Welcome to Trade Secrets. Today, we’ll check in on progress in something that we looked at previously — China’s role in debt crises and as a participant in global governance more generally. Also, because it’s more or less the only subject anyone is talking about publicly here in London, I’ll have a look at the late Queen Elizabeth II and her spectacular one-off policy intervention, taking on prime minister Margaret Thatcher.
As ever I’m on alan.beattie@ft.com or open DMs on Twitter @alanbeattie for thoughts or questions. Today’s Charted waters looks at fresh global estimates of forced labour, as the EU has worked up plans to ban products made under these conditions.
The danger for China in the crisis-lending game
Back in July I argued that the global system, if you can call it that, for working out sovereign debt defaults was unsatisfactorily ad hoc. In particular, China has become a big bilateral lender without participating in round-table creditor agreements to work out writedowns reasonably and equitably. Well, what do you know, just 10 days later (I’m not claiming a causal link), China announced it would participate in the plurilateral debt writedown negotiations in Zambia, having been a major lender in the Zambian economy for decades.
So, is China displaying its occasional pragmatic tendency to use plurilateral systems when they’re of use to it — and particularly to avoid taking all the blame if everything goes wrong? Not so fast. My Financial Times colleagues have just revealed that China has also secretly been extending emergency loans to a variety of beleaguered countries, including Pakistan, Argentina and Sri Lanka. These are essentially countries that have previously received long-term financing under China’s Belt and Road Initiative (BRI) and are now in problem debt. This is a big deal because while China has for decades given long-term development loans in more or less direct competition with the World Bank, it has sensibly generally shied away from the uncertainty and unpopularity that comes with supplanting the IMF as a crisis lender.
Secret emergency finance to bail out bad loans from the BRI without any conditionality to try to address underlying problems is not a cheering development. It’s going to mean throwing good money after bad and potentially getting the debtor further into trouble, impoverishing borrowers and other creditors alike. It also looks like poor co-ordination between different institutions in China, something that experts have always warned is an underestimated phenomenon. Just when you thought that global governance was improving a bit and authorities were working out problems pragmatically between themselves, you realise it’s never as simple as that.
When the Queen went into battle for the Commonwealth
One of the reasons for the Queen’s popularity was surely her steadfast refusal to comment on political issues in public, which over a seventy-year reign is a truly impressive achievement. (I’ve tried it and managed about half an hour.)
One famous exception when her views escaped into the public domain was her strong opposition to prime minister Margaret Thatcher blocking the British Commonwealth of Nations from putting trade and other sanctions on apartheid South Africa in 1986. Result: a lot of public pressure on Thatcher and a partial U-turn.
It’s quite a thing for the Queen to care about the Commonwealth so much that she took the side of a bunch of foreign governments against her own. To be honest, it’s not difficult to make the case against taking the organisation seriously, as did Thatcher. It’s a group of governments of wildly disparate levels of development, and indeed democracy, and not much success in encouraging the latter among its members. It doesn’t offer privileged trade access to the UK (or indeed each others’) markets as it used to: the UK joining the European Communities in 1973 saw to that. The occasional monomaniacal dreamer goes on about a CANZUK (Canada, Australia, New Zealand, UK) trade deal, but that idea’s going nowhere. Unlike France with its former colonies, the UK doesn’t still run Commonwealth countries’ currencies or intervene quite as readily in their politics.
Still, it’s clearly worth it for the Commonwealth’s members, of whom four relatively recent joiners (Mozambique, Rwanda, Gabon and Togo) weren’t even British colonies. It does provide technical assistance for trade and development, and it does some good work on aid. The heavily indebted poor countries (HIPC) campaign that wrote off sovereign debt owed to governments, the IMF and the World Bank in the late 1990s had its roots partly in the “Mauritius Mandate”, a call for debt relief made at a Commonwealth summit.
As decolonisation recedes into the past, so does the Commonwealth’s original rationale of managing the process. But a forum for developing and developed countries to talk about salient issues seems more or less worth having.
As well as this newsletter, I write a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all my columns and previous newsletters too.
Charted waters
The EU is on the brink of adopting a ban on all products made with forced labour, though officials admit it will be hard to identify them, Javier Espinoza and Andy Bounds report from Brussels.
This net will be cast wider than that of the US, which earlier this year enacted a blanket ban on all imports from China’s Xinjiang province, where there have been allegations of human rights abuses against Muslim Uyghur and other minorities. But catching violations at any stage of the production process will be tricky for EU member states, especially if countries do not co-operate. Services — including trade, transport and hospitality — account for the biggest share of forced labour internationally.
There are 28mn people around the world in situations of forced labour, up by nearly 11 per cent since 2016, a joint report by the International Labour Organization, Walk Free, and the International Organization for Migration revealed today. Migrants account for about 5 per cent of the total global labour force, but represent 15 per cent of adults in forced labour, the data showed.
“Banning imports of products made with forced labour is a step in the right direction, but it must be a clear and transparent process that protects those who have been exploited,” Katharine Bryant, Walk Free’s head of policy and programmes, told Trade Secrets (Georgina Quach).
Trade links
Cargo freight costs are generally back down to the levels of last spring before the great post-lockdown surge, giving some support to Team Transitory (of which I am one) in the shipping snarl-up debate.
The International Energy Agency details China’s massive dominance of the solar energy supply chain.
The Economist looks at how the European energy market could be reformed to help address crises.
The Times of India explains why Delhi stayed out of the US’s new Indo-Pacific trade initiative.
Trade Secrets is edited by Georgina Quach today.
Source: Economy - ft.com
