China Buys Less, Ethiopia’s Covid-19 Response & Vietnam-EU Trade Agreement

We Are The World.* From South Africa to Sweden, from Brussels to Brazil, there have been demonstrations around the world protesting the murder of George Floyd. This global phenomenon raises two questions. First, why does the world care so much about what happens in America? And second, why do we not see similar worldwide demonstrations against systemic problems and abuses in other countries? For example, do not Uyghurs’ lives matter? We think the answers are related.

People around the world are more likely to join protests addressing issues in America because they know there is a better chance of changing America than there is, for instance, China. America, despite all its many faults, is a democracy that has continued to change over time. China is an authoritarian dictatorship less likely to respond to worldwide pressure from demonstrations in the streets.

We actually think China would be susceptible to such pressure and we outline ways to use such pressure in our upcoming book but it’s understandable that America is seen as a more malleable target by the world. But second, and even more important, America, again despite all its many flaws, sees itself, and is seen by many in the world, as a beacon of hope, as an idea of liberty. That America has often failed in being that beacon spurs people all the more to make it so.

Te Nehesi-Coates once wrote “I propose to take our countrymen’s claims of American exceptionalism seriously, which is to say I propose subjecting our country to an exceptional moral standard.” That’s what the world is doing. If America does indeed start holding itself to a higher moral standard, because of our size, power and history, standards will also be raised for the whole world, including for authoritarian countries.

America is not currently a beacon for liberty around the world. But it may one day be so again, and many people around the world are working to make it so. And we aim to make a brighter day by giving information on how China is lessening its influence, Ethiopia’s successful Covid-19 response and Vietnam’s under reported new trade agreement. It’s this week’s International Need to Know, aiming to be the Quincy Jones of weekly international information and data.

*It was recently the 35^th Anniversary of We Are The World, which at the least is far less offensive than its sister Do They Know Its Christmas**, one of the four most offensive holiday songs ever written. But Ray Charles? He can sing any song and redeem it.
**We defy you to defend these lyrics: “And there won’t be snow in Africa this Christmastime; The greatest gift they’ll get this year is life;
Where nothing ever grows; No rain nor rivers flow; Do they know it’s Christmastime at all? Here’s to you; Raise a glass for everyone”

Without further ado, here’s what you need to know.

China Buys Less But Wants More Influence

When Obi-Wan Kenobi said, “If you strike me down, I shall become more powerful than you can possibly imagine” he was ripping off Jesus Christ but he was also onto something as we’ve seen over the last two weeks. China’s leaders, when it comes to trade, may want to study Obi-Wan. Last week China released trade data showing its May exports dropped 3.3 percent from a year earlier and its imports plummeted 16.7 percent from the previous year. China’s exports dropped less than might be expected partly because of its continued medical supply exports. Its imports plummeted because of a lack of demand domestically. As we wrote last week, no economy is an island during a pandemic and China is no exception. But we also need to remember that China in the long run is hoping to become more self-contained and build more of the stuff it currently imports. Pandemic or no, China may continue to import less. One current geopolitical strategic advantage China has is that it is so entwined in the world economy. It uses its large market to leverage that. We write in our upcoming book, “China is the largest trader in the world, accounting for 12.4 percent of global trade compared to the U.S.’s of 11.9 percent.” But if China reduces its imports, then its status as the world’s trader will be dead. And unlike Obi-Wan, China will be far less powerful.

We Need To Talk About Ethiopia

Covid-19 data is like Seattle weather in June: very heterogeneous (it might be 80 one day and 59 the next), very difficult to predict, and often dissuades one from leaving their house. At the beginning of the pandemic many were worried the devastation it would wreak on Africa once it traveled there. But so far Africa is doing okay. Recently we pointed to Ghana’s success, this week we take a look at Ethiopia. Both infections and deaths are remarkably low in Ethiopia The last couple years we’ve been touting Ethiopia even while recognizing its challenges. Although Ethiopia has limited both infections and deaths from Covid-19, we are cautious in complimenting its approach to containing the virus. We are guessing there are factors we don’t understand that play a part in Ethiopia’s success, and for that matter other developing countries’ success. It’s true that Ethiopia readied central quarantine and isolation locations (unlike most of the U.S.), but thus far they haven’t really needed them. They have not locked down but have encouraged social distancing and hand washing. It is a young population so perhaps that explains part of the success in terms of a low death rate. Maybe the government is not fully reporting infections and deaths though it seems at this point we would be finding some evidence of misreporting. There is much about this pandemic we are yet to understand. In the meantime, we cautiously add pandemic response as another feather in Ethiopia’s increasingly multi-plumed cap.

Dept of Underrated News: Vietnam-EU Trade Agreement

In a world awash in news, don’t forget that Vietnam this week ratified a free trade agreement with the European Union. The agreement was signed a year ago, ratified by the EU in February and now will begin implementation. “The EU will lift 85% of its tariffs on Vietnamese goods, gradually cutting the rest over the next seven years. Vietnam will lift 49% of its import duties on EU exports and phase out the rest over 10 years.” In a separate, parallel investment agreement, “E.U. companies will receive equal treatment with domestic bidders in competing for public contracts in Vietnam.” Vietnam is on a bit of a roll. They so far have successfully contained Covid-19. Like all economies, Vietnam’s has slowed during the pandemic but is doing much better than other parts of Southeast Asia. They are benefiting from countries diversifying out of China and this agreement aims to accelerate that as Vietnamese economist Pham Chi Lan explains, “COVID-19 has given Vietnam a hard lesson about being dependent on China,” It also showed other countries, including the EU, the negative impact of relying too much on China in their product value chain. The EVFTA (free trade agreement) comes in the right time as all parties realize they need to pivot and restructure to diversify the supply chain.” Vietnam poses one of the five most important questions in the world. As they continue to develop economically, will they follow the path of Taiwan, South Korea and other developing countries that after fast economic development and reaching higher levels of GDP per capita start to liberalize politically? Or will Vietnam follow China’s new path of becoming more authoritarian to maintain power even while focusing on growing the economy?