Group 57 Sophia

CNN :Time for electronics industry to end supply chain slavery

Editor’s note: Dan Viederman is CEO of Verité, a non-profit consulting organization that helps multinationals identify and solve supply chain and human rights problems. He has worked with NGOs, governments, investors and multinational companies to improve working conditions and eliminate human rights violations. The views in this article are solely his.

(CNN) — If you are reading this on a tablet, smart phone or computer monitor, then you may be holding a product of forced labor.

Verité’s two-year study of labor conditions in electronics manufacturing in Malaysia has found that one in three foreign workers surveyed was in a condition of forced labor.

Because many of the most recognizable brands source components of their products from Malaysia, almost any device you purchase may have come in contact with modern-day slavery.

Many customers have never heard the stories that most of the migrant workers living in Malaysia can recite by heart.

One such story goes like this. In 2011, a Nepali man named Bishal (not his real name) applied for a job with a Malaysian electronics company.

He was told he could only be employed if he first paid a $1,266 fee — about double the average annual income in Nepal.

Since Bishal didn’t have savings, he borrowed the funds from a moneylender at a monthly interest rate of 5%, using his family land as collateral.

After calculating the promised monthly salary, he was confident he would be able to pay back the loan and save money to send home for his family.

When he arrived in Malaysia, Bishal was faced with additional fees and realized he’d been deceived about his salary.

After purchasing food and transport, he had about $90 left over each month to pay down the loan and send home to his family.

This will be Bishal’s reality for the two years that he estimates it will take him to pay off his loan.

The debt isn’t the only thing keeping Bishal in Malaysia. He was also forced to surrender his passport to his Malaysian employment manager.

He cannot leave. He is a modern-day slave. And he is not alone.

For the past two years, Verité has met with workers in the Malaysian electronics sector, collecting 500 of their stories.

These laborers work long hours in poor conditions to produce the components for the electronic devices bought and sold on the U.S. and European markets.

Many of them become heavily indebted to obtain their jobs, and then work between one and two years in conditions of virtual debt bondage to pay off their recruitment fees.

The workers we spoke with are often stuck in the supply chains of major brands that you would instantly recognize.

Electronics is Malaysia’s leading manufacturing industry and a key driver of the economy, contributing to 33% of exports and generating 27% of all jobs in 2013.

Many companies from the U.S., Europe, and Asia use Malaysia as their manufacturing base. Foreign investment in the industry is extremely high, with 87% (roughly $2.6 billion) originating from foreign sources in 2013.

Businesses and consumers worldwide share in the shame of Malaysia’s forced labor problem.

This new and conclusive evidence of forced labor ought to disturb major electronics companies that outsource their production to Malaysia.

As stewards of international trade with the ability to influence global policy and affect consumer behavior, these companies have the power and responsibility to push for meaningful reforms and combat forced labor in the countries that supply their products.

While the factors underlying modern-day slavery in Malaysia are complex, the solutions are at hand.

First and foremost, multinational companies must implement strict policies to ensure that workers in their supply chains have not paid fees to get jobs and that they have easy access to their identity documents throughout their employment.

To do this, multinational companies must extend their current social assessments to include inquiries about worker debt and passport retention.

They must ensure that recruiters reimburse any illegal fees they have collected from workers.

Companies must also conduct due diligence on the business practices of recruiters who find, place or otherwise manage workers in their suppliers’ facilities.

Forced labor is prohibited by the internal codes of conduct of virtually all multinationals, yet it is common in the supply chains of the most sophisticated businesses in the world.

No multinational company intentionally relies on exploitation as part of its business model, yet many overlook forced labor practices that would shock their consumers.

Some companies have addressed the problem, including by strictly limiting fees and even reimbursing workers for overcharges. But it’s clear that we need a much larger, industry-wide effort.

It’s time that multinational electronics companies took strict, comprehensive and measurable steps to put forced labor in Malaysia and other countries out of business.

Group85@Sophia: ‘Africa has become a playground for globalisation’

“Africa is not on autopilot to some gilded age, warns Kingsley Moghaly, deputy governor of Nigeria’s central bank and author of Emerging Africa. Waht is being faisely celebrated as Africa’s rise is simply the continent having become a playground for globalisation, he says, adding that without job creatin to accompany population growth Africa will have to cope with armies of unemployed young people in a few decades’ time.”

Link for the video:

http://www.theguardian.com/global-development/video/2014/aug/04/africa-globalisation-jobs-kingsley-moghalu-video

Group12 – Paris IMBD – There are signs factories are coming back to the U.S., but is the tide of globalization ebbing?

A worker handles a roll of steel at the Baosteel Group Corp. facilities in Shanghai, China. Baosteel Group is the supplier of half the sheets used by carmakers in China. But there are forces at work that may bring manufacturing back to the United States.

A worker handles a roll of steel at the Baosteel Group Corp. facilities in Shanghai, China. Baosteel Group is the supplier of half the sheets used by carmakers in China. But there are forces at work that may bring manufacturing back to the United States. Bloomberg

By Eduardo Porter

New York Times

Not long ago, executives at the Dutch multinational Royal DSM, a globe-girdling maker of nutritional supplements and high-tech materials, used to require a battery of internal studies to decide where to do a deal or locate a new manufacturing plant.

But today, “we won’t even do the study,” Stephan B. Tanda, the managing board member with responsibility for the Americas, said. “It’s clear it will be the United States.”

The United States, he points out, has lots of cheap natural gas and a very lightly regulated labor market. At the same time, China, where Royal DSM has some 40 plants, is losing its edge.

“It is less attractive than it used to be as a source from which to serve the world,” Tanda said.

For the last time the U.S. was as competitive as it is now, he added, “you have to go back to before the first oil shock in the 1970s.” Of the $3.6 billion in acquisitions by Royal DSM since 2010, 80 percent has come to the United States.

Could globalization make a U-turn?

Over the last year or two, a growing number of business analysts have been arguing that we are entering a new era of global manufacturing, with the United States at center stage.

Last month, the Boston Consulting Group, following up on an earlier survey that suggested “reshoring” of factories back to the United States was the new name of the game, issued a report that argued that the U.S. had the lowest manufacturing costs among major exporters in the developed world and was nearly competitive with China.

But before becoming overly excited about the prospects for an American industrial renaissance, it is worth looking more skeptically at the claim that globalization has run its course.

“I don’t agree that China’s moment is coming to an end,” said Karl P. Sauvant at the Columbia Center on Sustainable Investment. “The most important determinant of investment is market size and market growth, and China remains a big market and continues to grow at a reasonable pace.”

So what if workers in China’s coastal areas are becoming more expensive? The country will move up the value-added ladder to make more sophisticated stuff. Indeed, countries tend to trade more as their incomes converge, not less. Manufacturers seeking cheap labor still have plenty of places to go, like Vietnam, Bangladesh, Mexico or even China’s heavily populated hinterland, which will benefit from Beijing’s huge investments in transportation infrastructure connecting it to the coast.

There are dynamics that could put a real dent in globalization. If energy prices take off again, that will favor regional rather than global production networks. Intellectual property piracy in China might temper multinational corporations’ appetite to invest in advanced industries there.

Technologies that allow fewer workers to perform more sophisticated tasks – 3-D printing, say – might encourage more production in rich countries, near consumer markets.

Already, slow growth is undermining the case for open markets that globalization rests on.

Trade has slowed significantly since the Great Recession. Small-scale protectionist measures have multiplied as countries have sought to protect domestic producers.

Terrorism and political instability could slow the process further.

Perhaps China’s rising costs will finally provide a break to U.S. workers who have been losing ground for two decades to a once-bottomless pool of cheap workers.

“Workers may have the opportunity to gain back lost shares of output in the decades ahead,” suggested Dean Baker of the Center for Economic and Policy Research in a short essay that also argued that no other nation would be able to duplicate China’s successes.

Still, Richard Baldwin of the Graduate Institute of International and Development Studies in Geneva points out that the convergence in incomes driven by the fast industrialization of China and some other countries like Brazil and India is unlikely to stop soon. In 1988, the share of world income held by the seven richest nations peaked at two-thirds. By 2010 it was down to half. It is, Baldwin proposes, “likely to continue to sag for decades.”

Evidence that globalization might be going into reverse is hard to find in the data. Global foreign direct investment flows remain substantially below the record $2 trillion of 2007. But last year they rebounded 9 percent, to $1.45 trillion, according to U.N. data. More than half went to developing countries and China received $124 billion, nearly a record and roughly 50 percent more than six years ago.

Even if the United States draws a larger share of global manufacturing, lots of high-wage jobs are unlikely to follow.

Jan Svejnar at the Center on Global Economic Governance at Columbia’s School of International and Public Affairs is optimistic about American prospects. “The most promising emerging market in the world is the United States,” he told me. But any new manufacturing that develops here will be capital-intensive, he added, relying on far fewer factory workers than in the past.

And for all the hope that cheap and abundant American energy or rising Chinese labor costs might drive a wave of reshoring, it isn’t happening yet.

James B. Rice Jr. and Francesco Stefanelli at the Center for Transportation and Logistics of the Massachusetts Institute of Technology looked carefully at some 50 U.S. companies – including Apple and General Electric – that have announced they were bringing jobs home. Most have yet to make any move.

“We don’t think that’s really what’s happening,” Rice said.

Source : http://www.buffalonews.com/business/there-are-signs-factories-are-coming-back-to-the-us-but-is-the-tide-of-globalization-ebbing-20140926

Group12@Sophia – Russia ‘biggest threat to global trade since the oil embargoes of the 1970s’

Vladimir Putin is digging in for a prolonged siege and a possibly permanent reversal of trade ties with the West. There can be no other way of interpreting the decision to ban many food imports from countries that have imposed sanctions, and the parallel threat to stop car imports and flights by Western airlines over Russian airspace.

Collectively, these moves would represent the most profound breakdown in global trade since the oil embargoes of the 1970s. Never mind the geo-political risks implicit in what’s going on, these wider threats to globalisation are being almost wholly ignored by financial markets, where misplaced complacency continues to be the order of the day.

There’s still time for Mr Putin to retreat from the brink, but he has shown few signs of it so far, repeatedly calling the West’s bluff in his piecemeal annexation of Ukraine. The cosy assumption that reason will prevail has already been repeatedly shattered. Why would Mr Putin back off now?

Banning food imports obviously amounts to a steep escalation in this tit for tat exchange with the West, but in fact Russia has been moving into ever more protectionist mode for some time now in apparent preparation for a breakdown in relations. Professor Simon Evenett of the University of St Gallen, Switzerland, says that so far this year, Russia has implemented 38 measures that directly harm trading partners, or nearly one in five of all such protectionist measures tracked globally by his Global Trade Alert.

“Recent Russian actions follow a profound expansion of industrial policy since the global economic crisis began” says Professor Evenett. “Those policies have seen extensive resort to subsidisation, tariff increases, and a wide range of non-tariff barriers. In fact, crisis-era Russian trade policy amounts to the import substitution policies of yesteryear cushioned by a raft of subsidies. Today, the Russian government is reported to be considering introducing protectionist measures in the automobile, shipbuilding, and aircraft production sectors, suggesting that the current foreign policy spate may be used to further nationalistic commercial ends”.

Goodbye globalisation, hello another era of growing geo-political and protectionist tension. We can but hope not, but it’s not looking good, not good at all.

http://blogs.telegraph.co.uk/finance/jeremywarner/100027872/russian-biggest-threat-to-global-trade-since-the-oil-embargoes-of-the-1870s/

Group35@Sophia – The ‘butterfly defect’ at the heart of globalisation

Globalisation brings immense benefits. As barriers to the movement of goods, services and capital have been lowered, many emerging economies have seen extraordinary improvements in living standards and incomes. Even more important than the physical flows across borders has been the rise of the internet over the past 15 years, which, together with improving literacy and education, is allowing ideas to spread faster than ever before. Yet growing integration and complexity has also resulted in new systemic risks that must be managed if we are to preserve the gains of recent decades.

The recent financial crisis was the first of the systemic crises of the 21st century but certainly will not be the last. At its heart were four critical failures. A mismatch developed between a system that had become global in its reach and a regulatory structure still rooted in national institutions. Revolutionary technological changes driven by the exponential improvements in computer power facilitated new financial instruments that were not understood by an older generation of supervisors. Management and regulators were blinded by the blizzard of data. Last, conflicts of interest were endemic in the system, and far from excessive risk-taking being curtailed, it was excessively rewarded. Politicians, chief executives and bank boards were seduced by lucrative incentives and the toxic mix of cheap credit, bonuses, and accounting and political systems that rewarded short-termism.

That the most highly supervised, institutionally well endowed and data-rich of industries could fail so catastrophically should provide a wake-up call for all of us. For the vulnerability of our interconnected global systems to the “butterfly effect” – in chaos theory, the potential for a ripple in one part of the world to be amplified and lead to major disturbances in another – is by no means confined to finance.

Increased mobility and population density has exacerbated the threat of a global pandemic. The virtual integration of global society and business over the internet has created a new threat of collapse due to cyber attacks or failures in the infrastructure. Meanwhile, rapid integration of the global economy is leading to rising greenhouse gas emissions, with the potential to trigger catastrophic climate change on the other side of our planet.

In all of these areas, a disconnect between an increasingly global world and the fragmented structure of nation-states – what we might call the “butterfly defect” – exacerbates systemic risks. At a time when in finance, as in many other areas, greater co-operation is required, international economic policy and governance is gridlocked. New ways of working are required, including through the establishment of creative coalitions of government, business, cities and civil society. Complexity cannot be fought with still more complexity.

Policies at the national and international level should aim to build resilience. In finance, this has implications for competition policy, for the geographical location of key institutions and for regulation, including to moderate short-term incentives. Fundamental reforms in global governance are required to harvest the upsides of globalisation and mitigate the systemic risks endemic to rapid economic growth and closer integration.

While systemic risks come from globalisation, they also pose the gravest threat to continued globalisation. The political and psychological response to growing complexity is to try to become more local. Protectionism, nationalism and xenophobia are on the rise, and there is a real danger that globalisation will be rolled back and that our societies will become more closed. This would be a terrible mistake, not least for poor people across the world who are yet to benefit from increased connectivity and growth. The way to manage the systemic threats arising from globalisation – financial, climate, pandemic, cyber and others – is to ensure we co-operate to address them.

Ian Goldin is director of the Oxford Martin School. He is co-author, with Mike Mariathasan, of the forthcoming ‘The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do about It’, which he will be discussing at the Oxford Literary Festival on Thursday 27 March. oxfordliteraryfestival.org

http://www.ft.com/cms/s/2/cb3e3c4e-a919-11e3-bf0c-00144feab7de.html#ixzz3EczVX48t

Group 87 Sophia – Why investors should bet on India

 

India’s prime minister is known for his pro-business policies, and his steady efforts to draw foreign investments could plant the seeds for a more prosperous India.

In a richly symbolic event, India put a spacecraft into orbit around Mars this week, beating Japan and China in the race and doing it at a fraction of what it cost NASA. The timing is propitious, as Indian Prime Minister Narendra Modi landed in the U.S. on Friday for his first official visit and amid highexpectations for India’s economic growth and potential.

Since he took office in May, Modi has begun to execute on the systematic reformation of India’s inefficient and bureaucratic markets to make them friendlier and more open for investors and businesses. So far, his actions seem to be working, with GDP accelerating to 5.7% in the second quarter after a period of stagnation; inflation is trending down and foreign capital is starting to come in.

Modi has also received praise for his recent deals with Japan and China, securing $33 billion of new investments from Japan; he even garnered $20 billion in infrastructure investment from China –India’s historical geopolitical adversary. These numbers may not be staggering from a Western perspective, but they are meaningful for an emerging economy like India’s, and more to the point, a sign of confidence from Asia in India’s economic prospects – a signal that the prime minister hopes to obtain from the U.S. as well.

Underpinning all this is Modi himself, who is proving to be a pragmatic leader. In addition to his loftier ambitions of easing India’s restrictive market regulations and upgrading the nation’s infrastructure, he seems intent on building India’s economic strengths from the ground up, pushing toprovide bank accounts for every Indian household across the nation, standardize banking practices to end exploitation of the poor and illiterate, provide insurance and pension plans for those with no access to them, and to promote the use of technology for education, social innovation, and business activity even in remote areas.

There are many challenges, of course. For one, there is Modi’s past as Chief Minister of the state of Gujarat, home to a notorious incident of Hindu-Muslim riots which he has been accused of mishandling. Combined with the Hindu roots of his Bharatiya Janata Party, political analysts have questioned his moral authority to govern over India’s minority Muslim population.

Another problem is that India’s labor force is skewed toward the agriculture sector, even though itshighest growth industries like information technology, telecom, healthcare, and retail are projected to require millions of new skilled workers which they may not be able to find. While Modi has called for more foreign investments in India’s manufacturing sector, his administration will first need to revamp archaic labor laws and improve education to ensure the pool of skilled labor required for long-term growth. Finally, there is a lack of women in the workforce and rampant government corruption, which the prime minister must also tackle.

Still, solving the economic and social troubles of a country as populous and complex as India isn’t easy, and what is important is that the nation finally has a leader who is willing to take on the challenge. Modi may have a tough road ahead but his disciplined style of governing and clarity of purpose could enable him to succeed.

In this spirit, as he now begins his dialogue with another great democracy and primary role model for free markets – the U.S. – there should be plenty of affinity between the two sides and opportunity to generate mutual prosperity through trade. India can certainly benefit from America’s financial resources and state of the art industrial/technological expertise to modernize its business landscape and national infrastructure, and U.S. investors can profit handsomely in the world’s most vibrant emerging market with the right foundation in place. Bilateral trade between India and the U.S. has reached $100 billion, and by some estimates, could grow to $500 billion by the end of the decade.

Historically, the relationship has been marked by crests and valleys, partly due to a disagreement over how much freedom to allow the private sector and more recently due to the stalling of a key nuclear deal over India’s unwillingness to provide end-user verification for plants and tracking of sourced fuel. The former could change with the advent of the Modi administration’s market-friendly philosophy, and the latter may have become less urgent due to India’s newly minted civil nuclear agreement withAustralia instead. What could also help India’s relations with the U.S. is raising foreign ownership limits in its defense sector from 26% to 49%, potentially creating a windfall for U.S. investors and defense contractors.

Yet another area to watch during Modi’s visit will be the contentious topic of outsourcing, which needs to be resolved in order to maximize the value of human capital in India and bolster the competitiveness of U.S. companies. The keys to success here will be the Indian government’s ability to bring its business policies closer in line with American best business practices and legal framework, and the ability of the U.S. to recognize the benefits, and even necessity, of outsourcing in an age of globalization.

India is reaching for the stars, both figuratively and literally, with an ambitious program of modernization and free market growth that can generate wealth for itself as well as its trading partners. That is a trend worth supporting.

Source: http://fortune.com/2014/09/27/why-investors-should-bet-on-india/

 

11@ Paris (IMBD) The Benefits of Economic Expansions Are Increasingly Going to the Richest Americans

Economic expansions are supposed to be the good times, the periods in which incomes and living standards improve. And that’s still true, at least for some of us.

But who benefits from rising incomes in an expansion has changed drastically over the last 60 years. Pavlina R. Tcherneva, an economist at Bard College, created a chart that vividly shows how. (The chart appears in print in the Fall 2014 edition of the Journal of Post Keynesian Economics, in her article “Reorienting fiscal policy: A bottom-up approach.”)

Back in the 1940s, ’50s and ’60s, most of the income gains experienced during expansions — the periods from the trough of one recession until the onset of another — accrued to most of the people. That is to say, the bottom 90 percent of earners captured at least a majority of the rise in income.

With each expansion in sequence, however, the bottom 90 percent captured a smaller share of income gains and the top 10 percent captured more.

Fast-forward to the 1990s and early 2000s expansions, and a new pattern emerged, with the huge majority of income gains going to the top 10 percent, leaving pocket change for everybody else. From 2001 to 2007, 98 percent of income gains accrued to the top 10 percent of earners, Ms. Tcherneva found, basing her analysis on data from Thomas Piketty and Emmanuel Saez, the academics who have made a speciality in documenting the rise of income inequality around the world. (As a point of reference, an American needed a 2011 adjusted gross income of $120,136 to be in the top 10 percent of earners that year, according to I.R.S. data.)

Capture d’écran 2014-09-28 à 18.02.48

Which brings us to the current expansion. Ms. Tcherneva’s data goes only through 2012, so perhaps in the two years since then things have gotten a bit better for most workers. But in the first three years of the current expansion, incomes actually fell for the bottom 90 percent of earners, even as they rose nicely for the top 10 percent. The result: The top 10 percent captured an impossible-seeming 116 percent of income gains during that span.

But one consistent finding of research into inequality is that merely cutting things off at the top 5 or 10 percent of earners doesn’t capture all of what is changing in patterns of wealth and earnings. So Ms. Tcherneva also compiled the same data for those in the top 1 percent. (The cutoff there, according to the I.R.S., is $388,905 in 2011 adjusted gross income).

This pattern is, in its way, all the more striking. One percent of the population, in the first three years of the current expansion, took home 95 percent of the income gains.

Capture d’écran 2014-09-28 à 18.02.40

But, she added, “this trickle-down mechanism never quite trickles down far enough to create job opportunities for all individuals willing and able to work.”

She would prefer forms of fiscal stimulus that focus more directly on employing workers, especially at the lower end of the economic ladder. “The manpower of the poor and the unemployed can be mobilized for the public purpose irrespective of their skill level, which in turn will be upgraded by the very work experience and educational programs that the program would offer,” she writes.

Not everyone would agree with that prescription. But this much is clear: Recessions are bad enough; everyone understands that they will tend to be times of stagnant or falling incomes. What is remarkable about the patterns of the last half-century is the steady march toward expansions that also do less and less to build up the incomes of most Americans.

http://www.nytimes.com/2014/09/27/upshot/the-benefits-of-economic-expansions-are-increasingly-going-to-the-richest-americans.html?ref=economy&abt=0002&abg=1

Group33@Sophia – HOW POOR COUNTRIES SEEMED TO BE CATCHING UP WITH RICH ONES—AND WHY THEY ARE NOW FALLING BEHIND AGAIN

IF THE 20th century belonged to the rich countries of North America and Europe, some economists argue, then the 21st will be the era of the emerging world. Economic growth across emerging markets has been scorching since 2000. Some of the largest countries, like India and China, managed growth rates above 10% per year. Continued growth at such rates would lead to “convergence” with the rich world. That would mean higher living standards in developing countries and a shift in the balance of economic and political power. Yet those prospects seem to be diminishing. Growth rates are dropping across emerging markets, from the largest—including countries like Brazil and Russia that are now in recession—to the smallest. As a result, the rate of convergence has dropped to almost zero. What was driving convergence, and why has it stopped?

When comparing income levels across countries, most economists use GDP per person, adjusted for purchasing-power parity, or PPP. PPP-adjusted GDP per person is around $53,000 in America, $36,000 in Britain, $12,000 in China, and $1,300 in Ethiopia. Such large divergences have long been a puzzle to economists; poor countries ought to be able to learn from richer ones and borrow technology in order to produce more and raise their incomes. Yet from the 1940s until the 1990s poor countries generally grew more slowly than rich ones, falling ever farther behind in income terms. Only a fortunate handful—including countries like South Korea and Singapore—made the leap from poor-country status to rich. It therefore came as a surprise in the late 1990s when the trickle of countries making the passage to higher income-levels became a flood.

Over the past 15 years, most emerging economies have enjoyed faster growth in GDP per person than rich ones, leading to convergence in incomes. Many economies have done well by doing the things economists long reckoned were required for catch-up growth: they opened their economies to global markets, reformed their laws to be more business-friendly, invested in infrastructure and educated their workers. And convergence generally worked the way economists long thought it would. In China, low-wage manufacturing of cheap goods for export eventually evolved into the production of more sophisticated goods and services, as workers and firms accumulated knowledge and experience. From 2000 to 2009, developing economies’ growth rates were more than four percentage points higher than those of rich countries, pushing their share of global output from just over a third to nearly half.

Yet the forces that drove convergence are now acting as a drag on emerging-market growth. Global trade grew more than twice as fast as output in the early 2000s, but has struggled to keep pace in recent years. Incomes in some economies were buoyed by rising commodity prices, which have since plateaued or begun to drop. Perhaps most importantly, expansion around the world of supply-chain oriented trade allowed poorer economies quickly to become export powerhouses by importing complex components (like computer chips) for assembly into finished goods that could be re-exported. Although it enabled faster growth, supply-chain trade may not have contributed much to developing economies’ technological sophistication. Amid slowing growth in trade and commodity prices, developing economies are therefore finding it harder than expected to build on past success. The end of the recent era of fast convergence may mean that developing countries will have to work harder to reform their economies and boost education in order to continue catching up with the rich world.

Source: http://www.economist.com/blogs/economist-explains/2014/09/economist-explains-9?zid=295&ah=0bca374e65f2354d553956ea65f756e0

It’s over, CRTC. Netflix and globalization have won – (Group 9 – Paris – Msc FMI)

John Ibbitson is a CIGI senior fellow, an award-winning writer and leading political journalist in Canada. Currently on a one-year leave from The Globe and Mail, John is researching, writing and speaking on Canadian foreign policy at CIGI while he works on a new book.

I am listening to Szymanowski’s Second Violin Concerto and thinking about Netflix and the end of Canadian culture as I used to know it.

And not just Canada’s. Any government that seeks to protect its national culture from the forces of globalization will fail. The digital universe is too powerful.

For this country, the beginning of the end came last Friday, when a Netflix executive told the Canadian Radio-television and Telecommunications Commission that it can go to hell. Or words to that effect.

The CRTC is considering whether to fence in the American-owned video streaming service. Commission chair Jean-Pierre Blais became agitated during a hearing when a Netflix executive refused to reveal how many Canadian subscribers it had and other data.

The CRTC’s chairman was right to be upset, not simply because an American corporation displayed frank contempt for a Canadian regulatory agency (though that is a thing, isn’t it?), but because at that exact moment the CRTC ceased to have any meaning as a regulator of culture. It’ll be gone in a few years, at least in its current incarnation, and Mr. Blais knows it.

And if he doesn’t know it, he should join me in listening to this violin concerto, which is another bell tolling the CRTC’s fate.

I’d barely heard of Karol Szymanowski, an early 20th-century Polish composer, when a friend told me he is so devoted to the Second Violin Concerto that he plays it before any long journey, so that he’ll have it in his head during the trip.

That’s enough reason to give the concerto a try. And there are so many ways to do it. I could, if I were very, very old, order a compact disc from Amazon.ca, the Canadian offshoot of the American online department store. But a CD? Really?

iTunes has it of course, including the critically preferred version with Thomas Zehetmair on violin and Simon Rattle conducting the City of Birmingham Symphony Orchestra. But last week I signed up for a free trial of Spotify, which is to music streaming as Netflix is to video streaming, and which has just arrived in Canada. Spotify has a classical music category. So what do they have by Karol Szymanowski?

Multiple versions of the violin concertos, including Zehetmair and Rattle. Multiple versions of the four symphonies. Multiple versions of the Stabat Mater (another personal favourite of my friend). Two different versions of the opera, King Roger. The complete piano music and string quartets, assorted other chamber music, ballets, lieder and then I gave up scrolling.

So why do I still have a music library?

When radio and then television came along in the 1930s and 50s, the federal government created a regulator to assign frequencies to different stations, to avoid confusion. But Ottawa couldn’t leave well enough alone. To protect Canadian culture from American competition, it created a state broadcaster, and compelled private broadcasters to include Canadian content and to contribute to a fund that subsidized Canadian music and television.

But then the Americans invented the Internet, and for years now it’s been clear that Canadian cultural protectionism is over. If Mr. Blais really does try to rein in Netflix, the popular backlash will only hasten the CRTC’s demise.

And just imagine what would happen if the CRTC were to impose Can-con restrictions on YouTube. Impossible, you say? Michael Geist, using information obtained from The Globe and Mail, analyzes a similar, but less noticed, conversation between Mr. Blais and a Google executive.

Stephen Harper knows what’s at stake. What’s more, the Prime Minister detests the socialist, import-substituting anachronism of a state broadcaster, cultural subsidies, quotas and protection. There is only so much you can do in a mandate, and dismantling the Wheat Board monopoly was a higher priority for the Tories than dismantling the CRTC, but Mr. Harper understands how important video streaming is to viewers, which is why he explicitly declared that he will permit no tax on (by which he means interference with) Netflix.

Critics fumed that such remarks undermined the integrity of the CRTC hearings. Yes, they did. Why do you think he made them?

It’s not as though many people really care any more about protecting local culture, at least outside Quebec. Even the most fervent Canadian nationalists can’t get enough of House of Cards and Sherlock and Ted Talks and Orange is the New Black and Borgen. (Don’t ask me how I watched the first two seasons of Borgen even though I don’t have cable.)

And if you proposed to anyone under 50 that Netflix and Spotify and YouTube and every other service that streams content onto smartphones and tablets should be licensed and taxed, with the money going to subsidize Canadian videos of Canadian dogs balanced on Canadian skateboards coasting down Canadian streets, dammit – well, you wouldn’t, would you?

It’s over. Globalization has won, in culture as in every other contest. Canadian cultural industries will have to compete in the marketplace along with everyone else. It’s simply a question of when the last protections are dismantled. It won’t be long.

 

http://www.theglobeandmail.com/news/politics/its-over-crtc-netflix-and-globalization-have-won/article20784448/

73@Sophia – With China Set to Open Stock Trading, Investors Lay Groundwork

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O’Connor, the $5.6 billion hedge fund owned by UBS, has been expanding its presence in Asia. It has hired traders from UBS’s proprietary trading desk to work in its Hong Kong and Singapore offices. In August, it hired John Yu, a former analyst at SAC Capital Advisors

It is not alone. Bankers, brokerage firms and hedge funds have all been quietly expanding their Asian operations to take advantage of one event: the biggest opening into China in years.

China plans to connect the Shanghai stock exchange to its counterpart in Hong Kong over the next month as part of an initiative announced by Premier Li Keqiang this year to open China’s markets to foreign investors who have been largely shut out.

The move will allow foreign investors to trade the shares of companies listed on the Shanghai stock exchange directly for the first time, and mainland Chinese investors to buy shares in companies listed in Hong Kong.

The potential rewards of an open market between the mainland and Hong Kong are enormous for investors. Currently, the only way for foreign investors to trade Chinese stocks is indirectly through a limited quota program that allows a trickle of foreign money into the country.

“This is the single most important development in China’s intention to internationalize this market,” one senior Western banker in Asia said of the planned reform, speaking on the condition he not be named because he was not authorized to speak publicly on the matter.

The program, called Shanghai-Hong Kong Stock Connect, will create the second-largest equity market in the world in terms of the market value of the combined listed companies, said Dawn Fitzpatrick, the chief investment officer of O’Connor. The largest remains the New York Stock Exchange.

“It is also going to create a much more efficient way for the global marketplace to value many Chinese companies, and this attribute alone makes the market more attractive,” she added.

The formal starting date for the program has not been announced, but officials have been aiming for sometime next month. Employees at brokerage firms across Hong Kong have been working extra weekend shifts since August, participating in mock trading sessions to test their readiness for the new program. On one recent weekend, 97 brokerage firms accounting for about 80 percent of the trading turnover in the Hong Kong market simulated a failure of their backup data systems for the Shanghai-Hong Kong two-way trade.

O’Connor, for its part, is among a small group of hedge funds that have already participated in the quota program, named the qualified foreign institutional investors program. They buy and sell shares denominated in both renminbi and Hong Kong dollars.

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The wide-open connection will allow hedge funds like O’Connor to expand their business between the two exchanges and trade directly.

Still, challenges remain, and some significant questions have not been answered.

The program is part of a broader reform package announced by President Xi Jinping last year. Critics point to other reform initiatives, like the building of new and planned free trade zones, that have been slow to take off.

Last September, regulators in Shanghai agreed to let a small group of United States and British hedge funds raise $50 million each from Chinese investors as part of a pilot program. One of these firms has complained that progress has been slow and weighed down by bureaucratic hurdles.

Linking the Hong Kong and Shanghai exchanges is not a new idea. In 2007, Hong Kong officials announced a similar plan to allow Chinese investors to gain access Hong Kong’s stock market. That plan never took off.

And while foreign and Chinese investors will have the chance to invest in hundreds of companies that were previously off limits, they will still be limited by quotas. The combined two-way trading volume will be capped at 23.5 billion renminbi ($3.8 billion), about 20 percent of the combined average daily trading volume on both markets. Individual mainland Chinese investors will need at least 500,000 renminbi in their brokerage account to buy Hong Kong shares, a threshold that excludes most retail investors.

Foreign buyers of Shanghai stocks will not be able to buy shares and sell them on the same day. It is still unclear whether they will be allowed to buy shares using margin financing or to engage in short-selling. And, in another hurdle, all trades will be settled in renminbi, introducing additional risk for foreign investors.

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There are also unresolved issues over taxes. Foreign investors in mainland China’s stock markets are technically liable for paying capital gains taxes, but China has historically not taxed such investments under the existing quota scheme. It remains an open question whether that practice will change.

Given these and other uncertainties, companies like MSCI — which compiles indexes that are tracked by funds with trillions of dollars invested in stocks around the world — have so far declined to include mainland Chinese shares in their indexes.

That could change as soon as next year, when MSCI is next scheduled to review Chinese shares.

“Were China’s domestic A-shares to be included in the MSCI benchmarks, it would be a game-changer, attracting billions of dollars of capital,” analysts at HSBC in Hong Kong wrote this month in a research report.

Regardless, some investors are pushing ahead.

Before he was hired by O’Connor, Mr. Yu was a China analyst at SAC, which since April has become a $10 billion family office called Point72 Asset Management. He will be based with O’Connor’s Asia team in Hong Kong. BlueCrest Capital Management, a hedge fund based in London, also recently hired several SAC traders.

Charles Li, the chief executive of Hong Kong Exchanges and Clearing, the stock market operator, has been forthright about the limitations of the trading program.

“It’s not perfect,” Mr. Li wrote in a post on his official blog last month. “While we have managed to find a solution to most of the challenges of aligning two very different markets, some of the differences were so significant that our solutions will inevitably constrain the market.”

Mr. Li added that, despite these constraints, “I believe that it is important to move forward rather than let such an important opportunity pass us by.”

Source: http://dealbook.nytimes.com/2014/09/24/with-china-set-to-open-stock-trading-investors-lay-groundwork/?_php=true&_type=blogs&ref=economy&_r=0