John Kerry and the last gasp of the two-state solution

JOHN KERRY, the American secretary of state (pictured), chose to mark the end of his long public career with a valedictory speech on December 28th devoted to the Israeli-Palestinian conflict. Coming just three weeks before he is due to step down, it was an admission by America’s senior diplomat that he, like so many before him, had failed to make any noticeable contribution to ending this stubborn struggle.

The speech was essentially an analysis of the policies of the current Israeli government which Mr Kerry described “the most right-wing in Israeli history, with an agenda driven by the most extreme elements”. He questioned its desire for peace with the Palestinians, given the relentless expansion of Jewish settlements in lands conquered by Israel in 1967. “Does it really want an intensifying conflict in the West Bank?” asked Mr Kerry. “How does that help Israel’s security? How does that help the region?”

Donald Trump, the president-elect, and many of Israel’s supporters in America and beyond criticised him. Strikingly, a spokesman for the British prime minister, Theresa May, said it was inappropriate for Mr Kerry to...Continue reading

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Trump Rally Darkens Skies for All-Weather Portfolio

All-weather and risk-parity portfolios designed to produce smooth returns have hit a rough patch since the U.S. election.

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News at Gilead Is Better but Not Good

A slowing decline in prescriptions is a positive development for the battered biotech

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Waiting for the Big Post-Christmas Sales

It was surprisingly calm from a pricing standpoint at the retailers Heard on the Street visited two days after Christmas.

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Will Sprint's Promises to Trump Pay Off?

Sprint’s jobs announcement shows it is learning to speak Trump’s language, a strategy that could help it win approval to merge with T-Mobile.

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Apple, eBay and Gold: We Called Them Right. We Missed Some, Too

Here are some of Ahead of the Tape’s best and worst calls in 2016.

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The Best and Worst U.S. Calls of 2016

From central banks to accounting scandals, from mergers to shadow financing, Heard on the Street columnists aim to provide useful advice for readers. Here’s where we got it right—and wrong.

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The Best and Worst Europe Calls of 2016

From central banks to accounting scandals, from mergers to shadow financing, Heard on the Street columnists aim to provide useful advice for readers. Here’s where we got it right—and wrong.

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The Best and Worst Asia Calls of 2016

From central banks to accounting scandals, from mergers to shadow financing, Heard on the Street columnists aim to provide useful advice for readers. Here’s where we got it right—and wrong.

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Where the Action Is in the Last Trading Days of the Year

In quiet financial markets, window dressing could spice things up as the year winds down.

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Qualcomm: The Company Governments Love to Hate

The company’s dominant position in wireless means state-sponsored pressure is unlikely to ease.

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Electric Cars: Still Unpopular with Buyers and Unprofitable for Sellers

Tesla and General Motors are rolling out mid-priced electric cars, and others are coming soon. But the auto industry faces big hurdles before widespread adoption.

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China's Currency Drops But Pressure Still Builds

Markets got somewhat used to a sliding yuan in 2016. That doesn’t mean the warning signals the currency is sending about China’s financial system have gone away.

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Virginia’s governor race could be a referendum on Donald Trump’s politics

VIRGINIA, the one state in the old confederacy carried by Hillary Clinton in 2016, chooses a new governor next year. Ditto New Jersey, another blue state, where the departing Republican governor, Chris Christie, is an on-again, off-again—but these days, mostly off-again—adviser to Donald Trump, the president-elect.

Virginia and New Jersey are the only states to pick governors in the year immediately following a presidential election. Because they represent important facets of America’s complex political personality—Virginia, the suburbanising South; New Jersey, the industrial north-east—their elections can be barometers of emerging trends and sentiment.

In Virginia, that could be voter satisfaction—or dissatisfaction—with what is going on across the Potomac river in Washington, DC. Recent history shows that more often than not Virginia voters signal a definite distaste for a new president.

Indeed, since 1976, the party that won the presidency lost the Virginia governorship the following year. There has been one exception to the so-called Virginia curse: in 2013, the year after Barack Obama was...Continue reading

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Surprise Drug Approval Is Holiday Gift for Biogen

Biotech stock Biogen gets a boost from early approval of its spine disorder drug.

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The Mystery of Japan's Stagnant Wages

Despite three years of unorthodox stimulus, Japan’s wage growth remains slower than expected.

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Paying to Lend: The Negative-Yield Story of 2016

Bonds have been selling off in recent weeks—but the early 2016 rally that took them into uncharted territory has a legacy.

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A Slightly More Frugal Google

The web giant shows signs of watching its “other bets” closely, but financial results remain steady.

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Banks' Interest-Rate Dreams Coming True

Big U.S. banks have rallied in recent months amid rising interest rates but, if the Fed carries out its plans, there is room for them to keep rallying.

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The Real Story About Rising Home Prices

Inflation-adjusted home values are far below their 2006 peak and achieving a new high could be tough to achieve in the new year.

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Trump Trade Causes Pain in Spain

Spanish banks may suffer from emerging-market woes following Donald Trump’s U.S. election victory, particularly those exposed to Mexico.

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Stephen Breyer urges a review of the death penalty

THIS year marks the 40th anniversary of Gregg v Georgia, the Supreme Court case that reintroduced the death penalty to America. Capital punishment had been halted in 1972 when five justices determined it to be “arbitrary and capricious” in violation of the bar on “cruel and unusual punishments” in the eighth amendment. But four years later, the court found that new state laws had mended the death penalty’s main defects, and the executioner was called back from retirement. In the first few years following Gregg, only a handful of people were put to death. By 1999, the number of executions reached a peak of 98 before beginning to fall again after the century’s turn. Thus far in 2016, only 20 people have been executed in America, the fewest since 1984.

As executions dwindle, the discussion about America’s system of capital punishment has shifted. Less energy is devoted to debating the death penalty’s supposed purposes of deterrence and retribution; more discussion, and litigation, revolves around peripheral issues like exempting children and the intellectually disabled from capital punishment, the relative roles of juries and judges in issuing...Continue reading

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Art of the Deal: Barclays Takes Mortgage Fight to Court

Deutsche Bank and Credit Suisse settle multi-billion-dollar probes, but U.K. bank declines.

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Italy's Bank Rescue Is a Precarious Balancing Act

The bailout of Monte dei Paschi di Siena will have important implications for other weak lenders in Italy and the rest of Europe.

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Much Ado About Not Much as OPEC Oil Deal Is Set to Kick Off

The group’s oil-output agreement, set to begin next month, may deliver a modest cut in production compared with what it was in September.

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What Trump's Cabinet Picks Mean for Markets

The people in President-elect Donald Trump’s administration are extremely shareholder friendly, but investors need to keep their enthusiasm in check.

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Retailers Lose Willpower as Christmas Approaches

Even the full-price stalwarts cave in to discounts the week before Christmas, and those that have been cutting prices slash even more.

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Euro-Dollar Parity: It's All About the Greenback

The euro parity party plans are being dusted off. But the rising dollar needs watching closely.

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Brazil’s gargantuan corruption scandal goes global

THE bribery affair centred on Petrobras, Brazil’s state-controlled oil company, has already shaken that country. The petrolão (“big oily”), as the scandal is known, has landed bosses of its largest construction conglomerates in jail and helped topple Brazil’s president. Now it is causing earthquakes abroad.

On December 21st America’s Department of Justice (DoJ) reached a $3.5bn settlement with Odebrecht, Brazil’s biggest builder, and with Braskem, a petrochemical joint venture between that firm and Petrobras. The DoJ alleges that since 2001 Odebrecht and Braskem paid $788m in bribes to officials and political parties in Brazil and in 11 other countries. Most of these are in Latin America. They include Venezuela, Mexico, Argentina and the Dominican Republic (see chart). Two Portuguese-speaking African countries—Angola and Mozambique—are also on the list.

The payoffs brought...Continue reading

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Biotech Stocks: Rate Expectations Matter

Biotech investors shouldn’t overlook what happens in the bond market.

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Auto Suppliers May Be the Real Winners as Cars Electrify

The biggest winners of the postrecession car boom haven’t been car companies but their suppliers. This is one feature of the automotive landscape the emergence of electric vehicles seems unlikely to disrupt. Suppliers with the right technology are worth their big stock-market premium.

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The failed electoral-college rebellion bodes ill for future elections

THE last-ditch effort by some Democrats to thwart a Donald Trump presidency ended in a fizzle on December 19th. The 538 members of the electoral college—the body that officially elects America’s chief executive, as ordained by Article II of the constitution—handed the real-estate magnate 304 votes, two shy of the total he was projected to win after the people voted on November 8th but a comfortable 34 votes more than the 270 he needed to win a majority. Mr Trump is set to be inaugurated as America’s 45th president on January 20th.

The ill-fated Hail Mary was lobbed by a number of liberal intellectuals, including Lawrence Lessig, a Harvard law professor and short-lived 2016 presidential candidate. In an opinion piece for the Washington Post last month, Mr Lessig observed that Hillary Clinton handily won the national popular vote. Since electoral-college electors are “citizens exercising judgment,  not cogs turning a wheel”, they should feel free to ignore the popular vote totals in their home states. Electors should then stand up for the principle of “one person, one vote”, Mr Lessig suggested, and switch their allegiance to Hillary Clinton....Continue reading

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Ethiopia opens Africa’s tallest and most controversial dam

SUB-Saharan Africa’s largest mass housing programme; its first metro; its biggest army. Ethiopia’s government likes to deal in superlatives. Last week the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) added another to the list: the tallest dam.

After years of delay, due primarily to funding shortages, the prime minister, Haile?mariam Desalegne, finally inaugurated the 243-metre (800ft) Gibe III dam on the Omo River on December 17th. Its hydroelectric plant has the potential to double the country’s measly energy output at the flick of a switch.

Dubbed “the water tower of Africa”, Ethiopia has long sought to harness the power of the rivers that tumble from its highlands. Flagship dam projects were central to the modernisation plans drawn up by the Italian administration of 1936-1941 and by the former emperor, Haile Selassie, in the 1960s. Gibe III is the latest in a series being built along the Omo River by the government, which is also constructing what will be the largest-ever dam in Africa when it opens, in theory, next year: the Grand Ethiopian Renaissance Dam on the Blue Nile. Together these projects are...Continue reading

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The most profitable time of the year

We look at the decline in holiday spending in America and ask what surprises 2017 could bring. And Adrian Wooldridge takes on the ghosts of capitalism past, present and future

The Highly Charged Way to Play Electric Cars

Utilities have received little attention compared with companies like Tesla in the electric vehicle revolution. It presents them with both an opportunity and a burden.

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U.S. Is Now the Problem Market for Swiss Watchmakers

Swiss watch exports to the crucial U.S. market are worsening even as Hong Kong shows signs of recovery.

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Biogen Faces No Easy Opportunities

The biotech’s risks run deeper than the outcome of its Alzheimer’s trial.

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Japanese banks grapple with ultra-low interest rates

BANKS the world over are wrestling with low interest rates. Nowhere have they grappled for longer than in Japan. Although the Bank of Japan (BoJ) introduced negative rates only in January, almost 20 months after the European Central Bank, its rates have been ultra-low for years: they first hit zero in 1999. In its long battle against deflation, it pioneered “quantitative easing”—buying vast amounts of government bonds—which depresses longer-term rates and thus banks’ lending margins. Since September the BoJ has also aimed to keep the ten-year bond yield at around nought, while holding its deposit rate at -0.1%.

Banks have had some relief lately: since Donald Trump’s election in November, the yield curve has steepened slightly—and share prices have leapt—as American interest rates have risen and the yen has tumbled. But on December 20th the BoJ kept policy on hold.

For Japan’s biggest lenders, negative rates are “an irritant, not a catastrophe”, says Brian Waterhouse of CLSA, a broker. Every tenth of a percentage point below zero, he estimates, shaves 5% from the earnings of the three “megabanks”: Mitsubishi UFJ...Continue reading

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What not to expect in 2017

IF 2016 was a year of shocks, what will the next 12 months bring? It is time for the annual tradition (dating all the way back to 2015) when this column tries to predict the surprises of the coming year.

By definition, a surprise is something the consensus does not expect. A regular survey of global fund managers by Bank of America Merrill Lynch (BAML) points to what most people believe. Following the election of Donald Trump, investors are expecting above-trend economic growth, higher inflation and stronger profits. They have invested heavily in equities and have a much lower-than-normal exposure to bonds.

So it is not too difficult to see how the first surprise might play out. Expectations for the effectiveness of Mr Trump’s fiscal policies are extraordinarily high. But it takes time for such policies to be implemented, and they may be diluted by Congress along the way (especially on public spending). Indeed, it may well be that demography and sluggish productivity make it very hard to push economic growth up to the 3-4% hoped for by the new administration. Neither fiscal nor monetary stimulus has done much to lift Japan out of its torpor,...Continue reading

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2016 in charts

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Thomas Schelling, economist and nuclear strategist, died on December 13th, aged 95

WITHIN half an hour of waking up on October 10th 2005, Thomas Schelling received four phone calls. The first was from the secretary of the Nobel Committee, with news that he and Robert Aumann had jointly won that year’s prize for economics. During the fourth call, when asked how winning felt, he answered: “Well, it feels busy.” He was nothing if not truthful. He also confessed to feeling confused about which bit of his work had won the prize.

It might have been his work on addiction—flicked off like ash from his own struggles with smoking. Economists must understand, he wrote, the man who swears “never again to risk orphaning his children with lung cancer”, yet is scouring the streets three hours later for an open shop selling cigarettes. Mr Schelling’s work laid (largely unacknowledged) foundations for future behavioural economists. In his thinking, addicts have two selves, one keen for healthy lungs and another craving a smoke. Self-control strategies involve drawing battle lines between them.

The prize could also have been for his work on segregation, showing how mild individual preferences could lead to extreme group...Continue reading

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Aung San Suu Kyi fails to calm Myanmar’s ethnic violence

SYED, a 33-year-old Muslim religious teacher, feared the worst. On October 9th Rohingya militants attacked border posts near Maungdaw, a township in the north of Rakhine state in western Myanmar, killing nine Burmese border guards. Syed, himself a Rohingya from Rakhine, was sure that a vicious crackdown by Myanmar’s army would follow. So he put on non-religious clothes and shaved his beard. Along with 16 others he left his home village. For days the group hid in a forest. Eventually they crossed the Naf River, which separates Myanmar from Bangladesh, and found their way to the sprawling, ramshackle Kutupalong camp near the coastal town of Cox’s Bazar.

Syed’s fears were justified. Myanmar’s army has blocked access to much of Maungdaw, keeping away journalists, aid workers and international monitors (troops claim to be searching for stolen guns and ammunition). But reports have emerged of mass arrests, torture, the burning of villages, killings of civilians and the systematic rape of Rohingya women by Burmese soldiers. At least 86 people have been killed. Satellite imagery analysed by Human Rights Watch suggests that soldiers have burned at least...Continue reading

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The persecution of a Christian mayor in Indonesia

WHEN the citizens of Jakarta, Indonesia’s capital, voted for Basuki Tjahaja Purnama as their vice-governor in 2012, it seemed a hopeful moment. He and his popular boss, Joko Widodo, had promised a bold programme of urban renewal to save the creaky, sinking and car-clogged metropolis. What’s more, the world’s largest Muslim-majority democracy seemed to enhance its reputation for tolerance. Mr Basuki,known as Ahok, is ethnic Chinese and a Christian: rarely before had an Indonesian from a minority community and religion risen so high.

Suddenly, Indonesia’s reputation for tolerance is in question. After Mr Joko, or Jokowi, ran for president and won by a landslide two years ago, Ahok assumed the Jakarta governorship. Just three months ago, Ahok still looked to be a shoo-in for the gubernatorial race next February. Since then, however, huge rallies organised by hardline Islamist groups have brought hundreds of thousands of anti-Ahok protesters to central Jakarta. Because of those protests, he himself is in court on blasphemy charges.

Ahok is arrogant, impatient and coarse—offending courteous Javanese manners. But he is effective: Jakartans...Continue reading

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Why Europeans are reading Stefan Zweig again

AFTER this bleakest of years for Europe, glib talk of the 1930s is in the air. The bonds of trust between nations are fraying, and the old saw that the European Union advances only in times of crisis is being tested to destruction. Populists are on the march. Britain is on the way out. And Europe’s neighbours are either menacing it (Russia) or threatening to flood it with refugees. One hyperventilating Eurocrat recently confided to your columnist that he feared another Franco-German war.

Small wonder that gloomy Europeans are starting to dust off their Stefan Zweig. A prolific and, in his time, wildly popular author of novels, biographies and political tracts, Zweig incarnated the interwar ideal of the cultivated European. A Jew who saw his books burned by the Nazis, he was exiled first from his Austrian home, in 1934, and then from Europe. Zweig’s literary star was eclipsed by contemporaries such as Thomas Mann and Joseph Roth. But his witness to Europe’s catastrophe, and his dedication to the cause of its union, have helped restore him to popular affection. (“The Grand Budapest Hotel”, a 2014 film inspired by Zweig’s writing, may also have...Continue reading

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Protests grow against Poland’s nationalist government

More hacks please, we’re Polish

POLAND’S populist government, led by the Law and Justice (PiS) party, has seen its fair share of protests since coming to power in late 2015. Demonstrators gathered on the streets of Warsaw when the government sought to weaken the constitutional tribunal and pack it with loyalists. They did so again when it purged more than 130 journalists from the state media. Thousands of black-clad women took to the streets against a plan to make it even harder to get an abortion. But the wave of protests since December 13th, including a parliamentary sit-in by opposition MPs, suggests that discontent is still growing.

The latest discord started on December 13th, the 35th anniversary of martial law in communist Poland. That day the government passed a law restricting freedom of assembly. Sites for demonstrations can be reserved for up to three years, it says, but preference will be given to “cyclical” rallies marking “especially…important events for Poland’s history” (rather than, say, protests against the actions of the government). Any counter-protests have to be at least 100 metres away....Continue reading

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Congo’s president refuses to go

CAN a thin blue line stop a revolution? In Kinshasa, the capital of the Democratic Republic of Congo, police are doing their best. On December 19th, the last day of Joseph Kabila’s final presidential term, they stood on street corners and at petrol stations, wrapped in body armour and clutching rifles. They arrested dozens of political activists and surrounded the houses of opposition politicians. The message was clear: stay at home, or risk being shot. Three cops took a short break to rob your correspondent, but most concentrated on suppressing dissent.

For now Mr Kabila, who has ruled Congo since inheriting the job from his dad in 2001, has the upper hand. But Congo, an unstable country of 80m, is plunging into a political no-man’s-land. No head of state since independence has left office peacefully after an election. The war that followed the overthrow in 1997 of Mobutu Sese Seko, a tyrant who had ruled for three decades, led to the deaths of hundreds of thousands or possibly millions, mostly from hunger and disease. One victim was Mr Kabila’s father, who was assassinated.

Tension has been building since it became clear that Mr Kabila...Continue reading

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Assad’s torture dungeons

No justice, no peace

IT WAS clear that Hamza Ali al-Khateeb had been tortured before he died. Returned to his family a month after he was arrested at a peaceful protest in April 2011, the 13-year-old boy’s dead body was covered with cigarette burns and lacerations. His jaw and both kneecaps had been smashed and his penis had been cut off.

As demonstrations against the regime’s rule spread across the country, the boy’s death at the hands of the regime’s security forces became a powerful symbol of its brutality. “I can only hope that this child did not die in vain but that the Syrian government will end the brutality and begin a transition to real democracy,” said Hillary Clinton, who was America’s secretary of state at the time. During the early days of the uprising many shared her hope.

Almost six years on that hope has been crushed. The scale of the killing carried out inside Syria’s torture dungeons is difficult to gauge: human-rights groups say the regime has tortured to death or executed between 17,500 and 60,000 men, women and children since March 2011. The dead, often buried in mass graves or...Continue reading

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What Disney’s city of the future, built to look like the past, says about the present

OUTSIDE the white fence is all strip malls, motels and resort villages. Come off the six-lane highway at the spaghetti junction where Interstate 4 meets Highway 192, go past the ornamental water tower, and you are in Celebration, a town of the sort that America stopped building in the 1950s. Most of its 4,000 homes are small by suburban standards, jutting up against narrow streets. Children walk to school. The small downtown has no chains, apart from an obligatory Starbucks. Its 10,000-odd residents are mostly white, white-collar and Republican. In some ways it is a vision of America’s past. Yet Celebration is only 20 years old.

The town was developed by Disney as an antidote to the isolation of the suburbs. By the 1970s more Americans lived in suburbs than either in cities or in rural areas. Two decades later there were more cars than drivers in America. By the turn of the century, SUV-driving suburbanites became the majority, outnumbering rural and city folk combined. The wholesale shift to the suburbs, ever-longer commutes and the rise of shopping malls and big-box stores fractured community life, as downtowns emptied and commerce shifted to the edges...Continue reading

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Shenanigans in North Carolina set a lousy example for America’s broader politics

Power from the people

WHEN, almost a month after the vote, Pat McCrory admitted defeat in North Carolina’s governor’s contest, abandoning his graceless demand for a recount, it looked as if Republican efforts to sway the state’s elections were finally exhausted. A voter-ID rule, and other restrictions passed by Republican legislators, had been scotched by a federal court that found they targeted black voters “with almost surgical precision”; but, say voting-rights activists, limits on early voting opportunities still suppressed black turnout. Gerrymandering had already helped to assure Republican supermajorities in the state legislature. That means lawmakers will be able to override the veto of Roy Cooper, the incoming Democratic governor—a reason, some observers thought, that they might not be too concerned by his victory.

That overestimated their maturity. Instead they called a special session of the General Assembly, in which they summarily diluted the power of the governorship before Mr Cooper assumes it in January. Mr McCrory, the defeated incumbent, has begun to sign the measures into law in the dying days of...Continue reading

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Donald Trump’s most damaging legacy may be a lower-trust America

At Disney World, the future is already here

Park life

WHEN the EPCOT Centre opened in 1982 it could not have been farther removed from Walt Disney’s original vision. Disney had wanted to build an “experimental prototype community of tomorrow”, or EPCOT, a Utopian town of 20,000 where a towering city centre would be covered by a dome, where there would be full employment and where new ideas and technologies were always being tested. When Disney died in 1966 that dream died with him. His successors turned EPCOT into a theme park that resembled a permanent world’s fair. Half of it was given over to visions of the future sponsored by corporations. The other half was a “world showcase” containing national pavilions with reproduction architecture—a faux-English pub in Britain, a miniature Piazza San Marco in Italy.

More than three decades after it opened, EPCOT remains hugely popular. It is the sixth-most-visited theme park in the world. It caters mostly to adults: bachelor parties and 21st-birthday drinking binges come for the “drink around the world” challenge, which involves drinking at each nation’s pavilion (avoid the Norwegian aquavit). The...Continue reading

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Mexican attitudes to marijuana mellow

IN NOVEMBER 57% of Californians voted to legalise the growing and use of marijuana for recreational purposes. Americans in seven other states and Washington, DC, are now, or soon expect to be, free to puff away at leisure, but liberalisation in the most populous border state will be felt acutely down south. Mexico has just marked the tenth anniversary of a war on drugs. It has spent millions of dollars on eradicating cannabis. Now it will abut a huge regulated market for the stuff—and one where 30% of the population is Mexican or Mexican-American. Changes in the United States may be prompting a rethink in Mexico, too—among ordinary people, policymakers and purveyors of pot alike.

Start with the citizens. Nearly a third of voters in Mexico currently support legalising marijuana for recreational use. Attitudes are mellowing: in 2008 only 7% approved of legal pot (see chart). Many Mexicans associate the herb with the horrors of the drug war, estimated to have cost more than 80,000 lives. For some this is a reason to crack down harder on it; for others, to take it out of the hands of criminals.

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Ebbs and flows in an unlikely marine superpower

Tugging at South America’s heart

LANDLOCKED Paraguay is sometimes called the “heart of South America”. If so, two great rivers are its arteries. Besides abundant hydropower, the Paraná and the Paraguay provide the lifeblood of the small, open economy—trade. In the absence of railways or good roads, it would seize up without the waterways. Improbably, Paraguay (population: 7m) boasts the world’s third-biggest fleet of tug-propelled barges, behind the United States (319m) and China (1.4bn).

On the outskirts of the capital, Asunción, a mountain of soyabean flour in a massive silo awaits loading. On the dock outside, a crane busily unpacks Japanese Isuzu lorries from a container vessel. In Puerto Fénix, business is up 75% in the past eight years, says Pablino Gómez, its operations manager.

Puerto Fénix is private, like most Paraguayan ports. In contrast to many countries, liberal Paraguay lets anyone purchase riparian property to set one up. Many have, so competition is fierce. Across the fence, Mr Gómez’s enterprise is flanked by two rivals. Margins have been squeezed, Mr Gómez admits, but larger...Continue reading

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Recession emboldens Argentina’s opposition

ASKED recently to rate his first year as Argentina’s president, Mauricio Macri gave himself eight out of ten. Some immodesty is justified. Almost overnight after taking office Mr Macri dismantled the populist policies of his predecessor, Cristina Fernández de Kirchner. He eased currency controls; had the national statistics institute stop massaging inflation figures; and resolved a dispute with holders of overdue government debt, restoring Argentina’s access to capital markets. 

Argentines have been less generous with praise. Mr Macri promised that by now confidence would be back and healthy growth would ease the pain of his reforms. Instead the economy remains sickly: GDP will shrink by 1.8% in 2016, says the IMF. In October industrial production fell by 8%, year on year; construction collapsed by 19%. One in 12 Argentines is out of work. Inflation may no longer be misreported, but looks stuck at 35%. With incomes crimped, households are spending 7.5% less on basic goods than in 2015, estimates CCR, a consultancy.

Lacking a majority in congress, until recently the president could at least count on disarray among rivals. The...Continue reading

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Killings at a Berlin Christmas market test Germany’s nerve

 

IN THE aftermath, police officers with automatic weapons guarded a cordon 300 metres around the Breitschiedplatz, a busy junction in the middle of Berlin’s shopping district. Beyond the barricades twinkled the sparkly lights on the roofs of little wooden chalets offering Glühwein. A screen normally used for adverts urged people to go home and ignore rumours. Other Christmas markets and some bars had emptied as the news filtered through. In train stations, armed police officers outnumbered passers-by. By late in the evening of December 19th the streets in the normally restless, insomniac German capital were eerily quiet.

All of which contrasted starkly with the carnage and chaos of a couple of hours previously when, at 8.15pm, a lorry had sped into the throng of the Christmas market at Breitschiedplatz. Jan Hollitzer, the deputy editor of Berliner Morgenpost, whose offices are nearby, told Canada’s CBC television that he heard noise and screaming from a group of destroyed huts. “Then I saw lights, many Christmas lights, that were shaking. Then the truck came out of the Christmas market...Continue reading

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Property Investors Need to Step Out of Their Comfort Zone

The future of property could be niche. Specialist buildings typically offer higher returns than the old staples of commercial property investment.

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The murder of Russia’s ambassador in Turkey puts the two nations on edge

ANDREI KARLOV, the Russian ambassador to Turkey, was only moments into his speech when the man standing behind him, disguised as a member of his own security detail, fired the first bullet into his back. Mr Karlov was speaking at an art gallery in Ankara, Turkey’s capital, on December 19th. His assassin, identified as an off-duty Turkish cop, claimed to be retaliating for Russian war crimes in Syria. “We die in Aleppo, you die here,” he shouted. He also repeatedly invoked God, before dying in a shoot-out with other police.

Turkey and Russia appear to be doing their best to limit the fallout from the assassination, which came amid largely peaceful protests in Turkish cities against Russia’s military support for Syria’s murderous regime. Recep Tayyip Erdogan, Turkey’s president, and his Russian counterpart Vladimir Putin both referred to the attack as “a provocation” and pledged to strengthen co-operation against terrorism. The Turkish foreign ministry vowed it “would not allow” the attack to damage relations.

Officials also confirmed that a meeting between the Turkish, Russian and Iranian foreign ministers, scheduled...Continue reading

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Christmas market deaths in Germany

AT LEAST nine people died and at least 50 were injured when a lorry crashed into a Christmas market in central Berlin on December 19th. The truck ran into the market near the Kaiser Wilhelm memorial church on Breitscheidplatz in the city’s central district of Charlottenburg, according to German police.

Police have not yet confirmed whether the incident was a deliberate attack or an accident. They have cordoned off the area and called on Berliners to “stay at home and not spread rumours”. One suspect died in an ambulance on the way to hospital, possibly of injuries sustained in the crash. Another suspect was arrested nearby in Tiergarten, approximately 20 minutes’ walk from the scene. He is being questioned.

The owner of the lorry, a Polish hauler, says he had lost contact with his cousin, who had driven the truck, at around 4pm on Monday afternoon. He told a television station that he suspected that the lorry had been stolen.

Witnesses said the vehicle ploughed into the crowds at speed, travelling around 65kph (40mph), suggesting deliberate intent. This makes the incident reminiscent of this summer’s terror attack in...Continue reading

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A court in France finds Christine Lagarde guilty of negligence

AS A teenager, Christine Lagarde represented France as a synchronised swimmer. She flourished in that discipline by displaying unusual levels of endurance and flexibility. Ms Lagarde, who has been the boss of the International Monetary Fund (IMF) since 2011, may again have to draw on the same qualities. A court in Paris this week convicted her in a case related to her spell as French finance minister, nearly a decade ago. But because its ruling looks half-hearted—it imposed no fine or prison term—she may find a way to keep her post at the fund.

Ms Lagarde and others had not expected a guilty verdict (indeed, her supporters suggest she is a victim of a political vendetta). After all, even the prosecutor had tried to withdraw the case, after more serious charges were dropped. But the Court of Justice of the Republic, made up of more politicians than judges and which tries only senior political figures, ruled it should proceed.

It found, on December 19th, she had been negligent in the use of public money over her decision, in 2008, to allow an out-of-court settlement in a legal dispute between the government and a businessman, Bernard...Continue reading

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Why Nigerian criminals prefer the cops to the mob

IN A sweaty restaurant in Lagos, Ajayi Oluwatosin David, a member of a government-affiliated paramilitary group, displays a picture on his cell phone of three alleged kidnappers lying naked before the feet of a crowd.

A day earlier, security guards had caught the trio, stripped them, taken photographs and turned them over to the police. Had Mr David’s colleagues not been on the scene, the mob might have beaten the suspects, wrapped them in petrol-soaked car tyres and set them ablaze. That is what happened in April to a robber caught stealing a television in a slum in Nigeria’s commercial capital.

Vigilante killings of suspected criminals happen often enough in Nigeria that they have their own moniker: jungle justice. Some are the result of hasty verdicts and mistaken identities: in 2012 four college students were wrongly accused of theft and killed by riled-up neighbours near the southern city of Port Harcourt.

Policemen and politicians condemn these and other killings, and the Nigerian senate is considering a bill aimed at cracking down on mob justice. But experts say they go on because crime is rampant and many people do not...Continue reading

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Dow 20000: Nike Is Missing Out

Retail giant Nike is one of only two Dow Jones Industrial Average components that are down this year.

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BlackRock's Winners and Losers in Post-Election Rally

Investors who piled into popular pre-election strategies were poorly positioned when circumstances changed.

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Moving America’s embassy to Jerusalem

A PINE grove in south Jerusalem has remained untouched for decades. This is the site reserved for America’s embassy in Israel. But like every other country that has diplomatic relations with the Jewish state, America has its embassy in Tel Aviv rather than the holy city. Donald Trump may change that.

He was not the first American presidential candidate to promise to move the embassy to Jerusalem in line with the Jerusalem Embassy Act, which was passed by Congress in 1995. But every president since has signed a national-security waiver suspending the act, arguing that Jerusalem’s status will be determined only after a peace agreement between Israel and the Palestinians. Although Israel has considered Jerusalem to be its capital since December 1949, most countries cling to the United Nations resolution from 1947 that divided Palestine to create the Jewish state. It said Jerusalem should remain a corpus separatum, or separate entity belonging to no country.

Mr Trump’s representatives have, however, said he intends to move the embassy. Last week he named David Friedman as ambassador to Israel. A bankruptcy lawyer, Mr Friedman is an outspoken supporter...Continue reading

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German Economy Gets in Festive Mood

Germany’s widely watched Ifo index posted a strong showing in December, painting a hopeful picture for early 2017.

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Chinese House Speculators Curb Their Enthusiasm

Chinese upmarket housing is rapidly cooling as regulators turn to risk control.

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Auto Companies: Better With Batteries Not Included

Tesla and others should leave battery making to the experts. Drivetrain technology may not be such a big selling point in the car of the future.

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Home Builders Are Confident: Why That's Problematic for Lennar

Rising optimism about the housing market might be an ominous sign for Lennar.

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A rival to the Palestinian president is sentenced in absentia

IT WAS a treat for the Palestinian president: a court sentenced his chief rival to prison. On December 14th, Muhammad Dahlan was found guilty of stealing $16m and given a three-year sentence. It may prove tricky to enforce, though, since Mr Dahlan has lived in exile for five years, and was tried in absentia. The verdict, like much in Palestinian politics these days, is mostly a sign of Mahmoud Abbas’ growing weakness and paranoia.

Mr Dahlan was a leading member of the president’s nationalist Fatah party, and the first director of the Palestinian Authority’s powerful secret police. In 2006, after the Islamist group, Hamas, won parliamentary elections, he was given the job of toppling their government in Gaza. Hundreds of people died during the subsequent infighting, some hurled out of tall buildings. He went on to serve as interior minister in the West Bank. But the president came to view him as a threat, and chased him out in 2011.

Since then he has enjoyed a comfortable exile in Abu Dhabi, where he works closely with the ruling family. He acquired Serbian citizenship after helping to arrange billions of dollars in Emirati investment in...Continue reading

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Buffett and the Naked Truth About Dow Chemical

The conversion of $4 billion in preferred stock by Dow Chemical leaves Warren Buffett’s Berkshire Hathaway as a major shareholder of the firm, but probably not for long.

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Donald Trump picks a hardliner as ambassador to Israel

FOR a new American president to pick an ambassador with no experience in trade, cultural or any other form of diplomacy is not particularly remarkable. These appointments tend to be rewards for loyalty, friendship and financial backing during the campaign. What is most unusual, however, is to appoint someone who is pronouncedly undiplomatic and espouses extremist views on the politics of the country he will be sent to. Yet that is what the president-elect, Donald Trump, did on December 16th by choosing David Friedman, his bankruptcy lawyer and campaign adviser, as America’s next ambassador to Israel.

Mr Friedman has questioned the need for a two-state solution, a long-sought resolve of the conflict, hitherto backed by American policymakers, whereby Israel and Palestine would co-exist side-by-side. He compared supporters of J Street, a liberal Zionist lobby critical of some of Israel’s policies, to kapos—Jews forced to work as functionaries in concentration camps—during the Nazi regime, adding that they were far worse, because kapos were threatened with extraordinary cruelty if they didn’t collaborate with the Nazis. He subsequently elaborated that supporters of J...Continue reading

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Keep the costs of trade in perspective

ECONOMISTS are realising that they have got some things about trade wrong in the past. Just because trade can make everyone better off, doesn't mean it will, for instance (at least without some help from politicians). That new research, and this year's political ructions, are generating some reflection on these issues among economists is a good thing. But it is important to maintain one's perspective. Tim Duy has not done that, I think, in this stemwinder of a post on the effects of American trade policy. He quotes Noah Smith, who says:

[I]n the 1990s and 2000s, the U.S opened its markets to Chinese goods, first with Most Favored Nation trading status, and then by supporting China's accession to the WTO. The resulting competition from cheap Chinese goods contributed to vast inequality in the United States, reversing many of the employment gains of the 1990s and holding down U.S. wages. But this sacrifice on the part of 90% of the American populace enabled China to lift its...Continue reading

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Republican legislators in North Carolina curb the powers of the incoming Democratic governor

WHEN, last week, Pat McCrory finally admitted defeat in North Carolina’s governor’s contest, belatedly abandoning his graceless demand for a recount, it looked as if Republican efforts to sway the state’s elections had finally been exhausted. A voter-ID rule, and other restrictions passed by Republican legislators, had been thrown out by a federal court that found they targeted black voters “with almost surgical precision”; still, say voting-rights activists, limited opportunities for early voting nevertheless suppressed black turnout in November. Gerrymandering, meanwhile, had already helped to assure Republican supermajorities in the state legislature, which will enable lawmakers to override the veto of Roy Cooper, the new Democratic governor—a reason, some in North Carolina thought, that they might not be too distressed by his victory.

Alas, that view overestimated their maturity. This week state Republicans called an additional special session of the General Assembly, in which they are considering a series of bills to dilute the power of the governorship before Mr Cooper assumes it on January 1st; assuming, as seems plausible, that Mr McCrory, the defeated...Continue reading

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What a Michael Kors Bag at Macy's Says About Christmas Sales

Retailers are getting savvier about adjusting their prices based on short-term demand, the latest data from Heard on the Street’s retail experiment shows.

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Adobe's Big Cloud to Fill

Software maker Adobe has moved most of its business to the cloud while also accelerating growth.

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China's Fed Hangover Will Linger

If the Fed follows through with more rate increases, China’s bond markets should keep feeling the pain.

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Russia's Soaring Markets Defy Messy Geopolitics

Russia’s economic policy and oil have underpinned gains for investors.

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Dorothy meets the Mnuchins

DOROTHY was unhappy. Life on the Kansas farm seemed dull, and her pocket money hadn’t rise in real terms for years. It was time for a change; time to make Kansas great again. Then, as she was sitting in the farmhouse with her dog Toto, a tornado came along, sweeping them up and taking her away, far from reality.

With a bump, the farmhouse landed on a woman. As Dorothy emerged, she saw a crowd of cheering little people.“You have killed the wicked witch of the east wing” they shouted. “We could not abide her charitable foundation or lax e-mail security procedure. But you have saved us.”

“Who are you?” asked Dorothy.

“We are the Mnuchins” they proclaimed “and we raise all the finance for the Wonderful Wizard of Oz, who lives in a giant tower with his name on the side.”

“What’s it called?” asked Dorothy.

“Ozterity” came the reply.

“Can the Wizard of Oz restore prosperity to my Kansas farm?” she asked.“Of course” they cried.

“Can the Wizard help me and my dog Toto?” she asked.

“It depends. Is Toto a Hispanic name?” said one Mnuchin. “And where...Continue reading

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Nintendo Loses First Round of Super Mario iPhone Launch

Super Mario’s debut on the iPhone sent Nintendo shares lower. A different mobile revenue strategy may help.

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The Trump Trade: Stocks' Biggest Postelection Rally Ever

On the doorstep of Dow 20000, this rally has achieved another more meaningful market milestone.

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Global Markets: Wrangling With a Waking Fed

A stronger dollar and higher U.S. bond yields are a double-edged sword for global markets.

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Paolo Gentiloni, Italy’s gentleman prime minister

Two Italians walk into a palazzo

ITALY’S new prime minister, Paolo Gentiloni, could scarcely be less like his frenetic forerunner, Matteo Renzi. In place of a provincial toughie known as “The Demolition Man”, Italy has acquired an affable Roman aristocrat with a preference for compromise. His inaugural speech to parliament on December 13th was memorable largely for its dullness.

Mr Gentiloni’s cabinet, however, will be almost identical to that of his predecessor, who resigned after his plan to reform the constitution was rejected in a referendum. The composition of the new team suggested that the handover of power is more apparent than real, and that Mr Gentiloni is expected to keep the former prime minister’s seat warm as Mr Renzi plots his return. Only one minister from the previous cabinet was dropped. Another, Maria Elena Boschi, who steered the reform bill through parliament, becomes Mr Gentiloni’s under-secretary. That will give her control of the cabinet’s agenda—and Mr Renzi a trusted associate at the centre of power. Angelino Alfano, the former interior minister, took Mr Gentiloni’s place as...Continue reading

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Igor Sechin, head of Rosneft, is powerful as never before

Burning bright

“HELLO, you’ve called Rosneft,” goes a joke making the rounds in Moscow. “If you have an oil asset and you don’t plan to sell, press the hash key.” The Russian word for hash key, reshetka, also means “bars”, as in jail—where those who cross Rosneft’s head, Igor Sechin, tend to land.

Mr Sechin is one of the most feared men in Russia and an essential instrument of Vladimir Putin’s power. A major player among the siloviki (former and current members of the security services), he epitomises Russia’s nexus between political power and property. Despite being a target of American sanctions, earlier this month he succeeded in selling a 19.5% stake in Rosneft to Glencore, a commodities firm, and the Qatar Investment Fund, raising $11bn. The deal, the biggest foreign investment in Russia since the start of the Ukraine crisis in 2014, pleased the Kremlin no end. “Putin needs that like he needs air,” says Olga Kryshtanovskaya, a sociologist who studies the Russian elite.

Another boost to Mr Sechin’s prestige came with the nomination of...Continue reading

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The EU’s Brexit negotiators prepare for disaster

“BREXIT is so fascinating!” exclaims a French official. Few Europeans wanted Britain to quit the European Union. But now that it is happening, foreign ministries and policy units across the EU are relishing the task ahead. As an intellectual exercise, managing the multifaceted complexities of Britain’s departure from the EU offers the kind of satisfaction rarely found in policy work. As a historic negotiation without precedent—no country has left the EU before, let alone one of Britain’s size and stature—it is a wonderful CV-builder. In Brussels, where the talks will take place, officials are scrambling to involve themselves with what one calls “the sexiest file in town”.

The preparations for Brexit on either side of the English Channel offer a Homeric parable of chaos and order. In Britain Theresa May, the prime minister, exudes swanlike calm, restricting her utterances on Brexit to warm banalities. But below the surface her government is paddling furiously to avoid being submerged by the awesome bureaucratic task bequeathed to it by Britain’s voters. One leaked note from a consultancy portrays a flailing government that needs up to...Continue reading

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A small act of national suicide in Peru

FOR most of this century, Peru’s economy has shone: income per person has doubled in the past dozen years. But education failed to keep up. In 2012 Peru ranked last among the 65 countries that took part in the Programme for International Student Assessment (PISA), which tests the reading, maths and science proficiency of 15-year-olds.

Fortunately, Peru then found an outstanding education minister. Jaime Saavedra, an economist whose mother was a teacher, spent ten years at the World Bank, rising to be vice-president for poverty reduction. Appointed three years ago to the education portfolio, he was the only minister to keep his job when Pedro Pablo Kuczynski replaced Ollanta Humala as Peru’s president in July. He has generalised a previous pilot plan to link teachers’ pay to performance, overhauled teacher training and school management and begun a crash programme of repairing dilapidated school buildings. He has also championed a law passed in 2014, which for the first time subjected universities to minimum standards for probity and educational outcomes.  

Mr Saavedra’s stewardship has brought results. Performance in...Continue reading

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Canada’s prime minister secures a deal for a national carbon price

TALK is cheap. Since 1997 Canada has signed five global climate deals pledging to lower its greenhouse-gas emissions. However, it has never implemented a national climate plan. Instead, its ten provinces and three territories have mostly been free to do their own thing.

Provinces rich in hydropower, such as Quebec and Ontario, made big strides, and British Columbia (BC) even introduced a carbon tax. However, big fossil-fuel producers such as Alberta sat on their hands. The results were predictably disappointing. In 1990, the base year for the Kyoto accord, national emissions were 613m tonnes. By 2014 they had risen to 732m tonnes, the world’s ninth-highest total. Canada withdrew from Kyoto in 2011 after deciding that its targets were unattainable.

But following nearly two decades of inaction, Canada may have reached a turning point. On December 9th Justin Trudeau, the prime minister, and 11 of 13 provincial and territorial leaders announced that they had agreed on a national climate framework. The deal combines disparate provincial efforts, and overlays them with two federal imperatives: by 2018 each province must have in place either a...Continue reading

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South Korea’s president fights impeachment and other demons

OVER the past two months, as the weekly candlelit protests along Sejongno, Seoul’s main boulevard, swelled from a few thousand participants to 2m, the calls bouncing off the high-rises for Park Geun-hye to step down are said to have become audible even in the Blue House, the president’s official residence and office, a short distance to the north, where Ms Park had cloistered herself away. The protests look set to continue, despite Ms Park’s impeachment by the National Assembly on December 9th. The Constitutional Court has six months to rule on her fate. While she waits, Ms Park has been stripped of her powers. But the protesters will not be satisfied until she is gone for good.

Aspects of Ms Park’s downfall verge on soap opera. The president, by her own admission, has long been close to a woman, Choi Soon-sil, who seems to have dictated or at the least influenced her decisions on everything from handbags to affairs of state. Ms Choi has been indicted on charges of extortion, abuse of power and possession of classified documents. Of particular outrage to ordinary Koreans are accusations that she secured educational preferment for her daughter and...Continue reading

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Shrinking exports spell trouble for Turkmenistan

WHEN the price of natural gas was high, Turkmenistan raked in $10bn a year from exports—a tidy sum for a country of 5m people. Most of it went on the grandiose schemes of Gurbanguly Berdymukhammedov, the authoritarian president and self-proclaimed “Protector”, or was distributed to his cronies. But the economy nonetheless grew at an average annual rate of 11% between 2010 and 2014, according to official statistics.

The price of natural gas has since halved, however, with dire consequences. Gas accounted for a quarter of GDP and half of all government revenue. The low price means the economy has slowed markedly (see chart), and the budget has swung from a surplus of nearly 10% of GDP in 2012 to a projected deficit of 3% this year. Dwindling foreign-exchange reserves equate to just nine months of imports.

For ordinary people, life is getting tougher. The government has raised the prices of subsidised electricity, gas and water. The devaluation of the manat, the currency, has pushed up already-high inflation: food prices rose by 28% in 2015. There are shortages of basic goods, such as flour, in some provinces. Bosses at state-owned...Continue reading

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Singapore expands its paternalistic policy on race

The old way of ensuring racial harmony

ON A side street in the centre of Singapore, a Muslim-American lawyer beats his wife bloody, only to be treated to rapturous applause. The lawyer is Amir Kapoor, the central character in Ayad Akhtar’s play “Disgraced”, which recently completed a run at the Singapore Repertory Theatre (SRT). The play centres on a heated argument about identity, assimilation and stereotypes among Amir, his white wife and two friends, an African-American lawyer and a Jewish art dealer.

Though Mr Akhtar’s play has been performed around the world, it was surprising to see it in Singapore, where the government has long been touchy about race and religion. Around 74% of Singaporeans are of Chinese ethnicity, 13% Malay, 9% Indian and the rest “other”. The government sees the country’s laudably harmonious multiculturalism as fragile, to be nurtured and guarded by policies such as ethnic quotas in housing, guaranteed minority-group representation in parliament and limits on free speech.

“Wounding the religious or racial feelings of any person” and “promoting enmity between different...Continue reading

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The president of the Philippines boasts about personally killing drug suspects

The president wants the opposite

THE tough-talking president of the Philippines, Rodrigo Duterte, boasts of killing people, ordering executions or wanting to kill someone about as often as Donald Trump boasts of being rich. But as with Mr Trump, it is hard to know how much to trust Mr Duterte’s boasts. At best, that makes the boss of the Philippines’ police and prosecutors not only a liar, but a cheerleader for extra-judicial killings. At worst, it makes him a criminal who should be in prison, not the presidential palace.

During the many years Mr Duterte was mayor of Davao, the biggest city in the southern part of the country, a vigilante group known as the Davao Death Squad gunned down drug suspects and others whom the gunmen thought were criminals. Mr Duterte has at times seemed to admit involvement in the group and at others denied its existence. In September a former member of the outfit testified to a congressional committee that, as mayor of Davao, Mr Duterte had ordered him and others to kill. Mr Duterte, through a spokesman, denied the accusation.

As a candidate, Mr Duterte promised to “end crime”...Continue reading

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Everyone is talking about demonetisation in India—except parliament

EARLY in November India’s government took a momentous decision by abruptly voiding 86% of the cash in circulation. The effects have been painful: businesses cannot pay workers or suppliers; day-long queues stretch outside banks as citizens jostle for new notes that cannot be printed fast enough to meet demand. The government said the trouble would be over by year’s end. It is clear now that the hurt will last far longer. Few in India can talk about anything else—yet India’s parliament has barely managed to discuss it at all.

In any other parliamentary democracy, such a glaring bungle would have prompted a strong legislative response. To cause a sharp slowdown in a perfectly healthy economy would invite fierce questions and perhaps a vote of no confidence. Governments have fallen for lesser goofs.

But in the world’s biggest democracy, things are different. True, India’s bicameral parliament did convene in mid-November for its month-long winter session, and opposition MPs loudly attacked “demonetisation”. Yet nothing like a formal parliamentary debate has taken place. Narendra Modi, the prime minister, has neither explained his...Continue reading

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Taiwan’s Kuomintang party is broke and adrift

Patrimony or party money?

THE Kuomintang (KMT) was once reputed to be among the world’s richest political parties. Its leaders fled mainland China in 1949 with shiploads of loot, including an estimated 138 tonnes of gold and the finest treasures of Beijing’s Forbidden City (see picture). The party then absorbed state property and other government assets that had been handed over by Taiwan’s departing Japanese colonial administrators in 1945. During the Kuomintang’s long single-party rule, which lasted until 1987, it amassed a vast business empire, complete with banks and television stations. So the fact that it is laying off 428 of its 738 employees for lack of money to pay them is, to say the least, a reversal.

At elections in January the independence-minded Democratic Progressive Party (DPP) won a majority in Taiwan’s parliament for the first time, as well as the presidency. The DPP, naturally, thinks the KMT’s wealth gives it an unfair advantage in elections. Its staff, before the lay-offs, was five times bigger than the DPP’s. Moreover, the DPP considers the KMT’s wealth illegitimate, in...Continue reading

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An early salvo in a trade war between America and China?

ANNIVERSARIES should be happier than that on December 11th, marking China’s 15 years as a member of the World Trade Organisation (WTO). On that day, China expected to be unshackled from its legal label as a “non-market economy” and attain “market-economy status”. In the event, America and the European Union refused to give it the nod. On December 12th the Chinese reacted: see you in court.

The fight will focus on the wording in the original accession agreement. The Americans and the Chinese are both confident of winning. Legal experts are divided. The WTO does not provide a clear definition of a “market economy”. And clumsy legal drafting does not help.   

The meat of the row is over the method WTO members use to protect their industries against cheap Chinese imports. Alleging that Chinese companies enjoy subsidised credit, energy and raw materials, America and the EU slap anti-dumping duties on 7% (see chart) and 5% respectively of their Chinese imports. The agreement welcoming China into the WTO explicitly gave other members licence to treat it as a non-market economy until December 11th 2016....Continue reading

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