Archive for category: Uncategorized

Canada First, Hello China from India and Where the Forests Are

/0 Comments/in /by

In recent months, thanks to a client providing us a bus pass, we have been taking the bus more frequently into downtown Seattle. Specifically we have been riding the notorious E Rapid Ride which travels down Aurora Avenue and whose ridership is not, shall we say, the type of people who are members of the Bellevue Club (where we had a meeting yesterday–more on that, perhaps, in the future). In fact, we are fairly certain on one mid-day ride a few weeks ago that we were the only rider not on meth. On various rides, we have had to roust the passenger next to us who was passed out, broker a fight between a homeless woman and the bus driver and walk by a passenger brandishing a sword. At first we were a bit snobbish about all of these rumblings on the bus but now we accept them and welcome them (as long as the sword is not brandished on us or anyone else). We realize these rides are one of our few exposures to people outside of our socio-economic class. A book we are reading, which we highly recommend, The Complacent Class, talks about how the U.S. is more segregated than ever: economically, educationally, socially and racially. We do not agree with everything in the book but its assertions and data are thought provoking. Even as we continue reading the book, we are not complacent about immigration in Canada, or about how China and India measure up on the Internet or even upon discovering some surprising data about forests. It’s this week’s International Need to Know, integrating data, analysis and information as best we can.

Canada First

We have witnessed revolts against immigrants in parts of Europe and have seen it up close here in America as well. Now Canada, the apparently mild mannered country to the north (having been to hockey games I’ve never understood that stereotype), might be joining the raucous fray. A new poll shows a “plurality of Canadians disapprove of the way the Trudeau government is handling the recent illegal border crossings.” 48 percent of those surveyed say those migrants crossing illegally from the United States into Canada should be sent back. One might think these Canadians are merely worried of American blue state refugees wandering into their country with glasses of roséand quinoa kale wraps* (and who wouldn’t be?), but the survey question clearly refers to people “from the Middle East and Africa” as you see in the graphic below. In addition, 46% of respondents disapprove of the way the Trudeau government is handling the refugee issue. In refugee matters, Canada is not an outlier but following other countries attitudes. As we have written before, we live in a new age of fear, and like all such ages, the risks of giving in to such an emotion are ripe for trouble and danger. .

 
  

*Full disclosure: in the last two weeks we too have sipped rosé and munched quinoa (but not in a wrap!)

Hello India? This is China

Twenty years ago there was a debate about who would develop faster, China or India. China won that argument as easily as Gonzaga will defeat West Virginia later today. China, until recently, averaged higher GDP growth and built up much better infrastructure. It is also way ahead in the digital economy. As you see in the graph below, far more Chinese use the Internet than those in India—71% to 21%.  Not coincidentally, Chinese are also far more likely than Indians to own a smart phone—68% to 18%. As the Pew Research Center reports, this digital advantage is due to China building a larger middle class with more wealth, “Between 2001 and 2011, the share of middle-income Chinese, those making $10.01-$20 a day, jumped from 3% to 18%. In India over the same decade, the middle class share of the population grew from 1% to 3%.” Of course, today China’s economy is growing more slowly (probably slower than official China government reported figures of 6.7%) and India’s economy is growing faster, around 7%. And since all those Chinese on their smart phones will be distracted playing video games and hanging out on WeChat, India’s economy, and digital sphere, may catch up more quickly than we think.

 

Seeing the forests through trees of new data

We have all read stories about the loss of forests, including the catastrophic loss of rain forests, but did you know in some countries there has been a gain of forest land in recent years? China, Russia* and India all have more forest land today than twenty-years ago, according to the World Bank. There have been huge losses in South America, especially in Brazil which since 1990 has lost 531,000 square kilometers since 1990. Large parts of Africa have also lost forest land. But many countries, especially developed ones, are gaining forest land. In fact, this data provides evidence for a pet (buffalo, as you will see) theory of ours that as more and more people huddle in mega cities, country sides will return to the way they were 200 years ago since no one, or at least few people, will be living in those areas. This will happen in many large countries, including in large swathes here in the U.S. In the future, we may again be singing about where the buffalo roam.   

Spanish Recovery, Crediting the Chinese and Where Women Dominate the Internet

/0 Comments/in /by

Regular readers of International Need to Know are aware we are unafraid of controversy, willing to tackle the big issues, able to buck convention when convention needs a good buck. So we report to you that last week while in the Valley of the Sun we tried, for the second time, an In-N-Out Burger, fries and milkshake. When we first tasted the famous Los Angeles based chain’s burger a number of years ago we posted on our Facebook page that we far preferred Five Guy’s burgers and fries. This was before our new political age of rage, back when Facebook was a platform for earnest debate on such matters (as well as for kitten videos and photos of food–it was a more innocent, joyous time). Our post caused much consternation, counter-attack and disbelief. But we stuck to our guns. However, we also believe in second chances and so eagerly ordered our food at In-N-Out last week. After this rigorous, fully scientific study we are eager to report that we stand by our original assertion no matter how many INTN readers it may cost us: In-N-Out is not worthy to carry Five Guy’s lettuce. But even as we dip another Cajun fry in ketchup, we serve you Spanish success, Chinese worries and information on where women rule the Internet. It’s this week’s International Need to Know, the fast food of international information only more nutritious.

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

Spanish Recovery

A number of years ago we had our cell phone pick-pocketed while on the subway in Barcelona. We chalked it up to the struggling Spanish economy and our careless ways. But amidst continued Brexit worries (more on that soon), Dutch election uncertainty and our continued angst over Italy, today we find European rays of light in Spain. The country’s economy was one of the hardest hit in the EU crisis, but last year its economy grew 3.2%, the third straight year of relatively robust growth.The Spanish economy continues to grow at the same rate this year. Deleveraging has occurred in Spain with household debt decreasing from over 120% of GDP to 97% of GDP over the last six years. Non-performing bank loans have fallen sharply too. There are, of course, still great challenges. Unemployment has fallen from 27% but it’s still high at 18%. And youth unemployment, although it’s fallen too, is still crazy high at just over 40% causing a lost generation of Spaniards. Also worrisome is that productivity is not only not growing but has decreased as you see in the chart below. Nonetheless, Spain, unlike Italy and Greece, has shown signs of life. That is a good and needed boost for the EU.

 
      

Crediting the Chinese Economy

If you want to look for positive signs in the Chinese economy, you can do so. If you want to look for negative ones, they’re easy to find too. China, as always, is complicated. Given that the rain pounds our window as we write, today we look for stormy weather in China and find it like Lena Horne humming a lyric. One worrisome barometer is that credit continues to grow at a faster pace than the economy. According to the chart below provided by the French financial firmNatixis, aggregate financing is growing 12.8% year over year. China is trying to transition from an export/infrastructure investment economy towards a more domestic consumer driven one. But, as you see in the second chart below, retail sales growth, although still increasing at a pretty good rate, has been steadily trending downwards since 2011.These two trends don’t seem sustainable. Of course, this is not to say China is about to crash, but it bears (wait, is that a pun?) watching.

  

Where Women Use the Internet More

We are not surprised but we were also unaware that in general men use the Internet more than women. Ten jokes immediately come to mind regarding men dominating Internet usage, none of which are suitable for a high-brow, sophisticated venue such as INTN. But, courtesy of the World Bank, we learn of 13 countries where women are on the web more than men. Almost all of the top five are fairly predictable coming from Northern progressive countries, including Finland, Denmark, Sweden and the Netherlands. But we never would have predicted that Bahrain would take the top spot. The full list of countries where women use the Internet more than men is below.

 

   

An Argument Worth Having, Economic Winning Streaks and the Best Passports

/0 Comments/in /by

We are on the road again this week, this time coming to you from the greater Phoenix area where we are keeping a close eye on our beloved Seattle Mariners. When we booked the trip many months ago, we forgot about the World Baseball Classic which started this week. In this tournament, countries play against each other with the winner earning a true world championship. This means some of the Mariners’ best players are off playing for their home countries–Venezuela, Dominican Republic, Canada–and not here for our viewing pleasure. One would think that someone writing something called “International Need to Know” would have kept up to speed on such a world event. But even as we bow our head in shame, take a sip from our beer, watch bright young prospects play in the sun and prepare to bite into a hot sausage sandwich, we bring you an argument worth having, inform you about the country that has the longest economic winning streak and issue information on which country’s passport you would be lucky to have. It’s this week’s International Need to Know, aiming to be at least a .300 hitter in the game of international affairs.

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

An Argument Worth Having

People fight about just about anything nowadays, often on social media platforms and even more often vociferously and angrily. So we were gratified to recently come across an argument worth having. Early last year, three economists–David Autor, David Dorn and Gordon Hanson– published a paper asserting China did indeed take away large swathes of jobs from the U.S. from 1990 to 2007. The paper, which was full of data, complicated equations and analysis, forced a re-thinking on trade issues by at least some. However, last week, George Washington University economist Jonathan Rothwell published a paper taking issue with Autor, Dorn and Hanson’s data. He asserts that the loss of jobs to China is not as significant as the original paper claimed. The three authors of the original paper have now shot back at Rothwell, stating, “The main methodological critique provided by Rothwell is unfounded. The critique provided does not follow from his own logic.” We do not have the chops to determine which side is right, but will note that the original paper, as we understand it, claims the negative trade effects were localized. That is, loss of jobs to China might have been very harmful to certain local communities, but the paper does not assert an overall loss of American jobs. In fact, as Kevin Drum recently illustrated, American, German and other countries’ manufacturing job losses have been remarkably steady over the last 50 years (see the chart below). Plus, China is now also losing manufacturing jobs–the U.S. is no longer siphoning jobs on net to China if it ever was (depending on which economist you believe). The economists’ argument regarding how many job were lost to China is definitely worth having but the squabble falls into the category of fighting the last war.

Connecticut Women’s Basketball Team of Countries

The Connecticut women’s basketball team has won more than 100 straight games as it heads into the NCAA tournament. That’s darn impressive for any team not playing the Washington Generals. Australia’s economy has an impressive streak of its own going, having gone more than 25 years without a recession. That’s the current longest streak without a recession in the world. Poland comes in second with 86 consecutive quarters without a recession followed by South Korea (proving I guess that you don’t need an active president to have a successful economy and that a dangerous neighbor next door armed with nuclear weapons can’t stop you either). The mighty Slovak Republic is fourth. These are four fairly disparate economies so there’s probably no big lesson to learn from them as a group. But it should be noted that of the longest economic win streaks since 1970, these four current streaks all rank in the top ten. That so many of the hot streaks are taking place today may, or may not, say something significant about our current world economy. Is the economy better, more resilient, propping itself up artificially or is it just statistical noise? Let’s get Autor, Dorn, Hanson and Rothwell fighting about this.

Passport to Freedom

At the airport last week while standing in the TSA pre-check line, which was longer than usual, passengers pulled out their passports and other IDs. I saw identification papers from many countries which leads to the question: which countries’ passport is the best to have? Nomad Capitalist, a consulting firm that helps people move around the world and pay reduced taxes, offers their Nomad Index which provides one perspective of which is the best passport. Its rankings are based on which countries allow the most visa-free travel, are most lax about collecting taxes overseas, have the best perception, provide the ability to have dual citizenship and provide the most overall freedom. Under those criteria, Sweden tops the index mainly because someone with a Swedish passport can travel to 176 countries without having to get a visa. It is also easier for a Swede living overseas to avoid paying Swedish taxes. As you can see in the table below, all of the countries in the top ten are in Europe. For those of you curious, the U.S. ranks only 35th in this index due to the taxes, perception and freedom categories. Afghanistan comes in last.

 

    

Uncertainty, Investing for the Long Term and Manufacturing Costs

/0 Comments/in /by

This week INTN is on the road in lovely Santa Clara, California where we are attending the Autonomous Vehicles Conference. It was a little awkward talking with the Lyft driver on the way to the conference hall telling him we were attending an event that aims to put him out of a job. In fact, a Lyft executive was on one of the panel discussions we attended and we thought about bringing the driver in to ask a question. Just a few years ago such a conference would have been regarded as one focusing on speculative technology and indeed there are still challenges to achieving fully autonomous vehicles–one company told of an Australian partner who informed them the car would need to be able to distinguish between a cow and a kangaroo (they hopped right to the task). But all the companies we talked with agreed that the two main challenges are not building autonomous vehicles that can truly drive on their own, but instead the triple threats of regulatory issues, cultural barriers and hackers. In fact, the existence of the conference itself is testament to the arrival of autonomous vehicles–it is your basic trade show, with networking, trade booths, and rubber chicken for lunch. We might as well be at a vacuum cleaner convention. But even as we prepare to shift into our autonomous vehicle future, we still bring you the results of a global uncertaintly index, information on where to invest for the long term and the big changes in manufacturing costs around the world. It’s this week’s International Need to Know, discarding envelopes from Warren Beatty even as we open up the world to your inquisitive eyes.

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

May You Live in Uncertain Times

Last week we presented an economic uncertainty index for China developed by three business professors. It should be taken with a grain of South China sea salt since it was based on tracking the frequency of articles about policy related economic uncertainty from only one newspaper, the South China Morning Post. But the three profs also track global economic uncertainty and for that they have a more rigorous method: they track articles on economic uncertainty from a variety of newspapers, as well as changes in tax codes and Fed predictions. As you see in their graph below, the global economic uncertainty index is at its highest level since 1997, when they began tracking the data. The previous peak of global uncertainty took place right after the Brexit vote. It’s surprising that both today’s uncertain times and Brexit led to a higher score in the index than the fall of Lehman Brothers and the global financial crisis. Does this say something about what is happening today or about newspapers and the Fed? We are uncertain (darn, will that increase the index even more?).  

 
  

Investing for the Long Term

We are told to invest for the long term. So which country’s stock market has performed the best over the last 117 years? Credit Suisse provides the answer in their 2017 Global Investment Returns Yearbook. There they document the returns of stock markets all over the world dating back to 1900. Surprisingly the country with the highest rate of return over that 117 year period is South Africa, followed by Australia. The U.S. comes in third with a real annualized rate of return of 6.4% (which we note worriedly is below what many pensions plan for). For stock market returns, it’s good to be a resource rich country such as South Africa and Australia. In fact, Credit Suisse notes, “A common factor among the best-performing equity markets over the last 117 years is that they tended to be resource-rich and/or New World countries.” Of course, stock markets are not economies. South Africa has had a great stock market for the long run but it’s economy is problematic. One last historical point of interest: note in the pie charts below which stock markets dominate today as opposed to 1899. A century’s time leads to lots of changes. What will China’s and India’s stock market’s relative sizes be 117 years from now (assuming there are still stock markets in the AI dominated future)?


    

The Cost of Manufacturing

For all the current concerns about China’s economy, its success over the last 20 years, especially compared to other economies, is remarkable. Take the increase in wages, for example. Manufacturing wages have increased since 2005 from $1.20 per hour to $3.60 per hour. That means Chinese manufacturing wages are above the rates of Mexico, Thailand and Brazil, to name just a few. That’s one of a number of reasons China is attempting to transform from a mainly manufacturing exporting economy towards one more reliant on services and domestic demand. 

 

China, India Solar Power and Good News

/0 Comments/in /by

We are amused when people trumpet hardline positions such as “I hate cats,” (fine, don’t get one), “Star Wars is better than Star Trek,” (don’t watch it) or “Rhianna is better than Beyoncé”–(hey, wait a minute!) We are also amused when politicians have to walk back tough stances. So imagine our glee at the President of Iceland’s remarks “that he’d ban putting pineapple on pizza if only he had the power to make laws” only to have to walk it back a few days later after an outcry on social media (is there any other kind of cry on social media?). On his Facebook page, the President recanted: “I like pineapples, just not on pizza. I do not have the power to make laws which forbid people to put pineapples on their pizza. I am glad that I do not hold such power.” While we ponder whether this was actually a clever Icelandic attack on the U.S. political situation, we bring you China in all its connectedness, India in all its solar power and the world in all its better, improved ways. It’s this week’s International Need to Know, putting our pineapples wherever we darn well please (but not on pizza) while bringing you the world in all its strange and wondrous ways.

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

All the Pieces Matter in China>

We present three bits of data and news from China that are actually connected in one way or another. As the great (greatest?) TV show, The Wire, used to say, all the pieces matter. First, is a perhaps weak piece of data but interesting nonetheless. Three economics professors walk into a bar and create an Economic Uncertainty Index  for China (more next week on their global uncertainty work). It’s based on the frequency of articles about policy-related economic uncertainty in the South China Morning Post (SCMP). As you see below, the index leaped up the last few months, apparently because of a certain loud U.S. president and a rise in worldwide protectionism talk that could damper China’s export economy. But, fortunately China is trying to transform to a domestic consumption driven economy. Yes, but the Shanghai Daily reports that “China’s expenditure on fast moving consumer goods in 2016 grew 2.9 percent, marking the slowest growth in the last decade and also a further slowdown from a 3.5 percent growth a year ago.” Finally we reported earlier this year that Chinese are trying to get their money outside of the country and using Bitcoin as one avenue, but that the Chinese government was trying to curtail this. We noted that is easier said than done. Sure enough, Quartz reports that peer-to-peer marketplaces are picking up the slack, particularly LocalBitcoins: “Yuan volumes on the marketplace have exploded in the past week. Trading on LocalBitcoins currently accounts for about 6% of the total trading volume in yuan, according to data source Crypto Compare. China is complicated. Not even McNulty and Bunk could crack it.

 
  

Solar Continues to Stalk the World

We told you of the continued advances of solar in China last month but don’t forget about India. The second largest country in the world is now the third-largest solar generator. Yes, India is now behind only China and the U.S. for solar generation. And it aims to generate much more in the future with a goal of 100 GW by 2022. Transforming to solar generation is important because India now has some of the most polluted cities in the world, more polluted than China’s. More solar generation is possible because of the continued fall in prices and increase in efficiency of solar power. Rooftop solar system costs, for example, have fallen 12% per year since at least 2012. Of course, it’s not just clean energy that India needs since 400 million people in India have no electricity at all. But, India has a “Power for All” program that aims to provide electricity to everyone in the country by 2019. That’s an ambitious target and we’ll be surprised if it’s met. But we aren’t surprised that solar is playing a larger role and India’s solar advances provide more evidence that regardless of changes in U.S. energy and climate change policies, Moore’s Law of solar will prevail.

  

The Continuing Case for Good Times

In our continuing effort to remind you that despite the dark clouds forming, despite the loud clamoring of doom and gloom, we live in the most peaceful and prosperous time in history, we point you to the graph below. It shows the rapid decrease in the number of deaths worldwide of children under five years of age. In 1990, 12.1 million children under the age of five died around the world. In 2015, less than half that number of young children died, 5.8 million. As financial advisors like to say, past performance is no guarantee of future results but it’s important to recognize we have been in a boom time for humans. Let’s hope it was not a bubble.

 
  

Myth of Chinese Nationalism, More Trouble in Greece & Drone Flying Cars

/0 Comments/in /by

There have been many great clutch performances in history. Michael Jordan’s push-off shot against the Utah Jazz to win a sixth NBA Championship, Edgar Martinez’s double down the line to send the Seattle Mariners to the American League Championship and the clutch in my 1987 Toyota Corolla not giving out until we exited I-95 some 20 years ago. But while watching the Grammy’s earlier this week when Adele flubbed the beginning of her tribute to George Michael we were reminded of the greatest clutch performance in history–Jennifer Hudson singing “I Will Always Love You” at the  2012 Grammy’s. Remember the circumstances: Whitney Houston had died less than 24 hours earlier. She was one of Hudson’s idols. The Grammys are watched by millions of people around the world. In a few short hours Jennifer Hudson with no prior warning had to prepare to sing an iconic song by an iconic singer–and she killed it. Completely. The greatest clutch performance in history. So we try not to fumble when telling you about the myth of Chinese nationalism, remind you of the continued troubles in Greece and announce the first operational drone flying car. It’s this week’s International Need to Know, not taking orders from Russia or anywhere else as we tell the story of our mixed-up, muddled world.

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

The Myth of Chinese Nationalism?

In a time of apparent increasing nationalism in Europe, the U.S. and other regions, the Chinese apparently didn’t get the memo. No, not the government which certainly has nationalistic tendencies, but the people themselves. Foreign Policy magazine points to a new paper by Alastair Iain Johnston, a professor at Harvard (with his name it was either Harvard or Cambridge, possibly Oxford, maybe, just maybe Ball State) that shows Chinese, especially Chinese youth, are becoming less nationalistic. Since 2002, Johnston, in partnership with Peking University, has been conducting surveys asking questions such as “Would you prefer to be a citizen of China?” and “Is China a better country than most?” The number of people responding yes to those two questions and others has actually declined between 2002 and 2015, suggesting a less nationalist bent. This is especially true of younger Chinese, “In each instance of the survey since 2002, respondents born after 1978 were markedly less likely to ‘strongly agree’ with any of the nationalist survey prompts than were their older peers. Perhaps most striking, by 2015, the proportion of older Chinese strongly agreeing to support their country ‘even when it is wrong’ was more than twice the proportion of youth who felt that way.” As always, the world is more complicated than we realize.

 
    

Among your worries, keep worrying about Greece

That kit bag* you keep your worries in? You’ve probably ordered a new one off of Jet.com or Amazon what with all that has been going on lately. But don’t forget to save a large compartment for Greece, which though it hasn’t been in the news much lately, continues to be in a lot of trouble. The IMF recently called Greece’s debt “explosive” and “highly unsustainable” (adding the word “highly” in there is in this case not gratuitous). Greece’s debt to GDP ratio has increased from 159% to 183%. The IMF, of course, believes the only realistic solution going forward is debt relief. Germany, however wants continued austerity. And given upcoming German elections it is not realistic that they will change their tune on this issue. But, it’s also not realistic that Greece will need only one more bailout and then all will be good.  This can is already at the end of the street. One more kick brings it to the corner. What’s around it?

*World War I allusions are all the rage nowadays and who are we to buck the trend?

      

Drone Flying Cars

There are many things we all need to know this week but none more important than the drone flying car being tested in Dubai that according to Popular Mechanics will start carrying passengers this summer. When you say “drone flying cars” we check our Straddle Bus skepticism at the door and are all in. The drone, the Chinese-made EHang 184, can carry a passenger weighing 220 pounds plus a small bag. According to Popular Mechanics, “After buckling into its race-car-style seat, the craft’s sole passenger selects a destination on a touch-screen pad in front of the seat and the drone flies there automatically.” We, of course, point you to video of the drone which has a half-hour of flying time and a range of 31 miles. So make sure when you punch in your destination, it’s not too far away. We await possible debunking and technical problems, but in the meantime–go to Dubai and get in your drone flying car!


Manufacturing Locations, Executives Views of China and Views on Immigration

/0 Comments/in /by

The worldwide INTN headquarters is home to two cats, one of whom, Willow, has recently been treated for hyperthyroid disease. The treatment consisted of injecting her with low doses of radiation. This meant for the last two weeks we were not allowed to be closer than a foot to poor Willow for more than one hour per day to avoid becoming over radiated. We originally got cats because we were told they are solitary creatures and so our not being home a lot would be acceptable. We were misinformed. They generally follow us around from room to room and constantly want to be petted and when appropriate (which is often) fed. In fact, as I typed that sentence, our other cat, Putter, leapt onto the desk and waltzed in front of the screen, annoyed that I was paying attention to you all instead of him. So although our words may contain an extra radioactive glow to them this week, they also describe where manufacturing will locate in the future, what executives think will happen in China and what people around the world think is important for immigrants to do. It’s this week’s International Need to Know, the Schrodinger Cat of important international information, both alive and dead at the same time (nothing goes over better than a quantum mechanics joke).

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

Where Will Manufacturing Go?

Notwithstanding that all countries are likely to have fewer manufacturing jobs in the future, where will be the top centers of manufacturing in the coming years? Deloitte asked the question of manufacturing executives under the assumption that if anyone would know, these folks would.* It is no surprise that these executives rate China first for manufacturing competitiveness in the current year. But, perhaps, surprisingly, they believe by 2020 China will fall to number two behind the United States (this survey was taken before the U.S. election, btw, so current Trump Administration actions had no effect on these rankings). China slips because of its rising wages and a perception that the U.S. is well ahead of China in advanced manufacturing technologies. Overall, North America and Asia dominate the rankings with only the UK and Germany making the top ten. Perhaps the other headline lurking in the list is the executives’ expectation that India will rise to number five by 2020. We find this a rather bold and intriguing prediction. India’s continued economic rise would have implications far beyond manufacturing.

 
*As of yet, we take no position on whether this is a good assumption or not. Ask us again in 2020.
  

Speaking of China, Executives and Manufacturing

We don’t mean for this week’s edition to mirror the Trump Cabinet–full of business executives–but AmCham China also surveyed this prized and interesting species–this time ones in China, and it too provides much grist for the INTN mill. They quizzed the execs on a variety of issues for their 2017 Business Climate Survey. For the second year in a row, 25% of respondents to the survey reported they have moved operations out of China in the last three years or are planning to do so. And as we pointed out in this space recently, even as the U.S. pulls back from its world leadership role, China is a square peg for the round hole role of global leadership. According to the Survey, “More companies are slowing investments and deprioritizing China as an investment destination due to slowing growth and increased concerns over barriers to market entry, the regulatory environment, and rising costs.” Further, “Eight in 10 say they feel foreign companies are less welcome in China than in the past, and more than 60% have little or no confidence that the government is committed to opening China’s markets further in the next three years.”  It’s hard to see China as a leader on free trade when it has so many barriers to entry of its own. But, I guess that’s the world we’re living in now.

  

This is Us

Unless you’re the Atlanta Falcons offensive coordinator and completely unaware of what is going on around you, then you have probably noticed that immigration has been in the news lately. So has the Pew Research Center which has a timely survey on national identity. It turns out that in many countries most people don’t view where a person was born as providing their national identity. Pew notes that “Only 13% of Australians, 21% of Canadians, 32% of Americans and a median of 33% of Europeans believe that it is very important for a person to be born in their country in order to be considered a true national.” You’ll see in the chart below that a few populations put a premium on where a person is born, such as those in Japan (no surprise), Hungary and Greece. Learning the national language is a bigger deal: “Majorities in every country surveyed say it is very important to speak the dominant language to be considered truly a national of that land. This includes a median of 77% in Europe and majorities in Japan (70%), the U.S. (70%), Australia (69%) and Canada (59%).” So, go ahead and move to another country, but learn the darn language, I guess. Of course, with computers getting better and better at language translation, perhaps that will become a lesser issue in the future.

  

Ecommerce Sales, Imports Helping Exports and Immigrants Starting Companies

/0 Comments/in /by

There are times when we realize it is important to take a strong and clear stance. We know sometimes expressing an opinion can be controversial, and indeed could cost us readers and even in some cases respect. But in light of the news this week*, we are compelled to tell you that we prefer Rhianna over Beyonce. We enjoy her music more, can hear the melody better and find her economy of lyrics more powerful and clear. This is not to besmirch Beyoncé whom we also enjoy, but if gun to head and told to pick one over the other, the choice is easy for us: Rhianna wins every time. So as we cue up Anti on our streaming service, we bring you information on worldwide ecommerce sales, examine the use of imports in exports and discover the role immigrants play in start ups. It’s this week’s International Need to Know, serving up international information in three part harmonies.

*Beyoncé’s having twins!  Bah, Rhianna, if she was pregnant, would have triplets

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

Breaking the Mortar Worldwide

Last year we happened to be riding by a Sears store on our bike and decided to stop in to see if they had a certain tool we were looking for and needed that afternoon. The building was as barren as inauguration day. We finally found one lone employee, on the phone, looking like an extra from The Walking Dead. Not only did the store not have the tool, the employee told me most stuff was on their website not in the stores. Indeed the store was nearly completely empty, not just of customers but also of employees and merchandise. When we met with someone from a large department store recently, they told us they weren’t worried about Macy’s, their concern was Amazon and Jet. This is not just a U.S. phenomenon. It’s global. Retail ecommerce sales worldwide increased 22.2% in 2014, 20.9% in 2015 and last year increased 18.6%. China has the largest volume of ecommerce retail sales (see chart below), followed by the U.S., UK and Japan. Ecommerce is still a minority of retail sales (less than 10%) which raises two questions: a) for how long will it be the minority and b) just how large is the opportunity for ecommerce around the world?  

 
  

It takes a village…in many countries

Lost too often in the debate on border tariffs, mercantilism, European intra-trade issues, immigrants and more, is that complicated products and services are composed of inputs from many countries. What is an American car or a Japanese car or a German car nowadays? A Toyota assembled in Tennessee* may be made in America but parts are sourced from many different countries. The engine may be manufactured in Japan and the axle somewhere else. This is true for almost every complicated product. In researching counterfeit goods (more perhaps on this in a future issue), we came across this interesting graph below from the OECD. The OECD report noted that “more than half of the world’s manufactured imports are intermediate goods.” The data is a bit old from 2009 but I doubt things have changed much in the last eight years. Perhaps this will change going forward with 3-D manufacturing and other technological and trade trends but for now the truth of trade is more complicated than our overlords admit or realize.

*A Toyota Assembled in Tennessee is the title of our next country song

  

Immigrants and Start Ups

We remember hearing the statistic while visiting Silicon Valley a few years ago that half of the companies there were either founded or headed up by people who were foreign born. As the new administration enacts and proposes new immigration rules, it’s worth remembering that nationwide this is true too.  According to the National Foundation for American Policy, “51 percent, or 44 out of 87, of the country’s $1 billion startup companies had at least one immigrant founder.” Further, the National Venture Capital Association found that “33 percent of U.S. venture-backed companies that became publicly traded between 2006 and 2012” were started by immigrants. The world’s people have made America successful. 

    

Shattering Authoritarian Myths, Clean Saudi Arabia and Higher Education Levels Around the World

/0 Comments/in /by

We are not one to believe in omens, fate or inevitabilities. When something bad happens to someone and they rationalize the catastrophe by telling us bad things happen for a reason, we wonder if it was the reason that was bad. Others tell us when catastrophe strikes that it is all part of the grand plan, which causes us to want to have a word with whomever is in charge. But when we were cleaning the photos off our phone the other day we came across the image below that we took late in the summer while walking to a Seattle Mariners baseball game. And we wondered if it was not an omen perhaps it was at least a warning of the coming political cataclysms. So even as we vow never to litter internationally, domestically or even galactically, we explore the myth of the successful authoritarian, examine a clean Saudi Arabia and ponder higher education levels around the world. It’s this week’s International Need to Know, a refugee to reason in a complicated world.

    

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

Shackle the Unfree Thoughts

As we noted last year, millennials support for democracy is lower than other age groups and their fondness for authoritarianism is also greater. And, over the last ten years, with the economic success of China, we’ve heard more and more people express the sentiment that democracies can’t be as successful economically because of all the process and the inability to get things done. We’re all for making ourselves more efficient (see our story on Europe’s more cost-efficient infrastructure, for example), but it is time for a dose of reality on what kinds of countries are more successful. The World Bank’s Doing Business Survey, which ranks countries on how easy it is to do business in them, finds that by far the most successful countries are free. Further, the bottom performers are mostly unfree. Don’t like the Doing Business Survey? Okay, check out the top 20 countries ranked by GDP per capita. Almost every single one of them is a free country. So let’s stop the pining for authoritarianism and concentrate on improving our democracies. 

 
  

A Clean Saudi Arabia

Even as the United States may pull back on climate change fighting efforts, other countries are full steam ahead (powered by renewables, of course), including Saudi Arabia. Fortune Magazine tells us that “Saudi Arabia will launch a renewable energy program in the coming weeks that is expected to involve investment of between $30 billion and $50 billion by 2023, Energy Minister Khalid al-Falih said on Monday.” Currently the country produces less than 1 percent of their energy from renewable sources but they plan on changing that, especially since energy demand in the country is growing at an 8% rate. They are also hoping to team up with other countries in the region such as Yemen, Egypt and Jordan in the push for renewable energy. We note that one of the forms of renewable energy Saudi Arabia is exploring is nuclear, which is likely to create angst in some quarters. They are exploring partnering with China on the nuclear energy initiative. The world, it’s a changing fast.

Primarily Secondarily

We’re involved with a project that has us reading about and researching higher education which led us to discover that Korea has the highest percentage of their population with a postsecondary degree. This is helpful because more and more of the jobs in the future are going to require such an education level (or a robot—we need our people to get smarter and our robots dumber. If it weren’t for the Flynn Effect, I’d swear the opposite is happening). Canada is second followed by mighty Luxembourg and the fighting Irish. Italy, which we are increasingly worried about (remember our warnings about GDP and banking), brings up the rear. 

  

Canada Compared to Venezuela, China a leader on free trade (??!!) and the world’s third most important graph

/0 Comments/in /by

New wood floors are being installed here at INTN’s global headquarters. This has wreaked havoc on house, computer and cats, the last of whom are most upset by the upheaval. Willow hides in the basement while the ever sociable Putter tries to hang out with the workers, but is apparently overcome with anxiety causing the poor feline to vomit repeatedly. Fortunately so far he has restricted his regurgitations to defacing the old floors though we tremble at what is to come. In the midst of it all, as we attempted to write this missive among saws, hammers and other noise, two salesmen came to our door wanting to talk to us about switching over to their cable company. When we attempted to explain to them this was not a good time (this should have been abundantly evident by wood, laborers and the general construction mess surrounding them on the front porch), they insisted their information was vitally important and we must talk to them right that minute. It was then that we wished we had trained Putter to vomit on cable company salesmen. So even as we call in the cat whisperer for expert advice, we compare Canada, Venezuela and iPhones, snicker at the idea of China as the leader of free trade and present the world’s third most important graph. It’s this week’s International Need to Know, purring with world information intended to scratch your fancy. 

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

Canada, Venezuela and iPhones

Last year we took to task a news organization for saying Venezuela’s economic problems are due to low oil prices. Canada is a great example of what we’re talking about. Canada, like Venezuela, is also a big oil exporter and certainly its economy suffered when oil tanked in 2014. But, because Canada has economic policies that are not crazy, their economy did not and would not suffer like Venezuela’s. In fact, Canada’s business confidence is at its highest level since before the oil crash and its economy added the most number of jobs since 2012. Meanwhile, it costs $98,000 to buy an iPhone in Venezuela. Canada is also preparing for President Trump by naming Chrystia Freeland* to be their new Foreign Minister. She led the charge in getting the Canada-EU free trade pact approved. With a good chance NAFTA will be torn up by Trump, she would have chief responsibility for negotiating the new pact. By the way, NAFTA was essentially an addendum to the U.S. – Canada Free Trade Agreement which would still be in force even if the new Trump Administration ends NAFTA. And when we talked with the Canadian government recently, the official indicated it’s probably time to update the agreement anyway. After all, many industries didn’t even exist when that free trade agreement was approved. Venezuela meanwhile is in no position to negotiate free trade agreements or much of anything else. It’s not about the oil.

*It’s worth noting that Freeland, of Ukrainian heritage, has been banned from traveling to Russia for her anti-Putin views.
   

 

China’s the Leader of Free Trade?

After his speech at Davos, there’s been lots of talk about China’s President Xi Jinping leading the world’s free trade movement since the U.S. is abandoning that role. President Xi certainly talked about the importance of free trade in his speech but his country doesn’t walk it. In fact, a good argument could be made that China is the most protectionist country in the world, or at least vies for the title with India. The “Global Mercantilist Index” ranks those two countries one and two (see chart below) for most protectionist. Even if we look at simple tariff rates, never mind all the non-tariff barriers, China is at best middle of the pack, behind such free trade stalwarts as Belarus, Nicaragua and Moldova. Or, look at China’s new cybersecurity law which will go into effect on June 1st of this year. The new law “imposes new security and data protection obligations on network operators, puts restrictions on transfers of data outside China and introduces new restrictions on critical network and cybersecurity products.” More than one China expert we’ve spoken with notes that the law is designed to bolster China’s local industry and cut out foreign companies. The world is changing but not so much that China is really the leader of the world’s free trade movement. That’s being led by a lovely couple in a small town in Chile out of their third-story apartment.

Rankings of Protectionist Countries

  

 

World’s Third Most Important Graph 

Last year we presented the world’s fifth most important graph. Today, we present the third, which arguably, like a college football BCS playoff argument, could be ranked higher. Either way, peer below and gaze on the factor that is driving so much of what is happening in the world today, including in the United States–the global labor share of corporate production has been decreasing since the early 1980s. Two economists at the University of Chicago crunched the data and found “of the 59 countries with at least 15 years of data between 1975 and 2012, 42 exhibited downward trends in their labor shares.”  Oh, and by the way, it’s not just in developed countries like the U.S., Germany and Japan–China is seeing the same trend (see second graph below).  Trends end eventually, as the Seattle Seahawks painfully learned this season. Whither and when this one is a crucial question for our future.

 

International Need to Know

Your weekly source of essential, under the radar, international information and data.

Subscribe

Archives

Over 300 International Need to Know newsletters.

2022

2021

2020

2019

2018

2017

2016

Buy Now

© 2022 Gittes Global