Proton's End? (Malaysia's Failed Auto Nat'l Champion)

♠ Posted by Emmanuel in at 2/22/2017 05:51:00 PM
It's time to let Proton go, Mahathir Mohamad.
Proton is the archetypal "infant industry" that never grew up. The pet project of former Malaysian Prime Minister Mahathir Mohamad, Proton was intended to be a national champion automaker able to duke it out with foreign competition. The problem is, even behind various protections and subsidies, Proton has never really made the cut. Bouncing around from state to private ownership, one thing has been consistent: it has lots of money over the decades.

It now appears that the end of the road nears for Proton as France's Peugeot Citroen and China's Geely are investigating buying the remaining assets of Proton. The most valuable part of it is the sports car legend Lotus:
France’s PSA Group and China’s Zhejiang Geely Holding Group Co. have submitted bids to buy a stake in money-losing Malaysian automaker Proton Holdings Bhd., according to people with knowledge of the matter. Negotiations are still preliminary, with bids being evaluated and clarified, said one of the people, who asked not to be identified as the talks are private.

The exact size of the stake to be sold in Proton, which also owns British sports car maker Lotus Cars Ltd., will be determined after discussions, the person said. A PSA spokesman said the company is “still in the negotiation process and wish to go further with Proton.” A representative for Geely declined to comment. A Proton spokesman didn’t immediately return a phone call seeking comment.

Proton, which is controlled by Malaysian tycoon Syed Mokhtar Al-Bukhary’s DRB-Hicom Bhd., is struggling from accumulated debts as sales slump. DRB-Hicom said in a Feb. 15 statement that it will conclude and announce its decision on the foreign strategic partner within the first half of this year.
Unsurprisingly, Dr. Mahathir's prescription is not to sell Proton but to impose more protections, as a blogger points out:
Lim said Mahathir had attacked Proton’s plan to bring in a joint-venture partner as this would cause [Malaysian] vendors and suppliers of components to close shop, resulting in “lots of workers losing their jobs”. Lim said, “It appears that the suppliers and vendors to Proton continue to be Mahathir’s main concern. In a previous post in October, Mahathir had complained that his businessmen friends were not given supplier contracts by Proton.

“Does Mahathir continue to insist that the welfare of his supplier friends who have gotten rich over the decades from Proton are more important than the survival of Proton?” He added, “Mahathir insists that Malaysia re-impose heavy protection to Proton. It appears that more than three decades of forcing Malaysia to purchase over-priced and low specifications cars while driving up the loan burden of millions of Malaysians is not enough.”
All I can say is that if Proton hasn't managed to make it to break even after all this time, then there is little point in keeping it afloat through more artificial life support.

Let Proton go gently into the night.  

Calexit Lite: Silicon Valley Starts Packing for Vancouver

♠ Posted by Emmanuel in at 2/21/2017 02:04:00 PM
Where to head after Trump's Hicksville, USA invades Silicon Valley.
Nearly everyone knows that California has leaned more Democratic in recent times, causing widespread bafflement there about Donald Trump's presidential election victory insofar as his opponent, Hillary Clinton, won the state by more than 4.2 million votes. Unsurprisingly, there is a renewed call for California to secede from the union. Not only is it fundamentally misaligned with Trump's misanthropic, misogynistic, and xenophobic vision, but it also is a net contributor to the finances of the United States of America. Hence the proposed referendum for California exit:
The arguments for Calexit are pretty simple: The state is drifting ever-further away from the rest of the country in cultural attitudes and public policies, especially with respect to immigration and the environment. California’s size and wealth (its GDP is similar to that of France) make it the one state that might make a go of it alone. It is also a “donor state” when it comes to the relationship of federal taxes collected from Californians to the federal spending conducted there; one recent analysis showed California ranking 46th among the states in relative dependence on Washington.

But it’s clear the main reason for sudden interest in Calexit is Donald J. Trump, and the possibility a federal Republican regime under his direction would preempt California preferences on a wide range of issues. Even though Governor Jerry Brown and other statewide Democratic elected officials have kept their distance from Calexit, the saber-rattling they have conducted about the state’s willingness to fight Trump and the GOP in court has undoubtedly fed the Calexit sentiment. The latest Trump provocation, threatening sanctuary cities with the cancellation of all federal funds, is being perceived by both his friends and enemies as mainly aimed at the Golden State.
To be blunt, it is unlikely that such a referendum will be held, let alone it succeeding on technical grounds. Hence, technology companies that are commercially and culturally influential have been fleet-footed in looking for alternatives in the expectation that federal policies inimical to their interests are likely to be implemented in the near future such as restricting visas for foreign workers strong in science, technology, engineering and mathematics [STEM]. What's a tech hub that's relatively close to Silicon Valley in a country more civilized than Trump's America?

Head for Vancouver, Canada my tech friend:
Drawing on links with nearby Seattle, and San Francisco further south, a tech boom in Canada’s third-largest city has pulled in tens of thousands of skilled workers and start-up entrepreneurs in recent years, sparking a fierce fight for the limited supply of office space. Now the commercial centre of Canada’s most westerly province of British Columbia is braced for a fresh influx of talent — this one driven by the shifting immigration policies of the Trump administration in Washington. A month after Donald Trump entered the White House, the US tech sector is still trying to figure out how to adapt to the sweeping immigration reform promised by the new president.
The movement has begun as Silicon Valley hedge their bets against Trump's Fortress America:
Gregor Robertson, Vancouver mayor, says that inquiries from US tech companies have risen sharply in recent months, putting further pressures on office spaces in areas such as Gastown. “We’re bracing for that to now grow even faster, to see more people come north,” says Mr Robertson, who expects tech sector job growth in the city to accelerate from 6 per cent to 10 per cent in the next few years.
 The industry currently employs 75,000 people in Vancouver. “It’s really a reaction to the level of uncertainty,” says Mike Tippett, a Vancouver-based entrepreneur. He believes a Canadian presence can be part of a “continuity strategy” for ambitious young US software groups. “They want a back-up plan that can be kicked into gear very quickly,” he adds.  
Think of Vancouver real-estate as a hedge against Trumpian political risk and you wouldn't go far wrong as far as most of Silicon Valley is concerned. (Except for Trump apologist Peter Thiel perhaps.)

Berlin Wall Redux: Asylum Seekers at US-Canada Border

♠ Posted by Emmanuel in at 2/19/2017 04:40:00 PM
Fleeing Trump's USA: Royal Canadian Mounted Police help Sudanese refugees reach a civilized nation.
During the Cold War, the fulcrum upon which the world seemed to hinge was the Berlin Wall. It symbolized the division between socialist repression and democratic freedom insofar as those attempting to cross from East to West Germany literally risked their lives to escape tyranny. Nowadays, it seems a leading exponent of state-sponsored tyranny is the United States, now led by a racist-protectionist-isolationist who would like nothing more than detain, harass or deport people unlucky enough to have been born elsewhere.

The recent meeting between American President Trump and Canadian Prime Minister Justin Trudeau has come to symbolize the growing gulf between the two nations. Trump wants to build Fortress America; Trudeau says refugees are welcome to his country. It seems these policy disparities are already playing out on the US-Canada border. As Trump's flunkies are ramping up their xenophobic dragnet, a new flashpoint has emerged:
Eight asylum-seekers, including four children, barely made it across the Canadian border on Friday as a U.S. border patrol officer tried to stop them and a Reuters photographer captured the scene. As a U.S. Customs and Border Patrol officer seized their passports and questioned a man in the front passenger seat of a taxi that had pulled up to the border in Champlain, New York, four adults and four young children fled the cab and ran to Royal Canadian Mounted Police on the other side.

One by one they scrambled across the snowy gully separating the two countries. RCMP officers watching from the other side helped them up, lifting the younger children and asking a woman, who leaned on her fellow passenger as she walked, if she needed medical care. The children looked back from where they had come as the U.S. officer held the first man, saying his papers needed to be verified.
Trump's border goons were not done yet, however:
The man turned to a pile of belongings and heaved pieces of luggage two at a time into the gully -- enormous wheeled suitcases, plastic shopping bags, a black backpack. "Nobody cares about us," he told journalists. He said they were all from Sudan and had been living and working in Delaware for two years.

The RCMP declined on Friday to confirm the nationalities of the people. A Reuters photo showed that at least one of their passports was Sudanese. The man then appeared to grab their passports from the U.S. officer before making a run for the border. The officer yelled and gave chase but stopped at the border marker. Canadian police took hold of the man's arm as he crossed.
From a nation whose leader once asked Mr. Gorbachev to "tear down the wall," the United States has gone into the business of putting them up. Back then the United States used to be a place folks aspired to move to. Trump's USA, however, is a xenophobic hellhole you're better off fleeing if you have any sense.

Fortunately, there are humane folks are north of the US-Canada border. In Trump's America, it'll no doubt become a harder place to reach as Trump's border goons crack down harder. To no one's particular surprise, Fortress USA is a lot like East Germany, cutting it off from its neighbors:
Behind me stands a wall that encircles the free sectors of this city, part of a vast system of barriers that divides the entire continent of Europe. From the Baltic, south, those barriers cut across Germany in a gash of barbed wire, concrete, dog runs, and guard towers. Farther south, there may be no visible, no obvious wall. But there remain armed guards and checkpoints all the same--still a restriction on the right to travel, still an instrument to impose upon ordinary men and women the will of a totalitarian state.
Trump may instead aim to divide the entire continent of North America, but the means and the logic are exactly the same. Get the hell out while you still can.

2/22 UPDATE: Canada's open borders policy continues (until Trump walls off Canada in the future, that is):
Canada will continue to accept asylum seekers crossing illegally from the United States but will ensure security measures are taken to keep Canadians safe, Canadian Prime Minister Justin Trudeau said on Tuesday.

The number of would-be refugees crossing into Canada at isolated and unguarded border crossings has increased in recent weeks amid fears that U.S. President Donald Trump will crack down on illegal immigrants, and photos of smiling Canadian police greeting the migrants have gone viral.

Without U(S): Canada, EU & Mantle of Global Leadership

♠ Posted by Emmanuel in , at 2/16/2017 03:27:00 PM
Fancy that; some people still believe in liberal ideals like concluding free trade agreements.
First off, against all odds, the Canada-EU Comprehensive Economic and Trade Agreement [CETA] is as good as done after European parliamentary approval. In the face of Brexit and Donald "Build the Wall" Trump--killer of the Trans-Pacific Partnership--we have an honest-to-goodness free trade agreement being concluded. Remember those? If I recall correctly, they involve removing remaining barriers to international trade between two or more countries...by reducing tariffs, for instance.

Just one trade deal and the Canadians and Europeans (or what I assume Trump would call the "failing EU") are now giddy thinking of usurping a role the US previously held. After visiting Trump in Washington--which he looked forward to as much as having a root canal operation probably--Canadian PM Trudeau headed to the European parliament in Strasbourg to celebrate CETA's signing:
With the passage of their trade deal, Canada and the European Union offer a counter to Trump, who has withdrawn from the Trans-Pacific Partnership (TPP) and wants to rework the North American Free Trade Agreement.

For Canada the Comprehensive Economic and Trade Agreement (CETA) is important to reduce its reliance on the neighbouring United States as an export market. For the EU, it is a first trade pact with a G7 country and a success to hail after months of protests at a time when the bloc's credibility has taken a beating from Britain's vote last June to leave.
This version of events is no doubt highly optimistic given the questionable future of the EU post-Brexit amid the encouragement Trump gave to any number of his European clones--racist / protectionist / isolationist elements--in France, Germany, Italy, the Netherlands, etc. Still, if not the Europeans, who else is there left to take up the mantle of global leadership after Trump's USA has effectively abandoned the cause of the liberal project?
Canadian Prime Minister Justin Trudeau said on Thursday that the whole world benefited from a strong European Union and that the bloc and his country needed to lead the international economy in challenging times. Trudeau told the European Parliament that the Union was an unprecedented model for peaceful cooperation in a speech that marked his distance from both the United States under new President Donald Trump, who has questioned the value and future of the bloc, and from Britain, which has voted to leave it.

An effective European voice on the global stage was not just preferable, but essential, Trudeau said.
"You are a vital player in addressing the challenges that we collectively face as an international community," he told EU lawmakers a day after they backed an EU-Canada free trade deal. "Indeed the whole world benefits from a strong EU."
Trudeau, who will also visit Germany, said that Canada and the European Union shared a belief in democracy, transparency and the rule of law, in human rights, inclusion and diversity.
Yes, there's China pretending to be the heir to the throne through Xi Jinping's free trade rhetoric, but of course there's the unavoidable fact of its unyielding political repression at home. As such, it would be a rather strange guarantor for the continuation of the (US-initiated) postwar order.

Absent any other plausible alternatives, the EU and Canada may be the best left.

'Trump ETF'? WisdomTree Global ex-Mexico Equity Index

♠ Posted by Emmanuel at 2/14/2017 05:42:00 PM
Santa Muerte: If you think Mexican stocks are good as dead, there's an ETF investing everywhere else.
There's an exchange traded fund (ETF) for almost everything. Do you think cyber security is the next big thing? Invest in one of the ETFs which put money into cyber security firms. Do you want to invest in an ethical ETF? There are--count em!--32 of these socially responsible funds which don't put money into alcohol, tobacco, defense, and so forth. Think of any sort of investment objective preference or objective out there and there is probably an ETF out there for you.

Now, the current US president is well-known for his hatred of Mexico. He wants to "renegotiate NAFTA" or the free trade agreement with the United States' southern neighbor together with Canada. He wants to build a wall on the US-Mexico to stop "rapists" and "criminals" from entering the US. The upshot for any reasonably well-informed person is that United States' policies discriminating against Mexico are likely coming, and that Mexico's economy will suffer as a result.

What, then, if you want to invest globally but fear Trump's anti-Mexico streak? Voila! There's an ETF for you, the WisdomTree Global ex-Mexico Quity Index which aims to invest in 2000 of the world's largest corporations--with the notable exception of those from Mexico:
The WisdomTree Global ex-Mexico Equity Index is a float-adjusted market capitalization weighted index that measures the performance of 2000 largest companies in developed and emerging markets throughout the world, excluding Mexico, that meet eligibility requirements. The Index was established with a base value of 200 on February 12, 2016. The Index is calculated in US dollars and is updated to reflect market prices and exchange rates.
So there you are. For the life of me, I cannot think of any good reason to not invest in Mexico unless you are expecting Mexico to significantly underperform every other country out there. Which, I believe that someone like Trump or those who believe in him would be convinced of.

Again, there's an ETF for everyone.

Can Singapore Land Saudi Aramco (Mother of All IPOs)?

♠ Posted by Emmanuel in ,, at 2/08/2017 05:59:00 PM
Make it big: Singapore competes for Saudi Aramco's $100B IPO listing.
Us Southeast Asians have been closely following the possibility--however remote--of the Singapore Exchange [SGX] landing the biggest IPO of recent times. Saudi Aramco indicated a few months back that it intends to make a public listing. Aramco being the world's largest state-owned oil company, the sums involved will make your head spin with $$$ signs. Not one to pass up a once-in-a-generation opportunity, Singapore has been courting the Saudis assiduously:
The island nation is studying proposals including inviting one of its state investment companies to become a cornerstone investor in Aramco’s IPO, as well as potential Singapore cooperation with the Saudi government on future investments, the people said. Singapore Exchange Ltd. management including Chief Executive Officer Loh Boon Chye visited Saudi Arabia late last year to pitch a listing on the bourse, according to the people, who asked not to be identified as the information is private.

Singapore, the biggest oil trading center in Asia, is hoping a full package of government incentives will give it a better chance of winning a piece of the listing than a standalone proposal from the stock exchange, the people said. Aramco is yet to make a final decision on the venue for the IPO, and Singapore faces challenges from larger international exchanges, the people said.
That said, many others are also approaching the Saudis like fellow Asian financial powerhouse Hong Kong and Canada (of all places):
The country’s plan shows the extent to which Asian economies are vying for a share of the IPO, which is estimated to be about $100 billion in size. Aramco officials have also received pitches on a potential Hong Kong listing for the company, which could come with anchor investments from Chinese funds, people familiar with the matter said last year. Company executives have also mentioned the possibility of listing in London, New York, Tokyo or Toronto.

TMX Group Ltd., the owner of the Toronto Stock Exchange, sent officials to Saudi Arabia as part of efforts by a Canadian consortium that includes major local banks to seek a slice of the IPO, said TMX spokesman Shane Quinn.
Singapore is hardly a shoo-in. Compared to other exchanges, SGX is small fry trading volume-wise:
Singapore’s average daily stock trading was about $761 million last year, compared with $5.8 billion in Hong Kong and $7.4 billion in London, the data show.
Moreover, the international (read: non-Singapore-domiciled) IPOs Singapore has had in recent years are not uniformly impressive:
The chequered history of foreign listings in Singapore is another factor. While the 2006 float of Chang beer maker Thai Beverage Pcl has outperformed, Hutchison Port Holdings Trust's $5.45 billion debut in 2011 went the other way. Units never closed higher than their $1.01 offer price and are currently at $0.43. Plans to lure English soccer team Manchester United also came to naught, putting another nail in the coffin of Singapore's rather ambitious desire to become a global sporting hub.
My intuition is that the Singaporeans will give it as good a go as possible, but they ultimately will not be disappointed too much if the IPO is not made there since they're decidedly underdogs here. Though I may be wrong, I am fairly confident that the US and UK are out of the running: the latter is too Islamophobic with a President Trump, while the latter is undergoing the transitory pains associated with Brexit.

Stay tuned.

2/21 UPDATE: If news reports are to be believed, Singapore isn't even among the contenders for the Saudi Aramco listing, with authorities favoring the New York Stock Exchange [NYSE] and the London Stock Exchange [LSE]:

Saudi Arabia is favouring New York to list state oil giant Saudi Aramco IPO-ARMO.SE, while also considering London and Toronto for the prospect of floating the firm, the Wall Street Journal reported on Monday.

Saudi officials also talked to exchanges in Singapore, Hong Kong, Tokyo and Shanghai but are unlikely to pursue listing in those places, the newspaper said, citing people familiar with the matter.
I am somewhat at a loss as to why the Saudis would prefer Trump's America. After all, they provide next to no US jobs and would certainly qualify as "stealers" of them from Trump's perspective. Listing stateside would make Aramco more vulnerable to US protectionism. Don't forget Trump's Islamophobia either, which certainly would find a US-listed foreign oil major a big, juicy target to demagogue against. Meanwhile, the UK is about to leave the EU, reducing the pool of potential investors.

Hey Trump, Japanese Buy Foreign Cars (Just Not US Ones)

♠ Posted by Emmanuel in ,, at 2/05/2017 12:17:00 PM
Japanese failing to buy hulking left-hand drive American gas guzzlers = protectionism according to the imbecile Trump.
Close links between Japanese business and government are the stuff of legend. This week, Shinzo travels to the United States to press the interests of Japanese automobile manufacturers in the face of President Trump's reflexive protectionism. Remember, he's already made a previous visit to Trump Tower shortly after Trump's election victory. Perhaps sensing this was not enough, Japan Inc. has sent Abe Stateside again:
Honda has expressed hopes that a visit to the US next week by Shinzo Abe, the Japanese prime minister, will help ease Donald Trump’s “misunderstandings” that have led the US president to take a critical stance towards Japanese carmakers.

“We have pursued a consistent policy of producing cars locally in America,” said Seiji Kuraishi, Honda’s executive vice-president, noting that 70 per cent of its cars produced in the US were sold there. “There seems to be a gap between the various things said on Twitter and the reality so I hope the misunderstandings will be resolved,” Mr Kuraishi added.

The comments by Japan’s third-largest carmaker highlight the increasing anxiety among Japanese businesses after Mr Trump threatened Toyota with a border tax for its plan to build a new plant in Mexico, and criticised Japan for what he described as a closed market for US cars. Akio Toyoda, the president of Japan’s largest carmaker, met with Mr Abe on Friday evening and they are believed to have discussed Japan’s visit to the US and Mr Trump’s policies.
During the November 2016 visit, Abe had some fantasy that the Trans-Pacific Partnership could be revived. Subsequently disabused by this fanciful notion, he and the Japanese have further been put on notice by Trump reviving 1980s-era rhetoric about Japan's trade unfairness. In trade parlance, these are "non-tariff barriers":
U.S. President Donald Trump on Monday said Japan was engaging in unfair practices on auto imports and exports, a topic that could come up when he meets Japanese Prime Minister Shinzo Abe as early as February...

"If, as an example, we sell a car into Japan and they do things to us that make it impossible to sell cars in Japan ... we have to all talk about that," he said. "It's not fair."

While Japan imposes no tariffs on U.S.-made cars, the U.S. levies a 2.5% import tax on Japanese vehicles. But American automakers feel that environmental regulations in Japan and other factors still limit their access to the market. Ford logged lackluster sales in the country before its exit last year.
Actually, the Japanese are buying a lot more foreign cars than they used to. Nearly a tenth of sales are now accounted for by foreign makes. However, American automakers have been unable to make products attractive in this market. That is, if the Japanese were so protectionist as Trump says, then all other foreign makes would be discriminated against, while clearly isn't the case anymore:
Foreign vehicles now hold a record share of the Japanese auto market even as U.S. President Donald Trump assails what he sees as unfair access hurdles, a sign that the struggles of some car companies have more to do with appeal than legal barriers...

Foreign automakers sold 295,114 vehicles in Japan last year, up 3.4% from 2015, according to the Japan Automobile Importers Association. Foreign imports' share of all registered vehicles rose to 9.1%.

But American cars have not shared in this growth. Ford Motor pulled out of the Japanese market in 2016. General Motors sells only around 1,300 vehicles a year here. U.S. automakers accounted for more than 30% of Japan's vehicle imports in 1995, but last year that figure was around 5%.
Moreover, Shinzo Abe understands this situation. To be blunt, Americans have made next-to-no effort to market cars that are suited for Japan.
Asked in parliament if Japan was doing anything to prevent the entry of U.S. cars, both Abe and his trade minister, Hiroshige Seko, pointed out there are no tariffs on American vehicles.

"It’s not only President Trump, but U.S. officials at all levels often bring this up," Abe said. "I tell them, if you go outside, you will realize that there are quite a lot of European cars, but no American cars and there are reasons for that. There are no dealers, they don’t exhibit at the Tokyo Motor Show and they don’t advertise on the television or in newspapers."

"Makers from some countries make an effort by switching the steering wheel to the other side," he said. "If there is a misunderstanding about this, I will of course explain it to the U.S. side."
If the Yanks expect to make a tidy business selling left-hand drive only, gas-guzzling behemoths made for the (less sophisticated) US market unsuited for Japan with its right-hand drive, dearer fuel, and space-constrained roads and parking, they are delusional.

There's no mystery here: US cars are profoundly unsuited for the needs and tastes of Japanese car buyers. European automakers that try hard to understand what Japanese motorists want have succeeded. On the other hand, no amount of heavy-handed US government intervention will persuade these motorists to buy quite frankly inferior models.

That's largely all there is to it. As the post title says, Trump should understand that the Japanese buy foreign cars, just not American ones. Next up: equally idiotic complaints about Japanese "currency manipulation'.

Did Trump Finish Off Asian Export-Led Development?

♠ Posted by Emmanuel in ,, at 2/03/2017 06:06:00 PM
Is it really a whole new world? If there's any such thing as a premature call, then it's probably to label Asian export-led development "dead" because of anticipated Trump-led US protectionism. As goes America, so goes the world, some think: When the US shuts its borders to trade, that's all she wrote. However, I would argue that saying that a process that's made any number of Asian countries immeasurably better off is over is way too early. To make a baseball analogy, we're only in the first inning of the Trump horror show.

Consider the following:
  • Trump hasn't even hit Asian countries with massive tariffs yet;
  • Even if he did, it's unlikely for these to stick once disputed at the WTO;
  • Trump will not remain in office forever; 
  • There are several other export markets other than the United States; and 
  • No alternative Asian development model has been mooted.
At any rate, Bloomberg has some commentary to the effect that the next generation of would-be Asian export-led developers are reconsidering following the path of their predecessors. Consider populous (and largely Muslim) Indonesia:
At stake for less developed but relatively open economies is the ability to sustain economic growth rates that for Indonesia at least have hovered around 5 percent, helping lift more of its people into the middle class and giving a large youth population access to jobs. Trade and investment from the U.S. and China, alongside Japan, has helped propel that.

"In the past, emerging markets could have relatively high growth because they could focus their strategy on industrialization and trade,” said Basri, who was finance minister from 2013-2014 and a former chairman of the country’s Investment Coordinating Board. “Now, with the Trump protectionism, they cannot go with trade again.”

Japan, China, Korea, Taiwan and Singapore were aided in becoming industrialized nations as the global economy was open at the time, Basri added. "The rest of the emerging markets probably cannot repeat the success story.”
Glum they are:
Emerging economies generally will struggle in the face of Trump’s policy shifts, with Russia likely one of the few beneficiaries, according to a report from Nomura Holdings Inc. It warned that U.S. protectionism and possible retaliatory measures could intersect with geopolitical tensions, with “no shortage of potential flash points” including the South China Sea and the Korean peninsula.
To paraphrase Albert Hirschman, I'd probably agree that going with a highly unbalanced growth strategy reliant on exports for the most part for generating growth is increasingly unviable. Perhaps a more balanced strategy giving domestic consumption and market development equal billing makes better sense at the current time. With large populations, Indonesia, the Philippines, India, etc. are better placed to substitute some international with domestic demand.

That said, the rigors of international competition are probably not to be dealt away  with so easily if development is the overarching objective.

Frankfurt or Dublin? Banks Flee Post-Brexit London

♠ Posted by Emmanuel in at 2/01/2017 02:45:00 PM
And they're off! London-based financial institutions have begun indicating jobs-at-risk from Brexit.
The UK's self-inflicted wound called "Brexit" has not gone unnoticed by other European financial centers keen on picking up some banking-related employment and revenues. For the UK to dismember its largest industry just like that is senseless, and there is no shortage of those wanting to take advantage of the situation. With the loss of passporting rights allowing seamless trading with EU countries seemingly inevitable, the race for a new EU financial center to supplant London is on--preferably one that *actually* uses the euro currency. Although there are any number of purported contenders, recent articles suggest that the front-runners for picking up what business London loses are Frankfurt and Dublin:
Frankfurt and Dublin are emerging as the biggest winners at London’s expense as banks prepare for Brexit by planning new hubs in the European Union. Standard Chartered Plc and Barclays Plc are considering choosing Ireland’s capital as their EU base for ensuring continued access to the bloc, according to people with knowledge of their contingency plans. Goldman Sachs Group Inc., Citigroup Inc. and Lloyds Banking Group Plc are eyeing Frankfurt, other people said.
Frankfurt has been touted as a once-and-future destination for bankers, but it's fair to point out that an expanded role for it was also touted with the introduction of the single currency. Yet, it remains a distinctly second-fiddle financial center. Can Brexit change matters? 
Frankfurt is a natural choice for many banks. The German city is home to the European Central Bank, the Bundesbank, as well as the European Insurance authority. The German Federal Financial Supervisory Authority hosted 50 representatives from some of the world's biggest banks on Monday to explain the steps required to set up a business in Germany.

"As committed Europeans, we do not see Brexit as a reason to celebrate," said Peter Lutz, the authority's deputy head of of Banking Supervision. "But now we need to take a pragmatic approach and offer institutions the necessary supervisory clarity for their strategic decisions."
Dublin, Ireland has advantages that Frankfurt lacks such as sharing the same language as the UK and one of the lowest corporate tax rates in the EU at 12.5%.
There are plenty of advantages to Dublin: English as the main language, same time zone as London, low corporate tax rate. Plus more than half of the world's leading financial services firms already have subsidiaries in Dublin, according to the city's International Financial Services Centre.
Paris is also in the running, but labor laws that make it harder to hire and fire have been a longstanding deterrent for more banks moving there:
Paris, only a short train trip from London, is hoping to boost its financial services sector by attracting bankers fleeing Brexit. The city launched an advisory service for companies that want to relocate from London following the U.K.'s vote to leave the European Union. HSBC, Britain's largest bank, has already said it could move roughly 1,000 jobs from London to Paris. Financial services firms in Paris manage 2.6 trillion euros worth of assets, according to the French government.

The city is also home to Euronext, Europe's second largest stock exchange, which is just behind London in terms of transaction volume and stock market capitalization. Paris is also key for the bond markets; firms in Paris carry out nearly 35% of total bond issues in the eurozone. However, some banks are concerned about strict French labor laws.
My inclination is to believe that the era of a consolidated financial center are over. No by design, but by reason of no destination having the same combination of positive attributes London has. Perhaps more diversification will be good in European finance? In any event, you don't expect the emergence of another London-like center.

Trump & Sending World Trade Back to the 1930s

♠ Posted by Emmanuel in at 1/30/2017 04:43:00 PM
The infantile Trump time travels back to the Great Depression and wishes things now are the way they were then.
Sales of dystopian novels have taken off as the ramifications of US President Donald Trump--I have to re-read that every now and again out of disbelief--become clear. Having pushed through with quite frankly anti-Islamic policies to ban citizens of seven countries whose citizens have never caused a single fatality Stateside from entering the US, it's probably only a matter of time before his isolationist-protectionist policies are unleashed at a time you least expect it.

We are getting a flavor of it already with Mexico and the tweet war. The question is, when does Trump's administration begin implementing discriminatory policies against the likes of China and Mexico? Unfortunately, much power has been vested in the executive for the sensible reason that, prior to Trump, no postwar American president has tempted fate by inviting a trade war. With Trump at the controls, however, there's no telling what depths of protectionism he'll sink to and how far down he'll drag down the rest of the world.

The Sydney Morning Herald imagines the not-so-unimaginable scenario of Trump dragging the world back to the interwar years between WWI and WWII. When countries could not obtain what they needed by trade, they did by war. How far back in time Trump takes the world can be measured by the tariff levels he sets:
A retreat to protectionism would indeed mark a stark reversal of the trend of the past half-century, which has, since the signing of the General Agreement on Tariffs and Trade in 1947, been marked by countries cutting tariffs and other trade barriers. Average tariffs have fallen to about 5 per cent, down about 22 per cent in the immediate post-World War II era.

Trump's 20 per cent Mexican tariff would transport the world back 70 years. A 45 per cent China tariff would take us back almost a century to the 1930 Smoot-Hawley Tariff Act, which imposed tariffs in excess of 50 per cent. This protectionist act – named after two Republican senators and signed by a Republican president, Herbert Hoover – caused a slump in US exports as other countries retaliated and is widely accepted to have prolonged the Great Depression.
It then goes with the discretion of the president over trade matters...
Various US laws grant the President the unilateral power to impose tariffs, including the hundred-year-old 1917 Trading with the Enemy Act. What would happen then? Well, retaliation would be swift. As a member of the World Trade Organisation (the great-great-grandson of GATT), any move by the US to impose a discriminatory tariff would trigger rights for other countries to retaliate. It'd be 1930 all over again. If other countries slap tariffs on American goods, this would hurt US exports and tend to increase the US trade deficit, the very thing Trump seeks to shrink.
...before ending with the obvious point that nobody really "wins" in a trade war:
While some special interests may be protected, global consumers – Americans foremost among them – would pay more to live, while also missing out on the opportunity to be employed by genuinely productive firms, specialised in what their country is relatively best at producing, and thus with long-term prospects and the ability to pay higher wages. It would be one of the biggest deliberate campaigns to destroy wealth in modern history. We must hope President Trump keeps his finger off the trade war trigger. Only time will tell how MAD this president really is.