COVID-19 Update, 4.8.20
India has too much grain, the Dutch are too stingy, the second race for space is on...and pandas.
Howdy, folks. Here are notable developments from the last two days. With the Jewish holiday of Passover upcoming, I’ll be moving away from a daily cadence but still aim to send out at least a few updates a week, as well as occasional thoughts on important or breaking issues. I am gratified so many of you are finding these reports useful. -- JLS
India’s grain problems. A favorable monsoon season last year led many Indian farmers to plant as much as 10 percent more grains compared to the previous year. COVID-19 is fast turning this meteorological blessing into a curse. Prices for key Indian crops ranging from corn to cotton have plunged between 20 and 50 percent in the last month. Indian government directives to contain COVID-19, which Prime Minister Narendra Modi said earlier today could be extended, is preventing Indian farmers from harvesting their crops and more importantly is delaying the Indian government’s purchasing programs. As a result, India does not have enough storage for its bumper crops: the USDA estimates current total storage capacity at 75 million tons and predicts total wheat and rice stocks by themselves to exceed 95 million tons by July. More than 20 tons of wheat, rice, and other grains may have to be “kept under open storage structures covered by tarpaulin sheets on wood plinth.”
What it means: The good news is India has surpluses in key grains that there may be significant global demand for soon, especially with logistical delays in South America, locusts in East Africa and the Middle East, and protectionist measures in countries like Ukraine and Kazakhstan. (Someone should let the Dude upstairs know he is getting his 10 plagues all out of order.) The bad news is that India’s food system is not designed for exports but for the Indian government to prop up small-scale Indian farmers. Perhaps this crisis will be the impetus Modi needs to generate enough political buy-in to implement the massive reforms needed in India’s agricultural system but even if that optimism is well-placed, it’s the sort of change that happens on a timescale of years, not weeks, and the problems are evident now. Perhaps counter-intuitively, lower grain prices and pressure on Indian farmers may well be a leading indicator for higher grain prices later in the year.
Europe is failing. A 16-hour marathon meeting of EU finance ministers broke up yesterday without resolution -- and with the Netherlands and Italy mired in a spat over how the EU should tackle the economic fall-out of COVID-19 as a bloc. Germany’s Finance Minister tried to put lipstick on the pig by saying that an agreement on EU-wide economic relief measures was “close” and could be reached as soon as Sunday. France’s Finance Minister urged “all member countries to live up to the exceptional challenges to obtain an ambitious agreement.”
What it means: The Dutch Finance Minister tweeted that the Netherlands remains against the idea of a common European debt instrument because that would mean the Dutch “have to guarantee debts of other countries which isn’t reasonable.” He also said the majority of the EU was against these so-called Eurobonds which hardly seems to be the case. Italy, Spain, and other countries do seem to be willing to compromise on this issue by relying on the European Stability Mechanism (ESM) but are drawing the line at Dutch insistence that ESM assistance should be based on “stringent economic conditions.” Spain reportedly was against a compromise that simply left the ESM conditionality wording vague and subject for future negotiations.
I confess that I find the Dutch attitude baffling. If it is not reasonable to guarantee the debts of other EU countries, then by that logic it is also not reasonable for other EU countries to follow EU monetary directives, or to abstain from printing their own currency, or from doing a host of other things. EU Finance Ministers are meeting again tomorrow but they are running out of time, and if the Netherlands wants there to be a functional and powerful European Union in ten years, it needs to do some serious soul-searching; if the Dutch government continues down this path, it may well get other European states to agree to the conditions it wants out of desperation, but at the cost of the EU’s future viability as a political project and even as a monetary union.
The United States of Space. The White House issued an Executive Order reiterating the US rejection of a 1979 international agreement on sovereignty issues in outer space, declaring that the US does not view this “legally and physically unique domain of human activity” as a “global commons.” Russia refrained from officially condemning the order but Russian President Vladimir Putin’s spokesperson said that “any attempts at ‘privatizing’ outer space in these or those formats...would be unacceptable.” In a separate but related development, Russian media reported that Germany had rejected a February proposal preventing the proliferation of space-based weapons before the European Union came up with its own regulatory framework for the issue.
What it means: The White House’s accompanying factsheet to the Executive Order was more revealing than the order itself. According to the factsheet, “American industry and the industries of like-minded countries will benefit from the establishment of stable international practices by which private citizens, companies, and the economy will benefit (emphasis added).” Space has been a source of geopolitical competition in the past, but after the Cold War, it has been a rare area of global coordination and even cooperation. Even when the US announced its goal of putting a man on the moon at the height of the Cold War, then-President John F. Kennedy’s reasoning was that “our leadership in science and in industry, our hopes for peace and security, our obligations to ourselves as well as others, all require us to make this effort, to solve these mysteries, to solve them for the good of all.” How unambitious we have become as the Second Space Race kicks off in earnest.
Emperor Xi. China’s Central Commission for Discipline Inspection (CCDI) announced on Tuesday that Ren Zhiqiang, a Chinese real estate tycoon and former executive of the Huayuan Real Estate Group, is under arreste for “serious violations of law and discipline.” Ren wrote an article critical of Xi Jinping’s rule on March 12 and disappeared shortly thereafter. He also has a history of being critical of Xi and the Chinese Communist Party; he was placed under probation back in 2016 for posts critical of Xi on the Chinese social media platform Weibo.
What it means: A China-watcher I follow on Twitter got a hold of the original March 12th article and translated it on his blog. It is worth reading in its entirety, but this quote stood out to me in particular: “In this epidemic, you can see reality, the Party is protecting the Party’s interests, officialdom is protecting its interests, the supreme ruler is only protecting his core position and interests. It’s precisely this kind of system which only heeds the destiny of the emperor, it never cares about the people’s situation.” The take-aways for me are two-fold: 1) there is still opposition to Xi in China, and 2) that opposition is too weak to affect Xi’s position.
The US calls China out. The United States condemned China for reportedly sinking a Vietnamese fishing vessel near the Paracel Islands last week. The strongly-worded statement accused China of asserting “unlawful maritime claims” while shirking its duties to remain focused on “supporting international efforts to combat the global pandemic.” The Philippines’ Department of Foreign Affairs expressed its solidarity with Vietnam’s official protest to China earlier today as well. China’s Foreign Ministry responded by criticizing what it decried as violations of China’s maritime rights.
What it means: Chinese media seemed to advocate a calm and measured response, and likely this ends with little more than a bevy of strongly-worded statements...but even as the US and China have found a way to deal with each other a little more pragmatically, the situation in the South China Sea obviously remains tense (even if I hate how often banal that word can be).
In Memoriam
“When I die let my ashes float down the Green River
Let my soul roll on up to the Rochester dam
I'll be halfway to Heaven with Paradise waitin
Just five miles away from wherever I am”
Here’s hoping he’s more than halfway there already -- RIP John Prine.
Honorable mention:
Ying Ying and Le Le, residents of Ocean Park (a Hong Kong zoo) can feel the love tonight (or rather felt it on Monday night); the two pandas took advantage of a lack of prying eyes and finally consummated their relationship after a decade’s worth of failed efforts. Mazel to these star-crossed voyagers!
Indian officials in the state of Uttar Pradesh “sealed” 15 districts to prevent the further spread of COVID-19; the “areas will be sanitised and only door step delivery of essential goods will be allowed.”
Russia is unwilling to consider a market-driven reduction of oil production by U.S. shale producers as counting towards America’s quota in an OPEC+ arrangement.
Japan declared a state of emergency in seven prefectures, including Tokyo.
Brazil says it is having “difficulties” in acquiring masks and ventilators from China.
China released an additional 500,000 tonnes of soybeans from its state reserves to the China Oil and Foodstuffs Corporation.
Singapore reported a record 142 new cases today and passed a bill to prohibit social gatherings in both public and private spaces.
Here is an interesting transcript of an interview with Mexico’s COVID-19 czar, Hugo López-Gatell.
If you see anyone not doing their social distancing, please treat them like this Russian man treated his chickens in this video.