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Protests over tiny islands in the East China Sea are disrupting trade relations between China and Japan, respectively the world’s second and third largest economies. In response to violent protests, including alleged arson of some Japanese retailers, major firms, including Panasonic, Honda, Canon, Mazda and others are temporarily suspending operations, reports BBC News.

Toyota is continuing operations. “Calls for boycotts of Japanese businesses and products have been spreading in the streets and on the internet,” the BBC News article reports. “The disputed islands, known as Diaoyu in China and Senkaku in Japan, are uninhabited but resource-rich.” The article suggests that anger surged after the Japanese government moved to purchase three of the islands from a Japanese businessman. Protests and plant closures could disrupt global markets; US officials are calling for calm and restraint. Multinational firms are not keen to invest in nations where violent protests are quick to erupt. – YaleGlobal Some of Japan’s biggest firms have suspended operations at Chinese factories; safety concerns grow amid violent anti-Japan protestsBBC News, 21 September 2012Rights:BBC © 2012

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CAMPIAN, BORDEAUX: Deep in the Bordeaux countryside, Chateau du Grand Moueys is a sprawling 170-hectare expanse of vineyards and forest. At its center, a neo-gothic castle with turrets and crenellated walls, bring to mind a medieval world of knights and romance. Seated within the chateau’s genteelly dilapidated dining room, the estate’s new owner, 49-year-old Chinese entrepreneur Zhang Jin Shan, chomps forlornly, on a croissant and contemplates how to revive the vineyard. Globalization has created new challenges for the French wine industry. Once secure in their supremacy, French vineyards now must compete with less expensive New World wines, at a time of declining demand from austerity-parched developed markets. I ask Zhang how he’s been enjoying the local French food. “Hai xing,” he replies with a shrug, using a Chinese phrase that signifies faintest approval. “I’ve got used to it.” Aline Moineau, the chateau’s longstanding manager, purses her lips tightly. Zhang doesn’t appear to notice and perks up talking about a luxurious 50-seat Chinese restaurant, the piece-de-resistance of the high-end hotel and spa that he plans for the premises. A clash of culture is obvious, feeding into larger resentments across Europe at China’s rising clout. I ask if a French restaurant would make more sense in a chateau? “No,” he answers emphatically. “In France there are many French restaurants, but very few Chinese ones.

The guests in my hotel will mostly be Chinese, and the fact that they can find good food here will be attractive for them.” “But perhaps they would want to try French food?” interjects Moineau. “Please, let Mr. Zhang talk with the journalist first, and ask your questions later,” snaps Sophie, the Chinese woman who serves as Zhang’s French interpreter.

The clash of culture is obvious, one that feeds into larger resentments across Europe at China’s rising clout and investments in the economically floundering continent. On the one hand, Europe welcomes Chinese riding to the rescue of distressed assets, but investors are focused on making profits. Inevitably Chinese consumers are influencing trends in taste, a development that’s not always to the liking of locals. Chinese investments in Europe are still small but growing at a heightened pace. In 2011 the Chinese invested $10 billion in the crisis-hit region, triple the amount of a year earlier, according to a study by economic consultancy Rhodium Group and the Chinese bank CICC. Chinese investors have been buying car companies, solar-panel producers and chemical plants among other acquisitions, prompting the European Council on Foreign Relations, a think tank, to publish a report titled “The Scramble for Europe,” drawing parallels between the European colonization of Africa in the 19th century and China’s current activity in Europe. While such declarations may be overblown, rocketing figures for wine consumption in the Chinese mainland, combined with the reputation enjoyed by Bordeaux wines have made owning a vineyard, or two, an increasingly attractive proposition. China is not a traditional wine-drinking nation. Still, in 2011 it surpassed the United Kingdom to become the fifth largest consumer of wine by volume, according to the International Wine and Spirits Research group.

The mainland’s wine market has experienced more than 20 percent growth every year since 2006, and around 20 percent of Bordeaux’s exports are now destined for China. China, not traditional wine-drinking nation, surpassed the UK to become fifth largest consumer of wine. Purchases by Chinese in Bordeaux began in 2008, when a trading company from Qingdao bought Chateau Latour Laguens, a 30-hectare vineyard. By 2011, more prestigious estates like Chateau Laulan Ducos, classified as a Cru Bourgeois, began passing into Chinese hands. Another significant acquisition in 2011 was the €10 million deal whereby COFCO, a state-owned oil and food giant, became owner of Chateau Viaud. During the Bordeaux en primeur tastings in 2011, when thousands of wine professionals from across the world travelled to the region to assess the year’s offerings, the estates offered vintage reports in three languages – French, English and Chinese. Bordeaux winemakers also recently published a recipe book pairing wines with Chinese dishes, suggesting, for example, a Saint-Emillon for pig’s feet. When Zhang bought Chateau du Grand Moueys earlier this year, it had been languishing on the market for five years.

The previous owners, the aristocratic Bomer family from Germany, had been hard pressed to find takers for the Chateau’s €12 million price tag. Although the final price is undisclosed, Zhang’s French staff say he paid a “fair price.” Karine Lemaitre, Chateau du Grand Moueys’ oenologue in charge of wine production, is excited about the possibilities of Zhang’s investment. But although Lemaitre is eager to experiment, she recognizes the challenges of foreign ownership – the biggest being the inability to communicate directly with Zhang.

The only French he can muster is a barely recognizable, if enthusiastic,  “oui!” Much is lost in translation, the local staff complain about the linguistic abilities of his translator and, as a result, decisions are delayed.  Zhang may be a newcomer to the world of French wines, but is not new to beverages. As head of the Ningxiahong group, he’s China’s emperor of goji berry drinks. Goji, a small red berry, has a long history of medicinal uses in China. Ningxiahong produces 30 million bottles of goji alcohol annually. Like many Chinese entrepreneurs of his generation, he’s a self-made man. He was born in 1963, a few years before the start of the Cultural Revolution, in an obscure town in one of China’s poorest provinces, Ningxia. His mother tilled the fields, while his father worked with the local railways. Chinese acquisitions of French vineyards have thus far been small or middling estates. Zhang didn’t attend university. Instead, armed with a technical diploma he landed an accounting job with a state-owned enterprise in 1983. By 1996 he’d made the leap to running a baijiu factory and making the popular Chinese spirit. In 2000, he bought Ningxiahong, a company active in real estate, printing, catering and travel, in addition to the goji business. Zhang has witnessed the opportunities that come with change. He’s dismissive about the wine produced at Chateau du Grand Moueys: The quality is mediocre, the packaging “low class.” A Paris-based designer has been pressed into service to redesign the bottles, adding red corks and gold lettering. Lemaitre, the oenologue, notes that similar redesigns are underway at other estates owned by Chinese in the region: “There is some kind of bandwagon effect. Everyone wants a certain kind of packaging and has the same plans. Buy a vineyard with a nice chateau, divert all the wine produced to China, and set up a hotel on the estate.” Chinese acquisitions of French vineyards have thus far been small or middling estates.

The mighty Grand Cru, the most prestigious of wine classifications, has eluded investors from the mainland.

To put the investments in perspective, only an estimated 20 estates out of about 9000 in Bordeaux are in Chinese hands. But Zhang dreams big and has plans to acquire a Grand Cru label “like Chateau Lafite” within the next decade. “When I was a child, I couldn’t even dream of going to a city like Beijing,” he chuckles. He waves his hand at the chateau’s airy interiors. “All this,” he says, “It makes me feel like a prince.” It’s not yet clear how profitable these Chinese investments will be, going forward.

Regardless, red and gold bottling, luxury Chinese restaurants in the countryside, and millions of bottles of French wine consumed by Chinese people as they dig into a supper of chicken feet a la mode, are bound to transform the hallowed French landscape of Bordeaux as much as its trading fortunes.  

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The real estate, automobile and motorbike markets, whichhave been gloomy for the last many months with the weak demand, is now freezingin the “forsaken spirits” month. See more here: Trade comes to a deadlock in forsaken spirits

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Trans-Pacific Partnership would open up new Asian markets for US products, but supporters must overcome protectionist instincts on both sides of the Pacific Bernard K. GordonAs the Doha Round of global trade talks nears its 12th year with no end in sight, the negotiations have all but failed. Frustrated with Doha’s stagnation and eager to expand trade and secure alliances, the United States has signed a series of bilateral free-trade agreements (FTAs), culminating in last year’s pacts with Colombia, Panama, and South Korea.

These deals have been generally favorable to the United States; the agreement with South Korea is expected to increase trade between the two countries by billions of dollars and create tens of thousands of jobs for each. Despite these results, the bilateral approach doesn’t offer much promise.

The passage of last year’s deals ended a five-year standoff between, on the one side, most Republicans in the House of Representatives and pro-trade advocates in the business community and, on the other, House Democrats, most unions, and U.S. car producers, which fought particularly hard against the deal with South Korea due to long-standing restrictions against U.S. car sales there. After a difficult process of lobbying, wrangling, and compromise, the Obama administration has little stomach left to attempt another bilateral deal.

To move its trade agenda forward, the White House has instead embraced a measure between the global Doha Round and the bilateral FTAs: a plurilateral process centered on the Trans-Pacific Partnership. Currently being negotiated by Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States, and Vietnam, the TPP will represent one of the world’s most expansive trade agreements. And if Canada, Mexico, and especially Japan, all of which expressed interest in joining the negotiations last November, also sign the agreement, the TPP will add billions to the U.S. economy and solidify Washington’s political, financial, and military commitment to the Pacific for decades to come. Given the potential windfall, the Obama administration believes that the TPP has a better chance of overcoming domestic opposition than would a Doha agreement or new bilateral deals. But the TPP faces obstacles. Critics in several nations involved in the negotiations fear that the United States, to protect its businesses and innovators, is trying to use the agreement to impose its own expansive copyright and patent regulations on its trade partners.

The relative secrecy surrounding the TPP talks has only deepened those anxieties. Negotiators have allowed interested stakeholders, from industry to the general public, to present information at open TPP sessions, but they have refused to release the texts of the negotiations. If the Obama administration fails to accommodate reservations about intellectual property rights and make the talks more transparent, there is a growing possibility that the TPP could collapse.

The resulting failure would represent a major defeat for the Obama administrationand undermine its goal of ensuring a long-term presence for the United States in the Asia-Pacific region. PACIFIC PROMISE As currently proposed, the TPP would go well beyond categories traditionally included in trade agreements.

To begin with, over the next decade, it would gradually remove all tariffs on trade between member states. Following the model of the FTA between the United States and South Korea, it would affectal most all forms of economic interaction among its members, covering policies on investment and government procurement, labor and environmental standards, agriculture, intellectual property, and such new sectors as state-owned and small and medium-sized enterprises, businesses with anywhere between 50 and 500employees.

The United States and its partners hope that the TPP becomes the linchpin of free trade in the Asia-Pacific region. But the TPP cannot achieve that potential without Japan.

The country’s GDP is more than double that of all the other TPP nations combined, save for the United States. Including Japan would mean that the agreement covered 40 percent of global GDP and add $60 billion to the U.S. export market.

That is why the Obama administration and the U.S. export sector declared its support for Japan’s addition to the TPP when Tokyo indicated its interest in joining.

This past December, more than 60 American food and agricultural organizations sent a joint statement to Ron Kirk, the U.S.

Trade representative, and Tom Vilsack, the U.S. secretary of agriculture, encouraging them“to smooth the way for Japan’sfull participation.” A week later, the Business Roundtable, an association of CEOs, and the U.S. Business Coalition for TPP, a collection of companies in favor of the free-trade agreement, sent similar letters to the U.S.

Trade representative. In March, Wendy Cutler, an assistant U.S.trade representative, told an audience in Tokyo that “the prospect of Japan joining the TPP . . . is important; it’s historic. And frankly it’s exciting.” Enticed by that possibility, the Obama administration has made the TPP the keystone of its trade policy, and it is doing all that it can to shape the agreement in the United States’ favor. For example, it has emphasized encouraging and protecting the interests of small and medium-sized enterprises. Such businesses generally have little experience in dealing with imports or exports, but Washington hopes to enhance their role in the TPP because they compose the bulk of U.S. employment and so by aiding them, it may be able to build domestic support for trade. Americans have long been indifferent to trade, believing that it benefits mainly foreigners, costs them jobs, and contributes to the U.S.

Trade deficit, which is seen as inherently negative despite the fact that it has long coincided with American trading and political power. PROPERTY WRONGS Even as Washington hopes that its efforts to shape the TPP will sooth the concerns of U.S. industries and unions, it has already rankled public interest groups and the governments of the other countries negotiating the agreement — particularly when it comes to intellectual property. In February 2011, a draft text regarding intellectual property from the TPP negotiations was leaked online. A number of U.S. and foreign groups, such as Intellectual Property Watch, Public Knowledge, TPP Watch, and Anonymous harshly criticized several measures outlined in the document. In particular, they condemned proposals for criminal enforcement of copyright and patent law that go beyond existing treaties between the various negotiating countries.

They also asserted that the TPP would require Internet service providers to identify users and that the United States is unreasonably seeking to impose its own extensive copyright protections on the agreement. U.S. law stipulates that the vast majority of copyrights should end after 70 years, but critics claim, incorrectly, that the Obama administration has called for the TPP to include a 95-year minimum copyright term on some works.

The legal scholars Sean Flynn and Jimmy Koo captured critics’ fears when they wrote in2011 that the TPP would create “the most extreme, anti-consumer and anti-development international instrument on intellectual property to date.” The administration has supported these proposals not to harm consumers but to protect American innovators. Intellectual property is already a major source of value for the United States; in 2010, for example, 40 percent of worldwide payments made to intellectual property holders — nearly $100 billion­ — went to Americans. According to the U.S. Commerce Department, those sums matched the profits earned from the export of aircraft, grain, and business services, three sectors that lead the U.S.

Trade surplus. And U.S. intellectual property will only become more important in the coming years, as several U.S.-based technological innovations, such as next-generation manufacturing techniques and cutting-edge wireless communications, drive the country’s trade.

The creators of those technologies will need as much shelter under the TPP as those who currently hold copyrights and patents under U.S. law.

The United States is hardly the only nation affiliated with the TPP that has an interest in securing copyright and patent protections for its citizens. In 2008, for example, Japan led the world in patent applications. And Singapore, with its multibillion-dollar biotechnology investments, also needs to protect its homegrown efforts. In rightly defending the intellectual property rights of American innovators, the United States has also led the way for these other nations. But it is clear that some of those countries do not believe that the United States has their best interests in mind. FREE TALKS Despite the broad interest in strong intellectual property protections among some countries negotiating the TPP, some nations continue to charge that the United States is making unreasonable demands. At the 11th TPP negotiating session, in Australia this past March, for example, the Australian press reported that every TPP negotiating member had rebuffed U.S. proposals regarding intellectual property rights. And in mid-April, several negotiators from Chileput the future of the agreement in doubt when they questioned “whether joining the TPP would be worth its costs if it included additional demands on intellectual property.” Meanwhile, during the same meeting in Australia in March, several organizations condemned the TPP for its potential impact on the availability of cheap drugs. Doctors Without Borders, for example, accused the U.S. government of inserting provisions into the TPP that would interfere with the low-cost delivery of malaria and HIV/AIDS medicines to developing nations. During a previous round of TPP negotiations, the group claimed that the agreement would “extend monopoly protection for old drugs by simply making minor modifications to existing formulas,” thereby preventing the introduction of cheaper generic drugs.

The U.S. government has not addressed every accusation leveled against it in the TPP process, but in late February, Demetrios Marantis, the deputy U.S.

Trade representative, said that his office “strongly disagrees” with Doctors Without Borders. He pointed out that the Office of the U.S.

Trade Representative had six months earlier established a nine-point TPP program, “Trade Enhancing Access to Medicines,” to ensure, in his words, that “generic drugs can get into the market as quickly as possible.” The United States has thus at least begun to address the anxieties of TPP skeptics. But a bigger problem remains. In the age of the Internet, rumors about provisions within the agreement can quickly spark worldwide resistance. More transparency and better information about the negotiating process could help counter such rumors. And although the United States and its partners have been receptive to presentations from interested individuals and groups, they have not fully opened the process to the public, fueling legitimate concerns about the ultimate shape of the agreement. In January, for example, Gary Horlick, a prominent trade lawyer and former U.S.

Trade official, described the TPP process as “the least transparent trade negotiation I have ever seen.” Although Kirk, the U.S.

Trade representative, has called the negotiations “the most open, transparent process ever,” his team has presented very little of the U.S. position to the public or even to interested parties not officially involved in TPP discussions.

The issue came to a head this past February, when 23 U.S. organizations representing the libraries of virtually every American research institution and university urged the Obama administration to “mandate public access” to the negotiation draft texts.

They argued that the provisions of the TPP “will touch every American family” and that “the enforceability and permanence of such binding rules . . . necessitate maximal transparency.” Days later, Senator Ron Wyden (D-Ore.) raised the request in a tense exchange in a hearing with Kirk.

Responding to the statement, Kirk said that the Obama administration has “moved to disclose more information sooner than any previous administration.” Unsatisfied with Kirk’s response, Wyden introduced legislation that would require the disclosure of any TPP negotiating text “not later than 24 hours after the document is shared with other parties.” Wyden’s proposal failed to gain traction, but the clamor for more openness in the TPP talks remains, both in the United States and abroad. A NEW KIND OF DEAL If the TPP negotiations bear fruit, the United States will become far stronger, economically and politically, over the next generation. A deal that included Japan would essentially result in a free-trade agreement between Washington and Tokyo, representing the long-sought “third opening” of Japan and the affirmation of U.S. power in the Pacific region. More broadly, the United States hopes that the TPP will cement a system of open, interconnected trade based on mutually-agreed-on rules.

That is why the U.S. government hopes to complete the broad outlines of a final deal by the end of the year. But first it must win over domestic opposition to the TPP, especially among the country’s automotive, insurance, and agricultural sectors. It also needs to accommodate, wherever possible, the concerns of critics at home and abroad about its intellectual property demands. And it must shed more light on the negotiating process. If the Obama administration fails to take these steps, then it may miss an opportunity to pave the way for a new kind of trade agreement and to reaffirm its economic and political stake in the Pacific.  Rights:Copyright © 2002-2012 by the Council on Foreign Relations, Inc. All rights reserved.

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With their domestic economy in a downturn, Chinese automakers are aiming for global markets, especially Africa. Chinese car companies must overcome a notoriety for poor manufacturing, complete with slang, including “fong kong” in South Africa and “zhing zhong” in Zimbabwe, that describes Chinese products as unreliable. By building manufacturing plants abroad in countries like South Africa, Chinese manufacturers hope to avoid costs associated with exportation and find favor with the large potential base of Africans seeking inexpensive forms of transportation. Customers remain wary about reliability and availability of spare parts, and may expect long-term warranties before giving Chinese brands a spin. – YaleGlobal Facing a slow market at home, Chinese auto manufacturers target AfricaErin Conway-SmithSalon, 4 June 2012Rights:Copyright © 2011 Salon Media Group, Inc.

Reproduction of material from any Salon pages without written permission is strictly prohibited.

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‘The confrontation has highlighted the Philippines’ growing economic links to China … as well as the vulnerability of those links.’ The standoff between Manila and Beijing over the Scarborough Shoal, which began on April 8 when the Philippines sent its Navy to confront Chinese vessels fishing in the area, has begun to have economic consequences well beyond China’s recently imposed import restrictions on bananas, which account for more than 30 percent of Philippine banana exports. In the famed, if not hackneyed, Chinese phrase about killing chickens to scare monkeys, what is going on in the Philippines probably should catch the attention of the other eight nations that border the South China Sea, over which China claims almost total hegemony.

The banana dispute actually began in March, when Chinese importers complained the fruits were infested by pests and therefore unsalable in Chinese markets.

The Chinese now require full inspections on all shipments and are not relying on clearances issued by Philippine quarantine authorities.

They have also begun inspections of papayas, mangoes, coconuts and pineapples, sending Philippine authorities scrambling for markets in the Middle East and other regions. On May 13, Sergio Ortiz-Luis Jr., head of the Philippine Exporters Confederation, said in a radio broadcast that China had “saved” Philippine exporters during the global credit crisis when exports to traditional markets dried up and had since become one of the Philippines’ fastest growing export markets. But since the banana spat began, Filipino businessmen complain they have lost 1 billion Philippine pesos ($23.1 million). Mindanao, a major source of banana exports, has been particularly hard-hit. Exporters are now blaming the government for its handling of the Scarborough Shoal standoff, which began a full month after Chinese authorities barred the bananas and has morphed into a real confrontation with the arrival of Chinese maritime surveillance forces vessels. However, Philippine authorities have refused to blame the Chinese in the dispute, instead saying exporters need to clean up their acts. A fishing ban implemented by both sides has defused the situation somewhat. Chinese authorities, however, have followed up the banana inspections by impounding Philippine papayas in Shanghai after discovering mealybugs in 43 crates of the fruit. Philippine authorities have reacted by tightening local inspections while the fruit is still on their soil. Agriculture Secretary Proceso Alcala told reporters he was seeking “100 percent inspections” now that Chinese authorities had turned their scrutiny on Philippine fruit exports.

The confrontation has highlighted the Philippines’growing economic links to China, which is now Manila’s third-largest trading partner behind Japan ($15.4 billion) and the United States ($13.63 billion), as well as the vulnerability of those links. In March, China accounted for 14.9 percent of Philippine exports, with $642 million in shipments, up 27.8 percent from the same month in 2011.

There have been expectations that China will become the country’s top trading partner by 2013. China shocked Asia in 2010 by using trade as a weapon in its bid to force policy changes in countries with which it had international disputes. For example, China blocked shipments of rare earth minerals to Japan that were crucial to a wide range of manufactured products, apparently in retaliation for Japan’s detention of a Chinese fishing captain after an incident near the Diaoyu Islands, which both countries claim and which have been the scene of sporadic confrontations in recent years. (The Japanese claim the islands as the Senkakus.) Later, the Chinese slowed rare earth shipments to the United States and countries in Europe, claiming they were trying to clean up the rare earth mining industry, which has caused disastrous pollution in many areas where the minerals are mined.

The embargo, if that is what it was, was viewed by analysts as the latest indication that China was willing to use economic clout to get its way in policy disputes.

The bigger point is that if China decides to get tough on the Philippines, it is obviously that the Philippines will come out as the loser. In recent years, the Philippine economy has made major upward strides, particularly because of inward remittances from overseas workers, at $20 billion a year, and business process outsourcing, now at $13 billion.

The Philippines, like other Southeast Asian countries, has lately begun to benefit from the exodus of low-end Chinese manufacturing as labor costs have grown, particularly in semiconductor components, computer parts and construction materials such as metals, cement, bricks and tiles. In addition to bananas, China imports pineapples, coconuts and seeds. China also imports billions of dollars in mining minerals from the Philippines. In 2009 and 2010, according to the latest United Nations Conference on Trade and Development report about trade dependency, China topped all leading destination markets for Philippine commodity exports, followed by Japan, the United States and Singapore.

Trade in the region now amounts to $5 trillion. With Vietnam, the Philippines, and China in particular continuing to squabble over vast potential oil and gas reserves, China, as with the confrontation over the Scarborough Shoal, has backed up its territorial claims with gunboats, thus turning the littoral nations more and more toward the United States. It remains to be seen if China’s attention to bananas might grow to include Indonesian coal, Malaysian timber and other exports like palm oil if the other nations bordering the South China Sea become too obstreperous.  Rights:Copyright © 2005 – 2012 Asia Sentinel.

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The eurozone’s debt problems won’t be limited to Europe, the world’s leading importer of many products, but could spread far and wide. Exporting nations in East Asia will have little choice but to expand their own markets, the World Bank advises, according to a report from the BBC News. “Risks emanating from Europe have the potential to affect the region through trade and financial linkages,” the World Bank report suggests. Slowing growth in China also signals the need for Asian economies to expand their own domestic markets.

The World Bank anticipates growth to slow to 7.6 percent from 8.2 percent. Slower expansion in China is largely responsible for that drop, though East Asia is expected to remain the world’s economically strongest region in 2012. – YaleGlobal The eurozone debt crisis could harm the growth of East Asian economies, the World Bank has warnedBBC News, 1 June 2012Rights:BBC © 2012

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