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Trump’s Tactic Is Certain To Create ‘Regime Uncertainty’– OpEd

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President-elect Donald Trump’s so-called Carrier deal, which seems to amount to a threatening conversation he had with Carrier’s managers, combined with some tax concessions by the state of Indiana, exemplifies the approach he has more or less announced he will take in dealing with U.S. companies that propose to move operations abroad. He threatens that such companies’ products will be subjected to a 35 percent tariff when imported into the USA. In various statements he had made it known that as president he will roam far and wide across the economic landscape, using his presidential powers to punish companies that transfer operations abroad and reward those that refrain from such rearrangements of their operations.

Such a presidential tactic will certainly have important consequences, but they will not be the ones that Trump promises. Such haphazard interference in company management cannot possibly focus directly on more than a few of the millions of firms in the U.S. economy. The president’s actions might capture media attention and create the impression that he is going to bat to protect threatened jobs, but the visible effects of such random blundering about will be tiny in comparison with the far-reaching effects on corporate managers and owners across the board, because such selective intervention in the details of companies’ operations epitomizes the kind of action by which governments create what I have called regime uncertainty—a pervasive fear that existing private property rights in one’s property and the income the property yields will be attenuated or destroyed by unpredictable changes in government taxation, regulation, or other action.

During the second half of the 1930s, the New Deal’s ever-changing programs and policy implementation gave rise to so much regime uncertainty that long-term private business investment never recovered to the levels it had reached during the second half of the 1920s. Investors’ fears kept them paralyzed or persuaded that only short-term investments were justified because the longer-term future was simply too uncertain and too fraught with potentially great losses, such as those associated with complete government take-over of the economy.

Even if Trump’s bully-boy tactics fell short of the New Deal’s, he might still create enough regime uncertainty to make investors reluctant to make long-term investments, and business managers reluctant to implement efficiency-enhancing changes, such as relocation of certain operations abroad.

Today’s economic order involves pervasive interrelations between foreigner producers, American producers operating abroad, and Americans operating in the USA. This reality means that, for one thing, the president would not really be able to identify what action he might take to preserve U.S. jobs—the matter is intricate, not obvious, because actions that seem to preserve jobs in Akron can easily destroy jobs in Dallas, completely unbeknownst to the president and his economic advisers. Moreover, the multiple points of contact between production abroad and production in the USA allow U.S. firms considerable latitude to avoid punishments the president might seek to heap on them—again, perhaps, with net destructive effects on U.S. jobs.

The whole idea of a free-range president barging and bellowing through the U.S. economy reeks of the worst, most destructive form of intervention. The less predictable such intervention, the greater is its discouragement of productive corporate rearrangements and long-term business investment, the latter of which is the most important driver of economic growth, especially because it serves as the main vehicle to putting technological improvements in place.

One can only hope that someone talks the president into the adoption of a less destructive approach to garnering headlines and giving the appearance of taking care of his base. Judging by pretty much everything Trump has said in public, he is a complete nincompoop so far as economics is concerned, but there are better and worse ways to act the fool. Let us pray that he backs away from the tactic epitomized by the Carrier deal.

This article was published by The Beacon


Robert Reich: The Art Of The Autocrat – OpEd

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Last week, Trump made a deal with Carrier (and its parent, United Technologies) to keep 800 jobs in Indiana rather than sending them to Mexico. Indiana agreed to give Carrier $7 million in tax breaks, and Trump assured United Technologies that its $6 billion a year in military contracts would be secure.

Then Tuesday morning Trump attacked aerospace giant Boeing – tweeting: “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!” Later he added “We want Boeing to make a lot of money but not that much money.”

Boeing shares immediately took a hit (but recovered by early afternoon as the company began to explain itself).

After which Trump turned Mr. nice guy. “Masa (SoftBank) of Japan has agreed to invest $50 billion in the U.S. toward businesses and 50,000 new jobs,” he tweeted shortly after Masayoshi Son, CEO of the company, arrived at Trump Tower in New York. “Masa said he would never do this had we (Trump) not won the election!,” Trump added.

I wonder what Trump promised Masa.

The art of the Trump deal is to use sticks (public criticism) and carrots (public commendation plus government sweeteners) to get big corporations to do what Trump wants them to do.

This isn’t public policy making. It’s not about changing market incentives. It has nothing to do with lawmaking. It’s a drop in the bucket in terms of jobs.

In reality, it’s the arbitrary and capricious use of personal power – hitting stock prices and turning public opinion against companies Trump doesn’t like, and raising stock prices and public opinion toward companies Trump does like.

Don’t be fooled into thinking Trump is being guided by anything other than his own random, autocratic whims. He could have attacked or lauded any one of thousands of big companies that are creating American jobs, or creating jobs abroad, or charging the government too much for their products.

This is the work of a despot who wants corporate America (and everyone else) to kiss his derriere.

Trump’s Call To Sharif Doesn’t Indicate Any Real Change To US Foreign Policy With India – Analysis

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By Manoj Joshi

It will take roughly a year to know the true direction of the incoming Trump Administration in the United States.

The phone calls and conversations that are making waves today – with Nawaz Sharif and Tsai Ingwen – are no indicator of which way the US will go under his presidency.

The policy will only assume shape after Cabinet appointees have gone through their confirmation hearings and sub-cabinet officials selected and appointed.

Given that some choices could be controversial, the confirmation process may prove to be long and arduous.

Strategy

Donald J Trump never really expected to win the election and had not done the elaborate preparation for taking up the job like his rival Hillary Clinton.

In any case, a Clinton administration would have appointed a large number of Obama officials who are currently in a state of shock because none of them expected to be out of a job so soon.

The special thing about foreign policy is that there are only some variables you can control. No matter how powerful or determined a US President, his policy still depends on developments abroad, as well as the actions of other countries, some friends and others rivals.

There is likely to be little change in American grand strategy which has sought to ensure that no regional hegemon (supreme leader) arises in Europe, Persian Gulf and East Asia.

The thing about foreign policy is that there are only some variables you can control. No matter how powerful or determined a US President, his policy still depends on developments abroad.

To this end, leading the alliance in Europe is important, just as it is to prevent the rise of Iran in the Persian Gulf.

Saudi Arabia simply lacks the population base to be a regional hegemon of any kind.

Russia’s resurgence is really a defensive reflex and not a bid to restore the glory of the erstwhile Soviet Union.

The real challenge is in East Asia where China is determined to challenge the American sway and has successfully breached the ASEAN.

Critics of Obama say that the eight years of his presidency have featured inaction, inattention and withdrawal from global affairs.

While the decision to pull out from Iraq was understandable, the speed of the withdrawal from Afghanistan has had widespread repercussions.

Likewise it would have been foolish of the Americans to go in too deep into European ventures like Libya and Syria, but its own pivot to Asia proved to be anemic.

Obama did little to check Russia and instead reached out to make peace with Iran and Cuba.

The emergence of Francois Fillon as the centre-right candidate for next year’s presidential elections in France, combined with the inclination of the US President- elect to make a deal with Russia could upend the verities of the Obama era which had sought to cordon Russia from Europe through economic sanctions.

Outreach

A US-Europe-Russia deal has vast implications. It will almost certainly involve handing over Syrian affairs to them, in exchange for Moscow backing off in Ukraine in exchange for the Americans acquiescing in the occupation of Crimea and lifting the sanctions.

NATO expansion into Ukraine and Georgia would be checked and the US would permit Assad to regain control of Syria with the commitment of fighting the ISIS.

People who complain about the amorality of all this forget that the US and China were supported the Pol Pot regime because of their antipathy for Vietnam.

This is what big power politics is all about. The outreach to Russia could have another important result – the pullback of the Russia drift towards a proto-alliance with China.

This will have important implications for the One Belt One Road project, as well as Chinese military modernization, which still relies on Russia for crucial elements such as jet engines and high quality air defence systems.

Fallout

The one area which remains an unknown is Iran. Conservative elements close to Trump have a deep antipathy to Iran and Cuba. In the case of Cuba, it is motivated by Cuban exiles that have deep roots in the conservative establishment.

In the case of Tehran a great deal of it arises from Israel and its powerful American supporters who view the current regime as an existential threat.

However, the US knows that any going back on the nuclear deal could have serious consequences, notably a breakdown of the big-power consensus that led to the Iran nuclear agreement.

The US would find it difficult, if not impossible, to resume the economic sanctions that had, to an extend, brought Iran around.

There could be a negative fallout for India as well. Our big geopolitical riposte to the OBOR, the Chah Bahar project could come undone.

In addition, our energy security could be affected in view of our huge purchases of Iranian oil. New Delhi would have to make choices here and they are not likely to be simple.

Not going with the Americans could have repercussions elsewhere, while tailing them could seriously damage our standing in a region which is vital to our security.

But again, making choices and shaping policies is what big power politics is all about.

This article originally appeared in Mail Today.

Taiwan, Thorn In China’s Side, Gets New Attention – Analysis

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Taiwan issue underscores limits of power for the US and China – and the calcification of international policymaking.

By Mark Harrison*

Since the 1940s, after Chairman Mao Zedong proclaimed the founding of the People’s Republic of China and the defeated Kuomintang retreated to Taipei, the Taiwan Strait has remained among the most intractable issues in international relations and a potential site for conflict in Asia. A brief phone call between the US President- elect Donald Trump and Taiwan’s President Tsai Ing-wen was a startling intervention in what’s become a warily balanced array of power relations sustained by arcane diplomatic formalisms.

The response from China, which maintains territorial claim to the island as sovereign territory, was relatively muted with more annoyance directed toward Taiwan. Immediate reaction elsewhere to the phone call included concerns about an escalation of the conflict for the entire region and the United States.

The call came at a time when cross-strait relations had already entered a challenging period. After some years of rapprochement between Taipei and Beijing under the government of Ma Ying-jeou, in power from 2008 to 2016, this year Taiwanese voters elected President Tsai Ing-wen of the Democratic Progressive Party. The new government is less sympathetic to Beijing’s interests, and Beijing has responded accordingly.

The call also highlighted the gap between Taiwan’s place in the broad strokes of international policymaking and the complexity of Taiwan’s circumstances.

The Taiwan issue emerged from the many ruptures in China’s modern history. Taiwan has an indigenous people, members of the great civilization that stretches across the islands of the Pacific. It was briefly a Dutch colonial outpost in the 17th century, then an exiled Ming loyalist kingdom, before being incorporated into the Qing Empire in 1662. Near the end of the Qing period, in 1895, Taiwan was ceded to Japan as a colonial territory.

On the mainland, the Chinese Nationalists, or KMT, overthrew the Qing and founded the Republic of China, ROC, in 1912. The Chinese Communist Party was established in 1921, and the two began the long civil war.

At the end of World War II, Taiwan passed from Japan to the authority of the ROC under the KMT. The result was disastrous. The Taiwanese rose up against KMT rule in 1947, and the uprising was crushed with the loss of tens of thousands of lives. From the violence emerged a Taiwanese nationalist movement, building on political activism from the colonial period. Then, in 1949, the KMT lost the civil war against the communists on the mainland and relocated the national ROC government to Taipei.

Through the 1950s, Taiwan became the exemplar of an Asian Tiger, focusing on development and a booming export-oriented economy, under a brutal military dictatorship.

In this period, Taiwan found a place at the intersection of state ideologies of the People’s Republic of China, the ROC and the United States. For the nationalism shared by both the PRC and the ROC, Taiwan’s former colonial history symbolized China’s humiliation at the hands of foreign powers during the last decades of imperial rule. The standoff between Taiwan and mainland China from the 1950s to 1980s, with both claiming to be the legitimate government for all of China, expressed the notion of a nation divided by civil war. Taiwan also served as a key expression of US global power, as “Free China,” during the Cold War.

This alignment of ideologies, contemporary and post-imperial, carried the idea that the direction of Taiwan’s history with mainland China was towards unification as a single nation-state, either the ROC or the PRC. Unification would represent the end-point of the conflict: A shared identity as Chinese would bring the two sides together, China’s late-imperial territorial losses would be exculpated, and Cold War ideological differences would dissolve.

However, in the 1980s, Taiwan began the political and institutional process of democratization. The first free and fair elections for the president of the ROC took place in 1996. Democracy also set free the ideals and ideology of Taiwanese identity and nationalism, the seeds of which were sown in the Japanese colonial era, hardening after the 1947 uprising.

In the years since democratization, even as Taiwan’s economic relationship with the mainland grew to more than US$200 billion of annual cross-strait trade, Taiwanese identity politics have found institutional political expression in the Democratic Progressive Party and cultural and social expression in art, literature, museums, education and media.

During these political changes, Beijing presented the concept of One Country Two Systems as a model for unification. Ultimately applied to Hong Kong, the model would have allowed Taiwan to maintain its capitalist economy and administrative autonomy as part of the People’s Republic of China. One Country Two Systems largely disappeared as a policy position by the mid-2000s, replaced by a policy of economic integration backed by military threat and the formula known as the 1992 Consensus, holding that each side agrees that there is one China and that Taiwan is part of China while setting aside respective definitions of the meaning of China.

However, the reality of Taiwan’s contemporary political and cultural life is that a majority of Taiwanese do not want unification. After nearly a century of political struggle for self-determination under Japan and then KMT authoritarianism, Taiwanese identity is galvanized by activist politics. Any attempt by Beijing to exercise governance over Taiwan would be met with intense resistance.

Setting aside the disastrous possibility of invasion and military occupation of Taiwan by the People’s Liberation Army, even through a non-military negotiated process, Taiwanese resistance to Beijing governance could only mean the start of instability, with no resolution of the Taiwan issue.

The long history of the democracy struggle and civic resistance from a Taiwanese majority would be a challenge for the most sophisticated and accommodating political institutions to manage. However, as Hong Kong has shown in recent years, Beijing’s responses to opposition in Taiwan are unlikely to be subtle or obliging. As a result, Taiwan within the PRC would threaten not only the cross-strait balance, but also destabilize Beijing and the region.

There is any number of scenarios of post-unification instability. Beijing could decide to implement patriotic education in Taiwanese schools, as it has done in Hong Kong. The Taiwanese, already bitterly divided, would erupt in protests intense and prolonged enough to create leadership splits between hardliners and moderates in Beijing over how to respond. Protests would test loyalty of local law enforcement while overseas Taiwanese communities would mobilize in the United States, Australia and elsewhere. If Beijing were to send its own law enforcement from the mainland to restore order, the echo of the 1947 uprising would be strong enough for cross-strait relations to be unrecoverable.

The inevitable destabilization of relations in a post-unification scenario raises crucial consideration of the status of Taiwan’s military force. China spends almost 15 times as much on its military as Taiwan, but Taiwan has advanced combat systems supplied by the US, including recent deliveries of advanced missile technologies.

Yet for any prospect of peace after unification, a precondition would require demilitarization for Taiwan. Such an unprecedented task, vast in scale and complexity, would require independent oversight and full commitment of the international community.

The question of Taiwan’s demilitarization suggests that there is no serious proposal for negotiated unification in play from Beijing. Needless to say, as Beijing no doubt understands, the act of making a proposal public would generate a counter-reaction from Taiwan’s polity only highlighting the difficult path forward.

Far from China’s economic and military power allowing a resolution of the Taiwan issue on Beijing’s terms, Taiwan illustrates the limits of China’s power and the importance of maintaining the current status quo. Extensive international involvement and cooperation would be required for Beijing to achieve its aims without destabilizing China and throwing the region into chaos.

In this context, Trump was right to take a call from Taiwanese President Tsai. It was an appropriate acknowledgement of a democratically elected leader and also illustrated the calcification of international policymaking on the Taiwan Strait, something Beijing has long relied on in its goals. But having disrupted policy norms, the incoming Trump administration is now tasked with leading the international community towards a meaningful understanding of the Taiwan issue that shows a path towards continuing peace and prosperity in the region.

*Mark Harrison, PhD, is senior lecturer in Chinese Studies at the University of Tasmania and faculty affiliate of the Asia Institute Tasmania.

Pakistan: Plane With 40 Passengers Goes Missing In North

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A commercial aircraft carrying about 40 passengers and crew members went missing in northern Pakistan on Wednesday after it took off from a tourist resort near the Afghan border, headed for Islamabad, officials said.

The small ATR-42 plane lost contact with the control tower minutes before it was supposed to land, Pakistan International Airline said.
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Local police in the town of Hawalian – which lies between the capital and Chital, the town from where the plan took off – told dpa the plane had crashed in the mountains, but there was no official confirmation.

Pakistani military has mobilized troops for rescue and relief operation and to look for the wreckage after locals in Hawalian said they saw the plane go down in the mountains, the army’s media wing said.

Original source

Increasing Synergy In India-Vietnam Ties – Analysis

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India-Vietnam relationship is one of the significant bilateral relationships in Asia, besides India-Japan partnership. Over the years, in particular since the establishment of diplomatic relations between the two on 7 January 1972, this bilateral tie has assumed robustness, ranging from politic–strategic, defence to economic areas and culture, education, training, entrepreneurship development, etc.

There have been exchanges of visits of top leaders between the two countries on regular basis further cementing the ties and seeking means to explore new vistas so that both can maximise mutual gains. It would not be wrong to say that no other country within the ASEAN grouping has received the kind of importance and attention by India than Vietnam. That makes India-Vietnam relations something very special.

The coming year shall mark the 45th year anniversary of the establishment of diplomatic relations and 10 years of Strategic Partnership, which was elevated to Comprehensive Strategic Partnership during Prime Minister Narendra Modi’s visit to Vietnam in September 2016. These two are significant milestones. Since the days of first Prime Minister Jawaharlal Nehru and President Rajendra Prasad, almost all top political leaders of India – President, Vice President, Speaker, many senior Ministers, etc. – have paid visits to Vietnam over the years, underlining the importance India attaches to Vietnam.

These visits have been happily reciprocated by Vietnam as well. The founder of Vietnam Ho Chi Minh is held in high reverence by the people of India. In continuation to these on-going dialogues, the first week of December saw two important visits by high-level delegations from Vietnam to India as a first step for celebration of 45th anniversary of diplomatic relations between the two countries in 2017. Vietnam’s Defence Minister Ngo Xuan Lich visited from 3 to 5 December and held talks with his counterpart Manohar Parrikar, besides having met Prime Minister Modi and National Security Advisor Ajit Doval.

The purpose of Gen Lich’s visit to India is to further deepen bilateral defence cooperation with India. Underscoring the importance of the visit, Gen Lich was accompanied by a mega 30-member delegation, the largest so far to have accompanied him on a foreign visit, including the Chiefs of the Air Force and the Navy and the Deputy Chief of General Staff.

The possible sale of BrahMos missiles by India to Vietnam that has been on the table for quite some time again came up for discussion. Vietnam has evinced interest to acquire this weapon system from India and India is committed to strengthen Vietnam’s defence capabilities as the security environment in the region has been deteriorating rapidly.

Vietnam is involved in a territorial dispute with China over the South China Sea (SCS). India too is engaged in oil exploration activities in the areas of the Sea that Vietnam claims and therefore has stake to defend its economic interests if those come under threat from an outside power. In principle India has agreed to sell the missiles to Vietnam over which negotiations are still on. Vietnam is keen to possess these supersonic missiles that can be fired from land, water and under water. India produces this weapon system in partnership with Russia and Russia shall have no objection if India enters into a commercial deal with Vietnam on this.

Other issues that came up for discussion included the much delayed project to train Vietnamese pilots on the Su 30. Hanoi’s request to train its pilots of Russian-built Sukhoi fighter-jets had been hanging fire due to financial constraints and logistical issues. Vietnam recently acquired 36 Su-30MK2 fighter jets from Russia. Since India has considerable expertise, after Russia, as it operates a large fleet of Su-MKIs, an Indian variant, Vietnam was keen that India trains its pilots. As expected, Gen Lich’s talks with Parrikar figured this issue. Finally, the agreement to train Vietnam’s Sukhoi-30 pilots was reached between Gen Lich and Parrikar on 5 December.

Though both India and Vietnam operate Russian Su-30 jets, the two countries’ models differ slightly in their configuration. India operates over 200 Su-30 MK1 fighters “air dominance jets” and has considerable expertise. Details of the training will be worked out between the two Navies soon and the training is likely to start from 2017 onwards. A memorandum of understanding was signed on peacekeeping as well as exchange of delegations. Parrikar offered “India’s partnership as a reliable player in terms of transfer of technology and building a local defence industry”. The two defence ministers also discussed the regional situation and took note of their converging interests.

The programme for cooperation between the Air Forces also included exchange of experts, repair and maintenance, besides training of pilots. Following the agreement on pilots’ training, Vietnamese pilots will begin arriving in India from early 2017 onwards to get both basic and advanced training on the Sukhois of the Indian Air Force.

India has announced two lines of credit – $100 million and $500 million – for defence purchases. India has also offered 50 slots to Vietnamese defence personnel under the India Technical and Economic Cooperation programme. Under the strategic partnership, India has already trained 550 Vietnamese submariners to operate nine newly-acquired Russian-built Kilo-attack diesel electric submarines during the past three years. Vietnam began inducting and operating Kilo class submarines since 2014. India already uses several Kilo submarines. Within the rubric of the comprehensive strategic partnership framework, Gen Lich sought replication of the success of cooperation between the two navies with the Army and Air Force as well. As a strategic partner, India is open to Vietnam’s ideas.

Following the agreement, the defence secretaries of both the countries shall meet in early 2017 to identify military projects and equipment under the new $500 million defence line of credit announced by Prime Minister Modi during his visit to Vietnam in September 2016.

Even while India was preparing to roll out a red carpet welcome for Lich on 3 December to further deepen bilateral military cooperation following up-gradation of the Strategic Partnership into Comprehensive level, Vietnam’s ambassador in India Ton Sinh Thanh was allowed by the Indian Navy to visit the under-construction Indigenous Aircraft Carrier (IAC) being constructed by the Cochin Shipyard Limited, underlying the high level of trust both countries share on defence matters. There could be a possibility of Vietnam opting for India-made aircraft carrier sometime in the future.

The other important visit from Vietnam was by the Chairwoman of the National Assembly Nguyen Thi Kim Ngan from 8 to 11 December. She and her Indian counterpart Smt. Sumitra Mahajan will ink a Memorandum of Understanding, which would expand exchanges of parliament delegation and training program with a view to push the existing Comprehensive Strategic Partnership between the countries. It may be recalled that Smt. Mahajan led a 8-member delegation of parliamentarians to Hanoi to take part in the 132nd Assembly of the Inter-Parliamentary Union. During the Assembly, two MPs from India were elected unanimously to the Bureaux of the First Standing Committee of the IPU on Peace and International Security and the Second Standing Committee of the IPU on Sustainable Development, Finance and Trade, separately. The four-year term of the two MPs on these Committees ends in 2018. Such visits further contribute not only to the mutual understanding but help define new contours in the bilateral Comprehensive Strategic Partnership.

With a view to reinvigorate its economic engagement with the ASEAN countries and the larger Asia, the Modi government has broadened the earlier “Look East policy” and has given a new candour by naming it “Act East policy”. In this Indian strategy, Vietnam finds a special place. India is among the top ten trading partners of Vietnam. After the elevation of the Strategic Partnership to a Comprehensive level, the economic component of the relationship now assumes a strategic thrust too. In particular, the key thrust areas where expansion is envisaged are garment and textile, pharmaceuticals, agro-commodities, leather & footwear and engineering.

In terms of trade, both countries are working to increase the bilateral trade volume from around $7-8 billion to a target of $15 billion by 2020. Indian investment in Vietnam is also increasing with many Indian companies registered with 23 new projects with a capital outlay of $139 million in areas such as food processing, fertilizers, auto components, textile accessories. Cooperation in the IT sector also looks promising.

While growth in the economic realm is making incremental progress, defence cooperation is the most significant pillar in the strategic partnership between the two countries. In this respect, the visit of the Defence Minister Lich assumes significance. Indian ships regularly make friendly port calls to Vietnam. For the first time, a Vietnamese Ship participated in the International Fleet Review at Vishakhapatnam, India, in February 2016. The objective of such cooperation between the two Navies is to maintain order in sea and secure maritime commerce from threats such as from piracy, terrorism, etc. By engaging with Vietnam at Sea, India wants also to convey the message to its other friendly countries that it is committed to global norms and to promote peace and stability in the Asia-Pacific region, including the resolution of disputes in the SCS.

Indeed, the Indian Ocean is now more important than ever and maritime security issues become important to many countries in the Asia-Pacific region. Peace and stability in the Indian Ocean is crucial to economic development to many Asian countries.  In particular, the behaviour of China in the Pacific and Indian Ocean has a direct impact on regional geopolitics. As a result, many countries in this region are readjusting their strategic foreign policy to deal with the new situations. In this perspective, India-Vietnam defence cooperation is a critical pillar in the strategic partnership and thus justifies its comprehensive character.

In view of its “Act East policy” in which deepening economic engagement with the ASEAN is the biggest component, India’s stakes are equally high though it is not a claimant as its economic interests are exposed to vulnerability and therefore have to be protected. Apart from its limited direct economic interest, India cannot overlook to the fact that the SCS is an important waterway for its trade and commerce with not only with the ASEAN countries but also with Japan, Taiwan, and South Korea.

In principle, India upholds the importance of safeguarding the freedom of navigation of the seas, the right of over-flight and the importance of peaceful settlement of disputes in accordance with the United Nations Convention on the Law of the Seas (UNCLOS). In several joint statements that India has issued with countries such as Vietnam, Japan and the US, India has reiterated this position, cited its own experience that it accepted the tribunal’s verdict relating to its maritime boundary with Bangladesh and therefore expects China to show the same sentiment regarding the verdict of 12 July 2016 relating to the SCS.

For India, it is important that Code of Conduct related to the SCS should be signed at the earliest when the rules based order is required by China’s increasing militarisation. In that way, instead of asserting itself as the rising power, China should become a responsible power as is expected of a permanent member of the Security Council and as a signatory to the UNCLOS.

India is a regional power with benign intent and needs to take into consideration to sensitivities and requirements of other friendly countries in Asia if it wants to play the role of a balancing power and security provider. Such a role shall help India enhance its regional profile and maintain peace and stability in the Asian region.

Indeed, it is not Vietnam alone but the rest of the ASEAN member countries look at India for a greater role towards the peace and stability in the region. At times, China has erroneously interpreted India’s position on the South China Sea as if to suggest that India endorses China’s position on the South China Sea. In order not to give such leeway, India need not feel shy to articulate its position strongly and argue to uphold the UNCLOS as the basis of the legal order of the sea. China rests its arguments by referring to the 2002 Declaration on the Conduct of Parties in the South China Sea, which says that “all related disputes should be addressed through negotiations and agreements between the parties concerned”, and therefore finds flaws in Philippines’ move to approach the tribunal for arbitration and therefore says invalid.

India is awakened to the emerging seriousness in the situation because of China’s attitude and has broken shackles to take a strong position by finding common grounds with Vietnam, where its own economic stakes are under threats as it is involved in oil exploration in the sea off Vietnam. Against this background and because of historical linkages dating back to its Buddhist roots, India and Vietnam have found commonality of interests, which is why bilateral ties have expanded in all domains – economic, security/defence and even culture. Apart from exploring the sale of BrahMos missiles, India is helping Vietnam to beef up its capability by capacity building, training and maintenance of equipment and port calls and exercises between the navies of the two countries. India’s decision to offer Vietnam a $100 million loan to purchase Indian-made defence equipment was based on this larger perspective of beefing up Vietnam’s defence capability.

Therefore, besides in accordance with the rubric of India’s “Act East policy”, deepening ties with Vietnam would contribute to promote peace and stability in the region. Indeed, Vietnam can be a critical player in the global production chain within the ASEAN and this complements India’s strategy of “Act East policy”. Furthermore, through Vietnam, India can seek to project its core national interest and articulate its strategic outlook in the Indo-Pacific region.

In conclusion, the “Act East policy” has outlined India as a responsible stake holder in the region and Vietnam is the most important anchor for this strategy. In this perspective, the two recent visits of senior leaders of Vietnam to India are significant, which help define new contours in the bilateral Comprehensive Strategic Partnership with exploring potentials in strategic, defence and trade cooperation, among others. It may be noted that it is not only India that backs the principle of rule of law in the SCS to stabilise the area, Japan too is committed to boost the maritime security capabilities of the ASEAN member countries. So, India, Vietnam and Japan can explore trilateral understanding in strategic, defence and trade cooperation for peace, stability and prosperity in the Asia-Pacific region and at large.


Disclaimer: The views expressed are author’s own and do not represent either of the ICCR or the Government of India.

Half Of People Believe Fake Facts

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Many people are prone to ‘remembering’ events that never happened, according to new research by the University of Warwick.

In a study on false memories, Dr Kimberley Wade in the Department of Psychology demonstrates that if we are told about a completely fictitious event from our lives, and repeatedly imagine that event occurring, almost half of us would accept that it did.

Over 400 participants in ‘memory implantation’ studies had fictitious autobiographical events suggested to them – and it was found that around 50% of the participants believed, to some degree, that they had experienced those events.

Participants in these studies came to remember a range of false events, such as taking a childhood hot air balloon ride, playing a prank on a teacher, or creating havoc at a family wedding.

30% of participants appeared to ‘remember’ the event — they accepted the suggested event, elaborated on how the event occurred, and even described images of what the event was like. Another 23% showed signs that they accepted the suggested event to some degree and believed it really happened.

Dr Wade and colleagues conclude that it can be very difficult to determine when a person is recollecting actual past events, as opposed to false memories – even in a controlled research environment; and more so in real life situations.

These findings have significance in many areas – raising questions around the authenticity of memories used in forensic investigations, court rooms, and therapy treatments.

Moreover, the collective memories of a large group of people or society could be incorrect – due to misinformation in the news, for example – having a striking effect on people’s perceptions and behaviour.

According to Dr Wade, “We know that many factors affect the creation of false beliefs and memories — such as asking a person to repeatedly imagine a fake event or to view photos to “jog” their memory. But we don’t fully understand how all these factors interact. Large-scale studies like our mega-analysis move us a little bit closer.”

“The finding that a large portion of people are prone to developing false beliefs is important. We know from other research that distorted beliefs can influence people’s behaviours, intentions and attitudes,” Wade added.

Scientists have been using variations of this procedure for 20 years to study how people can come to remember wholly false experiences.

European Commission Fines Three Banks €485 Million For Derivatives Cartel

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The European Commission said Wednesday it has fined Crédit Agricole, HSBC and JPMorgan Chase, a total of €485 million for participating in a cartel in euro interest rate derivatives.

According to the European Commission, the banks colluded on euro interest rate derivative pricing elements, and exchanged sensitive information, in breach of EU antitrust rules.

Crédit Agricole, HSBC and JPMorgan Chase chose not to settle this cartel case with the Commission, unlike Barclays, Deutsche Bank, RBS and Société Générale, with whom the Commission reached a settlement concerning the same cartel in December 2013. Since then, the investigation has continued under the Commission’s standard cartel procedure.

Today’s decision marks the end of a cartel investigation that was the first of several in the financial services sector.

According to Commissioner Margrethe Vestager, in charge of competition policy,  “A sound and competitive financial sector is essential for investment and growth. Banks have to respect EU competition rules just like any other company operating in the Single Market.”

Interest rate derivatives are financial products such as forward rate agreements, interest rate swaps or interest rate options, which are used by companies to manage the risk of interest rate fluctuations or for speculation. They derive their value from the level of a benchmark interest rate, such as the Euro Interbank Offered Rate (EURIBOR) and/or the Euro Over-Night Index Average (EONIA) for euro interest rate derivatives. The EURIBOR benchmark interest rate is meant to reflect the cost of interbank lending in euros and is based on individual quotes submitted daily by a panel of banks to a calculation agent.

The Commission’s investigation found that there was a cartel in place between September 2005 and May 2008, involving a total of seven banks (Barclays, Crédit Agricole, HSBC, JPMorgan Chase, Deutsche Bank, RBS and Société Générale) over varying time periods. It covered the whole European Economic Area (EEA).

According to the European Commission, the participating traders of the banks were in regular contact through corporate chat-rooms or instant messaging services. The traders’ aim was to distort the normal course of pricing components for euro interest rate derivatives. They did this by telling each other their desired or intended EURIBOR submissions and by exchanging sensitive information on their trading positions or on their trading or pricing strategies.

This means that the seven banks colluded instead of competing with each other on the euro derivatives market, the European Commission This market is very important not only to banks but also to many companies in the Single Market, which use euro interest rate derivatives to hedge their financing risk.

Wednesday’s Commission decision fines Crédit Agricole, HSBC and JPMorgan Chase for their participation in this cartel. This follows a settlement reached with Barclays, Deutsche Bank, RBS and Société Générale in the same cartel in December 2013.

The anti-competitive practices concerning benchmark interest rates revealed through antitrust enforcement have also been addressed by a more stringent regulatory framework. In June 2016, the European Parliament and the EU’s Council of Ministers adopted a new Regulation on benchmarks, following a proposal by the Commission. The Regulation makes it a violation of capital markets rules to manipulate benchmarks, such as EURIBOR, and reinforces the investigative and sanctioning powers of financial regulators.

As for the settling banks, the fines for Crédit Agricole, HSBC and JPMorgan Chase were set on the basis of the Commission’s 2006 Guidelines on fines.

In setting the level of fines, the Commission took into account the banks’ value of sales for the products concerned within the EEA, the very serious nature of the infringement, its geographic scope and its duration.

The fines imposed for the three banks are as follows:

Participants Duration of participation Fine (€)
Crédit Agricole 5 months 114,654,000
HSBC 1 month 33,606,000
JPMorgan Chase 5 months 337,196,000

 


France: Cazeneuve Takes Over As Head Of Government

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By Thierry Richard

(EurActiv) — France’s former Minister for the Interior Bernard Cazeneuve has taken over from Manuel Valls as head of the government, which he will lead for the last five months of François Hollande’s mandate.

“You have a habit of succeeding me,” Manuel Valls joked as he officially handed over control of the government to Bernard Cazeneuve on Tuesday (6 December). Cazeneuve took over from Valls as minister of the interior in April 2014. Now, as Valls steps down to prepare his presidential campaign, the former mayor of Cherbourg has once again been called in to replace him.

Valls may have used the position of prime minister as a springboard for his presidential ambitions, but Cazeneuve has said he will be happy to run the country until next year’s elections, giving him the record for the shortest term in office.

Hand-picked by Hollande, the new prime minister’s mission is to “protect” France. “This is a prime minister with strong knowledge of security issues and the fight against terrorism, which are the executive’s priorities,” the president explained.

Cazeneuve’s declaration of political priorities will take place next week. The new prime minister, whose mission will be a short one, has promised to use his time wisely. “Each day is useful, each day counts,” he said.

A fortunate ex-prime minister

Now a candidate for the presidency, Valls was keen to take credit for the reforms carried out by the current administration, including policies aimed at economic recovery, competitiveness and lowering taxes for middle and low earners.

“I was a lucky prime minister. It is a difficult thing to say in light of the struggles we have been through. But there is no crisis in [the government], just work in the service of France,” said Valls. He then told his successor, “You are a friend, you are a brother. That is a rare thing in politics.”

Often accused of being divisive and confrontational, Valls is clearly making an effort to build bridges in his party ahead of the election. “I have another responsibility today, to bring people together,” he said on Tuesday night on France 2.

Mini reshuffle

On top of appointing a new prime minister, President Hollande made just three changes to other government positions. Bruno Le Roux, the president of the Socialist group in the French parliament since 2012, will take over at the ministry of the interior. Jean-Marie Le Guen, one of Valls’ vocal supporters, has swapped positions with André Vallini, exchanging his parliamentary relations brief for the less prestigious development and Francophonie dossier.

The rest of the government remains unchanged. Contrary to the predictions of some observers, Hollande has not purged the government of Valls’ supporters, but opted instead for an “immediately operational” team with “experience”.

“Gateway government”

Cazeneuve’s nomination was welcomed by parts of the opposition. “I give him credit for keeping his dignity in all circumstances,” said Thierry Solère, the spokesman for centre-right Republic presidential candidate François Fillon.

“He is a good man, reassuring for the country in these troubled times,” tweeted François Bayrou, the president of the centrist Democratic Movement Party.

But former minister Éric Woerth, a Republican politician, pointed out the limited reach of this “gateway government that will function until the next election”.

The radical left also played down the importance of this cabinet reshuffle. Alexis Corbière, Jean-Luc Mélenchon’s spokesman, said, “Politically speaking, this is a complete continuity of what came before.”

Miracles Must Be Helped (And Adjourned) – Analysis

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The Case of China’s Economic Miracle and Germany’s Trade Surplus: An Age of Discontent

In the fifties of the last century the Italy’s economy grew at such an incredible rate that everywhere became popular the expression the “Italian Miracle”.

Helped and sustained by the diffusion of Italy’s everlasting fascinating culture (a lasting addition was neo-realism in movies) Italian products in fashion, processed foods, visual arts, leisure travel, the country reached top acceptance levels in world trade. Additionally, Italy also developed many powerful industrial sectors and reached a surprising high international level: 7th industrialized country in the world — much more industrialized (which meant a higher GDP) than the USSR, China, India, and South Korea.

That story would be incomplete if we didn’t point out that for several years the top economic growth rates were those of Italy, Germany (west for the moment) and Japan, the three defeated countries in the most stupid, pretentious and vulgar world war ever made. By the way that was not the Second World War, because the First World War was not that one at the beginning of XX Century, but that of Peloponnesus War that saw the rise of the best historian, Thucydides, after Herodotus, more able then the last one for moving his stories from chronicle to history, which is a bit more boring, but certainly a more concrete political tool.

Our 1940 – 1945 war was not the Second World War, because as Thucydides’ story makes clear, we have a world war when no country can refuse to fully engage on one side of the fighting. And in that Greek war, for the first time in history, no state was allowed to stay out of factually sponsoring one of the two contenders as some fascinating diplomatic speeches reported by Thucydides made clear, each country had to be participating friend or fighting enemy, and that made the first world war.

But to go back on our economic “Miracle” issue, we all reckon that “general miracles” are such because they defy common recognized laws, usually referred to physics, occasionally medicine. In both cases it is possible of course that common knowledge is incomplete and therefore astonishing results could be produced and assumed under the word “miracles”.

In physics to see a ball that runs spontaneously upward is helped by special colors and converging lines of side walls. This helps create a ‘Miracle’ (in sight). In medicine, at one time it was thought that productivity with regard to the extremely long hours of harbor workers could be increased by the massive distribution of cocaine among workers, which was specially praised by Freud. Obviously he didn’t know its side effects and later on Sigmund had some problems to discontinue his suggested miraculous medicines. Not so much with regard to the harbor workers, which was a problem of management, but with Freud’s stirred-up patients that loved very much his medicines and wanted more and more.

But helping miracles had to be discontinued in any case. Of course if you take out those adjusted colored walls and the exaggerate furniture of cocaine, balls manifest themselves going down and the workers stopped working altogether.

This is to say that “Miracles” must (or can) be helped, but to endure for the long range we must not forget that they cannot last forever with one specific caveat in economy: what in the physics of medicine can be partially at least temporally be mastered, in economics that is not possible. This is because there is an iron rule that by no means can be forgotten: “Economic miracles need always to be helped”, and if a country wants them to last, help must be revised or at least updated.

The Italian economic miracle depended on two immanent inner dynamic factors and one external occasional cause. Total deregulation of labor (southern Italy was China, providing cheap labor for northern Italy) and at the same time a dramatic raise in education. These were the two inner factors of that economic miracle. People were working every single minute of their life and at the same learning a lot every free minute after work. When the first impetus was running out to keep the economic miracle continue, Italy needed a political class that had to make a double transformation job: to transform the natural working impetus for satisfying basic needs, in a state coordinated regulated production system (as Germany did) and then to transform the hunger of education of common people in a modern well-functioning social texture that would lay down better chances for all future generations.

None of those transformations happened. Working relations were fast moving in a realm of continuous confrontation in which both entrepreneurs and unions shared the genuine lack of vision needed for transforming miracle in a stable economic organization, while the educational system was maintained in an absurd old fashion hierarchical discriminating approach led by conservative clerical inspiration that soon produced violent eruptions by incoming disappointed young generations. Since those fundamental components of the “economic miracle” failed to be properly updated, that maximized the abrupt reduction of the fundamental external miracle component – which was the financial support of the Marshall Plan. The Marshal Plan’s economic meaning was overshadowed by political in-fighting. Its impact on the economic miracle was not properly appreciated, which is exactly the same mistake that looms ahead with regard to China’s economic miracle.

In Italy’s case, after World War X (whose number, as I said before, I rather leave it here undefined) the US distributed lots of dollars to Italy’s war-destroyed economy that the Yalta agreement left under its influence. That was at a time when the US could print all the dollars it wished without any control outside of its wish and/or its factual printing capacity — a printing capacity that they honorably used to its fullest extant (in the case of the Vietnam war even at a bit stretched length).

Printed money was intended to produce Miracles of course. But, were many Miracles produced? Sure, but following the iron law of economic miracles they were helped by the Bretton Woods agreement that made the Federal System a unique emission bank for the world and made other currencies just divisional parts of the dollar. In other words, Miracles were helped. When that help ended, financing the Vietnam war had its role, each economy had to revert to its own home capacity to continue to produce miracles, not forgetting that economic miracles do not last if help is not adjourned.

Italian politicians did not understand that, as apparently German politicians do not now understand that either. And exactly the same problem faced by Italy – with due consideration of demographic dimensions – is the one facing the Chinese Economy: miracles were helped and now help must be adjourned. That very low cost totally unregulated labor, and the natural rush for industrial education do not suffice to maintain China’s economic miracle to continue working.

We should keep in mind, as I am sure the political leaders of China do, that the powerful underlined key factor for its miracle was the Marshall Industrial Plan (I invented the name to make clear the concept) made official by Mr. Henry Kissinger, but in reality made possible by President Richard Nixon who made the most dramatic historical change in American policy that no other President probably will be able to do, or possibly would dare to do.

Kissinger was authorized to pour into the Chinese economy, for the foreign political goal of checking the expanding USSR influence, thousands of American working forces (through transplanting factories), highest modern knowledge (by way of intense knowledge in built products) in addition to enormous corporate financial aid. Without that Marshall (Kissinger) industrial plan China’s economy would not have been able to skyrocket the way they it did. Miracle, in other words, was very much helped leaving open the problems of adjourning it in the near (?) future.

Of course some of us were very happy to see China back in the international arena. It was not acceptable for many of us that such a wonderful country with the most extraordinary cultural heritage had to live outside of the world’s trade transactions and cultural exchanges. Forcing China outside western world relations because of its communist regime, was a big foreign policy mistake for the US, or at least to say a military mistake, and Nixon had the guts to mend both of them.

While some of us don’t like Nixon for many things, and utterly dislike him for many others things, we should at least remember the extraordinary contribution he made to a better and safer world by going himself to China. That was a wonderful chapter of history we should keep in memory. But as we are still happy that thanks to Nixon, China surged in economic standards and interacted on all cultural as well as political levels with the western world, we must recognize the costs on our countries and beware of not making those costs become tragedies.

Here is where a wrong vision of globalization and free trade comes into the picture. In a limited – very limited – vision of globalized and free trade world there are people that sustain free trade and free movement of working factories without any restrictions, or perhaps better said, without any mutual concession that would make globalization and free trade be sustained by mutual development. It is now evident that this is not a sound globalization strategy, neither for countries that lost jobs nor for those who gained excessive surpluses. In the first case it enhanced the resentment of common people, and in the second case it promoted narrow-minded politicians who were able to provoke terrible damages.

In the rush to grasp immediate benefits subsequent to the falling of political and physical walls, short-sighted people forgot that equilibrium and common growth are proper stages of globalization, that is if we don’t want the process to end in tragedy. Italian politicians were not wise enough to establish a proper mutual accepted employers-unions industrial system and even worse they didn’t modernize the educational system. Therefore, when the happy uncontrolled flow of Marshall Plan money was reduced or minimized by the fall of the Bretton Woods monetary system, and the declining of other countries’ acceptance of the US printing dollars as it felt free to print, not only did the Italian economic miracle end, but the Italian economy entered a very difficult declining stage that continues, and which is difficult to check if not to reverse due to the emergence of limited intellectual political forces.

Latins say “mutatis mutandis” and in gentlemen English, one would say “once the necessary changes have been done”, that scrapping of the Italian miracle would happen also to Germany and to China. Germany is a country to which to the present Lady Chancellor, if nothing else at least with respect to the gentleman style — nobody would dare to suggest that Latin expression “mutatis mutandis” — that she should be invited, in proper English form of course, to change her strategy to keep alive the German economic miracle without destroying its “friends.”

Germany cannot continue to export its goods to ailing European economies while at the same time pretending a strong discretionary control of their budgets. Germany wants European Latin countries to lower pensions, less occupation, less public money, but in its vision these countries should keep buying lots of German goods. In Italy there is a saying that you cannot have “la botte piena e la moglie ubriaca”, which is a format for happiness, rendered in English in a weak way to mean “you cannot eat your cake and keep it”. Italians say that it is not possible to have – a barrel full of wine and wife drunk – in the easily shared assumption that having a barrel full of wine obviously is a good thing, where it is not so clear why a drunken wife should be such a good thing too. (Perhaps more possibility for fooling her? We have to think on it).

That principle applies to our case. If economic miracles have to be maintained, Germany and China must go back to common economic sense. They must pursue a more balanced economic growth with that of their clients. They cannot pretend that their miracles can keep demolishing other economies and at the same time be able to keep selling them their goods. That southern European countries, in the case of Germany, could look for other market relations is a reality proper to be pursued; that the western industrialized world, in the case of China, could rearm their industries to compete on knowledge based economies, where the western world has a clear hedge, must be properly taken by China into the picture. Southern European countries could very well try to reach out on their own to the Russian market or other Asian countries, in addition to America, for selling their knowledge and culture that is embodied in their goods. China should be aware that Vietnam, India, and so many other countries would be happy to produce the new technological home robot novelties that American ingenuity is going to launch on world home market. The fridge and the dishwasher of tomorrow’s middle class are home robots cooker, tapestry and floor cleaner robots, and for the young TV-addicted kids, the teaching robots, not to mention self-guided autos. That means that to maintain alive its economic miracle, Germany should recognize that the 4th Reich cannot be built at the expenses of other European countries. And China should recognize that cannot keep destroying other economies.

Why they should change this attitude? Because they both are very similar as their prolonged miracles were inaugurated an age of discontent that cannot be left to deteriorate in tragedy.

Going now to America, if we like Trump or not is not the issue. We must recognize that Trump has properly understood that Americans cannot accept that discontent becomes a tsunami in their own country, and he wants to halt it. We can discuss the means he wants to adopt to halt it, and properly give some differentiated contribution, but we have to recognize Trump’s proper attitude: economic miracles need help, some countries had it, and now help has to be adjourned. That help in the Italian miracle was the Marshall Plan and it was not adjourned. In Germany it was, and still is, the subordinate financial and production system of European countries, and it also needs to be adjourned. In China what I called the Marshall Industrial Plan needs a revision. Growth of Germany’s economy should not be based on an excessive surplus of balance of payment if they don’t want that miracle be discontinued by further Brexits, and China should recognize that since the real origin of its miracle is the Marshall Industrial Plan (say Kissinger’s strategy to control URSS from its flank) for the future it should properly be accepted, as I am sure its leaders are ready to do it, a more balanced growth facing the American economy.

But in addition to general trade terms of discussion, in economic miracles it should be kept in mind a very fundamental factor often neglected even by economists and surprisingly enough even by those claiming more balanced development. At the turn of XIX China had by far the highest GDP in the world. Almost double of the sum of GDPS of western countries. That position was completely changed not by industrial revolution, which was the effect and related to an intellectual mistake, but by the massive production and mass distribution of western knowledge applied to production, which was the cause.

Now in a more balanced globalized world that must be recognized for its proper MASS PRODUCTION AND DISTRIBUTION strategical role. On a world scale to assure a better and more balanced globalization, to focus just on trade terms it is not enough, the globalized world needs to assess another notion of nation’s wealth, that of MASS PRODUCTION AND DISTRIBUTION OF KNOWLEDGE. India is strongly considering the calculation, first in the world of the GDKP of a country, (Gross Domestic Knowledge Product), which goes along that direction. Lots of work has been done and now the final decision is at the desk of the ministry of statistics and that of the of PM.

There is no doubt that the quantitative notion of GDKP, with the model explored by India, which is much more then just the traditional Knowledge economy metric, would provide strong fuel for maintaining economic miracle alive (including that of China) . Let’s hope that the the new UN Director of Asian statistics, who had a fundamental role in promoting GDKP of India, will be able to promote in his new responsibility a diffusion in Asia of the GDKP notion. Such a measure would be a strong support toward lasting economic miracles in Asia, as well as in other parts of the planet.

In conclusion, let us assume that economic miracles need help, but at the same time let’s make clear to all, that miracles won’t survive if basic underlined help is unheeded for excessive ego assumptions.

*Umberto Sulpasso, senior Fellow of Center for Digital Future Annenberg School of Communication, University of Southern California has a Degree in Economics in Italy and MBA from Columbia University. Has been teaching in different countries Economy of Knowledge, and publishing books and directing ecnclopedias. His most recent publication has been Darwinomics where for the first time the model of GDKP was announced.

OPEC Production Cuts Reflected In EIA Forecast; HGL Production Grows Through 2017 – Analysis

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In EIA’s December Short-Term Energy Outlook (STEO), both the West Texas Intermediate (WTI) and Brent crude oil 2017 price forecasts increased by about one dollar per barrel (b) from the November STEO, with prices expected to average $51/b and $52/b, respectively.

The WTI price is forecast to average $49/b in the first half of 2017 and end the year at $54/b, while the Brent price is forecast to average $50/b in the first-half of 2017 and end the year at $55/b (Figure 1).twip161207fig1-lg

The forecast includes consideration of the Organization of the Petroleum Exporting Countries’ (OPEC) recent announcement to reduce production. However, the agreement only resulted in small changes to the STEO forecast. Notably, OPEC’s agreed upon output levels for early 2017 were similar to EIA’s November forecast, and already included some expectation of production constraint in 2017. EIA’s assessment of the non-OPEC contribution to production cuts may change based on announcements made after the meeting set for early December. Finally, recent improvements in global economic data may result in upward demand adjustments. All of this points to inventory rebalancing changes that offer support to crude oil prices.

At the November 30 OPEC meeting, member countries agreed to reduce production by approximately 1.2 million barrels per day (b/d) from an October baseline and lower OPEC’s production ceiling to 32.5 million b/d beginning January 1, 2017. EIA adjusted the December STEO by reducing OPEC’s crude oil production by 100,000 b/d in the first quarter of 2017 to 32.8 million b/d. The difference between OPEC’s and EIA’s production estimates likely reflects differences in production in Indonesia, Libya, and Nigeria, which are not participating in the agreement.

The agreement is meant to last six months with an option to extend for an additional six months. Saudi Arabia agreed to make the largest production cuts (approximately 40% of total cuts) and reduce production by 486,000 b/d to 10.1 million b/d. Iraq, the United Arab Emirates, and Kuwait agreed to cut production by 210,000 b/d, 139,000 b/d, and 131,000 b/d, respectively. Iran agreed to cap its production at approximately 3.8 million b/d, giving it room to increase production by about 90,000 b/d from October levels, according to trade press.

Several non-OPEC producers also announced their intention to freeze or reduce production, with the agreement stating that non-OPEC countries will reduce production by a total of 600,000 b/d. Trade press indicates that Russia will account for 300,000 b/d, staged over the first quarter of 2017, but it is currently unclear where the other 300,000 b/d will come from other than modest amounts from some Gulf nations such as Oman.

Oil prices rose as the OPEC agreement came together and was then announced; however, the extent to which the plans will be carried out and actually reduce supply below levels that would have occurred in its absence remains uncertain. If the agreement contributes to prices rising above $50/b in the coming months, it could encourage a return to supply growth in U.S. tight oil more quickly than currently expected. Crude oil prices near $50/b have led to increased investment by some U.S. production companies, particularly in the Permian Basin. A price recovery above $50/b could contribute to supply growth in other U.S. tight oil regions and in other non-OPEC producing countries that do not participate in the OPEC-led supply reductions.

EIA now expects modestly tighter balances than previously forecast. Total global oil inventories are now expected to build by 400,000 b/d in 2017, 100,000 b/d less than in the November forecast.

Continued supply growth in 2017 is expected to contribute to increases in global inventories. Petroleum and other liquids production is up in 2017 compared with 2016, with total world production increasing 1.3 million b/d to 97.4 million b/d in the current forecast. Despite the downward revision of OPEC production in the first quarter of 2017, total 2017 OPEC production (including both crude oil and other liquids, other liquids are not subject to the November 30 agreement) is still forecast to increase from 39.3 million b/d in 2016 to 40.2 million b/d in 2017. In addition to EIA’s inclusion of Indonesia, Libya, and Nigeria (which were excluded from OPEC’s production cuts), the increase in total OPEC production is influenced by expected seasonal demand growth and the return of some currently disrupted volumes. Non-OPEC 2017 production is forecast to increase by 350,000 b/d with the U.S. accounting for 210,000 b/d of that increase.

Despite new oil production coming online when global oil inventories are already at high levels, economic data have been better than previous expectations, and increases in oil demand growth could help to support prices in the coming quarters. Demand for global crude oil and other liquid fuels in the December STEO has been revised modestly upward from the November STEO with global demand now expected to grow by 1.4 million b/d in 2016 and 1.6 million b/d in 2017. U.S. consumption is expected to increase by approximately 1%, or 240,000 b/d, in 2017. Much of the growth in U.S. consumption is driven by consumption of ethane/ethylene, a hydrocarbon gas liquid (HGL), which is forecast to increase over 13% in 2017 from 2016 levels. The consumption increase is driven by an increase in the number of ethane crackers in the U.S.

The December STEO forecasts an increase in U.S. production of all HGL—a group of products including ethane, propane, normal butane, isobutane, natural gasoline, and refinery olefins—of 8.7% in 2017, but production of ethane accounts for nearly 80% of this growth. While HGL production happens at both natural gas processing plants and petroleum refineries, almost all of the growth in HGL production between 2008 and 2016 occurred at natural gas processing plants as a by-product of the growing supply of natural gas from shale gas and tight oil formations; this trend is expected to continue into 2017.

The December STEO forecasts U.S. ethane production to increase by 240,000 b/d to 1.5 million b/d for 2017. The increase is driven by additional ethane crackers coming online, providing a more economic use for ethane than ethane rejection (when ethane is left or reintroduced into the natural gas supply stream and is not accounted for as a petroleum product).

U.S. ethane exports are also forecast to increase in 2017. The December STEO forecasts net exports of ethane to rise over 145%, averaging 240,000 b/d in 2017 (Figure 2). This is partially driven by increased demand in the United Kingdom where an ethane cracker is expected to come online in 2017.twip161207fig2-lg

U.S. average regular gasoline and diesel retail prices climb

The U.S. average regular gasoline retail price rose five cents from the previous week to $2.21 per gallon on December 5, up nearly 16 cents from the same time last year. The East Coast, Midwest, and Gulf Coast prices each rose seven cents to $2.23 per gallon, $2.11 per gallon, and $1.98 per gallon, respectively. The Rocky Mountain price fell nearly three cents to $2.12 per gallon, while the West Coast price remained virtually unchanged at $2.57 per gallon.

The U.S. average diesel fuel price rose six cents to $2.48 per gallon on December 5, ten cents higher than a year ago. The Midwest price rose eight cents to $2.43 per gallon, the Gulf Coast price rose seven cents to $2.36 per gallon, the East Coast price rose five cents to $2.50 per gallon, the West Coast price rose four cents to $2.77 per gallon, and the Rocky Mountain price rose one cent to $2.46 per gallon.

Propane inventories fall

U.S. propane stocks decreased by 1.5 million barrels last week to 99.3 million barrels as of December 2, 2016, 1.4 million barrels (1.4%) lower than a year ago. Gulf Coast and Midwest inventories decreased by 1.0 million barrels and 0.6 million barrels, respectively, while Rocky Mountain/West Coast inventories dipped slightly, remaining virtually unchanged. East Coast inventories increased by 0.1 million barrels. Propylene non-fuel-use inventories represented 4.6% of total propane inventories.

Residential heating fuel prices increase

As of December 5, 2016, residential heating oil prices averaged $2.49 per gallon, nine cents per gallon more than last week and 16 cents per gallon higher than last year at this time. The average wholesale heating oil price is just over $1.72 per gallon, up nearly 14 cents per gallon from last week and 37 cents per gallon higher than a year ago.

Residential propane prices averaged nearly $2.12 per gallon, four cents per gallon more than last week and almost 15 cents per gallon higher than a year ago. Wholesale propane prices averaged $0.71 per gallon, just under seven cents per gallon more than last week and nearly 22 cents per gallon higher than last year’s price.

The Rise Of Anti-Establishment Italy – OpEd

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After the UK Brexit and the Trump triumph in the US, the rise of anti-establishment Italy is hardly a surprise. It is the effect of half a decade of failed austerity doctrines in Europe and decades of failed political consolidation in Italy – ever since the notorious Tangentopoli scandals.

While Italy’s constitutional referendum heralds a political earthquake that will eventually affect both France and Germany, the immediate result is more uncertainty in economy, political polarization and market volatility.

End of an era in Italy – and Europe

Only hours after Italians had cast their ballot in the referendum on constitutional reforms, Prime Minister Matteo Renzi announced his resignation after heavy defeat.

Renzi’s ‘Yes’ camp included most of his Democratic Party (DP) and centrist allies, and the tacit support of moderate voters, including some from Silvio Berlusconi’s Forward Italy (FI). In turn, the opposition lineup featured Beppe Grillo’s Five Star Movement (M5S), the regional Northern League (NL) led by Matteo Salvini in alliance with the far-right Brothers of Italy’s (Fdl) and Berlusconi’s Forward Italy (FI), a significant minority of PD allies, a number of small leftist groups.

According to projections, almost 60% of voters rejected constitutional changes. “My government ends here,” said Renzi from Palazzo Chigi. Moments later, he acknowledged that his pledge to resign if defeated at the polls had been a mistake.

“Democracy has won, the times have changed” concluded Beppe Grillo, the leader of the opposition’s Five Star Movement (M5S), calling for elections to take place as soon as possible. In his tweet, NL’s Salvini left little doubt about his preferred international partners: “Long live Trump, long live Putin, long live Le Pen, long live the Northern League.”

Again, media headlines reflect a “surprise,” an “upset,” a “disruption.” But by now, such views are plain silly. Last summer, I projected that Renzi was about to undermine his rule because of his pledge, which ‘politicized’ the constitutional referendum. Indeed, since the onset of the European sovereign debt crisis in spring 2010, I have argued that the policy solutions at Brussels and the core EU economies – including multiple “bailout” packages and the broad austerity regime – have been misguided, flawed and inadequate. Well before the UK referendum, I predicted the Brexit outcome. In effect, the outcome of the Italian referendum was fairly clear already in summer, when I forecasted the demise of the Renzi regime.

The problem is that most mainstream policy observers and media remain far too close to the political class and its financiers in Washington, London, Brussels, Rome and other advanced economies.

Few days ago, Alessandro Di Battista, a rising star of Grillo’s M5S issued a call to arms. Renzi’s referendum, he told the crowd, was just the latest gambit by a political class determined to insulate itself from the people it should serve. “There are two Italys: on the one side the very wealthy few who look after themselves, and on the other the masses who live every day with problems of transport and public health.”

Battista’s words were followed by the Five Star chant, “A casa! A casa!” (“Send them home”). M5S got what it wished for.

What next?

Despite neo-liberal dreams of continuity for Renzi’s regime, the triumph of Beppe Grillo was only to be expected. The same goes for the rise of government bond yields after the referendum and the relative weakening of the euro. These, however, are likely to prove temporary reactions.

If M5S takes charge of the government, the responses of the financial and currency markets will be more destabilizing and capital outflows are likely to escalate. Italy’s volatility could also result in a new sovereign downgrade, which would undermine the perception of stability that the European Central Bank (ECB) has struggled to maintain since the early 2011.

The political future of Italy will be harder to forecast, especially in the near term. First of all, Renzi’s constitutional referendum will be followed by Italy’s general election, which should take place already by summer 2017. If Renzi had won the referendum, his fragile political victory would have had to cope with the opposition’s attacks. Since the opposition won, that could pave way to a new referendum on Italy’s Eurozone membership, which, in turn, could result in an ‘Italexit’ – a fatal blow to European integration.

But how likely is this sequence of events?

As Italy has now rejected the constitutional referendum and given the M5S the critical political mandate, the latter should solidify its leadership in the general election while promoting its plan to hold a referendum on the Eurozone. Since almost every third Italian voter today supports M5S, this sounds viable but it will not be easy. After all, the Italian political landscape remains fragmented and fluid. Moreover, unlike its rivals, M5S shuns political alliances, which it would need in the post-referendum transition to consolidate its political might.

Ironically, in the absence of the kind of streamlined governance that Renzi proposed, neither Renzi’s PD, nor Grillo’s M5S, or any possible third (most likely center-right or radical-right) party will find it easy to manage the post-referendum transition. Indeed, Renzi’s referendum, despite its stated objective to make Italy more governable, has made Italy more ungovernable, at least in the short term. And that, in turn, will favor economic uncertainty, political instability and market volatility.

At the regional level, this environment could initiate end-game in Europe. As long as the sovereign debt crisis was limited to small Eurozone economies – Greece, Portugal and the like – which each represented less than 3% of the regional economy, bailouts were adequate to delay structural reforms. That period, however, ended in 2011, when the crisis spread to Italy and, to a degree, France. Together, these economies account for almost 30% of the regional economy. Today, bailouts are no longer an option. Economic solutions require structural reforms, which the Italy’s establishment shuns because these policies are seen as political suicide.

In contrast, opposition has seized the window of opportunity. If the center-left, anti-establishment and Euro-skeptical M5S fails to consolidate political power, it will open the door to radical right, particularly the Northern League, and the center-right opposition party Forza Italia.
Like M5S, the NL strongly opposed the October referendum. Unlike M5S, it represents radical right and is willing to form coalitions. The NL has been reorganizing its ranks to become a national party, with a Euro-skeptic platform. The party’s rising star Matteo Salvini perceives himself as Italy’s Marine Le Pen.

Salvini sees the euro as a “crime against mankind.” He is opposed to illegal immigration. On economic issues, he supports flat tax, fiscal federalism and protectionism. In demonstrations, he dons a Mussolini-style black shirt to court Italy’s extreme right group Casa Pound. In foreign policy, Salvini emulates Le Pen’s ideas, opposes the international embargo against Russia and supports Italy’s broader economic opening to Eastern Europe and Asia. In the US, he endorsed Donald Trump whom he met in Philadelphia last April.

Renzi’s fall, Grillo’s rise

Nicknamed il Rottamatore (the scrapper), the 42-year-old Renzi, former mayor of Florence, became the youngest person in history to be Italy’s Prime Minister in February 2014; younger than Mussolini. By then, the longest recession in Italy’s postwar history had ended. However, the Italian economy was a tenth smaller than before the crisis, while unemployment had doubled to over 12 percent since 2007.

Even today, unemployment remains at 11.6%, while youth unemployment exceeds 36%. The figures are the lowest since 2012, but after two decades of stagnation and half a decade of failing living standards, it’s no consolation.
By December 2014, the ratings firm Standards & Poor’s lowered Italy’s long- and short-term sovereign credit ratings to ‘BBB-/A-3.’ Nevertheless, S&P expected Italy’s government to implement reforms, and the ECB’s monetary policy to support a normalization of inflation. In Italy, that was easier said than done. To achieve change, Renzi needed structural reforms and to implement those reforms, he needed constitutional reforms. Italians were sympathetic to the idea of streamlining politics in the Eurozone’s third-largest economy in which a gridlocked legislature and unstable governments sustain a seemingly endless ping-pond between the two chambers of parliament. However, by staking his own political future with the outcome of the referendum, Renzi “politicized” the referendum.

Internationally, Renzi was regarded as social-democratic, progressive by outlook and reformist by inclination. Representing much-needed generational change in the aging Italy, he hoped to reverse the country’s decline by launching huge projects, starting with a new electoral law to consolidate political decision-making, reforms in the public administration, and the tax system. In reality, he leaned onto Italy’s neoliberal forces, supported eagerly the North Atlantic Treaty Organization (NATO) which leaves many Italians ambivalent and even gave his symbolic vote to Hillary Clinton in the US election, which left him stranded after the Trump triumph – in both Washington and Rome.

All of these forces fueled the support of the M5S, which was launched by Beppe Brillo, a popular comedian and blogger, and Gainroberto Casaleggio, a web strategist, right after the global crisis in 2008-9 right before the onset of the European sovereign debt crisis in spring 2010. After Casaleggio’s death last April, Grillo has led the party with a directorate of five leading members of parliament.

In the US and Western Europe, neoliberal media has labeled M5S “populist.” In reality, the party is anti-establishment, environmentalist, anti-globalist and Eurosceptic. Moreover, it sees itself more as a ‘movement’ than a ‘party’ and shuns the traditional left-right paradigm. Indeed, the “five stars” of M5s highlight the role of public water, sustainable transport, sustainable development, right to Internet access and environmentalism. It advocates direct democracy, non-violence and sees degrowth as the issue of the future. Many M5S goals can be seen as reactions to Rome’s ruling class, including the ‘zero-cost politics’ (politics is a temporary service, not a money-making machine), no criminal records (to increase transparency) and the no-alliances policy to ensure that M5S can push all of its tenets.

In effect, the reasons for the nightmare scenarios about M5S in the neoliberal media stem mainly from the fact that both Grillo and M5S are no fans of the US-led NATO and have explicitly condemned Western military interventions from the Middle East to South Asia, as well as US intervention in Syria.

Despite wide differences in the political platforms of Europe’s radical left and right, the common denominator from France’s Marine La Pen to Italy’s Grillo and the Spanish Podemos is the critique of NATO, US interventionism in Europe as well as certain respect for Putin’s Russia. That’s why these parties are habitually criticized by the mainstream media, which tend to rely on neoliberal capital.

Political losses, economic stagnation and banking fears

Despite half a decade of promises of deleveraging, Italy’s general government debt is still at 134% of the GDP; second-highest in the Eurozone right after Greece, and higher than at the onset of the European debt crisis. Even as Italy is amid a cyclical rebound, its real GDP growth will be around 0.9%-1.0% in 2016-17.

Without Rome’s reduced fiscal burden and the European Central Bank’s continued easing, Italy would have to cope with deflation. After all, living standards remain today where they were in the mid-1990s. Yet, in structural terms, this may be as good as it will get. Thanks to aging, slowing productivity and de-industrialization, growth is likely to decelerate to 0.8 percent or less and remain at that level until the mid-2020s. As challenges are about to increase, economic muscle will shrink. This benign scenario does not presume major economic or political destabilization – despite looming challenges in the banking sector.

Since the summer, Renzi has been willing to defy the EU and pump billions of euros into Italy’s troubled banking system. As the result of the country’s three-year recession and years of stagnation, bad loans restrict the bank’s ability to lend, which, weakens government’s efforts at rejuvenation and contributes to unease in Brussels. Earlier in the year, Brussels signed off some $170 billion worth of precautionary measures to support Italian banks’s with short-term liquidity challenges. Yet, it is the pressure on capital that’s the greater concern, as evidenced by stress tests in July.

These concerns were particularly associated with Italy’s third-largest bank, Banca Monte dei Paschi di Siena (BMPS), which has close ties with Renzi’s center-left Democratic Party (PD). While BMPS claimed it had secured underwriters to back a turnaround, the stress tests found the bank to have the greatest challenge out of 51 of Europe’s top banks to cover its toxic loans in adverse economic conditions.

In Italy, the inability to cope with a substantial share of non-performing loans (NPLs) in the banking sector may well subdue bank lending, which will keep brakes on consumption and investment.

In summer, the rating agency DBRS placed Italy’s last “A” credit rating on review citing uncertainty over the October referendum. DBRS is one of the four major agencies whose rating the EBS can use to keep Italy in the top band for collateral requirements for its lending to banks. A downgrade would bring Italy’s sovereign rating to BBB, which would raise the cost for Italian banks of using government bonds as collateral for ECB loans.

Recently, the neoliberal Financial Times reported that as many as eight of Italy’s troubled banks “risk failing” if Renzi lost the referendum and ensuing market turbulence deters investors from recapitalizing them, citing senior bankers. The timing of the report indicated tacit support for Renzi; the message, in turn, has been well-known in banking circles for quite a long while.

The recent shareholder approval of BMPS’s €5 billion recapitalization is an early step to save the bank. But far more is needed, even though the timing could not be more unfavorable.

After the UK Brezit referendum, the Trump triumph in the US and the overthrow of the Renzi regime, Italy’s banking crisis is contributing to a longer-term destabilization, which is likely to reinforce the fragmentation of Europe. In Washington, that is typically seen as the result of “populism” in Italy or elsewhere in Europe. In contrast, Italian opposition forces tend to argue that much of the country’s current economic stagnation and political fragmentation is, at least indirectly, the result of US interventionism.

How Tangentopoli and CIA paved way for Berlusconi – and Renzi

Following the end of the Cold War, Italy’s ruling class disintegrated after a nationwide judicial investigation into political corruption in the early 1990s. The Mani Pulite (‘clean hands’) investigation resulted in the demise of the First Republic and the dissolution of many political parties, even suicides of high-profile politicians and industrialists. At one point, every second member of the Italian Parliament was under indictment. Thanks to corruption charges, more than 400 city and town councils were dissolved.

Known as Tangentopoli (“Bribesville”), the corrupt system amounted to an estimated $4 billion, mainly from bribes for large government contracts.
Investigation began to expand in early 1992 when judge Antonio Di Pietro arrested Mario Chiesa, a member of the Italian Socialist Party for a bribe from a cleaning firm. As the party began to distance itself from Chiesa, the latter started to give out information about corruption that implicated the party itself. Soon thereafter, the investigations snowballed. That, in turn, led to the fall of the center-right Christian Democracy, while frustrated Italians turned from moderate parties to far-right Lega Nord (LN). By 1992, investigations began to shake moderate mainstream parties, the government-controlled energy giant ENI and veteran national politicians, including Bettino Craxi who accused judge Di Pietro of having provoked a “false revolution” of investigating only some politicians, while ignoring the opposition parties.

In national politics, the most critical result was the fragmentation of major center-left parties. Like in Brazil today, allegations also emerged about a ‘soft coup’ orchestrated by Italian judicial investigators and the CIA. Among others, US Ambassador Reginald Bartholomew said that, behind the operation, the CIA helped Italian prosecutors to accuse politicians – especially those who did not represent US interests in Italy.

As such, this kind of intervention was not exactly new in Italy. It goes back to the 1970s and 1980s “Years of Lead”, when Italy coped with waves of terror attacks and assassinations by neo-fascist terrorists. The latter, in turn, were associated with US-led Operation Gladio; a codename for a clandestine NATO “stay-behind” operation in Italy (and many other Western European countries) during the Cold War, led by the CIA. Leaning on the “strategy of tension,” these groups used extremism to foster destabilization, which would lead to demands for “law and order.”

The destabilization resulted in the center-right, pro-US Silvio Berlusconi’s four governments between the mid-1990s and 2013; until he was convicted of tax-fraud. These two decades also led multiple left-wing and center-left politicians consolidate their combined forces into Renzi’s Democratic Party (PD), which was acceptable in Washington. While Berlusconi represented the center-right in Italy, Renzi belongs to center-left. However, neither was a Eurosceptic, both supported US-led globalization, the NATO and military interventions in the Middle East..

Today, times have changed, as Grillo now puts it.

Renzi wanted structural reforms, EU integration and US cooperation. Despite its Euro-skepticism, the M5S supports EU membership, but also national referendum on the euro. Salvini wants political power, exit from the euro and Euro-skeptic cooperation with Russia. Yet, after the Brexit threat, Brussels cannot afford Italexit.

That’s a recipe for new uncertainty and volatility from Italy to France and German – all of which will face critical elections next year.

The commentary was originally released by The European Financial Review on December 7, 2016 http://www.europeanfinancialreview.com/?p=12062

Border Tension Leaves India-Pakistan Trade In Crisis – Analysis

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By Amitava Mukherjee*

Increased tension along the Line of Control (LOC), particularly in the wake of reported Pakistan-sponsored terrorist attack at Uri and Indian surgical strike in response, has left its mark on India-Pakistan bilateral trade which has reached a crisis point with Pakistan, according to media reports, suspending the import of cotton and some other agricultural commodities from India.

As Pakistan has a fast expanding consumer market, low volume of bilateral trade is going to hurt India more than it can inconvenience Pakistan’s economic interests.

There may be some reasons behind the argument proffered by a section of economic experts that India-Pakistan trade relations have shown so little growth over the years that the present spurt in hostilities will not subtract anything from the total quantum of bilateral trade volume. This may be true about the formal trade structure but unofficial trade between the two countries has registered phenomenal growth in the last decade proving the point that a policy of increased give and take between the peoples of the two countries might come in handy towards reducing mutual tensions.

Unofficial India-Pakistan trade now amounts to $2,612 million which was only $345 million in 2003-2004. In 2015-16, India exported $2,171 million worth of goods to Pakistan. In 2003-04, this figure was only $287 million. On the other hand, Indian imports from Pakistan — worth $58 million in 2003 — have risen to only $441 million in 2015-16.

So the balance of trade is tilted in favour of India and New Delhi would have to incur heavy financial loss if the current belligerent situation is allowed to continue. It is better to admit that Indian policy-makers have not been able to become sagacious as there is a perceptible tendency among them to write Pakistan off as a trade partner in spite of the fact that consumer spending in Pakistan has increased by 7 percent this year. In 2015, it had grown by 3.2 percent indicating a steady upward graph of consumption level.

Then why has New Delhi restricted its export markets in the European Union (EU) countries, the United States, Africa and South-East Asia when balanced economic relations with Pakistan might have helped in reducing mutual tensions.

In 2015-16, India’s total merchandise trade was around $641 billion. In it, Pakistan’s share was less than 0.5 percent. Howsoever favourable position India may enjoy in bilateral trade, Indian exports to Pakistan are minuscule — only 0.83 percent of its total outward shipments.

So there is scope for increased earning and better mutual understanding through enhanced trade. Pakistani spinners are the largest importers of Indian cotton — amounting to almost $822 million a year. This year there is scope for further increase as Pakistani cotton yield has suffered a nearly 15 percent slump. If India does not show initiative and keep an eye on the visible trend of increase in its cotton prices, then Pakistan may look towards Brazil, the US and African countries for supply of cotton.

Unfortunately, nearly 80 percent of India-Pakistan trade is carried out in either primary or intermediary products. Moreover, both tariff and non-tariff barriers are more stringent in India than in Pakistan. So far as imports from India are concerned, Pakistan imposes less import weighted average tariff rates than what India charges on Pakistani imports.

There is scope for qualitative improvement in India-Pakistan trade. The need of the hour is phasing out of primary products from trade lists and ushering in of a level playing field for both Pakistan and India.

*Amitava Mukherjee is a senior journalist and commentator. Comments and suggestions on the article may be sent to: editor@spsindia.in

Seventy-Five Years Ago: Remembering Pearl Harbor And A World At War – Analysis

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By John H. Maurer*

(FPRI) — The seventy-fifth anniversary of the attack on Pearl Harbor offers an opportunity to look back on the world-changing events of 1941. In that year, the United States was shocked into playing the role of a global superpower. This role was not one the American people sought to play. The wars then being waged in Europe, the Middle East, and Asia were conflicts that the American people wanted to avoid having to fight. These conflicts were other peoples’ wars, fought oceans away, in which many Americans believed the United States had no vital stakes at risk. The American people hoped to live in peace in the New World, a geostrategic safe haven in the Western Hemisphere, free from the hatreds and dangerous struggles that gripped the Old World of Europe and Asia. To many Americans, the United States would have a compelling national security interest in drawing the sword and fighting—a clear and present danger—only if some predatory foreign great power threatened the Western Hemisphere and the safety of the homeland.

In December 1941, the choice of whether the American people would fight or not was taken away from them when the rulers of Imperial Japan and Nazi Germany took matters into their own hands and struck the United States. Americans did not choose to fight: war was chosen for them. Nowadays, as we like to say in our flippant way, the enemy got a vote in determining our destiny. Not for the last time did an adversary shock the American people out of their complacency. Looking back on the momentous year of 1941 provides an opportunity to reflect on America’s place in the world, along with the dangers confronting it, both then and now.

At the beginning of 1941, Great Britain and its empire were fighting alone against Nazi Germany and fascist Italy. The previous year, the Nazi war machine scored a stunning series of victories, bringing about the conquest Western Europe. Most stunning of all was Germany’s rapid defeat of France during the spring of 1940. This strategic catastrophe might have spelled Britain’s defeat as well had it not been for the leadership of Winston Churchill, who rallied the British people to make a heroic stand against Nazi aggression and turned back a German air assault on their homeland. This victory in the Battle of Britain was the first major reverse inflicted on Nazi Germany and Hitler’s ambitions for global hegemony. Heroism, however, came at a heavy cost in loss of life and suffering: almost 25,000 British civilians—people of all walks of life—were killed on account of the German Air Force’s bombing of Britain’s cities. To put this suffering by Britain into perspective, the civilian loss of life inflicted on Britain during 1940 amounted to the rough equivalent of seven September 11 attacks! While the loss of life and urban damage was immense, the British people did not falter under this weight of attack. Churchill called this heroic stand Britain’s finest hour. Indeed, it was a finest hour of a people who refused to give up and fought back even in the face of terror attacks on their homeland.

While this time of testing aroused the passions of the British people, sober strategic calculation also lay behind the decision by Churchill and Britain’s leaders to fight on. Churchill and the British military chiefs knew that Britain and its empire could not bring about the complete defeat of Nazi Germany without powerful allies. Britain’s military leaders warned Churchill that unless the “United States of America is willing to give us full economic and financial support, without which we do not think we could continue the war with any chance of success.” (This emphasis appears in the original strategic assessment written by the British chiefs of staff.) In his strategic calculations, Churchill took a risk in counting on the United States being willing to assist Britain in this struggle. There was nothing inevitable about the United States offering this assistance. An isolationist America might have turned its back on Britain, leading to the horrific outcome of Europe’s domination by the Nazis.

Churchill was fortunate that Franklin D. Roosevelt, elected to an unprecedented third term as president, wanted to extend the maximum assistance to Britain permitted within the constraints imposed by the pace of American rearmament and by a deeply troubled, divided public opinion. Roosevelt agreed that the menace of Nazi Germany must be destroyed if the United States was to find enduring security and a better state of peace. He rejected the foreign policy and strategic advice offered by advisers—such as, Joseph Kennedy, the American ambassador in Britain—who advocated a strategy of hemispheric defense. Instead, Roosevelt moved to enact Lend Lease legislation that made it far easier for Britain to acquire American resources to wage war. Churchill called Lend Lease the most unsordid act. In stirring rhetoric, Churchill proclaimed: “We shall not fail or falter; we shall not weaken or tire. Neither the sudden shock of battle, nor the long-drawn trials of vigilance and exertion will wear us down.” He promised to “finish the job” of defeating Germany if the United States would give Britain the tools. This American assistance certainly helped Britain to rearm and increase its military strength during 1941. That the United States provided support was of critical importance in the British decision to continue the struggle against Nazi Germany.

In the eyes of Germany’s leaders, Lend Lease provided a definite sign of the increasing American commitment to defend Britain. It was American assistance that was keeping Britain in the war against Germany. Hitler and German government leaders also saw in American actions a confirmation of their extremist ideological views about the United States. In their warped worldview, American actions were directed from behind the scenes by a plutocratic conspiracy of Jewish leaders, who guided Roosevelt and fomented public hostility toward Nazi Germany. The German embassy in Washington reported that Lend Lease “stems from the pens of the leading Jewish confidants of the President. . . . With the passage of the law the Jewish worldview will therefore have firmly asserted itself in the United States.” To Hitler, the United States stood a sworn enemy, thwarting Germany’s ability to beat down British resistance and his superpower ambitions.

Stymied by renewed British strength and resistance, Hitler looked eastward, toward the Soviet Union, taking the fateful decision to attack Stalin, his erstwhile coalition partner. Why would Hitler even consider attacking Stalin, with whom he had a favorable partnership in the two countries’ non-aggression pact? First, Hitler could see no plausible strategy to bring about a quick defeat of a Britain led by Winston Churchill. A direct invasion of the British home islands was out of the question because of Britain’s renewed strength and the difficulties of conducting a crossing of the English Channel. Second, the United States was rearming and before long would be able to translate its economic strength into military might. Eventually, the coalition bloc of the British Empire and the United States would mobilize superior resources to that of Germany. Hitler estimated that he had at least another year before the United States would be armed and ready to enter the war against Germany. Third, Nazi Germany could use the window of opportunity caused by American military weakness to throw its main weight against the Soviet Union, crushing the Red Army and conquering large swaths of its territory. These conquests would give Germany the resources—food, oil, coal, industry, slave labor—to fight a protracted war against Anglo-America. This window to defeat the Soviet Union, in Hitler’s view, would soon close. He needed to strike and win big in 1941. The German army’s leadership concurred with Hitler’s strategic assessment, believing that Germany could rapidly achieve the Nazi goals of conquest and exploitation in the East.

The German assault on the Soviet Union did achieve great initial success. The German offensive strike that began on June 22, 1941 caught the Soviet armed forces by surprise. German armored forces cut through Soviet defensive lines, encircling and destroying Red Army units, capturing large numbers of prisoners. The German Air Force gained air superiority by destroying Soviet aircraft on the ground. While Soviet soldiers fought hard, they could not contain the rapidly advancing German forces. The Soviet Union was in a desperate fight to stave off the Nazi onslaught before it reached the major cities of Leningrad and Moscow and conquered the resources of the Ukraine, Don River basin, and the Caucasus.

In Hitler’s attack on the Soviet Union, Churchill and Roosevelt saw an opportunity to forge the Grand Alliance that could defeat Nazi Germany. Both Churchill and Roosevelt moved quickly to align themselves as partners with the Soviet Union. In a famous speech, Churchill broadcast British resolve to help the Soviet Union. As the war progressed, American and British aid would grow in importance, improving the ability of the Soviet Union to fight effectively against the Nazi invaders.

In August 1941—with the Soviet Union battling for its life; with Britain fighting in the Atlantic, in the air over Europe, and in Middle East; and with Nationalist China engaged in a brutal protracted war against Japan in Asia—Churchill and Roosevelt held a summit meeting off the coast of Newfoundland to discuss strategy and war aims. One result of this summit was the drafting and publication of the Atlantic Charter. In this remarkable document, Churchill and Roosevelt publicly called for the rollback of Nazi Germany’s conquests, the destruction of Hitler’s regime, and the disarmament of aggressor states. A later generation would call these aims regime change. Even before entering the war, then, the United States had provided a public declaration of war aims that would provide the basis for a new international order and an enduring peace.

Fearful that the Soviet Union’s resistance might collapse, Roosevelt and Churchill had to consider what to do next, how the war might be won even if the Red Army suffered defeat. That the war must be won—and that winning meant the extirpation of the Nazi regime—was always first in their minds. They refused to consider the alternative of negotiating a peace with the Nazi regime. There could be no lasting peace with Hitler in command of a powerful Germanic empire stretching from the Atlantic to the Urals. If the Red Army suffered further defeats on the battlefield, leading to a breakdown of the Soviet Union’s ability to offer a credible conventional military resistance in European Russia, then the war would take a much more dangerous turn. In the autumn of 1941, as a renewed German offensive reached toward Moscow, this awful scenario seemed to be coming to pass.

It was in this dangerous environment that Roosevelt and Churchill made the fateful decision to develop nuclear weapons. The British had given close study to the problem of acquiring nuclear weapons. The conclusion reached by a British scientific team, contained in a famous study known as the MAUD report, was “that the scheme for a uranium bomb is practicable and likely to lead to decisive results in the war.” In the view of the British scientists, the material for a nuclear weapon might be ready by the end of 1943. The British assessment was stark: “no nation would care to risk being caught without a weapon of such decisive possibilities.” American scientific leaders concurred. After receiving a briefing on nuclear weapons development, Roosevelt gave an immediate go-ahead for a major research and development effort. He also reached out to Churchill, proposing that Britain and the United States should pool their resources and work together in developing these weapons. Churchill concurred. Nuclear weapons would provide an ultimate offset strategy if Soviet resistance faltered and a Nazi super-state emerged on the continent of Europe.

The ability of the Soviet Union to fight on also required that brakes be put on Japanese aggression in Asia. Beginning in 1937, Japan initiated a major regional war against Nationalist China. Chiang Kai-shek, the Nationalist leader, refused to give up against Japanese aggression, despite the repeated beatings inflicted on Chinese armies. It was essential that Japan’s ambitions in Asia be contained, or else the balance of power would tilt even further in favor of Nazi Germany in Europe. In particular, Britain and United States wanted to deter the militarists in charge of Imperial Japan from striking north against the Soviet Union in northeast Asia. Some of Japan’s leaders actually wanted to pursue this course of action, to gang up with Nazi Germany to defeat the Soviet Union. The diplomatic and economic pressure put on Japan by the United States, along with a steady buildup of American and British forces in the Pacific, was meant to dissuade Tokyo from embarking on further aggressive wars. In a global war, what happened in Asia could have a huge bearing on outcomes in Europe.

This hardline stance against Japan, however, failed to lead to a negotiated settlement with Tokyo. While American and British actions did have the desired effect of forestalling a Japanese attack on the Soviet Union, Japan’s rulers instead attacked Britain and United States. The militarist leaders of Japan were not going to be denied their bigger war. Rather than find a diplomatic way out of the brutal quagmire that they had gotten themselves into by fighting Nationalist China, Japan’s rulers in their folly could only think about escalating the contest in their quest to dominate Asia. If they could not have a war with the Soviet Union, then they were going to attack Britain and the United States. The militarists’ quest for empire, the creation of a Greater East Asia Co-prosperity sphere, would ultimately lead to the destruction of the Japanese Empire and the first use of nuclear weapons.

The Japanese attack on Pearl Harbor shocked the American people, but did not break their will. This defeat instead galvanized them to bring the power of the United States to bear against the aggressor regimes. President Roosevelt would call December 7, 1941 a day that will live in infamy. Despite the heavy losses inflicted by the Japanese surprise attack, the president predicted that the United States would gain the inevitable triumph in the struggle forced upon the American people.

The Japanese attack also had an immediate effect on Hitler, who moved quickly to support his Japanese ally by declaring war on the United States. Hitler applauded the actions of the Japanese government by breaking off negotiations with Roosevelt—whom he labeled “this lying man” who had treated with Japan in a “dishonorable manner”—and launching a surprise attack. He believed that Japanese military successes would tie down substantial American and British resources in the Pacific. In fending off the Japanese onslaught, the United States would be in no position to carry out major offensive operations in Europe in the near future. Nazi Germany would thus be able to continue making its main effort in the war against the Soviet Union. Hitler had, then, another chance to break down Soviet resistance by German offensive operations during 1942. The war in Asia was shaping the strategic contours of the war in Europe.

In addition to these strategic calculations, Hitler brought to decision making his extremist ideological agenda in taking the step of declaring war on the United States. On December 11, 1941, in a speech asking his rubberstamp Reichstag to declare war on the United States, Hitler gave full rein to his extremist worldview. Hitler told the Nazi faithful: “We know what force stands behind Roosevelt. It is the eternal Jew.” Roosevelt, in Hitler’s estimation, was the puppet of a malevolent conspiracy, compelled to make war on and destroy Nazi Germany. “Roosevelt was strengthened in this resolve for war by the Jews surrounding him,” Hitler asserted. “The full diabolical meanness of Jewry rallied round this man, and he stretched out his hands.” In Hitler’s mind, Roosevelt was the warmonger, dedicated to starting a global conflict, doing so at that the behest of his Jewish overlords. To Hitler and the Nazis, the United States under Roosevelt was the great violator of international law and fomenter of war, seeking global hegemony.

In the wake of America’s forced entry into the war, Churchill traveled across the Atlantic to meet again with Roosevelt to hold high-level, face-to-face discussions about policy and strategy. As part of Churchill’s visit to Washington, he gave a speech before a joint session of Congress about the war on the day after Christmas. In the speech, Churchill reminded the assembled members of Congress that his mother was American. Putting his memorable humor on display, he quipped: “By the way I cannot help reflecting that if my father had been American and my mother British, instead of the other way round, I might have got here on my own.” In a more serious vein, Churchill made the case that the coalition formed against Nazi Germany and Imperial Japan would ultimately win the war, achieving the aims spelled out in the Atlantic Charter. He closed with the inspiring words: “The United States, united as never before, has drawn the sword for freedom and cast away the scabbard.”

What can we take away from studying the events of 1941? How can we apply the history of this momentous year to understanding our own times and America’s predicament in the world today?

One take-away is to remember the decisive role the United States plays in providing international stability and security. When the United States was disarmed, refusing to offer security guarantees to other countries facing armed aggression, the world faced great danger. By the time Pearl Harbor occurred, China had suffered through four years of Japanese aggression. In Europe, the French Republic went down to defeat before it could receive meaningful assistance from the United States. The defeat of France made the world a much more dangerous place for the American people. Britain also faced a hideous plight, fighting alone in a desperate struggle for survival and suffering fearful losses. Meanwhile, Soviet Russia incurred enormous losses in people and territory. Stalin’s ability to continue offering effective conventional resistance was put in grave jeopardy. Just imagine a world in which the United States had retreated into hemispheric defense during the Second World War and not provided support to those fighting against the aggression of the Axis powers. That nightmare scenario was averted because President Roosevelt understood that an isolated America would end up being a beleaguered America in a state of siege. Only by getting out of the cocoon of the Western Hemisphere could the United States play a part in preserving these important coalition partners. This lesson is surely an important one: American security means helping other countries fighting to defend themselves against common dangers.

Today, Americans seem so concerned about strategic over-extension that they want to limit as far as possible military commitments by the United States to other countries. Playing the role of an offshore balancer, we are told, provides a way to avoid overextension and limit risk to America’s position in the world. The reality is that the United States might readily fall into strategic folly by withdrawing too much from the world. The risks associated with a strategy of offshore balancing and restraint is greater than what it appears on surface. Maintaining international partnerships, based on shared interests in thwarting common dangers, is surely the wiser course of action.

American decision makers must always take a global strategic perspective, understanding the importance of a coherent strategy to balance commitments and resources among various regions around the globe. Churchill and Roosevelt had an understanding that strategic outcomes in Europe were shaped in part by events in Asia and the Middle East. The same is true today. What happens in one region of the globe has an impact on others. Working with partners is essential to forming a global strategy for the common good.

The incoming administration should thus set at the top of its foreign policy agenda a reinvigoration of America’s alliance relationships. By reaching out to partners in Europe, Asia, and the Middle East, Washington can strengthen its position on the world stage. At the same time, it is important that our partners understand that meeting common challenges requires their commitment to upholding an open international order. Shared values and interests require a sharing of burdens. American allies in Europe and Asia can do more to maintain an enduring peace based on shared values and strength.

Another take-away is the importance of harnessing science and technology, developing new strategic concepts, to offset the military capabilities of adversaries. Whether Americans like it or not, the United States must increase spending on defense if we intend to stay ahead of adversaries who want to create a new global order based on a different set of rules and norms. Budget projections offered up by the outgoing Obama administration that called for defense spending to fall into the range of two percent of gross domestic product would recreate the conditions of the late 1930s. No one should want a return to that grisly era. Those projected trends must be reversed. Higher defense spending, along with revitalizing coalition partnerships, is a strategic requirement to preserve the peace. Increasing the end strength of the American armed services, recapitalizing the force and rebuilding the nuclear deterrent are needed to underwrite a global strategy.  American military weakness opens windows of opportunity for aggression by states and movements that seek to use violence to achieve expansionist aims. By taking heed of this cautionary tale of seventy-five year ago, the American people can act to avoid a replay of those dangerous times.

The views expressed in this article are those of the author alone.

This essay draws on Maurer’s lecture on Churchill, Roosevelt, Stalin and the Origins of the Grand Alliance, delivered as part of the Stanley and Arlene Ginsburg Family Lectures, October 2016. The video can be found here.

About the author:
*Professor John H. Maurer
is a Senior Fellow of the Foreign Policy Research Institute’s Program on National Security, sits on the Board of Editors for FPRI’s journal, Orbis, and serves as the Alfred Thayer Mahan Professor of Grand Strategy in the Strategy and Policy Department at the Naval War College in Newport, Rhode Island.

Source:
This article was published by FPRI

Is India Prepared To Deal With Hybrid War? – Analysis

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By Brig Anil Gupta (Retd)*

Samba, Gurdaspur, Pathankot, Pampore, Uri, Macchail, about 200 ceasefire violations targeting civilians and now Nagrota — the list is endless and increasing. After every incident, strong statements are made, Pakistan is blamed, provocative debates are held on TV channels, an inquiry is ordered — gradually it fades away from the nation’s memory and things return to square one till we are awakened by another rude shock.

Pakistan remains in the denial mode as usual and indulges in mutual blame game till conclusive evidence is produced of its involvement and even then it has the audacity to continue to harp about home-grown militancy.

In fact, ever since 1947, Pakistan has never ever admitted initially to its involvement in tribal raids in J&K, 1965, 1971, Khalistan movement, Kashmir, Kandhar, Parliament attack, Kargil, and the current unrest in Kashmir. It is part of its strategy.

There is no denying the fact that Pakistan has been using hybrid threats against India since Independence. With the emergence of technology, the threats have become more deadly and potent and have been given a new name of “Hybrid War”.

Hybrid War can best be described as a combination of conventional and sub-conventional threats and can be unleashed both by the state and non-state actors.

China, another adversary of India’s, is also a big proponent of this type of warfare in the 21st century and terms it as “Unrestricted Warfare.”

This type of warfare is characterised by undefined battle space and extends to the flanks and rear as well. In other words, there is no front or rear in the hybrid warfare battlefield and it can manifest anywhere on the borders or deep inside the hinterland.

The tools of hybrid war, or the hybrid threats, include conventional warfare, irregular warfare, economic warfare, cyber warfare, subversion, criminal acts, Special Ops, information warfare or propaganda and violence. In hybrid war, conflicts are as much political as military.

Pakistan continues to use terrorism as an instrument of state policy. A section of Indian elite is also a tool of Pakistan’s hybrid warfare against India. Through its intelligence agencies and Track 2 diplomacy, Pakistan has successfully cultivated a section among India’s political and social elite that is not only pro-Pakistan but also questions the Indian Parliamentary resolution of 1994 claiming the entire state of J&K as an integral part of India.

The Nagrota attack bears the trade mark signature of General Raheel Sharif who was relinquishing office that day. During his tenure as Chief of the Pakistan Army, he ensured that any possible attempt at holding talks with India were nipped in the bud through sensational terror acts using the apparatus of the Deep State.

In the instant case, Raheel Sharif killed two birds with one stone. He not only negated the offer of talks during the proposed visit of Foreign Affairs Advisor Sartaj Aziz for the Heart of Asia Conference at Amritsar but also somewhat restored his military reputation that had been dented badly after the Indian surgical strikes in September.

In fact, the expected response from Pakistan after the surgical strikes was increase in terror activities. We should have been prepared to meet this threat from our adversary.

The stark reality is that we, as a nation, are not prepared to meet the challenges posed by the hybrid threats from our adversaries. Fidayeen attacks and mass casualty terror acts like in Mumbai in 1993, 2006 and 2008 are the manifestations of hybrid war unleashed by Pakistan.

We should have woken up in 1993 and minimised, if not totally eliminated, such threats in our heartland. Alas, we didn’t and had to suffer the ignominy of 10 more such attacks in different parts of the country till we were shocked by the 26/11 attacks in Mumbai in 2008.

Sadly, we are a nation of rhetoric. Lot of noises were made after 26/11 but even today, after 8 years have elapsed, can we put our hands on our chest and say that we are fully prepared to meet such threats. If we were, incidents like Gurdaspur, Samba, Pathankot, Pampore and Nagrota would not have happened.

After the 9/11 attack, the US revamped its entire security and intelligence apparatus to ensure the safety of its citizens and went whole hog to eliminate the terror threat from its soil. It raised the Department of Homeland Security with complete mandate and wherewithal to ensure that such threat could not manifest in future and Americans could live peacefully.

The result is there for all to see. Despite several attempts, the terrorists have found it virtually impossible to penetrate the American homeland security system.
This is how strong nations respond to the challenges of hybrid threats which manifest in the worst form of terrorism.

Regrettably, India has barely addressed the problem post-26/11 and not taken much action to ensure the safety of her citizens from these threats.

Since hybrid threats can manifest anywhere and everywhere, security becomes the responsibility of the entire society and not only that of the security forces or the government.

Security is not merely a thought process but a concept and a lifestyle which has to be understood and implemented by all citizens to make our nation secure. It can no more be treated as a routine activity.

We need to develop a ‘security culture’. Every citizen needs to imbibe security protocol. We have to get used to discomforts and inconveniences that may be caused due to implementation of security procedures.

Even those serving in various security agencies, including police, need to understand its importance and not treat it as a mere job to earn a livelihood.

A cursory look at the security personnel deployed at crowded places like bus stands, railway stations, malls, market places, religious shrines and so on will certainly raise a question in your mind if they are properly equipped, trained, geared and motivated to handle any kind of terror threat? The answer is obvious.

That is why terrorists move freely on our highways and travel distances to strike at will wherever they choose to. If that was not so, how did the terrorists reach Nagrota — it is neither located on the Line of Control nor close to the International Border.

We have a plethora of agencies but they lack coordination and cooperation. Turf wars are more important to us than national security and the lives of our citizens.

To counter the challenges of hybrid threats, we need a national response. First and foremost, without wasting any more time, we need a dedicated ministry to look after our internal security. The present MHA is too big and unwieldy to address the issue and don the desired role.

We need to invest heavily in our intelligence and surveillance capabilities. They are nowhere near the optimum level. Coordination and cooperation among the plethora of agencies should form the mandate of the proposed dedicated ministry.

We also need to invest heavily in state police capability-building. From a “Danda Force”, they need to be upgraded to a force capable of acting as a first line of defence against internal threats.

Our airports, coastal areas and highways need to be made impregnable. We also need to change the habit of working in watertight compartments. A greater amount of interaction and consultation between various organs of the state responsible for national security is required. Fortunately, we are no more saddled with highly risk-averse political leadership.

Our information warfare and counter propaganda capabilities need a quantum leap so that they can penetrate deep into Pakistan to exploit the obvious fault lines in that country. At a time when we are moving rapidly towards e-governance, digital world and cashless economy, our cyber warfare capabilities need a thorough re-look and enhancement.

Last, but not the least, we should be militarily prepared for punitive and pre-emptive operations against the terrorists and their sponsors and such operations should form part of our doctrine to combat Hybrid War.

Special Forces form an important component of this doctrine and we need to focus on their capacity and capability building as well as training.

Let us all vow not only to avenge Nagrota but also ensure that it is the last such incident and no more — not through words but dedicated actions. Funds should not be a constraint because national security is paramount to create an environment of peace and development.

*Brig Anil Gupta (Retd) is a Jammu-based political commentator, columnist, security and strategic analyst. Comments and suggestions on this article can be sent to editor@spsindia.in


Can Europe Resist The Trump Tide? – OpEd

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By John Feffer*

Norbert Hofer is a nasty piece of work.

On the surface, he seems like a bland, soft-spoken, conventionally handsome Central European engineer-turned-politician who emphasizes the conventional conservative values of family and nation. But during the recent prolonged Austrian presidential election — first round in May, second round last Sunday — the candidate of the Freedom Party was in fact a walking, talking dog whistle.

Behind the smiling façade, Hofer is a gun-toting, anti-immigrant, far-right-wing nationalist who once declared that “Islam has no place in Austria.” He dresses up his racism in the language of “identity” (beware white people who talk about identity — they really mean supremacy). He likes to wear a blue cornflower in his lapel, which he points out, quite correctly, is the color of his Freedom Party. It also happens to be the flower that secret Nazis used to wear to signal their beliefs to confederates. No surprise that the first leader of the Freedom Party back in the 1950s was a former Nazi and member of the SS.

Of course, this is not the Freedom Party of the Cold War era. Hofer has steered it in a pro-Israel, pro-Russia direction. After all, Benjamin Netanyahu and Vladimir Putin are the new one-two punch of a right-wing Judeo-Christian tradition that targets its third monotheistic cousin. In this way, Hofer is following the script of Donald Trump, who counts on the support of these two democratically elected autocrats in his multi-front assault on Muslims.

In the end, neither his soft-pedaled Nazism nor his hard-core illiberalism helped put Norbert Hofer over the top. He lost Sunday’s election by more than 300,000 votes.

As an also-ran, Hofer joins a long list of far-right-wing nut jobs who have come perilously close to leading European countries over the last few decades. Anti-Semite Jean Marie Le Pen forced a run-off in the French presidential election in 2002, but a concerted effort by everyone to the left of Genghis Khan produced a huge margin of victory for conservative Jacques Chirac. In the Balkans, far-right-wing candidate Corneliu Vadim Tudor of the Greater Romania Party came in second in Romania’s 2000 presidential elections, while far-right candidate Volen Siderov of the Attack party came in second in Bulgaria’s presidential elections in 2006. In Denmark, the People’s Party grabbed the second spot in the 2015 parliamentary elections.

“Whew!” said Europe. “Dodged those bullets!”

Indeed, many Europeans dearly hope that the victory of Green Party leader Alexander Van der Bellen in Austria’s presidential election proves that Donald Trump’s influence does not extend beyond the territorial waters of the United States. Sure, Britons supported Brexit — but that was by the slimmest of margins, and many of those “leave” voters had serious second thoughts the morning after. Up until recently the National Front’s Marine Le Pen was leading polls for the upcoming French elections in March. But the entrance of archconservative Francois Fillon into the race makes a replay of 2002’s trouncing of Le Pen the Elder much more likely.

On the other hand, Italians went to the polls, also on Sunday, and rejected the referendum sponsored by current Prime Minister Matteo Renzi. Voters turned against the measure for many reasons, but they were certainly signaling their displeasure with the political elite, and its economic policies. The clear winner in Italy on Sunday: the populist party of Beppe Grillo.

It’s not just Italy heading in a populist, Euroskeptic direction. As I explained a couple weeks ago, populists anticipated the Trump era by taking over in Poland, Hungary, and Slovakia, incorporating into their agenda many of the demands of parties further to their right.

In other words, Europe has dodged a few bullets, but it’s practically a fusillade out there.

So, what’s it going to be, Europe? Are you going to follow the example of Austrian voters and establish yourself as a counterweight to Trump’s America? Or are you going to follow the example of Italian voters and be swept away by the Trump tide? With so much of the world coalescing around some fusion of capitalism and authoritarianism — in Russia, China, Turkey and Central Asia, most of the Middle East, much of Africa, and parts of the Far East and Latin America — much depends on Europe.

Europe as Counterweight?

During the George W. Bush administration, “old Europe” looked with horror at U.S. actions in Iraq and elsewhere. Both France and Germany refused to go along with the invasion of Iraq and fiercely opposed other practices of the Bush team, like extraordinary rendition and torture.

Not all of Europe was so oppositional. The UK, under the self-aggrandizing Tony Blair, eagerly auditioned for the part of Washington’s lapdog. Poland, under the former Communists no less, hosted one of the CIA’s “black prisons.” And great moral voices, like Vaclav Havel, also backed the Bush administration, under the mistaken impression that Washington was engaged in a battle on behalf of human rights and Western civilization.

A similar division is emerging in Europe today. Germany and, at least for the time being, France are looking at Donald Trump and his foreign policy team with shock and bewilderment. Before the election, French President Francois Hollande said that Trump’s “excesses make you want to retch” and indirectly recommended that American voters to support Hillary Clinton. Since the election, Hollande has focused on urging Trump not to scupper the Paris climate deal, something the president-elect promised to do during the election.

But France may not serve as a counterweight to Trump for very long. Francois Fillon, the current presidential frontrunner, is only slightly closer to the center than Marine Le Pen. Like Norbert Hofer, he wants to wage a civilizational war against Islam, team up with Russia in this cause, reduce immigration, attack multiculturalism, and generally put France first.

That leaves Angela Merkel and Germany. Merkel is perhaps an unlikely figure to stand up to the likes of Donald Trump. She is the leader of the conservative Christian Democratic party. She’s no liberal, much less a progressive. She’s never been comfortable with multiculturalism and recently backed a burqa ban. But she also welcomed a million refugees into Germany and has forcefully defended Ukraine against the predations of Russia. Moreover, she’s reinforced Germany’s position as the anchor of the European Union, an institution that Trump dismisses out of hand.

Still, Christian Democrats in Germany are probably more to the left than many Democrats are in America. They’re certainly more committed to a social welfare state. And they take universal norms seriously. After the November election, Merkel was careful to remind the United States that the alliance is based on a set of values — “democracy, freedom, as well as respect for the rule of law and the dignity of each and every person regardless of their origin, skin color, creed, gender, sexual orientation, or political views” — and not just geopolitical convenience. Germany’s Deputy Chancellor Sigmar Gabriel, a Social Democrat, was considerably more emphatic:

Trump is the trailblazer of a new authoritarian and chauvinist international movement. … They want a rollback to the bad old times in which women belonged by the stove or in bed, gays in jail, and unions at best at the side table. And he who doesn’t keep his mouth shut gets publicly bashed.

Both major parties, meanwhile, have been hearing approaching footsteps on the right. The Alternative fur Deutschland (AfD), the latest Islamophobic political force to emerge in Germany, won over 14 percent of the votes in local elections in September in otherwise liberal Berlin. Like Norbert Hofer, the leader of the AfD is a scientist: chemist Frauke Petry. Under her equally soft-spoken and similarly xenophobic leadership, the AfD is pushing hard on the immigration issue, backing a new Integration Law that gives the state more power in determining the fate of refugees once they’re in Germany. Kerstin Koditz of the German left party Die Linke thinks it’s a terrible law:

Migrants are deprived of all self-evident fundamental rights, such as the free choice of residence. The law provides them with jobs but pays them only eighty cents an hour. That’s not even a tenth of the minimum wage. Second-class citizens are being created — a poor prerequisite for integration.

Don’t write off the European left quite yet. Hollande is out of the presidential race in France, so perhaps someone else from the Socialist Party can pull off an upset. The Social Democrats were actually the first-place winners in Germany’s local elections in September and they could conceivably cobble together a ruling coalition after the 2017 federal elections. Labor could take advantage of David Cameron’s miscues in the UK and retake power in the next elections (which have to take place before May 2020). The left is in charge in Greece and Sweden.

The EU could rebound from the Brexit vote and find new purpose in a fragmenting world. Or…

Things Fall Apart?

Donald Trump is a divisive figure for all the usual reasons — his sexism, racism, xenophobia. But he also represents a larger, older project of division: the movement to unravel federal power, as I argue in a recent TomDispatch essay. In the United States, this anti-federalism can be found among those who don’t want to pay taxes, maintain public schools, protect federal lands from ranchers, fund abortion clinics, sustain national health care, and so on.

In Europe, this anti-federalism appears as Euroskepticism. The same animus directed toward Washington elites translates across the Atlantic into hostility toward the bureaucracy in Brussels. The Trump tide can be measured in the growing popularity of populist figures like Norbert Hofer, Marine Le Pen, and Frauke Petry, as well as the greater tendency of mainstream politicians like Francois Fillon to draw from the same cesspool of ideas.

But the real test of the Trump tide will be the durability of the EU itself. Can the levees that visionary European leaders built over the course of decades keep out the polluted floodwaters?

On the one hand, the European Union seems solid enough. In 2013, with the accession of Croatia, it expanded to 28 members. Even with only modest growth — of less than 1 percent since the financial crisis of 2008-9 — the combined economic power of the EU ($19.1 trillion) remained ahead of the United States ($17.9 trillion) and just behind China ($19.5 trillion) in 2015. Despite some new walls in Eastern Europe to keep out refugees, the EU still meets former British Foreign Secretary Ernest Bevin’s definition of European integration as being able “to take a ticket at Victoria Station and go anywhere I damn well please.”

But the EU requires a certain leap of faith. When its members no longer believe in it — no longer trust that it will remain an advantageous alliance of interests — then its bonds begin to loosen. The first step in that process may well be the Brexit vote earlier this year. Or perhaps that will serve as a wake-up call, a reminder of how unusual and precious transnational cooperation can be — whatever one might think of the EU’s actual policies. According to recently polling in several major member states, support for the EU has edged upward since the Brexit vote.

Donald Trump’s presidential victory may well be an even stronger inoculation than the Brexit vote against the virus of right-wing populism and anti-federalist mania. Tides come in, often with tremendous destructive energy. But tides also go out. It’s still not clear what direction the Trump tide is heading.

*John Feffer is the director of Foreign Policy In Focus.

The Question Of The Electoral College – OpEd

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By Mitchell Blatt*

Since Donald Trump won a majority of electors on election day while losing the popular vote by over 2.5 million, there has been a movement afoot by a small number of electors, activists, and intellectuals to try to block Trump at the Electoral College.

A group of eight Democratic electors has gotten together to try to persuade other Democrats to support a rational Republican, a Republican elector resigned rather than vote for Trump, and on December 5, the first Republican elector who pledged to vote against Trump came public in a New York Times op-ed.

The argument that the “Hamilton Electors” and a number of intellectuals and lawyers have made in op-ed pages is that the Electoral College was conceived as a check on the passions of the public were they to elect a demagogue or someone totally unqualified.

A few examples:
The electoral college should be unfaithful – Kathleen Parker
The Constitution lets the electoral college choose the winner. They should choose Clinton. – Lawrence Lessig
8 New Reasons The Electoral College Shouldn’t Vote For Trump – David Halperin

As Parker said in her column yesterday:

The Founding Fathers didn’t fully trust democracy, fearing mob rule, and so created a republic. They correctly worried that a pure democracy could result in the election of a demagogue (ahem), or a charismatic autocrat (ahem), or someone under foreign influence (ditto), hence the rule that a president must have been born in the United States. We know how seriously Trump takes the latter.

Most important among the founders’ criteria for a president was that he (or now she) be qualified. Thus, the electoral college was created as a braking system that would, if necessary, save the country from an individual such as, frankly, Trump.

Where have readers heard this argument before?

The founders of the United States had these questions about democracy in mind when they wrote the Constitution. They knew that many voters were uninformed, so they put in systems to deal with that, like the election of the president by the Electoral College and the election of Senators by state legislatures. Progressives and populists have steadily taken away those safeguards for reasons that were lauded as pro-democratic.

The Seventeenth Amendment, passed in 1912, turned Senate elections to popular vote. Steadily laws have been passed in many states binding Electoral College electors to the results of a state’s president elections, and in most other states, the culture surrounding voting is such that there could be mass unrest if a state’s electors voted for someone other than the person who won their state’s election.

In my article on October 30, considering the problems democracies are facing around the world, I returned to the one of the original reasons why the Electoral College was conceived. Is now the time to use the Electoral College as originally intended? Trump’s unsuitability for office is clear.

To give but a few examples, from B+D’s January piece laying out the case:

Here we have a candidate who threatens to sue newspapers for reporting on his bankruptcies, who said he would “certainly” create a government database of Muslims in America, who incited his fans to physically assault a non-violent protester and said that they were right to do so, defended Putin from charges that he kills political opponents by equivocating the United States with Russia (“Our country does plenty of killing, too”), and his personal account tweets racist messages about “white genocide”. This is all fact. He has done it all. No amount of politically correct denials from Team Trump can change the reality.

Now that he has assumed the role of president even before having taken office, let alone having been officially elected, observers can see Trump continuing to put such demagogic behaviors into practice. He coerced Carrier to keep some jobs in America and threatened other companies with “retribution” if they don’t. In January he threatened newspapers that reported critically on him; yesterday he threatened to break contract with Boeing apparently over a slightly critical comment Boeing’s CEO made about trade. His attacks on specific businesses are the stuff of demagogues.

His foreign policy appears at times to be ill-thought-out, and he is surrounding himself with off-the-rails advisors like Michael Flynn, who espouses conspiracy theories, fear of Muslims, and reportedly had a predetermined notion that Iran was responsible for the #Benghazi attack. Michael Flynn, as national security advisor, is the kind of guy who could pull the U.S. into a war with Iran on the basis of no intelligence.

Trump’s continued ownership of a business empire in the U.S. and around the world puts him in violation of the Constitution’s Emoluments Clause, not to mention the fact that it would create clear conflicts of interest and opportunities for corruption even if all his businesses were only in the U.S. and even if his children were in charge. As someone who uses his own foundation to enrich himself, admitting as much in a post-election IRS filing, there’s no reason to believe he wouldn’t try to use the presidency to enrich himself. Indeed, he has already had met with Indian business partners, urged Scotland to prevent the development of wind turbines near his golf course, and invited the executive vice president of his company, Ivanka Trump, who is working on a deal with a Japanese government-linked clothing company, to sit in on a meeting with the Japanese Prime Minister. By electing Trump, the Electoral College would effectively be voting for someone who can’t uphold his oath of office.

So there are good reasons from a constitutional standpoint for the Electoral College to not elect Trump. The question is whether that could or would actually happen. It is hard to conceive Republican electors voting for a Democrat as hated as Clinton. The renegade Democratic electors have talked about convincing enough Republicans to vote for a Republican other than Trump to keep Trump under 270 so that the election is thrown to the House of Representatives, but that unlikely scenario would probably just have the outcome of delaying Trump’s election by the House. If the Democrats could actually vote to a person for a different Republican, then they would only need to get 37 Republicans to vote with them in order to elect him. So it’s unlikely.

The threat of violence shouldn’t be used as a reason to refrain from engaging in legitimate democratic actions, but the reality that Trump voters would be extremely angry and likely to cause unrest is certain to cross the minds of even some electors who are sympathetic to the arguments to block Trump.

What the Electoral College movement is doing most of all, even in its failure, is to start a conversation. The Hamilton Electors had to have known it would almost certainly fail, but if they didn’t raise the topic, the country wouldn’t be thinking about what the Electoral College means and whether it serves our purposes. This, combined with various movements towards a popular vote system, could eventually cause reforms in the long term.

If the Electoral College electors aren’t empowered to select a qualified candidate, then what is the point of an Electoral College, after all? The only argument one is left with is that a president should have to win support from a regional coalition. California shouldn’t “decide” our election (just like residents of Chicago, by virtue of its population, “decide” the governor of Illinois, or Taipei “decides” Taiwan’s president), conservatives (who benefit from the system) argue. “Ditching Electoral College would allow California to impose imperial rule on a colonial America,” the Washington Examiner headlined a piece by Michael Barone. What we’re left with is that the residents of a group of underpopulated states out west have a disproportionate impact in “imposing imperial rule on a colonial America.”

About the author:
*Mitchell Blatt moved to China in 2012, and since then he has traveled and written about politics and culture throughout Asia. A writer and journalist, based in China, he is the lead author of Panda Guides Hong Kong guidebook and a contributor to outlets including The Federalist, China.org.cn, The Daily Caller, and Vagabond Journey. Fluent in Chinese, he has lived and traveled in Asia for three years, blogging about his travels at ChinaTravelWriter.com. You can follow him on Twitter at @MitchBlatt.

Constitution Amendment In Nepal: An Unlikely Proposition – Analysis

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By S. Binodkumar Singh*

On November 29, the Communist Party of Nepal (Maoist-Centre) [CPN-Maoist-Centre]-led government in Kathmandu got registered a seven-point Constitution Amendment Bill at the Parliament Secretariat, seeking to amend the Constitution — adopted in a historical step on September 20, 2015 – and thereby address the concerns of Madhes-based parties.

The amendment bill proposes to have only six districts — Nawalparasi, Rupandehi, Kapilbastu, Dang, Banke and Bardiya — in Province 5, excluding the six hill districts of Palpa, Arghakhanchi, Gulmi, Rukum, Rolpa and Pyuthan, and adding them to Province 4.

The bill also seeks to amend the constitutional provisions pertaining to citizenship, provincial border, and proportional representation, among others.

In fact, the government had prepared the amendment bill in order to address the demands put forth by the agitating Madhesi parties as the alliance of Madhesi parties had served an ultimatum — ending November 28 — to bring an amendment proposal.

However, on November 30, the Federal Socialist Forum-Nepal (FSF-N), a key constituent of the United Democratic Madhesi Front (UDMF) and Federal Alliance, declared in a press statement: “The proposed Constitution Amendment Bill registered in Parliament has not addressed any demands raised by the UDMF and Federal Alliance. We will not accept this Bill as it has been brought despite our disagreement. Our protest will continue against racial discrimination and caste-based rule.”

Thus, on December 1, UDMF and Federal Alliance leaders, in a meeting with Prime Minister Pushpa Kamal Dahal, rejected his request to accept the Bill and participate in local polls. Disturbingly, on December 4, the leaders of the UDMF warned that Madhes will secede from Nepal if discrimination against Madhesi people continues.

Moreover, the government’s move also came amidst strong objections from the main opposition party, the Communist Party of Nepal (Unified Marxists-Leninists) [CPN-UML]. In particular, the party objected to the proposal to change boundaries of Provinces No.4 and No.5.

After the government got registered the amendment proposal, the CPN-UML summoned a Parliamentary Party (PP) meeting on November 30 and decided to use all its energies to thwart the proposed amendments to the new Constitution, terming these as “an attempt to undermine the sovereign existence of the country”.

Significantly, on December 1, the CPN-UML obstructed parliamentary proceedings, terming the Constitution Amendment Bill anti-national. For the second consecutive day, on December 2, opposition parties, including CPN-UML, Nepal Workers and Peasants Party (NWPP) and Rastriya Janamorcha, obstructed the House proceedings.

The opposition parties obstructed the meeting of Parliament for the third consecutive time on December 4, demanding withdrawal of the Constitution Amendment Bill. Following the obstruction, the meeting was deferred till 1 p.m. on December 7.

Also, as expected, the local populations in both the affected Hill and Terai Districts started staging protests, demanding that Province 5 be left unchanged. On November 30, protests soared in the different districts of Province 5.

In Butwal, students from the Lumbini Commerce Campus and Butwal Multiple Campus, among others, enforced a transport strike against the amendment bill. In Pyuthan, locals enforced a general strike against the Bill and also demonstrated at major thoroughfares in the district headquarters by holding protest assemblies and burning tyres.

Normal life in Arghakhanchi was also affected due to the indefinite district-wide general strike called by various organisations based in the district. In Gulmi, an indefinite strike was announced at an assembly of political parties, civil society and journalists, among others, organised by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Gulmi. In Palpa, political parties decided to continue protests until the government addressed the demand to not split the province.

On December 1, protests intensified across the hilly region.

More surprisingly, district-based political parties, both from the ruling and opposition sides, lambasted the Constitution amendment proposal.

On December 1, in Rolpa, party cadres and leaders of ruling-alliance partner Nepali Congress (NC) openly came out against the decision despite the party being in government. NC lawmaker from Rolpa Amar Singh Pun, leading the protests, stated: “For me, the people of Rolpa are greater than the party and I cannot stand against them. Here, people are not happy at all to be merged with other provinces. Pyuthan and Rolpa cannot stay under Province 4 as decided now. We want it in Province 5, as decided earlier.”

Similarly, Bishnu Muskan, NC District Chairman of Arghakhanchi, observed: “There’s overwhelming protest against the decision. How can the Government apply for it? People are not ready for it.”

Further, defying party lines, on December 3, senior ruling party leaders, NC Central Working Committee member Chandra Bhandari and Deputy Parliamentary Party leader Top Bahadur Rayamajhi of CPN (Maoist-Centre), joined the main opposition CPN-UML in demonstrations in Butwal. Going against their party line, leaders of ruling NC and CPN (Maoist-Centre) also appealed to their supporters to participate in the protests until the government withdraws the amendment bill.

“The people are always above parties. That’s why I am here respecting the people’s will,” CPN-Maoist Centre leader Rayamajhi declared, adding that any political party without public support becomes irrelevant. Similarly, NC leader Bhandari noted: “The seven-province federal model was finalised after years of discussions… so, we cannot make changes to the federal demarcations at the behest of others. If anyone is not happy with federalism, let’s go for a referendum.”

Separately, on November 30, the Nepal Magar Association Central Committee and Joint Magar Manch – Nepal, at a press conference held at the Reporters’ Club Nepal in Kathmandu, demanded the formation of an autonomous province by integrating the Magar land in Provinces 4 and 5, when the government undertakes constitutional amendment to resolve the dispute dogging the provincial boundaries. They also demanded guaranteeing inclusiveness based on proportional representation of the ethnic population in Parliament. The Magar community makes up 7.12 per cent of the total population of Nepal.

Meanwhile, on December 1, some 27 NC lawmakers representing the Terai-Madhes region criticised the CPN-UML for describing the Bill as an act of treason. The lawmakers observed: “It feels like UML is heading to make the issue more complex by obstructing Parliament and taking to the streets. These activities have sent out a message that the party is against elections.”

Expressing his confidence that the Constitution Amendment Bill registered in Parliament would be endorsed by a majority, NC President Sher Bahaur Deuba, stated, on December 2: “Not only will the UDMF but also the CPN-UML will vote in favour of the Constitution Amendment Bill. UDMF and CPN-UML will also vote in favour of the proposed Bill as the amendment has been brought after consultation with all the political parties.”

He further said that the government got registered the Constitution Amendment Bill after the main opposition CPN-UML had consented, and after Madhesi and ethnic communities reiterated their demands for the amendment.

With locals in various mid-western districts stepping up protests against the Constitution Amendment Bill, the ruling NC and CPN (Maoist-Centre) are in a “wait and see” mode, before taking any decision on the future course of action.

Leaders close to the top leaderships of NC and CPN (Maoist- Centre) have now shelved their original plan to announce the date for local-level elections, as the agitating UDMF, for whose sake the amendment proposal was introduced, has also refused to own it.

Moreover, the growing public grievance over the Bill might spur clashes. The Ministry of Home Affairs, on December 3, , circulated special instructions to the security agencies — Nepal Police, Armed Police Force (APF) and National Intelligence Department (NID) — to remain alert about a possible repetition of the Tikapur incident of 2015.

On August 24, 2015, eight people — seven policemen and a two-year-old boy – were killed when demonstrators protesting against proposals for administrative reform clashed with the Police at Tikapur in Kailali district. Scores of others were injured in the incident. The Home Ministry has also instructed the security agencies to avoid excessive use of force to control mobs.

No doubt, the Constitution Amendment Bill requires at least a two-thirds majority vote in Parliament for endorsement. As the main opposition CPN-UML has objected to the amendment and the agitating UDMF remains non-committal towards it, it is uncertain whether the bill would secure passage in Parliament.

With anti-amendment protests spreading across the country, it is going to be very tough for the government to get the amendment bill endorsed by Parliament without the support of the CPN-UML. The government will need the support of all the other parties in Parliament if the CPN-UML decides to vote against it — an unlikely proposition.

*S. Binodkumar Singh is a Research Associate at the New Delhi-based Institute for Conflict Management. Comments and suggestions on this article can be sent to editor@spsindia.in

Africa Must Ditch Neoliberal Policies To Improve Rice Sustainability – OpEd

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“The increasing role of rice in the food basket of [Sub-Saharan African] consumers has made rice a political crop whose price and accessibility directly influence social stability.” — Noted in Papa A. Seck, Rising trends and variability of rice prices: Threats and opportunities for sub-Saharan Africa (2010), 404.

Nearly 40 percent of Africa’s rice consumption is sustained by imports as a result of neoliberal Structural Adjustment Programs (SAPs) that have been instituted since the 1980s. Policies that promote domestic rice production should be pursued instead because reversing reliance on foreign imports is imperative to agricultural self-sufficiency within the continent.

The current issue with neoliberal policies is that they force Sub-Saharan Africa to conform to Western economic values rather than fulfilling its own interests. The intention of SAPs was to promote long term economic growth in poor countries by providing loans through the World Bank or International Monetary Fund. However, critics have often associated these loans with blackmail as each is tied to a specific set of constraining neoliberal requirements that the recipient is compelled to meet.

The demands from SAPs have firstly pressured African countries to decrease agricultural subsidies at the expense of smallholder rice farmers. In the Gambia, this resulted in a four-fold increase in the price of fertilizer and a subsequent 40 percent drop in domestic rice production as rural incomes could not keep up with rising farming costs. Ironically, while Western institutions pressured Africa to cut subsidies, agriculture continues to be massively subsidized in the US and in Asia.

Local rice farmers have also suffered because SAPs influence Sub-Saharan governments to decrease trade barriers; as a result, foreign imports have flooded the local rice markets in Africa. Smallholders are no longer able to compete with the cheaper imported rice in their own countries. Essentially, agricultural neoliberal policies have encouraged Sub-Saharan nations to marginalize smallholders, once “the backbone of African agriculture,” as a secondary concern.

In addition to the destruction of domestic farming, a greater risk is posed for African rice consumers as a whole. Since Africa has increased its dependence on rice imports to fulfill the demands of growing urban populations, its inhabitants have become alarmingly vulnerable to the ebb and flow of global food prices. When the price of rice shot up by 74 percent in 2008, African households were devastated. Loss of food security translated to a series of destructive food riots in urban areas. Promoting local self-sufficiency as a main food policy goal, therefore, is imperative to maintaining social stability and protecting citizens from both hunger and violence.

Three main policy changes are needed to improve smallholder farming and restore self-sufficiency in Africa:

  • Increasing the production and competitiveness of domestic farmers through public investment in rural development: specific aims include improving seed distribution and access to agricultural inputs, facilitating irrigation to support more farmland, and promoting other crops that are better adapted to local environments as substitute options for struggling rice farmers.
  • Reversing urban-bias in food policy: Consumers are willing to pay more for local rice on the condition that its quality matches or exceeds that of imported rice, so investment in post-harvest rice quality is the first step in shifting urban consumer demand away from foreign rice imports.
  • Improving local rice access and quality: first, advancing road and transport infrastructure would facilitate interregional commerce and subsequently provide consumers access to a larger variety of food sources. Second, establishing food for work and food transfer programs and improving methods of crop storage would increase food availability for the most at risk during emergency periods of low harvest (such as drought).

Without breaking free of neoliberal Structural Adjustment Programs, Sub-Saharan Africa cannot accomplish its goals of agricultural self-sufficiency. Instead, it will continue its trajectory of high risk, low reward growth. Smallholder farming will be further repressed, African countries will increase its import reliance, and urban inhabitants will be even more vulnerable to international market shocks. Evidence has shown very minimal economic growth, but high instability as a result of SAPs and other neoliberal policies. Therefore, Africa must put agricultural self-sufficiency at the centerpiece of its policies before opening up to the international market, but it needs the support of international institutions through reformed agricultural policies.

* William Li studies agricultural policy in developing countries as an undergraduate at the University of Pennsylvania.

Astronaut John Glenn Dies At 95

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Former NASA astronaut and Democratic US Senator from Ohio , John Glenn, has passed away at the age of 95. He died at the Ohio State University Wexner Medical Center in Columbus, Ohio, according to local newspaper the Columbus Dispatch.

On Febuary 20, 1962 Glenn flew the NASA mission Friendship 7, becoming the first American to orbit the Earth.

Thirty-six years later, at age 77, while still a sitting Senator, Glenn became the oldest person to travel into space.

“John Glenn is, and always will be, Ohio’s ultimate hometown hero, and his passing today is an occasion for all of us to grieve,” said Ohio Gov. John R. Kasich. “As we bow our heads and share our grief with his beloved wife, Annie, we must also turn to the skies, to salute his remarkable journeys and his long years of service to our state and nation.”

“Though he soared deep into space and to the heights of Capitol Hill, his heart never strayed from his steadfast Ohio roots. Godspeed, John Glenn!” Kasich said.

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