COVID-19 International Developments: Daily Scan, June 03, 2020
Prerna Gandhi, Associate Fellow, VIF
Economic
U.S. Weighs Tariffs against Nations Seeking to Tax Internet Firms

The Trump administration is taking the initial step to prepare tariffs against a range of trading partners unless they back off proposals to impose taxes that would fall heavily on the major American internet companies. The Office of the U.S. Trade Representative said on June 02 that it was beginning investigations into tax measures known as digital-services taxes that are being proposed or implemented in many countries as a way to tax commerce on the internet. The USTR said it was investigating a European Union-level proposal, as well as national proposals from Austria, Brazil, the Czech Republic, India, Indonesia, Italy, Spain, Turkey and the U.K. June 02’s announcement is a replay of an aggressive tactic pursued against France last year in which the U.S. ultimately threatened that country with tariffs on $2.4 billion of goods. Though the French tax was ostensibly designed to target digital services in general, French officials often referred to the measure as the “GAFA tax” which stands for Alphabet Inc.’s Google, Apple Inc., Facebook Inc. and Amazon.com Inc. —the American companies on whom such a tax would heavily fall.After the U.S. formalized the steps to impose tariffs of up to 100% on imports like French wine, cheese, handbags and porcelain, France agreed to postpone the new tax until at least the end of 2020.

Ericsson Emerges as 5G Leader after U.S. Bruises Huawei

The Swedish company is emerging as the steadiest player in the $80-billion-a-year cellular-equipment industry, telecommunications executives and analysts say, because it makes a technically advanced product that one rival, Nokia Corp., was late to develop and that Huawei may not be able to make in the future because of recent U.S. measures. While its competitors try to recover, Ericsson is moving forward after a costly years long restructuring has returned it to profitability. The question for Ericsson is figuring out which technologies of tomorrow to bet on. Ericsson is testing equipment in several fields that 5G’s superfast wireless speeds promise to unlock, such as driverless cars and remote-control mining machinery. The U.S. has also sought to boost Huawei’s rivals by providing loans to wireless carriers in developing countries so they can buy equipment from non-Chinese suppliers, among other moves. U.S. Attorney General William Barr in February suggested that the U.S. government take a financial stake in Ericsson or Nokia, or both, to “make it a more formidable competitor and eliminate concerns over its staying power.” The White House quickly backed away from the idea; a senior Trump administration official says it favours a free-market approach. Ericsson provides equipment for all three major U.S. carriers: AT&T Inc., Verizon Communications Inc. and T-Mobile US Inc.

Poland hoping to benefit from difficulties caused by the chaotic nature of India’s lockdown

Over the past three decades as globalisation has taken hold, India has become a major power in outsourcing. But the chaotic nature of the country’s coronavirus lockdown, announced at four hours’ notice in March, left many outsourcers scrambling to avoid outages as they switched to remote working. Poland — Europe's biggest outsourcing and offshoring hub, and one of the world’s top five — is one of the rival centres hoping to profit. Poland’s industry cannot compete with rivals such as India and the Philippines on labour costs. Instead it has sought to lure western multinationals with a combination of its greater proximity to western markets, the legal and regulatory frameworks that come with EU membership, a well-educated, multilingual workforce and good infrastructure. Jacek Levernes, co-founder of ABSL, the Polish business services trade body, said the industry was able to shift 95 per cent of workers to remote working within a week of the lockdown, whereas in some Asian hubs, it took several weeks to get up to 60 to 80 per cent of staff working from home, he claimed. However, India’s IT companies dispute the idea that they will lose business to Poland and argue that, barring some early confusion, they oversaw a Herculean mobilisation to keep business running.

WTO out of gas: Global powers vie for control over stuck vehicle

Amid fierce trade friction, the formal selection process faces a rocky road. World powers -- led by the U.S. and China -- are trying to ensure that the next WTO head has their benefactor's interest at heart, even if they do not field their own candidates. The two are already locked in a tug of war over who should be the next chief. Tim Groser, New Zealand's 70-year-old former trade minister and current ambassador to the U.S. has been pushed by the administration of President Donald Trump. Groser, a vocal critic of China's protective measure, will likely toe the American line as regards WTO policy.But Europe fears undue U.S. influence -- especially regarding the reform of the organization's appellate body -- and will oppose any WTO leadership that mirrors U.S. policy. Already, many European nations are mounting a drive to put up one of their own, Phil Hogan, 59, an Irish politician currently serving as EU trade commissioner. Meanwhile, China is not sitting idly by. The country still touts itself as "a developing country," and as such is trying to use this self-designation to champion the rights of developing countries in Africa and Asia. For example, Kenya, home to WTO chair front-runner Mohamed, saw foreign direct investment in her country more than double in two years to $1.6 billion in 2018.

Australia pins hopes on elusive gas panacea for climate, economy woes

Australia is working on plans for a gas-driven recovery from COVID-19 that will help the country adapt to a low-carbon future, with the conservative government tiptoeing away from its vocal support for coal. Prime Minister Scott Morrison, who once brandished a chunk of the divisive fossil fuel in parliament, has hailed cleaner burning gas as the key to cutting emissions in the transition to renewable energy. A plunge in prices for the fuel is also being touted as an opportunity to boost manufacturing, while a draft report to government on rebuilding from coronavirus put gas at the centre of its recovery plan and backed state support for the sector. The change of focus follows a devastating summer of bushfires and heightened public worries about climate change; along with what analysts say is increasing evidence that new coal-fired power is not economically viable in Australia. At the same time, it reflects a pragmatic choice that does not abandon fossil fuels. Others, however, say the plan is flawed. Even with its abundant reserves, the world’s largest liquefied natural gas (LNG) exporter will not be able to supply enough cheap gas to the right domestic markets without massive assistance. “In Australia we have the crazy situation where we’re the largest gas exporter in the world, yet we’ve consigned our domestic industry to inputs that just aren’t competitive,” said Stephen Bell, chief executive at plastics maker Qenos.

Race for 6G on

As fifth-generation wireless networks start to go mainstream, competition to develop 6G has begun, with Samsung Electronics and Huawei Technologies at the forefront, especially in the base stations that will form the backbone of future networks. Japan aims to play catch-up, while the U.S. desperately pushes to regain leadership in innovation. The U.S., meanwhile, apparently looks to build a leadership position in chips, used for high-speed data processing, tapping Intel and other American companies. Work to standardize technological specifications for sixth-generation networks is expected to begin around 2023. That move likely will kick-start development of equipment and parts ahead of anticipated commercialization around 2027. Tokyo wants 10% of relevant patents worldwide to come from Japanese companies. Samsung currently leads the 5G race as the holder of 8.9% of patents, followed by Huawei at 8.3% and Qualcomm at 7.4%. Three players control roughly 80% of the current base station market: the rapidly rising Huawei, Sweden's Ericsson and Nokia of Finland, IHS Markit says. Europe intends to work on developing standards with the 3rd Generation Partnership Project -- a collaboration of standards organizations -- and others.

Coronavirus has been ‘very devastating’ for many African airlines

African airlines had been piling on debt long before the pandemic but government bailouts allowed them to limp on for years. Now, as sub-Saharan Africa faces its first recession in a quarter-century, some airlines will find it harder to survive. That’s despite growing global interest in the continent of 1.3 billion people. In some cases, local airlines are so important for pan-African business on a vast continent with historically poor infrastructure that their collapse would cripple speedy travel. In other cases, however, airlines have been seen as vanity projects for states that can hardly afford to support them. Even Ethiopian Airlines, Africa’s only profitable airline in recent years, has signalled distress, citing revenue losses of up to $550 million between January and April. As a survival measure, the airline has thrown itself into cargo operations, including shipping medical supplies across Africa and to other continents. The International Air Transport Association in April warned that African airlines could lose $6 billion in passenger revenue compared to last year, and half of the region’s 6 million jobs in aviation and related industries could be lost. Air traffic this year is expected to fall by half, it said.

China's rare-earth firm moves from foreign-dependent to self-reliant

China's leading rare-earth supplier is speeding up construction of production facilities for ceria-zirconia solid solution that are expected to open in September. Experts said the development shows that China's rare-earth ceria-zirconia solid solution technology has broken international monopoly. China Northern Rare Earth (Group) High-Tech Co - which is under the country's largest light rare-earth producer Baogang Group - in Baotou, North China's Inner Mongolia Autonomous Region is stepping up construction of the new production line, which will make 500 tons of ceria-zirconia solid solution a year, according to a report that the company sent to the Global Times on June 02. For a long time, enterprises from Japan, France and the Netherlands have held 70 percent of the international market for ceria-zirconia solid solution, and domestic producers have been wholly foreign-owned, industry analysts said. The price of ceria as a raw material is only 13,000 yuan ($1,830) per ton, but the price of high value-added products is 130,000 Yuan per ton. The production technology used to make ceria-zirconia solid solution can also convert vehicle emissions into carbon dioxide, water and nitrogen through chemical reactions. So far, four or five environmental protection enterprises in the vehicle sector have contacted the company about cooperation.

Strategic
Out of Favour with Australia’s Central Government, China Targets States

One of Australia’s biggest states is pushing ahead on an infrastructure deal with China as ties between Beijing and the federal government are at a low, raising concerns that Chinese money may end up funding projects that are a national-security risk. Victoria joined China’s Belt and Road program—a trillion-dollar flagship foreign-policy initiative—in October. In recent days, the state’s premier, Daniel Andrews, has been touting it as a “passport to export” and a way to create jobs in a coronavirus-afflicted economy. The deal is driving a wedge between the south-eastern state and the government in Canberra, where views toward Beijing are hardening as the two countries spar over China’s handling of its coronavirus outbreak. An influential bloc of nationalist lawmakers is calling on the government to use the pandemic as a way to reshape the economy and reduce Australia’s reliance on China. The Victorian deal pledges cooperation on infrastructure projects, as well as on biotechnology, advanced manufacturing and technological innovation. Melbourne, the Victorian capital, is home to many of Australia’s biotech startups and health-care companies.

China Spotlights US Unrest in Pushback to Criticism on Hong Kong

China’s state media have carried prominently images of the recent unrest in the U.S., the police response and President Trump’s threat of force against protesters, while Chinese diplomats are using the events to counter criticism of Beijing’s efforts to stamp out demonstrations in Hong Kong. “Why did the U.S. have so many problems with the restrained and civilized way of law enforcement by the Hong Kong police but have no problem at all with threatening to shoot at and mobilizing the National Guard against its domestic protesters?” Foreign Ministry spokesman Zhao Lijian said on June 01. These moves come ahead of the June 4 anniversary of Beijing’s bloody 1989 crackdown on protesters in Tiananmen Square, a date when Hong Kong for three decades has held demonstrations. Hong Kong authorities prohibited a candlelight vigil this year, citing coronavirus-related social-distancing measures. Washington threw its support behind Hong Kong’s demonstrators from almost the start of the protests last year, which were prompted by concerns about Beijing’s increasing influence over the semiautonomous Chinese territory. In November, Mr. Trump signed into law the Hong Kong Human Rights and Democracy Act, which was intended to show solidarity with pro-democracy protesters in the city.

Coronavirus and new US sanctions reignite debate over Huawei in UK

Calls within the British government are growing to shut out Huawei Technologies from ultrafast 5G networks here as China faces increasing pushback over the coronavirus pandemic and security. The National Cyber Security Centre recently launched an emergency review of Huawei's role in the U.K.'s mobile networks, after the U.S. Commerce Department announced a further crackdown May 15. The NCSC previously concluded that security risks associated with Huawei products were manageable. The British government said in January that Huawei can supply up to 35% of non-sensitive parts of 5G networks, rebuffing American pressure to lock the company out over espionage concerns. The government now appears to be changing its tune in light of the U.S. sanctions and the growing criticism of China's initial response to the novel coronavirus. China's new national security legislation for Hong Kong has also hardened opinions on Beijing, especially given the city's past as a British colony. Europe is a key market for Huawei. The region accounts for nearly 50 of the company's 90 or so 5G contracts. Many European countries see British policies on Huawei as a litmus test of sorts, given the U.K.'s close relationship with the U.S.

Philippines President Duterte suspends his move to scrap US troop deal

Philippines President Rodrigo Duterte has suspended his decision to scrap a two-decades-old troop deployment agreement with the United States. His foreign minister on June 02 explained the U-turn citing political and other developments in the region. The termination of the Visiting Forces Agreement (VFA), which is central to one of Washington’s most important alliances in Asia, was due to take effect in August. It was also Duterte’s biggest move yet towards delivering on longstanding threats to downgrade ties with the Philippines’ former colonial ruler, Reuters said. Foreign Secretary Teodoro Locsin said the news, that the Philippines was no longer abandoning the pact, had been well received by the US. The VFA provides the legal framework within which US troops can operate on a rotational basis in the Philippines. Duterte scrapped the VFA on February 11 in response to the revocation of a US visa held by a former police chief-turned-senator who'd led his war on drugs.

Warring parties in Libya agree to restart ceasefire talks – UN

The United Nations’ mission in Libya has said the country’s warring parties have agreed to restart talks aimed at reaching a lasting ceasefire, after a three-month suspension. In a statement late on June 01, UNSMIL “welcomed” moves by the Government of National Accord (GNA) and forces backing eastern military commander Khalifa Haftar to accept “restarting negotiations on a ceasefire and the related security arrangements.” Pro-Haftar forces have been battling since April last year to seize the capital Tripoli from the UN-recognized GNA. A military commission made up of five GNA loyalists and five Haftar delegates held talks in February, but the dialogue was suspended, AFP said. UNSMIL voiced hopes that the resumption of talks by the joint military commission would be “the start of a truce on the ground and a humanitarian truce to provide the opportunity to reach a final ceasefire deal.”

Ukraine will 'never surrender sovereign control over Donbass or Crimea'

Ukrainian Foreign Minister Dmytro Kuleba on June 02 denied that Ukraine's president, Volodymyr Zelenskiy, has underestimated the challenge of achieving peace with Russia. Kuleba was in Berlin for talks with German Foreign Minister Heiko Maas. After the meeting, Maas once again called for a cease-fire in eastern Ukraine. Efforts to explore a peace solution had recently stalled again. A summit of heads of state and government in the so-called Normandy format — Germany, France, Ukraine and Russia — originally slated for April, had been cancelled due to the coronavirus pandemic. "We will never surrender sovereign control over Donbass or over Crimea, and it doesn't matter how much time it will take us, but we will de-occupy those territories and reintegrate them into Ukraine," Kuleba told DW. "We suggest to Russia a very simple solution: We will never cross our red lines, which are sovereignty and control of our border. In return we are ready to negotiate the special status of those regions within Ukraine, without providing them with the right to have a veto on any nationwide decisions," said Kuleba.

Israeli tanks cross technical fence with Lebanon

Lebanese soldiers engaged Israeli forces in a tense standoff after Merkava tanks on a military training exercise crossed the technical fence between the two countries, newspaper the Daily Star reported. The Lebanese newspaper obtained a video which showed the impasse between the troops, with the Lebanese soldiers armed with anti-tank grenade launchers as they faced at least two of Israel’s Merkava tanks in the town of Adaisseh. Peacekeeping troops from the United Nations Interim Force in Lebanon however managed to separate the soldiers. The area around Adaisseh is considered a no-man’s lands, and the Israeli tanks were not thought to have crossed into Lebanese territory although this was the first time they crossed the technical fence since the Summer War of 2006. Earlier, Israel handed over to Lebanon a shepherd who was shot by their forces as he was herding his goats in the occupied Shebaa Farms. Israel said the shooting happened after the sheep herder crossed the UN-marked Blue Line into Israeli territory.

Wuhan wraps up coronavirus tests on 10 million people

Wuhan, the central Chinese city where the pandemic coronavirus was first detected, has finished screening the city's population for the pathogen, provincial authorities said on June 02. Health workers screened about 10 million people in Wuhan between May 15 and June 01, identifying 300 asymptomatic cases but no symptomatic case, the Hubei government said. Wuhan deputy mayor Hu Yabo said the tests cost about 900 million yuan (US$126 million) and all expenses were covered by the government. China Business Network reported last month that laboratory workers mixed 10 samples together to reduce the workload. If the test was positive for the coronavirus, a second round of tests on the 10 people sampled would be carried out. "We have reassured people in Wuhan and around the country via this testing. This shows the [Communist] Party's ruling philosophy of putting the people first will definitely help the city's economy and society get back to normal," he said. "This expenditure was totally worthwhile." Wuhan, the first epicentre of the coronavirus, has reported 50,340 cases of the disease Covid-19, including 3,869 deaths, since December. The municipal government announced in mid-May that it would test all its residents after a cluster of new community cases was reported earlier that month.

Medical
At-Home Covid-19 Testing Arrives, With Accuracy and Access Questions

Companies are starting to roll out tests that can diagnose coronavirus infections at home, offering people who are seeking to return to work a potentially safer, more accessible option to check their health. Yet experts worry about the accuracy of the results generated by the at-home tests, costs that insurers often don’t cover and other factors that could limit use. At-home tests are the next wave of coronavirus diagnostics, following tests given by doctors at offices and hospitals. Some of the newest ones use a person’s saliva to detect an infection. All of the tests, whether done at home or not, must be sent to a lab for analysis. The U.S. Food and Drug Administration has authorized the emergency use of six coronavirus at-home collection kits, with the first at-home test green lighted April 20.The tests promise to expand diagnoses to people with disabilities, compromised immune systems or limited access to transportation who have struggled to leave their homes, health experts and industry officials say. While the technology behind at-home kits is similar to what other Covid-19 diagnostic tests use, where and when the sample is collected can affect accuracy, said Alan Wells, professor of pathology at the University of Pittsburgh and medical director at UPMC Clinical Laboratories.

Study panning anti-malaria drug Trump took against COVID faces new questions

British medical journal the Lancet on June 02 said it had concerns about data behind an influential article that found hydroxychloroquine increased the risk of death in COVID-19 patients, a conclusion that undercut scientific interest in the medicine championed by U.S. President Donald Trump. Hydroxychloroquine which has anti-inflammatory and antiviral properties - inhibited the coronavirus in laboratory experiments but has not been proven effective in humans, particularly in placebo-controlled, randomized clinical trials considered the gold standard for data. The debate has become highly politicized, and many scientists have voiced concern. Nearly 150 doctors signed an open letter to the Lancet last week calling the article’s conclusions into question and asking to make public the peer review comments that preceded publication. “This is not some sideshow or minor issue,” said Dr. WalidGellad, a professor at University of Pittsburgh’s medical school, who was not a signatory of the letter but has been critical of the study. “We’re in an unprecedented pandemic. We’ve organized these enormous clinical trials to figure out if something works. And this study stopped or paused a couple of those trials, and changed the narrative around a drug that no one knows if it works or not,” he said. The Lancet’s editors said in a note that serious scientific questions about the study were brought to their attention and an independent audit of the data has already been commissioned.

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