A Sneezing West Should Not Give Us Cold:Emerging Markets Vs The Euro-America Economic Crisis- Where Are The Vantage Points?
By Moses Varfee Kowo
As a spectator following the new trend in world affairs, it is important to give attention to a recent visit by British Prime Minister David Cameron as he load or jam packed the royal airliner with leading British investors seeking investment from East and Southeast Asian Countries. Prime Minister Cameron headed for Indonesia, Malaysia, Japan and Burma particularly seeking new investments for the Queen’s nation.
In Japan, Mr. Cameron appealed for investments in his country and said countries in East and South East Asia represented a huge investment opportunity for his country. He praised the Japanese carmaker NISSAN for its plans to build a new factory in Sunderland that could create more than 300 jobs in Britain but also create jobs in supply chain processes. Panasonic is also expected to set-up a fuel research centre in Cardiff while Mitsubishi is setting-up a wind turbine generator project in Edinburg. Prime Minister Cameron was seeking contracts for British Companies for a planned decommissioning exercise of Japanese Nuclear facilities following an earthquake and Tsunami which led to the Fukushima Nuclear disaster.
A leading Magazine in Indonesia, The Jakarta Post described the visit of the British Prime Minister to Jakarta as a move to seek investment for his ‘beleaguered nation’s businesses’. Prime Minister Cameron sought to further strengthen trade links with the world’s most populous Muslim nation which included a deal with the Indonesian carrier Garuda for the purchase of eleven aircraft from the British plane maker Airbus. Cameron and his team of British Investors were seeking to increase investments in the country which has dropped from a record 1.89 billion to a meager 419million.
Prime Minister Cameron also headed for Kuala Lumpur, Malaysia for another two days official visit, insisting on greater international trade between the two countries. In 2011 the United Kingdom was Malaysia fourth biggest trading partner with trade totaling 4.23 billion United States Dollars while Malaysia was the UK second biggest trading partner in the whole Asia. In the manufacturing sector, investment from the UK stood at around 6.23billion United States Dollars from all implemented and approved projects (New Straits Times, April, 2012).
The move by the British Prime Minister to the East is just one in a series of moves by western powers seeking new investment in Asia and other developing nations of the world as they leave the economic drought Europe and the United States of America. There have been more calls from countries in the West for more openness in trade from the Asians and other developing countries in Africa. There has been more trade litigation cases brought against developing countries at the World Trade Organization (WTO) involving unfair trade practices than any time in the history of that organization. But the question is why Europe and United States calling for open markets at this time? These litigations are not actually meant to see a more just market for competition; instead it is intended to use the World Trade Organization to Coerce Developing and emerging countries to immediately open their markets to assist in the current economic difficulties face by countries in Europe and the United States of America.
The European Union has taken more cases to the WTO through the 1948 establishment of the General Agreement on Trade and Tariff (GATT) involving protectionism policies and huge trade barriers such as excessive tariff on the importation of products from these weak economies in Europe created by the crisis. To justify their move to the WTO and place them in a comfortable position, these countries in Europe have taken steps to reduce tariff on the importation of goods in their countries but unfortunately these European countries are becoming less of a target for developing countries simply because most countries in the world are reluctant to sell their products in an environment where there are big austerity measures-which I call profuse and indiscriminant cuts in overall spending.
Today, the Obama administration is pressing Vietnam and Malaysia to open-up for free trade under the Trans-Pacific partnership and is also calling the two governments to reduce monopolies enjoyed by the state corporations in certain sector of the economy. The US government wants Malaysia to reduce monopolies enjoyed by PETRONAS, a state oil and gas corporation in Malaysia basically due to the fact that the company is standing even stronger than most US-owned oil and gas companies. The company (PETRONAS) profit in 2010 stood at 40billion, 10billion clear of the US oil giant ExxonMobil of 30billion (Foreign Policy magazine, April, 2012).
Strategic Alliance among developing countries
It important to bring out these facts about the current trend in world affairs pointing to many facts that leaders in the developing world can take cue or use as vantage point to protect their markets from the stress of the economic down-turn that is currently crippling western economies. Financial institutions in developing countries might not be able to withstand the stress from spilled-over effects of a damaging economic outlook from western countries. The reasons are simple to note, because Africa in particular might not have the infrastructure, solid economy and financial base to relieve their banks from collapse in the instance where they need funding to survive. Another reason is that Africa for example is still struggling with unemployment and therefore any more economic measure in Africa in the form of austerity will only be a final nail on the coffin for its people. It is therefore important to stop institutions in developing countries from mingling with European institutions to safeguard these entities.
Economic policymakers in developing countries should be cognizant of the fact that while these crippling economies in Europe and United States are pressing for open market is a clear attempt intended to help absorb some of the risk from these economies under the pretext of seeking free trade under the WTO protocols; they are also jealously protecting what is left of their own markets. For example, countries in Southeast Asia are also pressing the United States to open its shoes and clothes industries to the outside world though they are yet to adhere atleast for now because there is huge custom duties and tariff associated with importing clothes and shoes in the United States. Now it can be clearly seen that the West is pressing the developing world to live up to WTO protocols but also closing their markets to the rest of the developing world.
It will be cataclysmic if policymakers in the developing world fail to settle down for a 50-50 arrangement where all countries will be treated fairly and all markets are open consistent with Marrakesh, morocco and the Lisbon, Portugal protocols on fair trade practices. This is why we are constrain to support the Brazilian government move to take some protectionist measures to safeguard the Brazilian market by providing new incentive for company that are 60% Brazilian owned. It must be made extremely clear that not all aspects of protectionism are against free trade. It is the responsibilities of governments around the world to promote investments and competition on the home turf. This is why Professor Michael Porter contends, that companies must first succeed at home before finding solid grounds in the international markets. Japanese companies have succeeded in doing that very well.
I am also constrained to support the Argentine President move to strengthen businesses in her country. Now the government is asking companies to ensure export must be equal to import mainly from European countries. This has annoyed the European Union, but the Argentine government reason is simple and realistic. European Union countries were basically not buying Argentine products because they don’t have the money but instead they were exporting into Argentine market. Now what happens as a result of this, is that you putting Argentina into Balance of Payment deficit because they will be importing more than they will be exporting thereby challenging the strength of Argentine currency. Though realistically it is almost difficult if not impossible to achieve 50-50 import and export but it is good to export more which places a country in favorable Balance of Payment in most instances.
I burst into laughter recently when the Government in Thailand was shocked after a projected export to European countries felt by 3% which has worried the government in Bangkok. No one should tell the government in Thailand that trade with Europe is in trouble because the government sees economic crises in that part of the world characterized by big austerity (huge spending cuts). It was funny to me because why will the Thai government thinks that people in these countries will continue to buy when there is no money in their pockets or they expect the people to use rocks to purchase, Common logic. Austerity is not just spending cuts on non-essential areas, it includes cutting salaries, increase taxes, cuts in Health care benefits, pensions and also cuts on education, infrastructure and just everywhere to save money and pay debts.
The government in Thailand can basically adopt a strategy of focusing on Domestic Consumption because it has the population or turn to other markets like the African or South American markets or even in the Caribbean until things can stabilize in Europe which I doubt can happen anytime soon.
It remains the responsibility of policymakers in these developing economies to argue in a different and strong way before the trade governing body (WTO) that local markets must be protected against an aggression from desperate investors from Europe and the United States who are now looking for more secure ground for investments. There should be no mistake about this, the economic situation in Europe is far from over because institutions are still being downgraded and most banks are still failing the stress test conducted on the their ability to respond in case of an immediate shock. Today the fourth biggest bank in Spain, Bankia is asking for government bailout in the tone of 19 billion United States dollars.
Desperate to save Europe
The simple definition for news in the context of journalism is that news is an unusual event. In this situation, it is no news to see Indonesian President Susilo Bambang Yudhoyono load an Indonesian carrier of investors to seek investment from Europe or to see Malaysian Prime minister Najib Razak leave Kuala Lumpur to seek investment in London because these are traditional places where developing countries seek investment for their countries. But a Royal Aircraft fill with more than 30 British investors seeking investments in Asia is more newsy than anything else in recent times in the context of the current economic situation in the world. This is a chilling reminder that Prime Minister Cameron can no longer seek economic happiness for his country through the European Union framework with some countries planning a pullout from the organization. Former French president Nicholas Sakorzy openly criticized some countries in the bloc for joining the EU under false pretext and lying about their economic standing.
There are good advantage in the Asian and African markets that both continents can tap on for growth and development. European companies too are running from their own continent because labor is very expensive in the west. The Asian-Afro collabo can work around a relatively cheap labor force and heavy population and a reasonable cost of living to increase the productivity of the two continents by investing more in their two continents.
The world has changed and international political players must be willing to accept the changes in world affairs. Unfortunately there are countries mainly in the developing world that are not willing or possibly still living in the past that have refused to follow the inevitable change in world affairs.
In the 20th century the United States and possibly countries in Europe decided the trend in world trade and were the big brothers in deciding the way the world economy should run. This situation has changed because there are many countries making substantial use of the natural and human resources and can use these to strengthen their position in key decision making aspects of the world-even president Obama and the Europeans are aware of these existing facts. This is why the current U.S administration is seeking international consensus on issues before making decision. In the absence of a consensus, decisions from one end will certainly fail.
However there are still some issues of fear running in the minds of these developing countries about the remaining capacity of the United States or other 20th century power brokers to decide the course of action. Of course the United States is still a significant force but its power has dwindled in this 21st century.
Most developing countries still vote in various international organizations not on the basis of solidarity for fellow developing country but those votes are characterized by vested western interests. These tendencies can only continue to put developing countries in a begging position for a very protracted period of time. The recent election of the Korean-American Medical Doctor to the position of president of the World Bank is a chilling reminder of series of unresolved global issues and the lagadisical attitude of governments in the developing world to stand tall on these issues. The Colombian candidate for the Job Jose Ocampo complained on international wires that his own government was not supporting him. It later turnout to mean that the government in Bogota (Colombian capital) was supporting the American candidate; instead it was the government of Brazil that nominated the former Colombian Finance Minister.
The argument here is not to push the United States or Europeans away from decisions related to world economies as these countries or continents remain indispensible stakeholders or shareholders in world affairs. However it is understandable to note that except you living on utopia that the world has changed. This is a great opportunity for all countries to sit on the table and shuffle the cards evenly in clear view of everyone. This argument is also not meant to say all countries on planet earth can be equal but also there can be times where things can shift from one region to another. Therefore we are speaking of the emerging shift in world economy and politics and it is only but gracious for all to accept these shifts on the world stage. A sneezing America-Euro should not give us cold. Period!
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