Biden Visits Korea and Japan With Rare Opportunity

May 24, 2022 By alexfrewmcmillan in Asia, Australia, Business, China, Communist Party, Geopolitics, India, Indo-Pacific Economic Framework, Investment, Japan, Politics, Quad, South Korea, Stock market, United States Tags: Australia, Donald Trump, Fumio Kishida, Geopolitics, India, Indo-Pacific Economic Framework, Japan, Joe Biden, NATO, politics, Quad, Samsung Electronics, Solomon Islands, South Korea, Trans-Pacific Partnership, U.S. President, United States, Yoon Suk-yeol Leave a comment

On his first Asia spin as president, Joe Biden will find a surprisingly warm welcome, and is due to launch an economic framework for US-Asia relations.

Joe Biden is today starting his first Asia trip as U.S. president, visiting South Korea and Japan with an unusual opportunity to cement alliances with these key Asia Pacific democracies. He will be mindful all the time of the threats presented by a nuclearized North Korea and by China, with its promise to conquer Taiwan, by force if necessary.

I’m watching Biden’s first steps in Korea, where he has made a Samsung Electronics chip factory in Pyeongtaek his first stop. Samsung chief Jay Lee has been excused from attending his accounting-fraud trial to take Biden on a tour, where they’re joined by new South Korean President Yoon Suk-yeol. Samsung in November announced a US$17 billion chip factory near Austin, Texas, and is showing off its advanced 3-nanometer chips for the first time on Biden’s visit.

This story first appeared on TheStreet.com and its subscription service Real Money. Click here to see the original story.

During his five-day Asia stay, Biden will find fertile ground to forge friendships with new U.S.-friendly leaders in both Tokyo and Seoul, arguably the best opportunity in two decades to do so. Rivals China and North Korea, meanwhile, are both battling Covid-19 outbreaks that undermine domestic popularity for the leadership in Beijing and Pyongyang.

Still, U.S. and South Korean intelligence suggests that North Korea may well test another long-range intercontinental ballistic missile during Biden’s visit, or possibly even conduct its first nuclear-bomb test since 2017. Biden cancelled an intended trip to the demilitarized zone between the two Koreas, and there’s been no progress on denuclearization talks since he became president.

Biden arrives in Asia at a time that leaders have newly taken office who have pledged to improve relations with the United States. Japanese Prime Minister Fumio Kishida moved into the Kantei on October 4, while Yoon was inaugurated on May 10. Yoon may push for South Korea to join “the Quad,” the alliance of Pacific democracies that currently consists of the United States, Japan, Australia and India.

The U.S. president is due for a summit with Yoon on Saturday, then will fly to Tokyo on the next day, where he is set to launch the Indo-Pacific Economic Framework on Monday, May 23. The framework is a U.S.-led initiative designed to counter criticism that the United States has focused only on security issues in Asia. China champions the Regional Comprehensive Economic Partnership free-trade deal that went into effect with 14 other Asia Pacific nations on January 1. But the United States has been accused of an “all guns and no butter” approach.

The “IPEF” is very vague and in its early days. An early draft obtained by the Financial Times shows that member nations have agreed only to “launch negotiations” on trade. But even that assertion may be watered down in a planned two-page statement simply to say the countries are starting consultations that could lead to negotiations that might amount to something. Phew. The language was literally being finalized on the Air Force One flight to Seoul.

Biden is attempting to undo some of the damage done when former president Donald Trump pulled out of the Trans-Pacific Partnership, an executive order Trump literally signed on Day 1 when he took office in January 2017. Kishida in Tokyo will likely nudge Biden to consider rejoining the recast 11-nation partnership, which Japan had championed, although there’s been no indication the United States is considering that.

The IPEF will be a weak TPP substitute. It does not include any improved access to U.S. markets for Asian nations, whereas the TPP promised free-market access for many goods. But the IPEF will attempt to address infrastructure, supply-chain resilience, clean energy, and digital trade. Kishida will join Biden at the unveiling, with South Korea, Australia, New Zealand, the Philippines and Singapore likely to join Japan and the United States in the deal.

Biden will then attend a Quad summit in Tokyo on May 24. The four-way partnership has risen in profile since it was rebooted in 2017, having been on hiatus since Australia withdrew in 2008 in a bid to improve Aussie relations with China. How things have changed. Australia is once again “all-in” on the Quad, and is now instead embroiled in trade disputes with China, which it has also accused of meddling in domestic politics to the extent of attempting to get a Beijing “agent” elected to national office.

The Quad, whose leaders met in person in September at the White House, has made progress on public health with the Quad Vaccine Partnership, pledging 1.2 billion vaccine doses globally, and on infrastructure. It has also formed a coordination group to “deliver transparent, high-standards infrastructure” in the region, a response to China’s Belt and Road Initiative. It is also working on green energy, lower-emissions shipping and high-tech supply chains for goods like semiconductors.

But it has yet to make much obvious headway in handling the military threat China poses in the Pacific. Beijing has basically gotten away with its island-building program to construct missile, naval and air-force bases on islands in the South China Sea. There’s been deadly conflict on the Himalayan border between Indian and Chinese troops, where China has again built structures in contested no-man’s land.

Most recently, Australia in particular has been alarmed by a security pact China has struck with the Solomon Islands, which could see Chinese troops based in the island nation. U.S. officials have said they would need to respond to any deployment of Chinese paramilitary troops to a country that saw heavy fighting on Guadalcanal during World War II, after Japan built naval and air bases there. Aussie defense minister Peter Dutton said in response to the China-Solomon security pact agreed in April that “Australia should prepare for war,” claiming China is “on a very deliberate course at the moment.”

The leadership in Canberra is in question. Australia holds national elections on Saturday, in which it is mandatory to vote. The opposition, left-leaning Labor Party holds a very slight edge over the conservative Liberal Party, and its unpopular Prime Minister Scott Morrison, or “ScoMo.” If there’s a change in leadership, it’ll be a scurry to take part in the IPEF signing and the Quad summit, with Biden due to meet the leaders of India and Australia on the sidelines.

Unusually, a group of around 25 independent candidates known as the “teals,” almost all women with successful careers, may hold the balance of power in Australia. Inaction on climate change has fueled frustration with the “gray-haired men fighting for power,” as Damien Cave put it in The New York Times, in a country that produces the world’s highest levels of coal-generated greenhouse gas per person, and that faces devastating now-annual bushfires and floods.

One of Biden’s key differences from his predecessor on the foreign-policy front is his ability to forge multinational diplomatic alliances. He held a summit at the White House on May 12-13 for the leaders of the nine Southeast Asian nations in ASEAN, at which they agreed to strengthen economic ties, improve health security, collaborate on smart manufacturing and develop renewable energy. Most pointedly, they pledged maritime cooperation and to maintain “the South China Sea as a sea of peace, stability and prosperity,” noteworthy since China claims almost all of that sea as its own territory.

Biden noted a joint desire to see an Indo-Pacific that is “free and open, stable and prosperous, and resilient and secure.” The United States committed US$150 million in infrastructure initiatives with ASEAN op top of support of US$100 million made after Vice President Kamala Harris visited Southeast Asia in August.

Former president Donald Trump alienated just about everyone, and championed an isolationist policy of the United States going it alone. He opted to skip ASEAN meetings when he was in power. Given Trump’s antagonism toward NATO, which he repeatedly hit up for money, it is hard to imagine him having any success calling on Europe to present a united diplomatic front against Russia after its invasion of Ukraine. Then-German chancellor Angela Merkel was pretty upfront with her disdain for Trump; French President Emanuel Macron backed off their early “bromance,” saying the lack of U.S. leadership under Trump had led to NATO’s “brain death.”

Trump saved his warmest words for hardmen dictators like Russian President Vladimir Putin, describing Putin’s early moves in Ukraine as “genius.” Putin “was a friend of mine,” Trump told the golfer John Daly in March. “I got along great with him.” His attempts to curry favor with North Korean leader Kim Jong-un led to a great photo op as Trump became the first U.S. president to step across onto North Korean soil, but ultimately produced no progress on the diplomatic front.

Trump also criticized the “horrible” terms of trade with South Korea. He took Japan to task for not buying enough U.S. autos, while ignoring that many American models are way too big for Japanese streets. That informed a decision to impose higher tariffs on Japanese steel. Trump criticized Japan and South Korea, too, for failing to pay enough for the U.S. troops stationed on their soil.

The Biden administration rolled back the Trump-era tariffs on Japanese steel as of April 1. With this first Asia spin, Biden will be hoping to strengthen U.S. influence across the Pacific, both in terms of the economy and the security of the region. These first small steps may help improve the direction of U.S.-Asia policy, after many Asian nations began to sense that Washington was retreating from Asia. The United States, and its leader, are back here in Asia again.

Australia Reportedly Faces Secret Trade Ban by China

November 10, 2020 By alexfrewmcmillan in Asia, Australia, Business, China, Communist Party, Coronavirus, Covid-19, Politics, Stock market Tags: ASIO, Australia, China, Coal, Commodities, Copper, Lobster, politics, Sanctions, Stock market, Tariffs, Trade Leave a comment

This story first appeared on TheStreet.com.

https://realmoney.thestreet.com/politics/australia-reportedly-faces-secret-trade-ban-by-china-15481731

Is China punishing Australia by imposing a secret ban on a series of Aussie imports? That appears to be the case, with November 6 reportedly set as the day for the ban to begin.

Beijing has ordered a halt to the import of a wide range of Australia products, with at least seven product categories temporarily banned, according to a Bloomberg report citing “people familiar with the situation.”

The hit list would stop inbound shipments into China of coal, barley, copper ore and copper concentrate, sugar, timber, wine and lobster, the report states. The sources asked to remain anonymous because the information is sensitive.

Any temporary ban on commodities such as coal and copper would go much further than previous one-product restrictions, normally on high-profile consumer goods. China is Australia’s top trading partner, accounting for A$136 billion in imports into China in 2018, according to figures from the Australian government, with A$78 billion in Chinese goods heading the other way. That total two-way volume is up 35.8% since 2016.

Ore shipments explain why Australia punches above its weight as China’s sixth-largest source of imports, on par with Germany. Australia’s total trade ranks it as China’s 14^th largest partner, matching the size of the Aussie economy.

China often changes visa restrictions for its citizens without any public notice. It often tries out policy changes in the securities industry by letting industry insiders experiment without any official announcement of a change in the rules to see how things go. And it occasionally restricts permissions for the import of certain specific goods in retaliation of perceived slights.

But China normally publicizes its punishments on trade. So it is unusual that Aussie exporters are in the dark on any trade ban about to come down.

The effects are already being felt.

Lobsters languish

Tons of live Australian lobsters have been left stranded on the tarmac of a Chinese airport, The Sydney Morning Herald reports, with customs clearance taking too long for the shellfish to reach restaurants before they are spoiled.

Australian Trade Minister Simon Birmingham says he knows about the reports of “customs clearance issues” on premium shellfish shipments into China. Paperwork suddenly becomes hard to come by if China wants to punish companies from a particular nation or multinational. So-called “health and reliance checks” have been holding up shipments into Shanghai, with China the destination for 94% of Australian rock lobster exports.

The trade minister said “discriminatory screening practices” imply a breach of World Trade Organization rules and a breach of the China-Australia Free Trade Agreement.

I doubt Beijing’s bigwigs are going to let that bother them. World Trade Organization (WTO) and United Nations rules and protocols are very useful when China wants something, less so when they don’t suit Beijing.

Virus vitriol

China and Australia are at odds diplomatically after Australia requested an independent investigation into the origins of the coronavirus. Australia has also sent its warships to participate in “freedom of navigation” trips through waters that China claims in the South China Sea.

China pushes dodgy evidence of centuries-old fishing trips by Chinese vessels as justification for a land grab over the oil-and-gas-rich waters right up to the shores of the Philippines, Brunei, Malaysia and Vietnam. All those nations are fighting China with legal challenges over their territorial rights.

The trade restrictions began in May, when China introduced heavy tariffs on Australian barley and suspended imports of beef from some Australian slaughterhouses.

China has since launched an investigation into whether Australia’s wine producers are dumping bottles at cut-rate prices on the Chinese market. The Australian cotton industry says Chinese spinning mills have been told to stop buying Australian cotton.

Pressure tactic

The China International Import Expo is taking place this week in Shanghai, at which President Xi Jinping sung the praises of international trade. Officially, China’s commerce ministry has denied that Australian goods are under a ban.

Trade analyst Jeffrey Wilson told The Guardian this is a classic example of “gray zone” diplomacy, where China is attempting to scare Australian companies over access to a key market, using trade to exert political pressure.

“The ambiguity is by design,” he says. “It’s not a trade war, it’s psychological war.”

Shares in Treasury Wines Estates fell 8% in Thursday trading in Sydney after the maker of Penfolds wines said China’s drinks industry is requesting Beijing to impose unprecedented retrospective tariffs on Australian wine already sold in China. That’s part of an anti-dumping investigation launched in August by China’s commerce ministry.

Spying spat, too

Besides their public diplomatic spats, China and Australia are also engaged in a clandestine fight over spying and undue political influence over Aussie politics.

Sunny Duong, a Chinese-Australian community organizer, on Thursday became the first person charged over foreign interference in Australian politics under new Australian national security laws. Duong, who heads the Oceania Federation of Chinese Organisations from Vietnam, Cambodia and Laos, has been a prominent donor to the pet projects of various Australian politicians.

There are no details as yet as to what Duong, who has been very public with his appearances alongside Australian politicians, is supposed to have done wrong. But the Australian Federal Police raided several properties in Melbourne on Oct. 16 in relation to the investigation.

Australia’s spy agency, the Australian Security Intelligence Organisation (ASIO), has worked with the FBI-equivalent federal police on a counter foreign interference (CFI) taskforce in a year-long investigation.

“The CFI taskforce has taken preventative action to disrupt this individual at an early stage,” Australian Federal Police deputy commissioner Ian McCartney said, according to The Guardian. “Foreign interference is contrary to Australia’s national interest, it goes to the heart of our democracy. It is corrupting and deceptive, and goes beyond routine diplomatic influence practiced by governments.”

ASIO began warning in 2017 of Chinese influence attempts to control Australian politics through donations and sympathetic politicians.

In a blockbuster 2019 allegation, ASIO said it was investigating evidence that Beijing attempted to plant its operative as an elected official into the national Australian government. ASIO went public after news media broke the story. A Melbourne luxury car dealer, Bo “Nick” Zhao, reportedly told ASIO he was offered a “seven-figure sum” to run for government by a Chinese spy ring. Zhao was found dead in March 2019 from unexplained causes in a Melbourne hotel room.

As is typical, China has countered that Australia has been spying on China on a mass scale, instigating defections, spying on students and feeding false stories to the news media. A foreign ministry spokesman, Zhao Lijian, said in response to a report that Australia has tried to bug the Chinese embassy in Canberra that Australia is playing the “part of the victim, peddling rumors and stoking confrontation by staging a farce of the thief crying ‘stop thief.'”

Chinese exiles say they have faced intimidation from pro-Beijing squads while sheltering in Australia. It is a similar situation to what other Chinese exiles say has been happening in the United States. It appears these shadowy squads are sent to silence Beijing’s critics or force them to return to face Chinese courts through threats against their families in China or abroad.

Australia was the first country to ban the Chinese tech giant Huawei Technologies from involvement in the country’s 5G mobile phone network. It cited national security concerns.

However, China is particularly angry over Australia’s demand for an investigation into the roots of Covid-19. It has worked very hard behind the scenes to force concessions from the World Health Organization as to how it will investigate the virus, with the WHO leaving many key decisions to China, and hobbled in its attempts to send its own scientists to the virus epicenter in Wuhan.

5 Gray Swan Shocks On the Horizon In 2018

January 12, 2018 By alexfrewmcmillan in Business, China, Feature, Politics Tags: Alibaba, Black sway, Brexit, Business, Europe, Finance, Gray swan, Grey swan, Inflation, Investment, Investors, Nomura, politics, Tencent, United States, WeChat, Weixin Leave a comment

The Japanese investment bank Nomura (NMR) has 10 “gray swans” to watch out for in 2018. Unlike their cousins the black swans, which simply pop out of nowhere and therefore can’t be predicted, gray swans aren’t hidden or invisible, just largely ignored. At our peril, it seems.

They are topics that aren’t widely discussed, the bank says — not the question of what to do over North Korea, or whether nationalists will triumph in the Italian elections.

I’ll tackle the first five in this story and revisit the gray-swan family by addressing the other five in a second piece.

Continue reading →

China’s New Leaders Are No Threat to President Xi

October 26, 2017 By Alex Frew McMillan in Asia, China, Communist Party, Geopolitics, Politics Tags: China, Communist Party, leadership, Politburo Standing Committee, politics, President, Xi Jinping Leave a comment

China’s new roster of top leaders have shuffled into their places on the red carpet for their curtain call, the procession leaving no question as to who is in charge. President Xi Jinping has been reappointed to head the Communist Party, with no one waiting in the wings as his nominated heir.

What’s more, not one of the new members of the Politburo Standing Committee, China’s cabinet, is under the age of 60, meaning none of them is likely to succeed Xi when and if he stands down at the end of his second term in 2022.

It’s a highly unusual move, unprecedented in recent years, leaving Xi to continue his push for reform and fight against corruption unquestioned. Critics worry that Xi’s “rule” has evolved into a dictatorship, the president eliminating rivals who question his positions and squelching stories about his family’s amassed wealth.