands of reactions to the debate. But speaking for many was @jonathanwatts, a Latin American correspondent for The Guardian, who wrote: “Obama won this debate. World lost. Apart from 5 mins on China, it was all Middle East. Where was LatAm, Europe, climate?”

Aurelien Breeden contributed reporting.

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AS/COA – Explainer: Defense Spending in Latin America

Rachel Glickhouse
June 7, 2012

In much of Latin America, defense spending is on the rise. Economic growth contributes to the increase, as do the continued challenges of drug trafficking and border security. Since 2003, military expenditures in the region rose 8.5 percent each year and amounted to $73 billion in 2011. AS/COA Online takes a look at some of the big spenders, both in terms of overall expenditures and in terms of percent of GDP.

Rising Defense Spending: A Regional View 

The Stockholm International Peace Research Institute (SIPRI), which tracks defense spending worldwide, indicates that South American military spending rose from $44.9 billion in 2002 to $61.1 billion in 2011, based on 2010 prices and exchange rates. In Mexico, Central America, and the Caribbean, military spending rose from $4.9 billion to nearly $7 billion over the same period. Last year, significant increases from 2010 included Chile at 12 percent, Mexico at 5.7 percent, and Paraguay at 35 percent. Overall, however, military spending in Latin America dropped 3.3 percent in 2011, largely due in part to Brazil’s military budget cuts.

The South American Defense Spending Registry, a report issued this year by the South American Defense Council of the Union of South American Nations (UNASUR) also showed rising funding. The report found that Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela spent $126 billion on defense between 2006 and 2010. Brazil’s defense spending accounted for 43 percent of all spending, followed by Colombia and Venezuela at 17 and 11 percent, respectively.

Arms imports are also on the rise. SIPRI found that weapon imports to South America increased by 77 percent from 2002 to 2006 compared with 2007 to 2011. Similarly, North American arms imports rose 54 percent over the same period. In some cases—such as Chile, Peru, and Venezuela—natural resource revenues from oil and mining help fund arms purchases.

Though traditionally France, Germany, Israel, Spain, and the United States acted as top arms exporters to the region, China and Russia are growing players in defense exports to Latin America. Russia is quickly gaining on the U.S. arms export share worldwide, reaching 24 percent of global weapons sales from 2007 to 2011, versus 30 percent for the United States.

Brazil: A Big Spender Makes Cut

The tenth-largest military spender in the world last year, Brazil spent $35.4 billion. However, that amount decreased by over 8 percent from 2010, when the government cut its discretionary military budget by a quarter in a bid to stall inflation. The country was the twentieth-largest arms exporter in the world and the largest in Latin America from 2007 to 2011. But it’s also a major importer. There is a possibility that arms spending could increase next year if the Brazilian government agrees on a $9 billion deal to purchasefighter jets. The government is evaluating proposals from U.S.-based Boeing, France’s Dassault, and Sweden’s Saab, though negotiations originally began 16 years ago.

In late May, Defense Minister Celso Amorim said Brazil will spend 2 percent of its GDP on defense in coming years in order to protect the country’s natural resources. Brazil must build its military preparedness to “react or dissuade any effort to invade our territory,” he explained. Protecting the borders is a top priority to curb drug trafficking, smuggling, and undocumented immigration. Last month, Brazil signed an agreement with Colombia for the joint construction of an airplane and a ship to patrol the Amazon, as well as a $10 million deal to purchase Amazon patrol vessels from the Andean country.

Brazil is also in the process of building five nuclear attack submarines in an effort that some say promises to change the balance of power in the South Atlantic. The submarines are part of the Brazilian government’s efforts to protect its extensive offshore oil fields, though Brazil could also provide support to Argentina in its claim to the Falkland Islands. President Dilma Rousseff symbolically began the construction process in July 2011, and engineering work on the first submarine is slated to beginnext month. On May 30, a congressional commission approved the creation of a state-run company, Amazul, to develop the country’s nuclear submarine sector.

Modernizing Chile’s Aircraft Fleet

From 2007 to 2011, Chile was one of Latin America’s largest arms importers and ranked eighteenth overall globally. Chile has had one of the most active fighter aircraft modernization processes in Latin America, with four rounds of new purchases in the last two decades. The fourth round will replace a fleet of jets to be retired in 2015 and will be the largest arms procurement in Latin America after Brazil’s jet negotiations. The country also plans to purchase “the most advanced unmanned aerial vehicle in South America.” The first country to order the Israeli drone, Hermes 900 will be used for observation reconnaissance missions normally undertaken by the air force along the country’s long coastline.

While social spending also rose, military spending has outstripped health expenditures in Chile over the past decade. From 2007 to 2009, the country spent 3.5 percent of GDP on defense and 3.4 percent on health; from 2003 to 2006, Chile spent 0.8 percent more of GDP on the military than on health. In part, Chile’s defense modernization stems from growing revenues, since taxes on rising copper profits have helped fund new acquisitions.

Still Spending in Colombia

Military spending has risen steadily since 2002, reaching $10.95 billion last year. Colombia spent 3.6 percent of GDP on military and arms spending combined in 2010, tied with Ecuador for the largest portion of GDP spent on defense in Latin America. In September 2011, President Manuel Santos announced another spending increase: an additional $838 million for military equipment and expanded troops.

Ecuador’s Spiking Defense Expenses

Last year, Ecuador spent $2.3 billion on the military. In the region, Ecuador spends thehighest percent of GDP on the military alone: 2.74 percent in 2010. The Andean country also had the highest percent increase in military spending in the world; from 2002 to 2011, military expenditures rose by over 200 percent.

Funding Mexico’s Anti-Drug Trafficking Efforts

Mexico’s military spending rose 52 percent in real terms from 2002 to 2011, funding extra troops to fight drug trafficking, boost salaries, and increase arms purchases. Last year, the country spent $6 billion on defense, a 5.7 increase from 2010. However, defense spending in Mexico is among the lowest in the hemisphere as a percent of GDP: only 0.5 percent in 2010. That year, personnel costs amounted to nearly 70 percent of total defense spending. Still, military salaries remain low, which some point to as acause of corruption in the armed forces.

The Secretariat of Defense’s 2012 budget allocated $75 million for technology development, arms production and maintenance, new vehicles, and military equipment. The ministry focused on the air force, allocating one of the largest portions of the defense budget at around $87 million for operations and development. Since the country’s helicopter fleet is aging, the government has invested in new equipment. Last year, Mexico received two French-made Cougar helicopters after an initial purchase of 6 in 2010 and received three Black Hawk helicopters from the United States as a part of the Merida Initiative.

Expanding Peru’s Air Force

In Peru, military spending reached $2.09 billion in 2011, a nearly 40 percent increase from 2008. The government has also funded new aircraft purchases, in part to focus on coca eradication. In 2011, Peru signed an agreement to purchase 12 air force planes from Canada’s Viking Air for $100 million. Last year, the government announced a second plane purchase: a fleet of new fighter planes from Korea Aerospace Industries. But as the country was due to sign the $200 million contract with South Korea this month, Peru’s Ministry of Finance objected, saying the air force required previous approval from the ministry.

Weapons Imports Rise in Venezuela
Military spending in Venezuela has been erratic over the past nine years, ultimately falling to $2.38 billion in 2011. But weapons spending is on the rise. The Andean country accounted for the region’s largest increase in arms imports—555 percent over the nine-year span, making it the world’s fifteenth-largest weapons importer. Due to a U.S. blockade of arms purchases from both North America and allies such as Brazil and Israel, Venezuela increased weapons imports from China, Iran, and Russia. While analysts are uncertain whether a list of announced acquisitions from those countries will take place, “if all come to fruition, Venezuela could boast the most powerful air force in South America,” writes Flight Global Americas Managing Editor Stephen Trimble.

Russia in particular has stepped up exports to Latin America, and the region received 14 percent of all Russian weapon exports in 2011. In addition, Venezuela accounted for 10 percent of Russian military equipment exports last year. Russia pledged to loan Venezuela $4 billion from 2011 to 2013 to purchase Russian arms, though future deals could be impacted by “a possible power change” due to the upcoming presidential elections and President Hugo Chávez’s poor health. Iran has also provided military assistance, helping construct a gunpowder plant in the Andean country, and reportedly aiding Venezuela to build drones. China has sold a variety of military equipment to Venezuela, ranging from light aircraft to air surveillance systems. At present, China is helping construct the $140 million Venezuelan Remote Sensing Satellite, slated for launch in October.

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