East / Southeast Asia's Demographic Bifurcation

There's are always interesting demographic discussions about the "West and the Rest," but there are also interesting demographic variations within regions.Take the Asia-Pacific: While Japan is emblematic of the problems with a shrinking population, it will soon be joined in that situation by a number of East Asian neighbors absent large rises in fertility or large-scale inward migration:

"Japan was largely the only country that was aging and shrinking in terms of its labor force and population in the previous decade. But in the coming decade, several Asian countries – including China, South Korea, Hong Kong [...] will see their labor forces shrink. This will have important implications for GDP [gross domestic product] growth, consumer spending and asset prices, judging from Japan's experience..."

Japan is home to the fastest aging population in the world, with almost a quarter of its population over the age of 65. The country has struggled with sluggish growth stemming from a shrinking workforce, which has put pressure on the government to boost productivity levels.

OTOH, you have the more demographically promising Southeast Asian countries that have not yet reached a similar stage in the demographic transition as their wealthier northern neighbors:

The U.N. sees the working-age population in Indonesia and the Philippines peaking in 2058 and 2085 respectively, later than previously anticipated. At the same time it brought forward forecasts for other Asian countries including China, where the working-age population is expected to peak in 2015, and its total population, currently around 1.3 billion people, is seen decreasing after 2030.

BofAML's Chua says demographics are useful indicators of real GDP growth, noting a strong correlation between changes in working-age population and growth in the real economy over the past decade (2002-2012). 

To be sure, demographics alone do not drive economic growth. However, Japan's example does illustrate the pitfalls to having too few working-age people going forward. Previously marginalized as development laggards, more are taking notice of Indonesia and the Philippines as investment opportunities partly for demographic reasons. 

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Rousseff+Lula Double Act Unloads on US Net Spying

Cybersecurity is not an end unto itself; it is instead an obligation that our governments and societies must take on willingly, to ensure that innovation continues to flourish, drive markets, and improve lives. - Barack Obama [really]

It's been a busy time for followers of Internet governance as Brazil's president and her immediate predecessor unloaded both barrels at the United States' extreme abuse of its dominant position in the World Wide Web's infrastructure. Dilma Rousseff captured global attention not only by snubbing the White House's invitation for a state visit, but more recently by crucifying the double-talking American louse at the United Nations General Assembly.

[I] Here is the key part of her speech where she calls for the much-needed multilateral governance of the Internet to avoid rehashes of Americans spying on world leaders as well as you and me:

The problem, however, goes beyond a bilateral relationship. It affects the international community itself and demands a response from it. Information and telecommunication technologies cannot be the new battlefield between States. [The time] is ripe to create the conditions to prevent cyberspace from being used as a weapon of war, through espionage, sabotage, and attacks against systems and infrastructure of other countries.

The United Nations must play a leading role in the effort to regulate the conduct of States with regard to these technologies. For this reason, Brazil will present proposals for the establishment of a civilian multilateral framework for the governance and use of the Internet and to ensure the effective protection of data that travels through the web.

We need to create multilateral mechanisms for the worldwide network that are capable of ensuring principles such as:

1 – Freedom of expression, privacy of the individual and respect for human rights.
2 – Open, multilateral and democratic governance, carried out with transparency by stimulating collective creativity and the participation of society, Governments and the private sector.
3 – Universality that ensures the social and human development and the construction of inclusive and non-discriminatory societies.
4 – Cultural diversity, without the imposition of beliefs, customs and values.
5 – Neutrality of the network, guided only by technical and ethical criteria, rendering it inadmissible to restrict it for political, commercial, religious or any other purposes.

[II] Less noticed is a recent interview with Hindu News of former Brazilian President Lula. (Alike his country's soccer stars, he seemingly goes by one name.) For better or worse, he and his handpicked successor will forever be entwined alike Putin and Medvedev or Chavez and Maduro. While leaving Rousseff to steal the limelight at the UN, he nevertheless two put in his two cents' worth, as the Yanquis would say:

The U.S. president should apologise to the world for thinking that it can control global communications and ignore the sovereignty of other countries. The U.S. can’t just capture the activities of India, Brazil, China and several other countries. This is very serious. We need to force the United Nations to make a decision on this. Where is the security in the world today, with the U.S. intelligence agency snooping on everything? Where is the confidence in mobile communication or emails? When the NSA revelations came out, the U.S. vice-president (Joe Biden) called Brazil to apologise. It’s not the vice-president who has to apologise, it’s the U.S. president who should apologise to us. What would happen if the U.S. was target of spying? Now, they can steal any information and industrial secrets; they have access to information of our scientists. It means the end of freedom within the territory of a nation state [...]

The independence and economic growth of countries such as India and Brazil seem to bother the U.S, which is now committing a crime against democracy. The argument that they are doing this to take care of the security of other countries is absurd. Nobody asked them to do so. Nobody hired the American espionage system. Democracy is less democratic if one nation has the power to intervene in others. 

Be a man, Barack. Own up to your nation's cowardly actions and welcome those to make Internet governance better reflect its changing user base.

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Make a Killing? US FTAs and Big Tobacco

There is a debate surrounding the pending Trans-Pacific Partnership expansion about whether participants' policies aimed at curbing tobacco use will be dismantled in the name of free trade. Large American tobacco companies--collectively known as "Big Tobacco"--have certainly not shied away from using texts of trade liberalization measures in faulting curbs to their unfettered access to emerging markets.  Outgoing New York Mayor Michael Bloomberg has been especially vocal about what he believes is a major assault on global health led by the United States.

As per current TPP drafts, some argue that negotiating LDCs will be made to relent on the sorts of public policies that have proven effective Stateside in reducing smoking:

The proposal put forward by the US Trade Representative (USTR) last week in Brunei would reduce prices for US tobacco in low- and middle-income countries and make it more difficult for these countries to enforce anti-tobacco policies like package warnings and advertising and marketing restrictions.   This proposal would impact the nine TPP countries – Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the United States -- six of these fall into the World Health Organization’s Western Pacific Region, which had the highest smoking rate among men in 2009. 

To put the implications of this proposal into perspective, consider these two points: Tobacco use caused 100 million deaths in the 20^th century.  If current trends persist, it is projected to cause 1 billion deaths in the 21^st century.  More than 80% of those future tobacco-related deaths will occur in low- and middle-income countries (LMICs). Tobacco use in the United States is steadily declining, due largely to widespread anti-tobacco campaigns and stringent anti-smoking policies – the same kinds of policies that the TPP will make difficult to enforce in developing countries.

So, why is the US effectively hindering the export of its good anti-tobacco policies to the LMICs that need them most?  A few key issues have risen to the surface during this debate. A “carve-out” for tobacco – where tobacco would simply be excluded from the terms of the TPP agreement – was proposed by Malaysia and makes sense. But the USTR worries that a carve-out would set a precedent that could be used to block a variety of other US exports on health grounds.

In other words, how exceptional is tobacco based on health grounds? The fear is that all sorts of products would be excluded by other countries and dilute the FTA. Left unresolved, the tobacco issue may even spoil TPP negotiations altogether:

The White House has tried to finesse the issue, recently proposing that the TPP agreement acknowledge tobacco as a health concern but otherwise treat it no differently from other products. That compromise has satisfied no one. Health advocates are furious that the White House dropped its previous proposal for a stronger tobacco control exception in the TPP agreement. The business community opposes any special treatment for tobacco. With that controversy spilling into the press and threatening the conclusion of the TPP talks—the Obama administration's signature international economic initiative [...]

As the tobacco industry's tactics on trade shifted, the controversy reignited. Tobacco companies began using trade and investment agreements to file legal challenges to block new cigarette labeling and advertising restrictions. Australia is fighting four different trade and investment cases against its cigarette packaging law. Similar cases have been filed against Norway and Uruguay and threatened against Togo. Investment disputes are expensive and the outcomes can be unpredictable. Many developing countries do not have the expertise or resources to fight. Even New Zealand and Canada backed away from planned tobacco regulations in the face of litigation threats.

 Thomas Bollyky of the CFR's suggestions in making a limited exception seem to make sense:

• This exception must explicitly encompass the full range of tobacco control measures addressed under the Framework Convention on Tobacco Control and permitted under U.S. laws.
• This exception should be limited to nondiscriminatory tobacco control measures. An exemption from legal challenge cannot serve as a pretext for TPP countries to favor domestic cigarette producers. This condition is consistent with overall U.S. trade policy and the terms of the 2001 U.S. executive order on tobacco and trade.
• This exception must not include the cross-reference that exists in most U.S. trade agreements to the health exceptions in World Trade Organization agreements. Such references might inappropriately interfere with tobacco litigation already filed under those other agreements against Australia and other TPP countries.

My take is that fair warning is appropriate concerning the possible effects of cigarette smoking and ought not to be sacrificed to a distortion of the term "liberalization." Consumer interests are not well-served by hiding the facts about the health consequences of cigarette smoking and arguing otherwise is a sham. Smoke if you must, but do so while knowing the possible consequences.

Add this to the already lengthy list of obstacles to TPP. 

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Singapore Needlessly Discriminates Against Expats

The cute (and very rare) Singapore baby

Here's another interesting feature about the politics of migration being waged right here in Southeast Asia. One of the reasons why the People's Action Party of (PAP) Singapore lost 40% of the popular vote in the 2011 elections is frustration over foreigners purportedly taking away plum jobs, scarce housing and using public services, leaving its citizens to seethe. It even seems its losses are widening. In response, the PAP has ushered in curbs on hiring foreigners--a "Singapore for Singaporeans" sort of policy. With anger not yet subsiding, the government is now seeking to advertise openings first to locals as a policy response:

Singapore will widen foreign-worker curbs to professional jobs as the government clamps down on companies that hire overseas talent at the expense of citizens, stepping up efforts to counter a backlash against immigration.

The Southeast Asian nation said yesterday it will set up a job bank where companies are required to advertise positions to Singaporeans before applying for so-called employment passes for foreign professionals. The unprecedented policy will target jobs that currently pay at least S$3,000 ($2,400) a month, an amount that will be raised to S$3,300 by January. 

In case you're curious, the unemployment rate in Singapore is 2.1%--3% for Singaporeans. While it is minuscule by Western standards, Singaporeans are apparently not keen to compare themselves with the old world:

The job bank will be set up by mid-2014, the Ministry of Manpower said in a statement yesterday. Companies with 25 or fewer employees will be exempt from the new rules, as well as jobs that pay a fixed monthly salary of S$12,000 or more, it said. The cap was set as that would include 95 percent of the local workforce, it said.

“This is a step up from the government’s efforts to tighten the quality and the quantity of the foreign worker inflows,” said Chua Hak Bin, an economist at Bank of America Corp. in Singapore. “We’re moving to another phase now where they’re looking to ensure that opportunities for the middle-income Singaporeans are maintained.”

The nation’s unemployment rate rose to 2.1 percent in the second quarter, with the resident jobless rate at about 3 percent. That “translates to 50,000, 60,000 Singaporeans without jobs,” Tan, the minister, said. “What the regime allows is that there may be a better matching of demand and supply” between companies and job-seekers, he said. 

At any rate, I am convinced that there is nothing structurally amiss with immigration to Singapore for the very simple reason that its total fertility rate is well below the replacement rate of 2.1 children per woman. It has not reached that level since 1976. Barring migrants wholesale would result in depopulation in quite short order since its current total fertility rate is 1.2:

My take is that there is currently slack in Singapore's mostly white-collar labor market due to a number of factors such as reduced hiring in service sectors alike banking post-global financial crisis. These will soon even out, though, easing complaints from locals that foreigners are "stealing their jobs" and so forth. Natalist policies haven't exactly born fruit.  Make no mistake: Singapore's real problem in the medium- to long-term is not having too many people, but having too few of them. (Cue Barbra.)

PS: Besides, isn't Singapore supposed to be the world's most adaptive nation?

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Reasons to Doubt Trans-Pacific Partnership Expansion

There is an excellent compilation at the Financial Times as to why few expect a "high-quality" agreement to emerge from ongoing TPP negotiations. That is, one with few loopholes and opt-outs for different participants. Given the highly diverse interests of the twelve nations looking to expand this agreement--they range widely in levels of development, size and so on--it is thus unlikely that an agreement that pleases all will be concluded in the next few months. Or, an agreement may be struck, but one which features a bevy of loopholes and opt-outs catering to the special interests of each nation.

At any rate, here are four reasons to be pessimistic: 

1. The TPP seeks much stricter protection of intellectual property than many want. Poorer countries fear that such provisions will make it more difficult for them to use cheaper generic drugs, potentially denying their populations access to life-saving medicines. More generally, strict enforcement of IP is judged to favour advanced countries at the expense of poor ones, which have traditionally absorbed technological advances through copying. To enforce IP rights in too draconian a manner is, say opponents, a victory for protectionism, not for free trade.
2. The agreement seeks to regulate the role of state-owned enterprises, so that they do not enjoy unfair access to licences, contracts or state finance. This is seen as an assault on the sort of state capitalism in countries such as China. It is difficult, however, to see how meaningful rules could be imposed on Vietnam, a TPP member, where SOEs are used by senior Communist party officials as a cash cow for favoured projects and sometimes as personal piggy banks. Even Japan, where the Post Office is in state hands, and the US, which has Fannie Mae and Freddie Mac, may fall foul of some provisions. Temasek, the Singaporean sovereign wealth fund, is believed to be concerned that new rules could affect the performance of some of the companies in which it has invested. Malaysia’s bumiputra policies, which favour ethnic Malays in the awarding of state contracts, may also run counter to the TPP.
3. The TPP calls for a controversial investor-state dispute settlement that would, theoretically, allow companies to sue governments if they believed they were being treated unfairly. Australia has argued that this would weaken sovereign power in favour of multinationals. Anti-fracking activists say such a mechanism would allow oil companies to sue local authorities for imposing strict environmental guidelines. Canada has raised concerns that cigarette companies could use the provisions to take governments to court over anti-tobacco regulations. In Malaysia, Anwar Ibrahim, the opposition leader, has characterised the TPP as an attempt by the US “to impose its brand of economic model” on unwilling countries. 
4. As in every trade negotiation, each country is seeking exceptions for sensitive industries. Japan was allowed to join talks on the basis that it would drop its age-old agricultural protectionism. Yet when Japanese negotiators turned up to talks in Brunei in July, they sought exceptions for “five sacred” agricultural commodities: rice, wheat, beef, dairy products and sugar. Japan is by no means alone. Canada (and the US) want protection for their dairy industry in the face of strong potential competition from New Zealand. Vietnam wants an exception for its textile industry so that it can enjoy tariff-free access to the US while continuing to use yarn made in non-TPP countries, especially China. The sugar lobby is particularly vocal in the US. “There are a lot of areas where the US wants everyone else to change, but doesn’t want to change much itself,” says Jeff Schott at the Peterson Institute.

I've already mentioned agriculture before which I believe will ultimately prove to be the largest stumbling block. However, something unmentioned is the eccentric but enduring American complaint about the US auto industry's lack of access to the Japanese market despite producing unsuitable cars for use there [1, 2].

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Venezuela Nationalizes Toilet Paper Factory

"I am the Great MADURO", etc., etc.

[NOTE: For those unfamiliar with the "Beavis and Butt-head" reference, see here and here.] If this is an example of socialists taking over the "commanding heights" of the economy, I am at a complete loss for words. To me at least, toilet paper manufacturing as a strategic sector bog-gles the mind, but it may make sense in Venezuela. It is no big secret that the Chavistas have nationalized broad swathes of the Venezuelan economy. Supply problems? Central planning will solve them, free market be damned. From Economics 101, I was taught that price controls and import controls create rather than alleviate goods shortages. Apparently this stupid bourgeois logic holds no water in modern-day Venezuela. Silly me. Instead of relenting on government controls to remedy the supply situation for various goods including toilet paper, the ultimate solution apparently involves nationalizing these enterprises lock, stock and barrel. You got it--TP users of Venezuela, unite!

On Saturday, Vice President Jorge Arreaza announced the "temporary occupation" of the Paper Manufacturing Company's plant in the state of Aragua. The aim, he explained, is to review the "production, marketing and distribution (of) toilet paper [...] The People's Defense from the Economy will not allow hoarding or failures in the production and distribution of essential commodities," the vice president said. 

By the "People's Defense," Arreaza was referring to a government agency created on September 13 by President Nicolas Maduro to "defeat the economic war that has been declared in the country," according to a report from state-run ATV. This group is charged with looking at inefficiencies across various industries in the nation, including foods and other products, and taking action presumably in the South American nation's best interests.

For what it's worth, Venezuela's leaders see a conspiracy to hoard toilet paper--presumably to, ah, dump them when prices have risen sufficiently:

But the government has said private companies aren't doing their part, accusing them of hoarding their products in hopes of selling it later at a higher price. They've also suggested the problem is tied to a broader conspiracy. "There is no deficiency in production," Commerce Minister Alejandro Fleming said in May according to ATV, "but an excessive demand generating purchases by a nervous population because of a media campaign."

Be afraid. Be very, very afraid. To paraphrase Marx, the TP expropriators have been expropriated (or something like that).

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US Now Sends More Immigrants to Mexico

What would Cheech and Chong do about the United States now sending more migrants to Mexico than Mexico sends to the United States? That comedy act is stuck in a time warp where the supposedly backward Mexico always sends its unwashed masses to the United States in search of employment. So are today's uniquely Amerocentric debates about whether to give amnesty to illegal immigrants. Wake up to today's North American reality, boys and girls: On balance, the United States has sent more people to Mexico than vice-versa over the most recently recorded five-year period. The graphic above is from the New York Times, which also offers the thought-provoking companion article about how the real land of opportunity is Mexico:

Rising wages in China and higher transportation costs have made Mexican manufacturing highly competitive again, with some projections suggesting it is already cheaper than China for many industries serving the American market. Europe is sputtering, pushing workers away. And while Mexico’s economy is far from trouble free, its growth easily outpaced the giants of the hemisphere — the United States, Canada and Brazil — in 2011 and 2012, according to International Monetary Fund data, making the country more attractive to fortune seekers worldwide [...]

The shift with Mexico’s northern neighbor is especially stark. Americans now make up more than three-quarters of Mexico’s roughly one million documented foreigners, up from around two-thirds in 2000 [my emphasis], leading to a historic milestone: more Americans have been added to the population of Mexico over the past few years than Mexicans have been added to the population of the United States, according to government data in both nations.

In previous posts I've covered how Mexico is increasingly becoming the North American economic dynamo contrary to outdated beliefs that it is merely an entry route for drugs to the USA or a perennial source of migrants. The implications are meaningful and interesting. First, the emergence of Mexico as a manufacturing hub in the Americas challenges China's role as factory to the world given the latter's geographic disadvantage. Second, the US Census folks do not--and probably cannot--account for such migratory shifts as nearby countries become more progressive than the United States. Hence, expectations that declines in US birth rates will be more than compensated for by migration to the US are probably overstated. Detroitification or depopulation of the US is a very real threat if so. Third, it does bother me that the rest of the world so easily imbibes American prejudices about Mexicans when the latter hold the better cards in today's global political economy.

Make no mistake: the real Americans us folks from the developing world are better off emulating are probably those south of the border with their young, dynamic and manufacturing-savvy economy. Their football team may be doing poorly at the moment, but hey, I would readily forego the World Cup finals for a place at the top of the World Economy league table. Go south, young Yank, go south--but learn Spanish before you do.

Things change, my dear. At this rate I may be laughing my head off hearing Mexican policymakers debating what to do with all those Yanqui "illegals" in a few years' time.

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