The ESADEgeo Daily Digest, 24/05/2017

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Foreign Affairs—Z. Haider / Can the U.S. pivot back to Asia?

  • China is leveraging its resources to build multilateral institutions and initiatives with significant global support.
  • In his opening remarks at the first Belt and Road Forum last week, Chinese President Xi Jinping called upon the attendees to “build an open platform of cooperation and uphold and grow an open world economy,” echoing the speech he gave at Davos in January.
  • China is signaling that it is ready to assume to mantle of global economic leadership. According to Xi, the Belt and Road Initiative is “the project of the century”.
  • Washington must push back against China’s attempt to create its spheres of influence, trade, and investment across Africa, Asia, and Europe. But it must also carve out areas for cooperation with Beijing (through open discussions), since there are opportunities for Belt and Road to serve U.S. interests.
  • One way or another, the Trump administration must find its way back into the TPP, and aggressively promote U.S. investment and infrastructure-building in Asia.

The New York Times—D. E. Sanger & M. Haberman / Trump Praises Duterte for Philippine Drug Crackdown in Call Transcript

  • In a phone call last month, President Trump praised President Duterte for doing an “unbelievable job on the drug problem”, according to the Philippine transcript of the call. A senior administration official confirmed on the condition of anonymity that the transcript was an accurate representation of the call between the two leaders.
  • The program has been widely condemned by human rights groups around the world because extrajudicial killings have taken thousands of lives without arrest or trial.
  • About North Korea, Trump tried to reassure Duterte. “We have a lot of firepower over there,” Trump noted. “We have two submarines — the best in the world. We have two nuclear submarines, not that we want to use them at all.”
  • Trump discussed with Duterte China’s potential influence, and called President Xi “a good guy”.
  • The U.S. President twice invited Duterte to “come to the Oval Office.”

POLITICO—B. Smith-Meyer & R. Heath / Eurogroup confronts own deficit: governance

  • Leo Hoffmann-Axthelm, advocacy coordinator with the NGO Transparency International: “The Eurogroup should be institutionalized, with proper rules of procedure, document handling and a physical address with actual spokespeople. We can no longer be governed by an informal club.”
  • Emily O’Reilly, the EU’s ombudsman, is among those calling for reform. “It is obviously difficult for Europeans to understand that the Eurogroup, whose decisions can have a significant impact on their lives, [isn’t] subject to the usual democratic checks and balances.”
  • However, some of those who participate in Eurogroup meetings argue that its informality is precisely what makes it useful. The last thing they want is another bureaucratic EU institution.
  • The Eurogroup’s future is likely to depend on increasing the levels of trust and transparency. Dijsselbloem, the Eurogroup President, has moved in that direction, including issuing annotated agendas and written statements after its meetings.
  • France’s President Emmanuel Macron has floated a much more ambitious reform of the Eurozone that envisions a cross-border finance ministry.

Brookings—B. Bernanke / Some reflections on Japanese monetary policy

  • Bernanke argued in the past that, if the Bank of Japan (BOJ) showed more resolve, it could overcome the problem of deflation. But, since Shinzo Abe’s election in 2013, the Bank has shown great resolve, and while the results have generally been positive, deflation has not been decisively vanquished.
  • Some features of the Japanese economy and the legacies of past policies are interacting to prevent faster progress towards the BOJ’s inflation objective. These are factors outside the BOJ’s control.
  • The BOJ shouldn’t stop its determined pursuit of its inflation target.
  • If more stimulus is needed, the most promising direction would be through fiscal and monetary cooperation, in which the BOJ agrees to temporarily raise its inflation target as needed to offset the effects of new fiscal spending or tax cuts on the debt-to-GDP ratio. Such coordination could help generate the extra aggregate demand the BOJ is seeking.

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo.

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