SUNSTAR Press Digest, 2016 No 3

It is already the middle of September and politicians and parliaments are back in business. The season kicked off with the Hangzhou G20 Summit, a good place to gauge the international temperature. The two big issues of the weekend were the slowdown in global growth and the disquiet in the US and Europe about globalisation. It was Theresa May’s first outing on such an international scene. A steep learning curve no doubt. Soon afterwards, the North Koreans, not part of the G20, made news with the explosion of their 5th nuclear test explosion. Meanwhile the US election continues its inevitable run to November 8th and the UK is leaving everyone guessing about what Brexit means. Some say that this is a great opportunity for the EU to re-invent itself in a two-tier union, with a federalist inner core and a looser outer one to which even the UK could belong. This story will run and run as no one yet knows what the UK government wants.
Meanwhile the tragedy of Syria continues, in spite of a ceasefire, aid is still not reaching the besieged city of Aleppo.
On a lighter note every September the UK Queen and Prince Philip invite the Prime Minister for an informal weekend at Balmoral, their Scottish castle. It is meant to be a relaxed family affair with Prince Philip doing the BBQ and the Queen clearing the plates and doing the washing up. You will enjoy this historical, and slightly tongue in cheek look at how different PMs coped with this weekend.
Edward Albee, the brilliant US playwright has died after a short illness at the age of 88. His play “Who is Afraid of Virginia Woolf” brilliantly portrayed by Richard Burton and Elizabeth Taylor is one of the great plays of the 20th Century. BBC Obituary Edward Albee
I leave you with the list of the 6 best business books of the year as chosen by the Financial Times and McKinsey.

In this week’s digest
1   Hangzhou G 20 Summit
2   BREXIT, Shinzo Abe & UK Confusion
3   Hilary Clinton’s Health
4   Two-Speed EU? 
5   Syria
6   The Queen Does the Dishes
7   FT and McKinsey Business Book of the year

Summits are strange affairs. The preparation work starts a year in advance. “Sherpas”, the trusted officials from the respective governments start working on the next G20 the moment the last one ends. Nothing is left to chance and the final declaration has been written, read, discussed, amended and agreed long before the first plane has landed. Business groups, international trade unions, key lobby interests and NGOs spend a great amount of energy trying to have their key concerns mentioned in the final declaration. Host governments give huge importance to the event, a great national showcase and little is left to chance. Having been involved in the fringes of the London G20 in 2009 I can attest to the effort these events entail and the importance host governments attach to them. The first G20 was organised by President Bush who had been urged to act by UK PM Gordon Brown in response to the 2008 Financial Crisis. Since then the Leaders of the 19 countries involved plus the EU come together once a year, and their Economy Ministers and Central Bankers also meet up three times every year. Wikipedia has a list of G20 countries and of all the summits held since then. Go to Wikipedia.
Each summit has an official theme, Hangzhou’s was about stimulating global economic growth, now predicted at 3.1% rather than the desired 7%, and the need to ensure that global free trade is not reversed. A sub-theme however was about how to make globalisation work for people. The US, EU and Australia were vocal in saying that large numbers of their voters were taking positions against globalisation. One observer at the G20’s closed meetings said that Summit Leaders “were talking more about people and less about economics”. There was also talk of a public bandwagon for ditching “austerity” in favour of fiscal support policies.

There were tensions: President Obama and EU President Juncker had a pop at their Chinese hosts. Junker warned that the EU was not happy about China exporting cheap steel thus threatening EU jobs, whilst Obama pointedly said that “You can’t just export problems . You have got to have fair trade as well as free trade.” There was a hoo-ha about President Obama’s arrival, but this was played down by the President, though some observers thought this was a deliberate snub on the part of the Chinese

However each Summit also has an unofficial theme. Hangzhou was about China’s global leadership ambitions. As China sees it the West has been in decline since the 2008 financial crisis, a decline that is now accelerating amid the distractions of a US presidential election and the disarray in Europe over Brexit, migrants and recession. Within this landscape China sees itself as offering stability and steady global governance. The Chinese government used all its resources to make sure the summit was a success: they closed factories to reduce the pollution in Hangzhou, they stopped the traffic and emptied the city and tried to show China at its best, but its bid for global leadership is likely to fall short. In a region, where so many nations still have wounds from history, China’s nationalist politics are toxic to its hopes to lead internationally. A good background read can be found on the BBC’s Website. BBC Background to the Hangzhou Summit.

There are also two good articles in the Financial Times that give a good overview of the politics of the Summit.
See also George Parker’s articles in the Financial Times (These articles are behind a Paywall. You can access them by googling “George Parker G20”.)

Away from the cameras Summits are a great place for Presidents and Prime Ministers to talk informally away from the prying eyes of the global media. That informality and opportunity to iron out problems away from the public gaze may be the best outcome from any summit.

2   BREXIT, Shinzo Abe & UK Confusion
On the eve of the G20 Summit Japan’s PM Shinzo Abe sent Theresa May a letter and 15 page memorandum warning that Japanese businesses have a huge interest in the UK negotiating a “soft Brexit”. The message is that Japanese companies want the UK to negotiate a deal that leaves Britain not just in the EU customs union, and single market, but also retains a free flow of workers between the EU and the UK. 140,000 workers are employed by Japanese companies, many in areas of high unemployment. Nomura Bank, Mitsui, Hitachi, Toyota, Nissan and Honda are critical to the UK economy. See the UK’s Daily Mirror

PM Shinzo Abe is not the only one to want some clarity from the UK government. so far all Theresa May will say is “Brexit means Brexit”. Unfortunately, and maybe more accurately one of the interpreters at the European Parliament mis-translated this to be “Brexit means Breakfast”. However 50 days before May used the phrase for the first time it is wearing thin, particularly as key members of her cabinet seem to have diametrically opposite views on what the UK’s relationship with the EU will eventually be.

Will it be “Soft Brexit” as the Japanese PM seems to want, or the “Hard Brexit” of outside the EU, outside of the Single Market, the custom union and with not Freedom of Movement of workers?

The UK Parliament is getting restless and as time goes on the May government will find itself under pressure from the both the Brexit and the Remain camp. With a majority of only 17 she does not have much room to move. May has ruled out an early election (UK has a fixed term Parliament, with the next election due in 2020), but the smart money in London is on May being tempted by the weakness in the Labour Party in calling an election in the Spring of 2017.

Confusing most commentators is the surprisingly robust performance of the British economy. Shares are up (FTSE100 and FTSE 250), retail sales very healthy and Sterling after a big fall has stabilised. The right wing pro-Brexit Spectator Magazine was exultant (Read More), but a more balanced view can be heard in this very good podcast by Chris Giles, the Economics Editor of the Financial Times.

3   US Elections and Hillary Clinton’s Health
The US Presidential election is famous for going on too long and costing too much money. The polls have narrowed and the big issue of the week has been Hillary Clinton’s stumble after the 9/11 Memorial. The story has been spun in some of the media in terms of Clinton not being truthful, but the pressure is also on Donald Trump, who has been slow to divulge his own medical record.

This focus on health is somewhat exaggerated given that many people with chronic illnesses are working in high pressure jobs and deliver first rate results. It is also at odds with history. President Kennedy suffered from Addison Disease, had chronic back pain and severe anxiety, Eisenhower suffered from Crohn’s disease, and had a stroke and a heart attack whilst in office, whilst FDR was paralysed in both legs following a bout of polio. See the health of US Presidents for more information on this. On this side of the pond Winston Churchill’s daily drinking routine would give heart attacks to most of today’s health professionals and would be a big obstacle to becoming Prime Minister. Was Winston Churchill an Alcohol Abuser?

There are 50 or so days to go to the US Election and of course there will be the TV debates. One thing is certain, Donald Trump has toned down his rhetoric and softened his image since Kellyanne Conway joined his team, but she may not be able to totally gaffe-proof Mr Trump, as this weekend’s jibe at Hillary and the right to bear arms has shown.

This weekend EU Leaders met in Bratislava, for the first time without the presence of the UK. Brexit is not on the Agenda, as negotiations cannot start before the UK has triggered Article 50 of the Lisbon Treaty (the exit button to begin talks), but it is sure to dominate the thinking of EU leaders. Angela Merkel has said that the EU is at a critical junction. I have heard the phrase repeated so often over the 26 years I have been involved in EU affairs that I could be forgiven for doubting it, but I think that this time she is right. In designing the Euro EU leaders glossed over the huge fiscal and financial differences between their northern and southern countries: what is good for Germany was never going to work for Greece or Portugal. Secondly migration from both outside the EU and within the EU has pitted countries against each other. Added to this cocktail is the continuing threat posed by terrorists and the volatile situation in the Middle East and in the Ukraine. To this already dangerous mix there one must add difficult elections in Germany and France in 2017. If there ever was a time for Europe to be united this is certainly it, and yet there is a distinct lack of vision and leadership.

Some commentators think that we are moving towards a two-tier EU. An inner core of federalist countries with Germany, Italy, Span, Portugal, France, if the Front National do not win the Presidential elections, and an outer ring with the Visegrad Four (Hungary, Poland, Slovakia, Czech) with the Danes, the Swedes, the Dutch and possibly the Irish. Bloomberg has argued the case well earlier this summer. See Bloomberg on Two Tier EU. An article by Gideon Rachman in the Financial Times who believes this to be a great opportunity, in my view, well demonstrates how difficult it would be pull off such a deal. Google Gideon Rachman: Two-Tier Europe as this article is behind the FT Paywall.

Obama and Putin met in Hangzhou. No doubt frank and diplomatic words were exchanged. The continuing civil war is not good for the US or for Russia. Obama would very much like to be able to announce that ISIL/Daesh have lost all their territory both in Iraq and in Syria before he steps down. However bringing some order to Syria with its disparate rebel groups and Assad’s record of abuse of power not to mention use of chemical weapons will continue to be complicated. For now the international community’s focus must be to bring aid to the besieged city of Aleppo. Four days since the ceasefire was declared relief convoys are still being blocked from entering the city. See CNN on the Aid Deadlock

6   The Queen Does the Dishes
Every year, at the end of the summer, the UK Queen invites her Prime Minister and spouse to an informal weekend at Balmoral her beloved Scottish castle. It is a weekend of walks in the Scottish hills, family BBQs and fireside chats. Margaret Thatcher hated them, Tony Blair loved them, Harold Wilson would go collecting firewood for the BBQ. This account in the London Guardian is highly amusing. See the Guardian

7   FT & McKinsey Business Book of the Year
Each year the Financial Times and McKinsey select the Business Book of the year from a shortlist they announce in September.
This year’s list is as follows:

See Wikipedia: FT & McKinsey Business Book of the Year