Provider of in-depth & balanced analysis on hot issues around the world

President Herzog, Mrs. Herzog, Ambassador Nides and Virginia,and Taylor, and Taylor's boyfriend,Senator Rick Scott,Speaker of the Knesset,Mayor of Jerusalem,and so many dear friends, Tom, you started your words by remembering an evocative moment, when you were 14 years old in Ein haShofet. Well, somewhat younger than that, I had an evocative moment right here, on this hill top. It was barren. There was no Israel Museum. There was the Monastery of the Cross, olive trees. A barren hilltop except one tree, a balut tree. And we, the Jerusalem kids, would band in the valley and we would try to reach, undetected, to the top, to the tree. Reach the target. I say that because right now, well, last night, Israeli soldiers tried to reach, undetected, the most legitimate target on the planet: people who would annihilate our country. And because this Fourth of July in this extraordinary place falls on an extraordinary moment, Ladies and gentlemen, on behalf of the Government and citizens of Israel, I wish to send my warmest greetings to President Biden and the American people as we join in celebrating their Independence Day. And as Prime Minister, I wish to express my deep appreciation and gratitude for America's enduring support for Israel. For 75 years, the United States has been our irreplaceable and indispensable ally. Irreplaceable. Indispensable. Eleven minutes after our birth, and at vital junctures throughout our history, America has provided Israel with moral and political backing against those committed to wiping us out, to wiping out the one and only Jewish state. No less important, for nearly half a century, America has given generous military assistance to Israel, helping provide us with the tools, the tools we need to defend ourselves by ourselves. Decade after decade, our two countries have moved closer together. I'm proud to say that today, security cooperation has never been better, intelligence sharing has never been deeper and our alliance has never been stronger. I have long said that Israel has no better ally than America, and I say to you, America has no better ally than Israel. I'm confident that Israel's importance to the United States will become even clearer in the years ahead, as we work together not only to protect our common security, but also to develop the most advanced technologies that will reshape the 21st century. They will decide who leads the world. And Israel is America's vital partner in that effort. Ladies and Gentlemen, on July Fourth, all democratic countries should remember that the decisive event that ensured the rise of freedom in modern times, has been the rise of the United States of America. Time and again, America defeated the forces of totalitarianism and terror. Yet we should also remember a basic truth: Freedom is precious, and it's never free. It often requires firm and decisive action against those seeking to spread terror and imperil free societies. I remember that truth every Fourth of July, because that is the day my brother Yoni fell, commanding the rescue force at Entebbe. Today, on the eve of another Fourth of July, Israel's soldiers, once again, find themselves fighting forces of terror. Late last night, the IDF launched a comprehensive action against terrorist strongholds in Jenin. In recent months, Jenin has become a safe haven for terrorists. From that safe haven, terrorists perpetrated savage attacks, murdering Israeli civilians, men, women and children, as many children as they could find. As I speak, our troops our battling the terrorists with unyielding resolve and fortitude, while doing everything, everything, to avoid civilian casualties. I have no doubt that as Israel exercises its inherent right of self-defense, the United States will stand firmly by our side. And I also believe that in the months ahead, Israel and America will work closely together to thwart the danger posed by Iran and seize the opportunity to expand the circle of peace. Ladies and gentlemen, tonight is also an opportunity to thank outgoing US Ambassador Tom Nides for his service and for his friendship towards Israel. Thank you Tom. During your tenure here, you've demonstrated that your support for Israel comes both from the head and from the heart. On a personal level, I will say I'll miss your candor, your wit, your humour and your friendship. No matter what you do, what you decide to do in the next chapter of your life, know that Israel will always be your home away from home. And as you've said many times, quoting President Biden, we are mishpuche. So on behalf of your Israeli family, let me wish you a happy Independence Day. Happy Independence Day America.  God bless America and God bless our valued and unshakable alliance. 

Very well, in these last words, I would like to thank all those who have participated in this meeting, those who have reflected with us, and those who have raised their concerns, worries, and proposals with a view to the future. I would just like to make one comment, which I do not want to overlook, because we have not been unaware of the issue, which is the issue of Venezuela. I would like to recall that Argentina - since I assumed the presidency - left the Lima Group because we understood that there was a clear policy of interference in Venezuela, which was not going to solve the problems that Venezuelans had. The number of exiles that Venezuela has today is mainly the result of the economic sanctions that Venezuela has suffered. Therefore, from the very first moment, we tried to be part of the Contact Group and to sit with the Venezuelan parties to dialogue so that they could find a way out towards a better democracy and a better institutional framework for Venezuela. When the United Nations - through a report by Michelle Bachelet - questioned the treatment of human rights in Venezuela, we put together that report by Michelle Bachelet and then we worked so that the High Commissioner for Human Rights could establish an office in Caracas and work towards guaranteeing full respect for human rights in Venezuela. That was done. We resumed the dialogue through a meeting we had with President Macron and President Gustavo Petro in Paris, and from there, we sat the parties down again to continue the dialogue. Afterwards, there was an extended meeting, in the city of Bogota, if I am not mistaken, where this dialogue continued advancing. What has happened now with María Corina Machado is something that we take into account and that we are raising at the dialogue table, which is where we believe it should be raised. Because the problem in Venezuela should be solved by Venezuelans through dialogue among themselves, without other countries meddling in their internal affairs. If we guarantee, as President Abdo has rightly said, that it will be respecting institutionality and human rights, we are convinced that the best way to do it, dear President and friend, is by recovering the dialogue among Venezuelans. Today, Venezuelans are suffering a very difficult situation as a result of these sanctions, which we believe only hurt the Venezuelan people. That is why, when someone reproached the idea that President Lula had put forward a few days ago about the need to have a broader and more complete view of the Venezuelan conflict, I vindicated it because I believe that what I am telling is the true story. I particularly lived and saw how the problems were being overcome, and problems like this one appear - I am not going to deny that - but it seems to me that the place to raise it is at the dialogue table. It would be very auspicious if all those who disappeared from the dialogue table joined the Venezuelan dialogue table: Mexico, Colombia, Brazil, and us. If we genuinely want to help the Venezuelans, let us sit at that table so that they may return to dialogue and once again have the necessary guarantees to recover the fullness of their rights and the fullness of their institutional quality. I say this because I did these things as President of Argentina, not as President Pro Tempore of MERCOSUR. These are things that we should do as Presidents of our respective countries: to guarantee the independence and autonomy of each country and to call for dialogue when democracy or dialogue breaks down in those countries. For me, it is not an issue that went unnoticed; at that table, I raised the problem, dear Marito. At this point, for Argentina and for me personally, it is an immense honor to hand over the Pro Tempore Presidency of MERCOSUR to the sister Federative Republic of Brazil. On this occasion, I would like to emphasize that I am handing over the MERCOSUR Hammer symbol to a great President, to a dear friend, a friend dear to all Argentine men and women, Luis Ignacio Lula Da Silva. I understand, my dear friend, that in your hands lies the responsibility of leading this period of MERCOSUR with the conviction and political lucidity that I have always recognized and that has always characterized you. I want you to know, dear friend, that your challenges are our challenges, your decisions are our decisions, and I will support you with courage in the leadership of MERCOSUR during this next semester of 2023. This is your hammer.

In order to ‘walk, chew gum, and play chess’ at the same time, the US will have to both invest at home and sign more trade deals. A speech late last month by Jake Sullivan, President Biden’s national security adviser, on “Renewing American Economic Leadership” clarified that the administration wants to build resilience to “de-risk” from China. But dealing with Beijing will require more than investing at home. Washington also needs to re-engage in negotiations with China to manage difficulties in the bilateral relationship. And to better compete, the United States should get back into the business of signing trade deals. As Trade Representative Katherine Tai quipped during her 2021 confirmation hearing, the United States can “walk, chew gum, and play chess” at the same time. The Biden administration should not only invest in domestic resilience, but also participate in new trade agreements and negotiate directly with Beijing. Over the past two years, China joined the Regional Comprehensive Economic Partnership (RCEP), began acceding to the Digital Economy Partnership Agreement (DEPA), and applied to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). China’s integration into these new frameworks will create efficiencies in its own economy, while binding Beijing closer to the rest of Asia. Meanwhile, the United States does not expect to see the first “real outcomes” from the Indo-Pacific Economic Framework (IPEF) until the end of 2023, more than one year after its announcement. IPEF, moreover, lacks the market-access agreements characteristic of other, more substantive economic agreements. It is not surprising, then, that the 2023 Lowy Institute Asia Power Index ranks China 100 out of 100 on its “economic diplomacy” index, while the United States receives a ranking of only 34.6. The 2023 State of Southeast Asia survey similarly shows that only 21.9 percent of respondents view the United States as a leader in championing free trade, down from 30.1 percent in 2022. To be fair, Beijing has significant ground to cover before its markets become as free and as open as those in the United States. What many trade partners care about, however, is not where China and the United States have been, but where they are going. To many, it appears as if Washington is turning inward while Beijing continues to open its markets. This leads to the second error in Jake Sullivan’s “new consensus” on international economic policy. He expresses fatalism about China’s economic trajectory without giving credence to the possibility that China may change, or that the United States can play a role in influencing Beijing’s behavior. Sullivan explains, when “President Biden came into office, we had to contend with the reality that a large non-market economy had been integrated into the international economic order in a way that posed considerable challenges.” In response, Sullivan focuses on building domestic “resilience” and “capacity” to reduce America’s dependence on China. Washington appears to have given up on addressing the non-market practices contributing to U.S. dependence on China in the first place, including state subsidies and dumping. The administration also seems to have forgotten that access to low-priced imports is an important factor in the competitiveness of U.S. firms and the standard of living of American consumers. Fatalism about China’s trajectory tracks with the Biden administration’s overall Indo-Pacific Strategy, which does not seek to “change the PRC but to shape the strategic environment in which it operates.” Fortunately, Treasury Secretary Janet Yellen has bucked the trend by stating that she hopes to “engage” with Beijing “in an important and substantive dialogue on economic issues.” Not trying to influence Beijing, on the other hand, would give up an essential element of any effective China policy. Of course, prior negotiations were by no means unqualified successes. The Trump administration’s “phase one” trade deal largely failed to change Beijing’s behavior, in part, because the bilateral purchase agreements effectively, as Yukon Huang and Jeremy Smith of the Carnegie  Endowment for International Peace put it, “prescribed state-managed trade over market forces.” Other negotiations, however, have seen more success. Former Treasury Secretary Hank Paulson was able to persuade Beijing to revalue its currency by more than 20 percent in the late 2000s, helping to level the trade relationship. China’s WTO accession negotiations also moved the needle on the country’s economic policy. While Beijing failed to carry out many of its WTO commitments, China did reform key aspects of its economy and, notably, slashed its average tariff level from 15.3 percent in 2001 to 9.8 percent over the next decade. U.S. policymakers should learn the lessons of past negotiations rather than standing by as U.S.-China economic relations deteriorate further. One way to pressure Beijing to continue along the path of reform and opening up would be to carry out negotiations in concert with U.S. friends and allies. The Trump administration gave up significant leverage by dealing with Beijing bilaterally, outside the parameters of the international trade system. Plurilateral negotiations with U.S. partners — many of whom share U.S. grievances — may be more effective at convincing China to change course. The consequences of not having an effective economic dialogue with Beijing will become more apparent over time. Despite Washington’s wishes, China is simply not going away. Beijing will continue to join new trade agreements and integrate itself deeper into the global economy, even as the United States focuses on building resilience at home.

With relations at an all-time low, punitive actions targeting China have become politically popular, even if they have no analytical basis. Five years ago, then president Donald Trump launched a tariff-fueled trade war with China designed to reduce the bilateral trade deficit. His successor, President Joe Biden, then added a decoupling focus by restricting high-tech exports and curtailing professional and financial links. Both wanted to reduce imports of manufactured goods and bring home more jobs. How should one judge the effectiveness of their policies? Back then, and even more so today, the logic of Trump’s fixation on trade deficits made little sense. But security concerns have now become the rationale for reducing America’s trade relations with China and undercutting China’s growth potential. Against these yardsticks, the results are mixed but on balance unconvincing, given the costs in the form of inflationary pressures, repressed export growth, and a projected decline in global output. But U.S. politicians from both parties strongly support these restrictive measures because the costs are not obvious to their constituents, while the benefits from appearing to be tough on China resonate well with voters. Rising trade deficits The recent U.S. Census Bureau data indicate that the politically sensitive U.S. merchandise trade deficit with China was larger in 2022 than when Trump became president, while America’s overall trade deficit hit an all-time high of $1.18 trillion. This reinforces the views of nearly all the economists surveyed at the launching of Trump’s trade war: that the tariffs would not reduce U.S. trade deficits and the costs would be paid largely by Americans. For the Trump administration, the wild card was the “phase one” purchase agreement, which called for an increase of $200 billion in China’s imports from the United States. But state-to-state purchase agreements have no logical basis when global trade is largely shaped by the market-driven decisions of firms and consumers and subject to unpredictable events such as the coronavirus pandemic. Economic principles tell us that how much a country saves and spends determines its trade balance. The combination of Trump’s large tax cuts and Biden’s huge expenditure initiatives has led to soaring budget deficits, which are mirrored in record trade deficits. All this has little to do with China. Yet the Biden administration still insists that China honor the purchase agreement and links the removal of tariffs to its fulfillment. Asking China to honor an agreement that made no sense to begin with as a condition for dropping another equally ineffective policy defies logic. Trade diversification but increasing import dependence on other countries But this focus on bilateral trade numbers overlooks the sharp decline in China’s share of trade with the United States. Whereas China accounted for 47 percent of the U.S. trade deficit in 2017, it accounted for only 32 percent last year, with most of this decline offset by the increasing shares of other East Asian economies. Europe’s share of America’s overall trade deficit also declined from 21 percent to 18 percent. Only Canada and Mexico, via the United States-Mexico-Canada Agreement (USMCA), were able to increase their share from 11 to 18 percent. More insights can be gleaned from looking at the components of trade. Although the value of U.S. imports from China was essentially the same in 2022 as it was in 2017, total U.S. imports increased by about $900 billion during this period. As a result, China’s share of the total, made up largely of manufactured goods, fell from 22 to 17 percent. This decline, however, did not reduce America’s dependency on imports of manufactured goods. The share of imports relative to overall expenditures on manufactured goods rose steadily to 34 percent in 2022 from 23 percent two decades ago. The decline in China’s share of U.S. imports of manufactured goods was more than offset by imports from other countries, notably Mexico and Vietnam. These two developing countries, more than others, were able to import heavily from the United States based on their locational advantages and free trade agreements. Vietnam and China share a border and are linked by the ASEAN-China trade agreement, while Mexico and the United States also share a border and are linked by the USMCA trade agreement. Less noticed, however, is the behind-the-scenes role that China plays in supplying the components and materials for these other countries’ exports to the United States. Most of Vietnam’s increased exports were in product lines where U.S. imports from China fell, such as computer accessories and telecommunication equipment. China’s exports to Vietnam have more than doubled since 2017, and its trade surplus nearly tripled by 2022. China’s exports to Mexico increased by nearly 30 percent last year, on top of a 50 percent increase in 2021. China may be exporting less to the United States directly, but it is now indirectly exporting more. This explains why China’s share of global manufacturing production has continued to increase from 26 percent in 2017 to 31 percent in 2021. As for U.S. exports, the total averaged about $1.5 trillion from 2017 to 2020 but then jumped to $1.9 trillion in 2022. But this increase was not in manufactured goods but in exports of energy products and chemicals to Europe, spurred by the Ukraine crisis. The trade war did little to expand U.S. exports to China, the share of which fell from 8.4 percent in 2017 to 7.5 percent in 2022. Costs and benefits of decoupling According to one study, U.S. firms were handicapped by tariff-related higher costs of their imported inputs, and coupled with China’s retaliatory tariffs, this resulted in U.S. exports to China being 23 percent lower than they would have been in the absence of the trade war. The consequence is that America’s trade war policies generated very little growth in exports of manufactured products, despite the priority given to those policies by both the Trump and Biden administrations. If the purpose of the U.S. punitive actions toward China was to weaken China economically, there is no clear evidence of that happening. By developing alternative export markets and tapping pandemic-driven demand in the West for manufactured goods, China pushed its share of global exports to record levels in recent years. Meanwhile, China’s imports as a share of its GDP have been declining steadily, from a high of 28 percent in the early 2000s to 17 percent in 2022. One could argue that the world has become more dependent on China in trade while China has become less dependent on the world. The benefits of decoupling—if any—should be weighed against the costs imposed on U.S. consumers and producers and damage done to the export competitiveness of U.S. firms. To counter such tendencies, the Biden administration is promoting domestic manufacturing with subsidies in the Inflation Reduction Act. Such actions can be justified for strategic reasons, but the rationale is weakened by protectionist Buy America conditions. U.S. policymakers often counter by pointing to China’s use of subsidies to promote strategic industries, but Chinese firms were keen to import key technologies and components to ensure that their products were globally competitive on cost and performance grounds. The recent semiconductor and other U.S. restrictions on China’s access to high-tech products are also problematic because these products are “dual use,” with a much larger commercial market relative to military applications. Such restrictions hurt the many U.S. firms that derive significant revenues from selling to China and may contravene World Trade Organization guidelines. The costs of trade-related distortionary policies can be substantial. One oft-cited study estimates that taxpayers end up paying about $250,000 for each job saved in typical Buy America programs. At a broader level, a recent International Monetary Fund study estimates that a combination of U.S. trade and technological decoupling measures could reduce global GDP by some 7 to 12 percent. Ultimately, the problem lies in the lack of clarity on U.S. policy objectives. What does it mean to undercut China, and how will the United States know if it has succeeded? With U.S.-China relations at an all-time low, punitive actions targeting China have become politically popular, even if they have no analytical basis. The reality is that the United States and China have no choice but to continue trading with each other. But with security overriding commercial considerations, the economic interdependence built up over decades is now being reversed, leaving everyone worse off.

​Although the dollar continues to be the dominant global currency, Russia and China could dent this dominance. In the aftermath of global financial exclusion, Russia has had to make some strategic adaptations. The West’s sanctions had crippling consequences, and the Kremlin scrambled to find alternatives. In light of these developments, China became an important ally, and the Yuan—its currency—has taken on a more prominent role. It is telling that in Russia, the yuan has surpassed the United States Dollar (USD) in trading volume, a feat achieved a year after the Ukraine conflict, which triggered a series of sanctions against Moscow. As Russia and China band together, one wonders what other shifts will take place and how they will shape the future. Change is afoot, and the Russian market bears witness. The month of February saw a watershed moment as the yuan surged past the dollar in monthly trading volume for the first time. The momentum continued into March as the gap between the two currencies widened, showcasing the growing sway of the yuan. It’s an impressive feat, considering that the yuan’s trading volume on the Russian market was once quite insignificant. The winds of change blew through Russia’s financial system as the year progressed. Additional sanctions had taken their toll on the few remaining banks that still held power to make cross-border transactions in the currencies of countries that had been deemed “unfriendly” by the Kremlin. One such bank was Raiffeisen Bank International AG, whose Russian branch played a significant role in facilitating international payments within the country. However, the lender found itself under the watchful eye of both European and US authorities, which only added to the pressure. These events spurred the Kremlin and Russian companies to shift their foreign-trade transactions to currencies of countries that had not imposed sanctions.Converging coalitionsThe bond between Russia and China is growing stronger, with both nations seeking to bolster their positions on the global stage. Their alliance has spread across various spheres: military, economic, and political. With relations between Russia and the West crumbling, China has emerged as a key partner for Russia, providing it with the necessary support to counter economic and political pressure. On the other hand, China is keen on expanding its global reach, especially in the Eurasian region, and sees Russia as an important ally in this regard. President Xi Jinping’s recent visit to Moscow and his pledge to expand cooperation are likely to take this partnership to greater heights. Trade and investment ties are set to grow stronger, with both nations seeking to reduce their dependence on Western economies. Russia’s focus on infrastructure development and mega projects is also likely to benefit from China’s expertise in these areas. Energy is another significant area of collaboration, with Russia being a leading exporter of oil and gas and China being the world’s largest importer of these resources. Technology is also an essential domain, with both countries investing heavily in research and development to remain competitive in the global economy. While the alliance between Russia and China will likely have far-reaching geopolitical consequences, it is a complicated relationship with both nations pursuing their interests, even as they work towards common goals. As a result of Western sanctions, Russia has shifted its foreign trade transactions away from the dollar and euro to currencies of non-restricted countries. By doing so, the Kremlin and Russian companies hope to decrease their dependence on the Western financial system and explore new avenues for conducting their trade and economic activities. This shift in strategy reflects Russia’s determination to maintain its economic stability despite restrictions on its access to the global financial system. It also underlines the growing importance of alternative currencies in global trade as countries strive to minimise the impact of sanctions and safeguard their economic interests.Structural overhaulsThe Russian Finance Ministry was not immune to the winds of change either. Earlier this year, it made the switch from the dollar to the yuan for its market operations. It even went a step further by devising a new structure for the national wealth fund, earmarking 60 percent of its assets for the yuan. The Bank of Russia joined the chorus, urging its people and businesses to consider moving their assets to the rouble or other currencies considered “friendly.” This would help mitigate the risk of having their funds blocked or frozen. As the world undergoes a seismic geopolitical shift, it seems Russia is moving in tandem, searching for ways to secure its economic future. However, the dollar still reigns supreme in the Russian market. Even with all the changes taking place, it remains the most widely used currency, ceding its throne only occasionally to the yuan. This underscores the enduring dominance of the dollar, which has played a significant role in Russia’s financial landscape for years. However, as the world continues to evolve, one wonders how long it can hold on to its crown.