Recommended Weekend Reads

Guides to Understanding Trump’s Trade and Foreign Policy, What the EU Must Do to Build Up Their Defense Capabilities, the US Workforce Challenge, and Why China Isn’t the Obvious Winner in Latin America

March 28 - 30, 2025

Understanding Trump's Trade and Foreign Policy 

• A User’s Guide to Restructuring the Global Trading System      Stephen Miran/Hudson Bay Capital

  Stephen Miran is one of President Donald Trump’s top economic advisors.  He chairs the White house Council of Economic Advisors.  He is also the author of a 41-page memo – more a blueprint -  that lays out what can be achieved by what is being billed as a “Mar-A-Lago Accord” which would revise the framework for the global financial system. 

• Trump, Strategy, and Mercantilism   School of War Podcast

  Walter Russell Mead, Alexander Hamilton Professor of Strategy and Statecraft at the University of Florida's Hamilton Center and columnist for The Wall Street Journal, joins the show to talk about the role of economic issues in Trump’s strategic views.  They discuss Mercantilism and physiocracy, the role of Silicon Valley, the dollar, coalitions, tariffs, China, and what President Trump thinks about all of it.

• Annual Threat Assessment of the U.S. Intelligence Community   Office of the Director of National Intelligence

  In this year’s public annual report – the first of the new Trump Administration and under the oversight of new DNI Tulsi Gabbard- the DNI points out the following: Both state and nonstate actors pose multiple immediate threats to the Homeland and U.S. national interests. Terrorist and transnational criminal organizations are directly threatening our citizens. Cartels are largely responsible for the more than 52,000 U.S. deaths from synthetic opioids in the 12 months ending in October 2024 and helped facilitate the nearly three million illegal migrant arrivals in 2024, straining resources and putting U.S. communities at risk. A range of cyber and intelligence actors are targeting our wealth, critical infrastructure, telecom, and media. Nonstate groups are often enabled, both directly and indirectly, by state actors, such as China and India as sources of precursors and equipment for drug traffickers. State adversaries have weapons that can strike U.S. territory, or disable vital U.S. systems in space, for coercive aims or actual war. These threats reinforce each other, creating a vastly more complex and dangerous security environment. Russia, China, Iran and North Korea—individually and collectively—are challenging U.S. interests in the world by attacking or threatening others in their regions, with both asymmetric and conventional hard power tactics, and promoting alternative systems to compete with the United States, primarily in trade, finance, and security.

The EU’s Move to Build Up Its Defense Capabilities

• Joint White Paper for European Defense Readiness 2030     European Commission

  From the paper’s introduction: The international order is undergoing changes of a magnitude not seen since 1945. These changes are particularly profound in Europe because of its central role in the major geopolitical challenges of the last century. The political equilibrium that emerged from the end of the Second World War and then the conclusion of the Cold War has been severely disrupted. However much we may be wistful about this old era, we need to accept the reality that it is not coming back. Upholding the international rules-based order will remain of utmost importance, both in our interest and as an expression of our values. However, a new international order will be formed in the second half of this decade and beyond. Unless we shape this order – in both our region and beyond – we will be passive recipients of the outcome of this period of interstate competition with all the negative consequences that could flow from this, including the real prospect of full-scale war. History will not forgive us for inaction.

• Defending Europe without the US: first estimates of what is needed    A Joint Publication of Bruegel and the Kiel Institute for the World Economy

  Europe could need 300,000 more troops and an annual defense spending hike of at least €250 billion in the short term to deter Russian aggression.  From a macroeconomic perspective, a debt-funded increase in defense spending should boost European economic activity at a time when external demand may be undermined by the upcoming trade war (Ilzetzki, 2025; Ramey, 2011), though yields and inflation may rise. Ilzetzki (2025) argued that defense spending can also positively contribute to long-term growth via innovation, but a precise quantification of such effects is still needed.

• The Case for Europe    Strategic Europe

  By choosing to vote against a United Nations resolution marking the third anniversary of Russia’s invasion of Ukraine, the United States seems intent on abandoning its leadership of the West after eighty years of hegemony. Europe is going through its gravest hour since the Second World War—and most Transatlanticist political leaders are starting to realize it.  At best, Europe will have to defend its territory alone and take responsibility for deterrence. At worst, it will have to fend off great powers actively seeking to subvert it as they assert their respective spheres of influence. This could involve political interference, economic coercion, and open aggression, tearing Europe apart. Europe’s choice lies in between these two scenarios. Rather than predict success or failure, it is worth outlining the building blocks that make the case for a stronger Europe possible and the pitfalls this vision could run into.  

• Germany’s big spending splurge gives EU the jitters    Politico Europe

  European Union governments have expressed fears that the radical spending plans announced by Germany’s chancellor-in-waiting will end up skewing the bloc’s single market and could give the country an unfair competitive edge. A month on from an election that made Friedrich Merz almost certainly the next leader in Berlin, the upper house of parliament on Friday approved a historic change to the country's basic law to exclude defense investment above 1 percent of economic output from the nation’s strict spending rules, along with a €500 billion fund for infrastructure and green energy, clearing the final parliamentary hurdle.  While Germany’s allies in Europe have broadly welcomed Berlin’s long-awaited loosening of the purse strings, there is a sense of unease about the impact it could have at a time when economies are still struggling to recover after the twin shocks of Covid and the Ukraine conflict, and with the looming threat of a trade war with the U.S.

• Why Europe can’t defend itself: Political fragmentation is blocking autonomy   Wolfgang Munchau/UnHerd

  Imagine a world in which Western Europe was actually able to stick it to Vladimir Putin and Donald Trump simultaneously. As if. Back in the real world, there’s a remote possibility the Europeans might get their act together sufficiently to stand up to one, or the other. But not both. They will, in classic fashion, be split. Some of the eastern European countries, the Baltic States, for example, will prioritize a push-back against Russia. Others, like France, are more concerned with driving their independence from the US. Then there is a third group that wants neither. So, where does that leave Europe? What they are agreed on is the plan is to increase military spending. The EU will follow Germany’s example and partially exempt the defense budget from the fiscal rules. But the truth is, no amount of investment will wean the EU off its American dependency any time soon. It will take decades to close the immense defense technology gap. To build entire industries from scratch takes time. You need defense companies, supply chains, and know-how. Europe is far from the cutting edge of 21st century defense technology and its expertise in that sector has been diminished since the end of the Cold War.

• Behind NATO’s 2 Percent: Measuring the True Scope of Alliance Defense Investments and the NATO Defense Deficit    Mackenzie Eaglen & Cole Spiller/American Enterprise Institute

  This working paper examines NATO’s military spending through two key lenses: how NATO allies measure defense expenditures and the strategic implications of the long-term defense deficit created by chronic underfunding. While 21 member states now meet the 2 percent of GDP benchmark, the alliance must look beyond numerical targets to assess whether these investments translate into real military capability.2 Closing NATO’s $2 trillion defense deficit requires greater transparency in accounting to allow for more complete analysis, as well as sustained increases in spending to build credible deterrence against rising threats.

The Changing US Workforce

• Shifting Immigration Toward High-Skilled Workers    Penn Wharton Budget Model

  We evaluate two immigration policies that shift 10 percent of future low-skilled immigration toward either: (i) high-skilled immigrants (“HSI”) that otherwise maintains the current share of STEM workers within the high-skilled group, or (ii) only high-skilled STEM workers (“HSI STEM”) that increases the share of STEM relative to other high-skill workers. The number of total immigrants remains the same under both policies. Both policies grow the economy, reduce federal debt, and increase wages across all income groups: lower-skilled, higher-skilled non-STEM workers, and higher-skilled STEM workers. In fact, this policy change affords the rare opportunity of a “Pareto improvement” benefitting all groups.

• Technology Adoption and the Changing Role and Background of Clerical Workers   Federal Reserve Bank of Cleveland

  From 1980 through 2015, the share of clerical jobs in the employed labor force declined more significantly in large and expensive cities than in smaller cities. Moreover, the remaining workers performing these occupations in large and expensive cities had, on average, higher education levels and were more likely to perform tasks usually done by managerial and professional personnel when compared to their small-city counterparts. In this Economic Commentary, we show how these patterns are related to the uneven adoption of information communication technologies (ICT) across geographies and discuss adoption’s impact on clerical jobs’ tasks and worker requirements.

• Defensive Hiring and Creative Destruction      Jesus Fernandez-Villaverde/Yang Yu/Francesco Zanetti/National Bureau of Economic Research

  America has long struggled with a lack of productivity growth despite huge investment in research and development. Jesús Fernández-Villaverde, Yang Yu, and Francesco Zanetti find that the defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction, which in turn maintains the status quo and leads to stagnant productivity growth.

The Americas 

• China Won’t Be the Obvious Winner in Latin America    Ryan Berg/Foreign Policy

  After a mere two months in office, a narrative on the Trump administration’s policy toward LAC and great-power competition has emerged: Regional influence will accrue to China at the expense of the United States because Washington appears a “bully,” has talked of reviving the controversial Monroe Doctrine, and has occasionally adopted the rhetoric of territorial expansion. A deputy assistant secretary of state in the Biden administration accused the Trump administration of shortsightedness, leading to “an opening for China, made in America.” Even a former staffer in the first Trump administration worried that the current approach to LAC “could unwittingly facilitate the extension of Beijing’s influence.” Will the Trump administration’s more assertive approach toward LAC benefit China?

• What Elections Mean for Canada and the Future of North America    Center for Strategic and International Studies

  On March 23, newly minted Canadian Prime Minister Mark Carney announced snap elections for April 28, kicking off a contest to determine Canada’s future at a critical juncture. The election pits the incumbent Liberal Party, which has received a second wind since January in part due to tariffs and political threats from the United States, against the Conservative Party under the leadership of “Canada First” politician Pierre Poilievre. No matter the outcome, however, the next leader of Canada will inherit a tense relationship with the United States, public pressure to deliver economic gains, and an increasingly fraught global security environment that impinges upon Canada’s sovereignty.

Recommended Weekend Reads

Business Strategy in a New Geopolitical Age, Chile’s Libertarian Presidential Candidate, One Moment and Two Speeches, Data Center Energy Demands, and What is the Mar-a-Lago Accord?

March 14 - 16, 2025

Below are our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list. 

Business Strategy in an Age of Heightened Geopolitical Risk

• How to Strategize in an Out-of-Control World       MIT Sloan Management Review

  During the past few years, company strategies have been disrupted repeatedly by major shocks like the COVID-19 pandemic, the outbreak of war in Ukraine and the Middle East, and breakthroughs in generative AI. In the first months of 2025, a stream of political surprises has been impacting company agendas — and further upheavals seem likely.   This turbulence is having a real impact on business: Our analysis of nearly 7,000 organizations over a 20-year time frame shows that variance in company profitability can increasingly be attributed to factors that lie beyond the company and its industry. (See “What Shapes Profitability?”) Contextual factors — like geopolitics, technology, and climate — now account for 43% of the variation in the net profit margins of public corporations.

The Indo-Pacific

• Conversations: China’s Naval Flotilla and Australia’s Response    Lowry Institute Podcast

  Defence analyst Marcus Hellyer talks with the Lowy Institute’s Sam Roggeveen about the unprecedented appearance of Chinese warships off Australia’s east coast. What message was Beijing sending? How well did Australia’s defense force perform in response? And what are Australia‘s future options with the United States in retrenchment?

• One Moment, Two Speeches   Center for Strategic and International Studies

  Two weeks ago, the world’s two most powerful countries witnessed a rare moment of symmetry. On March 4th  at 9:00 pm US EST, President Donald Trump strode into the Capitol to give his second administration’s first address to a joint session of Congress. Meanwhile, on the other side of the planet, at 9:00 am Beijing time, Chinese Premier Li Qiang was just finishing up his speech summarizing the annual Government Work Report(GWR) to the National People’s Congress. Both are two countries’ key national annual addresses in which the executive reports on the state of the country to the legislative branch. This side-by-side moment highlights not only major differences in the political systems and political theater, but also some surprising similarities in substance as well.

• Trump-ism and East Asia    Global Policy/Durham University

  Alastair Newton argues that Donald Trump’s abandonment of the US-led international order and efforts to reshape global trade and finance do not bode well for economies in East Asia which may find themselves forced by Washington into a Chinese sphere of influence as part of a grand bargain with Beijing.

Latin America

• The Radical Libertarian Reshaping Chile’s Presidential Race   Americas Quarterly

  He’s been called the “Gabriel Boric of the right”—maybe because, like Chile’s young president, he wears a beard and made a name for himself criticizing the country’s political establishment. But Johannes Maximilian Kaiser Barents-von Hohenhagen, 49, objects to the comparison.“ Kaiser, who proudly describes himself as a “reactionary,” is now taking a turn in the spotlight after a recent poll showed him tied for the lead in October’s presidential election. He is the latest right-wing populist in Latin America to channel widespread frustration with crime, immigration and politics as usual, although his story has some distinctly Chilean twists.

•  Inside a Mexican Cartel ‘Extermination’ Camp: Ovens, Shoes, and Teeth    Washington Post

  For months, the tips had been appearing on a Facebook page. There was a mass grave hidden in a rural village outside Guadalajara, in western Mexico, the messages said. Mexico has grappled for years with a crisis of disappearances, with more than 110,000 people reported missing. Relatives of the disappeared have unearthed hundreds of graves filled with corpses. This seemed like another. But the people who ran the Facebook page — a group in Jalisco state who search for the missing — were puzzled. After getting more anonymous tips, Indira Navarro, head of the group, and dozens of other victims’ relatives arrived on March 5 at an abandoned ranch outside La Estanzuela and started poking around. They dug up three underground ovens. They found hundreds and hundreds of singed bone shards — from skulls, fingers, teeth. It was what Mexicans call an “extermination camp.” But the image that’s really stunned Mexicans was of the shoes. There were piles of them — well over 200. The camp is a sign of how much criminal groups have penetrated the Mexican economy. They don’t just traffic drugs to the United States; they extort businesses, “tax” migrant smugglers, and run vast networks of contraband goods, from gasoline to wood.  Navarro’s group believes the ranch in La Estanzuela was a recruiting and training center for one such crime group. The area is dominated by one of the country’s largest cartels, Jalisco New Generation (CJNG).

American’s View of Currencies

• Cryptocurrency Ownership among U.S. Households     Federal Reserve Bank of St. Louis

  Cryptocurrency has become more prevalent since it first entered the global economy. However, no consistent measurement of cryptocurrency ownership among American households has emerged. This blog post uses what data are available through the Survey of Consumer Finances (SCF) to estimate the distribution of cryptocurrency ownership in the U.S., finding that roughly 4.3% of Americans held such assets.

• Thoughts for Your Penny?    Hoover Institution

  One of the concepts you come across in a well-taught monetary economics course is the idea of seigniorage. An online dictionary does a pretty decent job of defining it: “The profit made by a government by issuing currency, especially the difference between the face value of coins and their production cost.” Although the definition highlights coins, the concept applies to paper money also.  The US government makes a pretty penny (pun intended) on seigniorage. It’s not as much as it used to be because more and more people use credit cards and even cryptocurrency to buy goods and services. Still, it’s a good amount.  The biggest gain from seigniorage is on the $100 bill. Printing one costs the federal government just 9.4 cents.

  So, when the feds spend this $100, they make a nice profit of $99.90. Not bad. Printing a $1 bill costs the feds 3.2 cents. So even on a $1 bill, the feds make 97 cents.  But minting small coins loses money for the feds. In its 2024 Annual Report, the US Mint reports the cost of producing each coin denomination. The cost of producing a penny was $0.03. In other words, the cost of producing a penny was three times the value of the penny. Interestingly, the feds went underwater even on the nickel, whose cost, at $0.11, was over twice the value of the nickel. That’s why I stated earlier that the federal government should stop producing nickels also. It isn’t until you get to the dime that you find a coin that the feds make money on. Interestingly, the cost of producing a dime, at $0.045, is less than the cost of producing a nickel.

the Race for Critical Minerals and the Growing Electrical Demand for Data Centers

• Who is Paying for all that data center power?   Volts Podcast/Substack

  In this episode, Harvard Law's Eliza Martin and Ari Peskoe unpack how data centers' skyrocketing electricity demand could leave ordinary customers subsidizing Big Tech's power bills. Most chilling is the potential alliance between utilities and tech giants that threatens to derail much-needed utility reforms while entrenching fossil-fueled infrastructure.

• The Potential for Geothermal Energy to Meet Growing Data Center Electricity Demand   Rhodium Group

  Next-generation geothermal energy has a number of advantages in meeting growing electricity demand from data centers. This report estimates how much of this demand could potentially be served by geothermal over the next decade.

• Why the U.S. Keeps Losing to China in the Battle Over Critical Minerals    Wall Street Journal

  The U.S.’s desperate need for critical minerals—which include resources such as nickel, lithium and cobalt in addition to graphite—has been underscored by the Trump administration’s aggressive push for greater access in Ukraine and Greenland, rattling allies. In December, Beijing said it would ban certain mineral exports to the U.S. and conduct stricter reviews of graphite sales, in response to U.S. restrictions on semiconductor exports to China.   Yet with its thumb on many of the best resources, China can dictate prices. Washington’s policy flip-flops keep blowing up miners’ plans. And many Western mining companies struggle to navigate higher-risk countries where critical minerals—all needed for green technologies and national defense—are prevalent, leaving them flat-footed when unrest erupts. 

The Mar-a-Lago Accord: What Is It?  Will It Happen?

• What is the Mar-A-Lago Accord?              Apollo Academy/Apollo Capital Management

  The always brilliant Torsten Slok explains is brilliantly: The US dollar is the global reserve currency because America is the most dynamic economy in the world, and the US provides stability and security. As a result, there is upward pressure on the US dollar because everyone wants to own the world’s safest asset.  This safe-haven upward pressure on the dollar overwhelms the negative impact on the dollar coming from the US current account deficit. With safe asset flows putting constant upward pressure on the dollar, there is a need for a deal—a Mar-a-Lago Accord—to put downward pressure on the US dollar to increase US exports and bring manufacturing jobs back to the US. The Mar-a-Largo Accord is the idea that the US will give the G7, the Middle East, and Latin America security and access to US markets, and in return, these countries agree to intervene to depreciate the US dollar, grow the size of the US manufacturing sector, and solve the US fiscal debt problems by swapping existing US government debt with new US Treasury century bonds. In short, the idea is that the US provides the world with security, and in return, the rest of the world helps push the dollar down in order to grow the US manufacturing sector

•   Meeting in Mar-a-Lago: is a New Currency Deal Plausable?              Atlantic Council

  In 1985, finance ministers from France, Germany, Japan, the United Kingdom, and the United States came to an agreement in the Plaza Hotel in New York City to intentionally devalue the US dollar. In the five years leading up to the Plaza Accord, the US dollar had doubled in value, threatening to upend global trade and destabilize the international financial system. Today, Washington is once again chattering about the possibility of a currency deal. This time, the venue may move south for what Trump’s incoming chairman of the Council of Economic Advisers, Stephen Miran, described as a “Mar-a-Lago Accord.” In a September report, Miran declared the overvaluation of the US dollar responsible for the “roots of economic discontent.”
  

• Mar-a-Lago Accord, Schmar-a-Lago Accord  Steven Kamin/Mark Sobel/Financial Times

  In recent weeks, the buzz has been mounting about a new American plan — a “Mar a Lago Accord” — to upend the global monetary system. We can only hope it remains idle chatter. In brief, based on a detailed discussion paper by CEA Chair nominee Stephen Miran, the accord would have America’s trading partners help weaken the dollar and commit to providing low-cost, long-term financing to the US government, enforced by the threat of higher tariffs or removal of security guarantees.   Intriguingly, there has been no announcement by the Trump administration or even a tweet by Trump, but Miran’s paper — along with various utterances by Treasury Secretary Scott Bessent — have led Wall Street observers to believe such an initiative is indeed in the offing. And that’s too bad, because a Mar-a-Lago Accord would be pointless, ineffectual, destabilizing, and only lead to the erosion of the dollar’s pre-eminent role in the global financial system.

Recommended Weekend Reads

Why Trump Is Focused on the Panama Canal, America’s Data Center Hotspots, How Iran Lost Before It Lost, The Four Main Groups Opposing Xi Jinping, and Should We Believe the Economic Data?

Please find below our recommended reads from reports and articles we read in the last week.  We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list.

Americas

• Panama: From Zoned Out to Strategic Opportunity   Ryan Berg/Center for Strategic and International Studies

  Since his election in November 2024, President Donald Trump has staked out strong positions on the importance of the Western Hemisphere to the United States’ national security interests. A secure, prosperous, and free Western Hemisphere underpins U.S. geopolitical and economic success. Panama is the most strategically significant geography in the Western Hemisphere. With 40 percent of U.S. container traffic passing through the Panama Canal, it rightfully drew President Trump’s attention. Trump has highlighted concerns about the status quo regarding the disposition of the canal, its operation, and People’s Republic of China (PRC)–owned ports dominating the approaches. This commentary will not relitigate the merits of the 1977 Carter-Torrijos treaty, sovereignty, or transit rates but rather highlight the strategic importance of Panama, legitimate concerns over Beijing-owned ports, and the need for sustained diplomatic engagement and U.S. private sector investment.

• Trump’s Panama Canal threat revives memories of 1989 US invasion  Financial Times

  With US President Donald Trump this week threatening to “take back” the Panama Canal, residents who survived the battles 35 years ago are angry that they are once again at the whim of their country’s main ally. “The invasion overthrew the military dictatorship of General Manuel Noriega, who was captured, flown to the US and jailed on drug trafficking charges. Panama has been a democracy and staunch US ally ever since.

• Will Trump Focus on the Western Hemisphere?    The Net Assessment Podcast

  The hosts get together to talk about the second Trump administration’s agenda in the Western Hemisphere. What interests does the United States have in Latin America? Should the United States be pushing back on China’s activities in the region? If so, what carrots and sticks can the United States offer countries there? And will the administration officials eager to focus on the region be able to sustain that focus, when so many other parts of the world are competing for U.S. attention?

• It’s Time for a U.S.-Greenland Free Association Agreement  Kaush Arha/Alexander Gray/Tom Dans  National Interest

  American security interests and Greenland’s economic aspirations necessitate an institutional partnership between the two. Greenland, an autonomous territory of Denmark, is part of North America in terms of aspiration and geography. It is high time Greenland’s position in North American orbit was cemented. As the world’s largest island atop the North Atlantic, it is an indispensable U.S. ally in the most proximate theatre between the United States and its NATO allies and the Russia-China authoritarian advance. American investments and markets are essential catalysts to turbocharge Greenland’s economic growth and prosperity and ensure its continued alignment with NATO as its place within the Kingdom of Denmark evolves in the years ahead.  It is time for a US-Greenland Free Association.

• America’s data center job hot spots   Axios

  President Trump has announced his support for Stargate, a massive $500 billion AI infrastructure project which, when you break it down, it all about building more data centers.  But where are the data center job hotspots in America?  Axios breaks it all down.

Middle East

• How Iran Lost Before It Lost: The Roll Back of Its Gray Zone Strategy  War on the Rocks

  “Today, you can get in a car in Tehran and get out in the Dahia, Beirut.” Five years and two months after Gen. Qasem Soleimani made this statement, the Islamic Republic of Iran is in retreat. Iran’s air and ground lines of supply to Lebanon now go through Sunni-dominated Syria, where the Assad regime recently crumbled. Even if Iran could more easily get to Lebanon, Hizballah is the weakest it has been in over a generation, having been relentlessly battered by Israel. In the words of one high-ranking commander in Iran’s Revolutionary Guard Corps: “We lost, we badly lost.”  Iran’s ability to deter and wage war in recent decades was largely through gray zone methods. And the structures, resources, and allies that allowed it to do this are now in tatters. But the erosion of Iran’s gray zone strategy was already happening when Assad was still in power and Hizballah loomed over Israel as a fearsome threat. Iran’s economic dysfunction and political disarray prevented it from building and sustaining resilience. This analysis highlights how Iran’s economic malfeasance, fueled by internal divisions among government stakeholders, has undermined its geopolitical ambitions and prevented it from converting regional influence into sustainable economic leverage, marking a potential turning point in its regional strategies.

  Indo-Pacific

• 2025 could be the tipping point for India’s economic aspirations  OMFIF

  Amid the multiple global shifts taking place today, India stands at a critical juncture. The world’s most populous democracy faces a turbulent landscape of geopolitical rivalries, technological shifts and the urgency of climate action. The question remains: will global economic forces propel India toward leadership, or will they impede its ascent?

• The Four Main Groups Challenging Xi Jinping   The Jamestown Foundation

  Chinese President Xi Jinping faces challenges to his authority from four main groups: 1) retired party elders such as Li Ruihuan and Wen Jiabao; 2) princelings, especially those based overseas; 3) military leaders, such as Zhang Youxia; and 4) parts of the middle and entrepreneurial classes who are voicing their discontent.  Xi is unlikely to be overthrown or face a coup, but his ability to force through his agenda may be reduced.  Indicators that Xi is embattled include his absence from chairing two recent high-level meetings, references to “collective leadership” the PLA Daily newspaper, and an adjustment to PRC diplomacy to a more conciliatory approach, especially toward the United States.  This apparent reduction in power could be a result of the country’s bleak economic situation, which Xi’s policies from last year have not resolved.

• China's Economic, Scientific, and Information Activities in the Arctic  Rand Corporation

  How might China's scientific, information, and commercial activities in the Arctic contribute to the country's broader security goals by enabling the collection of intelligence, allowing access to critical infrastructure, or providing other types of military advantages? China's activities in the Arctic have increased, and China's overall approach to strategic competition, which fuses the public with the private and the civilian sphere with the military, has heightened U.S. concerns that China might be on its way to becoming a security and military actor in the Arctic and that Russia is enabling this pathway. In this report, the authors present an analysis of China's economic, scientific, and information activities in the Arctic and call special attention to the intelligence collection and military risks that they might present, including the threat signals for these risks. The authors explore five categories of activities: natural resource exploitation, knowledge development, access to infrastructure, data transmission, and public diplomacy.

• From Fast Lane to Gridlock: Have Chinese Car Exports Peaked?   Rhodium Group

  China’s auto industry has been a success story in recent years, with car exports emerging as a bright spot in an otherwise slowing economy. Between 2021 and 2024, the number of cars shipped from China surged by 300%, propelling China past Japan to become the world’s largest car exporter by units. However, this rapid growth now faces significant challenges. Trade barriers and outright bans in major markets like the US threaten to stall export momentum. Slumping export growth will put pressure on Chinese automakers, potentially leading to industry consolidation. But incumbent carmakers shouldn’t celebrate too much—even with slower export growth, Chinese carmakers are transforming into formidable global competitors in the auto market.

Geoeconomics

• How German Industry Can Survive the Second China Shock   Sander Tordoir/Brad Setser  Centre for European Reform

  Industrial production in the EU’s largest economy has been declining for over five years, a source of profound angst in a country where manufacturing contributes around 5.5 million jobs and 20 percent of gross domestic product (GDP). Germany is starting to realize that China’s new automotive, clean technology and civil aviation industrial base directly competes with Germany’s manufacturing foundation. China’s macroeconomic imbalances now directly infringe on German industrial interests. Germany, with its low debt levels and endangered industrial base, has both the policy space to act and the most to lose if it does not. But it cannot act alone against the new Exportweltmeister. As Henry Kissinger once quipped, Germany is “too big for Europe and too small for the world.”

• Use of Artificial Intelligence and Productivity: Evidence from Firm and Worker Surveys   RIETI Discussion Paper Series

  Abstract: With the rapid diffusion of artificial intelligence (AI), its effects on economic growth and the labor market have attracted the attention of researchers. However, the lack of statistical data on the use of AI has restricted empirical research. Based on original surveys, this study provides an overview of the use of AI and other automation technologies in Japan, the characteristics of firms and workers who use AI, and their views on the impact of AI. According to the results, first, the number of firms using AI is increasing rapidly and firms with a larger share of highly educated workers have a greater tendency to use AI. Robot-using firms are also increasing, but the relationship between their use and workers’ education is weakly negative, suggesting that the impact on the labor market is different for each technology. Second, AI-using firms have higher productivity, wages, and medium-term growth expectations. Third, AI-using firms expect that while it will increase productivity and wages, it may decrease their employment. Fourth, at the worker level, more-educated workers are more likely to use AI, suggesting that AI and education are complementary. Currently, AI may favor high-skill workers in the labor market. Fifth, workers who use AI evaluate their work productivity to have increased by approximately 20% on average, suggesting that AI could potentially have a fairly large productivity enhancing effect.

• Should We Believe the Economic Data or Americans “Lyin” Eyes?  The Answer is Yes  Scott Winship/American Enterprise Institute Center on Opportunity and Social Mobility

  Many Americans are convinced the economy is ailing and that life is financially tougher today than a decade—or a generation—ago. Social media posts wax nostalgic for a long-lost era when all single breadwinners allegedly could afford a home and two cars for a family of four. Everyone seemingly knows someone who did everything they were supposed to do but is now stuck with six figures of student loan debt and a string of gig economy jobs. So, are Americans “right to believe their lyin’ eyes,” as Cass claimed in a recent op-ed titled, “Three Cheers for Economic Pessimism”? This formulation begs the question of whether American beliefs about the economy conflict with objective measures. Cass and the declensionists are no more reliable guides to those beliefs than accurate interpreters of economic data. What Americans tell surveyors is consistent with the objective data, for the most part. There has been no long-term decline in economic conditions.

• The Upcoming Trump Tariffs: What Americans Expect and How They Are Responding  Olivier Coibion/Yuriy Gorodnichieknko, Michael Weber

  Abstract: In a recent survey, we asked Americans to tell us about what they thought would happen under Trump’s tariff policies and how this might affect their decisions. The results point toward widespread anticipation of tariffs being imposed on our trading partners, especially China, with significant expected passthrough into the prices of both imported and domestically produced goods and a general acknowledgment that American consumers will bear an important share of the cost of tariffs. In response to higher future tariffs, many Americans, and particularly Democrats, report that they would increase their purchases of foreign goods in anticipation of the upcoming tariffs and higher prices, while simultaneously trying to save more in the face of higher uncertainty about future policies. Managers’ report that their firms would become more likely to raise prices, change their mix of products and seek out alternative suppliers as the rise in tariffs approaches.

Recommended Weekend Reads

20 Trends to Watch in 2025 and 9 U.S. Political Issues that Bit the Dust in 2024, What Do Chinese Citizens Think of the Communist Party? And The U.S. Assessment of China’s Military

December 27 - 29, 2024

Please find below our recommended reads from reports and articles we read in the last week.  We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list.

 We hope you have a wonderful New Year and our warmest best wishes for a joyful and prosperous 2025!

Global Trends& Events to Watch in 2025

• 20 Gallup Trends to Watch in 2025   Gallup

  Next month’s transfer of power in the U.S. could reshape American views on politics, the economy and societal issues. Generational shifts and technology are also driving change. Gallup lays out 20 trends they are tracking 2025 to see how Americans react to the new political landscape and how society continues to evolve.
  

• The Real Stakes of the AI Race: What America, China, and Middle East Powers Stand to Gain and Lose   Reva Goujon/Foreign Affairs

  A sense that global technology competition is becoming a zero-sum game, and that the remainder of the twenty-first century will be made in the winner’s image, pervades in Washington, Beijing, and boardrooms worldwide. This angst feeds ambitious industrial policies, precautionary regulations, and multibillion-dollar investments. Yet even as governments and private industry race for supremacy in artificial intelligence, none of them possess a clear vision of what “winning” looks like or what geopolitical returns their investments will yield.
  

• Global Summits to Watch in 2025: Priorities for a Splintering World   Council of Councils

  Global summits give leaders an opportunity to come together to advance solutions and prepare responses, but can they keep up with the pace at which the world’s most urgent problems are intensifying?  Here is a list of the most anticipated summits set for 2025, where newly elected leaders, increased participation from the Global South and emerging powers, and reframed conversations could help answer that question.
  

• 9 Political Issues That Bit the Dust This Year   Politico Magazine

  The end-of-year obituary packages are publishing — remembering the people who shaped our world in ways large and small.  Politico decided to do something a little bit different. This year, we asked POLITICO reporters to tell us: What are the trends in politics that died in 2024 — or that are at least heading into obsolescence?

  China

• Do Chinese Citizens Conceal Opposition to the CCP in Surveys?  Evidence from Two Experiments  The China Quarterly/Cambridge University Press

  There has been a number of questions about the support among average Chinese citizens for the ruling Chinese Communist Party.  In this research paper, it is noted that most public opinion research in China uses direct questions to measure support for the Chinese Communist Party (CCP) and government policies. These direct-question surveys routinely find that over 90 percent of Chinese citizens support the government. From this, scholars conclude that the CCP enjoys genuine legitimacy.  However, the researchers who conducted this study found from two survey experiments in contemporary China that make clear that citizens conceal their opposition to the CCP for fear of repression. When respondents are asked in the form of list experiments, which confer a greater sense of anonymity, CCP support hovers between 50 percent and 70 percent. This represents an upper bound, however, since list experiments may not fully mitigate incentives for preference falsification. The list experiments also suggest that fear of government repression discourages some 40 percent of Chinese citizens from participating in anti-regime protests. Most broadly, this paper suggests that scholars should stop using direct question surveys to measure political opinions in China.

• Military and Security Developments Involving the People’s Republic of China 2024  U.S. Department of Defense Annual Report to Congress

  The Defense Department’s annual report charts the course of the PRC’s national, economic, and military strategy and offers insight into the People’s Liberation Army’s (PLA) strategy, current capabilities, and activities, as well as its future modernization goals.  In 2023, the PRC continued its efforts to form the PLA into an increasingly capable instrument of national power. Throughout the year, the PLA adopted more coercive actions in the Indo-Pacific region while accelerating its development of capabilities and concepts to strengthen the PRC’s ability to “fight and win wars” against a “strong enemy,” counter an intervention by a third party in a conflict along the PRC’s periphery, and project power globally. Working-level and senior-level military-to-military channels of communication resumed following President Biden and PRC leader Xi Jinping meeting in November 2023. This report illustrates the importance of meeting the pacing challenge presented by the PRC’s increasingly capable military.
  

• China Ousts Two Military Lawmakers as Xi’s Defense Purge Widens   Bloomberg

  China abruptly ousted two military lawmakers from its national parliament without explanation, as a purge of key personnel in the upper echelons of the nation’s defense establishment shows no sign of easing. Xi, China’s most powerful leader since Mao Zedong, has been intensifying his grip on the military. He ordered a reorganization of the armed forces this year, replacing the Strategic Support Force created in 2015 with three new branches. He also held the first military-political work conference since 2014, a conclave he previously used to assert his authority over the PLA. 

• The China-Russia relationship and threats to vital US interests  Brookings Institution

  This piece is part of a series titled “The future of U.S.-China policy: Recommendations for the incoming administration” from Brookings’ John L. Thornton China Center. Four leading scholars of Chinese and Russian foreign policy look at the growing alignment between the People’s Republic of China and the Russian Federation – an alliance that has significant implications for vital U.S. interests and the interests of U.S. allies and partners. Animated by shared grievances against the configuration of the international order and mutual concerns about perceived external threats, principally from the United States, the Sino-Russian partnership has deepened over the last decade across the military, economic, and diplomatic domains. Beijing and Moscow’s strategic alignment will pose a significant test for the incoming Trump administration.

Americas

• A Journey Through The World’s Newest Narco-State: Drugs Transformed Ecuador from a Latin American Success Story into a War Zone  1843 Magazine

  Over the past ten years, cocaine has transformed Ecuador from one of South America’s most stable nations – with safer streets and higher living standards than many of its neighbors – into the most dangerous country on the continent. More than 8,000 murders were recorded last year. Victims are wide-ranging: ten volleyball players, nine shrimp fishermen, six mayors, five tourists, two state prosecutors, a presidential candidate and the leader of a political party are among those shot or assassinated since 2023. The industrial city of Durán – where much of the governing apparatus has been hijacked by mobsters – has a good claim to being the murder capital of the world; on average, someone is killed there every 19 hours.

Europe

• Offensive Strategy: the EU’s Economic Security  Carl Bildt/European Council on Foreign Relations

  ‘Economic security’ has become a Brussels buzzword in recent years, shaped by a blend of pressure from Washington and Brussels’ own protectionist instincts. In sports, playing defense rarely wins championships. The economic security agenda is defensive; it might slow the decline, but it will not reverse it. What Europe needs is a bold, offensive strategy.

Podcast Recommendation of the Week

• China Considered  Hosted by Elizabeth Economy, the Hoover Institution

  Elizabeth Economy is arguably one of the finest China scholars out there.  She now hosts a podcast sponsored by the Hoover Institution at Stanford University. that features in-depth conversations with leading political figures, scholars, and activists from around the world. The series explores the ideas, events, and forces shaping China’s future and its global relationships, offering high-level expertise, clear-eyed analysis, and valuable insights to demystify China’s evolving dynamics and what they may mean for ordinary citizens and key decision-makers across societies, governments, and the private sector.

Recommended Weekend Reads

Big Changes Are Coming to Latin America, How Russia and China Evade Sanctions Together, and How Monetary Policy Impacts U.S. National Security

October 4 - 6, 2024

Please find below our recommended reading from reports and articles we read last week. We hope you find these useful and that you have a relaxing weekend. And let us know if you or someone you know wants to be added to our distribution list.

Americas

• It isn’t only Sheinbaum.  Meet the Women Who Run Mexico  Washington Post

  Mexico inaugurated its first female president on Tuesday, reaching the milestone before its northern neighbor. Even if the United States elects Kamala Harris as president in November, it will lag well behind this traditionally macho country on broader gender parity. The new president, Claudia Sheinbaum, will govern with a cabinet that is half female and a Congress evenly divided between men and women. Women head the Supreme Court and central bank and run top federal ministries. Mexico has become a global leader in gender parity thanks to aggressive laws establishing quotas for women in politics and government. They have had a dramatic impact. Mexico’s legislature ranks fourth in the world for female representation, while the United States is No. 70 — just behind Iraq — according to the Inter-Parliamentary Union.

• Gabriel Boric’s Unlikely Legacy   Americas Quarterly

  Fresh off his 2021 primary victory, President Gabriel Boric famously predicted that “if Chile was the cradle of neoliberalism, it would also be its tomb.” Three years later, his ambition to remake Chile got buried instead. Now approaching his final year in office, the former student activist often sounds less like Marxist icon Salvador Allende and more like the traditional center-left politicians he once derided. He espouses growing the economic pie, vows “mano dura” against crime, and blasts Venezuela as a dictatorship. Has Boric genuinely moderated his convictions? Or, as his less scripted remarks suggest, is this the tactic of an agile young politician biding his time? 

• How are the United States and China Intersecting in Latin America?   Brookings Institution

  Strategic competition between the United States and China is impacting how the two countries relate to each other across the world, including in Latin America. How are the United States and China approaching Latin America and where do their interests intersect? What is the character of their interactions in the Western Hemisphere—rivalry, cooperation, or something in between? And finally, should competition with China be used to motivate American policymakers to devote more attention and resources to Latin America?  In this written debate, the authors address the title question with essay-length opening statements. The statements are followed by an interactive series of exchanges between authors on each other’s arguments. The goal of this product is not to reach any conclusion on the question but to offer a rigorous examination of the choices and trade-offs that confront the United States in its competition with China.

• Brazil’s Largest Mafia is Entering Politics. The Government Must Act  New York Times

  The city of São Paulo, Brazil, is about to elect its next mayor, but the talk of the town is about a party that’s not on the ballot on Sunday: The “party of crime,” or as it’s formally known, the First Capital Command (P.C.C.). Police officials recently claimed that the criminal group moved almost $1.5 billion through fintech companies, using some funds to finance candidates around São Paulo State. And one of the front-runners for São Paulo mayor, the far-right fitness coach and influencer Pablo Marçal, is running under a small political party whose president was caught on tape bragging about his P.C.C. ties earlier this year. (The party president has denied the audio is of him, but reporters from the newspaper Folha de S. Paulo say they confirmed its authenticity with six independent sources.)

• How Organized Crime Threatens Latin America   Journal of Democracy

  Abstract: Organized crime has emerged as the most important security threat to democratic governance in Latin America. This essay explains why Latin American democracies have been able to curb other security threats (from the military, insurgents, and oligopolists) but are struggling to contain organized crime. Organized crime possesses power assets associated with traditional security threats (military capacity, territorial control, and access to markets). But it also operates innovatively: It infiltrates and coopts the state, which makes it difficult for presidents to rely on state institutions (such as the police, the army, the courts, and prisons) to act in a unified way to fight organized crime. To date, there are no successful cases of Latin American states truly defeating organized crime. But states have means of rendering organized crime less predatory and violent.

Geoeconomics 

• National Security Policy as Monetary Policy: Military Means to Counter Inflation   The War Room (An Online journal of the U.S. Army War College)

  Although the U.S. Federal Reserve System is the only federal entity with a legal mandate to set monetary policy and manage inflation, inflation impacts every department and agency. To endure and win conflicts of the future, U.S. national security requires monetary stability and economic resilience. The U.S. military must prepare to support civil authorities and deter foreign threats from stoking harmful inflation in the U.S. economy by disrupting supply chains. Temporary trade disruptions during the COVID-19 pandemic and the 2021 Colonial Pipeline ransomware attack contributed to the surge of inflation in the post-pandemic years.  In January 2022, Chairman of the Federal Reserve Jerome Powell testified before Congress that the conventional monetary policy tools of the central bank were ineffective at countering inflation driven by supply-side shocks. Since 2023, however, U.S. and allied maritime security operations in the Red Sea and the Black Sea have contributed to lowered costs associated with threatened shipping lanes, despite not defeating the threats outright. Looking ahead, the U.S. military should prepare to manage and counter even worse supply-side inflationary shocks that might arise from competition or conflict with a great power adversary.

• Trade Intervention for Freer Trade   Carnegie Endowment for International Peace

  By targeting specific trade violations rather than balanced flows, global trade policy has been focusing on the wrong outcome. New trade rules are needed to create an international trading system in which comparative advantage allocates production.

• Growth and Productivity in the Americas   AEI Economic Perspective

  Across the Americas, low output and productivity growth are key policy challenges. Growth expectations for many countries have fallen in recent years, with Latin America and the Caribbean especially lagging behind emerging market peers. In many cases, total factor productivity growth has been negative for decades. This is due to several structural factors, including low overall investment, low educational attainment, high informality, and inadequate infrastructure. Going forward, “nearshoring,” digitalization, and the energy transition offer opportunities to renew growth. It will be incumbent on authorities to grasp these opportunities.

• When Does Federal Debt Reach Unsustainable Levels?  Penn Wharton Budget Model

  The Penn Wharton Budget Model (PWBM) estimates that---even under myopic expectations---financial markets cannot sustain more than the next 20 years of accumulated deficits projected under current U.S. fiscal policy. Forward- looking financial markets are, therefore, effectively betting that future fiscal policy will provide substantial corrective measures ahead of time. If financial markets started to believe otherwise, debt dynamics would “unravel” and become unsustainable much sooner.

• The Political Economy of Zero-Sum Thinking  S. Nageeb Ali, Maximilian Mihm, and Lucas Siga

  Abstract: This paper offers a strategic rationale for zero-sum thinking in elections. We show that asymmetric information and distributional considerations together make voters wary of policies supported by others. This force impels a majority of voters to support policies contrary to their preferences and information. Our analysis identifies and interprets a form of “adverse correlation” that is necessary and sufficient for zero-sum thinking to prevail in equilibrium.

Russia, China, and Sanctions

• How Western Curbs on Russian Oil Revenue Benefit China  Harvard Kennedy School/Belfer Center for Science and International Affairs

  Since Russia’s Invasion of Ukraine in February 2022, the United States has worked closely with the European Union (EU) and other allied nations to impose wide-ranging economic sanctions on Russian government agencies and companies as well as on individual officials and business leaders. The results are mixed.  Some policies have demonstrably constrained Russia’s resources, obstructed trade, slowed investment, and blunted not only innovation but also maintenance of Western equipment. Freezing over $300 billion in Russian assets has considerably reduced Moscow’s financial maneuvering room. Denying several major Russian banks access to the SWIFT network has complicated Russia’s effort to settle transactions, as have sanctions that limit Russia’s ability to use U.S. dollars and Euros.

• Is a “Shadow Fleet” of Oil Tankers Really Circumventing the Russia Price Cap?  Carnegie Politika

  Russia has chosen to defy the price cap by sourcing tankers and auxiliary services outside of the Western coalition. These tankers, which supposedly knowingly operate in defiance of Western sanctions, have been nicknamed the “shadow fleet.” The prevailing assumption today is that most if not all of Russian oil transported by sea is being sold outside of the price cap regime. Some of it is still carried by vessels owned by shipowners and/or insured by insurers that are subject to the price cap coalition legislation.  The article covers 2,849 oil tankers, of which 735 picked up at least one cargo in a Russian port this year and is based on data collected via the ships’ automatic identification systems, which can be accessed via many ship tracking services. The vessels carried an average of 48 million barrels of oil per day (the rest most likely traveled via pipelines to the refineries). 

• China is Ready for War – And Thanks to a Crumbling Defense Industrial Base America is Not  Seth Jones/Foreign Affairs

  Amid a growing bipartisan consensus that the United States needs to do more to contain China, much of the policy debate in Washington has focused on China’s economic and technological clout. Now, given China’s economic problems—high youth unemployment, a troubled real estate market, increased government debt, an aging society, and lower-than-expected growth—some scholars and policymakers hope that Beijing will be forced to constrain its defense spending. Others go so far as to say the Chinese military is overrated, contending that it will not challenge U.S. dominance any time soon.  But these assessments fail to recognize how much China’s defense industrial base is growing. Despite the country’s current economic challenges, its defense spending is soaring, and its defense industry is on a wartime footing.

Recommended Weekend Reads

How Will the U.S. Election Impact the Rest of the World? The BRICS’ Growing Power and Influence and the Geopolitics of Port Security in the Americas

September 27 - 29, 2024

Please find below our recommended reads from reports and articles we read in the last week.  We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list.

Geopolitics & the U.S. Elections

• The Global Impact of the 2024 U.S. Presidential Elections  Center for Strategic and International Studies

  The audience for the U.S. presidential election is global and has a global impact. The election takes place at a moment when the demands of two wars in Europe and the Middle East, China’s assertiveness, and coalitions of autocratic leaders are putting unprecedented stress on the rules-based international order. These developments, as much as the election, are compelling changes in how global leaders look at their future with the United States regardless of signals of policy continuity or discontinuity from a Harris or Trump presidency. This report provides concise analysis and predictions covering the globe.

• Why US-China ties will worsen regardless of the US vote    Matt Gertken/Hinrich Foundation

  BCA Research’s Chief Strategist Matt Gertken argues the upcoming US elections will not determine the course of US-China relations.  Regardless of which party wins the elections, the superpower rivalry is set to deepen as national and economic security competition intensifies. Both Washington and Beijing are doubling down on antagonism, and trade ties will worsen in the foreseeable future.

The Growing Influence of the BRICS

• BRICS Considering Petro-Yuan in next de-dollarization attempt  OMFIF

  Unlike the BRICS Summit in Johannesburg in 2023, which was waved off by Western observers as no real threat to the dollar, October’s summit in Kazan, Russia, is set to be ground-breaking for two reasons. First, there have been major changes since the last summit. BRICS – comprising Brazil, Russia, India, China, and South Africa – has been expanded by five important new members: Saudi Arabia, United Arab Emirates, Iran, Egypt and Ethiopia. Saudi Arabia, the world’s main supplier of petrol, has also joined Project mBridge, the Bank for International Settlements’ digital currency arrangement. The country has made comments about considering alternatives to the present dollar-based oil payments system and being open to using the Petro-Yuan for oil settlements.  Second, there is Russia, a country at war with Ukraine and engaging in economic conflict against the whole Western alliance. It will use the Kazan summit as a means to push BRICS members to join this endeavor. Russia is planning a new denomination for oil, – the Petro-Yuan – its own mBridge system to pay for oil and even a common BRICS currency to reduce dependence on the dollar.

• The Battle for the BRICS: Why the Future of the Bloc Will Shape Global Order   Foreign Affairs

  In late October, the group of countries known as the BRICS will convene in the Russian city of Kazan for its annual summit. The meeting is set to be a moment of triumph for its host, Russian President Vladimir Putin, who will preside over this gathering of an increasingly hefty bloc even as he prosecutes his brutal war in Ukraine. The group’s acronym comes from its first five members—Brazil, Russia, India, China, and South Africa—but it has now grown to include Egypt, Ethiopia, Iran, and the United Arab Emirates. Saudi Arabia also participates in the group’s activities, but it has not formally joined. Together, these ten countries represent 35.6 percent of global GDP in purchasing power parity terms (more than the G-7’s 30.3 percent) and 45 percent of the world’s population (the G-7 represents less than ten percent). In the coming years, BRICS is likely to expand further, with more than 40 countries expressing interest in joining, including emerging powers such as Indonesia.

  As the United States and its allies are less able to unilaterally shape the global order, many countries are seeking to boost their own autonomy by courting alternative centers of power. Unable or unwilling to join the exclusive clubs of the United States and its junior partners, such as the G-7 or U.S.-led military blocs, and increasingly frustrated by the global financial institutions underpinned by the United States, such as the International Monetary Fund and the World Bank, these countries are keen to expand their options and establish ties with non-American initiatives and organizations. BRICS stands out among such initiatives as the most significant, relevant, and potentially influential.

• Expansion of BRICS: A quest for greater global influence?   European Parliament Think Tank

  The official Think Tank of the European Parliament explains who the new members of the BRICS are and what this means. The BRICS decision to open the door to new members was taken at its Johannesburg summit in August 2023, sparking a debate about its growing international influence. According to estimates, BRICS+, as the organization has been informally called since its expansion, now accounts for 37.3 % of world GDP, or more than half as much as the EU (14.5 %). However, besides an increase in economic power the new members could bring potential conflicts (Saudi Arabia/Iran or Egypt/Ethiopia) into the group, making the reaching of consensus on common political positions more difficult. Since the new members would only contribute roughly 4 % to the group's cumulative GDP, the significance of the expansion should be seen beyond the purely economic effect, in the form of greater influence for the group and for developing countries as a whole within international organizations such as the United Nations, the World Trade Organization and the Bretton Woods institutions.

• The Battle for the BRICS: Why the Future of the Bloc Will Shape Global Order   Foreign Affairs

  In late October, the group of countries known as the BRICS will convene in the Russian city of Kazan for its annual summit. The meeting is set to be a moment of triumph for its host, Russian President Vladimir Putin, who will preside over this gathering of an increasingly hefty bloc even as he prosecutes his brutal war in Ukraine. The group’s acronym comes from its first five members—Brazil, Russia, India, China, and South Africa—but it has now grown to include Egypt, Ethiopia, Iran, and the United Arab Emirates. Saudi Arabia also participates in the group’s activities, but it has not formally joined. Together, these ten countries represent 35.6 percent of global GDP in purchasing power parity terms (more than the G-7’s 30.3 percent) and 45 percent of the world’s population (the G-7 represents less than ten percent). In the coming years, BRICS is likely to expand further, with more than 40 countries expressing interest in joining, including emerging powers such as Indonesia.

Latin America

• Claudia Sheinbaum and the Shadow of AMLO   Americas Quarterly Podcast

  Claudia Sheinbaum will take office as Mexico’s new president next week, on October 1, 2024. Often described as a technocrat, she also supports some of current President AMLO’s more controversial policies, such as the judicial reform that was just approved. In this episode, Vanessa Rubio, a professor at the London School of Economics and a former senator and deputy minister, shares what she expects from Sheinbaum’s government. Rubio argues her administration will take shape as a new blend—one that could be deemed “techno-populist.”

• The Geopolitics of Port Security in the Americas Center for Strategic and International Studies Americas Program

  “[T]he truth of the matter is that the People’s Republic of China is rapidly filling the vacuum created by the departure of American military forces from the isthmus [of Panama]. . . .Their presence adds to the danger of using the Colon Free Zone to purchase restricted technology with dual civilian-military use.” This sentiment would not seem out of place in a contemporary discussion of Chinese strategic advances in the Western Hemisphere. It is, in fact, more than two decades old, coming from the testimony of Dr. Tomas Cabal, then professor of business at the University of Panama, who appeared before the U.S. House Subcommittee on Domestic and International Monetary Policy on December 7, 1999.

Alternative Energy

• New Battery Designs Could Lead to Gains in Power and Capacity   The Economist

  In their quest to build a better battery, researchers have blazed a trail through the elements of the periodic table. The earliest prototype cells ran on nickel and cadmium; successors have used everything from zinc and iron to sodium and lead. Instead of the other long-overshadowed components of cells. Those efforts are starting to pay off and several companies are looking to further radically improve the battery as we know it.

Recommended Weekend Reads

September 13 - 15, 2024

Geoeconomics

• The Innovation Paradox     MF Finance and Development Magazine

  We've long assumed that investing more in research and development is a surefire way to spur innovation, increase productivity, and fuel job creation and economic growth. And yet, as the US dramatically expanded R&D spending over the past four decades, the opposite happened. Innovation, productivity gains, and economic expansion slowed. What went wrong?
  

• High and Rising Institutional Concentration of Award-Winning Economists   National Bureau of Economic Research/Richard Freeman, Danxia Xie, Hanzhe Zhang, Hanzhang Zhou

  Abstract: We analyze the institutional clustering of award-winning researchers. We collect nearly 300,000 annual education and career affiliations of nearly 6,000 award-winning researchers across 18 major academic fields in the natural sciences, engineering, and social sciences. All fields, except for economics, exhibit a low and decreasing concentration, which suggests a trend toward decentralized knowledge production.  Conversely, economics shows a high and rising concentration.  We investigate potential reasons for this anomaly, including researcher mobility, reliance on physical assets, the age of fields, the role of prestige, and the influence of the United States in shaping disciplinary norms (Fulcrum Note: So, this proves economists do roam in packs? Hmmm…)

India

• Can India Change Course?  A Conversation with Pratap Bhanu Mehta   Foreign Affairs Podcast

  Pratap Bhanu Mehta, President of the Centre for Policy Research, is one of India’s wisest political observers—a great political theorist and writer as well as a fierce critic, and occasional target, of Modi and his policies. Foreign Affairs Senior Editor Kanishk Tharoor spoke with him on September 3 about what the election means for Indian democracy and where the country goes from here.

European Union

• The Future of European Competitiveness: A Comprehensive Strategy for Europe   Mario Draghi

  Former European Central Bank President and former Italian Prime Minister was asked by EU President Ursula von der Leyen to conduct a comprehensive study on how the European Union could become more competitive with the US and China.  This past week, Draghi published a 400-page comprehensive and wide-ranging report offering recommendations for ten main economic sectors.  Overall, Draghi says the EU needs to invest between €750 - €850 billion per year – close to 5% of the bloc’s GDP – to stay competitive in the face of shrinking populations, the need to rapidly and massively ramp up combined defense capabilities, and offset the supply of previously cheap energy (mostly coming from Russia).  

• A World of Chips Acts:  The Future of U.S.-EU Semiconductor Collaboration  Center for Strategic and International Studies

  The U.S. and the EU have each recently enacted legislation providing for an unprecedented volume of public investments in semiconductors, with the largest portion allocated to the establishment of new onshore chip production facilities. Substantial funds are also allocated to semiconductor research and development, supply chain security, and workforce expansion and training. These parallel initiatives have been prompted by an awareness in both regions of threats to economic and strategic security arising out of their dependency on foreign-made chips. The question posed by the enactment of the two Chips Acts is how such joint activities can be deepened, broadened, and leveraged by direct engagement between the United States, the European Union, and national authorities to address the vulnerabilities faced by both ecosystems.

• The EU has a playbook to de-risk from China.  Is it working?    Brookings Institution

  The European Union’s (EU) decision to raise its tariffs on Chinese electric vehicles (EVs) has prompted speculation about whether the EU and the United States could cooperatively “de-risk” from China. Much like the United States, the EU has developed a “de-risking” playbook with three goals: to protect its economy from outside encroachments, to promote its own competitiveness and resilience, and to partner with others to amplify its economy’s strengths and mitigate its vulnerabilities. In fact, the term “de-risking” was pioneered by European Commission President Ursula von der Leyen and later embraced by the Biden administration and all G7 leaders.   But is it working?
  

China

• China Decoupling Handbook: Where We Are, What To Do    American Enterprise Institute/Derek Scissors

  Scissors writes the case for a smaller US-China relationship keeps getting stronger, arguing that China under President Xi Jinping will not become a better partner.  To achieve this decoupling, which is already underway, additional policies are needed around imports, exports (especially technology), inbound investment, outbound investment, and supply chains.   In his “handbook,” Scissors details how best to carry out such policies in each area.

• Why Catching Up to Starlink is a Priority for Beijing   Carnegie Endowment for International Peace

  China’s push to enter the satellite internet market shouldn’t come as a surprise. The Chinese Communist Party (CCP) has poured significant resources into closing the gap with America’s space-based technologies, and its efforts are starting to pay off. on August 9, a Long March 6A rocket blasted off from the Taiyuan Satellite Launch Center in the northern Chinese province of Shanxi. The rocket carried eighteen low-Earth orbit (LEO) satellites from the government-backed company Qianfan. State media hailed the launch as China’s answer to Starlink, the U.S.-based satellite internet pioneer, and the first step toward breaking America’s dominance in this market. Qianfan intends to grow its constellation to more than 600 satellites by the end of 2025 and to eventually place 14,000 satellites into orbit

Recommended Weekend Reads

August 16 - 18, 2024

Please find below our recommended reads from reports and articles we read in the last week.  We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list.

Hacking, Deep Fakes, and the 2024 U.S. Elections

• 100 Days Until Election 2024   U.S. Director of National Intelligence

  Already seeing the foreign governments attempting to meddle in the upcoming U.S. elections, The Office of the Director of National Intelligence (DNI) issued this unclassified memo explaining how the U.S. intelligence community is monitoring foreign actors trying to influence and disrupt the upcoming elections.  Well worth the read to understand the threat at hand.

• How Foreign Governments Sway Voters with Online Manipulation   Scientific American

  2024 is the year of elections, with more than half the world’s population heading to the polls to vote. More than 100 countries including India, Taiwan, the UK, France, Russia, Venezuela, and soon, the United States, have held are holding national elections.  Most of the elections were free and fair, while others – such as Russia and Venezuela – were rigged, and opposition candidates either arrested or “disappeared.”  But one constant in most of these elections has emerged: Foreign government efforts to interfere and either discourage voters or mislead them with disinformation.  Scientific American Magazine did a deep dive into how malign foreign governments use social media and other mediums to achieve their goals.
  

• Iran Steps into U.S. Election 2024 with Cyber-Enabled Influence Operations Campaign  Microsoft On the Issues

  Two weeks ago, news broke that the Trump campaign had been hacked, and the most likely culprit is Iran.  How is this happening?  In a new report from Microsoft details how foreign countries are seeking to negatively influence the 2024 US election.  As the report details, these malign forces started off slowly in 2024 but have steadily picked up the pace over the last six months. Russia was primarily the initial operator, but more recently, Iran has picked up the pace.  China is not far behind.

Source: Microsoft On the Issues

• Iran using covert influence campaigns to undermine Trump's candidacy, U.S. intelligence says     CNN

  CNN reports how Iran is using covert social media activity and related influence operations in an effort to undercut the candidacy of former President Donald Trump, a US intelligence official said Monday in an updated assessment of threats to the November election.

China

• China’s Imaginary Trade Data   Brad Setser/Council on Foreign Relations “Follow the Money” Blog

  Council on Foreign Relations Senior Fellow Brad Setser took a deep dive into the IMF’s latest assessment of China.  In the appendix, he found something interesting: China has a new way of calculating its good trade balance - and that calculation is deeply misleading and helps to explain the apparent fall in the current account surplus.  For example, Setser believes the new method understates the current account surplus by $300 billion as of the second quarter of 2024 and that the actual surplus is closer to $700 billion.
  

• China’s Great Wall of Villages   The New York Times

  President Xi calls them “border guardians.”  In this superb interactive report using satellite imagery, the New York Times reports on how the government built twelve new villages in frontier areas claimed by other countries in recent years, the New York Times reported based on satellite images. They are among more than fifty new villages in frontier areas, and while civilian in nature, they provide access points for China’s military. A spokesperson for the Chinese Embassy in Washington said regarding border issues, Beijing seeks “fair and reasonable solutions” through peaceful consultation.

Source: New York Times

• Marijuana and Mexican cartels: Inside the stunning rise of Chinese money launderers  NBC News

  Over the past decade, Chinese organized crime groups in the U.S. quietly became the dominant money launderers for Mexican cartels. Then they used the profits to take over the illicit marijuana trade.  Experts worry that the organizations that now dominate money laundering worldwide pose a potential national security threat to the U.S.

Geoeconomics

• Don’t Believe the AI Hype   Daron Acemoglu/Project Syndicate

  Acemoglu, an MIT Economics Professor, writes that if you listen to tech industry leaders, business-sector forecasters, and much of the media, you may believe that recent advances in generative AI will soon bring extraordinary productivity benefits, revolutionizing life as we know it. Yet neither economic theory nor the data support such exuberant forecasts.
  

• Has the Recession Started?    Pascal Michaillat (UC Santa Cruz) and Emmanuel Saez (UC Berkeley)

  Abstract: To answer this question, we develop a new Sahm-type recession indicator that combines vacancy and unemployment data. The indicator is the minimum of the Sahm indicator -  the difference between the 3-month trailing average of the unemployment rate and its minimum over the past 12 months—and a similar indicator constructed with the vacancy rate—the difference between the 3-month trailing average of the vacancy rate and its maximum over the past 12 months. We then propose a two-sided recession rule: When our indicator reaches 0.3pp, a recession may have started; when the indicator reaches 0.8pp, a recession has started for sure. This new rule is triggered earlier than the Sahm rule: on average, it detects recessions 1.4 months after they have started, while the Sahm rule detects them 2.6 months after their start. The new rule also has a better historical track record: it perfectly identifies all recessions since 1930, while the Sahm rule breaks down before 1960. With July 2024 data, our indicator is at 0.5pp, so the probability that the US economy is now in recession is 40%. In fact, the recession may have started as early as March 2024.

Recommended Weekend Reads

August 2 - 4, 2024

Please find below our recommended reads from reports and articles we read in the last week.  We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list.

China

• How is China’s domestic situation evolving?    Brooking Institution

  There is a lot of discussion in Washington about China’s social and economic challenges and the potential implications of these challenges for Chinese society, governance, and foreign policy. In the following collection of short essays, Brookings scholars offer their different perspectives drawing on decades of experience living and working in China to answer the question, “How is China’s domestic situation evolving?”  They cover everything from gender right to economic challenges to domestic tourism to education to political and military changes and challenges.

• Why the China model is failing   Australian Strategic Policy Institute

  The authoritarian China model under President Xi Jinping’s leadership is facing increasing failure. Its most critical flaw lies in the unconstrained power of the ruling Chinese Communist Party (CCP), arbitrarily intervening in market and social activities for the interest of itself or its leaders without robust mechanisms for accountability and self-correction.  The China model is thought to have contributed to the country’s ‘economic miracle’ in more than four decades to the early 2010s. From 1978 to 2012, the Chinese economy grew at an average annual rate of 9.4 percent, rising from low-income status to become the world’s second largest. For many developing countries, this growth symbolizes the success of the CCP’s authoritarianism, which they seek to emulate.
  

• China’s updated playbook for reviving growth risks more tensions with the world  Peterson Institute for International Economics

  China’s most senior leadership concluded a major political meeting in July with a communiqué correctly identifying a “grave and complex international environment” and “arduous tasks” at home. But as expected, there was limited indication of new policy approaches to revive its slowing economy and recover from a real estate crisis. Nor did the meeting portend a serious effort to defuse growing backlash in the United States, the European Union, Indonesia, Brazil, and others against China’s economic playbook, which emphasizes increased investments in manufacturing for exports to boost its sluggish growth.
  

• Why is It So Hard for China to Boost Domestic Demand? Carnegie Endowment for International Peace

  As most analysts expected, the Chinese Communist Party’s Third Plenum communiqué, released July 18, was much vaguer on demand-side measures designed to boost the role of consumption in driving the Chinese economy than it was on supply-side measures. This was the case even though over the past five to ten years, a near unanimous consensus has developed among both Chinese and foreign economists that consumption’s very weak role in driving the economy is the main constraint to sustainable growth in China. Despite this consensus, Beijing has been unable to shift the economy away from its overreliance on investment—and, more recently, on its trade surplus—to maintain high growth rates. In early June, American economist Paul Krugman publicly worried in a Bloomberg interview that China’s leaders were “bizarrely unwilling” to use more government spending to support consumer demand instead of production

The Global Drug Trade

• We bought everything needed to make $3 million of fentanyl.  All it took was $3,600 and a web browser   Reuters

  In this fascinating interactive report, Reuters investigative reporters showed that at the tap of a buyer’s smartphone, Chinese chemical sellers will air-ship fentanyl ingredients door-to-door to North America. Reuters purchased enough to make 3 million pills. Such deals are astonishingly easy – and reveal how drug traffickers are eluding efforts to halt the deadly trade behind the fentanyl crisis.

• Sky High: The Ensuing Narcotics Crisis in the Middle East and the Role of the Assad Regime   Observatory of Political and Economic Networks

  The staggering scale of recent narcotics seizures in the Middle East—and Arab Asia in particular—and their ties to state and non-state actors in Syria is drawing the world’s attention. The United Kingdom, the United States, and the European Union have begun sanctioning Syrian and Lebanese suppliers as part of their response, with US legislators awaiting a holistic government response. Some countries in the region have recently considered the once-unthinkable: normalizing relations with the Assad regime, partly in the hope of cooperating directly with Damascus to curb the supply.

  This research documents the seizure over the last three years of over a billion pills of amphetamine-type drugs commonly known as ‘captagon’. It offers the most comprehensive attempt, to date, to understand the breadth and nature of the ongoing narcotics crisis and the networks sustaining much of their supply in Syria and to a lesser extent in Lebanon. While all drug types are observed, special attention is given to captagon.  Researchers constructed two databases specifically for this project. The first documents 1,251 drug seizures originating, transiting through, or reaching their destination in Arab Asian countries between 2016 and 2022. The richness of the data enables identification of how seizures vary by drug type, amount, countries of origin, countries of transit, and geolocation of seizures over time.  The second is a network database that maps actors involved in the supply of narcotics from Syria and Lebanon. It contains 712 nodes (441 individuals and 271 non-individuals) and a narrative detailing their roles and relationships within the network. The database, compiled from primary and secondary sources, is the most expansive documentation effort on the subject to date.

Economics/Trade/Foreign Direct Investment

• The Bretton Woods Moment – and Its Necessary Replacement   Carnegie Endowment Working Group for Reimaging Global Economic Governance

  Despite a concatenation of shocks—a China shock in trade, the global (or North Atlantic) financial crisis, surges in migration, a global pandemic—the current architecture of global economic governance has persisted and demonstrated remarkable resilience and adaptability. Trade has not collapsed; financial integration recovered from the global financial crisis; the cross-border movement of people has resumed post-pandemic. The interwar decades of disintegration, nationalist isolation, and great power war have yet to be replicated. Rather than “deglobalization” or the collapse of the existing global order, institutions and integration appear to have reached a stable plateau. Nevertheless, this plateau risks further descent into disorder, albeit less from a concerted attack on that order than out of discontent with its failure to confront such urgent challenges as climate change effectively. Conflict over the current distribution of costs and benefits poses another threat to the status quo. 

• Low US Economic Confidence Steady  Gallup

  Gallup’s Economic Confidence Index registers -35 in July, stable compared with the past two months and consistent with the longer trend of negative public sentiment about the current and future American economy.  Gallup’s Economic Confidence Index did show improvement between November and March, gaining 20 points, but since then has slid back to where it was in December 2023. During President Joe Biden’s term, confidence has slumped to as low as -58 in June 2022 amid soaring inflation, the worst reading since the Great Recession in 2008 and early 2009.

• Trends in Competition in the United States: What Does the Evidence Show?  Carl Shapiro & Ali Yurukoglu/National Bureau of Economic Research

  Has the United States economy become less competitive in recent decades? One might think so based on a body of research that has rapidly become influential for antitrust policy. We explain that the empirical evidence relating to concentration trends, markup trends, and the effects of mergers does not actually show a widespread decline in competition. Nor does it provide a basis for dramatic changes in antitrust policy. To the contrary, in many respects the evidence indicates that the observed changes in many industries are likely to reflect competition in action. We highlight research that points to targeted interventions that can enable antitrust enforcement policy to better promote and protect competition. Throughout the paper, we identify open questions and opportunities for future research in the cross-industry evidence-at-scale paradigm, the industry-specific study paradigm, and their intersection.

Energy Policy

• Taking Stock 2024: US Energy and Emissions Outlook   Rhodium Group

  Every year, Rhodium Group provides an independent projection of future US greenhouse gas (GHG) emissions under current policy and expectations for economic growth, future fossil fuel prices, and clean energy cost and performance trends. In the ten years since we released our first Taking Stock report, the US has made progress on a path to decarbonization. In 2023, US GHG emissions were 18% lower than they were in 2005. In addition, policies enacted at all levels of government have never been stronger for achieving even deeper cuts to emissions, including the passage of the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA), adoption of a suite of federal regulations aimed at driving down emissions, and ambitious state action. With all federal and state policies on the books as of June 2024, we estimate the US is on track to reduce its GHG emissions by 38-56% below 2005 levels in 2035, representing at least a doubling—and potentially as much as a four-times increase—from the pace of annual emissions abatement from 2005 to 2023. On the way to 2035, we find the US could reduce its emissions by 32-43% below 2005 levels in 2030. These emissions reductions under current policy are a measurable acceleration in mitigation even compared to our Taking Stock 2022 edition from just before the passage of the IRA, in which we found the US on track for a 24-35% reduction below 2005 levels in 2030. But they are not enough for the US to achieve its 2030 climate commitment under the Paris Agreement of a 50-52% reduction by 2030, or deep decarbonization by mid-century.

Great Power Arctic Strategy

• The High North – Important or Overlooked?     Janes Defense Group Podcast

  In this podcast, James Rands, senior Balkans and military capabilities analyst at Janes, joins Harry Kemsley and Sean Corbett to provide a deeper understanding of the High North, Arctic region.  With climate change likely to expose a northern sea route in the next decade or so and the potential abundance of natural resources, many countries will want to stake claim on this previously impenetrable region. Rands highlights the military capabilities required to operate in this challenging environment. They also discuss the important role open-source intelligence plays in providing early-warning indicators of activity and any escalation in tensions in what is likely to become a key global strategic area.

• Arctic Strategy 2024   US Department of Defense

  In a new report, the US Defense Department lays out a strategy to defend the Arctic.  In the introductory memo, Secretary of Defense Lloyd Austin states: “The United States is an arctic nation, and the region is critical to the defense of our homeland, the protection of the US national sovereignty, and our defense treaty commitments.  I am issuing this 2024 Arctic Strategy to guide the US Department of Defense in a concerted approach to preserve the Arctic as a stable region in which the US homeland remains secure and vital national interests are safeguarded.”

Recommended Weekend Reads

July 5 - 7. 2024

Here are our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list.

U.S. Elections

• Trade Isn’t Great Retail Politics for Either Party   Kevin Nealer/Council on Foreign Relations

  Since the United States trade imbalance flipped sharply negative in the mid-1970s and nose-dived in the Ronald Reagan years, both the Democratic and Republican parties have sought to weaponize trade as a political wedge issue. That approach has not worked for either of them. As a result, trade is unlikely to be a major theme in the 2024 election cycle.  Broadly, Americans are now less supportive of the role of trade in the U.S. economy. But the picture gets muddled as you dig into those sentiments, with a bare majority believing trade does more good than harm. Support for trade has largely recovered from the historic low of the 2016 campaign levels, but a sharp partisan divide that reverses decades of preconceptions reveals Democrats are now more favorable to trade’s impacts than Republicans by a margin of nearly 2:1. Yet trade as an issue virtually never breaks into the top-ten list of voter concerns. Certainly, the term trade is often subsumed under broader economic concerns; voters rightly include trade neuralgia with macro-policy worries such as inflation and interest rates.

Tension in the Himalayas

• Why do India and China Keep Fighting Over This Desolate Terrain?    New York Times Magazine

  The 2,100-mile border separating India and China passes through some of the world’s most inhospitable terrain. In the west, it runs along India’s Ladakh region at an altitude of 13,000 to 20,000 feet. During the months when the area isn’t covered in snow, the ground resembles a moonscape. The earth is sandy, strewn with rocks and pebbles; not a blade of grass grows anywhere; there are no visible signs of animal life. In winter, temperatures can drop to –40 degrees. The bleak conditions and barren vistas can induce despair in those who set foot on the land. “I’ve been to those places,” a former Indian diplomat who now works for an international Buddhist organization in Delhi told me. “When you visit, you tend to think, Who the hell even wants this area?”

• Why the Himalayan Region is Integral to a Rules-Based Order in the Indo-Pacific The Diplomat

  Chinese militarization and expansionism in the Himalayas remains a perennial concern not just for India but for the United States – and its Indo-Pacific allies and partners.  China has been pursuing a “salami tactic” strategy with its neighboring states, including India and Bhutan, trying to rebrand the entire Himalayan region as “Xizang,” a Mandarin term for Tibet.

China

• China’s Growing Risk Tolerance in Space: Peoples Liberation Army Perspectives and Escalation Dynamics   Rand Corporation

  Chinese leaders see themselves in competition with the United States to build military power in space. The multiplication of U.S. and Chinese capabilities could lead to unstable competition in space, raising the risk of rapid, and perhaps unintended, military escalation. This report surveys open-source literature across the Chinese defense enterprise to present a composite image of People’s Liberation Army (PLA) perspectives and key factors for U.S.-China crisis stability in space. It draws on authoritative Chinese writings to understand Chinese perceptions of threats from the United States by reviewing Chinese publications on U.S. intent and capabilities in space. The report additionally traces the evolution of PLA thinking on escalation dynamics in space over the past two decades. The report concludes with an assessment of the challenges facing U.S. officials looking to manage U.S.-China crisis dynamics in space.
  
  

• National Perspectives on Europe’s De-Risking from China   Metrics

  The “de-risking” of relations with China has become an organizing principle for the European Union (EU) since it was first put forward by President of the European Commission Ursula von der Leyen in March 2023. This report of the European Think-tank Network on China (ETNC) analyses how 21 EU member states and the United Kingdom view de-risking from a national context. Each chapter is written by China experts who broadly set out to address the same set of questions with respect to their own country: What is the country’s standpoint on the EU’s approach to de-risking?  Which China-related risks is that country most concerned about? Was the country’s standpoint on de-risking resulted in any concrete measures? How does that standpoint affect the country’s views on or approach to China? 

Global Markets and Geoeconomics

• Sovereign Wealth Funds: Corruption and Other Governance Risks   Carnegie Endowment for International Peace

  In the 1990s, SWFs held $500 billion in assets, but by 2020, they had more than $7.5 trillion in assets under management (AUM), equal to about 7 percent of the global AUM of $111.2 trillion. Globally, prior to 2010, there were only fifty-eight SWFs. Today, however, SWFs have become an increasingly fashionable type of state-owned entity to set up, and there are currently 118 operating or prospective SWFs. In the African continent alone, prior to 2000, there were only two SWFs. Since 2000, sixteen new SWFs have been set up.  The report argues that what is particularly concerning about this dramatic growth is that SWFs have been established not just in countries with strong rule of law and civil liberty protections but also in countries marked by high corruption risks, insecurity, violence, and weak or absent rule of law.

• The Eclipse of the Petrodollar  Hippolyte Fofack/Project Syndicate

  Much of the reporting earlier this month about the “non-renewal” of a decades-old “petrodollar agreement” between Saudi Arabia and the United States was riddled with inaccuracies and half-truths. Some outlets even went so far as to allege that Saudi Arabia would “stop using the US dollar for oil sales.” Still, despite these errors, and although the dollar remains dominant, the momentum for de-dollarization is building, reflecting broad geopolitical and macroeconomic shifts.

• Top Dollar: Why the Dominance of America’s Currency is Harder Than Ever to Overturn  Eswar Prasad/Foreign Affairs

  The U.S. economy is no longer the colossus it once was. Its public debt is gargantuan and rising, and policymaking in Washington is erratic and unpredictable. Persistent threats of debt defaults undercut the perception that U.S. government bonds are safe.  It would be no surprise, then, if the dollar were rapidly losing its power. But in fact the opposite is happening: the trends that would be expected to weaken the dollar, many of them driven by U.S. policy, are only strengthening its global dominance. The dollar remains on top in part because of the U.S. economy’s size and dynamism relative to other major economies. But more than that, although American institutions are fraying, those in other parts of the world are in no better shape, with populism and authoritarianism on the rise. Moreover, economic and geopolitical turmoil serves only to intensify the quest for safe investments, usually leading investors back to the dollar, which remains the most trusted currency. The United States financial markets are much larger than those of other countries, making dollar assets easier and cheaper to buy and sell.