23 December 2017   Leave a comment

The UN Security Council has voted to impose more sanctions on North Korea.  The sanctions include refined petroleum products and North Korean exports of food products, machinery, electrical equipment, stone and wood.  The final resolution represented a compromise since the US had lobbied for an immediate repatriation of North Korean workers from Russia and China and for a complete ban on petroleum exports to North Korea.  These measures were opposed by China and Russia, and the China Times ran an editorial which outlined the concessions demanded by the two states:

“China and Russia went through tough negotiations with the US regarding the proposals. China firmly opposes any indication that the council might grant the US permission for military action. It also objects to a maritime military blockade against Pyongyang that might trigger conflict. The US compromised on these issues. The new sanctions include slashing limits on North Korean imports of refined oil from an annual 2 million barrels a year to 500,000. The resolution caps crude oil imports at 4 million barrels a year and extends the deadline for North Korean workers to return home from 12 months to 24 months. The sanctions don’t include leading North Korean leaders. North Korean exports and its imports from China are restricted by category, but not entirely banned.”

The editorial goes on to point out the reasons for the concessions:

“Pyongyang’s nuclear and missile development is unacceptable. It is also unacceptable to use force against it and change the political situation in North Korea and the Korean Peninsula. It is hoped that Washington and Pyongyang can discover their common interests.
“The new resolution is extremely harsh. It may be the last hope for a desperate situation on the peninsula. South Korea recently said it could suspend joint military drills with the US until after the PyeongChang Winter Olympics in February 2018. It is hoped Pyongyang gets the message and responds positively.”

In other words, China’s position remains unchanged:  it wants North Korea to stop the development of its nuclear weapons testing (but does not support the US objective of denuclearization) but is also not willing to impose measures that might lead to the downfall of the North Korean regime.

 

Jane’s Defence Budgets is one of the world’s most authoritative sources on military spending and it has just released its annual report (it is incredibly expensive so I cannot provide a link to the actual report).  The press release on the report contains some interesting information.  Significantly, global defense spending has reached a record high:

“According to the Jane’s report, defence spending will grow for the fifth consecutive year, reaching $1.67 trillion in 2018 and overtaking the previous post-Cold War record of $1.63 trillion seen in 2010.”

Not surprisingly, the US leads the pack with a proposed 4.7% increase in the defense budget in President Trump’s budget.  But western and eastern European states are also raising their military spending to a tremendous extent and many of those states will meet NATO’s target of 2% of total spending (US, Greece, Estonia, Turkey, Latvia, the UK, Lithuania, Poland, and Romania).  The increase spending reflects growing fears of Russia military pressure as that country continues to forge a more ambitious foreign policy in Europe and the Middle East, despite the fact that Russia’s own military spending is going down.  Even though the absolute numbers are increasing, military spending is taking a smaller share of total wealth: “….over the last decade global defense spending has dipped to an average of 2.2 percent of GDP, down from 2.7 percent.”

 

The New York Times is reporting that the recently passed tax bill in the US might result in counter-actions by many of the US trading partners.  US trade and investment partners realize that they now have to compete with the US on their corporate tax rates and all the subsidies in the tax code to promote US investments abroad.  In a very real sense, the chief export of the new US tax code will be austerity as other countries will have to reduce their revenue streams as well.  The impact on China will be significant, particularly since its corporate tax rate is about 45%.  When considering dramatic changes in economic policy in a globalized world, one should never forget to anticipate the reaction of other states to expected outcomes.  One should always assume that whatever one thinks is a positive for the domestic economy will have a negative effect on international partners.

 

Posted December 23, 2017 by vferraro1971 in World Politics

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