The World This Week

Our editors give us a breakdown of this week’s biggest news stories

United Kingdom: Ross Alexander Hutton 

Between July and September, the U.K. economy grew by a record 15.5% representing a strong rebound through the summer. Although the U.K. is ‘technically’ out of recession, this data represents the period before the intensifying of coronavirus restrictions over the autumn which undoubtably slowed the recovery down and reversed the summer trend. Since the U.K. is a disproportionality service-based economy, the economic impact of Coronavirus has been more acute than its closest neighbours. Hence, the Chancellor admitted it is going to be a difficult winter ahead as the U.K. isn’t out of the woods yet. Historically the increase in unemployment from 4.5% to 4.8% is still quite low but with record levels of redundancies and the full effect of another lockdown still to be assessed, the unemployment rate is painting a rather misleading picture of the health of the economy. However, the news of progress towards a safe and effective vaccine, is “very encouraging” for the U.K. economy, the Bank of England governor said this week, as it reduces uncertainty in the economy. 

This week for Number 10 was defined by both relationship beginnings and endings. On the one hand, the Prime Minister was delighted to be one of the first world leaders to receive a phone call from U.S. President-elect Joe Biden in a show of strength for the U.K.-U.S. special relationship as a Biden aide asserted that the President-elect believed “deeply” in the special relationship, and “looks forwards to making that partnership even stronger”. Whilst this will calm Johnson’s worry of being at the ‘back of the queue’, difficult decisions lie ahead as the Brexit process could undermine the ‘special relationship’. On the other hand, this week marked a dramatic shift in the balance of power at the heart of Johnson’s administration as he told his chief adviser to leave Downing Street for the last time. This was an explicit attempt to smother the ‘Vote Leave’ faction’s influence on the levers of power, in favour of a more consensual style of politics, epitomised by Johnson’s soon to be American counterpart. 

Brexit negotiations are approaching the “moment of truth” as time is running out for a draft deal to be ratified by both sides in time for the beginning of 2021. However, the same issues which have blocked progress for weeks remain in place, making a deal within days unlikely. Will the chief negotiators be willing to finally give concessions and reach a compromise? Only time will tell.

Europe: Peter Hourston

European leaders generally welcomed the news last week which confirmed that former Vice-President Joe Biden had secured enough votes in the electoral college to beat incumbent President Donald Trump in the US Election. President of the European Commission Ursula von der Leyen, declared of “renewed partnership” between Americans and Europeans and Secretary-General of NATO, Jens Stoltenberg, military alliance, described the President-Elect “a strong supporter of Nato and the transatlantic relationship”. At an EU trade summit on Monday there was hope that the end of the Trump administration would “reboot” the transatlantic partnership and end some of the disputes on trade, military spending and foreign policy from the last four years. However, an EU diplomatic source told the FT that the “old normal” of life before the Trump presidency “is not on the cards”. Also, populist EU leaders were reluctant to congratulate Biden, such as Slovenia’s Janez Jansa who said he would wait until all ballots had been counted, Matteo Salvini, leader of Italy’s opposition anti-migration League party, supported Trump’s allegations of voter fraud and Marine Le Pen, leader of the far-right National Rally party in France said she would “absolutely not” recognise Mr Biden’s victory until all legal challenges to it were exhausted. 

At a breakthrough summit in Brussels, the governments of the EU agreed a deal with the European Parliament on the bloc’s next seven-year spending plan, which will create a €1.8tn package along with the Covid recovery fund agreed in July. An important feature of the deal was the inclusion of a ‘rule of law’ clause which will link the values of the EU with access to finance. This was opposed to Hungary’s Victor Orban, who has often been criticised for attacking the independence of judges.

At the European Central Bank’s annual forum on central banking, being held online, ECB President Christine Lagarde suggested that emergency monetary policy measures, such as bond-buying and ultra-cheap loans to banks, will continue well into 2021, at least “until vaccination is well advanced and the recovery can build its own momentum.” Since the onset of the pandemic earlier this year the ECB has launched schemes such as the pandemic emergency purchase programme (PEPP), which has bought more than €640bn of bonds, and its targeted longer-term refinancing operations (TLTRO), which have lent almost €1.5tn to banks at rates as low as minus 1 per cent. 

Asia Pacific: Satyajit Mohanan 

China and 14 other countries have agreed to form the world’s largest free trade bloc, encompassing nearly a third of all economic activity. The Regional Comprehensive Economic Partnership, or RCEP, was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations (ASEAN). RECP will take already low tariffs on trade between member countries still lower, over time. In addition to the 10 ASEAN nations, the accord includes China, Japan, South Korea, Australia and New Zealand, but not the United States. The accord leaves the door open for India, which dropped out due to fierce domestic opposition to its market-opening requirements, to rejoin the bloc.

India is planning to challenge the ruling given by an investment treaty arbitration (ITA) tribunal, constituted under the India-Netherlands bilateral investment treaty (BIT), in the infamous case involving Vodafone and India. This case arose after the Indian Parliament amended the Income Tax Act retrospectively, thus overruling the decision of the Supreme Court. Vodafone challenged this amendment before an ITA tribunal under the India-Netherlands BIT. The tribunal ruled that India has violated its BIT obligations. This case is said to have a critical impact on the future relations between Indian its foreign investors.

Africa & Middle East: Camille Capelle 

Since the start of the conflict between Ethiopia’s national forces and the Tigray People’s Liberation Front, the war has already caused the loss of hundreds of lives and sent a wave of refugees from the country. People fleeing the fighting report the atrocities they have experienced, and the UN has put out a statement that war crimes may be being committed. Countries fear for the instability the conflict could bring to the region, in particular by drawing in Eritrea or having to pull resources from the fight against Islamist fighters in Somalia. This week air raids were targeted at two airports in the northern region by government forces. On top of this, the mass killing of civilians is increasing fears that ethnic cleansing of Amharas. Human rights organisations are investigating these incidents as the fighting goes on. 

Regional tensions increase for Israel, after the report came out in the NY Times that Israeli agents had killed Abdullah Ahmed Abdullah, also known as Abu Muhammad al-Masri, “Al-Qaeda’s second-in-command” in Tehran several months ago. Iran, however, rejects these statements, claiming them to simply be part of the Washington’s ‘information war’ on Iran. Both Iran and the US are using the media to imply connections and even causation between their opponents and the terrorist group. 

North America: Amelia Brown 

American pharma company Pfizer, along with German biotechnology company BioNTech announced last Monday that their coronavirus vaccine was 90% effective at preventing coronavirus infection. The companies expected to file for Emergency Use Authorization from the US FDA in the third week of November. Pfizer said they project being able to produce 50 million doses in 2020, and up to 1.3 billion in 2021. But who will get those doses first? It’s unclear. The EU signed a deal with the two companies on Wednesday to allow purchase of an initial 200 million doses, and then an additional 100 million. The US government’s Operation Warp Speed also has a deal with the company from their $1.95 billion advance-purchase agreement from July. After the announcement of the promising vaccine, Pfizer stock rose 7% and the company’s chief executive sold $5.6 million in stock, as part of a pre-programmed sale.

Canadian Prime Minister Justin Trudeau talked about the Canadian-Britain trade deal negotiations to Financial Times (FT) this week. The deal would replace the EU-Canada trade deal for the UK when the transition period for Brexit ends on 1 January. Trudeau said, “the UK hasn’t had to negotiate trade deals in the past few decades, so there is an issue of not really having the bandwidth within government to move forward on this.” By ‘past few decades’ Trudeau was referring to how Brussels ran trade policy for EU members, including the UK since they joined in 1973. If there is no deal in place before the new year, tariffs and trade barriers between the two countries would go back up, but Trudeau said “Canada’s a really easy one. We’re there for it. We’d like to do it,” in talking about making a deal before then.   

Latin America & the Caribbean: Annie Smith 

After suffering from Hurricane Eta last week, Honduras, Guatemala, and Nicaragua are preparing for Tropical Storm Iota, which is expected to bring “dangerous winds, storm surge and rainfall” on Monday. The United States-based National Hurricane Center has warned Iota may be at or near major hurricane strength when it reaches Central America. Guatemalan President Alejandro Giammetttei has ordered evacuations for areas in Guatemala, and President Juan Orlando Hernandez of Honduras has also urged his residents to evacuate to shelters. Category 4 Hurricane Eta killed at least 120 people earlier this month after causing flash flooding and landslides.

Mexico reached one million COVID-19 cases on Saturday, the eleventh country to reach the grim milestone yet it holds the fourth-highest death toll in the world. Mexico is expected to reach 100,000 deaths on Sunday, with only the United States, Brazil, and India seeing more fatalities from the novel coronavirus. Critics have blamed the rise in cases and deaths in the country due to the government failing to follow accepted measures such as face mask mandates, lockdowns, testing, and contact tracing. Assistant Health Secretary Hugo Lopez-Gatell has said that wider testing would be ‘a waste of time, effort and money’ and called face masks ‘an auxiliary measure to prevent spreading the virus.’ Only 1.9 percent of the population has been tested for the virus since the pandemic began, as only seriously ill citizens receive tests.

Science & Technology: Paula Plechschmidt 

A recent development in AI has been GPT-3. GPT-3 is OpenAI’s language generator and uses machine learning and AI in order to produce human-like text when given a prompt. Trained on essentially all the text available on the internet, this machine is to date the most impressive imitation of human intelligence when it comes to language generation. Some even say that this development reflects a definite step towards AGI, artificial general intelligence, at which point electronic intelligence is foreseen to match the intelligence of humans.

The gaming industry has been benefiting significantly from this coronavirus crisis. On Thursday the Chinese gaming giant Tencent reported surging revenues, attempting to convince the public of a future positive growth. However, this outlook has to be taken with a grain of salt due to the insistence of Chinese domestic regulators to reign in the power of big tech. This trend has been observed globally over the past year and a half and it is no surprise that China has followed suit. In a push to fight the monopoly the large tech companies represent, regulators have brought the fintech leader Ant Group’s IPO to a halt and brought out a new set of antitrust guidelines.

Theory: Cassi Ainsworth-Grace 

The pandemic has been fertile ground for an experiment into risk. Economists across the world have found exactly that. Economists Martin Eichenbaum, Miguel Godinho de Matos, Francisco Lima, Sérgio Rebelo and Mathias Trabandt have used the Covid-19 pandemic as a natural experiment to study how consumers respond to low-probability events like our current pandemic, environmental disasters and terror attacks. They studied the consumption patterns and behaviour of Portuguese public sector workers, whose income has remained largely unchanged as a result of the crisis. In particular, they investigated how different age groups adjust their consumption patterns.

Their findings? Older workers are more likely than other age groups to reduce their consumption of goods that require high-levels of contact, for example traditional retail and hospitality. As the risk associated with Covid-19 is dependent on the age of an individual, it is clear that workers change their consumption as a response to the level of risk they face.

Image Source: CNN

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