China, the US: Talk to the hand.
Also: NATO, Russia, Thailand, South Korea, Mexico, climate and insurance.
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CHINA. UNITED STATES. Talk to the hand.
Beijing’s top general refuses to meet as pilots play fighter jet chicken.
China said on Tuesday the US should respect its concerns and “correct wrong practices” if it wants military dialogue. The US Indo-Pacific Command on Tuesday released footage of an aggressive interception over the South China Sea.
INTELLIGENCE. Despite multiple Pentagon requests, China’s defence minister refuses to meet Lloyd Austin at this week’s Shangri-La Dialogue, an annual gathering of military brass in Singapore. Minister Li Shangfu has been under US sanctions since 2018, when he purchased Russian arms as the PLA's procurement chief. The US says the sanctions do not impede a meeting. While correct in theory, for China, the issue is a matter of principle and pride.
FOR BUSINESS. While Sino-US military relations are frozen, talks proceed on economics. With the US hosting this year’s Asia Pacific Economic Cooperation meeting, which Xi Jinping is expected to attend, even if by video, Beijing is incentivised to play it cool. Lacklustre Chinese also requires keeping investment and trade going (excepting some sectors, like chipmaking). But unless the generals can also keep an open line, the risk of an accident looms large.
CHINA. UNITED STATES. Talk to the twit.
Elon Musk promises no decoupling.
Tesla’s chief executive met with China's foreign minister in Beijing on Tuesday, who said “We must step on the brake in time, avoid dangerous driving and be skilful at using the accelerator to promote mutually beneficial cooperation.”
INTELLIGENCE. While China enjoyed giving Musk a lecture on ‘Xi Jinping Thought’, which will be closely parsed in Washington, business interests aren’t the same as strategic interests. And accentuating the dilemma, while Musk wants to increase Tesla’s presence in China, for Twitter and Starlink, the market remains off-limits. History demonstrates that trade is no panacea for war. This was true of Germany in 1914, Japan in 1941 and Russia in 2022.
FOR BUSINESS. Beijing’s analogy was as tortured as Musk’s intentions were sincere. While Musk likes to tease Western policymakers – a recent spat with the EU on Twitter will blow over – he cannot afford to be churlish in Tesla’s second-biggest market. His call for US-China entente follows similar entreaties by the CEOs of Apple, Mercedes-Benz, and Siemens. For many corporate bosses, decoupling from an economy the size of China’s would finish their careers.
NATO. RUSSIA. Northern exposure.
War games in the Arctic and another drone attack in Moscow.
NATO vowed on Tuesday to defend its new member Finland, which hosted its first joint exercise with the alliance. Vladimir Putin said late Tuesday that air defences had destroyed eight drones launched at the Russian capital.
INTELLIGENCE. NATO wants to demonstrate its commitment to Europe as the war in Ukraine grinds on. Meanwhile, the US is pressuring Turkey to agree to Sweden’s accession, with Biden hinting on Tuesday that such a move may allow the US to approve a $20 billion sale of F-16s and modernisation kits. Local media has seized on Russia’s alleged reaction: a beluga whale, which appeared off Norway in 2019 wearing Russian insignia, resurfaced near Gothenburg.
FOR BUSINESS. Even if NATO can’t do more to materially assist Ukraine – particularly as escalation risk rises after multiple strikes inside Russia – the alliance wants to deter future aggression by shoring up Europe’s defences. In pursuit of this, there are early signs of détente with recalcitrant ally Turkey, which could, in time, mean greater leverage and an easier operating environment for Western firms. Expect Russia’s whale to next appear near Istanbul.
Written by former diplomats and industry specialists, Geopolitical Dispatch gives you the global intelligence for business you won’t find anywhere else.
UNITED STATES. THAILAND. SOUTH KOREA. Supply and demand.
Procurement isn’t easy for Washington’s Asia-Pacific allies.
Thailand's air force said last week that the US had denied its request to purchase F-35 jets. On Tuesday, South Korea hosted Australia’s defence minister for bilateral talks, including on expanded defence industry cooperation.
INTELLIGENCE. Washington’s strategists and policymakers agree that Asia is the most consequential theatre for US interests in the 21st century. Yet, in terms of armaments, the focus has been on Europe. Denying Thailand F-35s will only tip Bangkok closer to Beijing, irrespective of who forms government following its 14 May elections. With a bullish trade agenda and confidence in its ability to manage Pyongyang, partners like Seoul are stepping into the breach.
FOR BUSINESS. An Asian arms race should be manna for American defence firms, but procurement pipelines are full, and Washington is struggling to meet its own needs. Amid a naval supply squeeze, the Pentagon is reportedly studying Japan as a shipbuilding yard. For the air force, the Comptroller General said on 23 May that over one million spare parts for the F-35 program had gone missing since 2018. Nimble exporters like South Korea stand to gain.
UNITED STATES. MEXICO. All quiet on the southern front.
The head of the US Border Patrol steps down.
Raul Ortiz told staff on Tuesday he will retire, having seen through major changes after Title 42 restrictions expired on 11 May. Donald Trump said on Tuesday he would end automatic citizenship for children born to illegal migrants.
INTELLIGENCE. Illegal crossings at the US-Mexico border have declined since pandemic-era Title 42 restrictions were replaced with new rules this month, giving the Biden Administration respite on an issue the Republicans have traditionally dominated. Yet Ortiz’s retirement isn’t the end of the story. The processing of migrants within US borders remains a daily hot-button issue, with both sides of politics playing to the base. External push factors also remain.
FOR BUSINESS. US investors and employers will be unable to skirt migration in the lead-up to the 2024 election. With border issues still toxic, worker shortages will remain unsolved, and the risk of knee-jerk policymaking will continue, with global numbers of displaced people and asylum seekers stuck at record levels. The issue is also live for Europe and Britain, both facing their own polarised debates around border security, labour markets and national identity.
CLIMATE. INSURANCE. Getting to net zero.
A UN climate compact loses more than half its members.
Tokio Marine left the UN’s Net Zero Insurance Alliance on Tuesday, following earlier departures by AXA, Allianz, Zurich, Swiss Re, Lloyds and others. The moves were blamed on antitrust concerns raised by US Republican state governments.
INTELLIGENCE. Firms are finding it hard to balance ecological and financial sustainability. The rapid unravelling of the Net Zero Insurance Alliance follows a growing backlash to corporate ESG policies. Still, it also reflects the difficulty of achieving climate and governance goals without harming shareholder value or upending business models. Advocates will be concerned as more firms move from climate enthusiasm to disillusionment and panic.
FOR BUSINESS. Greenwashing, inflation and climate alarmism have reduced the salience of eco credentialing for consumers. Non-climate environmentalism could provide a refuge for firms wanting to be seen to do right without losing money. In the wake of a successful biodiversity summit in 2022, the world is on the cusp of a new plastics treaty this week in Paris. Its lack of notice or controversy speaks to a greater alignment of profit and purpose.
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