East Asian Free Trade Area is looking more likely!

This year has seen significant progress in negotiations, the outcome of which were only revealed at the ASEAN Plus Three summit in November. Early indications that an agreement might finally be reached occurred in August at the 14^th ASEAN Economic Ministers Plus Three (AEM+3) Meeting in Indonesia. The final communication of which welcomed “the joint proposal by China and Japan, ‘Initiative on Speeding up the Establishment of an East Asia Free Trade Area (EAFTA) and Comprehensive Economic Partnership in East Asia (CEPEA)’.

Until this joint proposal by China and Japan on the future of an East Asian Trade Area, the whole process had been held hostage to the Sino-Japanese strategic rivalry. This deadlock was eventually broken by the worsening global economic situation and, relatedly, the United States bid to boost its flagging growth through exports which drove a return to Asia via the Trans Pacific Partnership. For China, the TPP is seen as particularly threatening as its intellectual property and investment protection requirements will pose a formidable barrier to joining – even if China were actually to be invited (which it is not). This new reality seems to have been enough to shift China’s priorities towards reaching an agreement in East Asia, even if that meant moving towards Japan’s position on issues of coverage and membership.

The outcome of this shift in strategic perceptions was the joint proposal by China and Japan calling for the East Asian Free Trade Area to cover goods, services and investment, i.e. an agreement which brings in Japan’s WTO-plus interests. Since the outset of negotiations on the EAFTA, Japan has been focussed on the investment related issues (and rather less interested in tariff liberalization). Since Japan has few tariffs left to cut, and those that remain are in the politically sensitive agricultural area, any EAFTA which focussed solely on tariff measures would not be of much interest to Japan politically. Specifically with regards to China, Japan has been unwilling to enter an agreement which does not address its concerns about its firms ability to confidently invest in the growing Chinese market — indeed, it is partly for this reason that the bilateral China-Japan FTA remains frozen. However, outside the bilateral negotiations and in the context of the EAFTA, China is willing to discuss Japan’s wider set of economic interests. This year Japan and China have jointly sponsored setting up three working groups to deal with trade in goods, services and investment respectively which will begin work in April of 2012, with the start of negotiations on the final text scheduled to begin in November of next year.

More importantly, the joint agreement virtually concludes the long standing disagreement over membership. China had been adamant about the EAFTA being limited to the ASEAN Plus Three process only, however it appears that the final agreement will include a wider membership than that. The East Asia Summit grouping of Australia, New Zealand and India is clearly the next logical step.

It is likely that Australia, New Zealand and India ­­— each of whom have their own ASEAN + 1 Free Trade Agreement in place ­­­— would be brought into the new trade area via the so-called “ASEAN + +” institutional mechanism. While the set up of this mechanism is not yet finalized, it is clear that it will aim to “roll up” the series of ASEAN + 1 agreements. The framework is being negotiated at the ASEAN Plus Working Groups, which are considering rules of origin, tariff nomenclature, customs procedures, and economic cooperation. These will feed into the working groups on trade, services and investment to provide the single template agreement.

Yet there remain some major hurdles. Firstly, the terminology has not been settled, with both the EAFTA and CEPEA still being bantered around. This suggests that the Chinese bargaining position has not been dropped, and there may still be some tussles over the membership. Secondly, while the Japanese and Chinese leaders have directed the bureaucrats to start negotiations, political leadership will be required to sign the agreement into force. However, the Heads of Government only enter the process next year, and in the mean time another flare up in Sino-Japanese relations could put everything back into deep freeze.

Notwithstanding those issues, it is clear that the halting trend towards the realization of an EAFTA is progressing. While there will no doubt be more setbacks, an EAFTA now seems to be more a question of when than if.

A more polished version appears on the East Asia Forum here.

China: Control the gold

I was reading idly the Annual report on exchange arrangements and exchange restrictions and discovered an interesting little fact about the Chinese monetary system:

By law, all gold produced in China is sold to the PBOC, which in turn sells it on to those wishing to use the gold jewelry, industrial or other purposes. Since most currency in China (like elsewhere) is paper money, the original purpose of the law (to ensure supply of precious metal for coin) is forgotten and this must just be a nice way of taking a cut for the Bank.

It sort of makes sense too in that it forces Chinese mainlanders to settle in RMB. If inflation becomes a bigger problem for people, they will not be happy with that but the government at least keeps control (esp as the standing committee runs the PBOC). Contrast that with what is happening Vietnam as the Dong inflation is driving people to settle debts in gold and other metals.

No doubt there will be other random posts on China shortly...

How to waste an opportunity: Ira Kan

Kan Naoto managed to survive the no confidence moved against him, in fact he 'won' hansomely with vote of 152 for to 293 against.

Wow, Kan appears to be slowing but surely winning against the influence of Ozawa faction. This is the third major win. Maybe Japan will turn the corner yet!

Or not.

In order to defeat the no confidence motion, Kan had to promise to step down in the near term (undefined).

His win has set himself up as (yet another) lame duck PM in Japan. Great.

Japan is therefore still on course to play the master game of strategic irrelevance - and they are not going to like the cards dealt them.

Sino-Japanese relations: fleeting flirtation or long-term engagement?

This weekend (21-22 May) the leaders of China and Korea are hosted by Japan for the Fourth Trilateral Summit, the first such Summit since the triple disaster of March 11. As a part of this visit, Wen Jiabao and Lee Myung-bak will travel to Fukushima to demonstrate their nation’s continuing support of Japan’s reconstruction.

Indeed, both China and South Korea have already contributed significantly during Japan’s disaster response in the immediate aftermath of the crisis, providing emergency relief teams and the provision of material support. The large (and unprecedented) level of support that China offered, especially the prompt dispatch of a Chinese search and rescue team, has led some to posit that warming relationships between Japan, China and Korea may be the silver-lining to Japan’s national tragedy. Especially with regard to China, with whom Japan’s relationship slumped precariously after a fishing infraction turned into a territorial dispute in November of 2010, the quake represented for some a possible circuit-breaker.

Certainly there has been an improvement in the relationship at the societal level. China’s media commented very favourably about the Japanese people’s resilience and lawfulness under the extreme duress of the power, food and water shortages – not to mention failing communications and concerns about family members. The Chinese media wondered aloud if China could ever reach such levels of civility. That peers in Asia were viewing the Japanese societal response favourably was a story which was in turn picked up the Japanese media and became a source of national pride for the many Japanese doing it hard. At that moment the empathy and mutual respect between the Japanese and Chinese (and others around the world) was at its zenith.

Yet in the longer term it is very unlikely that the earthquake will mark a turning point in the Sino-Japanese relationship. This is because tensions in the Sino-Japanese relationship are due to more than societal distrust but the basic strategic interests and perceptions of the two powers.

In this context it worth remembering that in the aftermath of the triple disaster China’s full offer of a PLAN hospital ship and expanded rescue team were not accepted by Japan.

This refusal by Japan was due the fundamentally different strategic orientations of the two countries and a (reasonable) lack of trust of the Chinese military in Japanese policy circles, not to mention the political implications of inviting Chinese military personal into Japan to work next to the US forces under Operation Tomodachi. Japanese politicians too would have had some difficulty in explaining a major Chinese presence after recent and damaging disputes – especially over the export of rare earth (a subject that Kan has flagged for discussion during the Trilateral Summit). Japan already made clear its order of preference (and trust) during the crisis, and despite the positive appraisals of Chinese assistance in the media, the fact is that Japan accepted only limited Chinese assistance due to a fundamental differences and competing interests.

Even the initial societal level warming up of the relationship is starting to cool. The Chinese media is reporting negatively on the choice of Fukushima as feature of the Trilateral summit, while discussion is Japan about how to cope a regional order that China is increasing being able to influence and in which Japan will play a junior role is heating up. Opinion within Japan is divided. The influential journalist Yoichi Funabashi has been arguing that Japan must ‘cleave to’ China in the future, but he acknowledges that a reorientation towards China would require political courage – a commodity in desperately short supply.

There is therefore no reason to expect that Japan’s even weaker domestic political and economic situation after the crisis will help to improve the Sino-Japanese relationship in the long term. Rather, despite the current warming of ties at the societal level, the most likely course for this important relationship is unfortunately the reassertion of old and competitive patterns of interaction.

Joel Rathus is a recent PhD graduate from Adelaide University, an EAF scholar and a regular contributor to the East Asia Forum. His other posts can be found here.

Japan and territory, the cat is away?

As Japanese politicians have turned towards dealing with the reconstruction effort, and with the hawkish Maehara standing down over a scandal, Japan's neighbors are considering their choices.

Alot has already been noted on China's positive and friendly response, more than phone calls, china sent to Japan personnel to help with the disaster in the same way that Japan had sent personnel (JSDF) to China to help during their earthquake in the West. (http://www.eastasiaforum.org/2011/04/15/opportunity-in-crisis-sino-japanese-relations-after-the-earthquake/)

Korea has also been sympathetic. But the Korea defense establish has taken the opportunity to press forward its claims on the takeshima/dokdo islands. see,

http://www.asahi.com/politics/update/0413/TKY201104120653.html?ref=rss
http://www.asahi.com/politics/update/0412/TKY201104120480.html?ref=rss
http://rss.asahi.com/click.phdo?i=83f4ab513f8b7ad000ad7d990a13c63a

Give a man a fish: Japanese fisherman becoming bureaucrats?

Due to the high levels of radiation found in Squid caught by fishermen in Ibaraki-shi (near Fukushima) a decision has been made not to fish - fairly obviously this is because they can not sell the produce has it is detrimental to public health.

More curiuosly, the local government decided to hire of the fishermen out of work as local government officials for one year. I have no idea what they will do, neither do they.

Compensation is one thing, but taking these men out of the workforce for one year to twiddle their thumbs is not a solution - although in the short term more boots on the ground for reconstruction may not be a bad thing.

http://www.asahi.com/politics/update/0409/TKY201104090353.html?ref=rss

Cross post: Shakedown artists

Highlights:

US Commerce Dept. used as black mail tool by US companies, esp. towards Chinese.

The role of the USTR and Special 301 in pushing TRIPS ahead by picking off opposing countries and denying them GSP tarriff preferences.

Author: Henry on March 25, 2011 at Crooked Timber.

Via Alex Tabarrok, this Wall Street Journal article is very interesting.

Some U.S. furniture makers and their lawyers have found a reliable way to extract cash from Chinese competitors deemed by U.S. officials to have “dumped” their products in the U.S., selling them at unfairly low prices. Each year since 2006, they have asked the Commerce Department to review the U.S. duties paid by Chinese manufacturers on imports of wooden bedroom furniture. Many Chinese firms, fearing a steep rise in duties, agreed within months each time to pay cash to their U.S. competitors in return for being removed from the review list. “Everybody in the industry in the U.S. and China understands that these payments are clever shakedowns,” said William Silverman, a lawyer representing U.S. furniture retailers, big importers of Chinese products, at an October hearing of the U.S. International Trade Commission. … About $13 million was paid to a group of 20 U.S. furniture makers from 2006 through 2009, according to a November ITC report. The U.S. firms told the ITC that a much larger, but unspecified, amount of money went to pay the U.S. firms’ lawyers.

Not many people realize how much of US trade policy is effectively set by private industry groups, whose interest in free trade, for better or worse, is largely opportunistic. This is especially obvious in the area of property rights. I recently finished reading an excellent report edited by Joe Karaganis on the politics of the piracy debate, which has a good chapter on just this topic by Sean Flynn and Karaganis.

The so-called “Special 301” process, under which the US identifies purported offenders against US-preferred intellectual property standards, is especially open to abuse.

US copyright industries and the USTR have, in key respects, a symbiotic relationship. The IIPA was instrumental in the creation of the Special 301 process, and annual IIPA country submissions furnish the primary and often only evidence on copyright issues cited in the Special 301 reports. In all but a few cases in any given year, the USTR closely follows IIPA recommendations in assigning countries to the watch lists. In 2008, the USTR accepted forty-six of the IIPA’s fifty-four recommendations (84%). In 2010, it accepted all the Priority Watch List recommendations and twenty-one of twenty-four for the Watch List (an acceptance rate of 91%). For the most part, IIPA findings and recommendations simply pass through into USTR reporting.

This close relationship is not an accident. The USTR was created in 1974 to explicitly strengthen the ties between industry and government in trade negotiations. Its mandate was revised repeatedly in the 1970s and 1980s to make the USTR more responsive to business needs and revised further to ensure that it would not be limited or constrained by the provisions of existing trade agreements, such as the GATT and later the WTO. … The 1985 case against Korea, also primarily on pharmaceutical patents, established what one negotiator described as a “blueprint” for the resolution of Special 301 disputes: bilateral treaties, or side agreements, that committed the targeted country to higher levels of patent and copyright protection …

The strategic dimension of these actions grew more explicit in the late 1980s as the Uruguay Round of GATT negotiations neared its conclusion and set the stage for a new international trade agreement—the eventual WTO. Developing countries, led by India and Brazil, supported the strengthening of existing provisions on counterfeiting but opposed the inclusion of broader IP rules in the form of TRIPS. … The United States placed five of the ten “hard-liners” opposing TRIPS in the first Special 301 Report in 1989—Brazil, India, Argentina, Yugoslavia, and Egypt. Two years later, India, China, and Thailand became the first Priority Foreign Countries, triggering Section 301 investigations. Brazil lost its GSP benefits in 1988, Thailand in 1989, and India in 1992—all on matters related to pharmaceutical patents. US pressure, combined with assurances that TRIPS would end such unilateral action, eventually broke the anti-TRIPS coalition. … Congress [then] amended the trade statute in 1994 to specify that even countries fully compliant with TRIPS might lack “adequate and effective” IP protection. The amended statute authorized the use of Special 301 to promote IP and enforcement policy beyond what was required by TRIPS.

The USTR has direct ties to industry through various advisory committees. … long-standing revolving door between the USTR and its industry clients, which creates a reward system for USTR officials who cater to industry requests …

Flynn and Karaganis suggest that the process has become slightly more open in the last couple of years – countries which are targeted now have a little time to present their counter-arguments. But it is hard to escape the conclusion that the USTR is effectively an instrument through which US businesses can use government processes to threaten harsh retaliation against countries which do not conform to a very specific and narrow set of intellectual property standards, that favor US producers, but are not at all in the interests of these countries themselves.

Unfortunate event in East China Sea

Maehara Seiji pretty made his name on the back the Senkaku dispute September of last year. His name was mud in Beijing, which ironically, is an advantage of sorts. The newly appointed Matsumoto Takeaki is unlikely to has the punch to be able to take the fight to Beijing over the East China Sea issue and will be a responsive player. As much as anything, the upcoming trilateral meeting between the CJK make making a stand on the start of production (extraction of Oil) by China's state owned SNOOC in the disputed areas (Shirakaba) too difficult I suspect.

While Chief Cabinet Sect. Edano has noted with concern the development of CNOOC going into the area to start production, he is waiting before responding.

I think Maehara would have picked up the phone and starting making a fuss already.

http://www.asahi.com/politics/update/0309/TKY201103090225.html?ref=rss

Maehara Resigns

Maehara seiji has resign as Foreign Minister.

Initially I expected he would fight off the charges, which are frankly a little ridiculous. If Ozawa can fight through decades of scandal, then Maehara certainly could whip this obviously minor case.

However, it is clear that Maehara is in for the long game (perhaps a little too obviously!). His decision to steep down reflects his belief that Kan will not be able to win the next election, which is now more likely to be called than ever.

Evidence: on the way out, Maehara very statesman-like said "an election would be for the national interest" - here.

Gillard to Tokyo: pushing on a string?

Julia Gillard will visit Japan from April 20 including a summit with Kan Naoto. It is unlikely however that Australia’s efforts will result in any major deals being brokered at this meeting as Japan’s ruling party continuing to fragment and as Japan’s limited political dynamism is hit further.

The major issue which both Australia and Japan would like to be able to resolve is the Free Trade Agreement negotiations. These negotiations have been tortured, with liberalization of agricultural goods being the chief problem. The negotiations, which began in 2007, were most recently this February and marked a return to the table after nearly ten months hiatus. Yet the official negotiators from Japan and Australia were still unable to make a break through, prompting Trade Minister Kaieda Banri to call for the negotiations to be resolved at the political level. This is an appropriate response, as the Agreement was initially proposed by Prime Minister Abe Shinzo as part of a political calculus of the benefits of such an agreement to both countries. It is in this context that Gillard is making her four day long visit to Japan, a visit aimed to resolve at the political level the issues still outstanding in the FTA.

But while success would be quite a coup for either leader, there are good reasons to doubt that visit may be in vain.

The DJP is imploding over the issue of trade liberalization. Kan Naoto has been leading with a concept of “re-opening Japan”, the flagship of which has been the joining Trans-Pacific Partnership. It is important to understand that Japan-Australia FTA is perceived as a litmus test for the viability of including Japan in the TPP process. Thus Japan’s membership in the TPP will come only when others are convinced that Japan is serious about comprehensive liberalization of trade – including the political sensitive agricultural sector.

But already the Party has split on the TPP issue. The former Minister of Agriculture, Forestry and Fishery Yamada Masahiko is leading a group of parliamentarians bitterly opposed to the TPP. The group, which is called the “Serious Consideration of the TPP”, is nearly 180 Diet-men strong and announced its establishment on the 24 February. Moreover, the Group has organized a series of public hearings on the dangers of the TPP led by a prominent economist Uzawa Hirofumi which directly undercuts the Kan administration’s public information session in the rural regions which address the benefits of agricultural reform. The opposition to the TPP is also a stalking horse for opposition to an Australia-Japan FTA which includes agriculture. Indeed, Yamada Masahiko (Ozawa faction) is strongly opposed to such an FTA and has written publicly about the costs of signing onto an FTA with Australia.

Kan’s leadership of the DPJ is also in question. While there is no obvious challenger to leadership of the Party, the most recent public polling showed low support for the Kan administration (21%). The fact that Kan Naoto might well lead the Party to defeat in the next election has made it difficult for Kan to prevent individual parliamentarians from taking up local issues at the cost of national strategy. While the announcement of an FTA with Australia, as a prelude to joining and eventually acceding to the TPP, might help Kan somewhat recover political momentum, it is unlikely to make a major difference and as such Kan is likely to focus his efforts and what remains of political capital elsewhere. Moreover, although the current administration wishes to reverse the current situation of rural votes (which overwhelming, even passionately oppose FTAs) holding a disproportionate influence (a rural vote can be worth an ‘unconstitutional’ 2.5 urban votes), were an election to be called it is likely that the DJP would lose its majority and hence government.

In conclusion, it is unlikely that Kan Naoto and the leading DPJ have the political will (or coherence) to be able to meet the expectations of Julia Gillard and the ALP on the degree and type of liberalization within the FTA. Rather, the summit is likely to produce an agreement on Japanese investment into Australian rare earth and some other bureaucratic matters (replacing Mclean).

Border Bias, totally reasonable?

The Scientific American is running a piece on Border Bias.

Essentially noting that political borders matter for decision making in ways that are not entirely rational. Of course, political factors are rational after their own fashion, but requires a different type of thinking - and pol. sci. love borders! (not the bookshop, we shop bookdepository.com.)

The experiment had an(hypothetical) earthquake strike within 200 miles of one's possible new house - one choice of house was in state of the quake and one choice out of state (but both 200 miles from epicenter). Unsurprising people generally chose to be out of state althought the risk of another quake is identical. The authors are surprised.

They should not be. Queensland is going to be doing a lot of budget heavy lifting with knock on effects in education and health due the flood - and if the quake occurs in your state then you suffer these indirect effects which would be better to avoid by being out of state- even if risk of future quakes is identical.

perfectly reasonable really

Inequality and Crisis

There is no doubt that economic inequality breeds societal instability. Recent events in the Middle East and in particular Egypt correlate strong with youth unemployment/underemployment, and China remains on guard against inflation wiping out gains of its poorest citizens for the same reason.

Indeed, one could argue that relovultion is is function of just two variables, inequality and populations density - although I had better write a paper on that rather than just assert it.

An arguement is now emerging in the United States, a country with high inequality by OECD (Developed Western) standards, that the GFC is linked to inequality.

The arguement runs, " Poorer Americans’ debt troubles, the logic goes, stemmed in part from their efforts to bridge the gap with the rich by borrowing money. A flood of cash from China, together with enterprising bankers and mortgage subsidies from the U.S. government, created the perfect environment for those efforts to get out of control."

That is as maybe, but I think it overlooks the role of inequality among US richest households. The Gini CoEf is steeper among the top 1% than top 5%, 5 is steeper than 10%, which steeper than 25% etc. In other words, the higher you get the more 'disadvantaged' you feel (so keep it real chump).

Borrowing to finance lifestyle beyond their means is a more forgivable moral failing among the disadvantaged or poorer members of the community, but it is not limited to them. The borrowing I believe was societal wide.

With money coming in on bargain basement interest rate, both rich and poor alike borrowed to satisfy there immediate demands - be a new TV or new Pink and Gold Humvee.

http://blogs.wsj.com/economics/2011/02/19/number-of-the-week-the-perils-of-inequality/?mod=WSJBlog&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29&utm_content=Google+Reader

Circle is complete

For those of you who still haven't read Andrew Sheng's From Asian to Global Financial Crisis - get onto it.

Ben Bernanke is now claiming that it is effectively "hot money" Foreign Investment which caused the GFC in the US. This is a photo-stat of Asia's arguement in 1997-8 during their Crisis - which resulted in Asia as a collectively moving away from the washington concensus and capital account liberalization. The US's complaint is ironic, but also helps to explain why a new concensus on capital account liberalization is emerging. Now liberal investment would be great if you can trust the pricing mechanism - the global credit rating agency have proven their useless so amazing that this is unlikely. The irrational bias of investor towards their home market is starting to look pretty sensible.

Quotes

Ben Bernanke - "Foreign investors’ hunger for safe US assets helped to cause the 2007-2009 crisis by encouraging banks to turn risky mortgages into AAA rated bonds, Ben Bernanke, US Federal Reserve chairman, argued in Paris on Friday.

“The preference by so many investors for perceived safety created strong incentives for US financial engineers to develop investment products that ‘transformed’ risky loans into highly rated securities,” said Mr Bernanke, presenting a new research paper that he co-wrote with other Fed economists."

This AMAZING anecdote courtesty of the FT.

http://www.ft.com/cms/s/0/eea1957c-3b5e-11e0-9970-00144feabdc0.html#axzz1EO1UIahc

Cross listing,

Another knock on effect of the GFC: Stock exchanges merge as companies seek to both signal higher credibility and maintain access to working capital. This means that global exchange markets might shrink to just 2 or 3 main players. NYSE is a shoe-in, but London vs Deutsche is less clear cut.

Singapore, Tokyo, Shanghai and Hongkong share Asia and is a real toss up for who will get the Asia's capital capital. Part of the reason why this battle will take a while, "Asia's lack of a regional regulator means it hasn't undergone any of the cross-border market liberalization measures seen in the west such as Europe's Market in Financial Instruments Directive (MiFID). This means there is a huge fragmentation of rules and regulations between markets, limiting the scope for cross-border trading and reducing liquidity."

By the numbers,

The Shanghai Stock Exchange and BM&F Bovespa, more on Brazil and China at http://www.eastasiaforum.org/2010/10/28/china-a-motivator-for-latin-america/
this is an interesting story.

Deutsche Börse and NYSE Euronext, with interesting historical parallels. http://www.cfr.org/economics/big-bourse-mergers-back-but-hold-hyperbole/p24112

the London Stock Exchange and Toronto’s TMX Group,

SGX of Singapore and Australia’s ASX are all in takeover talks.

see,

http://www.reuters.com/article/2011/02/14/us-asia-exchanges-idUSTRE71D0Z120110214?pageNumber=2

From: http://www.ft.com/cms/s/0/7c6d8f9a-3a07-11e0-441-00144feabdc0.html#axzz1EFzVNauD

Babbage's thesis is to dismember

It is good to know that in a rapidly changing strategic environment, some things do not change. Like Ross Babbage's thinking on dismemberment.

Here is an excerpt from his 1978 Doctoral thesis, which observes that Australia should consider (he does not expressly recommend) a global strategic deterant capacity (nuclear weapon) capable to "tear a limb off" a superpower aggressor (read, Soviet union). For the record, Dismemberment in normal english means 'deter by being able to so damage the oppopent as to make any operation against Australia too costly to consider' (my paraphrase). (...and are't we that already?)

Arm ripping returns in his response to the 2008 Defense White paper, as Dobell notes here.

An in current Kokoda Paper he advocates for "asymmetric operations against China, host American bases, develop long range persistent strike capabilities and acquire nuclear attack submarines." Which is to say, a strategy premised on damaging so badly the superpower aggressor (now read China) as to deter attack aka Dismemberment.

Now the circle is complete

http://www.lowyinterpreter.org/?d=D%20-%20Ross%20Babbage%20and%20Australia%27s%20strategic%20edge

We don't owe you anything

Chinese Foreign Ministry Spokeswoman Ma Zhao Xu (馬朝旭) has gone on record stating that Japan does not have any grounds to claim damages for the Senkaku/Diaoyutai island collision.

Reason: Because China asked Japan for compensation.

This response is due to the Japan Coast Guard recent delivery of a demand for compensation to the (now heroic) Capt. Zhan.

Still, Ma is tame choice for a response. At least China did not wheel on the Ultimo Ratio Regis known as Spokeswoman Jiang Yu (scary - watch her in action here).

http://www.asahi.com/politics/update/0213/TKY201102120264.html?ref=rss

Then who is the b*tch?

Maehara Seiji, MOFA Minister on Japan, discusses the Russia-Japan relationship as similar to Male-Female relations. Reason: "Because a Peace Treaty (still unsigned since 1945) will be based on the mutual feeling of how we important we are".

Maehara adds, "But those islands are so ours, boy-o"

http://www.asahi.com/politics/update/0213/TKY201102130029.html?ref=rss

Japan and Australia FTA resumed

After the China-Australia FTA negotiations were restarted last year, the Japan-Australia FTA has also resumed. Maybe a break was for the best, certainly demonstrated that Australia can wait.

More interesting, after Kevin Rudd trip to Japan last year and the positive sounding he got on the FTA, there is evidence that Japan is trying serious to get the negotiations up.

Maehara Seiji in his recent speech to Diet on Foreign Policy (here) called for early conclusion to negotiations with Australia. Maybe by the end of this year we will have the framework agreement in place.

Crowding out the government!?

I post this mostly for amusement, but it raises serious questions.

Queensland, and Brisbane (wher eI came from) has been hit by a massive flood - so large that even the BBC news lead with it.

Now there are appeals for people to contribute charity to help rebuild.

Fair enough, but are private contributions really good? Consider, that these are Tax Deductable.

This is therefore the private sector crowding out the public section by reducing federal tax income and increasing the Queensland income. It simply can not be efficient to do this, the charity is fine but making it tax deducable is inappropriate in this case as it will warp rebuilding priorities.

I expect to be a popular man in canberra?