Invitation Only Research Event
Muscat, Oman
The GCC states have invested significantly in cybersecurity and have made large strides in protecting governments, businesses and individuals from cyber threats, with the aim of delivering on their ambitious national strategies and future visions. However, several challenges to cybersecurity and cyber resilience in the region persist, putting those ambitious plans at risk.
These challenges include the uneven nature of cybersecurity protections, the incomplete implementation of cybersecurity strategies and regulations, and the issues around international cooperation. Such challenges mean that GCC states need to focus on the more difficult task of cyber resilience, in addition to the simpler initial stages of cybersecurity capacity-building, to ensure they harness the true potential of digital technologies and mitigate associated threats.
Set against this background, this workshop will explore opportunities and challenges to cyber resilience in the GCC focusing on four main pillars:
1. Cyber resilience: in concept and in practice
2. Building an effective cybersecurity capacity
3. The potential of regional and international cooperation to cyber resilience
4. Deterrence and disruption: different approaches
This event will be held in collaboration with the Arab Regional Cybersecurity Centre (ARCC) and OMAN CERT.
PLEASE NOTE THIS EVENT IS POSTPONED UNTIL FURTHER NOTICE.
Invitation Only Research Event
Smart Peace brings together global expertise in conflict analysis and research, peacebuilding and mediation programming, and behavioural science and evaluation. Together, Smart Peace partners are developing integrated and adaptive peace initiatives, working with local partners to prevent and resolve complex and intractable conflicts in Central African Republic, Myanmar and northern Nigeria.
This roundtable is an opportunity for Smart Peace partners to share the Smart Peace concept, approach and objectives, and experiences of the first phases of programme implementation. Roundtable discussions among participants from policy, practice and research communities will inform future priorities and planning for Smart Peace learning, advocacy and communication.
Smart Peace partners include Conciliation Resources, Behavioural Insights Team, The Centre for Humanitarian Dialogue, Chatham House, ETH Zurich, International Crisis Group and The Asia Foundation.
Corporate Members Event Director's Breakfast Briefing Partners and Major Corporates
Chatham House | 10 St James's Square | London | SW1Y 4LE
General David Petraeus, Partner, KKR; Chairman, KKR Global Institute; Director, CIA (2011-12)
Chair: Dr Robin Niblett, Director, Chatham House
Drawing on his experience as commander of US forces in Iraq and Afghanistan and director of the CIA, General David Petraeus (Ret) will reflect on the current state of global security focusing in particular on the role of the US within the international security infrastructure and the world order.
This event is only open to Major Corporate Member and Partner organizations of Chatham House. If you'd like to attend, please RSVP to Linda Bedford.
To enable as open a debate as possible, this event will be held under the Chatham House Rule.
Ana Alecsandru is a research assistant for the International Security programme, covering projects related to nuclear weapons policy and emerging technologies. She is also a PhD candidate at the University of Birmingham (awaiting Viva examination).
Her doctoral research examined the relationship between trust and verification in nuclear arms control negotiations between the United States and Russia.
Prior to joining Chatham House, she worked at the University of Birmingham on various projects concerning nuclear weapons policy while doing her PhD.
Ana completed an internship in the Arms Control, Disarmament, and WMD Non-Proliferation Centre at NATO HQ in Brussels in 2014. She was also a research intern at the United Nations Office for Disarmament Affairs (UNODA) in New York in 2016.
During her doctoral studies, she received full grants to participate in the 2017 IGCC’s Public Policy and Nuclear Threats Boot Camp hosted at UC San Diego and the 2017 Nuclear Safeguards and Non-Proliferation Training Course hosted by the European Commission’s Research Centre in Ispra.
Ana holds an MA in Security Studies and an MA in Research Methods from the University of Birmingham. She completed her BSc (hons) in International Relations at the University of Bath. For her doctoral research, she was awarded a studentship by the UK Economic and Social Research Council.
Invitation Only Research Event
Chatham House, London
In April 2018, the Commonwealth Heads of Government Meeting (CHOGM), held in London, saw the creation and the adoption of the Commonwealth Cyber Declaration. The declaration outlines the framework for a concerted effort to advance cybersecurity practices to promote a safe and prosperous cyberspace for Commonwealth citizens, businesses and societies.
The conference will aim to provide an overview on the progress made on cybersecurity in the Commonwealth since the declaration was announced in 2018. In addition, it will examine future challenges and potential solutions going forward.
This conference is part of the International Security Programme's project on Implementing the Commonwealth Cybersecurity Agenda and will convene a range of senior Commonwealth representatives as well as a selection of civil society and industry stakeholders. This project aims to develop a pan-Commonwealth platform to take the Commonwealth Cyber Declaration forward by means of a holistic, inclusive and representative approach.
Please see below meeting summaries from previous events on Cybersecurity in the Commonwealth:
Attendance at this event is by invitation only.
Members Event
Chatham House | 10 St James's Square | London | SW1Y 4LE
HE George Vella, President, Republic of Malta
Chair: Dr Alex Vines OBE, Managing Director, Ethics, Risk & Resilience; Director, Africa Programme, Chatham House
The president of Malta discusses the current security challenges in the Mediterranean region, reflecting on the role of international cooperation in addressing climate change, migration and refugee flows.
16 January 2020
Change was slow to come but progress has since been swift. Not only can a continuing focus on inclusivity benefit service people and the organization, it is also an essential element of a values-based foreign policy.The new UK government will conduct a review of foreign, security and defence policy in 2020. If the UK decides to use values as a framework for foreign policy this needs to be reflected in its armed forces. One area where this is essential is continuing to deepen inclusivity for LGBTIQ+ personnel, building on the progress made since the ban on their service was lifted in 2000.
I witnessed the ban first-hand as a young officer in the British Army in 1998. As the duty officer I visited soldiers being held in the regimental detention cells to check all was well. One day a corporal, who I knew, was there awaiting discharge from the army having been convicted of being gay. On the one hand, here was service law in action, which was officially protecting the army’s operational effectiveness and an authority not to be questioned at my level. On the other, here was an excellent soldier in a state of turmoil and public humiliation. How extreme this seems now.
On 12 January 2000 Tony Blair’s Labour government announced an immediate lifting of the ban for lesbian, gay and bisexual personnel (LGB) and introduced a new code of conduct for personal relationships. (LGB is the term used by the armed forces to describe those personnel who had been banned prior to 2000.) This followed a landmark ruling in a case taken to the European Court of Human Rights in 1999 by four LGB ex-service personnel – supported by Stonewall – who had been dismissed from service for their sexuality.
Up to that point the Ministry of Defence's long-held position had been that LGB personnel had a negative impact on the morale and cohesion of a unit and damaged operational effectiveness. Service personnel were automatically dismissed if it was discovered they were LGB, even though homosexuality had been decriminalized in the UK by 1967.
Proof that the armed forces had been lagging behind the rest of society was confirmed by the positive response to the change among service personnel, despite a handful of vocal political and military leaders who foresaw negative impacts. The noteworthy service of LGBTIQ+ people in Iraq and Afghanistan only served to debunk any residual myths.
Twenty years on, considerable progress has been made and my memories from 1998 now seem alien. This is a story to celebrate – however in the quest for greater inclusivity there is always room for improvement.
Defence Minister Johnny Mercer last week apologized following recent calls from campaign group Liberty for a fuller apology. In December 2019, the Ministry of Defence announced it was putting in place a scheme to return medals stripped from veterans upon their discharge.
The armed forces today have a range of inclusivity measures to improve workplace culture including assessments of workplace climate and diversity networks supported by champions drawn from senior leadership.
But assessing the actual lived experience for LGBTIQ+ people is challenging due to its subjectivity. This has not been helped by low participation in the 2015 initiative to encourage people to declare confidentially their sexual orientation, designed to facilitate more focused and relevant policies. As of 1 October 2019, only 20.3 per cent of regular service people had declared a sexual orientation.
A measure of positive progress is the annual Stonewall Workplace Equality Index, the definitive benchmarking tool for employers to measure their progress on LGBTIQ+ inclusion in the workplace; 2015 marked the first year in which all three services were placed in the top 100 employers in the UK and in 2019 the Royal Navy, British Army and Royal Air Force were placed 15th=, 51st= and 68th respectively.
Nevertheless, LGBTIQ+ service people and those in other protected groups still face challenges. The 2019 Ministry of Defence review of inappropriate behaviour in the armed forces, the Wigston Report, concluded there is an unacceptable level of sexual harassment, bullying and discrimination. It found that 26-36% of LGBTIQ+ service people have experienced negative comments or conduct at work because of their sexual orientation.
The Secretary of State for Defence accepted the report’s 36 recommendations on culture, incident reporting, training and a more effective complaints system. Pivotal to successful implementation will be a coherent strategy driven by fully engaged leaders.
Society is also expecting ever higher standards, particularly in public bodies. The armed forces emphasise their values and standards, including ‘respect for others’, as defining organisational characteristics; individuals are expected to live by them. Only in a genuinely inclusive environment can an individual thrive and operate confidently within a team.
The armed forces also recognize as a priority the need to connect to and reflect society more closely in order to attract and retain talent from across all of society. The armed forces’ active participation in UK Pride is helping to break down barriers in this area.
In a post-Brexit world, the UK’s values, support for human rights and reputation for fairness are distinctive strengths that can have an impact on the world stage and offer a framework for future policy. The armed forces must continue to push and promote greater inclusivity in support. When operating overseas with less liberal regimes, this will be sensitive and require careful handling; however it will be an overt manifestation of a broader policy and a way to communicate strong and consistent values over time.
The armed forces were damagingly behind the times 20 years ago. But good progress has been made since. Inclusion initiatives must continue to be pushed to bring benefits to the individual and the organization as well as demonstrate a values-based foreign policy.
Will Davies is the Army Chief of General Staff Research Fellow in the International Security programme. He commissioned into the British Army in 1996 and has deployed to Bosnia, Kosovo, Iraq and Afghanistan in tank and reconnaissance units and latterly as an advisor.
He recently returned from the Kurdistan Region of Iraq as the UK’s advisor to the regional government’s Peshmerga reform programme. In 2015 he helped change defence policy to enable women to serve in combat roles including the infantry.
Will’s research focus at Chatham House is on armed forces’ overseas engagement.
2018-19 | Special Defence Advisor to Ministry of Peshmerga Affairs, Kurdistan Region of Iraq |
2015-16 | Women in Ground Close Combat, Deputy Team Leader |
2012-15 | Commanding Officer, 1st The Queen’s Dragoon Guards (recce regiment) |
2008-14 | Three deployments to Helmand Province, Afghanistan with British Army |
2005 | Masters in Defence Administration, Cranfield University |
2003 | Deployment to Iraq with British Army |
1996-99 | Deployments to Bosnia and Kosovo with British Army |
1995 | MA(Edin) Geography, University of Edinburgh |
6 November 2019 , Volume 96, Number 1
The first issue of International Affairs in 2020 explores the geopolitics of the 'Indo-Pacific' region.
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
8 January 2020 , Volume 96, Number 1
7 January 2020
Targeting cultural property is rightly prohibited under the 1954 Hague Convention.As tensions escalate in the Middle East, US President Donald Trump has threatened to strike targets in Iran should they seek to retaliate over the killing of Qassem Soleimani. According to the president’s tweet, these sites includes those that are ‘important to Iran and Iranian culture’.
Defense Secretary Mark Esper was quick on Monday to rule out any such action and acknowledged that the US would ‘follow the laws of armed conflict’. But Trump has not since commented further on the matter.
Any move to target Iranian cultural heritage could constitute a breach of the international laws protecting cultural property. Attacks on cultural sites are deemed unlawful under two United Nations conventions; the 1954 Hague Convention for the Protection of Cultural Property during Armed Conflict, and the 1972 UNESCO World Heritage Convention for the Protection of the World Cultural and Natural Heritage.
These have established deliberate attacks on cultural heritage (when not militarily necessary) as a war crime under the Rome Statute of the International Criminal Court in recognition of the irreparable damage that the loss of cultural heritage can have locally, regionally and globally.
These conventions were established in the aftermath of the Second World War, in reaction to the legacy of the massive destruction of cultural property that took place, including the intense bombing of cities, and systematic plunder of artworks across Europe. The conventions recognize that damage to the cultural property of any people means ‘damage to the cultural heritage of all mankind’. The intention of these is to establish a new norm whereby protecting culture and history – that includes cultural and historical property – is as important as safeguarding people.
Such historical sites are important not simply as a matter of buildings and statues, but rather for their symbolic significance in a people’s history and identity. Destroying cultural artefacts is a direct attack on the identity of the population that values them, erasing their memories and historical legacy. Following the heavy bombing of Dresden during the Second World War, one resident summed up the psychological impact of such destruction in observing that ‘you expect people to die, but you don’t expect the buildings to die’.
Targeting sites of cultural significance isn’t just an act of intimidation during conflict. It can also have a lasting effect far beyond the cessation of violence, hampering post-conflict reconciliation and reconstruction, where ruins or the absence of previously significant cultural monuments act as a lasting physical reminder of hostilities.
For example, during the Bosnian War in the 1990s, the Old Bridge in Mostar represented a symbol of centuries of shared cultural heritage and peaceful co-existence between the Serbian and Croat communities. The bridge’s destruction in 1993 at the height of the civil war and the temporary cable bridge which took its place acted as a lasting reminder of the bitter hostilities, prompting its reconstruction a decade later as a mark of the reunification of the ethnically divided town.
More recently, the destruction of cultural property has been a feature of terrorist organizations, such as the Taliban’s demolition of the 1,700-year-old Buddhas of Bamiyan in 2001, eliciting international condemnation. Similarly, in Iraq in 2014 following ISIS’s seizure of the city of Mosul, the terrorist group set about systematically destroying a number of cultural sites, including the Great Mosque of al-Nuri with its leaning minaret, which had stood since 1172. And in Syria, the ancient city of Palmyra was destroyed by ISIS in 2015, who attacked its archaeological sites with bulldozers and explosives.
Such violations go beyond destruction: they include the looting of archaeological sites and trafficking of cultural objects, which are used to finance terrorist activities, which are also prohibited under the 1954 Hague Convention.
As a war crime, the destruction of cultural property has been successfully prosecuted in the International Criminal Court, which sentenced Ahmad Al-Faqi Al-Mahdi to nine years in jail in 2016 for his part in the destruction of the Timbuktu mausoleums in Mali. Mahdi led members of Al-Qaeda in the Islamic Maghreb to destroy mausoleums and monuments of cultural and religious importance in Timbuktu, irreversibly erasing what the chief prosecutor described as ‘the embodiment of Malian history captured in tangible form from an era long gone’.
Targeting cultural property is prohibited under customary international humanitarian law, not only by the Hague Convention. But the Convention sets out detailed regulations for protection of such property, and it has taken some states a lot of time to provide for these.
Although the UK was an original signatory to the 1954 Hague Convention, it did not ratify it until 2017, introducing into law the Cultural Property (Armed Conflicts) Act 2017, and setting up the Cultural Protection Fund to safeguard heritage of international importance threatened by conflict in countries across the Middle East and North Africa.
Ostensibly, the UK’s delay in ratifying the convention lay in concerns over the definition of key terms and adequate criminal sanctions, which were addressed in the Second Protocol in 1999. However, changing social attitudes towards the plunder of antiquities, and an alarming increase in the use of cultural destruction as a weapon of war by extremist groups to eliminate cultures that do not align with their own ideology, eventually compelled the UK to act.
In the US, it is notoriously difficult to get the necessary majority for the approval of any treaty in the Senate; for the Hague Convention, approval was achieved in 2008, following which the US ratified the Convention in 2009.
Destroying the buildings and monuments which form the common heritage of humanity is to wipe out the physical record of who we are. People are people within a place, and they draw meaning about who they are from their surroundings. Religious buildings, historical sites, works of art, monuments and historic artefacts all tell the story of who we are and how we got here. We have a responsibility to protect them.
Members Event
Chatham House | 10 St James's Square | London | SW1Y 4LE
Robert Malley, President & CEO, International Crisis Group
Chair: Dr Leslie Vinjamuri, Dean, Queen Elizabeth II Academy for Leadership in International Affairs; Director, US and the Americas Programme
Following a year of protests, extreme politics and the emergence of new and sophisticated security challenges, Robert Malley and Leslie Vinjamuri examine the International Crisis Group’s Ten Conflicts to Watch in 2020.
They identify key challenges for international relations, discuss the potential for national and regional political instability and consider how these issues may impact foreign policy, international security and democratic governance.
7 May 2020
The coronavirus crisis has resulted in an unprecedented economic downturn. Conventional quantitative easing measures used after the 2008 financial crisis will not be enough this time.What is quantitative easing? How was it used after the 2008 financial crisis?
Quantitative easing (QE) has been in existence since the Japanese central bank introduced it at the turn of the millennium. The simplest way to think about it is this: when interest rates can't go down anymore and play their normal role of stimulating growth, central banks try to expand the money supply. So, they're expanding the quantitative amount of money they put into the system.
Of course, after 2008 because of the scale of the financial and economic collapse, many Western countries resorted to QE. Some have never gotten rid of it. Others have started to, but as a result of this crisis, have gone straight back to that playbook.
33 million Americans have now filed for unemployment and one in five American workers have lost their jobs due to COVID-19. These are levels not seen since the Great Depression. You recently called for G20 countries to provide income support for all citizens. Why is this so urgent to implement now?
It is incredible to reflect back on the short time since I published that piece. I entitled it the need for a so-called people's QE, and in some ways a number of European countries, including the UK, have executed some aspects of what I was suggesting.
The United States has not, even though the absolute amounts of money the US authorities have put through their fiscal system to try and support the economy is actually bigger as a percentage of GDP than many in Europe.
What they haven't done is support ongoing employment through various schemes that many European countries have done, of which the UK has, to some degree, been one of the most ambitious.
That’s partly why you see such enormous filing for unemployment claims in the US. There’s no direct support to encourage employers to keep their employees on, in complete contrast to what you see in many Scandinavian countries who were the first to do it in Europe, and something the UK has since done.
On a practical level, what might a smart people’s QE look like?
We are living in an extraordinary time. Like many others in my generation, it’s nothing that any of us have gone through. Perhaps economically, the only parallel one can find is from the 1920s and 1930s.
It became obvious to me in early March that governments are going to have to essentially force as many of us as possible, if we weren't doing absolutely crucial necessities, to stop working or to work from home. It was pretty obvious that the consequences could be horrific.
So, the idea of a people's QE that I suggested then, some would have regarded as quite audacious. The most dramatic thing that could be done was, to put it simply, governments effectively pay for every business and every employee to have a two month paid holiday. Obviously, this would cost a very large amount of money for governments, but it would be the least disruptive way of getting us all to stay home.
And when the time is right to start letting us get back to anything vaguely like normality, there wouldn't be as much permanent disruption. I think about six weeks have passed since I wrote that piece. Actually, given the policies many governments have announced, I'm not sure undertaking the audacity in generosity of what I suggested would have cost any more. Over the long term, it might have actually turned out to be less.
Of course, there are ethics issues around whether the system could be gamed or not, amongst other issues. But six weeks later, I still believe that would have been the smartest thing to do. It certainly would have been much better than trying to encourage many businesses, particularly smaller ones, to take out loans.
A couple of countries got close to what I was suggesting – Germany and Switzerland were very quick to give 100% government guarantees to business, as well as generous wage support systems. But a number of other countries haven't, like the US, even though they wrote a $1200 check for each citizen.
Should a people’s QE involve the purchase and write off of consumer debt and student debt by a central bank?
I think these things might have to be considered. I remember being on a conference call to Chatham House members where we discussed what would be the likely economic consequences and what policymakers should do. One person on the call was talking about quite conventional forms of policy just through various forms of standard QE.
During the Q&A, someone asked whether we thought the US Federal Reserve might end up buying equities. And I said, well, why not? Eventually, it might come to that.
Actually, before that discussion was over, the Fed coincidentally announced they were going to buy high-yield corporate bonds, or very risky company debt. This is something that would have been unheard of even by the playbook of 2008.
So, I don't think ideas like a kind of provision to help student debtors is entirely crazy. These are things that our policymakers are going to have to think about as we go forward in the challenging and unpredictable days and weeks ahead.
Poorer countries like El Salvador have gone as far as cancelling rent and major utility bills for its citizens. Do you think countries like the US and UK have gone far enough to help people during the crisis?
Going one step further than a people’s QE and postponing major payments is a pretty interesting concept. I think in reality, it would be very disruptive to the medium to long-term mechanism of our societies. It could be very, very complicated.
But, of course, some parts of the G20 nations, including the UK, have moved significantly in these areas as it relates to rent payments or mortgage payments. There have been significant mortgage holidays being introduced for many sectors of our community. I think the British government has been quite thoughtful about it without doing the whole hog of potentially getting rid of our transaction system for two months or beyond.
You know, this may well be something that has to be considered if, God forbid, there is a second peak of the virus. If countries come out of a lockdown and all that results in is a dramatic rise in infections and then death again, we're going to end up right back where we are. Policymakers may have to implement more generous versions of what we've done already, despite what the long term debt consequences could be.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act in the US has been criticized as a corporate bailout while offering little to the American people. It was recently reported that hedge fund managers are applying for bailouts as ‘small businesses.’ Do you think more oversight is needed in how the stimulus funds are allocated?
The speed at which many countries have responded and introduced policies means that there's going to be some gaping holes which allow people to unfairly benefit from the system. And if indeed, that were to be the case, I cannot see why a hedge fund should benefit from government generosity.
A true hedge fund is supposed to be a form of investment manager that thrives in times of great volatility, and knows how to better navigate such financial markets than more conventional funds. So this shouldn’t be an environment where hedge funds seek the same kind of help as small businesses. That is certainly something the government should be very careful about.
Some economists argue that central banks are not independent as they finance fiscal spending through purchase of government bonds. Do the strong measures taken by central banks in response to the crisis undermine the argument for central bank independence?
In my view, an effective central bank has to do whatever is necessary, including doing very unconventional things, when the society in which that central bank operates needs it.
Most of the time, central banks are pretty boring places, but they really become crucial organizations when we go through times like the 1920s, 1930s, 2008, and of course, this current crisis. If they want to maintain their legitimacy, whatever the true parliamentary or congressional legal standing is, they have to do things quickly and as we've seen in this case, differently than the convention in order to do what our societies need.
Somebody was asking me just last week whether the Fed buying high grade debt was legal or not. I think that’s a pretty irrelevant conversation because if it’s not legal now, it will be made legal tomorrow. So, I think central banks have to keep their legitimacy and they have to do what is necessary when the time requires it. In that sense, I think most central banks have handled this crisis so far pretty well.
Neil Shearing is group chief economist at Capital Economics, the leading economic research company. He heads a team of 70 economists spread across Europe, the Americas and Asia, and is responsible for driving the firm’s research agenda as well as developing its products and relationships with clients. He is also a director of the company.
Neil has 20 years’ experience as a macroeconomist, built in both the government and financial sector. He presents regularly on the global economic and financial market outlook and is a well-known voice within the investment community, having worked in both London and New York.
Neil has written articles in the Financial Times and a number of other newspapers, as well as appearing regularly on TV and radio.
Prior to becoming group chief economist, Neil was chief emerging markets economist at Capital Economics, managing a team that won several awards for forecast accuracy. He also managed the New York office.
Neil joined Capital Economics from HM Treasury where he worked as an economic adviser in various areas, including fiscal policy and global economics.
He holds degrees in Economics from the University of York and the University of London and is a fellow of the Royal Society of Arts.
Neil's main area of research interest is in analysing and understanding structural shifts in the global economy. This clearly touches on a wide range of issues, but a fundamental question today is whether we’re facing the end of globalisation, a key area of current work which raises several interesting questions.
What does history tell us about past waves of globalisation? Are they doomed to end? What role is technology playing? Could new technologies drive another wave of integration or are they more likely to lead to re-shoring as robots replace workers? Which countries would be most vulnerable to a rollback of globalisation? Related to this, will emerging economies ever 'catch up' to income levels in developed economies? What are the implications for policy makers (governments, central banks) and global institutions (IMF, World Bank)?
27 April 2020
The IMF faces a big dilemma in its efforts to support the global economy at its time of desperate need. Simply put, the Fund’s problem is that most of the $1tn that it says it can lend is effectively unusable.There were several notable achievements during last week’s Spring meetings. The Fund’s frank set of forecasts for world GDP growth are a grim but valuable reminder of the scale of the crisis we are facing, and the Fund’s richer members will finance a temporary suspension on payments to the IMF for 29 very poor countries.
Most importantly, a boost to the Fund’s main emergency facilities - the Rapid Credit Facility and the Rapid Financing Instrument - now makes $100bn of proper relief available to a wide range of countries. But the core problem is that the vast bulk of the Fund’s firepower is effectively inert.
This is because of the idea of 'conditionality', which underpins almost all of the IMF’s lending relationships with member states. Under normal circumstances, when the IMF is the last-resort lender to a country, it insists that the borrowing government tighten its belt and exercise restraint in public spending.
This helps to achieve three objectives. One is to stabilise the public debt burden, to ensure that the resources made available are not wasted. The second is to limit the whole economy’s need for foreign exchange, a shortage of which had prompted a country to seek IMF help in the first place. And the third is to ensure that the IMF can get repaid.
Since the IMF does not take any physical collateral from countries to whom it is lending, the belt-tightening helps to act as a kind of collateral for the IMF. It helps to maximise the probability that the IMF does not suffer losses on its own loan portfolio — losses that would have bad consequences for the Fund’s role within the international monetary system.
This is a perfectly respectable goal. Walter Bagehot, the legendary editor of The Economist, established modern conventional wisdom about managing panics. Relying on a medical metaphor that feels oddly relevant today, he said that a panic 'is a species of neuralgia, and according to the rules of science you must not starve it.'
Managing a panic, therefore, requires lending to stricken borrowers 'whenever the security is good', as Bagehot put it. The IMF has had to invent its own form of collateral, and conditionality is the result. The problem, though, is that belt-tightening is a completely inappropriate approach to managing the current crisis.
Countries are stricken not because they have indulged in any irresponsible spending sprees that led to a shortage of foreign exchange, but because of a virus beyond their control. Indeed, it would seem almost grotesque for the Fund to ask countries to cut spending at a time when, if anything, more spending is needed to stop people dying or from falling into a permanent trap of unemployment.
The obvious solution to this problem would be to increase the amount of money that any country can access from the Fund’s emergency facilities well beyond the $100bn now available. But that kind of solution would quickly run up against the IMF’s collateral problem.
The more the IMF makes available as 'true' emergency financing with few or no strings attached, the more it begins to undermine the quality of its loan portfolio. And if the IMF’s senior creditor status is undermined, then an important building block of the international monetary system would be at risk.
One way out of this might have been an emergency allocation of Special Drawing Rights, a tool last used in 2009. This would credit member countries’ accounts with new, unconditional liquidity that could be exchanged for the five currencies that underpin the SDR: the dollar, the yen, the euro, sterling and the renminbi. That will not be happening, though, since the US is firmly opposed, for reasons bad and good.
So in the end the IMF and its shareholders face a huge problem. It either lends more money on easy terms without the 'collateral' of conditionality, at the expense of undermining its own balance sheet - or it remains, in systemic terms, on the sidelines of this crisis.
And since the legacy of this crisis will be some eye-watering increases in the public debt burdens of many emerging economies, the IMF’s struggle to find a way to administer its medicine will certainly outlive this round of the coronavirus outbreak.
This article is a version of a piece which was originally published in the Financial Times
21 April 2020
Following five clear steps will create the confidence needed for both the consumer and business decision-making which is crucial to a strong recovery.With the IMF forecasting a 6.1% fall in advanced economy GDP in 2020 and world trade expected to contract by 11%, there is intense focus on the question of how and when to re-open economies currently in lockdown.
But no ‘opening up’ plan has a chance of succeeding unless it commands the confidence of all the main actors in the economy – employees, consumers, firms, investors and local authorities.
Without public confidence, these groups may follow official guidance only sporadically; consumers will preserve cash rather than spend it on goods and services; employees will delay returning to work wherever possible; businesses will face worsening bottlenecks as some parts of the economy open up while key suppliers remain closed; and firms will continue to delay many discretionary investment and hiring decisions.
Taken together, these behaviours would substantially reduce the chances of a strong economic bounce-back even in the absence of a widespread second wave of infections. Five key steps are needed to achieve a high degree of public confidence in any reopening plan.
First, enough progress must be made in suppressing the virus and in building public health capacity so the public can be confident any new outbreak will be contained without reverting to another full-scale lockdown. Moreover, the general public needs to feel that the treatment capacity of the health system is at a level where the risk to life if someone does fall ill with the virus is at an acceptably low level.
Achieving this requires the government to demonstrate the necessary capabilities - testing, contact tracing, quarantine facilities, supplies of face masks and other forms of PPE (personal protective equipment) - are actually in place and can be sustained, rather than relying on future commitments. It also needs to be clear on the role to be played going forward by handwashing and other personal hygiene measures.
Second, the authorities need to set out clear priorities on which parts of the economy are to open first and why. This needs to take account of both supply side and demand side factors, such as the importance of a particular sector to delivering essential supplies, a sector’s ability to put in place effective protocols to protect its employees and customers, and its importance to the functioning of other parts of the economy. There is little point in opening a car assembly plant unless its SME suppliers are able to deliver the required parts.
Detailed planning of the phasing of specific relaxation measures is essential, as is close cooperation between business and the authorities. The government also needs to establish a centralised coordination function capable of dealing quickly with any unexpected supply chain glitches. And it must pay close attention to feedback from health experts on how the process of re-opening the economy sector-by-sector is affecting the rate of infection.
Third, the government needs to state how the current financial and economic support measures for the economy will evolve as the re-opening process continues. It is critical to avoid removing support measures too soon, and some key measures may have to continue to operate even as firms restart their operations. It is important to show how - over time - the measures will evolve from a ‘life support’ system for businesses and individuals into a more conventional economic stimulus.
This transition strategy could initially be signalled through broad principles, but the government needs to follow through quickly by detailing specific measures. The transition strategy must target sectors where most damage has been done, including the SME sector in general and specific areas such as transport, leisure and retail. It needs to factor in the hard truth that some businesses will be no longer be viable after the crisis and set out how the government is going to support employees and entrepreneurs who suffer as a result.
The government must also explain how it intends to learn the lessons and capture the upsides from the crisis by building a more resilient economy over the longer term. Most importantly, it has to demonstrate continued commitment to tackling climate change – which is at least as big a threat to mankind’s future as pandemics.
Fourth, the authorities should explain how they plan to manage controls on movement of people across borders to minimise the risk of new infection outbreaks, but also to help sustain the opening-up measures. This needs to take account of the fact that different countries are at different stages in the progress of the pandemic and may have different strategies and trade-offs on the risks they are willing to take as they open up.
As a minimum, an effective border plan requires close cooperation with near neighbours as these are likely to be the most important economic counterparts for many countries. But ideally each country’s plan should be part of a wider global opening-up strategy coordinated by the G20. In the absence of a reliable antibody test, border control measures will have to rely on a combination of imperfect testing, quarantine, and new, shared data requirements for incoming and departing passengers.
Fifth, the authorities must communicate the steps effectively to the public, in a manner that shows not only that this is a well thought-through plan, but also does not hide the extent of the uncertainties, or the likelihood that rapid modifications may be needed as the plan is implemented. In designing the communications, the authorities should develop specific measures to enable the public to track progress.
Such measures are vital to sustaining business, consumer and employee confidence. While some smaller advanced economies appear close to completing these steps, for many others there is still a long way to go. Waiting until they are achieved means higher economic costs in the short-term. But, in the long-term, they will deliver real net benefits.
Authorities are more likely to sustain these measures because key economic actors will actually follow the guidance given. Also, by instilling confidence, the plan will bring forward the consumer and business decision-making crucial to a strong recovery. In contrast, moving ahead without proper preparation risks turning an already severe economic recession into something much worse.
19 March 2020
COVID-19 is a sharp reminder of why trade policy matters. As the UK works to forge new trade deals, it must align its trade policy agenda with its climate ambition.COVID-19 is a sharp reminder of why trade and climate policy matters. How can governments maintain access to critical goods and services, and ensure global supply chains function in times of crisis?
The timing of many trade negotiations is now increasingly uncertain, as are the UK’s plans to host COP26 in November. Policy work continues, however, and the EU has released its draft negotiating text for the new UK-EU trade deal, which includes a sub-chapter specifically devoted to climate.
This is a timely reminder both of the pressing need for the UK to integrate its trade and climate policymaking and to use the current crisis-induced breathing space in international negotiations - however limited - to catch up on both strategy and priorities on this critical policy intersection.
The UK government has moved fast to reset its external trade relations post-Brexit. In the past month it formally launched bilateral negotiations with the EU and took up a seat at the World Trade Organization (WTO) as an independent member. Until the COVID-19 crisis hit, negotiations were also poised to start with the US.
The UK is also in the climate spotlight as host of COP26, the most important international climate negotiation since Paris in 2015, which presents a vital opportunity for the government to show leadership by aligning its trade agenda with its climate and sustainability commitments in bold new ways.
This would send a signal that ‘Global Britain’ is not just an empty aspiration, but a concrete commitment to lead.
Not only is concerted action on the climate crisis a central priority for UK citizens, a growing and increasingly vocal group of UK businesses committed to decarbonization are calling on the government to secure a more transparent and predictable international market place that supports climate action by business.
With COP26, the UK has a unique responsibility to push governments to ratchet up ambition in the national contributions to climate action – and to promote coherence between climate ambition and wider economic policymaking, including on trade. If Britain really wants to lead, here are some concrete actions it should take.
At the national level, the UK can pioneer new ways to put environmental sustainability – and climate action in particular - at the heart of its trade agenda. Achieving the government’s ambitious Clean Growth Strategy - which seeks to make the UK the global leader in a range of industries including electric cars and offshore wind – should be a central objective of UK trade policy.
The UK should re-orient trade policy frameworks to incentivize the shift toward a more circular and net zero global economy. And all elements of UK trade policy could be assessed against environmental objectives - for example, their contribution to phasing out fossil fuels, helping to reverse overexploitation of natural resources, and support for sustainable agriculture and biodiversity.
In its bilateral and regional trade negotiations, the UK can and should advance its environment, climate and trade goals in tandem, and implementation of the Paris Agreement must be a core objective of the UK trade strategy.
A core issue for the UK is how to ensure that efforts to decarbonise the economy are not undercut by imports from high-carbon producers. Here, a ‘border carbon adjustment (BCA)’ - effectively a tax on the climate pollution of imports - would support UK climate goals. The EU draft negotiating text released yesterday put the issue of BCAs front and centre, making crystal clear that the intersection of climate, environment and trade policy goals will be a central issue for UK-EU trade negotiations.
Even with the United States, a trade deal can and should still be seized as a way to incentivize the shift toward a net zero and more circular economy. At the multilateral level, as a new independent WTO member, the UK has an opportunity to help build a forward-looking climate and trade agenda.
The UK could help foster dialogue, research and action on a cluster of ‘climate and trade’ issues that warrant more focused attention at the WTO. These include the design of carbon pricing policies at the border that are transparent, fair and support a just transition; proposals for a climate waiver for WTO rules; and identification of ways multilateral trade cooperation could promote a zero carbon and more circular global economy.
To help nudge multilateral discussion along, the UK could also ask to join a critical ‘path finder’ effort by six governments, led by New Zealand, to pursue an agreement on climate change, trade and sustainability (ACCTS). This group aims to find ways forward on three central trade and climate issues: removing fossil fuel subsidies, climate-related labelling, and promoting trade in climate-friendly goods and services.
At present, the complex challenges at the intersection of climate, trade and development policy are too often used to defer or side-step issues deemed ‘too hard’ or ‘too sensitive’ to tackle. The UK could help here by working to ensure multilateral climate and trade initiatives share adjustment burdens, recognise the historical responsibility of developed countries, and do not unfairly disadvantage developing countries - especially the least developed.
Many developing countries are keen to promote climate-friendly exports as part of wider export diversification strategies and want to reap greater returns from greener global value chains. Further, small island states and least-developed countries – many of which are Commonwealth members – that are especially vulnerable to the impacts of climate change and natural disasters, need support to adapt in the face of trade shocks and to build climate-resilient, trade-related infrastructure and export sectors.
As an immediate next step, the UK should actively support the growing number of WTO members in favour of a WTO Ministerial Statement on environmental sustainability and trade. It should work with its key trading partners in the Commonwealth and beyond to ensure the agenda is inclusive, supports achievement of the UN Sustainable Development Goals (SDGs) and helps developing countries benefit from a more environmentally sustainable global economy.
As the UK prepares to host COP26, negotiates deals with the EU and US, and prepares for its first WTO Ministerial meeting as an independent member, it must show it can lead the way nationally, bilaterally, and multilaterally. And to ensure the government acts, greater engagement from the UK’s business, civil society and research sectors is critical – we need all hands on deck to forge and promote concrete proposals for aligning UK trade policy with the climate ambition our world needs.
15 March 2020
There have been warnings for several years that world leaders would find it hard to manage a new global crisis in today’s more confrontational, protectionist and nativist political environment.An infectious disease outbreak has long been a top national security risk in several countries, but the speed and extent of COVID-19’s spread and the scale of its social and economic impact has come as an enormous and deeply worrying shock.
This pandemic is not just a global medical and economic emergency. It could also prove a decisive make-or-break point for today’s system of global political and economic cooperation.
This system was built up painstakingly after 1945 as a response to the beggar-thy-neighbour economic policies of the 1930s which led to the Second World War. But it has been seriously weakened recently as the US and China have entered a more overt phase of strategic competition, and as they and a number of the other most important global and regional players have pursued their narrowly defined self-interest.
Now, the disjointed global economic response to COVID-19, with its enormous ramifications for global prosperity and economic stability, has blown into the open the urgent need for an immediate reaffirmation of international political and economic cooperation.
What is needed is a clear, coordinated and public statement from the leaders of the world’s major countries affirming the many things on which they do already agree, and some on which they should be able to agree.
In particular that:
Such a statement could be made by G20 leaders, reflecting the group’s role since 2010 as the premier forum for international economic cooperation.
But it could be even more appropriate coming from the UN Security Council, recognising that COVID-19 is much more than an economic challenge; and also reflecting the practical fact, in a time when international travel is restricted, the UNSC has an existing mechanism in New York to negotiate and quickly agree such a statement.
A public statement by leading countries could do a great deal to help arrest a growing sense of powerlessness among citizens and loss of confidence among businesses worldwide as the virus spreads.
It could also set a new course for international political and economic cooperation, not just in relation to the virus, but also other global threats with potentially devastating consequences for economic growth and political stability in the coming years.
Research Event
Chatham House | 10 St James's Square | London | SW1Y 4LE
Michael Gasiorek, Professor of Economics, UKTPO Fellow, University of Sussex; Director, Interanalysis
Julia Magntorn Garrett, Research Officer, UKTPO, University of Sussex
Allie Renison, Head of Europe and Trade Policy at the Institute of Directors
Maximiliano Mendez-Parra, Senior Research Fellow, Overseas Development Institute
Chair: Professor Jim Rollo, Associate Fellow, Global Economy and Finance Department, Chatham House; Deputy Director, UK Trade Policy Observatory
The UK government’s public consultation on tariffs closes on 5 March. This meeting will discuss the proposals floated in the consultation document and consider their effects on tariff and protection levels, prices and variety. It will also place tariff policy in the wider context of trade policy, including the UK’s future trading relationship with the EU and the USA.
4 March 2020
Finance ministries and central banks have a critical role to play to mitigate the threat Covid-19 poses to the global economy.Epidemics, of the size of Covid-19, have huge economic impacts – not just from the costs of managing the health of people, but stopping them, and keeping the economy working. The 10% fall in global stock markets since it became clear that Covid-19 would not be limited to China has boldly highlighted this.
Suppressing the epidemic, but allowing the economy to still function, requires key decisions, in which central banks and finance ministries play a part.
The scope to use monetary policy to manage the economic impact of Covid-19 is limited. The fact that the underlying cause of the shock is an infectious disease outbreak (rather than a banking crisis, as in 2008-09) and nominal interest rates are currently close to zero in most major advanced economies reduces the effectiveness of monetary policy.
Since 2010, reductions in fiscal deficits mean there is more scope for supportive fiscal action. But even here, high public debt levels and the desire not to underwrite ‘zombie’ companies that may have been sustained by a decade of ultra-low interest rates remain constraints.
However, outside broad based fiscal and monetary policies there are six ways in which finance ministries and central banks will play a critical role in responding to the crisis.
A first crucial role for finance ministries and central banks is in helping provide the best possible economic evaluation of strict containment measures (trying to isolate each potential case) versus managing the epidemic (delaying the spread of the virus, protecting the most vulnerable and treating the sick, while enabling the majority of people to get on with daily life). Given the economic consequences, they must play a full part, alongside health experts, in advising political leaders on this key decision.
Second, if large numbers of staff are required to work from home to manage the epidemic, they have the lead role in doing whatever is necessary to ensure that financial markets – and thus the wider economy – will continue to function smoothly.
Third, they need to ensure adequate funding for the public health response. Steps that can make an enormous difference to the success of containment strategies, such as strengthening surveillance, and guaranteeing the availability of testing kits and protective equipment for front line health workers, must not fail because of a lack of funding.
Fourth, they have a lead role in designing targeted economic interventions for the wider economy. Some of these are needed immediately to re-enforce and incentivize strict containment strategies, such as ensuring that employees without full or adequate sick leave cover have the financial support to enable them to report and self-isolate when they get sick.
Other interventions may help improve the resilience of the economy in accommodating moderate ‘social distancing’ measures; for example, by providing assistance to small firms to help them gear up for home working.
Yet others are needed, as a contingency, to safeguard the most vulnerable sectors (such as tourism, retail and transport) in circumstances where there is a prolonged downturn. The latter may include schemes to allow deferral of tax payments by SMEs, or steps to encourage loan extensions and other forms of liquidity support from the banking system, or by moves to underwrite continued provision of business insurance.
Fifth, national economic authorities will need to play their part in combatting ‘fake news’ through providing transparent and high-quality analysis. This includes providing forecasts on the likely economic impact of the virus under different scenarios, but also detailed information on the support and contingency measures they are considering, so they can be improved and refined through feedback.
Sixth, they will need to ensure that there is generous international support for poor countries, by ensuring the available multilateral support facilities from the international financial institutions and multilateral development banks are adequately funded and fit for purpose. The World Bank has already announced an initial $12 billion financing package, but much more is likely to be needed.
They also need to support coordinated bilateral aid where this is more effective, as well as special measures to support particularly vulnerable groups, for example, in refugee camps and prisons. Given the importance of distributing sophisticated medical equipment and expertise quickly, it is also important that every effort is made to avoid delays due to customs and migration checks.
The response to the immediate crisis will rightly take priority now, but economic authorities must also play their part in ensuring the world finally takes decisive steps to prevent a repeat of Covid-19 in future.
The experience with SARS, H1N1 and Ebola shows that, while some progress is made after each outbreak, this is often not sustained. This epidemic shows that managing diseases is absolutely critical to the long-term health of global economy, and doubly so in circumstances where traditional central bank and finance ministry tools for dealing with major global economic shocks are limited.
Finance ministries and central banks therefore need to push hard within government to ensure sustained long-term funding of research on prevention and strengthening of public health systems. They also need to ensure that the right lessons are drawn by the private sector on making international supply chains more robust.
Critical to the overall success of the economic effort will be effective international coordination. The G20 was established as the premier economic forum for international economic cooperation in 2010, and global health issues have been a substantive part of the G20 agenda since the 2017 Hamburg Summit. At the same time, G7 finance ministers and deputies remain one of the most effective bodies for managing economic crises on a day-to-day basis and should continue this within the framework provided by the G20.
However, to be effective, the US, as current president of the G7, will need to put aside its reservations on multilateral economic cooperation and working with China to provide strong leadership.
11 February 2020
Brussels will find its much-vaunted heft in setting standards cannot help it advance its geopolitical interests.There are two well-established ideas in trade. Individually, they are correct. Combined, they can lead to a conclusion that is unfortunately wrong.
The first idea is that, across a range of economic sectors, the EU and the US have been engaged in a battle to have their model of regulation accepted as the global one, and that the EU is generally winning.
The second is that governments can use their regulatory power to extend strategic and foreign policy influence.
The conclusion would seem to be that the EU, which has for decades tried to develop a foreign policy, should be able to use its superpower status in regulation and trade to project its interests and its values abroad.
That’s the theory. It’s a proposition much welcomed by EU policymakers, who know they are highly unlikely any time soon to acquire any of the tools usually required to run an effective foreign policy.
The EU doesn’t have an army it can send into a shooting war, enough military or political aid to prop up or dispense of governments abroad, or a centralized intelligence service. Commission President Ursula von der Leyen has declared her outfit to be a ‘geopolitical commission’, and is casting about for any means of making that real.
Through the ‘Brussels effect’ whereby European rules and standards are exported via both companies and governments, the EU has indeed won many regulatory battles with the US.
Its cars, chemicals and product safety regulations are more widely adopted round the world than their American counterparts. In the absence of any coherent US offering, bar some varied state-level systems, the General Data Protection Regulation (GDPR) is the closest thing the world has to a single model for data privacy, and variants of it are being adopted by dozens of countries.
The problem is this. Those parts of global economic governance where the US is dominant – particularly the dollar payments system – are highly conducive to projecting US power abroad. The extraterritorial reach of secondary sanctions, plus the widespread reliance of banks and companies worldwide on dollar funding – and hence the American financial system – means that the US can precisely target its influence.
The EU can enforce trade sanctions, but not in such a powerful and discriminatory way, and it will always be outgunned by the US. Donald Trump could in effect force European companies to join in his sanctions on Iran when he pulled out of the nuclear deal, despite EU legislation designed to prevent their businesses being bullied. He can go after the chief financial officer of Huawei for allegedly breaching those sanctions.
By contrast, the widespread adoption of GDPR or data protection regimes inspired by it may give the EU a warm glow of satisfaction, but it cannot be turned into a geopolitical tool in the same way.
Nor, necessarily, does it particularly benefit the EU economy. Europe’s undersized tech sector seems unlikely to unduly benefit from the fact that data protection rules were written in the EU. Indeed, one common criticism of the regulations is that they entrench the power of incumbent tech giants like Google.
There is a similar pattern at work in the adoption of new technologies such as artificial intelligence and the Internet of Things. In that field, the EU and its member states are also facing determined competition from China, which has been pushing its technologies and standards through forums such as the International Telecommunication Union.
The EU has been attempting to write international rules for the use of AI which it hopes to be widely adopted. But again, these are a constraint on the use of new technologies largely developed by others, not the control of innovation.
By contrast, China has created a vast domestic market in technologies like facial recognition and unleashed its own companies on it. The resulting surveillance kit can then be marketed to emerging market governments as part of China’s enduring foreign policy campaign to build up supporters in the developing world.
If it genuinely wants to turn its economic power into geopolitical influence – and it’s not entirely clear what it would do with it if it did – the EU needs to recognize that not all forms of regulatory and trading dominance are the same.
Providing public goods to the world economy is all very well. But unless they are so particular in nature that they project uniquely European values and interests, that makes the EU a supplier of useful plumbing but not a global architect of power.
On the other hand, it could content itself with its position for the moment. It could recognize that not until enough hard power – guns, intelligence, money – is transferred from the member states to the centre, or until the member states start acting collectively, will the EU genuinely become a geopolitical force. Speaking loudly and carrying a stick of foam rubber is rarely a way to gain credibility in international relations.
This article is part of a series of publications and roundtable discussions in the Chatham House Global Trade Policy Forum.
Creon Butler joined Chatham House from the Cabinet Office where he served as director for international economic affairs in the National Security Secretariat and G7/G20 ‘sous sherpa’, advising on global policy issues such as climate change, natural resource security, global health threats and the future of the international economic architecture.
Creon first joined the Cabinet Office in 2013 as director in the European and Global Issues Secretariat, advising prime minister David Cameron on international economic and financial issues, ranging from country-specific developments in China and Germany to global challenges such as antimicrobial resistance and anticorruption.
He designed and organized the UK’s global Anti-Corruption Summit in May 2016.
Earlier in his career, he served in the Bank of England, HM Treasury and in the Foreign and Commonwealth Office, where he was director for economic policy and chief economic adviser.
He was also deputy high commissioner in New Delhi from 2006 to 2009.
2016-19 | Director, National Security Secretariat Cabinet Office |
2013-16 | Director, European and Global Issues Secretariat, Cabinet Office |
2009-12 | Senior Adviser, International and EU, HM Treasury |
2006-09 | Minister and Deputy High Commissioner, British High Commission, New Delhi |
2004-06 | Director, Economic Policy, Foreign and Commonwealth Office |
1999-04 | Chief Economic Adviser, Foreign and Commonwealth Office |
1994-99 | Head, Monetary Instruments and Markets Division, Bank of England |
1993-94 | Adviser, Monetary and Exchange Rate Policy, Bank of England |
1991-93 | Principle Private Secretary to the Deputy Governor (Eddie George), Bank of England |
1984-91 | Economist, various departments, Bank of England |
1982-84 | Researcher, London School of Economics |
1981-82 | MSc (Econometrics and Mathematical Economics), London School of Economics |
1978-81 | BSc (Economics), London School of Economics |
Research Event
Chatham House | 10 St James's Square | London | SW1Y 4LE
Michael Gasiorek, Professor of Economics, University of Sussex; Director, Interanalysis; Fellow, UK Trade Policy Observatory, University of Sussex
Julia Magntorn Garrett, Research Officer, UK Trade Policy Observatory, University of Sussex
Prof Jim Rollo, Deputy Director, UK Trade Policy Observatory, University of Sussex; Associate Fellow, Global Economy and Finance Department, Chatham House
Nicolo Tamberi, Research Officer in the Economics of Brexit, University of Sussex
L. Alan Winters, Professor of Economics, Director, UK Trade Policy Observatory, University of Sussex
The upcoming UK general election is arguably a 'Brexit election', and as such, whoever wins the election will have little time to get their strategy for Brexit up and running to meet the new Brexit deadline of 31 January 2020. But what are the political parties’ policies for the UK's future trade? This event will present and discuss what the five main parties’ manifestos imply for future UK trade. Each manifesto will be presented and analysed by a fellow of the UK Trade Policy Observatory (UKTPO) and will be followed by a Q&A session.
10 October 2019
This paper examines the governance problems in the monetary system and global trade and regulation. It then explores whether issues have arisen because the US has given up its dominant role, and if so how these might be rectified.
Summary
Research Event
Chatham House | 10 St James's Square | London | SW1Y 4LE
Speakers include:
Dr Lorand Bartels, Reader in International Law; Fellow, Trinity House, University of Cambridge
Laura Bannister, Senior Adviser on EU-UK Trade, Trade Justice Movement
Peter Holmes, Fellow, UKTPO; Reader in Economics, University of Sussex
Andrew Hood, Partner, Regulatory & Trade, FieldFisher LLP
At this event, which forms the second annual UK Trade Policy Observatory conference, there will be six presentations over the course of the day before concluding with a panel discussion and Q&A. This year’s conference will focus on the following legal areas of trade policy:
To register for this event, please click here.
Research Event
Chatham House | 10 St James's Square | London | SW1Y 4LE
Professor Jagjit S. Chadha, Director, NIESR
Dr Kamala Dawar, Senior Lecturer in Law, University of Sussex; Fellow, UKTPO
Dr Michael Gasiorek, Senior Lecturer in Economics, University of Sussex; Director, Interanalysis; Fellow, UKTPO
Chair: Professor Jim Rollo, Deputy Director, UKTPO; Associate Fellow, Chatham House
In the five months since the last extension of the Brexit deadline, the questions about the UK’s trading relationship with the EU remain as open as before, as do those about what sort of relationship it should seek with other partners.
The world has not stood still, however, and so the UKTPO is convening another panel to consider constructive ways of moving forward. The panel will discuss potential trajectories for UK trade policy, followed by a question and answer session.
The UK Trade Policy Observatory (UKTPO) is a partnership between Chatham House and the University of Sussex which provides independent expert comment on, and analysis of, trade policy proposals for the UK as well as training for British policymakers through tailored training packages.
29 August 2019
There are four good reasons why Beijing might want to think twice before using its currency to retaliate against US tariffs.The renminbi seems to be back in business as a Chinese tool of retaliation against US tariffs. A 1.5 per cent fall in the currency early this month in response to proposed new US tariffs was only a start. Since the middle of August the renminbi has weakened further, and the exchange rate is now 4 per cent weaker than at the start of the month. We may well see more of a ‘weaponized’ renminbi, but there are four good reasons why Beijing might be wise to think before shooting.
The first has to do with how China seeks to promote its place in the world. China has been at pains to manage the collapse of its relations with the US in a way that allows it to present itself as an alternative pillar of global order, and as a source of stability in the international system, not to mention moral authority. This has deep roots.
Anyone investigating the history of Chinese statecraft will quickly come across an enduring distinction in Chinese thought: between wang dao, the kingly, or righteous way, and ba dao, the way of the hegemon. Since Chinese thinkers and officials routinely describe US behaviour since the Second World War as hegemonic, it behoves Chinese policymakers to do as much as possible to stay on moral high-ground in their behaviour towards Washington. Only in that way would President Xi be able properly to assert China’s claim to leadership.
Indeed, China has a notable track record of using exchange rate stability to enhance its reputation as a force for global stability. Both in the aftermath of the Asian crisis in 1997, and of the Global Financial Crisis in 2008, Chinese exchange rate stability was offered as a way of demonstrating China’s trustworthiness and its commitment to multilateral order.
Devaluing the renminbi in a meaningful way now might have a different rationale, but the cost to China’s claim to virtue, and its bid to offer itself as a guardian of global stability, might be considerable.
That’s particularly true because of the second problem China has in thinking about a weaker renminbi: it may not be all that effective in sustaining Chinese trade. One reason for this is the increasing co-movement with the renminbi of currencies in countries with whom China competes.
As the renminbi changes against the dollar, so do the Taiwan dollar, the Korean won, the Singapore dollar and the Indian rupee. In addition, the short-run impact of a weaker renminbi is more likely to curb imports than to expand exports, and so its effects might be contractionary.
An ineffective devaluation of the renminbi would be particularly useless because of the third risk China needs to consider, namely the risk of retaliation by the US administration. Of this there is already plenty of evidence, of course.
The US Treasury’s declaration of China as a ‘currency manipulator’ on 5 August bears little relationship to the actual formal criteria that the Treasury uses to define that term, but equally the US had warned the Chinese back in May that these criteria don’t bind its hand. By abandoning a rules-based approach to the definition of currency manipulation, the US has opened wide the door to further antagonism, and Beijing should have no doubt that Washington will walk through that door if it wants to.
The fourth, and possibly most self-destructive, risk that China has to consider is that a weaker renminbi might destabilize China’s capital account, fuelling capital outflows that would leave China’s policymakers feeling very uncomfortable.
Indeed, there is already evidence that Chinese residents feel less confident that the renminbi is a reliable store of value, now that there is no longer a sense that the currency is destined to appreciate against the dollar. The best illustration of this comes from the ‘errors and omissions’, or unaccounted-for outflows, in China’s balance of payments.
The past few years have seen these outflows rise a lot, averaging some $200 billion per year during the past four calendar years, or almost 2 per cent GDP; and around $90 billion in the first three months of 2019 alone. These are scarily large numbers.
The risk here is that Chinese expectations about the renminbi are ‘adaptive’: the more the exchange rate weakens, the more Chinese residents expect it to weaken, and so the demand for dollars goes up. In principle, the only way to deal with this risk would be for the People's Bank of China (PBOC) to implement a large, one-off devaluation of the renminbi to a level at which dollars are expensive enough that no one wants to buy them anymore.
This would be very dangerous, though: it presupposes that the PBOC could know in advance the ‘equilibrium’ value of the renminbi. It would take an unusually brave central banker to claim such foresight, especially since that equilibrium value could itself be altered by the mere fact of such a dramatic change in policy.
No one really knows precisely by what mechanism capital outflows from China have accelerated in recent years, but a very good candidate is tourism. The expenditure of outbound Chinese tourists abroad has risen a lot in recent years, and that increase very closely mirrors the rise in ‘errors and omissions’. So the suspicion must be that the increasing flow of Chinese tourists – nearly one half of whom last year simply travelled to capital-controls-free Hong Kong and Macao – is just creating opportunities for unrecorded capital flight.
This raises a disturbing possibility: that the most effective way for China to devalue the renminbi without the backfire of capital outflows would be simultaneously to stem the outflow of Chinese tourists. China has form in this regard, albeit for differing reasons: this month it suspended a programme that allowed individual tourists from 47 Chinese cities to travel to Taiwan.
A more global restriction on Chinese tourism might make a devaluation of the renminbi ‘safer’, and it would have the collateral benefit of helping to increase China’s current account surplus, the evaporation of which in recent years owes a lot to rising tourism expenditure and which is almost certainly a source of unhappiness in Beijing, where mercantilism remains popular.
But a world where China could impose such draconian measures would be one where nationalism has reached heights we haven’t yet seen. Let’s hope we don’t go there.
This article was originally published in the Financial Times.
Yojiro Uchino was director of the defence budget at the Ministry of Finance in Japan from 2016 to 2019, working on budgets for the country's National Defense Program Guidelines and also its Mid-Term Defense Program.
During his fellowship, Yojiro will be undertaking research on the relationship between national security and fiscal positions, as well as the balance between free trade and national security.
Yojiro Uchino is based at Chatham House until July 2021, hosted by the Global Economy and Finance programme.
2015-16 | Director, Allowance Control and Mutual Assistance Insurance Division |
2014-15 | Director, Inter-Division Affairs of Budget |
2012-14 | Director, Government Shareholding Office (where he planned simultaneous IPO of Japan Post, the holding company, and its subsidiaries Japan Post Bank and Japan Post Insurance) |
1997 | Admitted to the Bar in New York State Supreme Court |
1996 | LLM, University of Michigan Law School |
1992 | BA Law, University of Tokyo |
Dorothy was the founding director general of the Ghana-India Kofi Annan Centre of Excellence in ICT, a position which she held for over a decade.
She works globally as a policy adviser, evaluator, project manager and organizational management consultant.
Over the course of her 30-year career in international development and technology she has held management positions with the UN and global management consulting firms on four continents.
As a strong advocate of the importance of building robust local innovation ecosystems based on open source technologies, she serves on the board and as a mentor to a number of start-ups and NGOs focused on women in tech.
17 June 2019
The nationalist urge to keep the world off your back extends to foreign finance.It is nearly 30 years since Rudiger Dornbusch and Sebastian Edwards published a seminal book, The Macroeconomics of Populism. Their conclusion back then was that the economic policies of populist leaders were quintessentially irresponsible. These governments, blinded by an aim to address perceived social injustices, specialised in profligacy, unbothered by budget constraints or whether they might run out of foreign exchange.
Because of this disregard for basic economic logic, their policy experiments inevitably ended badly, with some combination of inflation, capital flight, recession and default. Salvador Allende’s Chile in the 1970s, or Alan García’s Peru in the 1980s, capture this story perfectly.
These days, the macroeconomics of populism looks different. Of course there are populist leaders out there whose policies follow, more or less, the playbook of the 1970s and 1980s. Donald Trump may prove to be one of those, with a late-cycle fiscal expansion that seemed to have no basis in economic reasoning; Recep Tayyip Erdogan, by some accounts, may be another.
But a much more interesting phenomenon is the apparent surge in populist leaders whose economic policies are remarkably disciplined.
Take Mexico’s president, Andrés Manuel López Obrador. When it comes to fiscal policy, it is odd indeed that this fiery critic of neoliberalism seems fully committed to austerity. His budget for 2019 targets a surplus before interest payments of 1 per cent of GDP, and on current plans he intends to increase that surplus next year to 1.3 per cent of GDP. He has upheld the autonomy of the central bank and, so far at least, his overall macroeconomic framework is anything but revolutionary.
Hungary’s prime minister Viktor Orban offers another example of conservative populism. Under his watch, budget deficits have been considerably lower than they had been previously, helping to push the stock of public debt down from 74 per cent of GDP in 2010, the year Orban took over, to 68 per cent last year.
This emphasis on the virtues of fiscal prudence is also visible in Poland, where Jaroslaw Kaczynski’s PiS has managed public finances with sufficient discipline in the past few years to push the debt/GDP ratio below 50 per cent last year, the first time this has happened since 2009.
The obvious question is: what has changed in the decades since Dornbusch and Edwards went into print?
One answer is that today’s populists tend to strive for national self-reliance, which encourages them to avoid building up any dependence on foreign capital. And since that goal is achieved by keeping a tight rein on macro policy, fiscal indiscipline is avoided in order to limit vulnerability to foreign influences.
Perhaps this is because the 'them', or the perceived enemy, for many of today’s populists tends to be outside the country rather than inside. Broadly speaking, it is the forces of globalisation — and global capital in particular — that are the problem for these leaders, and self-reliance is the only way to keep those forces at arm’s length. This helps to explain why, for example, Orban has been so keen to repay debt to Hungary’s external creditors. He has relied instead on selling bonds to Hungarian households to finance his deficits, even though the interest rates on those bonds are much higher than he would pay to foreign creditors. It also helps explain why the PiS in Poland has presided over a decline in foreign holdings of its domestic bonds. Foreign investors owned 40 per cent of Poland’s domestic government debt back in 2015, but only 26 per cent now.
In other words, among many of today’s populists there is a blurring of the distinction between populism and nationalism. And the nationalistic urge to keep the rest of the world off your back seems to dominate the populist urge to spend money. The perfect example of that instinct is Vladimir Putin: not necessarily a populist, but his administration has been emphatic about the need to keep public spending low and to build solid financial buffers. National self-reliance is an economic obsession for the Russian government, and provides a model for other countries who wish to insulate themselves from international finance.
One of the reasons why the macroeconomics of populism have changed in this way is the historical legacy of economic disaster. If you are a populist leader in a country where financial crisis is part of living memory — as it is in Mexico, Hungary and Russia, say — you might do well to err on the side of conservatism for fear of repeating the mistakes of your predecessors.
But another reason why populism looks different for countries like Poland, Hungary, Mexico and Russia has to do with mere luck. Hungary and Poland, in particular, enjoy the luck of geography: having been absorbed into the EU, they have received financial transfers from Brussels averaging some 3-4 per cent of GDP in the past few years, so that populism in these countries has been solidly underpinned by the terms of their EU membership. López Obrador is enjoying the inheritance of his predecessor’s sound macro policy, together with a buoyant US economy and low US interest rates. Russia has had the good fortune of oil exports to rely on.
The thing about luck is that it can run out. So maybe it’s not quite time yet to bury the old macroeconomics of populism. But for the time being, it seems true to say that many of today’s populists have an unexpectedly robust sense of economic discipline.
This article was originally published in the Financial Times.
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