Yves here. While this piece gives a good summary of the underlying dynamics behind some of the big economic conflicts, it’s less precise on the state of play at some points than I’d like. This section from a new story in DW, China vows quick trade deal as Trump sends mixed signals, seemed like a useful addition:
US President Donald Trump sowed confusion on Tuesday over the trade-truce with China, as he said negotiations could extend beyond an agreed 90-day timeframe. The three-month period halted the addition of new tariffs by both countries and was aimed at resolving the ongoing trade dispute. Trump and his Chinese counterpart Xi Jingping agreed to the truce on the sidelines of the G20 summit in Argentina
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Trump took to Twitter to discuss the talks, first expressing positive feelings and later leveling threats..China, on the other hand, has kept quiet on the details since the meeting in Argentina, but released an optimistic statement on Wednesday….
US officials have struggled to provide concrete details of what the two countries agreed on at the dinner between Trump and Xi. The White House has alleged that China pledged to purchase a “very substantial” amount of agricultural, energy, industrial and other products from the US, to help narrow the current trade deficit. Additionally, China was said to be beginning to buy products from US farmers “immediately.”
Beijing, however, has not yet confirmed what, if any, concessions it has made to the Trump administration.
By Vijay Prashad, an Indian historian, editor and journalist. He is a writing fellow and chief correspondent at Globetrotter, a project of the Independent Media Institute. He is the chief editor of LeftWord Books and the director of Tricontinental: Institute for Social Research. He has written more than twenty books, includingThe Darker Nations: A People’s History of the Third World (The New Press, 2007), The Poorer Nations: A Possible History of the Global South (Verso, 2013), The Death of the Nation and the Future of the Arab Revolution (University of California Press, 2016) and Red Star Over the Third World (LeftWord, 2017). He writes regularly for Frontline, the Hindu, Newsclick, AlterNet and BirGün. Produced by Globetrotter, a project of the Independent Media Institute
Last week, two important meetings took place—one, in Buenos Aires, Argentina, of the Group of 20 (G20) nations, and two, in Vienna, Austria, of the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers. The two meetings did not produce any resolution to the major economic challenges in the world. But they did soothe the nerves of financial markets. At the G20, the United States and China dialed down the temperature over trade but did not settle the long-term grievances each side has of the other. At the OPEC+ meeting, Russia and Saudi Arabia agreed to cut production and raise the price of oil despite pressure from the United States and others to keep oil prices low.
At neither meeting did the major powers find solutions to their problems. They are all caught in mazes from which there are no easy exits. But what calmed the world of finance was that the geopolitical tension between the major powers seemed to have lessened. What impact this reduced tension has for the world’s people, however, is not clear.
Trade
The “trade war” engineered by U.S. President Donald Trump against China began with tariffs and ended with a damp squib. At the G20, Trump told China’s Xi Jinping that the U.S. tariffs that would have gone up to 25 percent on $200 billion worth of Chinese imports will no longer be applied. China, for its part, said that it would import more goods from the United States. No specifics were announced, which is why the tensions over even this agreement spilled over onto Twitter (courtesy of Trump’s hyperbole) and into more sober statements from the Chinese government.
The more fundamental questions of intellectual property and currency valuation remain unsolved. The United States accuses China of theft of the intellectual property of U.S. firms, but the Chinese counter—as they have in the arbitration panels of the World Trade Organization—that they merely draw from technology transferred as a result of commercial agreements freely made by firms eager to use Chinese labor. It will be impossible to resolve these two problems, since neither side sees the issues in the same way. Their worldviews regarding intellectual property and currency valuation are utterly alien to each other. If the United States believes that China is unfairly valuing its currency, the Chinese point to the unfair advantage that the dollar has over every currency in the world since it is used as one of the major global currencies for facilitation of trade and for the storage of wealth.
Oil
Russia’s Vladimir Putin and Saudi Arabia’s Mohammed bin Salman offered each other a friendly hand slap at the G20. Everyone seemed happy to see Mohammed bin Salman, despite the clear evidence of his role in the murder of the Saudi journalist Jamal Khashoggi.
But the real agreements between Russia and Saudi Arabia were not directly made in Buenos Aires. They were made more quietly in Vienna at the OPEC+ meeting. At Buenos Aires, Putin said, “yes, we have an agreement to prolong our accords.” He was referring to the deal between Russia and Saudi Arabia since 2016 to manage oil prices to their mutual benefit. The deal notwithstanding, Saudi Arabia has continued to pump itself into trouble—flooding the market with oil, driving prices down and depleting its own treasury as a result. Now Russia is eager to see oil production cuts and oil prices rise. Trapped by sanctions and by low oil prices, Russia has plunged into internal economic difficulties. The real issue was how much each country inside and outside OPEC should pump. That is why Putin said, “there is no final deal on volumes.” In fact, even after the deal has begun to emerge, there is no final deal. Saudi Arabia has not been a good partner here. It has pumped outside the numbers over the course of the past few years, largely under pressure from the United States.
There are two reasons why the United States wants low oil prices, despite the fact that the U.S. is now one of the world’s largest oil producers. First, low oil prices mean an immediate subsidy for the U.S. consumer and for U.S. manufacturing firms. There is no economic incentive to move to renewable energy when oil prices are low. Second, low oil prices hit adversaries of the U.S.-led world order that—as it happens—are major oil producers. The list includes Iran and Venezuela, two countries that have been sent into internal turmoil as oil prices have plummeted. But the United States has sufficient tools to hurt these countries without forcing oil prices down. For instance, even if oil prices rise, U.S. sanctions can be harsh enough to cut Iranian and Venezuelan oil out of the market. The lack of Iranian and Venezuelan oil operates as an effective cut in oil production, which will itself raise oil prices.
Saudi Arabia has already begun to pressure Libya and Nigeria to reduce oil exports, although both these African countries are reliant upon oil revenues. Saudi Arabia has succeeded in pushing Qatar out of OPEC on political grounds, but since Qatar only produces 2 percent of OPEC’s crude oil the departure, Qatexit is not meaningful. Inside the world of oil, there are those who are always pushed aside so that others can benefit.
Oil Buyers’ Club
In 2005, Indian Petroleum Minister Mani Shankar Aiyar assembled his counterparts from across Asia to start a discussion on a buyers’ club. The precise issue on the table was the “Asian Premium” charged by Saudi Arabia and other oil producers to Asian countries. The “Asian Premium” is substantial—close to $10 billion per year for the Asian consumers of Gulf oil. It is what bothered Aiyar and the other oil ministers. But they did not come to any agreement.
Asia is the largest importer of oil in the world. India and China, with the United States, are the three largest importers of oil. Right behind them are Japan and South Korea. If you add the oil imports by China, India, Japan and South Korea, then these four Asian countries import a full third of world oil imports. They are both reliant upon the oil exporters, but they also have power as a bloc of consumers.
In 2012, China’s premier Wen Jiabao said that there needed to be a counter-cartel to OPEC that should include Europe and the United States. Interest in his proposal was minimal. Oil had reached $100 per barrel. It stifled economic growth and did not move any of these industrial giants toward non-carbon renewable fuel.
The issue of a buyers’ cartel came back on the table in April this year at the International Energy Forum. The chairman of Indian Oil Corporation (IOC) Sanjiv Singh and the chairman of China National Petroleum Corporation (CNPC) Wang Yilin then met in Beijing to go deeper into the possibility. By June, China and India—which import 17 percent of the world’s oil—had begun to openly talk about a buyers’ cartel to help create “stable and moderate” oil prices, as India’s current Petroleum Minister Dharmendra Pradhan put it.
China and India have been upset by the U.S. sanctions on Iran. They have felt that these produce an adverse impact on Asian economies. They are joined by Japan and the European Union, who are also not pleased with these sanctions. It is now being said that if China and India establish a buyers’ club, Japan and Europe will join in.
Smell of Tear Gas
From the air-conditioned rooms of the oligarchy, we go to the tear gas of the streets.
Protests in Paris, France, have been the most violent in decades. The yellow vests (gilets jaunes) appeared as if out of nowhere to demonstrate against the French government’s hike in fuel prices. They make the case that the violence of the economy has destroyed their ability to function. Any violence on the streets is a reflection of the violence that structures their lives. The streets of Paris smelled of tear gas.
In Buenos Aires, Argentina, labor unions and political groups of one kind or another planned massive protests against the G20. They wanted to scream at their leaders, who have been deaf to their pleas. But the Argentinian government held the G20 meeting at the Costa Salguero convention center, on the magnificent Rio de La Plata. Police cordoned off the area, while the coast guard boats sailed up and down the river. No one could get near the site. None of the leaders were interrupted by the chants.
There were no protests in Vienna. The OPEC building was nonetheless surrounded by the elite WEGA units. No one knew that the meeting was being held. There is so little democracy in the institutions that structure our lives.
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>The yellow vests (gilets jaunes) appeared as if out of nowhere to demonstrate against the French government’s hike in fuel prices.
Ok so was gilets jaunes a protest against the fuel price or wasn’t it? (wraps throbbing head in a warm damp towel).
Good article. The buyers’ club idea is intriguing.
“[Saudi Arabia] has pumped outside the numbers over the course of the past few years, largely under pressure from the United States.” What does the author mean by this? I’m aware Trump is bragging about low oil prices now, but Saudi was keeping prices artificially low for a while after Obama lifted sanctions on Iran because it was trying to drive the Americans (due to our fracking) and Iranians out of business. After Trump restarted the saberrattling prices “mysteriously” went back up.
The US has only one policy, foreign and domestic, civil or military, secular or religious. It’s MONOPOLY. And it always has had.
Not always. It wasn’t until the US and USSR stepped into the power vacuum left by the European empires that it began to act like one in earnest. I also have a hard time believing it would sabotage its own companies in order to gain an oil monopoly, especially since they were doing so well before the whole thing.
Sorry, but low oil prices don’t help anymore in terms of savings. They lower consumer spending on the high side, which due to capital flows has meant a larger and larger part of consumer spending. Completely overwhelming increases on the lower end. The national account weakens, weakening manufacturing.
Secondly, they don’t provide manufacturers with much “savings” anymore as manufacturers don’t use nearly as much oil. 80% of manufacturing growth has been in domestic oil mining. Literally, it has been that bad in the non-energy sections this cycle despite some modest onshoring of production. This blunder is made by many. A 20th century attitude to a 21st century issue of decadent capitalism and its consumption based nightmare.
Well if one can see MBS, then he is in front of you and not stabbing you in the back. In addition very few Kings want to witness the blood directly, too.
Please refer to Henry II’s precedent with Thomas a Becket.
Nick- do you have any links you can provide to support the statements you made in your comment especially the “80% of manufacturing growth has been in domestic oil mining”?
Thx
“The OPEC building was nonetheless surrounded by the elite WEGA units. No one knew that the meeting was being held. There is so little democracy in the institutions that structure our lives.”
It never crossed my mind that OPEC and democracy should show up in the same paragraph.
BTW – Venezuelan crude can generally be replaced in US refineries by Canadian oil sands crude, which is a major reason that the various pipelines from Canada to the mid-West and Texas have been proposed.
GM is making a major bet on electric cars and trucks for the future. I suspect that the vehicle manufacturers will be much better positioned for $100 oil 5-10 years from now than in 2012 and 2007. The big question is whether or not he electric grid will be.
The Chinese version of what Xi & Trump discussed:
http://news.morningstar.com/all/dow-jones/us-markets/201812052338/china-breaks-its-silence-on-90-day-us-tariff-truce-update.aspx
A similar experience to negotiating with Trump: https://www.thepinballcompany.com/product/austin-powers-pinball-machine/
Agree that the US wants low oil prices to reduce consumer transportation and heating costs and to help the US petrochemical industry. But the second claim that low oil prices hinders renewable energy development is simply wrong. There is very little, almost no electricity produced in the US with oil.
I think they are thinking of electric vehicles driving demand for electricity which requires energy sources other than oil.
“Don’t give in to the Prius monster!” a co-worker recently said. Others say, if AGW is true, then it’s time to get your kicks before it’s too late. Go for the gusto, it’s almost Last Call.
I’m not even sure they’re speaking their own minds, or just mouthing slogans we’ve been raised on for generations now. It’s not reasoned, or evidence-based. Just spouted like game show contestants.
I’ll tell you what it is: enough to make a grown man cry.
I’m guessing that we are in a transition period. Power was based on oil in the 20th century and to a large extent it still is as you can see in the wars against oil-producing countries like Iraq, Venezuela and Russia. Peak oil has intensified this international contest and it will not end well. However, another factor is that towards the end of last century, technology came to be a center of gravity for a nation’s power and the US had it in aces. That is changing now and the Chinese are determined to seize this high ground. The US, under Trump and his cohorts, are determined to keep this edge by trying to force China to abandon their efforts in research but I am guessing that the Chinese technological sector is too far advanced for it to be stopped now. The US’s main weapon is to isolate countries – e.g. Russia, Iran, etc – so far as they can but the number of countries that the US is trying this with is going towards half the population of the planet when you count in China. Perhaps a bridge too far out of desperation?
The oil industry has spun off the wheel, my friend. This is breathtaking.
With respect, the rest you are missing my a long shot.
Please re-think exactly who has the upper DIPLOMATIC AND OTHER hand here and now? I do mean this very respectfully especially to you as I trust you are a citizen of USA and live there? I am a citizen but do not live there.
You do understand that a trade imbalance means that one party ain’t paying for the stuff and labor they have been getting from the other party? Start here. This is the reverse of the 1930s with slightly differing players but only slightly.
USA needs to wake the heck up and get your factories and productive economy back cranking for your benefit and our benefit, dude. But you just work for your benefit. 40% of USA economy is administration? Some recent study from Harvard. Wow! That stat is more than 5% and that zone is done. Horrible and tragic but simple truth.
And then you have to find someone to build those factories and then operate them? You have massive beyond mere structural unemployment and more. You accoumplished your goal long ago. Once outsourced and long enough, you loose your internal human talent to produce that which was outsourced. China et al did NOT steal your knowledge. You gave it to them and, by your hand, have now lost it in your country. You broke it, you fix it.
Forget your fascination with finance and get out there and fix those factories and farms as well as a few power plants, municipal water and gas systems, security systems and superfund sights and poisoned agriculture.
By the way. Your immigration problem on your Southern Border? Most of us from South, Central and Mexico do not in any way actually want to work on your farms, in your slaughter houses, etc. Check out the net remittance numbers if you want a little better taste of that reality.
Your sainted farmers are begging you Americans to help them harvest and plant. I mean begging on the net and elsewhere because so many of their staff from south of your border have returned home and will not come back.
Some 40% of you people meet the definition of poor (Pew Foundation) and you will not get your hands dirty in your fields to produce food for you? Get over yourselves.
Ya have to pay for stuff including that made in China. You really need to grok the real story of Chairman Mao. You have to pay for the oil should we chose to sell it to you.
Paying for our stuff and labor is not some piece of dollar. You have to DELIVER the service and stuff we need and want. Otherwise, you are defaulting on your debt. Well north of 400 trillion dollars. Scotia
Bank study and mine.
I was poisoned in your fields doing just that in South Dakota when I was a poor white kid. If I can do it, you can do it for you.
I am not trying to mean or even vaguely disrespectful. The very last thing I want to see is your failure. It is not in my interest. I still have dear friends, clients, colleagues up there. But me? Not likely to come back. Immigration never sources in good. You might look at a few others who have left such as Miss Tina Turner.
Regards and good evening. I need to sleep a little and am tired of cleaning up your messes including US Treasury.
One last observation.
You need to stop the violence which is the first principle of the law. It is your responisbilty to pull your offensive military back within your borders now. The defensive matters are and will be handled by others. Done.
The amount of intensely dirty oil your military consumes and spews daily is in excess of most nation states!
And you get upset with COP whatever number non-obligations? Cake walk for you folks. Stop the violence.
And you are not disabused of the actual physical capabilities of your military? It is an open sick sad but violent joke. Your war machines are so tragically old and shabby they are killing and hurting your own military people? I mean what culture do you have up there? Your new stuff will not fly and can barely navigate the oceans and killed, in one incident, I think eight of your sailors on a US navy vessel? Sickos is that culture. You can find this and more via google.
My 94 year old daddy was a diplomat in Washington DC during WWII with a non-USA embassy. What do I say to him today, may I ask you?
How truly horribly tragic and beyond awful for all of us.
I meditate daily for a small return of peace and grace.