COVID-19 International Developments: Daily Scan, May 13, 2020
Prerna Gandhi, Associate Fellow, VIF
Economic
Japan, US affirm need for WTO reform

Foreign Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer affirmed the need for reforms to the World Trade Organization in a phone call on May 12, the Foreign Ministry said. The two agreed on the need for "permanent changes" to be made to the WTO's dispute settlement system, the ministry said, adding that the call was held at the request of the American side .U.S. President Donald Trump has often criticized the Geneva-based organization as ineffective at its job of enforcing rules on international trade, showing his dissatisfaction by blocking appointments to its top court, the Appellate Body. Since December, the Appellate Body has not had enough members to hear new appeals after the terms of two of the remaining three judges expired. It is normally composed of seven members. Motegi and Lighthizer also discussed the establishment of regulations on e-commerce and agreed to work together on the response to the novel coronavirus, the ministry said.

China’s local officials under pressure amid coronavirus pandemic to address rise in unemployment

The coronavirus pandemic has forced a dramatic change in priorities for Beijing’s leaders, as they grapple with falling economic growth and a rising unemployment rate that threatens social stability – the foundation of the ruling Communist Party’s legitimacy. China’s leadership has responded by making controlling unemployment a higher priority for the year ahead than getting the growth rate back on track. At the same time, local officials have been told multiple times that they must also fulfil the country’s anti-poverty targets by the end of this year, putting further pressure on local cadres to deliver results. The unemployment issue has dominated multiple government meetings over the past two months and was named as the country’s priority at the April 17 meeting of the Politburo Standing Committee, Beijing’s highest decision-making body, headed by Xi. Finding jobs for this year’s fresh crop of graduates has been flagged as a critical task for local officials this year. Six central government departments and Communist Party bodies launched a special campaign last week to push for more jobs for graduates – estimated to number a record 8.47 million this year.

Leave China? No thanks, some Japanese firms say to Tokyo’s cash incentives

“Toyota has no plans to change our strategy in China or Asia due to the current situation,” the Aichi-based carmaker said in a statement. “The auto industry uses a lot of suppliers and operates a vast supply chain and it would be impossible to just switch in an instant. We understand the government’s position, but we have no plans to change our production.” As part of a record stimulus package unveiled amid the coronavirus pandemic, the Japanese government has earmarked 220 billion yen (US$2 billion) for companies that want to move production back to Japan and a further 23.5 billion yen for firms that want to shift manufacturing to Southeast Asia. The move came after car companies and other manufacturers suffered shortages of parts from China. There are also worries about being hit with future tariff increases or new duties, as a result of Beijing’s ongoing trade war with the US. Another concern has revolved around the theft of Japanese firms’ intellectual property; while there have also been rumblings of discontent within some governments about collaborations with Chinese companies that might compromise national security. Yet analysts say Japanese companies still see an upside to remaining in China.

Global economic outlook still worsening, says IMF

IMF managing director Kristalina Georgieva said the IMF’s previous forecast that emerging and developing countries would need $2.5tn of financial assistance to see them through the crisis would be revised upwards. “It is very important to concentrate on understanding clearly what protection measures we can offer to [emerging and developing] countries, so that a liquidity problem does not become a solvency problem,” she said. Countries had announced fiscal support measures adding up to $8.7tn since the onset of the crisis, Ms Georgieva said, adding that the IMF’s message to its members was, “please, spend as much as you can and then a little bit more”. But, she added, the record capital outflows that emerging economies experienced in March had “seen a reversal” in April. This was thanks in part to liquidity injections by central banks including the US Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan, which had fuelled investors’ bond-buying. The IMF has been under pressure to expand its special drawing rights — but the US vetoed the proposal last month.

Trump orders federal pension fund not to invest in Chinese stocks

President Donald Trump has ordered the main federal government pension fund not to invest its portfolio in Chinese companies, which his administration says pose a serious national security risk to the US. The intervention comes as the Federal Retirement Thrift Investment Board, an agency that manages almost $600bn in its “Thrift Savings Plan”, prepares to shift the international component of the fund into an index that includes Chinese companies. Robert O’Brien, US national security adviser, and Larry Kudlow, the White House economic adviser, said using the MSCI All Country World ex-US Investable Market index would “expose the retirement funds to significant and unnecessary risk” because they would be investing in Chinese companies that pose both national security and humanitarian concerns by operating in violation of US sanctions. The FRTIB in November rejected a request from a bipartisan group of senators not to invest in the index, saying that such a move would disadvantage the roughly 5.5m federal employees who invest in the retirement fund. But the White House stepped up pressure this week, as Mr. Trump blamed China for the Covid-19 pandemic.

Coronavirus Lockdowns Trigger Big Drop in Consumer Prices

The coronavirus pandemic pushed down April consumer prices by the most since the last recession as efforts to contain the virus disrupted demand for energy, travel, clothing and other goods and services. The Labour Department said the consumer-price index fell by 0.8% last month, the second month in a row prices have eased since the pandemic reached the U.S. and the biggest drop since 2008. Business closures and stay-home orders aimed at containing the virus have created cheap oil, and falling prices for air travel, clothing, and car insurance and other goods and services. One area where the pandemic is pushing prices higher: food. The price index for food at home posted its largest monthly increase since February 1974. Americans stocked up at the pandemic’s outset. Since then, outbreaks have forced meat-processing plants to close and otherwise snarled supply chains. The April price index for meats, poultry, fish and eggs increased 4.3% from a month earlier. Economists expect the decline in prices to be short-lived, with costs firming up as the U.S. reopens its economy and demand increases.

Saudi Aramco makes nearly $17bn, sticks to dividend pledge

Saudi Aramco, the world’s biggest oil company, announced net profits of $16.7 billion for the first quarter of 2020, a period that saw the beginning of the collapse in demand in global oil markets because of the lockdowns in all major economies. It is the first time Aramco has reported financials as a publicly listed company. Profits were nearly 25 percent down compared to the same period last year, but were significantly less than the fall in oil prices, which roughly halved over the three-month period. Revenues were down by some 16 percent at $60.2 billion. “The COVID-19 crisis is unlike anything the world has experienced in recent history, and we are adapting to a highly complex and rapidly changing business environment,” said Aramco President and CEO Amin Nasser. “Aramco has demonstrated resilience during economic cycles, and has an unparalleled position due to a strong balance sheet and low-cost structure,” he added. Analysts said the results show that Aramco is more resilient to volatile global energy markets than other big oil companies.It 25 percent profit decline compared with an average of 35 percent down by the five big oil companies over the past fortnight.

Energy storage is key for adding renewables to EU grid

Innovative energy storage solutions will play an important role in ensuring the low-cost integration of renewable energy sources to EU grid systems, according to a new study published by the European Commission (EC) on May 11. The Energy Storage Study - Contribution to The Security of Electricity Supply in Europe study funded by the Commission stressed the primary importance of "an appropriate deployment of energy storage technologies," which is considered necessary for the successful transition that relies on variable renewable energy sources. According to the study, the main energy storage reservoir in the EU, at more than 90%, is by far pumped hydro storage. The study said these storage systems contain huge capacity and power due to their size and water volumes. Secondly, it found that lithium-ion batteries represent most of electrochemical storage projects; however, the EC warned that the recycling of such systems should be strongly taken into consideration, as well as their effective lifetime. Thirdly, the study noted that in the EU, the segment of operational electrochemical facilities, a rising energy storage alternative, is led by the UK and Germany.

Turkey Strains to Ward off Currency Crisis as Pandemic Weighs on Economy

Months before the new coronavirus hit, Turkey was straining to stave off a currency crisis burning through billions of dollars of foreign-exchange reserves to prop up the Turkish lira. Now, the pandemic threatens to push Turkey into a full-blown balance-of-payments crisis, leaving President Recep Tayyip Erdogan facing one of the biggest challenges in his 18-year rule. At home, the outbreak has triggered soaring unemployment and threatened to unleash runaway inflation. And like other emerging markets, Turkey is also exposed to the partial lockdowns still in force in its main export market for its automobiles and textiles, the European Union, where slumping demand has caused a vicious chain reaction. The lira has regained some ground, but is still 15% weaker than at the start of the year. Members of Erdogan’s administration have acknowledged that Turkey could use some financial help. They have said Turkey held talks with the U.S over getting access to dollars through a short-term lending facility from the U.S. Federal Reserve. But analysts said the U.S. would be loath to extend significant financial assistance to Turkey as long as tensions stemming from Ankara’s decision to procure the S-400 air-defence system from Russia weren’t resolved.

Strategic
On the Ground in Wuhan, Signs of China Stalling Probe of Coronavirus Origins

Beijing now appears to be stalling international efforts to find the source of the virus amid an escalating U.S. push to blame China for the pandemic, according to interviews with dozens of health experts and officials. China has only made public the genetic sequences of “environmental samples” from the market’s sewers, stalls and a garbage truck—not material directly from any animals—Chinese and foreign researchers say. Some say they’ve been told by Chinese officials that animals taken from the market were destroyed. Several Huanan market vendors said they had not done tests to establish how many of them were infected. Although Chinese officials said they were tracing the suppliers of wild meat in the market, they have not published any information on those people or animals they handled. Meanwhile, China has frustrated efforts by foreign officials and researchers to join the hunt. When a World Health Organization mission visited Wuhan and other Chinese cities for nine days in February, they didn’t go to the Huanan market, but discussed it and the potential animal origins of the virus with Chinese counterparts.

China fires its latest underwater nuclear missile into spotlight with science prize

Researchers involved in the development of China’s most advanced submarine-launched nuclear missile, the JL-3, have been recognised in one of the country’s top science awards. The team that worked on the “underwater-launched large solid-fuel carrier rocket”, or SLBM, is among the 10 nominated to receive a National Award for Excellence in Innovation. China has not officially confirmed it is developing the JL-3 – or Big Wave – missile, but the Chinese navy has tested it, as reported by the South China Morning Post. The People’s Liberation Army (PLA) Rocket Force is developing its third-generation SLBM JL-3, with a range of over 12,000km (7,450 miles), far enough to hit the United States if the missile was launched from the Chinese coast. China conducted a few test flights in 2018 and 2019. The new intercontinental-range solid-fuel JL-3 is estimated to be fully integrated with the next-generation submarine Type 096 in 2025.

China steps up maritime activity with eye on post-pandemic order

In April, the Chinese aircraft carrier Liaoning passed between two Japanese islands, Okinawa's main island and Miyakojima, in the East China Sea with a full fleet. This marked the carrier group's first time sailing to and from the Pacific Ocean via the passage and was seen as yet another sign of China's stepped-up military activity in neighboring seas. In addition to increased activity near the Japanese-administered Senkaku Islands, which China claims as the Diaoyu, Beijing is revising a law to enlist People's Armed Police Force personnel -- who number 700,000 to 800,000 -- in handling maritime disputes with foreign ships. The revision, the first in 11 years, could pass within the next few months. China views the South China Sea as an important sea lane for energy imports from the Middle East. Increased military involvement in the waters could lead to scuffles with neighbours like Vietnam and Philippines, with which it has competing maritime claims. The moves each point to Beijing's ambitions to assert a stronger presence in the post-coronavirus world order. This all comes when the U.S. Navy has recently experienced a rare power vacuum in the West Pacific and the South China Sea. Its closest two aircraft carriers were limited in their actions.

'I don't think you are the end-all': Rand Paul calls out Fauci over Covid-19 policy

Republican Senator Rand Paul challenged National Institutes of Allergy and Infectious Diseases director Dr Anthony Fauci on the nation's Covid-19 policy, suggesting the US is waiting too long to reopen. Paul, who also has a medical degree, called for “a little bit of humility in our belief that we know what's best for our economy,” questioning Fauci's support for a prolonged economic shutdown during a Senate hearing on the government's coronavirus response on May 12. Paul added that continuing the lockdown would widen the class divide, explaining that if children are kept out of school for months on end, then “the poor and underprivileged kids who don't have a parent that's able to teach them at home aren't going to be able to learn for a full year.” He also said that the catastrophic narrative painting Covid-19 as a killer necessitating mass shutdowns had gotten started with “wrong prediction after wrong prediction,” starting with the British scientist Neil Ferguson's apocalyptic forecasts. “We don't know everything about this virus,” Fauci countered, challenging that children in some parts of the country were turning up with “a very strange inflammatory syndrome” similar to Kawasaki syndrome.

Russia slams U.S. assertion at U.N. that it remains party to Iran nuclear deal

Russia’s U.N. ambassador slammed the United States on May 12 as “ridiculous” for arguing it was still a member of the Iran nuclear deal two years after it quit, so Washington could trigger a return of all United Nations sanctions on Tehran. The United States, Russia, China, Germany, Britain and France in 2015 agreed to the deal with Iran that prevents Tehran from developing nuclear weapons in return for sanctions relief. The U.N. Security Council enshrined the deal in a resolution that still names the United States as a participant, even though it left. U.S. President Donald Trump quit the agreement in 2018 and described the accord from Barack Obama’s presidency as “the worst deal ever.” U.S. Secretary of State Mike Pompeo, however, said last month the language in the resolution was “unambiguous” and “the rights that accrue to participants in the U.N. Security Council resolution are fully available to all those participants.” He was referring to the ability of a participant to the nuclear deal - known as the JCPOA - to trigger a so-called snapback of all U.N. sanctions on Iran.

China's Foreign Ministry underlines one-China principle on WHO affairs

It is a smooth process for technical experts from the Taiwan region to participate in the World Health Organization (WHO) technical activities under the one-China principle, a Chinese Foreign Ministry spokesperson said on May 12. Spokesperson Zhao Lijian's remarks came after the foreign affairs department of Taiwan authorities said a day before that the Chinese mainland signed a confidential Memorandum of Understanding (MOU) with the WHO in 2005 on affairs related to the Taiwan region's participation in the WHO activities. It is no secret about the MOU signed by the Chinese government and the WHO in 2005, Zhao told a routine press briefing, adding that relevant information could be reached online. There is only one China in the world and the Taiwan region is an inalienable part of China's territory, Zhao stressed, noting that China does not need to sign an MOU with any international organization to "return Taiwan to China."He noted that 16 batches of 24 medical and health experts from the Taiwan region have participated in the WHO technical activities since 2019.

Pakistan army chief asks Iran to tighten border security, stop terror attacks

Pakistan’s top commander asked Tehran to tighten its borders in a bid to curb terrorist attacks on Pakistani security forces by militants allegedly operating from Iran. Pakistani Foreign Minister Shah Mahmood Qureshi on May 11 also linked the spread of the coronavirus disease (COVID-19) pandemic in Pakistan with the forced sending of pilgrims back from Iran. Chief of Army Staff (COAS) Gen. Qamar Javed Bajwa called his Iranian counterpart, Maj. Gen. Mohammed Bagheri, and discussed an array of issues including border fencing, improvement of border terminals and the killing of Pakistani security personnel near the Pakistan-Iranian border, the Inter-Services Public Relations (ISPR) said in a statement on May 11. Bajwa contacted Bagheri in the wake of an attack on a Frontier Corps patrol team in the Buleda area of Kech district last week in which six Pakistani security personnel lost their lives. Pakistan’s Economic Coordination Committee (ECC) on April 29 approved 3 billion rupees ($18.6 million) in additional funds for the fencing of its border with Iran.

Nigeria violence drives 23,000 into neighbouring Niger: UNHCR

Violence in northwest Nigeria has forced about 23,000 refugees to flee to Niger since April and raised concerns about the deteriorating security situation, the United Nations has said. The numbers fleeing to neighbouring Niger have almost tripled from last year when the UN High Commissioner for Refugees (UNHCR) reported the first influx of 20,000 people following a rebellion and banditry in northern Nigeria, which killed hundreds and displaced thousands. "We are working closely with authorities in Niger to relocate at least 7,000 refugees to safety ... where water, food, shelter, access to health and other essential assistance can be provided," UNHCR spokesman Babar Baloch told a media briefing on May 11. "Discussions are also ongoing with the authorities to recognise on a prima facie basis the refugees fleeing Nigeria and arriving in the region," he said. Nigeria closed all land borders in March to curb the spread of the coronavirus pandemic, which has infected more than 4,600 people in the country with 150 deaths. Overall, Niger hosts more than half a million refugees from Mali, Burkina Faso and Nigeria, according to a recent UN report.

Medical
Fears grow over heat exhaustion caused by wearing masks in summer

Medical experts have called for extra vigilance regarding heat-related illnesses this summer, amid growing fears that the wearing of face masks to prevent the spread of the novel coronavirus could cause breathing difficulties and dehydration. As wearing masks in hot weather makes it difficult for cool air to reach the lungs, the respiratory muscles are activated resulting in shortness of breath, which in turn makes it easier for heat to build up inside the body. It is important to cool the body down in order to prevent heat exhaustion and heatstroke. Noriyuki Koibuchi, a professor at Gunma University's Graduate School of Medicine specializing in environmental physiology, said that as there are many nerve fibers in the face, it is more sensitive to heat and cold than other parts of the body. "As you take more frequent breaths when wearing a mask, you should definitely avoid vigorous exercise (when wearing one)," Koibuchi said. In China, at least two junior high school students collapsed and died last month while wearing face masks during physical exercise examinations. The deaths have prompted experts to warn of the dangers of wearing high-grade masks during intense exercise, which could lead to oxygen deficiency.

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