ESADEgeo Daily Digest, 12/12/2017

Politico—Jacopo Barigazzi / EU unveils military pact projects

  • EU foreign ministers unveiled on Monday a list of projects they want to form part of Pesco, a new military pact to which 25 member states have already signed up (the only holdouts are the UK, Denmark and Malta).
  • The final list of projects – which was cut down to 17 by national defense policy directors and the European Defense Agency – cover areas such as training, capability development and operational readiness.
  • An essential element of the pact is that it promotes a two-speed approach, in that only groups of member countries support certain projects.
  • Diplomats have long been concerned about the tension between Germany, which wanted a more inclusive approach, and France, which wanted it to be more ambitious and operational. “The list of projects [selected] shows that we have found a balance,” said one of the diplomats.

Project Syndicate—Dani Rodrik / Does Europe really need fiscal and political union?

  • Former German finance minister Wolfgang Schäuble saw political union as a means to impose strong fiscal discipline on member states from the center, tying their hands and preventing “irresponsible” economic policies. Varoufakis also favored the idea of a political union, but because he thought it would relax creditors’ stranglehold on his economy and create room for progressive politics across Europe.
  • But there is also an alternative, much less ambitious view, according to which neither fiscal nor political union is needed. What could be done instead is to de-link private finance (which would be integrated at European level) from public finance (which would be left to member states), insulating each from the malfeasance of the other.
  • Advocates of cutting the Gordian knot between private and public finance recognize that governments’ approach to banks must change radically if this separation is to work. But it is not clear that their proposed remedies would work.
  • As long as economic policy remains the province of national governments, sovereign risk will likely continue to distort the operation of cross-border finance. Sovereign states can always change the rules ex post, which means full financial integration is impossible.
  • Pretending that we can separate private from public finance may exacerbate, rather than moderate, financial boom-and-bust cycles.

Financial Times—Shawn Donnan / Trump trade tsar wields power over WTO destiny

  • Having fully embraced the protectionist “America First” vision that President Trump brought into the White House, the US Trade Representative Robert Lighthizer has quickly become an influential voice, and stands to be an important and potentially disruptive figure in the global economy.
  • As Lighthizer and ministers from the 163 other members of the World Trade Organization (WTO) meet in Buenos Aires this week, no other attendee wields more power over the future of the institution or the international trading system it anchors.
  • A China hawk, Lighthizer has been a persistent WTO critic and argues it has not coped well with the rise of the Chinese economy. In a statement, his office said he would use this week’s meeting to “advocate for US economic and trade interests, including WTO institutional reform”.
  • Reportedly, the EU and several other participants abandoned efforts at a ministerial statement after the US language to prohibit the WTO’s appellate body from violating members’ sovereignty and to strip out a longstanding affirmation of the multilateral system’s role in the global economy.

ECFR—Jeremy Shapiro / One less adult in the room

  • It’s not clear that Europeans have a policy response to the potentially radical nature of the Trump presidency. Beyond the rhetoric, European leaders have not really altered their approach to the US at all.
  • European leaders believe generals and Republican establishment figures that surround Trump will blunt his worst instincts. But the reason that this theory has worked at all this year is that Trump doesn’t care about most foreign policy issues, particularly with regard to Europe.
  • However, after a year or two, US Presidents tend to discover that their powers are limited in domestic affairs and that Congress is extremely difficult to deal with. Thus, they generally end up retreating into foreign policy.
  • Trump will probably focus on Iran and North Korea – and do so in ways that threaten peace in both of those regions. He will also turn back to the trade agenda, where he already has like-minded cadres in place, to push for a ‘better deal’ from NAFTA, China, and the WTO.
  • After strong-worded statements by Angela Merkel and German Foreign Minister Sigmar Gabriel, and with their parties looking like they will form the next German government, it is possible that the most powerful country in Europe is finally starting to consider how to manage a post-American Europe.

The New York Times—Alex Williams / Will robots take our children’s jobs?

  • A much-quoted 2013 study by the University of Oxford Department of Engineering Science estimated that 47 percent of current jobs, including insurance underwriter, sports referee and loan officer, are at risk of falling victim to automation, perhaps within a decade or two.
  • Just this week, the McKinsey Global Institute released a report that found that a third of American workers may have to switch jobs in the next dozen or so years because of A.I.
  • According to Martin Ford, author of “Rise of the Robots: Technology and the Threat of a Jobless Future”, machine learning does not just give us new machines to replace old machines, pushing human workers from one industry to another. Rather, it gives us new machines to replace us, machines that can follow us to virtually any new industry we flee to.
  • But MIT’s David Autor argues that reports of the death of work are greatly exaggerated. Almost 50 years after the introduction of the A.T.M., for instance, more humans actually work as bank tellers than ever.
  • If we are heading towards a world without traditional jobs, some believe that everyone will end up receiving a universal basic income, which will free us to enjoy leisure activities.

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

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