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      in World Politics

      Europe’s Thirst for Virtual Water: Blueberry Fields Forever?

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      Blueberries have long established themselves among the superfoods. They are tasty, low in calories and full of beneficial nutrients. Most importantly, they are a rich source of antioxidants that serve to protect against a range of diseases, most notably cancer. This might explain why the demand for blueberries has steadily increased over the past few years. Between 2015 and 2019, Europe’s blueberry imports increased from 45,000 tons to 113,000 tons. Between 2018 and 2019 alone, the volume of imports rose by more than 40%.

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      Blueberries consist mostly of water. In fact, some 85% of the fruit is H2O. And that’s where the problem starts. In Western Europe, most of the blueberries you find in supermarkets today are imported from Spain; more precisely, from one province in the autonomous region of Andalusia, Huelva, located in the southwest, where Spain borders Portugal. Andalusia is known for the beauty of its major cities like Seville, Granada and Cordoba, and its beach resorts of Marbella, Torremolinos and Malaga.

      Andalusia also happens to be among the poorest autonomous regions in Spain. In 2019, it ranked close to the bottom with respect to GDP per capita; only Estremadura and Melilla ranked lower. In 2016, around 40% of the population lived in poverty; among children, the poverty rate stood at 44%.

      The Blueberry Dark Side

      Andalusia has also been the launching pad for Vox, Spain’s radical populist right. In the regional elections of 2018, Vox gained 11% of the vote, which put the party in a pivotal position. Since neither the left nor the right commanded a majority in the region’s parliament, Vox found itself in a position of kingmaker. At the time, Vox came out in favor of the center right. In Huelva, like across Andalusia, Vox is a major political player. In the November national election of 2019, Vox garnered more than 20% of the vote in Huelva, second only to the socialists who won 36%.

      Vox is a political force to be reckoned with. The party promotes itself as an ardent defender of ordinary hardworking people and of the unity of the Spanish state, threatened by Catalan and Basque independence aspirations. At the same time, the party has vigorously rejected any human responsibility for climate change. Environmental concerns are certainly not on the party’s agenda.

      This brings us back to blueberries from Spain. Over the past several years, the cultivation of blueberries in Huelva province has progressively expanded. Between 2016 and 2020, blueberry spring exports (February to May) increased by more than 80% in volume and more than 40% in value. At the same time, land devoted to blueberries increased from 4.4 squared miles to roughly 14 square miles. As a result, production more than doubled, from 20,815 tons in 2014-15 to 45,506 tons in 2019-20. Altogether, the cultivation of the three major “red fruits” produced in Huelva — blueberries, strawberries and raspberries — provides employment to over 100,000 people, generating roughly €1 billion ($1.2 billion) in revenue.

      Embed from Getty Images

      This is one side of the equation, one that Huelva’s authorities like to propagate. Unfortunately for them, the other (dark) side has once again been making international headlines. Here the focus is on the disastrous impact that cash crops have had on the natural environment, in particular on the Donana national park, a wetland reserve and UN Heritage site that is a refuge for over 2,000 different species of wildlife and serves as a way station for millions of migratory birds every year.

      The national park was already on the receiving end of an environmental catastrophe that severely affected its delicate ecological balance. In 1998, a dam burst at a mine near Seville, releasing up to 5 million cubic meters of toxic slush into the Guadiamar River, the main water source for the park. Cleaning up the mess cost the Spanish state some €90 million. It spent a further €360 million to restore parts of the park. Some of the money came from the European Union. It took several years for the park’s wildlife to recover.

      Yet little was learned from the disaster. By 2016, UNESCO threatened to put the park on its danger list. And for good reason: As The Guardian reported at the time, Donana was “said to have lost 80% of its natural water supplies due to marsh drainage, intensive agriculture, and water pollution from the mining industry.” The article cited a report from the World Wildlife Fund (WWF) that charged that farmers had been drilling more than 1,000 illegal wells that accelerated “the park’s destruction, as drought-resistant plants replace water-dependent ones in the region.”

      Ecological Crisis

      The expansion of cash crop cultivation in Huelva has only added to the ecological crisis, once again ringing alarm bells not only in individual countries that are among Huelva’s most important customers, such as Germany and the United Kingdom, but also in Brussels. A recent report on the website of Germany’s premier news program, ARD’s “Tagesschau,” set the tone: “Spain’s national park is drying out.” The main reason: Huelva’s red fruit industry has not only encroached on park land but, more importantly, has systematically starved the park of its most important lifeline — water. According to the report, estimates are that roughly 1,000 of the wells dug to irrigate the plantations are illegal. In other words, nothing had changed since 2016.

      By 2020, the European Commission had had enough. It took Spain to court. In December, it charged that Spain had looked the other way and allowed the continued illegal appropriation of groundwater, in the process inflicting serious damage to the nationally and internationally protected Donana wetlands. For all practical purposes, the failure lay largely with the regional Andalusian government. Five years ago, the regional government advanced a plan to protect Donana; five years later, according to an article in Spain’s leading newspaper El Pais, only 17% of the measures had been realized, 43% were incomplete, the rest — nada.

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      The regional government has, however, made an effort to go after Huelva’s most egregious water thieves. In March, two ex-mayors — one a socialist, the other a conservative — were put on trial together with 13 farmers, all of them accused of illegal appropriation of water. At the same time, the government has tried to shut down illegal wells. But with over a thousand currently in operation, the backlog is great, and more often than not the authorities have met with determined resistance.

      At the same time, however, the regional government has continued to license new water rights. In 2017, for instance, the government conceded more than 270,000 cubic meters of public groundwater to a cooperative society, which allowed the cooperative to more than double its production of blueberries in the Sierra de Huelva. All this, as a public official in charge of water management claimed, was done in the name of “sustainable development.” Donana’s endangered wildlife would probably disagree. But then, they don’t have a voice, and those speaking in their name, such as the WWF, have to a large degree been unheeded.

      Virtual Water

      Spanish blueberries produced in Huelva are a prime example of the ludicrousness of a development strategy based on international trade. Spain is a semi-arid, water-poor country. The distribution of water across the national territory is highly unequal. Water is relatively abundant in the north and relatively scarce in the south. Agriculture accounts for a large junk of the country’s total water use, roughly 60%. Yet agriculture contributes just 3% to the country’s GDP and employs roughly 4% of the active workforce. Particularly in the south, decades of agricultural practices have exhausted the soil and turned once fertile land into desert, shrinking the supply of arable land.

      Under the circumstances, producing a crop as water-intensive as blueberries in a semi-arid region borders on the absurd. The amount of water required to produce a certain amount of a product is generally referred to as a water footprint. The water footprint of blueberries is around 840 liters per one kilogram of fruit. This means that embedded in every kilo of blueberries for sale in the local supermarket are more than 800 liters of water. This is what is nowadays known as “virtual water” — the amount of water hidden from and invisible to the end consumer. Virtual water has become an increasingly important concept in international trade theory. What it means in practical terms is that with every kilo of blueberries we import from Spain, we bring in more than 800 liters of water.

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      By now, the absurdity of the situation should be obvious. Not only do we import water from a water-scarce region, but by importing the virtual water embedded in blueberries, we contribute to the depletion of a scarce resource in the exporting region which, in turn, is a major cause of the gradual destruction of one of Western Europe’s largest natural wetlands. And things are likely to get even worse. The upsurge in demand for blueberries and other red fruits has brought new producers into the market.

      As a result, prices have substantially declined, compelling producers to expand production and explore new market opportunities. Just the other day, after years of negotiations, Brazil gave a green light to the importation of blueberries from Huelva after the red fruits industry passed an on-the-ground inspection by a delegation of Brazilian authorities. And Brazil might only be the beginning. Huelva authorities have already set their eyes on even larger markets, notably China and India. In the meantime, environmental advocates are pinning their hopes on the European Court of Justice, which is supposed to consider the case over the next few months. Judgments rendered by the court are binding. Member states are obliged to comply with court decisions without delay. If found guilty, Spain might have to pay heavy fines.

      The WWF, which has been among the most vocal and determined advocates of the Donana national park, is confident that the court will rule in its favor. As Juan Carlos del Olmo, the secretary general of WWF Spain, put it, “Spain is about to be condemned for allowing the destruction of Doñana, a heritage that belongs to all Europeans.” He emphasized that the “Spanish authorities and especially the Regional Government of Andalusia, which have both turned a blind eye to this situation for years,” need “to take real measures to halt the degradation of Doñana.” This means, above all, closing the illegal wells that are “looting the aquifer and destroying biodiversity.”

      2020 marked the fifth anniversary of the United Nations Sustainable Development Goals, to which Spain has committed itself “at the highest level.” This includes ensuring “the lasting protection of the planet and its natural resources.” It is not entirely obvious how the export of massive amounts of virtual water from Huelva’s blueberry fields is supposed to contribute to the latter goal.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      What the UAE-Turkey Rivalry Means for Europe’s Energy Security

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      In recent months, the United Arab Emirates has adopted a number of stances inimical to Turkish ambitions in the Mediterranean. This has taken the form of closer relations between the UAE, Greece and Greek Cyprus, more joint military exercises, and increased energy collaboration with Israel via the Abraham Accords. But with President Joe Biden in the Oval Office, the UAE has toned down its overt military posturing and complemented its strategy with economic means. The shift relies on hydrocarbon pipeline proposals that exclude Turkey with the aim to diminish its geopolitical importance to Europe.

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      The UAE views Turkey as a threat for two reasons. First, Ankara supports the Muslim Brotherhood, which the Emiratis have designated as a terrorist organization. Second, Turkey has been active both militarily and economically in North Africa, Syria and the Horn of Africa. In 2019 and 2020, competition between Abu Dhabi and Ankara flared, with both powers directly funneling mercenaries and money to Libya, stepping up competition in Somalia and castigating each other in diplomatic statements. The UAE also aligned with Greek Cyprus, Greece, France and Egypt against Turkey while providing financial and possibly military support in the form of mercenaries to anti-Turkish actors in the region.

      Energy Games

      During Biden’s first months in office, however, the UAE has undertaken two major actions that indicate a softer approach toward Ankara. First, on January 29, Abu Dhabi declared that it was ready to work closely with the UN on Libya. Second, the UAE began dismantling its base in Assab, in Eritrea. Although this move comes largely in an attempt to extricate itself from the war in Yemen, it also means losing a critical power-projection site that has acted as a counterbalance to Turkey’s and Qatar’s presence in Suakin, in Sudan. This does not mean that Abu Dhabi considers Turkey to be any less of a threat. On the contrary, recent UAE actions portend a refocusing on investment in pipelines and infrastructure in the eastern Mediterranean to blunt Ankara’s energy ambitions, especially concerning Turkey’s role in Europe’s energy security.

      Embed from Getty Images

      Moscow’s influence on Europe’s energy markets has emerged as a concern for the European Union and the US, with Russian supplies accounting for 40% of European gas consumption. Turkey is commonly floated as a solution because it can connect alternative pipelines from the Caspian and Central Asia. Turkey becoming an important energy transportation hub would give it leverage over the EU and allow it to better play the US, Western Europe and Russia against each other.

      However, the UAE’s attempts to lock Turkey out of the eastern Mediterranean energy pipelines threaten Ankara’s goals of becoming a larger player in the EU’s energy market. The UAE is attempting to do this by joining the Eastern Mediterranean Gas Forum (EMGF) — comprised of Cyprus, Egypt, Greece, Israel, Jordan and Palestine — as an observer. Although the EMGF claims to be open to anyone, its ostensible purpose is to lock Turkey out of the Mediterranean hydrocarbons market, especially with the EastMed pipeline project. This pipeline would transfer gas from Cyprus and Israel to Greece and then further on to Europe; it is a major reason for Turkey’s involvement in Libya. The EastMed faces certain financial and political struggles, and the UAE’s endorsement of the project could galvanize initiative and create a breakthrough in rallying a coalition to circumvent Turkey on the energy market.

      Moreover, Abu Dhabi’s improving relations with Israel provide it more alternatives in convening an anti-Turkish coalition. The Abraham Accords also augment the UAE’s ability to constrain Turkey by allowing Abu Dhabi to collaborate with Israel on joint pipeline projects. If the UAE manages to connect itself to the EastMed, or any other, pipeline, Turkey’s status as an energy alternative to Russia would diminish in the eyes of Europe and the US. It appears as if the UAE has already taken initiative in this regard: On October 22, 2020, Israeli state-owned Europe Asia Pipeline Company signed a binding memorandum of understanding with MED-RED Land Bridge, a company that has both Israeli and Emirati owners, to transport oil from the UAE to Europe.

      The joint venture would rely on the Eilat-Asheklon pipeline, built by Israel and Iran in the 1960s, that would send Emirati hydrocarbons from Eilat, on Israel’s Red Sea coast, to Ashkelon, on the Mediterranean. Though this is an oil pipeline, this portends future initiatives that could see Emirati gas transported through Israel to Greece, via a connection to the EastMed. Furthermore, Emirati oil tankers disembarking in Eilat would come with an increased security presence in the area. Though not a military base, the venture could make up for the power projection loss from the now defunct base at Assab.  

      Economic Foothold

      An Emirati bid to manage an Israeli port at Haifa represents another Emirati attempt to cement an economic foothold in the eastern Mediterranean. The port at Haifa is also close in proximity to Lebanon and Israel’s disputed oil blocs, some of whose drilling licenses have been awarded to France’s Total. As noted by Amos Hochstein, the former coordinator for international energy affairs at the US State Department, the UAE could adopt a larger role in resolving this dispute, which would free up more gas reserves that could be exported around Turkey. UAE mediation would also draw it economically closer to France, which has, for the most part, confronted Turkey in the eastern Mediterranean. If Total receives new oil blocs, a French economic dimension could also align against Turkey in the region, bolstering the UAE’s initiatives.

      The Emirati bid for Haifa’s port comes after DP World, Abu Dhabi’s shipping and operations company, completed the Port of Limassol in Cyprus in 2018. Both actions represent the UAE’s push to bolster its infrastructure in the region, which would complement future pipeline initiatives. The UAE then signed a military cooperation agreement with Cyprus on January 12, which signified a deepening of this relationship. It followed an Emirati-Greek military partnership and a trilateral meeting between the UAE, Greece and Greek Cyprus, evidencing that Abu Dhabi is trying to complement military measures with diplomatic coalitions.

      Cyprus proves critical to the UAE’s energy ambitions. Not only is the island a vital connecting point for the EastMed pipeline, but it also recently discovered gas, both of which provide Europe with an alternative to Turkey’s energy supply. This gas will flow to Cairo via a pipeline agreed upon in 2018, where it will be liquified and exported to Europe. These pipelines may not decisively change Turkey’s role in Europe’s energy security, but they nevertheless threaten Ankara’s energy ambitions and indicate that the UAE is undertaking a multifaceted strategy to undermine its rival.

      Though both Turkey and the UAE would prefer to see each other’s geopolitical significance diminished in the eyes of Western Europe and the US, it would be best for Europe if the two actors worked together. Europe would face a crisis if a jingoistic Russia cuts off the gas deliveries to the continent. Moscow has already threatened Ukraine’s energy supply. As many have argued, Emirati-Turkish competition erupted because of a power vacuum left by incremental US withdrawal from the region. However, if the US and other disinterested states could attempt to broker a détente following the lifting of the blockade on Qatar, collaboration between Ankara and Abu Dhabi could prove a viable supplement for Europe’s energy security.

      *[Fair Observer is a media partner of Gulf State Analytics.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in World Politics

      The Risk of a No-Deal Brexit Remains

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      The risk that we will wake up on May 1 to find we have a no-deal Brexit after all has not disappeared. The deadline for the ratification by the European Parliament of the trade deal between the European Union and the United Kingdom was due to be February 28. But Parliament postponed the deadline to April 30. It did this because it felt it could not trust the UK to implement the Trade and Cooperation Agreement (TCA) — as the deal is formally known as — properly and as agreed and ratified. 

      This distrust arose because the implementation of the Ireland and Northern Ireland Protocol of the withdrawal agreement — the treaty that took the UK out of the EU — had been unilaterally changed by the British government. If a party to an international agreement takes it upon itself to unilaterally alter a deal, the whole basis of international agreements with that party disappears.

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      The matters in dispute between the UK and the EU — the protocol and COVID-19 vaccines — remain unresolved. The European Union is taking the United Kingdom to court over the protocol, but the court is unlikely to decide anything before the new deadline of April 30.

      In the normal course of events, the TCA between the UK and the EU would be discussed in the relevant committee of the European Parliament, before coming to the plenary session of Parliament for ratification. The next meeting of the Committee on International Trade is due to take place on April 14-15, and the agenda for the meeting has been published. It includes a discussion on the enforcement of trade agreements, the general system of preferences and, significantly, trade-related aspects of the COVID-19 pandemic. It makes no mention of the TCA with the UK.

      Trade-related aspects of the pandemic will inevitably include a discussion on vaccine protectionism, which is a highly contentious issue between the EU and the UK that has poisoned relations and led to bitter commentary in the media. The fact that the committee has not included a discussion of the TCA with the UK on its agenda for what may well be the only meeting it will have before the April deadline is potentially very significant.

      Ratifying the Trade Deal

      The TCA is a 1,246-page document, and its contents, if ratified, will take precedence over EU law. To ratify such an agreement without proper scrutiny in the relevant committees could be seen as a dereliction of the European Parliament’s responsibility of scrutiny. We should not forget the scrutiny that was applied to the much more modest EU trade agreement with Canada. The same goes for the deal with Mercosur states (Argentina, Brazil, Paraguay and Uruguay).

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      Furthermore, the TCA would, if ratified, set up a network of committees to oversee its implementation. These will meet in private and their work will diminish the ongoing oversight by the European Parliament of a host of issues affecting all 27 EU member states. The TCA also contains a system of dispute-resolution mechanisms that will quickly be overwhelmed by work. The TCA has many items of unfinished business, on which the European Parliament will want to express a view. It is hard to see how any of this can be done before the end of April.

      The UK government led by Prime Minister Boris Johnson has adopted a deliberately confrontational style in its negotiations with the European Union. The more rows there are, the happier the support base that Johnson is seeking to rally for his Conservative Party. Johnson’s European strategy has always been about electoral politics, not economic performance. This has led to almost complete confusion between the British government and the EU.

      If the European Parliament ratifies the TCA without there having been seen to be a satisfactory outcome to the EU-UK negotiations about the Ireland and Northern Ireland Protocol and over the export of vaccines, it will be a political setback for Parliament and a source of immense satisfaction for Johnson.

      Yet one should never underestimate the role emotion can play in politics. The entire Brexit saga is a story of repeated triumphs of emotion over reason — and the European Parliament is not immune to this ailment. Boris Johnson could be pushing his luck a bit far this time.

      *[A version of this article was posted on John Bruton’s blog.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in US Politics

      The Guardian view on China, Xinjiang and sanctions: the gloves are off | Editorial

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      China’s response to criticisms of horrifying human rights violations in Xinjiang is clear and calculated. Its aims are threefold. First, the sanctions imposed upon individuals and institutions in the EU and UK are direct retaliation for those imposed upon China over its treatment of Uighurs. That does not mean they are like-for-like: the EU and UK measures targeted officials responsible for human rights abuses, while these target non-state actors – elected politicians, thinktanks, lawyers and academics – simply for criticising those abuses.Second, they seek more broadly to deter any criticism over Xinjiang, where Beijing denies any rights violations. Third, they appear to be intended to send a message to the EU, UK and others not to fall in line with the harsher US approach towards China generally. Beijing sees human rights concerns as a pretext for defending western hegemony, pointing to historic and current abuses committed by its critics. But mostly it believes it no longer needs to tolerate challenges.Alongside the sanctions, not coincidentally, has come a social media storm and consumer boycott targeting the Swedish clothing chain H&M and other fashion firms over concerns they voiced about reports of forced labour in cotton production in Xinjiang. Nationalism is a real and potent force in China (though not universal), but this outburst does not appear spontaneous: it began when the Communist Youth League picked up on an eight-month-old statement, and is being egged on by state media.China has used its economic might to punish critics before – Norway’s salmon exports slumped after dissident Liu Xiaobo won the Nobel peace prize – and often with the desired results. But this time, it is acting far more overtly, and it is fighting on multiple fronts. Some clothing companies are already falling into line. Overall, the results are more complex. The sanctions have drastically lowered the odds of the European parliament approving the investment deal which China and the EU agreed in December, to US annoyance. Beijing may think the agreement less useful to China than it is to the EU (though many in Europe disagree). But the measures have done more to push Europe towards alignment with the US than anything Joe Biden could have offered, at a time when China is also alienating other players, notably Australia. Foreigners – who in many cases have offered more nuanced voices to counter outright China hawks – are already becoming wary of travelling there, following the detention and trial of two Canadians, essentially taken hostage following their country’s arrest (on a US extradition request) of a top Huawei executive. The sanctioning of scholars and thinktanks is likely to make them more so. Businesses, though still counting on the vast Chinese market, are very belatedly realising the risks attached to it. Those include not only the difficulty of reconciling their positions for consumers inside and outside China, but the challenges they face as the US seeks to pass legislation cracking down on goods made with forced labour, and the potential to be caught up in political skirmishes by virtue of nationality. For those beginning to have second thoughts, rethinking investments or disentangling supply chains will be the work of years or decades. But while we will continue to live in a globalised economy, there is likely to be more decoupling than people foresaw.The pandemic has solidified a growing Chinese confidence that the west is in decline, but has also shown how closely our fates are tied. There can be no solutions on the climate emergency without Beijing, and cooperation on other issues will be both possible and necessary – but extraordinarily difficult.Beijing’s delayed response to the UK sanctions suggests it did not anticipate them, perhaps unsurprising when the integrated review suggested we should somehow court trade and investment while also taking a tougher line. But the prime minister and foreign secretary have, rightly, made their support for sanctioned individuals and their concerns about gross human rights violations in Xinjiang clear. Academics and politicians, universities and other institutions, should follow their lead in backing targeted colleagues and bodies. China has made its position plain. So should democratic societies. More

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      in World Politics

      The Brexit Deal Presents Opportunities for a New Partnership

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      It was agreed almost at the last minute: The Trade and Cooperation Agreement (TCA) between the European Union and the United Kingdom, signed on December 30, 2020, prevented a no-deal Brexit just one day before the end of the transition period. Four and a half years after the referendum, relations between the EU and its former member state have thus been put on a new footing. It is a considerable achievement of the negotiators on both sides that such a complex agreement was reached despite the adverse conditions.

      Yet the end result, due to the British quest for sovereignty, is a (very) hard Brexit. Although the movement of goods will continue with zero tariffs and zero quantitative restrictions, many new non-tariff trade barriers will arise when compared to single market membership. Services, including finance, are largely excluded from the treaty, and with very few exceptions, the British are leaving European projects such as Erasmus. London has also excluded foreign and security policy altogether from the institutional cooperation with the EU.

      Brexit Trade Deal Brings Temporary, If Not Lasting, Relief

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      Despite the restricted market access, the EU can claim to have achieved the inclusion of comprehensive instruments to ensure fair competition, a level playing field. This includes the possibility of reintroducing tariffs and other trade restrictions should there be a significant divergence in labor or environmental standards in the future. Both sides have achieved their remarkably defensive goals: Boris Johnson gets his hard Brexit, and the EU was able to defend its single market and its standards.

      To Be Built Upon

      The original idea of an “ambitious and deep partnership” between the EU and the UK, however, has fallen by the wayside. In the first few weeks of 2021, the EU and the UK have already squabbled over vaccines and the status of the EU ambassador in London. Nevertheless, if used wisely, the agreement could represent the low point in British-European relations, from which a new partnership emerges after the difficult Brexit negotiations. However, there are five reasons the TCA could enable an improvement in relations.

      First, the trade deal does not mark the end of negotiations between London and Brussels. The agreement itself provides for a review after five years — that is, just under six months after the likely date of the next UK general election — in the course of which relations can also be deepened again. There is also a review clause for the Northern Ireland Protocol in 2024, transition periods for energy cooperation and fisheries, and further talks on data exchange and financial market services in 2021. Similar to Switzerland, there will be almost constant negotiations between the EU and the UK, albeit at a less politically dramatic level than recently. It is precisely this de-dramatization of relations that offers an opportunity to restore trust and improve cooperation.

      Second, the agreement is designed to be built upon. It establishes institutionalized cooperation between London and Brussels with an EU-UK Partnership Council and a number of specialized committees, for example on trade in goods, energy cooperation and British participation in EU programs. It is explicitly designed as an umbrella agreement into whose overall institutional framework further supplementary agreements can be inserted.

      Continued Interdependence

      Third, economic relations will remain important for both sides despite new trade restrictions. The geographical proximity, the close integration of supply and production chains in many economic sectors, and the mutual importance in trade will ensure continued economic interdependence. The EU remains by far the largest export market for the UK, which, in turn, as the second biggest economy in Europe, will also continue to be a major economic partner (and competitor) for the union. Added to this are the level playing field provisions of the TCA, with both partners committing to maintaining existing EU standards as far as they affect trade and investments, and incentives have been created to keep pace with new standards.

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      Fourth, the willingness of both sides to make compromises to avoid a no-deal Brexit paradoxically also clearly revealed the common interests despite the difficult divorce. For example, the TCA declares climate policy to be a shared interest, in which the UK will play a central role in 2021 by hosting the next climate summit together with Italy. Opportunities will also present themselves here for trilateral cooperation with the new US administration. The continued participation of the British in a small number of EU programs, such as the EU’s Copernicus Earth observation program and parts of the data exchange in home affairs and justice policy, is also stronger than expected.

      Fifth, with the combination of the Withdrawal Agreement and the TCA, Northern Ireland has become a shared responsibility of the UK and the EU. In order to keep the border open with the EU member state of the Republic of Ireland, the rules of the EU single market will continue to apply in Northern Ireland, whereas a trade border has been created in the Irish Sea between Northern Ireland and the rest of the UK. Any deviation from EU standards will now require the UK government to weigh not only whether this breaks the level playing field rules — thus allowing the EU to erect trade barriers — but also whether new intra-UK trade barriers with Northern Ireland are created.

      The EU equally has a responsibility in the interests of its member state Ireland to work with the British government to ensure that these complex arrangements work as smoothly as possible so as not to jeopardize peace in Northern Ireland.

      The trade treaty, which came into being under great pressure, both temporal and political, thus achieves one thing above all — the creation of a foundation on which British-European relationship can be reconstructed. Hard Brexit is now a fact, and the step from EU membership to a third country with a trade agreement has been completed. But negotiations are from over: As neighbors, the EU and the UK will continue to negotiate and renegotiate their relationship in the foreseeable future. It is now up to the political leadership on both sides to determine how this foundation is used. The EU and Germany should be open to building on this foundation with options for deepening cooperation in areas where there were gaps left behind by the TCA due to time or political circumstances.

      *[This article was originally published by the German Institute for International and Security Affairs (SWP), which advises the German government and Bundestag on all questions related to foreign and security policy.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      Forecasting the US-China Relationship

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      With a new US administration about to be inaugurated, it is prudent to look at the dynamics and variables shaping the future of one of the world’s most important relationships, that between Washington and Beijing. President Donald Trump came into office looking to take a more aggressive approach toward China. Trump’s reliance on figures like Peter Navarro and Mike Pompeo put American foreign policy on a forceful path. While Navarro, as Trump’s trade adviser, was focused on conducting trade wars, Secretary of State Pompeo was centered on military balancing. In the final year of the Trump presidency, relations with China were rapidly disintegrating, with little room left for cooperation.

      Joe Biden Will Face a Much-Changed and Skeptical World

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      If President Trump presided over a rapid deterioration of the US-China relationship, under President Joe Biden, the relationship is likely experience a stable deterioration. A stable deterioration is typified by two features: the continuance of deviating trajectories and the transactional nature of future cooperation. These two features interact to create a new status quo in the US-China relationship.

      Deviating Trajectories

      The era of engagement between Beijing and Washington was sustained through a shared interest in China’s economic and political integration in the international community. Today, China under President Xi Jinping has sought to both blunt international political institutions and create international financial bodies, thereby challenging US spuremacy and allowing for more Chinese dexterity. Xi’s international revisionism struggles against American national interests, creating a split between the two global giants.

      As President-elect Joe Biden is in the final stages of forming his national security team, he sends a strong, clear signal: This will not be a third Barack Obama term. Biden has declared that he plans on nominating Antony Blinken as secretary of state and Jake Sullivan as national security adviser. While both are veterans of the Obama administration, their tone and language signal a break from the Obama years. Both Blinken and Sullivan have acknowledged the need to develop a new strategy for China that goes beyond traditional engagement into managing competition.

      Embed from Getty Images

      At a Hudson Institute event last summer, Blinken stated, “We are in a competition with China — and there’s nothing wrong with competition, if it’s fair.” Continuing the theme of managing competition with China, a piece for Foreign Affairs co-authored by Sullivan with Kurt Campbell, the CEO of the Asia Group, suggests that “the signs that China is gearing up to contest America’s global leadership are unmistakable, and they are ubiquitous.”

      These statements follow a larger trend within the Democratic Party of getting tougher on China. For example, in the 2016 Democratic Party Platform, China is only mentioned seven times. In the 2020 document, mentions were up to 22 and included language like “push back against” and “stand up to.” A Biden administration is going to bring strategic clarity to US-China competition. Key advisers like Sullivan and Blinken are not pollyannish about the relationship and recognize the dramatic change that has been occurring for nearly a decade. As Biden leaves America’s engagement strategy behind, he will advance a more confident and more energetic foreign policy in defense of US interests and values.

      Meanwhile, on the Chinese side of the relationship, President Xi Jinping has pursued an aggressive posture that has shaken the regional order. His ambitious “national rejuvenation” strategy has created consternation. Xi has abandoned institutional integration and instead established his own multilateral financial institutions to blunt the influence of the World Bank and the International Monetary Fund. The People’s Liberation Army has also been more assertive in promoting Beijing’s territorial claims in the South China Sea. The complete political absorption of Hong Kong has alarmed neighboring Taiwan. Lastly, Xi’s extraordinary Belt and Road Initiative has expanded China’s political influence across the region.

      President Xi’s national rejuvenation campaign is in direct conflict with the interests of the United States and its allies. The US stands atop of an international order that promotes political and economic liberty. Through this alliance system, the United States promotes and secures a free and open Indo-Pacific. Under Xi’s helmsmanship, China wants to displace, if not replace, the US and develop a new, Sinocentric order. These trajectories will only continue to deviate until a new status quo can develop.

      Areas of Cooperation

      While the chasm in the US-China relationship widens and deepens, there are several areas where American and Chinese interests align. The United States and China must develop procedures for collaboration in these areas. If the relationship is only limited to competition, problems will arise that could otherwise be solved. Additionally, neither country gains from complete destruction of bilateral relations.

      The stabilization of the Korean Peninsula will require significant coordination between Washington and Beijing. Neither the Chinese nor the Americans want to see conventional or nuclear conflict on the peninsula. The two countries do not need to feign friendship to achieve stabilization, but it does require communication.

      Climate change is an issue that is not only an opportunity for cooperation but a problem that demands collaboration. As the world’s two largest economies, the US and China have a lot of influence in affecting the trajectory of global warming and climate change. Both countries stand only to gain from working together on this issue. Collaboration on the environment does not require a new proclamation of camaraderie between the two nations. Each government can recognize that cooperation on climate change is important without declaring a new era of relations. The business-like, transactional nature of US-China cooperation creates an environment where the two countries can work together without upsetting the aggressive factions within their respective countries.

      When accounting for these dynamics, the most likely scenario to play out under the Biden administration is stable deterioration. Stable deterioration recognizes the continued decline in bilateral relations brought about by the deviating trajectories of the two countries but understands that there is a limit to that decline. Both countries accept collaboration when interests align, but the nature of cooperation is transactional. Through managing competition and transactional cooperation, a new status quo in the US-China relationship will develop.

      This scenario assumes that neither President Biden nor President Xi perceives any value in the destruction of bilateral relations, but both recognize that competition is unavoidable. Both countries will continue to pursue their interests in the region, and neither will apologize for it. But both the United States and China will work together to develop a new relationship that allows them to compete without the total abandonment of the relationship.   

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      Brexit Trade Deal Brings Temporary, If Not Lasting, Relief

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      “What we call the beginning is often the end / And to make an end is to make a beginning.” So said Ursula van der Leyen, the president of the European Commission, announcing the completion of Brexit negotiations on Christmas Eve, quoting from T.S. Eliot’s “Little Gidding,” the final quartet of his last great poem. Van der Leyen’s words perfectly capture the defining trait of the EU-UK Trade and Cooperation Agreement (TCA): It is a platform for further ambition in cross-border partnership between the UK and EU rather than a ceiling on current ambitions.

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      Relief was the predominant emotion amongst the business community on both sides of the Channel before the New Year. Now that the dust has settled and attention has turned to the detail of the deal reached, there should be no illusions that the TCA ends EU-UK negotiations. We set out below what, in high-level terms, the TCA means for EU-UK trade in goods and services, and where there are gaps to fill and questions to still be answered over the coming months and years.

      What Does the TCA Mean for Trade in Goods?

      Firstly, the good news. Under the TCA, there are no tariffs or quotas on cross-border trade in qualifying goods between the United Kingdom and the European Union. In this regard, the TCA goes further than any EU trade agreement negotiated with a third country. This is a hugely positive outcome for businesses with UK and EU supply chains, particularly in sectors such as the automotive and agri-food industries, where tariffs imposed on so-called World Trade Organization terms under a no-deal Brexit would have been high.  

      However, it is crucial for those involved in cross-border trade to appreciate that only goods that are of EU or UK origin benefit from zero tariffs and zero quotas under the TCA. Rules of origin are a key component of every trade agreement and determine the “economic nationality” of products. Under the TCA, a product will attract a tariff if a certain percentage (beyond a “tolerance level”) of its pre-finished value or components are not of either UK or EU origin. The tolerance levels vary from product to product and require careful analysis. Therefore, businesses will need to understand the originating status of all the goods they trade between the UK and the EU to ensure they benefit from the zero tariffs and quotas under the agreement. Businesses will also need to ensure that their supply chains understand the new self-certification procedures to prove the origin of goods.

      Embed from Getty Images

      Beyond the qualified good news on tariffs and quotas, the deal is less helpful in that full regulatory approvals are required for goods being imported into the EU from the UK and vice versa. While in certain important sectors (automotive, chemicals and pharmaceuticals) the UK and the EU agreed on specific rules to reduce technical barriers to trade, the UK government did not achieve its longstanding negotiating objective of securing broad mutual recognition on product standards.

      Therefore, from January 1, 2021, all products exported from the EU to the UK will have to comply with the UK’s technical regulations and will be subject to any applicable regulatory compliance checks and controls. Similarly, all products imported from the UK to the EU will need to comply with EU technical regulations and will be subject to all applicable regulatory compliance obligations, checks and controls.

      There will also be specific changes to food and plant safety standards under the TCA. UK agri-food exporters will have to meet all EU sanitary and phytosanitary (SPS) import requirements with immediate effect. In this sector, UK exports will be subject to official controls carried out by member state authorities at border control posts. Similarly, EU agri-food exporters will have to meet all UK SPS import requirements, following certain phase-in periods the UK government has provided.

      Far from being a “bonfire of red tape” promised by certain advocates of Brexit before the 2016 referendum, the TCA introduces a “bonanza of new red tape” for businesses who wish to sell their products in both UK and EU markets. On January 8, UK Cabinet Office minister, Michael Gove, acknowledged that there would be “significant additional disruption” at UK borders over the coming weeks as a result of customs changes and regulatory checks.

      What Does the TCA Mean for Trade in Services?

      As has been widely noted by commentators, the deal on services is far thinner than on goods. More than 40% of the UK’s exports to the EU are services, and the sector accounts for around 80% of the UK’s economic activity. As an inevitable consequence of leaving the EU single market, UK service suppliers will lose their automatic right to offer services across the union. UK business will have to comply with a patchwork of complex host-country rules which vary from country to country and may need to establish themselves in the EU to continue operating. Many have already done so.

      The level of market access will also depend on the way the service is supplied. There are four “modes” for this. Services can be supplied on a cross-border basis from the home country of the supplier, for example over the internet; to the consumer in the country of the supplier, such as a tourist traveling abroad and purchasing services; via a locally-established enterprise owned by the foreign service supplier; or through the temporary presence in the territory of another country by a service supplier who is a natural person.

      All of this means that UK-established businesses will need to look at domestic regulations on service access in each EU member state in which they seek to operate, and vice versa for EU-established businesses seeking market access in the UK.

      A Basis for Ongoing Negotiations

      The TCA does not mark the end of EU-UK negotiations, and in some areas these discussions start immediately. For example, the agreement has provided an end to so-called passporting of financial services under which banks, insurers and other financial service firms authorized in the UK had automatic right to access EU markets and vice versa.

      The EU and the UK have committed to agree on a memorandum of understanding that will establish a framework of regulatory cooperation in financial services by March this year. With an end to passporting, it is likely that there will be more friction in cross-border financial services, but the extent of that friction depends on the outcome of future negotiations between EU and UK governments and regulators.

      To take another example of importance to the UK economy, the TCA does not provide for the automatic mutual recognition of professional qualifications. As of January 1, UK nationals, irrespective of where they acquired their qualifications, and EU citizens with qualifications acquired in the UK, will need to have their qualifications recognized in the relevant EU member state on the basis of that state’s domestic rules. However, the TCA leaves the door open for the EU and the UK to agree on additional arrangements in the future for the mutual recognition of qualifications, something that professional bodies will be pushing for immediately.

      Whilst there has been understandable relief from politicians, businesses and populations on both sides of the Channel suffering from Brexit fatigue that a deal — any deal — has been reached, the sheer extent to which the TCA envisages ongoing negotiations between the UK and the EU on issues both large and small over the months and years ahead has not been widely appreciated.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      Was It Wise for India to Reject the RCEP?

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      Last month, 15 Asia-Pacific countries formed the world’s largest trading bloc. The Regional Comprehensive Economic Partnership (RCEP) is China’s response to the US jettisoning the Trans-Pacific Partnership (TPP) under President Donald Trump. The deal excludes both India and the US. Though the RCEP is not as comprehensive as the TPP and does not cut tariffs to the same degree, its members comprise a third of the world’s population and of the global GDP. Given international attention on Xinjiang and Hong Kong, pulling off the RCEP is a major feather in China’s cap.

      Is India Missing the Boat?

      Many blame India for not joining the RCEP, suggesting it is missing out on access to a big market. Indian policymakers take a different view. They realize that countries like South Korea, Vietnam and China have terrific manufacturing capabilities. Opening markets to their goods could damage India’s industry. India could risk that blow if it could sell services to manufacturing powerhouses and earn a net benefit in the process. However, the RCEP focuses on goods, not services, giving India little incentive to sign on.

      In the past, free trade agreements with Asian economies have yielded limited benefits in terms of economic growth, increased investment or geopolitical heft. Instead, they have led to a surge of cheap imports that have decimated India’s inefficient domestic industry. India’s goal is to make its industry more efficient instead of deindustrializing prematurely.

      In Asia, a New Kid on the Trade Bloc

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      While many experts and much of the media predict doom and gloom in a post-RCEP world, both foreign direct investment (FDI) and foreign portfolio investment (FPI) are flooding into India. The country received a record-high FDI of $35.37 billion in the first five months of India’s fiscal year starting on April 1. The November FPI of $8.5 billion exceeds FPI inflows of the past two years combined. Clearly, investors envisage a different reality than the pessimists.

      The pessimistic outlook on India in the post-RCEP world comes from the fact that India missed the free-trade boat earlier and stagnated in the 1970s. Starting in 1969, India lurched to hard-line socialism under Indira Gandhi, the daughter of India’s first prime minister, Jawaharlal Nehru. She began by nationalizing 14 of the largest private banks in the country. After her reelection in 1971, Gandhi nationalized the coal, steel, copper, refining, cotton textiles and insurance industries.

      Apart from going on a nationalization spree, Gandhi gave unbridled power to bureaucrats, who strangled businesses with red tape. She championed public sector behemoths that turned out to be corrupt, inefficient and uncompetitive. Arguably, she did more to destroy private industry than 190 years of British rule.

      Silver Linings to Staying Out

      There are key differences between the 1970s and today. Indian conglomerates such as Reliance Industries and Adani Enterprises have their flaws, but they are not as inefficient as the public sector. In the services sector, India has managed to provide for American and even European markets. Doing business is much easier than in the 1970s because the political elite and the colonial bureaucracy are not as capricious, arbitrary and toxic to private enterprise. So, staying out of RCEP is unlikely to lead to a 1970s-style stagnation.

      There is another tiny little matter. Many economists are blinded by the dogma of free trade. As one of the authors has argued in the past, trade invariably produces winners and losers. Recent press reports reveal that Hershey used financial instruments called futures to squeeze cocoa farmers in West Africa. This is part of a centuries-long pattern. Trade has not necessarily proven to be good to countries exporting commodities from Ghana to Bolivia. On the other hand, countries such as South Korea, Vietnam and, above all, China, that have industrialized, developed technologies and moved up the value chain have done quite well out of trade.

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      The US itself became a major industrial power through a policy of protectionism. Alexander Hamilton took the view that economic independence was as essential as political independence. The US Congress’s first piece of legislation was the Tariff Act of July 4, 1789, which protected American infant industries from ruinous British competition. Many others, including East Asian tigers, emulated American industrial policy.

      There is a strong argument to be made that India’s economic failure came not from protectionism but socialism. By giving colonial bureaucrats the commanding heights of the economy, Nehru and his daughter cut India off at its knees. Economic liberalization in 1991 unleashed growth, but competition from East Asia prematurely deindustrialized India, robbing it of productivity growth. 

      Badly burnt, Indian policymakers are trying something different. Like South Korea in the past, India is favoring its own version of chaebols. The country is embarking on an indigenous form of protectionism, so the RCEP is not on the cards. Furthermore, thanks to fear of both China and Pakistan, India has thrown in its lot with the US. Just as the country once traded preferentially with the Soviet Union, India now aims to do so with its new ally. Already, India exports services and people to the US and gets revenue and capital in return.

      The RCEP, as it stands, has little upside for India. Besides, some of its members like China and Australia have increasingly fraught relations with each other. Key details of the RCEP are yet to be worked out, and reality might turn out to be very different from the hype. Doomsayers damning India might not quite be right. Staying out of the RCEP could well turn out to be wise.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More