📰 Tilting at windmills
Donald Trump’s trade war ignores the complexity of world supply chains and glosses over issues within U.S. industry
•In U.S. President Donald Trump’s simplistic world-view, slapping tariffs on the U.S.’s main trading partners — Canada, China, the European Union, and Mexico — will reduce U.S. trade deficits, bring back well-paying manufacturing jobs, and make America great again. This has such populist appeal — some 73% of Republican voters support the tariffs according to a PEW Research Center poll in July — that pro-trade Republicans in Congress have largely been silent on the issue.
Trade with China
•Since China, for instance, exported some $505 billion worth of goods to the U.S. last year but imported only $130 billion, Mr. Trump assumes that China could not match the escalation in tariffs since it has a weaker hand. In April, he tweeted, “When you are already $500 Billion DOWN, you can’t lose.”
•This approach simply ignores the complexity of global supply chains. It also glosses over underlying problems with the U.S. industrial structure. These changes, rather than globalisation, are responsible for the stagnation of average U.S. wages in real terms for almost 40 years.
•Non-Chinese owned companies account for almost 60% of Chinese exports to the U.S. Much of this consists of very specialised parts required by U.S. factories to make a variety of products ranging from out-board motors for boats to computer routers. Since these non-Chinese companies cannot easily relocate their operations to other countries, the net result is that the burden of the tariffs will be felt by consumers in the U.S. The Trump administration’s imposition of a 20% tax on washing machines in February led to its price going up in U.S. stores by 16.4%.
•U.S. imports from China also include products which contain parts made in other countries. The Peterson Institute for International Economics estimates that 87% of computers and electronics, which constitute the largest share of Chinese exports to the U.S., includes parts and financing from other countries like South Korea, Japan, and the U.S. itself. So not only does this limit the negative impact on Chinese manufacturing practices, it also affects other countries. Even before Mr. Trump imposed a 10% tariff on $200 billion worth of Chinese goods in July, South Korea’s exports of cars and consumer electronics to China fell substantially.
•According to Professor Mary Lovely of Syracuse University, U.S. merchandise exports from China account for only 3% of Chinese manufacturing revenue. And the impact of tariffs on a potential reduction of these exports is further diminished by a 7% fall in the value of the Chinese currency. Beijing also has more than $1 trillion in foreign currency reserves to cushion the brunt of a trade war with Washington.
•The retaliatory tariffs China has imposed on U.S. products have also had a negative impact on German car producers in the U.S. where BMW has its largest factory in Spartanburg, South Carolina rather than in its home country. By raising duties on soybeans and pork, it has struck at Mr. Trump’s key constituencies of support in the U.S. midwest. Beijing’s tariffs even hit Kentucky bourbon to increase pressure on the Senate majority leader Mitch McConnell who represents that State.
•Similarly, the 25% tariff imposed on Mexican steel exports to the U.S. has had no impact on the Mexican automobile industry. The northern Mexican city of Matamoros produces 90% of all steering wheels used in U.S. vehicles and the city is also the largest producer of windshield wipers in North America. Instead, these tariffs by raising the cost of production compelled U.S. companies to reduce employment!
Internal worries
•No tariff can overturn the cost advantage Mexico has over the U.S. in labour costs. The national minimum wage there is a little over $4 a day while the average worker in the U.S. automobile sector earns $18 an hour. In effect, as Gao Feng, a Chinese government spokesman, said, “The U.S. is opening fire on the world, and on itself too.”
•Second, the focus on trade crucially ignores changes in the U.S. corporate structure and industrial relations over the last 30 years which have led to the phenomenon of extreme inequalities in income and wealth in the country. Ever since U.S. President Ronald Reagan launched an assault against the air traffic controllers’ union in 1981, trade unions have been in retreat. In the years that followed, legislation and the courts have made it easier to fire union organisers, to use scabs to break strikes and for employers to campaign against unionisation of workers. As a result, less than 7% of private sector employees today are unionised, compared to a third in the 1950s.
•Meanwhile, as Professor Robert Reich, Secretary of Labour under U.S. President Bill Clinton, notes, “anti-trust enforcement has gone into remission” and it has become easier for large companies to merge and form giant oligopolies. At its peak in the mid-1990s, there were 8,000 publicly traded firms in the U.S. stock market. In 2016, there were only 3,627.
•Recently, Apple became the first company to have a $1 trillion valuation and today just 30 companies reap half of all profits produced by all publicly traded companies. In 1975, the corresponding figure was 109. Half of all the gains registered by Standard & Poor’s 500-stock index was delivered by just five companies: Apple, Amazon, Facebook, Netflix, and Alphabet, the parent company of Google.
•The greater concentration of capital allows the giant oligopolies to raise prices which takes more of a worker’s pay cheque. Fewer companies means workers have less choice of employers and so have less bargaining power. Anti-poaching and mandatory arbitration arrangements further weaken labour’s hand. Moreover, the focus on short-term profits leads firms to use their capital to buy back shares, driving up share prices to benefit shareholders and top managers who have an increasing percentage of their compensation in company shares.
The Germany example
•Take Germany as a contrast. Between 2002 and 2008, when the U.S. lost one-third of its manufacturing jobs, Germany lost a mere 11%. How could this be?
•Since most German firms are privately owned, rather than buying back shares, they invested their capital in boosting their productivity. German firms include worker representatives on their corporate boards, invest in apprenticeship programmes, and in relevant research and development projects. During the recession of 2008-09, instead of dismissing employees outright, German firms reduced work hours and helped retrain workers. They thus have a deep pool of skilled labour.
•When computers and numerically controlled machines are progressively inducted into production, constant upgrading of labour skills is vital to preserve well-paying jobs. Washington has made no systematic effort to upgrade skills. Tim Cook, the CEO of Apple, constantly emphasises that his company has shifted production to China not because labour is cheaper there but because it has a much wider pool of skilled labour than does the U.S.
•Mr. Trump has neither the vision nor the inclination to address these structural problems of the U.S. economy. Like Don Quixote, Don Trump is merely tilting at windmills.
📰 Contested numbers on overstayers
What is the issue?
•Britain has long insisted that too many Indians have been overstaying their visas. It has cited this as a reason for not relaxing visa rules for Indians. In 2016, British Prime Minister Theresa May had said that Britain would consider giving India an improved visa deal “if, at the same time, we can step up the speed and volume of returns of Indians with no right to remain in the U.K.” India acknowledged the problem and cooperated in the U.K.’s crackdown on “bogus colleges” that enrolled international students but did not have the required standing. However, it has challenged the U.K. on the extent of the issue, and has asked why Britain would allow this one issue to stand in the way of better bilateral ties.
How many students are alleged to have overstayed?
•There are no official figures on Indian overstayers.
•In 2017, a senior official suggested that Indians represented the largest number (more than 100,000). However, Britain’s process of assessment itself came under question later when figures from exit checks revealed that around 4,700 international students (from across non-EU countries) had overstayed their visas in 2016-2017, as against the previous government estimates of 100,000 annually.
Is there sign of a resolution?
•Earlier this year, a Memorandum of Understanding (MoU) on the return of illegal immigrants was set to be signed during Prime Minister Narendra Modi’s visit to the U.K. However, Indian concerns over Britain’s demand that Indian authorities would have only 15 days to verify the antecedents of an undocumented migrant resulted in the MoU being shelved for the time being. Nevertheless, even without the MoU, individuals continue to be returned to India, once their details are verified.
Where do things stand?
•Things got more tense in June when Britain excluded India from relaxed visa norms for students, and International Trade Secretary Liam Fox linked it to the MoU issue.
•India’s demands for “easier norms” as part of a “constant conversation” between the two countries cannot be dealt with if India does not address the issue of “overstayers,” he said.
•“I am sure there are many [overstayers], but where did this figure of 100,000 come from?” asked the Indian High Commissioner to the U.K., Y.K. Sinha, in June. It is clear that the issue will remain atop the agenda for some time.
📰 Quad countries discuss ocean security
Report on regional stability launched
•The Quad grouping is one of the many avenues for interaction among India, Australia, Japan and the US and should not be seen in an exclusive context, a senior Japanese diplomat said on Wednesday.
•“We should not really regard Quad in any comparative or in an exclusive context. This four-country meeting is an important modality. There are various modalities where India, Australia, Japan and the US interact, including on a bilateral and trilateral basis…,” said Hideki Asari, Minister and Deputy Chief of Mission of the Embassy of Japan.
•He was speaking at the launch of a report on the policy recommendations on Indian Ocean security by four think tanks from the Quad countries at the Vivekananda International Foundation (VIF).
•The other think tanks which include Australia National University, Sasakawa Peace Foundation, Japan and Sasakawa Peace Foundation, USA, along with VIF formed the Quadripartite Commission on Indian Ocean Regional Security, which put out a series of 20 policy recommendations for stability in the Indian Ocean Region (IOR).
•The report calls for maintaining the momentum of high-level consultations among the Quad countries with the aim of “free and open Info-Pacific region” and progressively move it to a political level.
•In this regard, Mr. Asari said that Japan’s Indo-Pacific policy by definition is open and inclusive, and added, “All four countries have used the word inclusive and so all are in agreement of the inclusiveness of the Indo-Pacific.”
•“Australia, Japan, India and the US should work with countries in the IOR to help maintain independent security and economic policies by supporting high-quality alternatives to unilateral Chinese investments and political alignment with Chinese regional objectives,” one of the recommendations reads.
•Another recommendation is that the four countries should work to oppose “the establishment of permanent Chinese military bases” in the IOR. This should include demonstrating to China that its security needs can be met “through cooperation and consultation with other nations” and without the recourse to a “disruptive unilateral military presence.”
•Calling the four countries to enhance sea land defence capabilities, the report stresses that naval fleets should evolve increasingly long range operations. “This may require consideration in Japan of new options such as nuclear propulsion for its submarines,” the report added.
•In 2017, on the sidelines of the East Asia Summit in Manila, the Quad countries held discussions on reviving the decade-old grouping which is seen by China as an attempt to contain it.
📰 ‘Discuss Kartarpur corridor with Pak.’
To allow devotees to visit gurdwara there: Capt. Amarinder
•Punjab Chief Minister Amarinder Singh has sought the personal intervention of External Affairs Minister Sushma Swaraj in seeking access from the Pakistan government to enable devotees to visit the gurdwara in Kartapur on the 550th birth anniversary of Guru Nanak Dev.
550th birth anniv.
•In a letter to the Union Minister, the Chief Minister has urged Ms. Swaraj to take up the matter with her counterpart for having the corridor from the International Border to Kartarpur opened for the duration of the celebrations. “This will allow the faithful to pay their respects at the gurdwara in Kartarpur,” said Capt. Amarinder. He also pointed out that Kartarpur is located across the river Ravi at a distance of around 4 km from the International Border near Dera Baba Nanak in Gurdaspur district. Capt. Amarinder noted that the 550th birth anniversary of the first Guru, who breathed his last in Kartarpur, is being observed in November 2019.
📰 ‘State can stop voluntary retirement of doctors’
‘Right to retire is not above the right to save lives’
•The State can stop government doctors from taking voluntary retirement in public interest, the Supreme Court has ruled.
•The fundamental right to retire is not above the right to save lives in a country where government hospitals cater to the poorest, a Bench of Justices Arun Mishra and S. Abdul Nazeer said in its judgment.
•“The concept of public interest can also be invoked by the government when voluntary retirement sought by an employee will be against public interest.”
•The court said public health was suffering from a scarcity of doctors. Qualified doctors did not join the public service, and even if they did so, they chose voluntary retirement and went into lucrative private practice.
Interest of public
•It said the poor could not be put in peril by a paucity of specialists in government hospitals. The State governments had an obligation “to make an endeavour under Article 47 to look after the provisions for health and nutrition.”
•The doctors, as citizens, had certain fundamental duties under Article 51(A) towards their fellow citizens. The right to practise a profession under Article 19(1)(g) was subject to the interest of the general public, the court said.
•The ruling is based on an appeal by the Uttar Pradesh government against the Allahabad High Court’s decision to allow Dr. Achal Singh, who was working as Joint Director, Medical, Health and Family Welfare, in Lucknow, to voluntarily retire with effect from March 31, 2017.
•Though the High Court allowed Ms. Singh to retire, it rued the way government doctors were seeking voluntary retirement almost every day in the State. The High Court said the government healthcare sector needed senior doctors as they were “absolutely necessary to run the medical services which are part and parcel of the right to life itself.”
📰 Pulling back from the brink
Extraordinary changes are required to prevent a ‘hothouse earth’ pathway
•Just when we thought the news on climate change could not get worse, a group of scientists have published a paper in the Proceedings of the National Academy of Sciences deliberating on how the planet might move into a high temperature “hothouse earth” pathway from where there would be no return.
Earth’s equilibrium
•We are living in a precariously equilibrated earth where the temperature is just right for ecosystems to flourish. The Holocene, which began about 12,000 years ago, is the stable epoch during which Homo sapiens settled and developed agriculture and other technological innovations. These led to social and economic transformations, which have brought the world to this juncture. Human activity, supported by the burning of fossil fuels and deforestation, led to an increase in greenhouse gas (GHG) emissions that are now causing global warming. This time period, the epoch when humans play a dominant role in shaping the earth systems, is being referred to as the Anthropocene.
•The delicate equilibrium of the biosphere/earth system has to do with processes that amplify or dampen warming. For instance, melting of Greenland ice increases open waters that absorb more sunlight and then increase warming and cause further melting. This is a positive feedback. With the increase in carbon dioxide (CO2), chemical-weathering increases and removes CO2 from the atmosphere over geological time — an example of a negative feedback. When positive feedbacks become stronger than the negative ones, the system may change abruptly and get pushed out of equilibrium. The earth and its systems have shifted between alternative states through long-term processes over its geological history. Now, it appears we are approaching some critical thresholds.
Tipping point
•The paper identifies a threshold beyond which the earth’s systems are no longer able to stabilise at intermediate rises in temperature. The authors point out that technology trends and decisions taken in the next decade or two will determine the path of the earth system over the next hundreds of thousands of years.
•Many feedbacks respond either continuously or show abrupt change. A geophysical tipping point is a threshold beyond which a system moves from one stable state to another. This study indicates that crossing a threshold (roughly determined to be about 2º Celsius warmer than pre-industrial times) would lead to the tumbling of a series of tipping points, like a set of dominoes. The destruction of the Amazon forest due to wildfires, the loss of permafrost with warming, the weakening of CO2 absorption by the oceans or the melting of polar ice caps, among many other slow-moving catastrophes, are examples. The authors provide over a dozen examples of regional climate tipping points. If many tipping points tumble beyond 2ºC (as suggested by the scientists), it would irrevocably disrupt ecosystems and societies and there would be runaway climate change, taking us to a hothouse earth.
•The authors identify three clusters of tipping-linked cascades, out of human control, that could happen over time with rising temperatures.
•Atmospheric concentrations of CO2 (now over 400 ppm) are responsible for global average temperatures that are about a degree Celsius higher than at pre-industrial times. To find another time on earth with these levels, we need to go back some 3-4 million years to the mid-Pliocene, when sea levels were 10-22 m higher. The authors consider this stage to remain accessible only if there is a great deal of concerted effort in a remarkably short period.
•In the mid-Miocene (about 15-17 million years ago), CO2 concentrations were 300-500 ppm and sea levels were 10-60 m higher than today. This is where the earth is possibly headed with continuing GHG emissions. Even if the Paris Agreement of 2015 is implemented and we managed to keep warming below 2º C or even 1.5º C, the risk of a cascade of feedbacks that pushes the earth into the hothouse path may be unavoidable. In order to stabilise the earth, we would have to recognise and then carry out deliberate, sustained action to secure earth systems and also adapt to a warmer world. Some of these feedback effects, such as loss of Arctic ice, could be reversed over a few hundred years, but others such as Antarctic ice would take much longer.
•Global emissions have not plateaued, reportedly having risen by 1.4% last year. According to the authors, deep cuts in GHG emissions, increasing carbon sinks, finding ways to remove CO2 and perhaps even deflecting solar radiation to modify the energy balance would all be needed along with adapting to living in a warmer world.
Case for change
•Technological solutions alone are insufficient. Fundamental shifts in social values and economic mores are essential. The changes required and ways to make them in an ethical manner are still being debated, with a lot of uncertainty on whether these can be accomplished.
•Given history and the state of the biosphere, some scientists are not hopeful about avoiding the hothouse path. Others like James Hansen believe that it could still be avoided and the earth could stabilise at a rise below 2º C through infrastructural, societal and institutional transformations. Incremental changes along with increasing contributions from renewables and improvements in energy efficiencies would not be sufficient. There should instead be major changes in technological innovation, behaviour, values and governance. This is an unprecedented challenge for humanity.
📰 Retrograde move: On Punajb's proposed law on sacrilege
Punjab’s proposal to provide for a life term for sacrilege is excessive and undesirable
•The Punjab Cabinet’s decision to amend the law to make acts of sacrilege against the holy books of major religions punishable with life imprisonment is retrograde and fraught with undesirable consequences. It may also set off a needless flurry of legislation in the rest of India to pander to different groups. The current proposal is a slightly expanded form of amendments passed by the Punjab Assembly in 2016, specifically aimed at curbing acts of sacrilege targeting the Guru Granth Sahib. The Centre had then returned the Bills, saying that protecting the holy book of only one religion would make it discriminatory and anti-secular. The proposal now cleared by the Cabinet aims to also cover the Bible, the Koran and the Bhagvad Gita. In specifics, the law will introduce a new section (Section 295-AA) in the Indian Penal Code after India’s own ‘blasphemy law’, Section 295-A, which criminalises “deliberate and malicious acts intended to outrage religious feelings”. As prior permission of the Central or State government is needed to prosecute someone under such sections, a consequential amendment to the Code of Criminal Procedure will be required. The earlier Bill was introduced by the Shiromani Akali Dal government following allegations of desecration of the holy book. Opposition to the Bill was then limited to the question whether holy books of other religions did not warrant the same protection. None seemed concerned about using religious sensitivities to score political points.
•Is there any necessity for a fresh provision to protect religious books from damage, insult and sacrilege, when Section 295-A itself covers it? While upholding its constitutional validity in 1957, the Supreme Court had clarified that the section “punishes the aggravated form of insult to religion when it is perpetrated with the deliberate and malicious intention of outraging religious feelings”. It is true that one limb of any blasphemy law, as Section 295-A can be termed, is aimed at preserving public order; and miscreants can fan disorder and tension by malicious acts such as damaging or desecrating a holy text. This can be invoked to jail someone for three years. Providing for a life term for the same offence in relation to religious texts would be grossly disproportionate. ‘Sacrilege’ itself is a vague term, and would render the section too broad. There is a history of misuse of laws aimed to protect religious sentiments, and those that seek to punish persons who promote enmity between different groups. They have a chilling effect on free speech, and give a handle to anyone claiming to be outraged to pursue vexatious prosecutions. There is a case to read down Section 295-A and Section 153-A of the IPC that give scope to prosecute people in the name of protecting the feelings of a section of society. There is no case whatsoever to enhance jail terms.
