2 Takes on Why China 'Wins' a Trade War with America

♠ Posted by Emmanuel in , at 12/29/2016 05:21:00 PM
The premise of Donald Trump's China-bashing rhetoric is that the United States still holds all the good [trump?] cards in the global economy. As such, it can pretty much do as it pleases to serve its own interests. Because of lackluster leadership by others, however, the United States has allowed others to take advantage of it time and again. So, Trump proposes to slap tariffs of up to 40-some percent on Chinese made products to level the playing field.

[1] But what if the premise is wrong? Winter Nie of the famed IMD business school not only argues that China holds the better cards--it has more export markets aside from the United States to approach, but American firms that have invested in PRC-based supply chains will be hurt more than the other way around:
A trade war would be problematic, but it would not be a disaster for China, mainly because the U.S. needs China more than vice versa. Twenty years ago, the situation might have been different. China was dramatically underdeveloped, and it wanted access to Western technology and manufacturing techniques. China has most of what it needs now, and what it doesn’t have it can easily obtain from vendors outside the U.S. While the American market looked enticing a few decades ago, it is relatively mature, and today the newer emerging market countries have become much more interesting to Beijing.

Although a good deal of American high tech equipment is manufactured in China, the lion’s share of the profits go to the American companies that designed the equipment. If that were to stop, American companies would be hurt more than Chinese manufacturers.
What's more, market access to 1.4 billion Chinese consumers makes it crucial for American firms to have access to:
The fastest growing markets for the best items China produces, like laptop computers and cell phones, are in developing regions such as India, Latin America, and Africa. In contrast, China itself is a market that the U.S. can hardly ignore. By the end of 2015, Chinese consumers bought 131 million iPhones. The total sales to U.S. customers during the same period stood at only 110 million. And iPhones are only a small part of U.S. exports. Boeing, which employs 150,000 workers in the U.S., estimates that China will buy some 6,810 airplanes over the next 20 years, and that market alone will be worth more than $1 trillion.

Were Trump to start a trade war, the most immediate effects would probably be felt by companies like Walmart, which import billions of dollars of cheap goods. The prices on almost all of these items would quickly skyrocket beyond the reach of the lower economic brackets—not because of manufacturing costs, but because of the tariffs. The result would be an economic war of attrition that China is infinitely better positioned to win.
CUHK professor James Wang also argues that China wins, largely elaborating on holding out in an economic war of attrition. With a centralized economic apparatus able to tap into state resources, China may be better placed to weather the fallout from a trade war compared to the anarchic US government system and its freewheeling enterprises. The latter's lack of coordination will lead to crying uncle sooner:
China would outlast the U.S. in a trade war, which is a “distinct possibility” next year after President-elect Donald Trump takes office, a commentator wrote in the $1 billion Pine River China Fund’s investor letter.

China’s government would be better placed than the U.S. to marshal state resources to cushion the impact on exporters, wrote James Wang, a City University of Hong Kong professor who pens a monthly commentary for the fund. Privately-owned Chinese exporters would be worse hit than state-controlled peers because they have less political clout in Beijing, he said.

“By design, decision-makers in a democracy face difficulties coordinating a relief effort and must eventually face a political backlash from impacted domestic producers,” Wang wrote. “On this basis, the Chinese may have more runway to play the long game in a trade war.”
It's not so much that China "wins" then, but it loses less. 

Actually, Trump's Been Great for Mexico's Exports (So Far)

♠ Posted by Emmanuel in , at 12/26/2016 02:11:00 PM
Koreans and others are still doing alright in Mexico. Arguably even better in recent months.
Let us first get an update on the state of Mexican exports to the United States--by far its largest export market. Buoyed by automakers setting up shop south of the border to manufacture automobiles and automobile components at significantly lower costs destined for the United States, it's become a key manufacturing hub for this industry. Consequently, Mexico is now the second-largest exporter to the US (China is tops) after overtaking Canada. To an economist, it simply makes common sense. To the isolationist-protectionist, bunker-mentality specialist Trump, it's "stealing American jobs":
Mexico is overtaking Canada as the No. 2 exporter of goods to the U.S. this year, in a sign of how economic ties have deepened between the two countries even as the relationship is being questioned by President-elect Donald Trump.

Shipments from Mexico totaled $245 billion in the first 10 months of the year, according to Commerce Department figures released Tuesday, ahead of Canada’s $230 billion. If the trend continues, it would be the first time ever the U.S. bought more imports from its neighbor to the south. The two countries ended 2015 tied in exports to the U.S.
Now, more on all this Trumpery. All of Trump's over-the-top anti-Mexico rhetoric has sunk its currency, the peso, to very weak levels.  Mexicans' worst fears came to pass with the US presidential elections that sunk the currency even further. All-time lows, in fact. But, guess, what: just before Trump assumes office, Mexico has turned an expected trade deficit into a surplus, with a weak currency contributing quite a lot. In large part, this unexpected turn of events is due to his rabid anti-Mexico rhetoric about building a wall and the United States leaving the North American Free Trade Agreement (NAFTA):
Mexico is overtaking Canada as the No. 2 exporter of goods to the U.S. this year, in a sign of how economic ties have deepened between the two countries even as the relationship is being questioned by President-elect Donald Trump.

Shipments from Mexico totaled $245 billion in the first 10 months of the year, according to Commerce Department figures released Tuesday, ahead of Canada’s $230 billion. If the trend continues, it would be the first time ever the U.S. bought more imports from its neighbor to the south. The two countries ended 2015 tied in exports to the U.S.
Consider the following unexpected scenario: as long as Trump does not do something radical like leave NAFTA (which, unfortunately, appears under the executive's privilege), Mexico may actually be helped by Trump. Unexpected consequences arise all the time. If so, Michael Bloomberg's advice is sound: don't pay attention to Trump's sound and fury but rather his administration's policies:
Ignore Donald Trump’s words and focus on his deeds, Michael Bloomberg has told Mexico, advising the country to use the president-elect’s antitrade rhetoric as a wake-up call to sharpen its economy’s competitiveness.

“My advice for Mexico is to use this as an opportunity to look inward and see what you can improve to make this country more competitive,” the former New York mayor, whom Mr Trump last week asked for advice on a potential cabinet nominee, told the FT during a visit to Mexico. On a call last week the two laughed about barbs they traded during the election campaign.
The world economy is a weird place. Obviously, things are not what quite what they seem on the surface.

Xenophobe Trump Needs Migrants to Hit 3% GDP Growth

♠ Posted by Emmanuel in , at 12/22/2016 02:11:00 PM
To generate growth, the US needs more rather than less people from abroad. The math is simple.
Amidst the barely concealed xenophobia of Trump's presidential campaign, something is becoming more evident the nearer he approaches the Oval Office: His economic promises go against what's been found possible in terms of generating growth relative to employment. To begin, witness another of his "clash of civilizations," "us against them" type remarks after the recent Berlin attacks:
President-elect Donald Trump characterized the gruesome truck attack on a Christmas market in Berlin as part of a systematic campaign by Muslim extremists against Christians, fueling speculation that he views the war on terrorism as a clash of civilizations and not a conflict against extremists. Trump’s late-Monday statement noted that the 12 people killed and 50 wounded were “innocent civilians.” But rather than identifying them as German citizens and tourists, he cast the attack in unusually religious terms.

“ISIS and other Islamist terrorists continually slaughter Christians in their communities and places of worship as part of their global jihad,” Trump said. “These terrorists and their regional and worldwide networks must be eradicated from the face of the earth, a mission we will carry out with all freedom-loving partners.”
I though this commentary from MarketWatch's Rex Nutting particularly useful with regard to accepting more migrants, wherever they may come from. With worker productivity slowing instead of speeding up being the trend of the past few decades, the US economy will need to hire more workers it doesn't currently have to achieve a sustained growth increase. That is, it needs more people--make that a lot more people--from abroad. Suffice to say that the lofty goals Trump sets cannot be achieved lest the United States' labor situation changes fairly significantly in the near future (i.e., over his term):
There are only two ways to get the economy to move faster over a sustained period: Hire more workers, or make the workers we have more productive. Those two factors — working harder and working smarter — determine the economy’s potential growth rate, or its speed limit. Potential growth is the sustainable level of output that the economy can supply, and right now it’s below 2%.

Here’s the economic equation: Potential growth = labor-force growth + productivity growth.
With outsized worker productivity gains being unlikely, then, the only real way is to increase the number of workers to achieve these growth targets. With a diminishing native workforce, the US will need to look abroad for workers:
Unless we can magically get productivity to improve at the fastest rates in the past 50 years, the only way to get to the gross domestic product to grow at 3% on a sustainable basis would be to hire 33 million workers over the next 10 years.

The problem? With the working-age population barely growing, the supply of qualified and willing Americans to hire would quickly run out, which means we’d need to open up the borders and let more immigrants in. In 2020, for instance, the working-age population is expected to grow by about 600,000, according to the Census Bureau. But to grow GDP at 3%, the economy would need 2.8 million more workers that year, even if productivity rebounds modestly, as assumed by the Congressional Budget Office in its projections about potential growth.
Maybe the incoming wall-building, Islam-baiting US president would do well to reconsider his viewpoints. As it stands, his numbers here--like most everywhere else--do not add up.

UPDATE 1: Yes, Q3 growth in the US was just revised upwards to 3.5%, but that hardly qualifies as "sustained" after a number of lackluster quarters. Plus, you have to figure exactly what the unpredictable Trump will do once he gets the keys to the Oval Office.

UPDATE 2: Here's more on how conventional economists see labor productivity growth constraining US growth prospects.

Semi-Detached: The Architectural Roots of Brexit

♠ Posted by Emmanuel in at 12/09/2016 03:05:00 PM
Look closely enough and you might find the roots of Brexit.
I almost forgot to post this interesting architectural analogy made in the Financial Times in the wake of the dreaded Brexit. With all sorts of thoughtful commentary of the "I knew this was going to happen all along" variety made referencing British history, this was the best of the lot. For instance, in 1534, Henry VIII famously renounced the Catholic Church and created the Church of England for the main purpose of facilitating his divorce from Catherine of Aragon. So, the 2016 Brexit was simply another move towards isolation from the continental cousins. This is your British divorce to paraphrase Steely Dan.

Even more intriguing, though, is the idea that Brexit has architectural roots. Instead of being at the center of action at all times, the British supposedly prefer a modicum of isolation from their near-neighbors--while not being entirely too far away. Proximate but not very close, in other words.
England, says historian David Starkey, enjoys a “semi-detached relationship with continental Europe”. The phrase is revealing. First, the reference is to “England”, not “Britain”. Second, the metaphor he uses is architectural. What more English archetype is there than the semi-detached house? That strange hybrid that doesn’t stand on its own — it is inseparable from its neighbour — yet somehow still embodies a dream of suburban independence.

The paradox of the conjoined semi, the Siamese twin of architecture, as a symbol simultaneously of British independence and dependence, perfectly encapsulates the contradictions at the heart of British, and more specifically English, difference. But it is only one. British dreams of domesticity are characterised by peculiarly native typologies: the semi, the bungalow, the Victorian terraced house, the chocolate-box country cottage. Why dream of a cottage when, in your fantasy world, you could just as easily have a villa?
Good question. Again, the point is that reasonably prime accommodations will require compromises among those who are not exceedingly wealthy.  In Britain, this often involves abutting the wall of one's neighbor to save on building expenses as a sacrifice--but not to the extent of regular interaction with him or her. It is a profoundly middle-class ideal. A German sent to investigate the virtues of British architecture relative to that on the continent had this to say:
What Muthesius found was an architecture perfectly suited to the particular conditions of English domestic life. This was something very different to the continental apartments that formed the housing stock of Germany and central and much of northern Europe. On the continent apartments were arranged for effect. Sequences of enfilade rooms, grand chambers and halls overlooked the (often noisy) street while mean service spaces and servants’ quarters backed on to dingy courtyards. Prestige was imparted by scale and location — not convenience. There was little privacy and rows of interconnecting rooms were impractical and inflexible.

In Britain, on the other hand, Muthesius found houses that were tailored to their inhabitants’ needs. Corridors and halls provided separation between rooms and privacy for their occupants (from each other, from servants and from children). Larger rooms accommodated dining and billiard tables, while bedrooms, studies and drawing rooms were intimate and cosy. There was space, but not an excess of it. Location appeared slightly less important to the Brits but the garden — front for separation, back for relaxation — was sacrosanct. The difference lies in what was sacrificed: the British might sacrifice a place within the streets and squares of the city centre for a leafy suburban site, whereas the continentals gave up space and greenery for a prestigious location.
When I am feeling less charitable, I attribute Brexit to racism and xenophobia. However, can it be that there are less sinister reasons for preferring this sort of living arrangement with the rest of Europe--semi-detached? 

I guess there's little point in guessing by now.

No @#$%: China Stats are Admittedly Fictional

♠ Posted by Emmanuel in at 12/08/2016 03:47:00 PM

The incredible macroeconomic figures the PRC has released in recent decades year in and year out without fail beggar belief. Not only are they exceeding those of most other countries for extended periods of time, but they also show amazing regularity. Most of the time, they come out in line with forecasts made by PRC authorities. Now, however, we are seeing some changes behind the curtain. As the Communist leadership aims to produce more meaningful (read: more accurate) readings of its economic performance, the onus is on statistical authorities to fess up about overstated figures:
China’s top statistician has acknowledged the country’s problems with falsification of economic data, pledging severe punishment for perpetrators in a nod to widespread suspicion that official numbers often fail to reflect true economic conditions.

 “Currently, some local statistics are falsified, and fraud and deception happen from time to time, in violation of statistics laws and regulations,” Ning Jizhe, director of the National Bureau of Statistics, wrote in a column for Communist party mouthpiece the People’s Daily on Thursday.
The thing about China is that they incentivized local- and provincial-level officials to overstate their economic performance. Since their criteria for evaluation was on reporting increases in output, they did so whether they truly reflected what was actually occurring. The leadership sets targets, and the officials are forced to fudge the figures if they do not come up to the level expected. The result? Years and years of pure fabrication that statistical bodies are only trying to deal with now:
Critics of Chinese statistics have consistently argued that political interference in statistical compilation is the problem, not the solution. Communist party officials, especially at the local level, are still evaluated largely on their ability to meet or exceed economic growth targets. For many years, the sum of provincial GDP figures has far exceeded the national total [my emphasis]. The party has taken tentative steps in recent years to reduce the role of economic growth targets in evaluating cadres’ performance, but strong incentives remain.
Ultimately, de-linking the apparatchiks' performance appraisals from raw growth statistics should be the goal. In the meantime, I believe that weighing a broader base of indicators--social and environmental ones as per modern practice in other countries--makes sense. Otherwise we will simply have more and more years of remarkable if highly dubious figures

Corporate Racket: Pretend to Leave Trump's USA

♠ Posted by Emmanuel in , at 12/04/2016 03:39:00 PM
Wave this in front of the dimwit Trump and collect lots of government money.
US President-elect Donald Trump's avowed interest in keeping American jobs Stateside--no matter how misguided they may be--are nonetheless a lucrative opportunity for companies if they play their cards right. In the run-up to the dreadful day he actually takes office, there have already been a number of instances that may set the template for what follows. First, he has (wrongly) claimed credit for keeping jobs Stateside that weren't going anywhere, anyway:
President-elect Donald Trump took to Twitter on Thursday night to say Ford Motor Co. executive chairman William Ford Jr. had called to say the company would not move production of the Lincoln MKC from its Louisville Assembly Plant to Mexico.

Ford, however, said it neither planned to close the Louisville, Ky., plant nor reduce jobs there. The company said it had considered moving Lincoln production to Mexico to increase production of the Ford Escape in Louisville. Trump criticized Ford during the campaign for its decision to move small-car production from Michigan to Mexico. Trump suggested he might impose tariffs on Ford cars assembled in Mexico.
You see, the Ford Escape and the Lincoln MKC are ear-identical sister models. Freeing up capacity in the US production facility by moving the assembly of the less-popular Lincoln MKC to Mexico would have created more opportunities at home. However, the not-so-bright Trump takes it that moving any manufacturing out of the US would be a loss. Again, this sort of simplistic zero-sum thinking is what you'd expect of him. 

Even more interesting has been the planned move by American conglomerate United Technologies  to Mexico via its Carrier air-conditioning subsidiary. In order to keep some of the jobs Stateside, the state of Indiana has forked over $7 million in subsidies:
Trump, who campaigned on promises to keep manufacturing jobs from fleeing the country, claimed credit for a deal in which Indiana state officials agreed to give United Technologies Corp $7 million worth of tax breaks to encourage the company to keep around 1,000 jobs at its Carrier unit in Indianapolis instead of hiring in Mexico.

The agreement was less than a complete victory for Trump, as the air conditioner maker will still send an estimated 1,300 jobs there. The deal does nothing to prevent other employers from shipping work out of state and has been criticized by Democrats and Republicans alike who call it corporate welfare.

Sanders, who attacked U.S. trade policy in his race against Hillary Clinton for the Democratic presidential nomination, said Trump's deal with Carrier set a "very dangerous precedent" of having taxpayers subsidize multi-billion dollar corporations to "beg them" to keep jobs in the country.
It strikes me that when life gives American manufacturing a lemon of a leader like Trump, you might as well make lemonade. Any announcement concerning sending jobs abroad will be contested on his Twitter feed. Voila! A recipe for corporate handouts on a national scale has been born:
  • STEP 1: Have existing manufacturing or other operations abroad. 
  • STEP 2: Ensure widespread media attention about an impending move so that Donald Trump or his minions like Mike Pence hear about about it. 
  • STEP 3: Wait for Trump or his team to contact you to arrange for financial compensation so that these jobs are "kept"Stateside.
  • STEP 4: Trump tweets about "keeping jobs in America" to impress the stupid while you're laughing all the way to the bank since you probably didn't intend to send jobs abroad anyway.
Trump is a joke, and most of the rest of the decent world probably agrees he's a pretty sick one as well. But hey, I guess American manufacturing firms are better off pretending that you're shipping a bazillion jobs abroad if Trump is willing to call their bluff by paying them so handsomely. 

And no, such idiocy certainly won't make America great again. Quite the opposite, in fact.

UPDATE 1: Even Sarah Palin of all people (sorta) understands this better. Can you believe it?

UPDATE 2: To use Trump's mangled language, I'm bigly unimpressed with the idea that the same sort of "pattern bargaining" not to leave America will likely go on. From his "victory speech" at the abovementioned Carrier plant in Indiana:
[W]e’re going to have a lot of phone calls made to companies when they say they’re thinking about leaving this country, because they’re not leaving this country. They’re not going to leave this country. And the workers are going to keep their jobs. And they can leave from state to state, and they can negotiate good deals with the different states, and all of that. But leaving the country is going to be very, very difficult.
I know a money-making racket for companies when I see one. It's called "Pretend to Make America Great Again by Keeping Jobs Stateside."

From 1985 Plaza Accord to 2017 'Trump Tower Accord'?

♠ Posted by Emmanuel in , at 11/30/2016 05:29:00 PM
Like Macaulay Culkin, foreign exchange markets circa 2017 may need some direction from Trump.
Too strong a US dollar is not usually good for the rest of the world economy, but that's what we have at the moment with widespread expectations that the United States will hike interest rates faster with a "President Trump." As growth is expected to ramp up through pump priming, the dollar has strengthened accordingly. A casualty since the November 8 election result has been emerging markets--currencies, bonds, stocks...you name it. Not only do they have to deal with an increasingly more attractive US market, but there's also Trump's threat of protectionist measures against developing countries. It has not been a pretty picture in the emerging markets.

However, neither the incoming US leadership nor the developing countries currently being roiled by the strong dollar may necessarily be pleased by this state of affairs. US exports would become less competitive abroad with a strong currency. Meanwhile, the likes of China, Mexico and so on would become easier target for unfairly "manipulating" their exchange rates from the perspective of a President Trump when, in reality, it is the rampaging dollar that is more behind the current moves.

What to do? In 1985, the United States famously gathered economic bigwigs of other major American trade partners at the famous Plaza Hotel in New York to agree to coordinated interventions leading to a weaker US dollar and stronger yen, deutsche marks, francs, etc. Between then and now, Donald Trump briefly owned the Plaza--hence his cameo appearance giving directions to Macaulay Culkin in Home Alone 2: Lost in New York set in--where else--the New York Plaza.

Trump may no longer own the Plaza, but the idea of gathering foreign economic leaders to weaken the dollar once more makes sense according to Hongkongers Andrew Sheng and Xiao Geng:
The strengthening dollar and weakening yuan are shaping up as powerful crosscurrents for global growth. Their divergence could amplify tensions between the U.S. and China over a persistent trade deficit that President-elect Donald Trump has promised to shrink through tariffs and by labeling China a currency manipulator, risking a trade war between the world’s biggest economies. It’s a scenario both sides are keen to avoid.

China doesn’t want excessive yuan weakness because it would prompt companies and savers to shift money out of the country at a destabilizing pace. America doesn’t want unbridled dollar strength that would hurt exporters. While the problem could self correct if the greenback loses steam, there are also worries that it won’t.
How about the Trump Tower Accord--especially to help Asia avoid another regional financial dislocation. The US getting its external deficit under control would also be a plus:
One solution could be a "Trump Tower Accord" modeled on the 1985 Plaza Accord named after the New York hotel where it was signed. Like that pact, a new agreement would seek to put a lid on the dollar’s gains...

"A Trump Tower Accord is needed to bring some coordination into the international financial system to avoid the unnecessary negative shocks and uncertainty of uncoordinated policies," Xiao said in emailed remarks...

The risks are especially acute in Asia, home to the world’s fastest-growing economies. A weakening yuan -- it fell to an eight-year low versus the dollar last week -- will pressure regional currencies just as the Fed gears up to lift interest rates for only the second time in a decade. That combination will strain government’s international reserves and pressure companies who borrowed dollar denominated debt. 
Because such a move could worsen the trade deficit, and work against the President-elect’s stated intention to keep American jobs from migrating overseas, “it is hard to rule out” currency intervention as something a Trump treasury department might find politically expedient, Faust said.
As pointed out by the authors, the US dollar was already overvalued by 10-20% at midyear. What more now as the currency has only gained steam since then? Sometimes, the market may need a nudge to set itself right on occasion. That moment is probably now.

Life at Samsung's Vietnam Factory After Galaxy Note 7

♠ Posted by Emmanuel in , at 11/23/2016 06:00:00 PM
No thanks to Galaxy Note 7, it won't be a very merry Christmas in these parts.
The recall of Samsung's Galaxy Note 7 worldwide for its battery catching fire has damaged any number of things including Samsung's sales and profits, Samsung's reputation (though some would say less than you think) and...Samsung's hiring of local workers at its Vietnam assembly plant[s]. Nearly a third of Samsung's assembly operations are now being handled in the lower-cost Southeast Asian destination. Obviously, hopes were high that business would pick up at year end when retail demand is highest for the Christmas season.

However, what we instead have is whiplash from the Galaxy Note 7 being discontinued due to safety concerns. Anecdotes about slowing activity are emerging from areas surrounding Samsung's factory town:
"The factory used to be so busy toward the end of the year, and the workers wouldn't come out until night," Nguyen Van Loi says as evening falls and employees shuffle out. He has been selling fruit here for six years, but his sales this month are down 30% from October.

Just over a month has passed since Samsung halted production of the Galaxy Note 7 after a number of phones' batteries caught fire. Some workers at the Bac Ninh plant, which employs some 110,000 people, have been told to stay home. Others have seen their pay fall by half owing to a loss of overtime. "My pay has gone down by 40-50%," says Nguyen Thi Kieu Anh, a 19-year-old assembly line worker. She and other workers say they have been going home three hours earlier, at 5 p.m., since production of the Note 7 ended in mid-October. 
Worse may be in store:
While the factory appears to have been spared layoffs so far, those consigned to waiting at home have had their pay reduced by 70%, employees say. New hiring to ready for the typical year-end rush also appears to have been halted. Nguyen Van Chien, who runs a nearby boarding house, said he now has 30 roomers compared with 50 last year. With his income down by a third, he is finding it hard to make ends meet, he said.
It's going to be a lonely Christmas near Vietnam's manufacturing operations. For what it's worth, though, less than a tenth of its population is Christian, so Samsung's ill-timed lump of coal may matter less.

Korea, Japan Try to Save Their Shipping Industries

♠ Posted by Emmanuel in at 11/21/2016 04:53:00 PM
It's better to merge than to fade away: the tale of global shipping.
It is no big secret that the global shipping industry is currently encountering difficult conditions. The bankruptcy of Korean shipping giant Hanjin points out how overcapacity--too many ships have been built in expectation of rising shipping demand worldwide in recent years that didn't materialize--has dented the fortunes of this industry. Supply exceeds demand, and correcting the oversupply has not been a pleasant process for those involved. Given its crucial place in ensuring that goods manufactured in East Asia get to consumer markets elsewhere, however, the likes of Korea and Japan cannot simply let market forces play out and quite possibly result in the further diminution of their shipping capabilities.

First up is Korea, where a bankruptcy court has approved of a mid-sized carrier picking up the remaining assets of Hanjin. Especially attractive was the idea that they would lay off fewer workers:
Shipping operator Korea Line Corp. won a contest for some assets of bankrupt Hanjin Shipping Co., whose collapse in late August stranded billions of dollars in cargo at sea, disrupting supply chains world-wide. In a surprise decision, a Seoul court on Monday awarded Korea Line, a midsize bulk-shipping operator, the first right to purchase the assets of Hanjin’s Asia-U.S. route, as well as its stake in a California terminal.

A judge at the Seoul Central District Court, which is handling Hanjin’s insolvency proceedings, said it chose Korea Line over Hyundai Merchant Marine Co., which had been expected to win. Hyundai Merchant was backed by senior government officials and its main creditors, which said they would promote the company as the country’s largest oceangoing carrier.

“Korea Line proposed better terms, including higher prices,” the judge said. “It also offered to take over more Hanjin employees.”
Fears of another Hanjin are also playing out in Japan in the form of consolidation among the largest shipping lines. Instead of competing with each other for business tooth and nail and denting profit margins in the process, this merger is intended to decrease intra-national competition to the benefit of the wider Japan, Inc:
Decades of fierce rivalry between the three main Japanese ocean carriers ended with the agreement to merge their container operations that will propel the new entity into the league of the mega-lines.

In its analysis of the Japanese merger of “K” Line, MOL, and NYK Line, Alphaliner said the “J-3” will become the world’s sixth-largest container line, with the top seven lines controlling around 65 percent of the global liner capacity by 2018. The top seven are expected to widen the gap even further with the rest of the market in the coming years.

The merged pan-Japanese carrier will operate a combined fleet of some 1.37 million twenty-foot-equivalent units with a global market share of about 6.6 percent, based on Alphaliner’s assessment of the capacity operated by the three carriers as at October 31. Their joint orderbook totals 358,000 TEUs.
It will be interesting to see how shipping lines will be impacted by non-passage of the TPP enlargement and China's promotion of the rival RCEP. I'll be posting more about that shortly...

Economic Folly: Thai Rice Subsidies Never Die

♠ Posted by Emmanuel in , at 11/19/2016 05:13:00 PM
The importance of rice production to the Thai economy cannot be overstated. In the past, I have discussed [1, 2] the current ruling junta's efforts to punish the overthrown Yingluck Shinawatra for her abuses in overpaying for rice to buy the favor of those in rural communities. Appallingly, however, the same junta is now planning to implement another rice subsidy program. This while it is busy pursuing the prosecution of Yingluck Sinawatra.

The junta's calculations are aimed at regime survival. With rice prices at multi-year lows and the recent death of longtime figurehead King Bhumipol, it needs to prop up its domestic popularity lest it be forced out of power:
Just weeks after Thailand’s military government imposed an unprecedented $1 billion fine against an ousted prime minister for her handling of an ill-fated rice subsidy program that racked up huge losses, the junta did something else extraordinary: It announced a major assistance plan of its own. The $1.5 billion effort, which helps struggling rice farmers in part by guaranteeing prices well above market rates, is ironic given its similarities to the larger subsidy program for which the junta has castigated ex-premier Yingluck Shinawatra.

But the current government may have had little choice but to act. Global prices for the grain have plummeted to their lowest in nearly a decade, severely weakening an industry crucial to Thailand’s economic well-being. Some analysts say the about-face is also intended to stave off potential unrest during the sensitive, year-long mourning period following the death last month of King Bhumibol Adulyadej, and to win over some of the politically powerful farmers who make up 40 percent of the population. The rice-growing north is a traditional stronghold of Yingluck and her allies.

The junta has begun to realize “they simply cannot ignore the plight of the farmers anymore, especially (if) they wish to be in power for the long term,” said Puangthong R. Pawakapan, an associate professor at Bangkok’s Chulalongkorn University.
That said, the junta's program is said to be less costly and therefore more economically viable:
The junta’s plan is similar to Yingluck’s in that it is offering artificially high prices for rice, dispersing large sums to farmers and encouraging them to keep the grain off market in hopes of stimulating prices. But Jitti Mongkolnchaiarunya, dean of Thammasat University’s School of Development Studies, said the latest plan is less risky because its scope is smaller, its price ceilings lower, and rice farmers — not the government — will be responsible for storage.
What can I say? It's a tragicomedy that never seems to end.

Will Apple Supplier Foxconn Make iPhones Stateside?

♠ Posted by Emmanuel in at 11/18/2016 11:56:00 AM
If Apple supplier Foxconn starts assembling iPhones Stateside, Tim Cook may not need to visit China anymore.
Despite the US stock markets rising since the election of Donald Trump due to expectations that he will inject massive amounts of stimulus into the economy, a notable laggard has been Apple. Like other technology companies with supply chains that are extensive in Asia, Trump's protectionist rhetoric has been of concern to investors. That is, will punitive tariffs be applied to practically all the things Apple sells since most of it is made in the Far East? (Is that now the Fear East?)

The Nikkei Asian Review has an interesting new article suggesting that Foxconn--the largest Apple supplier based in Taiwan and with many facilities in mainland China--is considering setting up Stateside. (Yes, this is the Foxconn of the now-infamous worker dormitory suicides.) The purpose, evidently, would be to get around the criticism that Apple has been "sending jobs" abroad:
iPhones might one day soon carry "Made in America" labels. Key Apple assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, has been studying the possibility of moving iPhone production to the U.S., sources told the Nikkei Asian Review. "Apple asked both Foxconn and Pegatron, the two iPhone assemblers, in June to look into making iPhones in the U.S.," a source said.

"Foxconn complied, while Pegatron declined to formulate such a plan due to cost concerns." Foxconn, based in the gritty, industrial Tucheng district in suburban Taipei, and its smaller Taiwanese rival churn out more than 200 million iPhones annually from their massive Chinese campuses.
So it's mainly Apple that is prodding its Taiwanese suppliers instead of them thinking about relocating Stateside. As you'd expect, their concerns mostly deal with increased costs of manufacturing in the US:
Another source said that while Foxconn had been working on the request from Apple Inc., its biggest customer that accounts for more than 50% of its sales, Chairman Terry Gou had been less enthusiastic due to an inevitable rise in production costs.

"Making iPhones in the U.S. means the cost will more than double," the source said. The person added that one view among the Apple supply chain in Taiwan is that U.S. President-elect Donald Trump may push the Cupertino, California-based tech titan to make a certain number of iPhone components at home.
The thing about making iPhones in the States is that they were never made there to begin with, so there's no possible historical counterexample to cite. Moreover, Trump's idea is probably not to compel foreign companies make iPhone parts in the US, but rather American firms. Still, it does show how concerned Apple is about the political entanglements that it may get into with an incoming Trump presidency given his protectionist campaign rhetoric. Although campaign rhetoric may not accurately reflect actual policy, it always helps to be prepared. 

Trump Makes America #1 Environmental Rogue Regime Again

♠ Posted by Emmanuel in , at 11/13/2016 05:32:00 PM
Welcome to the coalface, circa 2016 in TrumpWorld.
As a lover of conspiracy theories, Donald Trump famously said that climate change is a hoax perpetuated by the Chinese (nevermind that they're now the world's largest carbon emitters, but hey, what's logic gotta do with it?) What are the consequences of this belief? Initially, Trump may withdraw the United States' participation in the Paris Agreement. Oddly enough, the Chinese--once the most obstructive of countries on dealing with the issue--are now cautioning Trump on junking the agreement at the ongoing UNFCCC Conference of the Parties in Morocco:
In a sign of how far the world has shifted in recognising the need to tackle global warming, Beijing — once seen as an obstructive force in UN climate talks — is now leading the push for progress by responding to fears that Mr Trump would pull the US out of the landmark accord.

“It is global society’s will that all want to co-operate to combat climate change,” a senior Beijing negotiator said in Marrakesh on Friday, at the first round of UN talks since the Paris deal was sealed last December. The Chinese negotiators added that “any movement by the new US government” would not affect their transition towards becoming a greener economy.
At stake is a lot of funding for developing countries to deal with the problem. Namely, the Green Climate Fund (GCF) meant to provide $100 billion from developed to developing countries to deal with it:
Without extra money, they say they won't be able to do so much. Trump, who has called man-made climate change a hoax, wants to cancel the Paris Agreement and halt any U.S. taxpayer funds for U.N. global warming programs.

If he follows through, that will threaten a collective pledge by rich nations in Paris to raise climate finance from both public and private sources from a combined $100 billion a year promised for 2020.
Since Trump's win, nations from China to Saudi Arabia have reaffirmed their support for the Paris Agreement's goal of eliminating net greenhouse gas emissions sometime from 2050 to 2100.
But there is widespread unease about finance at the Nov. 7-18 talks on climate change among almost 200 nations being held in Marrakesh, Morocco.
It is arguably that the rest of the world has so little say in US elections when what happens there has such major consequences for everyone else--including the fate of the planet. It's back to the situation while Bush Jr. was in office: America is likely to become the world's worst environmental rogue regime again.

To *Really* Escape Trump, Yanks Should Move to Bhutan

♠ Posted by Emmanuel in at 11/11/2016 11:01:00 AM
Americans fleeing TrumpLand are well-advised to consider splendidly isolated and beautiful Bhutan (pop. ~760k).
While the election of Donald Trump as US president was as shocking to me as it was to the rest of the world, something else struck me as equally baffling: Americans unhappy about this turn of events--his opponent won more votes overall, remember--began crashing websites for immigration to Canada and New Zealand. I presume that they were looking for Anglophone nations to move to with generally liberal social orientations. However, consider that these countries are part of the "Five Eyes" intelligence consortium, so you'd hardly be getting away from this particular security grouping. Moreover, Canada and New Zealand have deep economic ties as well with the United States. For instance, over 60% of Canada's imports and exports involve its neighbor the United States.

So, what happens in the US does have a significant bearing on the likes of Canada and New Zealand given their significant security, economic, and political ties. No, if you really want to get away from Trump's United States and all that it stands for, I would suggest moving to countries with the following characteristics:
  • negligible diplomatic ties with the United States;
  • negligible economic ties with the United States; and
  • progressive social policies
Actually, the United States has trade with almost every nation on earth, save perhaps North Korea. Its diplomatic representation is also pretty much universal. I also have difficulties finding countries with progressive social policies fairly isolated from the United States--not repressive regimes the US likes applying sanctions to. So it took me a long time to look around before [ahem] settling on...Bhutan. Its virtues in line with the criteria mentioned above are substantial:

[1] Diplomatic relations - There is no US embassy in Bhutan. Instead, the nearest consular outpost of the Yanks is in New Delhi, India. How isolated is Bhutan? When Secretary of State John Kerry met its prime minister in 2015--the first time a top US diplomat has ever met a Bhutanese leader--the meeting did not even happen in Bhutan itself but rather in Ahmadabad, India.

[2] Economic relations - Bhutan, according to UNCTAD statistics, is home to zero American foreign direct investment. Nada, zip, zilch. So, you won't see McDonalds every other street corner on the high street (which is an alien concept to begin with). Meanwhile, bilateral trade is next to nothing--something like $6 million a year.

[3] Progressive social policies - This is where Bhutan should score big points with the Bernie Sanders set. Instead of using using GDP as its measure of progress, the Bhutanese have famously made Gross National Happiness their yardstick:
Perhaps inspired by age-old wisdom in the ancient Kingdom of Bhutan, the fourth King concluded that GDP was neither an equitable nor a meaningful measurement for human happiness, nor should it be the primary focus for governance; and thus the philosophy of Gross National Happiness: GNH is born.

Since that time this pioneering vision of GNH has guided Bhutan’s development and policy formation. Unique among the community of nations, it is a balanced ‘middle path’ in which equitable socio-economic development is integrated with environmental conservation, cultural promotion and good governance.
So our American friends--and a whole lot of other progressive, US-skeptical readers besides--are probably thinking: "I'm sold! Where do I sign up?" But alas, there is a catch: Naturalization is fairly restrictive--especially for those born before 1985:
BY NATURALIZATION: Bhutanese citizenship may be acquired upon fulfillment of the conditions listed below and upon obtaining permission of government: Naturalized before June 10, 1985: Person had reached age 21, had resided in country for at least 10 years, owned agricultural land, and had the petition for naturalization accepted by government authority.

Naturalized after June 10, 1985: Person is 21 years old, has resided in country for 15 years if one or more parents is a citizen, (20 years for child of non-citizen), and knows the language and customs.
Given the restrictiveness of Bhutan, the best most can aspire to is "visitor" status. But hey, if the whole idea is not really to avoid the US forever but to camp out somewhere until Trump's term in office ends (or he is removed from office), then what are you waiting for?

Beautician 1, Brexit 0: EU's Turn to Stop It

♠ Posted by Emmanuel in , at 11/03/2016 03:45:00 PM
The pound flies after the court decision was released requiring parliamentary approval of Brexit.
A few months ago I featured a story on the legal challenge mounted by British hairdresser Deir Dos Santos concerning the need for UK parliamentary approval to commence on the process of exiting the European Union. In EU jargon, this is known as the Article 50 process. Today, the ruling was issued in favor of Deir Dos Santos and against Prime Minister Theresa May who intended to serve Article 50 to the EU by March of 2017.

My belief is that this is not a mere "technicality" on the road to Brexit. Instead, requiring parliamentary approval--if upheld since HM government intends to appeal--changes the picture entirely. Prior to this turn of events, the British pound was driven to multiyear lows by the fear of a "hard Brexit"--the UK leaving the EU without having agreed to market access agreements. Recall that UK parliamentarians were largely against Brexit (480 stay against 150 leave). So, while the ruling Conservatives and their Labour counterparts give lip service that they will honor the result of the referendum (and the "people's will" by extension), the actual implication is that anything remotely resembling a hard Brexit will likely be turned down by parliament. What politician would like to be on record for having royally screwed the British economy by isolating it economically from its most important trade partners? 

So, the job for the EU assuming they want to keep Britain in their fold is now much simpler. Knowing that parliamentarians--a generally more educated bunch than the mob of the electorate--will scotch a highly unfavorable deal, the EU simply needs to keep making grossly unfair offers to the UK over and over. Since parliament is now required to consider the offer tabled by the EU prior to the UK triggering Article 50, the EU should adopt an absolutely hardline position to negotiations that no sane British politician would agree to. That is, next to no trade concessions whatsoever. Parliamentarians were already disinclined to Brexit to begin with, so now they have a simple excuse to keep rejecting it: "the EU keeps making a bad offer."

Not only does this keep the demonstration effect of how awful life could be outside the EU to deter others from leaving, but it also keeps the UK inside it indefinitely if Eurocrats play their cards right.

The EU always intended to offer the UK a raw deal. The difference now is that relatively sane people (UK parliamentarians) need to agree to this raw deal. The EU should make the terms so ludicrously bad that no quorum will be arrived at to trigger Article 50. After a few years, this stuff will have died down as folks get tired of this entire nonsense. Everyone can be happy save for the delusional Brexiteers. 

Whew! EU-Canada FTA [CETA] is a Go

♠ Posted by Emmanuel in , at 10/30/2016 12:45:00 PM
In this year of Brexit 'n' Trumpism, the globophobes have been defeated. Wonders never cease.
Perhaps the Europeans are not dead in the FTA negotiation sweepstakes after all: After the Walloons in Belgium held up the Comprehensive and Economic Trade Agreement [CETA], this EU-Canada FTA is set to go ahead after all after the Walloons were assuaged. It is only a matter of hours before the Canadian PM Justin Trudeau arrives in Brussels to finalize the deal:
After several rounds of talks late into the night Belgium formally gave its endorsement on Saturday morning. Smaller than the U.S. state of New Jersey, Wallonia region blocked the deal between more than 500 million EU citizens and 35 million Canadians for several weeks. Politicians there argued the deal would undermine labor, environment and consumer standards and allow multinationals to crush local companies.

Read more here: http://www.charlotteobserver.com/news/business/national-business/article111456727.html#storylink=cpy
There was a lot of uncertainty until the end, with tiny Wallonia hijacking the wishes of nearly half a billion Europeans and the Canadians:
The European Union and Canada were set to sign a landmark trade pact on Sunday, ending days of drama after a small Belgian region refused to endorse the agreement and deeply embarrassed the EU. The long-delayed Comprehensive and Economic Trade Agreement was bedeviled by yet another hold up early in the day when Canadian Prime Minister Justin Trudeau's plane had to return to Ottawa because of mechanical issues.

The two-hour EU-Canada summit was rescheduled to start in Brussels at 1100 GMT (7:00 EDT.) Trudeau will sign the pact with European Council President Donald Tusk, EU Commission President Jean-Claude Juncker, and Slovak Prime Minister Robert Fico, whose country holds the EU's rotating presidency. "This is an important day for the EU and Canada too, because we setting international standards which will have to be followed by others with whom we are in negotiations as far as free trade is concerned," European Commission President Jean-Claude Juncker said.
Maybe the US-EU FTA, the Transatlantic Trade and Investment Partnership, is not dead in the water yet?

Mrs Clinton's New E-Mail Investigation Hits Mexican Peso

♠ Posted by Emmanuel in , at 10/28/2016 09:35:00 PM
There's an interesting article on MarketWatch on how the FBI issuing a recent statement that it would look further into Hillary Clinton's e-mails--here we go again--has affected various markets. Earlier in the day, it looked like US stock markets would end a three-day losing streak, but the uncertainty reintroduced into the American presidential elections put paid to that as understandable fears of a Trump presidency returned.

More interestingly from an international perspective, the Mexican peso hit the skids once more as "Build a Wall" Trump and his NAFTA-canceling xenophobia were given a lifeline:

Just when you thought it was all over...

Duterte and the "People's Republic of the Philippines"

♠ Posted by Emmanuel in , at 10/23/2016 03:55:00 PM
Duterte claims the Philippines is now in the PRC's ideological flow. Take it with a whole heaping of salt.
Friends abroad have asked me how to make sense of the bombastic and oafish Philippine President Rodrigo Duterte. My answer is always the same: Watch what the Philippine government does and not what he says since the latter is a completely unreliable guide to national policy. A case in point is his most ridiculous statements yet during a state visit to China. Apparently overwhelmed by the welcome granted to him that tinpot dictators the world over have also been given, Duterte began rambling incoherently as is his habit:
In a state visit aimed at cozying up to Beijing as he pushes away from Washington, the Philippine President announced his military and economic "separation" from the United States.
"America has lost now. I've realigned myself in your ideological flow," he told business leaders in Beijing on Thursday. "And maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. It's the only way."
If only that were so. The aftermath of Duterte's quite frankly idiotic statements is that two things nearly always happen. First, he backtracks on them--Trump-style it must be noted--as to lose most of the original force:
Philippine President Rodrigo Duterte said he’s not cutting the nation’s cord with the U.S. and that maintaining ties would be in his country’s best interest, stepping back from his “goodbye” America comments made during a four-day state visit to China.

“It’s not severance of ties,” Duterte said in a televised briefing in Davao city around midnight Friday, after returning from Beijing. “It’s in the best interests of my country that I don’t do that,” he said. On Thursday, he told Filipino and Chinese businessmen and officials in a China forum that “in this venue, I announce my separation from the U.S.”

Back in the Philippines, Duterte said the comments refer to a foreign policy that doesn’t “dovetail” with America. “What I’m really saying was separation of foreign policy, which in the past and until I became president, we always followed” the cue from the U.S., he said.
Second, his cabinet members and other surrogates downplay the gravity of what he's said:
Duterte’s cabinet members, who have often sought to tone down his statements, followed a similar routine this time. Hours after the president’s “separation” remarks, Finance Secretary Carlos Dominguez and Economic Planning Secretary Ernesto Pernia said the Philippines will maintain relations with the West. Duterte is “rebalancing” foreign policy and broadening the country’s alliance and not separating from the U.S., they said in a joint statement.
Bottom line: Duterte's "word" is as good as nothing. Discount it fully. Pay attention to what the Philippine government does rather than what Duterte says is your best guide to what's happening in the "People's Republic of the Philippines."

Venezuelan Oiler PDVSA: Debt Swap or Bankrupt

♠ Posted by Emmanuel in ,, at 10/19/2016 04:25:00 PM
"Delay when we need to pay you back...or we'll default on Oct. 28!" Investor relations, Venezuela-style.
When oil prices were at $100 or higher, Venezuela was flying high, using oil revenues to fund "socialist" PR stunts such as selling subsidized heating oil for poor Americans. As the price of oil tanked, however, the Venezuelan government has been less able to mount such extravagant displays of "generosity." After years and years of low oil prices, we instead have a situation in which state-owned oil company PDVSA is now threatening its creditors with default by next week if they do not accept the swap of bonds due in 2017 with new ones instead due in 2020:
Venezuela's government-run oil giant -- the country's largest source of cash -- is warning that it could default on its bonds as early as next week. Petroleos de Venezuela S.A., or PDVSA, failed to get investors to agree on a deal to push back debt payments by three years. The company said it is extending its deadline for a third time so investors can accept a deal by Friday night. This time, it warned that things could get messy. "If the exchange offers are not successful, it could be difficult for the company to make scheduled payments on its existing debt," PDVSA said in a statement Monday night.

PDVSA owes $1.6 billion in principal and interest on October 28 and another payment of $2.9 billion is due on November 2 for a separate bond. It's unclear if PDVSA may actually default or if it's trying to strong arm investors to take the deal. "I don't think they've prepared themselves for a default, I think it's mostly just a threat. The concern is that they're starting to talk about it," says Siobhan Morden, head of Latin America fixed income strategy at Nomura Holdings.

In total, Venezuela is asking investors to "swap" $5.3 billion of bonds due in 2017 with bonds due in 2020, essentially allowing the government to push back payments. But PDVSA hasn't been able to lure enough investors to accept the offering. It's led Standard & Poor's to cut its rating on PDVSA in mid-September to two notches above default.
What does PDVSA matter to Venezuela? Pretty much everything in terms of generating foreign exchange:
PDVSA represents much more than just an oil company. It is Venezuela's lifeline. Oil shipments make up over 95% of the country's export revenue -- that's cash the government badly needs to pay for imports of food and medicine, which are in short supply. Things have been so badly mismanaged that Venezuela's oil production hit a 13-year low over the summer after oil services provider such as Schlumberger (SLB) dramatically reduced operations earlier this year due to unpaid bills.
PDVSA has been used as a government piggy bank, but it's almost run out of funds. Also consider that the PRC, which has given Venezuela an estimated $60B, is no longer willing to give more:
After pouring billions into Venezuela over the last decade, China is cutting off new loans to the Latin American nation. It's a major reversal of relations between the two nations, experts say. It also comes at the worst time for Venezuela, which is spiraling into an economic and humanitarian crisis.
"China is not especially interested in loaning more money to Venezuela," says Margaret Myers, a director at Inter-American Dialogue, a Washington research group that tracks loans between China and Latin America.
But barter trade--China was being repaid in oil--doesn't quite work when PVDSA is so poorly run that its output has fallen to multi-year lows that there's not much left to barter:
Since 2007, China's state banks loaned Venezuela $60 billion, according to the Inter-American Dialogue. That's more that it loaned to any other Latin American country. China is considered Venezuela's most important creditor. Of that, Venezuela still owes China approximately $20 billion, experts say, and there's no sign that it can pay back the amount amid its crisis.

Venezuela pays back the vast majority of its loans to China with oil shipments. Last year, Venezuela's state-run oil company, PDVSA, shipped about 579,000 barrels of oil per day to China, according to the company's financial audit.
Without Chinese aid--and assuming oil prices don't spike back above $100 anytime soon--you can see the endgame in sight for PDVSA.

From Busan to LA, Bankrupt Hanjin Hits World

♠ Posted by Emmanuel in at 10/18/2016 04:18:00 PM
"Busan, we have a problem."
The oversupply of shipping vessels in the wake of world trade slowing down in recent years has resulted in the bankruptcy of one of Korea's most venerable firms, Hanjin Shipping. For years it has brought Korean-made goods to the rest of the world, but that didn't stop it from declaring bankruptcy earlier this year as its financial position became untenable. Its ships have not been able to dock at the world's major ports--those large enough to accommodate these large ships--over legal complications. What's more, shipments meant for the Christmas season have been stranded at sea together with these vessels:
With South Korea's biggest shipping company filing for bankruptcy protection, the vessels, sailors and cargo of Hanjin Shipping are stuck in limbo, stranded at sea. Ports, fearing they will not get paid, refuse to let them dock or unload...

Not only are ships not allowed to unload, containers waiting to be picked up are also being held back by the ports as collateral over unpaid bills. And even if the ports did allow them in, Hanjin would probably not as the vessels could expect to be immediately repossessed by the firm's creditors.

Beyond the ships and containers, there is of course the cargo within those containers - in many cases part of a tight chain of supply and delivery. By September, the global shipping industry is already into what is its busiest time of the year ahead of the Christmas season.
Busan is better known worldwide as the home of a US Navy base. However, it too has been Hanjin's main port for the longest time. As goes Hanjin, so goes the port city of Busan, and things aren't going too well at the moment:
A group of companies in South Korea’s port city of Busan said about 11,000 jobs are at risk if the troubled container line Hanjin Shipping Co. isn’t rescued.

With no Hanjin ship berthing at its terminal in Busan, the world’s fifth-busiest port, the city’s shipping industry is headed for a crisis, Lee Seung Kyu, chairman of Busan Port Development Association said. About 1,000 tractor drivers are unemployed, and many contractors may be forced to shut down their businesses, said Choi Chul Hee, a port executive. Hanjin handles about 50 percent of the facility’s container volume, he said, dealing a blow to an industry that accounts for 30 percent of the city’s economy.

“The lost volume will find its way to China and Busan will lose its competitiveness,” said Choi. “The economy of Busan will be hit if Hanjin Shipping fails.” Some companies that provide services to Hanjin Shipping and their workers haven’t been paid a total 42 billion won ($39 million), while about 10 percent of the 10,000 workers at the port haven’t received their wages for about three to four months, according to Kim Young Deuk, president of Eastern Marine Service Co. and also the head of Busan Marine Industry Association. Hanjin Shipping declined to comment.
At the other end of the world, the port of LA is clogging up with empty Hanjin containers that will  not be making a return trip to Busan:
As Hanjin Shipping Co. vessels drop off containers after weeks stranded at sea following the company’s bankruptcy, ports are dealing with a new problem: what to do with the empty boxes they leave behind.

Since the South Korean ocean carrier filed for bankruptcy five weeks ago, roughly 15,000 Hanjin containers have trickled in through the Ports of Los Angeles and Long Beach, often weeks after they were due to arrive. Now emptied of their goods, many are cluttering warehouse yards and parking lots across Southern California. With Hanjin’s ships no longer making the trans-Pacific trip, the company’s containers aren’t needed to carry goods back and forth.
While the stranded containers themselves are a nuisance, logistics companies say the bigger issue is that many are still attached to the wheeled trailers that trucks used to get them off the docks. These pieces of equipment, known as chassis, are vital to port operations, and putting thousands out of commission can delay the container deliveries for all shipping companies—not just Hanjin—people in the industry say.
The interesting thing to ponder is Hanjin's fate alongside that of Korea, Inc.: Is the problem particular to this company only and not the larger Korean export machine? Certainly it's an important cog whose demise may raise shipping costs for producers. Given the potentially vast spillover effects, will the Korean government bail it out...or ask another company to help shore it up? Or, will an erstwhile competitor like Hyundai Merchant Marine be encouraged to purchase part of its operations? For the rest of Korea Inc., the show must go on.

Yo Blair! Can ex-PM Tony Save Britain from Brexit?

♠ Posted by Emmanuel in at 10/11/2016 03:35:00 PM
Him again? Blair, Labour, and preventing a "hard Brexit."
There was an interesting story which came out over the weekend concerning former British Labour Prime Minister Tony Blair returning to (presumably) Parliament due to his concern over the UK's imminent decline in its global standing from Brexit. In particular, Blair is wary of the danger of a so-called "hard Brexit" being favored by the current Conservative PM Teresa May--a nasty divorce from all EU institutions. Being out of office giving Blair little voice in the whole sordid business, there appears to be only one recourse...
Former Prime Minister Tony Blair could return to a frontline role in British politics to try to prevent Theresa May's Conservative Party from destroying the country with a so-called "hard Brexit", he said in an interview.

The only Labour prime minister to win three general elections, Blair was hugely popular during the start of his 10 years in power but his support for the U.S.-led invasion of Iraq severely tarnished his reputation.


In an interview with Esquire Magazine, Blair said it was a "tragedy" that Britons were left with a choice between a Conservative Party intent on a hard Brexit and a Labour Party that he described as "ultra-left" and stuck in the 1960s.

"I don't know if there's a role for me," he said. "There's a limit to what I want to say about my own position at this moment.


"All I can say is that this is where politics is at. Do I feel strongly about it? Yes, I do. Am I very motivated by that? Yes. Where do I go from here? What exactly do I do? That's an open question."
My personal misgivings about Blair concern his decision to go along with the Iraq invasion. On economic matters, I do not really have significant qualms about the "third way." On having a cosmopolitan vision of the world economy, I am actually on board with him. Yes, the current Labour leader Jeremy Corybn is a warmed-over 60s/70s-era socialist. The question is, can the "third way" currently chart a course between the Conservative Brexit crowd and his party's current infatuation with Communistic throwbacks like Corbyn?

First elected last year on a wave of enthusiasm for a new type of politics, [Current Labour Party leader Jeremy] Corbyn was forced to compete again for his job. Although he was returned as leader with a higher mandate than before, he still lacks the backing of the centrist members of his party.

Blair said Corbyn offered a "mixture of fantasy and error". As a result, he said Britain was a "one-party state".

"The reason why the position of these guys is not one that will appeal to an electorate is not because they're too left, or because they're too principled. It's because they're too wrong," he said.
Unfortunately, the honest truth may be that Blair circa 2016 is even more unsaleable than Corbyn due to supporting the aforementioned Iraq invasion. People remember. We'll see; he can certainly try. As an anti-Brexit voice, I am not waiting for Blair to "save" the UK from it. Rather, it will be a coalition of like-minded incumbents from whatever party who muster enough courage to prevent May's xenophobic version of it from coming true.

Worst Branding Deal Ever? "Trump Tower Manila"

♠ Posted by Emmanuel in at 10/08/2016 09:25:00 PM
Is getting your private parts groped part of the deal if you buy a unit at this Trump-branded Manila condo?
In psychology, there is a term "colonial mentality" referring to those living in former colonies adopting an inferiority complex towards their former colonizers. This phenomenon is particularly acute in the Philippines, where American-sourced things are typically regarded as superior to their local equivalents. If it has a whiff of the US, then it must be better by virtue of the association. Yippee, America #1!

Philippine developer Century Properties certainly exudes this thinking by pandering to American celebrities. While Paris Hilton is derided as an airhead heiress in her home country--the archetypal dumb blonde--she actually has a branding arrangement for a beach club in the Philippines with them. Amping the inferiority complex further, Century Properties negotiated branding for a "Trump Tower Manila" with The Donald in 2011 [!] The press blurb claims:
I've always loved the Philippines. I think it's just a special place and Manila is one of Asia's most spectacular cities. I know that this project will be second to none.
Now, this statement would of course be more believable as having come out of the [tic tac-loving] mouth of Trump were it not for his vile racist attacks on the Philippines. Apparently, even Filipino-Americans--all 3.4 million of them--he's suggested deporting due to their association with this terror-infested country:
More recently, he decided to stop using the word "Muslim" as he called for halting immigration from countries with high rates of terrorism, although he has yet to say which countries that would include.
At a rally in Portland, Maine, on Thursday afternoon, Trump provided a lengthy explanation of why he thinks the United States needs to be skeptical of immigrants from many countries, even if they follow the legal process. Reading from notes, Trump listed nearly a dozen examples of immigrants, refugees or students who came to the United States legally -- often applying for and receiving citizenship -- and then plotted to kill Americans, sometimes successfully doing so. The countries that he referenced in these examples: Somalia, Morocco, Uzbekistan (he asked the crowd where it was located), Syria, Afghanistan, the Philippines, Iraq, Pakistan and Yemen (which he pronounced "yay-men"). Trump's staff has yet to confirm if there are countries from which the nominee wants to limit immigration.
To be fair, The Donald is bashing foreign countries in this election cycle to play to fears of a white xenophobic audience Stateside. Way back in 2011, Trump's name was not yet so associated with racism, xenophobia, misogyny, business failure and what else have you. Still, he is a man of no scruples who will say what sells. It's just that sometimes, his messages are contradictory selling to different audiences.

Century Properties ends up with the mother of all bum deals. It's paying good money to Trump to use his name, when lately his name has been associated with so many unsavory things. That he alludes to deporting 3.4 million Filipino-Americans while deriding the Philippines as a terrorist haven makes buyers of "Trump Tower Manila" fit the typical profile of his customer base: chumps.

When the scum of America is regarded as a "luxury" brand in the Philippines, it's colonial mentality at its worst. Aside from that, enjoy your condo.

10/11 UPDATE: To be fair, there are other Trump branding deals with other nationalities he has greatly offended through his racist remarks. See, for instance, the Muslim-basher's licensing arrangements in the Middle East in a recent Newsweek article