4 August 2013

The unfinished business of Kargil

 by nitin pai 
29/7/13


Last week, we marked the 14th anniversary of the Kargil war. Fourteen years is long enough to turn raw memories into pro forma observances: military parades conducted, wreaths laid, candles lit, heroes remembered and lip services paid. Fourteen years is long enough for the political leadership, defence establishment and the public discourse to forget that the Kargil war left us with some unfinished business.

The Kargil Review Committee (KRC) - which broke with tradition and published its report in December 1999 - identified the scope and the urgency of that unfinished business. There is one paragraph that captures the essence of the detailed 277-page report: "The Committee is of the view that the present obsolete system, bequeathed to India by Lord Ismay [Lord Mountbatten's chief of staff], merits re-examination... An objective assessment of the last 52 years will show that the country is lucky to have escaped through various national security threats without too much damage, except in 1962. The country can no longer afford such ad hoc functioning. The Committee therefore recommends that the entire gamut of national security management and apex decision making and the structure and the interface between the Ministry of Defence and the Armed Forces Headquarters be comprehensively studied and reorganised."

After an initial flurry of action under the Vajpayee government, the task of reorganising India's national security apparatus is not even marking time. It has ground to a halt. The National Democratic Alliance (NDA) government set up a group of ministers to act on the KRC's report. Its task force on defence - headed by Arun Singh - suggested an incremental approach towards integrating the army, navy and air force into a joint defence force. The eventual goal was to restructure the armed forces into geographical tri-service theatre commands, with a chief of defence staff acting as the interface between the military establishment and the political leadership.

Yet while the NDA government established the integrated defence staff (IDS) headquarters, the tri-service Andaman and Nicobar Command and Strategic Forces Command, the then prime minister, Atal Bihari Vajpayee, demurred when it came to appointing a chief of defence staff, given resistance in parts of military and civilian establishments. The United Progressive Alliance government demonstrated little enthusiasm for most of its two terms, except for appointing a committee in 2011 - under the chairmanship of Naresh Chandra - to review the KRC's recommendations. The workings, the report and the implementation (if any) of this committee are invisible to the public.

While the crucial task of reforming India's British Raj-era military command structure has fallen off everyone's radar screens, the public discourse on defence is dominated by pay scales, stalled purchases and procurement scandals.

It may appear that the country has been lucky to have escaped without too much damage for another 14 years. But the failure to restructure our armed forces in line with contemporary needs will impose strategic costs beyond just delays and scandals. The current structure, divided as it is between the army, navy and air force (and within their constituent arms), is unable to holistically conceptualise India's strategic environment.

Take, for instance, the Cabinet's approval for a new mountain strike corps to handle the Chinese threat along the unresolved boundary. It involves an army formation of 45,000 soldiers and a cost of Rs 62,000 crore over 2012-17, tasked with mounting an offensive in Tibet in the event of a Chinese attack. This move was widely hailed as a robust Indian response to China's aggressive actions along the boundary and its steadfast refusal to move towards a settlement. Few asked where the money and the soldiers are going to come from. As my colleague Rohan Joshi notes, the army is already short of 10,000 officers and 30,000 soldiers. With slower economic growth, higher social expenditure and looming deficits, how does the government plan to finance this expansion? 

Emerging Economies – When Giants Slow Down

The Economist

Jul 27th 2013 -- This year will be the first in which emerging markets account for more than half of world GDP on the basis of purchasing power, according to the International Monetary Fund (IMF). In 1990 they accounted for less than a third of a much smaller total. From 2003 to 2011 the share of world output provided by the emerging economies grew at more than a percentage point a year (see chart 1). 

The remarkably rapid growth the world has seen in these two decades marks the biggest economic transformation in modern history. Its like will probably never be seen again. According to a recent study by Arvind Subramanian and Martin Kessler, of the Peterson Institute, a think-tank, from 1960 to the late 1990s just 30% of countries in the developing world for which figures are available managed to increase their output per person faster than America did, thus achieving what is called “catch-up growth”. That catching up was somewhat lackadaisical: the gap closed at just 1.5% a year. From the late 1990s, however, the tables were turned. The researchers found 73% of developing countries managing to outpace America, and doing so on average by 3.3% a year. Some of this was due to slower growth in America; most was not.

The most impressive growth was in four of the biggest emerging economies: Brazil, Russia, India and China, which Jim O’Neill of Goldman Sachs, an investment bank, acronymed into the BRICs in 2001. These economies have grown in different ways and for different reasons. But their size marked them out as special—on purchasing-power terms they were the only $1 trillion economies outside the OECD, a rich world club—and so did their growth rates (see chart 2). Mr O’Neill reckoned they would, over a decade, become front-rank economies even when measured at market exchange rates, and he was right. Today they are four of the largest ten national economies in the world.

The remarkable growth of emerging markets in general and the BRICs in particular transformed the global economy in many ways, some wrenching. Commodity prices soared and the cost of manufactures and labour sank. Global poverty rates tumbled. Gaping economic imbalances fuelled an era of financial vulnerability and laid the groundwork for global crisis. A growing and vastly more accessible pool of labour in emerging economies played a part in both wage stagnation and rising income inequality in rich ones.

The shift towards the emerging economies will continue. But its most tumultuous phase seems to have more or less reached its end. Growth rates in all the BRICs have dropped.The nature of their growth is in the process of changing, too, and its new mode will have fewer direct effects on the rest of the world. The likelihood of growth in other emerging economies having an effect in the near future comparable to that of the BRICs in the recent past is low; they do not have the potential for catch-up the BRICs had in the 1990s and 2000s. And the BRICs’ growth has changed the rest of the world economy in ways that will dampen the disruptive effects of any similar surge in the future. The emerging giants will grow larger, and their ranks will swell; but their tread will no longer shake the Earth as once it did.

The Great Return

The BRIC era arrived at the end of a century in which global living standards had diverged remarkably. Towards the end of the 19th century America’s economy overtook China’s to become the largest on the planet. By 1992 China and India—home to 38% of the world’s population—were producing just 7% of the world’s output, while six rich countries which accounted for just 12% of the world’s population produced half of it. In 1890 an average American was about six times better off than the average Chinese or Indian. By the early 1990s he was doing 25 times better.
There followed what Mr Subramanian and Mr Kessler call “convergence with a vengeance”. China’s pivot towards liberalisation and global markets came at a propitious time in terms of politics, business and technology. Rich economies were feeling relatively relaxed about globalisation and current-account deficits. Bill Clinton’s America, booming and confident, was little troubled by the growth of Chinese industry or by offshoring jobs to India. And the technology and managerial nous necessary to assemble and maintain complex supply chains were coming into their own, allowing firms to spread their operations between countries and across oceans.

The tumbling costs of shipping and communication sparked what Richard Baldwin, an economist at the Graduate Institute in Geneva, calls globalisation’s “second unbundling” (the first was the simple ability to provide consumers in one place with goods from another). As longer supply chains infiltrated and connected places with large and fast-growing working-age populations, enormous quantities of cheap new labour became accessible. According to figures from the McKinsey Global Institute, a think-tank, advanced economies added about 160m non-farm jobs between 1980 and 2010. Emerging economies added 900m.

Riding the whirlwind

The fruits of this cheap labour were huge steps forward in global trade. Merchandise exports soared from 16% of global GDP in the mid-1990s to 27% in 2008. The Chinese share of global exports topped 11%, with trade accounting for more than half of the country’s GDP. Mr Subramanian and Mr Kessler see China as the first “mega-trader” to grace the world stage since Britain’s imperial heyday.

The growth in trade was matched by a growth in demand for commodities as China and the nations supplying it soaked up energy and raw materials such as iron ore, copper and lead (see chart 3). Prices surged, generating a bonanza for the emerging world’s commodity producers and contributing to a broad-based boom, to the great benefit both of fellow-BRICs Russia and Brazil and of smaller economies, including many in Africa.

From 1993 to 2007 China averaged growth of 10.5% a year. India, with less reliance on trade, managed an average of 6.5%, more than twice America’s average growth rate. The two countries’ combined share of global output more than doubled to nearly 16%. Global financial imbalances ballooned. From 1999 advanced economies ran a current-account deficit which peaked at nearly 1.2% of rich-world GDP in 2006. Emerging economies’ combined current-account surplus peaked in the same year at 4.9% of GDP.

The Slowing of Two Economic Giants

The New York Times
Pranab Bardhan

July 14 - - India — The world’s two most populous countries are slowing down. To be sure, China’s output is expected to grow by 7.8 percent this year, and India’s by 5.6 percent — far superior to 2 percent for Japan, 1.7 percent for the United States, 0.9 percent for Britain and a shrinkage (negative 0.6 percent) in the troubled euro zone, the International Monetary Fund projected last week. But there is no sequel in sight for the 10-percent-plus growth China and India posted in 2010. The West can no longer count on their continued expansion to lift its sagging economies. For 2.5 billion people, the consequences are more dire: in India, less money to strengthen the threadbare social safety net, and in China, possible political instability. What does the slowdown mean for these two giants, and which will come out ahead?

Let’s start with China, the bigger of the two economies. Talk of a global “Beijing consensus” — state-controlled capitalism as an alternative to the “Washington consensus” about how poor countries should develop — has largely disappeared. China’s new leaders are focused on problems at home: battling corruption, reining in the overheated housing market, scaling back the government’s outsize role in the economy, and cracking down on financialspeculation.

China may be close to exhausting the possibilities of technological catch-up with the West, particularly in manufacturing. For China to move up the value chain, and become an advanced-manufacturing powerhouse like Germany, it must move beyond off-the-shelf technology and copying rival designs and reap gains from genuine innovation, which can come about only through research and development.

China has amassed huge foreign exchange reserves, partly by keeping the value of its currency low. It now has to rebalance its economy away from the construction boom and financial speculation and toward private consumption and improvements in pensions, health care and other forms of social protection. Crony capitalism has been allowed to misallocate capital toward too-big-to-fail, low-productivity state-owned firms operated by loyal apparatchiks and away from dynamic private small firms.

Concentrated wealth poses problems for both countries. The Hurun Report, a Shanghai-based wealth monitor, estimated last year that the 83 richest delegates to the National People’s Congress and an advisory group, the Chinese People’s Political Consultative Conference, had a net worth of over $250 billion. By comparison, the declared assets of all of the roughly 545 members of the Lok Sabha, the lower house of India’s Parliament, amount to only about $2 billion.

In India, the collusion between Indian billionaires and politicians, while rampant, is somewhat less direct and more subject to political and media scrutiny. In China, collusion between party officials and commercial interests, especially at the local level, has caused widespread popular anger against arbitrary land acquisition and toxic pollution.

The economist and philosopher Amartya Sen recently argued on this page that India has lagged behind China because it had not invested enough in education and health care, which raise living standards and labor productivity. He rightly emphasizes that deficient social services and the inequality that results are not just a matter of social justice, but of economic growth as well, as the history of much of East Asia shows. But one should not get the impression that progress in social services is by itself sufficient for growth. Exemplary welfare programs in the state of Kerala in India, and in Sri Lanka, have not been matched by spectacular economic performance. The latter also requires improvements in infrastructure, less cumbersome regulations and a culture that fosters entrepreneurial investment.

Mr. Sen raises but does not examine a puzzle: why voters in the world’s largest democracy cannot get politicians to effectively deliver social services. Infant and maternal mortality and poor sanitation are not salient electoral issues. This is partly because India’s fractious society (more heterogenous than China’s) has often emphasized uplifting the dignity of former oppressed social groups over basic good governance.

Naturally rich

By Kalpana Sharma

The Hindu Containers carrying alumina from Vedanta Aluminium Ltd. Photo: Arunangsu Roy Chowdhury
PTI At a gram sabha in Niyamgiri hills, Kalahandi district. The locals are protesting against the proposal.

The Niyamgiri tribals’ rejection of the State Government’s plans to mine the hills for bauxite should lead to a rethink on the current notions of poverty and development.

I have never been to Niyamgiri in Odisha. But what is playing out there since July 18 is a drama that has people like me mesmerised even at this distance. For in those thickly forested hills, where under the rich and diverse plant and animal life above the soil lie valuable deposits of bauxite underneath, an environmental battle of an epic scale is being fought. On the one side are some 8,000 Gondhia Kondh and other tribals, sometimes referred to as “primitive” tribes. On the other is the State of Odisha and one of the most powerful multi-national companies in the world, Vedanta. In the face of this apparent inequality, is it even possible for an outcome that favours the outnumbered minority?

Such an outcome is a very real possibility. Because from July 18 until August 19, these so-called “primitive” people — who have lived for centuries on the slopes of the Niyamgiri hills, drunk its clear waters, eaten its fruits, hunted some of its animals, grown small crops and merged with the natural resources abundant around them — have been asked to speak. A Supreme Court ruling in April this year, ordered the Odisha government to hold gram sabhas, or palli sabhas as they are called, in all the villages that would be affected by the State government’s plan to mine the hills for bauxite. While the court’s order has clearly stated that all the villages affected should be consulted, the Odisha government has cleverly chosen only 12 out of an estimated 112 villages that want to have a say. Perhaps it thought that a dozen villages could be “handled” easily.

Instead, the State government was in for a rude shock as one palli sabha after another unanimously voted against the mining project. These unlettered men and women stated without hesitation that any mining in the region would disturb what the Gondhia Kondh regard as their deity, Niyamaraja. The apex court had clearly stated that this is what the palli sabhas should examine and decide upon — whether mining would impact their traditional beliefs. At the time of writing, six out of 12 have unanimously reiterated that the mining project would disturb their deity.

It has been truly inspiring to read the reports about these palli sabhas, covered in detail by Down to Earth, the environmental magazine produced by the Centre for Science and Environment (http://www.downtoearth.org.in/content/battle-niyamgiri) and some mainstream media. First, the very fact that such a process of consultation is even taking place is extraordinary. It has never been done before. Second, the circumstances are particularly difficult. There are no motorable roads to many of the places where the palli sabhas are held. The district magistrate deputed to be present during the meeting has had to trek uphill through treacherous terrain for several kilometres to reach the place. That experience in itself should be transformative for people who otherwise are used to the aggrieved trekking long distances to offices in urban centres.

When nature goes berserk


Published: August 3, 2013 
Neena Rao

The Hindu A hydropower site in the North-east. Photo: Ritu Raj Konwar

Abuse of a fragile ecosystem can prove disastrous, says the author, examining hydropower development in the Northeast.

A month after the “Himalayan Tsunami”, news channels have turned their attention to more sensational “current” issues. A few days ago they were blaring that it was not a Himalayan tragedy — it was a Himalayan blunder! We should have known better than to build bumper dams along mountain rivers in an ecologically fragile zone, the dynamics of which we understand very little.

Today, viewers like me are so accustomed to receiving shocks ever so often that, if one doesn’t have something as drastic and shocking as the previous news, there is a sense of emptiness almost leading to withdrawal symptoms. The nation seems to be almost addicted to this highly stimulating drama. Nobody has the time and patience to listen to the real causes of these problems, let alone comprehend in a manner that can lead to remedial action. We seem to be in a state of collective stupor.

During the Uttarakhand disaster reporting, many were in agreement that indiscriminate and senseless “development” was one of the predominant culprits in the sensitive and fragile eco-zone; hydropower development being perceived as a prime contributor. Oddly, this disaster could herald what could be in store further east along the Himalayan range. There too hydropower projects are being undertaken indiscriminately, despite technical advice to the contrary.

Hydropower development may not be bad in itself. In fact, considering the country’s infrastructure needs in general and energy requirements in particular, harnessing our hydropower potential wherever appropriate is definitely a good step forward. However, the approach to this development is the real issue here.

A case in point is Sikkim. The apathy towards the environmental impact of hydropower development is evident in the State where the recommendations of the Carrying Capacity Study undertaken by the National Hydropower Corporation of the Teesta River basin have been ignored conveniently. This study clearly mentions that the Teesta River basin, according to its carrying capacity, cannot take up more than six mega hydropower projects in the State.

The Comptroller and Auditor General (CAG) of India observed in its 2009 report on Sikkim that the land profile of the State consists of steep slopes and narrow gorges and is prone to weathering, erosion and frequent landslides. Further, it is also located in Zone IV of the seismic zone map of India. It adds that, during the last 50 years, as many as 115 cases of major landslides and nine major earthquakes of magnitude of more than five on the Richter scale, were recorded in the region. The CAG report specifically cautions against the establishment of hydropower projects that involve extensive excavation, tunnelling, blasting, construction of mammoth water reservoirs, powerhouses and allied works. Such activities put tremendous stress on the fragile environment of the State and could bring about unprecedented disasters and calamities (CAG, 2009).

However, despite all these warnings, in just two years after the completion of the Carrying Capacity Study, the Government of Sikkim has gone ahead declaring 28 such projects on the Teesta in Sikkim alone. The justification is that hydropower projects, especially the river projects, are environmentally benign.

The Ministry of Environment and Forests have made it mandatory to have three-tier monitoring committees at the Central, State, and at the project levels. They are mandated to meet twice a year and involve the local community in monitoring these projects. Apart from this, there are several other stipulations and legal provisions to safeguard the environment and involve local people in decision making. However, very little has been put into practice on the ground.

Houston, We Have a Problem

China's notoriously lagging space program may finally be catching up to America's.
AUGUST 2, 2013


On Nov. 19, 1999, China's Shenzhou space program got off the ground with the launch of the Shenzhou I. It was a simple spacecraft, with no cargo, no life-support system, and certainly no astronaut. Just four years later, with the Shenzhou V and its pilot, Yang Liwei, China had become the third country in history to send a manned vessel into space. Since then, China has sent a total of five manned missions into orbit, including June's 15-day Shenzhou X mission, the country's longest to date. During the mission, three astronauts conducted automatic and manually controlled dockings with an orbiting module. These are crucial steps in establishing a permanent space station, which China hopes will replace its current small orbiting module by 2020. 

While China remains significantly behind the world's other two space powers -- the United States and Russia -- the end of America's shuttle program in 2011 means that the future of manned space exploration may well shift, however gradually, from Washington to Beijing. China already has plans to send up a larger "space lab" in 2015 before unveiling its own space station in 2020. More ambitiously, it is also exploringthe feasibility of putting a man on the moon by 2025. With these lofty goals, the next decade could be even more significant than the last. As John Hickman writes for Foreign Policy, there "are unmistakable warning signs that China may surpass the United States and Russia to become the world's preeminent spacefaring power."

Above, Chinese astronauts Zhang Xiaoguang, Nie Haisheng, and Wang Yaping salute after getting out of the re-entry capsule of the Shenzhou X on June 26.


Chinese astronaut Nie Haisheng flashes a victory sign after the re-entry capsule of the Shenzhou X lands in north China's Inner Mongolia region on June 26.

Xi Consolidates Control Over the Military

By Zachary Keck
August 3, 2013

With the promotion of a number of PLA officer to general, Xi Jinping appears to be seeking to consolidate his control over the military.

On Wednesday, a day before the PLA's 86 birthday, Xi promoted six PLA officers to full general, state media reported. Two of these officers were Xu Fenlin, commander of the Guangzhou Military Region and Cai Yingting, the Nanjing Military Region commander. They are now the only two of China’s seven military region commanders to hold this rank, according to South China Morning Post.

Want China Times notes that many of the generals are extremely young, which is likely to make them more loyal to Xi personally.

“Of the six appointments, three have only recently satisfied the conditions for eligibility,” the article noted. It also observed that General Cai is now the youngest general in the PLA.

Hu Jintao, Xi’s predecessor, also promoted young officers as generals in order to more fully consolidate his control over the PLA, and ensure that his patrons would be in leading positions after he left office.

Meanwhile, SCMP points out that both Generals Xu and Cai have some history or common bonds with President Xi, who also serves as the chairman of China’s Central Military Commission, the country’s highest military decision-making body.

President Xi met with General Cai in Guangzhou just a month after taking power last November when Xi conducted his “southern tour” modeled off former Paramount leader Deng Xiaoping. Although more speculative, General Cai was born in Fujian, where Xi spent seventeen years working.

General Cai has spent much of career working on Taiwan issues. In August of last year he also led a military delegation on a trip to the United States.

Prior to this week, Xi had only promoted one general since taking over the CMC last year. In November, a week and a day after assuming control, Xi promoted Wei Fenghe, the commander of the Second Artillery Corps, which controls China’s nuclear arsenal, to full general.

Xi differed from his two immediate predecessors in taking over the CMC at the same time as he became General Secretary of the Communist Party. However, as part of much of the CMC and top military brass was stacked with generals loyal to Xi’s predecessor Hu Jintao.

In late October, for example, Fang Fenghui, Zhang Yang, Zhao Keshi and Zhang Youxia were tapped to run the PLA’s four “General Departments:” the General Staff, General Political, General Logistics, and General Armaments, respectively. With the possible exception of General Zhang Youxia, a princeling but one who rose through the ranks, all four men were seen as Hu loyalists.

Ahead of the 18th Party Congress, Generals Fan Changlong and Xu Qiliang were also made the PLA’s two vice-chairmen to the CMC. Some analysts said both men were close to Hu, although there was disagreement on this point.

In any case, Xi Jinping has exerted himself strongly over the military since taking over the CMC in November, including instituting a campaign to rid the PLA officer corps of excess, and extending his “mass line” campaign to the military. In April Xi also decreed that generals and senior officers in the PLA would periodically be sent to the front lines to serve among the grunts for a certain amount of time.

A PLACE IN THE SUN

Strategypage 
July 28, 2013

Japanese are becoming more alarmed at increasing Chinese military activity in waters and air space around Japan. It’s not just disputed areas, especially the Senkaku Islands, but around distant Okinawa and increasingly east of Japan, in the Pacific. Operating out there is what the Chinese would have to do for a blockade of Japan. As a result of all this Chinese naval and air activity there is growing support for expanding the Japanese military, especially obtaining long range UAVs for maritime patrol and ballistic missiles for hitting Chinese bases in the event of hostilities. This doesn’t bother China as much as constant Japanese chatter about developing nuclear weapons. But the Chinese believe that decades of anti-nuke militancy would prevent Japan from actually going down this road. If Japan did build nukes, it would make Japan once more dangerous to China and that could cause a really dangerous situation.

China is losing its diplomatic and propaganda effort to prevent the Philippines, Japan, Vietnam and other victims of Chinese territorial claims from forming coalitions and bringing their complaints to international forums. That’s a problem because many of the Chinese claims violate international maritime laws and Chinese chances of winning in court are not nearly as good as their bullying tactics are.

All this is disturbingly similar to the situation in the late 19th century when Germany, recently united (in 1870) for the first time and turning into the premier economic power in Europe (only the U.S. was larger) began demanding territory that belonged to others and insisting it was also owed greater respect and deference because Germans had been wronged by their neighbors for thousands of years. The Chinese complaint is that Europeans (and their lackey Japan) took advantage of a temporarily weakened China and now China is back on its feet and wants payback. The German demands led to nearly a century of war and conflict that left over 100 million dead. The Germans wanted “a place in the sun” and got desolation and despair instead. China believes its situation is different, but their neighbors don’t agree.

India accused China of using UAVs to patrol the northwest (Kashmir) border and entering Indian territory nearly 200 times since early 2012. Closer investigation of this revealed that most, or all, of these sightings (by Indian troops) were actually the planets Jupiter and Venus moving close to the horizon. Meanwhile Chinese incursions on the ground are less ambiguous and increasingly frequent.

India is accusing China of violating a March agreement that was supposed to halt the Chinese practice of sending troops to follow each other’s infantry patrols along the LAC (Line of Actual Control) and sometimes sending troops into Indian territory. The LAC is also known as the MacCartney-MacDonald Line and is the unofficial border between India and China. The LAC is 4,057 kilometers long and is found in the Indian States of Ladakh, Kashmir, Uttarakhand, Himachal, and Arunachal. On the Chinese side its mostly Tibet. China claims much territory that is now considered part of India. The practice of monitoring each other’s patrols has led to hundreds of armed confrontations over the last few years as one side or the other accuses “foreign troops” of crossing the LAC. China has become less vocal about its claims on Indian territory recently but has not abandoned these assertions. This is a big relief to India, which has a defense budget one third that of China’s. But India accuses China of sending a mounted (on horseback) patrol into Indian territory in Ladakh (northwest India) on July 16th and remaining across the line until the next day when confronted by Indian troops. China says it was a misunderstanding, but in the GPS age this is not as convincing as it used to be.

Why Hating China Is Futile

During an election campaign, two things are guaranteed. Parties will discuss how they are more righteous than their rivals. And they will show voters how they’ll punch China’s lights out faster than their opponent.

But, from an economic standpoint, hating China is futile. In fact, if China grows at a clip of 7% or more for the next five years it could outstrip Mexico as the United States’ No. 2 trading partner. Right now, China is No. 3 and far behind Mexico, which enjoys a free trade agreement with the U.S.

Meanwhile, China imported $108.6 billion in U.S. goods last year, up from $102 billion in 2011 and $89.5 billion in 2010. By comparison, Mexico imported $208 billion of U.S. goods and services in 2012.

China has a way to go to catch up. Yet, China is a different animal than Mexico. Mexico is not going through a structural shift of being an export economy morphing to a consumer-focused one. China is. And when China turns inward, it means a stronger currency, higher incomes, and more consumer spending. At least, in theory. Imports this year have slowed due to the general weakness in the Chinese economy. But overall, the richer-China theory has proven correct. Consumers are demanding more goods from the U.S. and corporations there are upsizing, buying U.S. capital goods.

The U.S. China trade deficit is still getting bigger. But that’s not necessarily China’s fault. They are buying more from the us than ever before.

In the decade between 2003 and 2012, total U.S. exports to China rose 294%, an increase of nearly $81 billion, according to The Trade Partnership data compiled by the U.S. China Business Council.

Many exports to Hong Kong are destined for China’s markets. Together, U.S. exports to Hong Kong and China reached $144.4 billion in 2012. The combined U.S. exports to the two destinations grew by 26% from 2010-2012, and posted a 6% gain from 2011.

While it’s true, most of the stuff we export to China comes out of a farm in the bread basket states (China bought $21 billion worth of agricultural commodities, mainly soybeans, from the U.S. last year), the country also spent $16 billion on transportation equipment, $14 billion on computers and electronics and $12 billion on chemicals.

Republican & Democrats Should Embrace China

Over the last decade, the growth in America exports to China was broad based and widely shared among congressional districts around the country. In 2012, 262 congressional districts (60%) increased exports to China, the U.S. China Business Council (USCBC) said in a report released Thursday. Between 2003 and 2012, 401 congressional districts (92% of them) experienced triple-digit growth in their exports to China.

As this trend continues, hating China will be harder for politicians. It will be like a southern state congressman voting to slash the defense budget. You can’t say China is a currency manipulator killing American jobs if they just spent a few million helping your state hire a few hundred oil workers.

Out of 435 congressional districts, 249 of them had higher growth in exports to China last year than any other market in the world, according to the USCBC’s “Congressional District Exports to China” report.

China wants what we produce. But they should want even more of it. The U.S. lags behind the Europeans and Japanese in the Chinese market.

Propaganda, Not Policy: Explaining the PLA’s “Hawkish Faction” (Part One)

Publication: China Brief Volume: 13 Issue: 15
July 25, 2013
The Most Famous of Hawks, Luo Yuan

The regular appearance in the Chinese media of People’s Liberation Army (PLA) figures calling for aggressive foreign policy causes controversy and confusion among foreign observers. The most sensational remarks usually are made by academics at PLA institutions. Foreign media routinely pick up sensational quotes from these military officers—such as Major General Luo Yuan’s repeated suggestion for declaring the Diaoyu Islands a Chinese military target range or Rear Admiral Zhang Zhaozhong’s recent call for a blockade of Philippine outposts in the Spratly Islands—and attribute them to senior military leaders, as their ranks seem to suggest (Beijing TV/Global Times Net [Huanqiu Wang], May 27;South China Morning Post, March 3; Tea Leaf Nation, February 25). Operational commanders, however, seldom comment in public on policy issues. Prominent foreign policy analyst Wang Jisi has publicly complained about “reckless statements, made with no official authorization” which had “created a great deal of confusion” (Asian Wall Street Journal, July 1, 2012). In April, recently-retired deputy military region commander Wang Hongguang wrote military pundits had “misled the audience” and caused “interference with our high-level policy decision-making and deployments” (Global Times, April 20). This two-part series assesses who these outspoken PLA officers represent and the implications of their hawkish statements through an evaluation of their backgrounds, affiliations and statements on their work.

Debate about belligerent public remarks from military personnel often surrounds the extent to which they might represent the voice of hawkish PLA constituencies, pressuring the leadership to adopt more aggressive policies. Some analysts tend to dismiss such bluster as largely irrelevant on the basis that military media pundits have no operational military authority, despite their high rank. Others, however, emphasize how continued outspokenness by military figures presupposes high-level party or military support, and that they thus give voice to behind-the-scenes political struggles. A third view proposes that the hawks are the voice of the PLA as an institution, pushing the military’s policy preferences (“Hawks vs. Doves: Beijing Debates ‘Core Interests’ and Sino-U.S. Relations,” China Brief, August 19, 2010) [1]. Analysis of scattered biographical information on the most prominent hawkish PLA media commentators, plus comments regarding their own work, suggests each perspective is partially right. None is a general in a conventional military sense, yet they are far from irrelevant. Their backgrounds, affiliations and positions, however, indicate their role probably has more to do with the regime’s domestic and international propaganda work objectives than political debates. 

Luo Yuan

The most famous PLA “hawk” is retired Major General Luo Yuan. His biography suggests he has operated, and continues to do so, in the areas of Taiwan affairs, intelligence and military propaganda. Son of intelligence czar Luo Qingchang, Luo Yuan joined the PLA in 1968 (Southern People Weekly, March 26). He often has stated that he fought on the front lines in Laos against the United States in the early 1970s, and his official biography states that he was a squadron (ban) and platoon (pai) leader (People’s Net [Renmin Wang], February 20, 2012). In 1978, he returned to Beijing to begin his academic career and entered the Academy of Military Sciences (AMS), where he has been affiliated for the bulk of his career (Southern Weekend, April 9, 2012). He attained the rank of major general in 2006.

Luo has a strong background in “united front” activities, especially related to Taiwan. Until March this year, Luo Yuan was a member of the Chinese People’s Political Consultative Conference (CPPCC)—China’s paramount advisory body and a “people’s patriotic united front organization”—where he tabled high-profile proposals for a unified coastguard as well as a law on soldiers’ benefits and social status (China Today, March 4; PLA Daily, March 14, 2012; March 10, 2010). He was a member of the CPPCC Committee for Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese, for which his principal work was “to contribute to cross-strait exchange, the strengthening of military trust and the peaceful reunification of the motherland”, according to a 2011 article in the official PLA newspaper that quoted him at length on the topic (PLA Daily, March 4, 2011). His current position is the Executive Vice President and Secretary General of the China Strategy Culture Promotion Association (CSCPA), a self-proclaimed non-governmental think tank formed in 2011 as a platform for friendly exchange of “research on international issues, Taiwan issues and culture issues” according to the CSCPA website. Its President Zheng Wantong is a former United Front Work Department deputy director and CPPCC vice chairman (Xinhua Reference, January 24, 2002).

Want world domination? Size matters

The West is not going to let China dominate the world, economically speaking, that easily.

In the end, trade—not war—will attract others to the West’s economic core 29/7/13

Horace Greeley, Napoleon Bonaparte and Cecil Rhodes may seem strange bedfellows, but they all agreed that territorial, political and economic size was critical to a country’s success. They wanted more land—in the West, in Europe or overseas. In 1904, Halford Mackinder, an Oxford geographer, told an august assemblage at the Royal Geographical Society that the country that controlled the Russian “heartland”, a frostbitten Central Asian steppe, would dominate “the world island”—the combined territory of Europe and North Asia—and in time come to rule the world. A centrally located piece of territory like the Russian plain, Mackinder argued, could be expanded West and East without the need for naval power.

As it turned out, Russia was then facing both war and revolution, and could not fully control the heartland, to say nothing of ruling the entire world. But Mackinder’s terms pointed to the critical role of territorial and economic size in the competition among nations.

Without quoting Mackinder, President Barack Obama and Chancellor Angela Merkel of Germany have recently sought to form a huge free-trade zone that would join Europe with the US in a new Transatlantic Trade and Investment Partnership, creating an economic power with nearly half of the world’s gross domestic product.

Of course, the joining of the two continents would increase trade and employment.

But the underlying reason for bridging the narrowing “Atlantic Channel” is that power is shifting East, and there is a need to reconsolidate the West. Paradoxically, closer ties with Europe will be the means by which Obama carries out his “pivot to Asia” as America and Germany bring together advanced industries and a vast population of skilled workers.

In the short term, China will respond to this trans-Atlantic combination by strengthening its ties with the outside world. While dumping dollars and buying euros, China has sought to turn its American bond holdings into shares in American corporations. It has moved into London’s money markets and invested heavily throughout Africa. None of this has created an alternative political unit, however.

Obama’s and Merkel’s pursuit of greater democratic size is not a new objective. Strategists have always known that countries with more people, wealth and economic space can produce more and trade over a larger region. This is not a declaration of economic war against the East. Rather, it reflects an awareness that China and others need to be brought into the West, bringing two halves of the world together. A greater American and European combination would amass $32 trillion today and much more tomorrow. A balance of power leads to conflict. But an overbalance attracts others to its economic core.

And China is dependent on that core. Unlike Russia, China must import the majority of its oil, and its use is currently at 9.7 million barrels a day. The money to buy this petroleum and natural gas must come from exports, mainly exports to the West. Here, the West maintains a continuing advantage, because China receives only about 50% of the “value added” of its exports. The rest is garnered by European and American companies, which provide the research and development, design, marketing and financing for most products exported from China.

Why Iraq Could Become Obama's Next Big Foreign Policy Crisis

Time
Michael Crowley

The Middle East has presented Barack Obama with many nasty surprises. But Iraq has not been among them. Since the last U.S. combat troops left 19 months ago, the site of America’s long Bush-era nightmare has held together relatively — repeat: relatively — well. It may not be Disneyland, but Iraq has so far avoided descending back into the savage state of anarchy many people predicted.

Alas, it may be that Iraq is living on borrowed time. One reason why was illustrated on Monday, when al-Qaeda fighters staged a brazen attack on two Iraq prisons, using car bombs, mortars and rocket-propelled grenades to free hundreds of inmates — including many of their brothers in arms.

“The number of escaped inmates has reached 500, most of them were convicted senior members of al-Qaeda and had received death sentences,” Hakim al-Zamili, a member of the Iraqi parliament, told Reuters.

The attacks — one of which targeted Baghdad’s notorious Abu Ghraib prison — illustrate the growing threat to Iraq’s stability posed by al-Qaeda in Iraq, known to U.S. officials as AQI. The group’s fighters, which may number between 2,000 and 3,000, aim to stoke the Sunni-Shi‘ite rivalry that tore Iraq apart in the mid-2000s and has been inflamed by the sectarian civil war in neighboring Syria. “They’ve got the wind at their backs from the Syrian rebellion,” where Sunni rebels are fighting an Alawite Shi‘ite regime, says Kenneth Katzman, a Congressional Research Service analyst who recently completed a detailed report on Iraq. “Their goal is to destabilize and bring down the Maliki government, and they think igniting sectarian conflict might accomplish that.”

The new concern comes at a time when some close observers of Iraq — including two former senior government officials who focused on Iraq and who recently spoke with TIME — say they’re cautiously optimistic that Iraq’s political actors can work together. Recent tensions between Iraqi Kurds and Arabs have cooled of late, for instance. And one of the officials argued that recent provincial-election defeats for Nouri al-Maliki’s State of Law Coalition may have chastened a Prime Minister who has ruled with a dangerously heavy hand, infuriating Iraq’s Sunnis by favoring his fellow Shi‘ites.

The growing promise of oil wealth may also be providing an incentive for dueling factions to cooperate, this official says. Iraq plans to boost oil production by nearly one-third over the next year — a boon for the U.S. because Iraq’s oil production counters Iranian crude blocked by sanctions, thereby limiting global price hikes.

But the hopeful talk will die fast if al-Qaeda militants can ignite a vicious new cycle of Sunni-vs.-Shi‘ite violence. “They have been hitting Shia civilians,” says Jessica Lewis, a former army intelligence officer in Iraq now with the Institute for the Study of War. “We’re seeing Shi‘ite militias forming” in response. Lewis calls Monday’s prison attacks sadly predictable. “Al-Qaeda has been speaking about prison breaks and the release of prisoners as a principal objective since before the American withdrawal,” she says. Abu Ghraib is “the mother prison … where the core of the al-Qaeda network” was held, she adds.

With violence rising, some Iraqi leaders who bade America good riddance in late 2011 are now asking Washington for help. “The Iraqis sort of kicked us out,” says Katzman. “A lot of the [security] programs we hoped to continue, they basically discontinued. Now the Iraqis are getting nervous because of AQI, and they want us back again.”

Could it happen? Last month, Joint Chiefs of Staff Chairman Martin Dempsey did suggest that the U.S. consider sending “teams of trainers” to help Iraq fend off what he called a “re-emerging” al-Qaeda threat.

But while it’s possible the U.S. will offer help at the margins, Iraqis shouldn’t expect an American cavalry. Leaving Iraq is one of Barack Obama’s proudest accomplishments, and the President clearly has no desire to undo it — possibly even at the cost of seeing Iraq slip back into chaos.
Michael Crowley is a senior correspondent for TIME.

Obama's Bad Bet on the Egyptian Military

August 2, 2013

Egypt's political chasm continues to widen following the military's ouster of former President Mohammed Morsi, who, despite his many flaws and blunders, was the only democratically elected president in the country's history.

On one side is a curious amalgam: secularists (some democrats, some not), liberals, Coptic Christians and remnants of Hosni Mubarak's regime, particularly from the police, the military and the judiciary.

On the other stands Morsi's Muslim Brotherhood, now being joined at the barricades by other Islamists, including hard-line Salafists from the Al-Nour party, who had stood with Egypt's military leader, General Abdel Fattah El-Sisi, when he announced Morsi's removal on July 3.

More ominously, Egypt's political and cultural schism has segued into a bloodletting that shows no signs of ending. Scores of protesters have been killed -- most shot by the security services -- the wounds to the head and chest suggesting that the police had more than crowd control in mind. Many more people have been injured.

Morsi remains in detention, although the European Union's foreign policy czar, Catherine Ashton, was allowed to see him on Tuesday; though she, a seasoned diplomat, declined to divulge what he had told her, supposedly because she might get it wrong. (Given this odd explanation, one wonders whether the generals defined the ground rules for her visit.) Initially, the justification for holding Morsi was that it was for his own safety (though even his family was unable to see him); now he's been charged with conspiring with the Palestinian Islamist movement, Hamas.

Morsi's detention, along with the arrest of other senior Brotherhood leaders and the shutting down of the movement's media, indicates that the military leadership's real motive is to paralyze the party, perhaps even to put it out of business.

Enraged Brotherhood supporters have swarmed the streets, their sit-ins and marches galvanized by the fervor of Ramadan.

Brotherhood moderates -- the movement is not a monolith -- are rethinking their faith in electoral politics. The radicals, for their part, are proclaiming that it was folly to believe in the first place that the army or the United States would ever let an Islamist government, even an elected one, rule. Egypt's prospects for peace, let alone democracy, will remain poor if the latter assessment prevails. On the other side, the Brotherhood's staunchest enemies depict it as a shari'a-driven group with dictatorial inclinations that has no place in politics.

So deep is the mutual suspicion, so numerous the stereotypes and conspiracy theories, that even the minimal trust required to find a compromise is lacking.

In the Middle East, a Decade of War Promises a Decade of Disorder

The Financial Times
Philip Stephens

July 25, 2013 -- At first glance, there is something almost quixotic about John Kerry’seffort to revive Israeli-Palestinian peace talks. The US secretary of state has certainly been energetic in the enterprise. It is less clear that he has the full-throated backing of the White House. And, anyway, should not the US be focusing on more pressing matters such as the civil war in Syria and coup in Egypt?

one ever looked foolish by voicing pessimism about the long-misdescribed Middle East peace process. Many think Israel’s support for colonisation of the West Bank has rendered academic any debate about two states. As for Barack Obama, when did the US president last take a big political risk to match up to those fine speeches? And Mr Kerry? Some say the shuttle diplomacy is more a reflection of excessive self-belief than of real prospects for a breakthrough.

There is, however, another way of looking at this. If Mr Kerry does fail, the two-state game really will be over. Attention will turn to the rights of Palestinians trapped in West Bank bantustans. Israel will be obliged to face up to the choice it has always avoided: a state reaching from the Mediterranean to the Jordan river cannot be at once Jewish and democratic. As to any other regional priorities, what else could the US be doing?

Over several days before the Egyptian coup, Washington sought to persuade the military not to remove President Mohamed Morsi. The pleas were brushed aside. Since then, the US has struggled to keep onside with the generals by agreeing that the toppling of an elected government was somehow something other than a coup. Mr Obama must be getting used to setbacks. In August 2011 he called for the departure of Syria’s Bashar al-Assad: “The time has come for President Assad to step aside”. Two years on, the Syrian leader remains firmly in place. There was a time when if a US president said someone had to go, one way or another they generally went.

The Europeans are weaker still. Britain and France imagined that the removal of Libya’s Muammer Gaddafi marked out a role for Europe in the wake of the Arab uprisings. Instead, tactical success in deposing Gaddafi has made way for strategic failure as Libya has fallen into armed chaos. London and Paris pressed for the lifting of the EU embargo on arms sales to anti-regime forces in Syria. Since then Mr Assad’s forces have advanced, yet Britain has now abandoned the idea of arming the rebels.

When Mr Morsi was ousted, leaders across Europe asked their advisers what they could do in response. The uncomfortable answer was “nothing much”. Not so long ago there was talk of a new model of interventionism that would square the war-weariness of voters with the protection of European interests. The west would act as the conductor of an orchestra of regional powers. Now these powers are playing their own tunes. From time to time they grab the baton. Washington’s reluctance to call a coup a coup was explained by its concern to retain leverage by avoiding an automatic halt in US military aid. In Britain’s case, the government felt obliged to bow to pressure from the Saudis and Emiratis, who also happen to be bankrolling the new regime in Cairo.

Mr Obama’s much-trumpeted “pivot” to Asia was intended as a carefully calibrated shift away from the Middle East. As things have turned out, the Arab world has run well ahead of the White House in anticipating events. Unsurprisingly, Arabs have concluded that if the US is getting out, they had better get on with fighting their own corners.

Though there are myriad smaller fissures, the Middle East is now defined by its Sunni-Shia faultline – Saudi Arabia and the Gulf states on one side and Iran and its proxies on the other. No manner of western military intervention is going to settle the conflicts generated by this theocratic rivalry. The US is left to help contain Shia Iran and Hizbollah on one side and push back against Sunni jihadism on the other.

Many will argue that there is nothing much to be done. This week General Martin Dempsey, chairman of the US joint chiefs of staff, poured several buckets of cold water over those who think a limited operation could tilt decisively the balance in Syria. Intervention, he observed, would mean war, with all the consequent costs in blood, treasure and unforeseen consequences. That said, it is as much a mistake to underestimate as overestimate the limits of western power. This point was made eloquently the other day by David Miliband, the cerebral former British foreign secretary who is moving to New York to head the International Rescue Committee.

Briefing Paper: A Return to East of Suez? UK Military Deployment to the Gulf

The UK is approaching a decision point where a significant strategic reorientation of its defence and security towards the Gulf is both plausible and logical; and, for the first time since the UK unceremoniously left the Gulf in 1971, a coherent strategy for a ‘return to east of Suez’ is emerging.



This Briefing Paper highlights that the UK’s ‘return east of Suez’ is more evolutionary than revolutionary and only partially related to the US pivot towards the Pacific. Stansfield and Kelly also suggest the UK is giving renewed emphasis to its position in the Gulf in order to maintain the special relationship with the US’ as well as engagement with the defence task in hand – namely deterring Iran.

With a foreword by Professor Michael Clarke, 'A Return to East of Suez' offers a first analysis of what could be one of the most important British defence reorientations since the end of the Cold War.

About the Authors

Professor Gareth Stansfield is the Al-Qasimi Chair of Arab Gulf Studies and Professor of Middle East Politics at the University of Exeter, where he is the Director of the Institute of Arab and Islamic Studies and Director of Research in the Strategy and Security Institute. He is also a Senior Associate Fellow and

Director of Middle East Studies at RUSI.

Dr Saul Kelly is a Reader in International History in the Defence Studies Department, King’s College London at the Joint Services Command and Staff College, Shrivenham. He has published extensively on Great Power politics in North Africa and the Middle East in the nineteenth and twentieth centuries.

China and the U.S. Court Africa

August 3, 2013

During a weeklong trip to Africa, with stops in Tanzania, Senegal and South Africa, President Barack Obama announced a new model of engagement between the United States and Africa, based less on aid and more on trade and partnership, with his country helping Africa "build Africa, for Africans." Through several US-Africa economic initiatives launched during his visit, especially regarding trade and energy, Obama strives to catch up with China, which has created strong partnerships on the continent. Obama arrived three months after Xi Jinping visited Tanzania on his first foreign trip as Chinese president in March 2013.

During the trip, the US president indirectly juxtaposed the US and Chinese trade and investment proposals, suggesting that US investors would support local economic capacity, not simply consume its raw materials, eyed by China, given its ever-growing industrial capacity.

The US and China are both interested in ensuring employment for their citizens, gaining access to valuable resources and securing new stable trade partners. Nevertheless, China will likely win the battle over Africa, due to its policies of non-interference in internal affairs, especially regarding human rights and democracy, lagging for many African countries.

Tanzania was a logical choice among Obama's destinations, given that the US and the African country have had longstanding economic relations. According to Obama, Tanzania has continuously been one of the best US partners in Africa. The US has provided aid to promote transparency, address health and education issues, and target development indicators to sustain progress. In turn, Tanzania exports agricultural commodities, minerals and textiles to the US, while importing wheat, chemicals and machinery.

One key initiative announced by Obama was Power Africa, a $7-billion program combining public and private funds and loan guarantees, aimed at ensuring cleaner, more efficient electricity generation capacity. He suggested the program will build on "Africa's enormous power potential, including new discoveries of vast reserves of oil and gas, and the potential to develop clean geothermal, hydro, wind and solar energy." An indirect implication is that the US could make use of new resource reserves in Africa for both Power Africa and its own national interests. Obama visited the Ubungo power plant, run by US-based Symbion.

Another key project on Obama's agenda was launching Trade Africa, a new partnership between the US and sub-Saharan Africa "that seeks to increase internal and regional trade within Africa, and expand trade and economic ties between Africa, the United States, and other global markets." The partnership will be initially implemented in the East African Community, or EAC: Burundi, Kenya, Rwanda, Tanzania and Uganda. Among its original goals, Trade Africa intends to "double intra-regional trade in the EAC, increase EAC exports to the United States by 40%, and reduce by 15% the average time needed to import or export a container from the ports of Mombasa or Dar es Salaam to land-locked Burundi and Rwanda in the EAC's interior." This suggests that the US wants to assist these countries in improving regional trade capacity.

Despite indirect suggestions that the US, because of its support of local economies, is a better economic partner for Africa than China, the two global players have similar goals and approaches. China has already massively supported local African economies, by building much needed infrastructure, including roads, ports and bridges in multiple African countries.

Chinese companies, either building infrastructure or involved in other businesses, have also provided job opportunities. While it's true that China brings most white-collar workers to develop infrastructure projects, the majority of blue-collar staff is African. For instance, the 2010 construction of Chinese-funded Imboulou Hydroelectric Dam in the Democratic Republic of the Congo, employed more than 2,000 locals and 400 Chinese construction workers; at the China-Benin Textile Company, there are 5 Chinese employees and 1,100 local staff members.