From: aditya rana
Date: Sat, Nov 19, 2016 at 12:27 PM
Subject: On China as the New World Leader of Globalisation; Gut Bacteria and Diabetes!
To:
Hi!,
With Trump's election as the US President, and the focus of most financial commentators being primarily on the potential domestic impact of his economic policies, an overlooked (but key) area is the unique opportunity it offers China to replace as US as the global champion of globalisation. John Ross, fellow at Renmin University, wrote an insightful analysis on the subject. To summarise:
-Trump is the first US President since WW II to proclaim his support for protectionism, as reflected in his opposition to both multilateral trade treaties currently being nogiated (TPP and TTIP), contrasting with China's support for increased international trade and the signing of 14 free trade pacts (FTAs) with 22 countries in Asia, Latin America, Oceania and Europe. This is a key event for the world economy.
-International trade is one area where economic theory and the facts of economic development are in sync, numerous studies have shown the correlation between the trade openness of an economy and its speed of economic development.
-The first sentence of Adam Smith's The Wealth of Nations states: 'The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is directed, or applied, seem to have been the effect of the division of labour'.
-Modern economics has fully confirmed this view, by determining that the most important factor in economic growth is the increase in 'intermediate goods- - i.e. the output of one industry (a steering wheel) used as an input in another industry (car). Thus increase of 'intermediate products' follows from an increase in the division of labour. The second critical factor for economic growth is fixed investment, which again reflects the division of labour – with the outputs of capital goods industries used to produce other products. It is important to note a key underlying aspect of this feature – an international (as opposed to local) division of labour.
-The importance of international trade follows directly from the decisive role which the division of labour plays, as noted by Adam Smith: 'the division of labour is limited by the extent of the market' – increasing division of labour required an increasing market size. Adam Smith advocated free trade for this very reason.
-This fundamental economic force underpin China's rapid growth since its opening up in 1978 - a greater use of the international division of labour than either the US or Japan. China's trade in goods and services was 41.2% of its GDP, compared with 36.8% in Japan and 28.1% in the US.
-The chief advantage of division of labour in economic development is the mutual benefit it provides to the participating countries – a true 'win-win' situation. This is why China has been able to secure FTAs with a variety of countries and it aims to do yet more. Globalisation has played a key role in lifting millions out of poverty in China, India and other countries and why it remains critical for developing nations to achieve economic development.
-The US helped build a globalised world order (GATT and the WTO) after its devastating experience during the Great Depression, when it passed an act to increase tariffs in 1930 causing its trade share in GDP to drop from 11% in 1929 to a low of 6.6% in 1932. This was a key factor (in addition to an inadequate monetary response) in causing the depression.
-To appreciate the stark contrast between the American and Chinese approaches to global trade – it is important to realise that the US had already started to break away from the globalisation trend by promoting the TPP and TTIP agreements, which were based on regionalised protectionism rather than free trade (despite the rhetoric).
-For example, by excluding the second largest trading nation China from the agreement, its goal was not to liberalise trade but form a bloc under US dominance against China. As the US Secretary of Defence secretary Carter noted: 'In fact, you may not expect to hear this from a Secretary of Defence, but… passing TPP is as important to me as another aircraft carrier.'
-The domestic objection to TPP arose in the US because it furthered the interests of US corporations at the expense of workers. As the well-known US economist Jeffrey Sachs noted of the TPP's provisions: 'Their common denominator is that they enshrine the power of corporate capital above all other parts of society, including… even governments… The system proposed in the TPP is a dangerous… blow to the judicial systems of all the signatory countries.'
-By contrast, China has now become the world's largest economy in active support of free trade and globalisation (though with Europe, in theory, being a supporter as well). Since the early 1990s, the world's five most rapidly growing non-oil economies - China, Cambodia, Vietnam, Laos and India – all have a high trade share in GDP. For example, the Indian economy's share in trade is now slightly higher than even China. The developing world will remain committed to globalisation, even if the US retreats towards more protectionism.
-The most important policy initiative undertaken by China is the RCEP – a proposed FTA between ASEAN and the six states which ASEAN has FTAs (Australia, China, India, Japan, South Korea and New Zealand). RCEP has numerous advantages over TPP - it includes mostly rapidly growing economies, whereas TPP is based on slowly growing economies (US, Japan). Currently, China accounts for a third of Australia's exports and 20% of Korea's – under the FTA, 95% of Australia's exports to China will be tariff free.
-Unlike the TPP and TTIP which give international jurisdiction to institutions controlled by the US, RCEP relies on harmonisation of national standards with minimal international supervision. Finally, another aspect of China's leadership in globalisation, its One Belt One Road (OBOR) and the Asian Infrastructure Development Bank (AIIB) goes beyond a framework based primarily on tariffs and regulations to focus on the practical aspects of the development of trade through infrastructure investment.
-In conclusion, it remains to be seen how much of Trump's rhetoric translates into protectionist practices, but the change in rhetoric is significant enough and has opened the door for China to play the leading role in international trade and globalisation.
-Fascinating analysis and makes a persuasive case for China formally taking over the globalisation leadership role from the US. Much of the developed world seems to be in the grip of a debilitating underlying trend which is anti-trade, anti-global and insular in nature, (together with the all the associated unsavoury sentiments which have hitherto been kept at bay due to the norms of civility and political correctness. Trump is just another skilful demagogue to take advantage of this sentiment in a long list of such unpleasant characters. This will only accelerate the relative decline of America (and much of the developed world's) hard and soft power - which actually is good in the longer term for the world as it implies less self-serving power politics and meddling in regional affairs, allowing countries to build their own regional alliances based on mutual benefit.
-The relative retreat of the US from the world stage has important political implications as well. As perceptively noted by Mr. Chandran Nair in the FT recently in a commentary on the Philippines shift away from the US to China: "The larger point is that the concept of Pax Americana is outdated. The world is increasingly abandoning the view of the US as the sole (and self-appointed) protector of global peace and prosperity. In fact, the idea that America should not be a world policeman resonates with large numbers of people in the US. The world may want other countries to share that responsibility with the US or, perhaps, to replace it. Mr Duterte is the first in Asia to do something about it. His views on self-determination are shared by many who are resentful of being subservient in the hegemonic geopolitical system but have believed until now that they are helpless.'
A Healthy Gut Reduces Diabetes Risk:
-The importance of healthy gut bacteria in promoting good health is an increasing area of focus for medical science, and increasing your intake of plant food has been shown to have a beneficial impact on your gut bacteria, as a recent article published by the American Diabetes Association journal points out.
PRCM, November 19, 2016:
http://spectrum.diabetesjourna
-Eating patterns high in fruits, vegetables, legumes, and whole grains can enhance the health of microbiota (gut bacteria), according to an article published in Diabetes Spectrum. Western diets high in fatty meats and low in fiber have a negative effect on gut bacterial health, increasing inflammation, obesity, and diabetes risk. To improve gut health, consume plant-based food sources of prebiotics, probiotics, and 25 to 38 grams of fiber per day. Prebiotics including leeks, asparagus, garlic, onions, whole wheat, oats, soybeans, and bananas, and probiotic sources include sauerkraut, kimchi, tempeh, soy sauce, miso, and water kefir.
Here's to taking better care of the more than a trillion (mainly) health promoting bacterial cells in our body (which outnumber human cells by a ratio of 10-1!) by eating more plant food!
Regards,
Aditya
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