Category Archives: Society

Asia, China, Japan, Politics, Society, United States

The embroilment over the Senkaku Islands between Japan and China…

SENKAKU ISLANDS

Intro: Japan and China, and America’s delicate balancing act

The row between Japan and China over the Senkaku islands is escalating. It has implications for almost everyone.

The Senkaku (or to China the Diaoyu) is an obscure archipelago comprising a tiny chain of five uninhabited islets and three barren rocks, located hundreds of miles from land. To an outside observer this might seem an unlikely prize given the awkwardness of the island’s geographical position, but with everything from oil revenues to regional clout at stake, the dispute in Asia is cause for grave concern.

The history concerning ownership of the islands is important to understand. Whilst Beijing maintains that the islands were claimed by China in the 1300s, Tokyo insists they were classed as an international no man’s land until Japan seized control and took them over in 1895. The political dispute has been rumbling on since the 1970s, but the pressure has steadily increased in recent years as a newly rich and empowered China has sought to flex its regional muscles by attempting to extend its influence in the US-dominated Pacific.

Last year, Japan stoked tensions with the announcement by the Governor of Tokyo of plans to use public money to purchase the islands from their private owner. That hardly gave notice of Japan’s intention to defuse ongoing tensions. Now, though, it is China that has upped the ante. Last week, Beijing declared a new ‘air defence identification zone’ covering a swathe of the South China Sea, including the disputed islands. The order from China requires all aircraft entering the sector to submit flight plans or face ‘defensive emergency measures’. This was always going to be contentious, if not provocative for Tokyo, as the area overlaps with one of Japan’s own air defence zones.

Indeed, Tokyo’s response was swift and uncompromising. The Prime Minister, Shinzo Abe, derided the plan as being ‘unenforceable’ and of having ‘no validity’. Two Japanese long-haul airlines which initially complied with Beijing’s demands were soon persuaded to withdraw their co-operation.

The reaction of the United States, however, has been imperative here. Because Washington has a post-war commitment to the defence of Japanese territory (which includes the Senkaku Islands), and given its recent foreign policy ‘pivot to Asia’, Beijing’s moves are increasingly being interpreted as a test of resolve for Barack Obama and of Mr Abe. America’s orientation towards Asia has stemmed from China’s rising power.

The U.S. has acted decisively. This week, it sent two unarmed B52s through the zone without notifying the Chinese authorities.

In an attempt to pacify tensions being inflamed still further, the Pentagon quickly claimed the flight was a long-planned training mission. For many analysts, though, the message is crystal clear – particularly given that it came days after the Defence Secretary, Chuck Hagel, denounced Beijing’s move as a ‘destabilising attempt to alter the status quo in the region’. Mr Hagel stated, too, that American military operations or its foreign policy on Asia would not change.

America’s intervention and move has been the right one, simply on the premise that China cannot be allowed to throw its weight around. If Beijing has a case then it must be sought through the correct legal channels, not implemented and administered unilaterally because of its desire to control.

Japan must also bear some responsibility in provoking tensions as flashpoints have become commonly frequent. In equal fashion it has shown itself too ready to indulge in rhetorical chest-beating with Mr Abe at times exhibiting disturbingly nationalist leanings. For the U.S., maintaining regional balance is paramount, and it should not been seen to be endorsing posturing from either side.

The diplomatic task facing the US in Asia is as difficult and perilous as any it is currently faced with. The Senkaku Islands may be just a few distant and remote rocks, but the chances are they could become the fulcrum upon which one of the greatest challenges of 21st century geopolitics lie. With both Beijing and Tokyo under growing domestic pressure for a show of strength abroad, and with the inevitable disruption that China’s economic rise will cause, America must be sure of its approach in maintaining regional balance.

At the heart of the dispute are eight uninhabited islands and rocks in the East China Sea. They have a total area of about 7 sq km and lie north-east of Taiwan, east of the Chinese mainland and south-west of Japan's southern-most prefecture, Okinawa. The islands are controlled by Japan.

At the heart of the dispute are eight uninhabited islands and rocks in the East China Sea. They have a total area of about 7 sq km and lie north-east of Taiwan, east of the Chinese mainland and south-west of Japan’s southern-most prefecture, Okinawa. The islands are controlled by Japan.

Related issue:

In response to an article published on The Economist, dated 20 October, 2012, entitled: ‘Rattling the supply chains’, MD wrote:

‘The simmering tensions between Beijing and Tokyo over the Senkaku islands has prompted questions over what the high-profile dispute could mean for proposed trade talks between Asia’s two largest economies and South Korea, as well as for regional trade overall.

An announcement in May of this year was made of plans to open formal trade negotiations between Seoul, Tokyo and Beijing. They agreed to begin the talks by the end of 2012 but this deadline has lately been called into question, with many analysts believing that two of the three parties might not even make it to the negotiating table.

The tensions between China and Japan stem from a territorial dispute over a series of tiny islands in the East China Sea, an area to which both countries have now laid claim. The islands – known as Senkaku in Japan and the Diaoyu in China – have symbolic significance, with their surrounding waters said to be rich in natural gas deposits.

The row, which has intensified rapidly in recent weeks, reached new heights in the past few days when Chinese finance officials pulled out of attending annual meetings with the IMF and World Bank that were being hosted by Tokyo. How the disagreement will be resolved remains unclear, as well as what the broader trade implications could be. The tri-lateral trade agreement with South Korea, for instance, might be under threat.

However, despite their disagreements, Chinese and Japanese officials have made clear that the proposed free trade agreement could have major benefits for both economies. Regardless of his insistence that his country will not cede sovereignty of the disputed territory, Japanese Prime Minister Yoshihiko Noda has openly acknowledged the value of eliminating trade barriers with Asia’s most powerful country. In the last decade alone, trade between the two nations has tripled, reaching more than $340 billion. A continuing row is not only likely to damage what has been a healthy relationship over the past ten years but could prove troublesome for the wider Asia region. Regional trade could be affected; ties between many countries could radically change because, invariably, any major trade relationship will always involve Japan and China.

Some of the predicted effects are beginning to surface. Japanese car exports to China have suffered since the dispute began and according to the latest JPMorgan Chase projections, could decrease by as much as 70 per cent in the final quarter of this year.’

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Banking, Britain, Business, Economic, Financial Markets, Government, Society

Banking practices of the Royal Bank of Scotland referred to City regulators…

DAMNING REPORTS

The latest accusations being levelled at the Royal Bank of Scotland are as incriminating as any in its recent chequered history.

Small and Medium Sized Enterprises (SMEs) have long complained that they cannot get the loans they need, despite protestations by the banks to the contrary. A newly released report from Sir Andrew Large, a former deputy governor of the Bank of England, on the bank’s small-business-lending, confirms that much of the criticism levied at the bank in recent times is justified and the taxpayer-rescued institution must explain why it has not been doing all it could to assist Britain’s economic recovery. In normal circumstances, such practices would be worrying enough for the newly installed chief executive of the bank, Ross McEwan.

But these are not normal circumstances; Mr McEwan is also faced with a more troubling contention. According to another published document from Lawrence Tomlinson – deemed a successful businessman and ‘entrepreneur in residence’ at the Department of Business – RBS may have sunk to even greater depths in its condescending and haughty treatment of Britain’s SMEs. Contemptuous, because not only has the bank been transferring perfectly legitimate and profitable companies into its high-risk Global Restructuring Group (GRG), but the West Register (the bank’s property division), has reportedly been acquiring their assets on the cheap after imposing deliberate and exorbitantly high fees on them. Many companies in this high-risk category, deemed perfectly viable, have been unable to pay these fees imposed and as such have found themselves having their assets taken over by the bank at heavily discounted prices.

Both these reports must be put into context. Prior to 2008, RBS had been reckless over a number of years in its dealings, over-extending loans to many small firms that did not justify such levels of confidence. As the bank now struggles to repair its balance sheet, bad debts are continually being written off and lending practices have been tightened.

The findings contained within these reports have left many feeling aghast, not least Mr Tomlinson himself. His inquiries and formal deliberations suggest something altogether more serious. Vince Cable, the Business Secretary, has acted quickly and sent the evidence to City regulators. For his part, Mr McEwan has called in the law firm Clifford Chance to conduct an internal review of the bank’s practices. Such deviant and acute methods would be inexcusable from any bank, but from one that is largely owned and controlled by the state makes matters even worse.

COMMENT & ANALYSIS

The claims made in Lawrence Tomlinson’s report into the way the Global Restructuring Group at the Royal Bank of Scotland has dealt with struggling enterprises are truly dire.

It rightly is a matter that needs to be examined by the regulators the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

Forcing struggling firms into insolvency when there may have been a chance of survival is bad enough. Ruthlessly seizing property and assets for its own gain is immoral and much worse.

Yet, should we be surprised? RBS had a hand in almost all the post-crisis scandals, including Libor fixing, interest rate swaps and the sale of payment protection insurance. The bank is also being sued by investors for failing fully to disclose the parlous state of its finances ahead of the £12bn rights issue to shareholders in 2008.

Tomlinson and the Department of Business also have some questions to answer. The in-situ ‘entrepreneur in residence’, for example, is a little mysterious. How was he chosen for this appointment, what is the scope of his role and how much did he tell civil servants and the Secretary of State, Vince Cable, about his own business affairs before he took on this rather curious role?

What also of the poor judgement by Tomlinson not to disclose that NatWest, RBS’s main operating offshoot, had granted him an overdraft and that in the last couple of years he was engaged in a major refinancing operation? Financial analysts will find it extraordinary that this was not considered a relevant factor either by Tomlinson or the Department for Business, and that it was not disclosed in the report. Making a strong case against the predatory behaviour of RBS is one thing, the dealings and judgments of Mr Tomlinson are clearly and significantly related.

The published accounts of Tomlinson’s business LNT Group are, even by the standards of many private empires, on the opaque side. They show a group that is indebted and making losses, with a host of intercompany relationships that are difficult to untangle.

The main product of Tomlinson’s dealings looks to be the design and building of new care homes, something the UK badly needs. But this is a notoriously difficult sector in which to operate – as was seen from the fate of Southern Cross – and management often has to choose between keeping costs under control and maintaining high standards of care.

Before giving Mr Tomlinson a government imprimatur one should trust that Vince Cable and his Department looked carefully at all his dealings before approving the appointment.

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Arts, Government, History, Politics, Society, United States

John F. Kennedy and his legacy 50-years on…

PRESIDENT JOHN F. KENNEDY

The reputations of presidents’ are based on a number of factors, but luck plays a significant part – not just in terms of what happens while they are in office, but also the luck of who writes their biographies once they have gone. Wars, for example, give presidents a boost, whilst, conversely, any financial crises will have the reverse effect.

The pre-eminent political biographer, Robert Caro, delivered a monumental multivolume labour of love that has, in many respects, redeemed the reputation of Lyndon B. Johnson. Some may deduce that LBJ emerges as the luckiest president of the past century.

Robert Caro’s LBJ depicts and portrays an ultimate fixer, a politician who knew better than anyone how to get his way in the challenging and demanding burrow and nest of Washington. Because of how Caro has written, it’s Johnson’s guile that people look to when they ask how President Obama could do better in his dealings with Congress.

But, as the established stock of LBJ has risen, John F. Kennedy has become the man who merely talked about the transformative legislative programme that Johnson himself turned into reality. In the long shadow cast by LBJ, Kennedy is perceived as a glamorous but slight figure, a crowd-pleasing president who was brave, attractive and ambitious, yet ultimately ineffectual. On the 50th anniversary of Kennedy’s assassination, many of his admirers are trying to reverse this image. For example, Caro focuses on foreign policy, which was Kennedy’s strength and Johnson’s weakness. LBJ’s achievements were undoubtedly domestic; Caro, as yet, has failed to explain the terrible mess Johnson made of Vietnam. Caro’s ‘unfinished’ biography will surely have to tell in some future volume the tragic coda of this calamitous episode.

The presidency of John F. Kennedy ended just as he was finding ways to move beyond the stagnant and terrifying philosophical logic of cold war confrontation that had taken the world to the brink of catastrophe in the Cuban missile crisis. In 1963, it looked as though Kennedy had stumbled on the path to a more peaceful future. Johnson was the man who departed from it.

During the last year of his life Kennedy’s quest for safer relations with the Russians is evidenced from the speeches Kennedy gave in the summer of 1963 about war, peace and the means of moving from one to the other. The Limited Test Ban Treaty (LTBT), a nuclear arms control agreement that Kennedy signed into law in October 1963, was probably his proudest achievement of his presidency up to that point.

Some commentators may suggest this was a sure indicator of things to come, the first step towards a stable and secure coexistence between the superpowers. Others, like economists, may treat Kennedy as a moral visionary, but economists are not historians. A man, they say, who possessed the gifts of oratory and character that was able to change to change the course of history at this perilous juncture is based on two questionable assumptions.

The first is that treaties matters. The LTBT was only what it said it was: limited. It specifically prohibited further nuclear testing in space or underwater but clearly permitted it underground. The treaty had been watered down from something more comprehensive, first by Russian qualms about international oversight and then by the misgivings of the US joint chiefs about the government of Nikita Khrushchev. Charles de Gaulle refused to sign it.

Arguing, though, that it was a landmark moment (as opposed to changing the course of history) is probably better placed. The treaty certainly signalled that the US and the Soviets could agree on something substantial. It also showed that a US president could get such an agreement passed the Senate, which had a tendency of shooting down plans for peace. We should look no further than from all of that which followed-on from the failure of Woodrow Wilson to get the Senate to ratify the League of Nations in 1919, a deficiency that continually haunted Kennedy. Kennedy did, however, secure ratification of the LTBT by an impressive margin of 80 votes to 19. This subsequently opened the door to the creation and ratification of the Nuclear Non-Proliferation Treaty (NPT), which was approved by the Senate in 1969 and has been vital in limiting the spread of nuclear weapons around the world.

The contention that speeches actually matter is highly dubious. In his book, ‘To Move the World: JFK’s Quest for Peace’, by Jeffrey Sachs, the author believes that Kennedy’s oratory in 1963 – above all the ‘peace speech’ he delivered in Washington, DC, on 10 June that year – was crucial in persuading Russia’s leaders, US politicians and people all over the world that the time was right for a sea change in international affairs. Whilst Sachs talks up Kennedy’s logic with beauty and how it had the power to move, he provides no evidence that such rhetoric made the vital difference. Are we to conclude that just because Kennedy said it was time for peace the Soviets quickly signed a peace treaty? Sachs does infer that such a treaty came into being because they had been persuaded by what Kennedy had said.

The near calamity of the Cuban missile crisis is recognised as persuading both sides to look for alternatives. However, we should not take for granted that this took the form of turning away from war to peace. It wasn’t so much the risk of Armageddon, but the temporary loss of control that terrorised both sides. The LTBT and NPT were ways of reasserting control as the two superpowers had struggled for something to cling onto as they moved wearily about in the dark without direction. The treaties may have limited the ability of others to get nuclear weapons but it didn’t stop the superpowers from ramping up their own arsenals or persistently pursuing proxy wars around the globe.

Kennedy’s decision to focus on foreign affairs in 1963 was not without cost. It came at the expense of doing other, equally urgent things. The last 100 days in office encompassed both sides of Kennedy; the statesman and chancer on the one hand, the moralist and opportunist on the other.

Other commentators like Thurston Clarke in his book, ‘An Intimate Portrait of a Great President’, also celebrate Kennedy’s great achievement in getting the LTBT passed the Senate but suggests it was done by calling in political favours that could not then get cashed in elsewhere. Forcing the treaty through, for example, came at the expense of a concerted push on civil rights legislation. Clarke says that was a choice between ‘ethics and history’ with Kennedy, a vain, and when he needed to be, a cold-hearted man, choosing history. He was known to weigh himself after every swim, terrified that he was turning into a jowly, middle-aged man. Kennedy’s charm could be turned on and off like a light switch.

Nevertheless, like most commentators Clarke is convinced that this was a great man cut down at the moment of his greatest potential. He insists that Kennedy would have enacted his own comprehensive civil rights legislation in his second term, and argues that Kennedy had seen the folly of his Vietnam escapade and was determined to get out. He was just waiting for the right moment, which would come with his re-election.

The plausibility of this must be questioned. Presidents invariably think they will achieve in their second term what they failed to do in their first but it rarely happens like that. Kennedy’s mantra in 1963 was talked up as being what he was going to do ‘after 1964’ but he was also a well-established ditherer who made sure there was always a get-out clause. There is no evidence, for instance, that he knew how to get round the openly racist Southern bloc in the Senate. In 1963, he sounded more like someone who had parked comprehensive civil rights legislation than a politician who knew how to accomplish it. The day after his peace speech, he gave a powerful talk on civil rights – but he also told black civil rights leaders that they should learn to be more like the Jews and focus on education as the path to improvement.

Clarke cites as evidence of how much Kennedy meant to people and how much his passing mattered. In an unsentimental age, when it was unusual to shed tears in public (and unthinkable for many men), so many cried when they heard of the president’s assassination. According to a Gallup survey 53 per cent of Americans had wept in the days following his death. They shed tears because ordinary people felt a connection and shared a feeling that his death represented the loss of some unspoken promise.

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