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Geopolitical trends and impact on businesses in 2019

From US-China trade tensions to Brexit woes in Europe, 2019 is likely to be a roller coaster for geopolitics. As much as a government can help businesses reach their full potential with various reforms, its relations with other countries can significantly hamper operations.

Taking the example of US-China trade war, US President Donald Trump in March 2018 had said that, “Trade wars are good, easy to win,” but a year down the line, US businesses operating in China don’t seem to share the view. According to a survey, 60% of companies surveyed believe tariffs have harmed their operations.

And it is not just the trade war, we’ve seen big corporate giants move operations out of the United Kingdom, fearing the impact of Brexit as uncertainty rose after failed Parliamentary votes. Similarly, US sanctions on Iran impacted the global supply and prices of crude oil.

With more than 9 months remaining in 2019 and budding topics like Venezuelan political crisis, European Parliamentary elections, Canada-China tensions, we expect it to be an interesting year for geopolitics.

In this Live Discourse, we are tracking all the interesting happenings in geopolitical relations and its impact on businesses worldwide.


Parag Narang
Updated: 22-03-2019 19:32 IST
Geopolitical trends and impact on businesses in 2019

With more than 9 months remaining in 2019 and range of budding topics we expect it to be an interesting year for geopolitics.

Key Updates


22-03-2019 07:32:18 PM

Businesses relieved by Brexit extension but uncertainty still haunts

Businesses relieved by Brexit extension but uncertainty still haunts

Britain's economy has struggled beneath the weight of Brexit uncertainty for nearly three years, but many business leaders would probably be relieved just to have more of the same for the next few months. 

The risk of a damaging no-deal exit by the world's fifth-biggest economy from the European Union on March 29 has been averted by the reprieve granted to Prime Minister Theresa May by other EU leaders on Thursday. But the possibility could return as soon as April 12. Or the delay could stretch into May or beyond, depending on the prime minister's ability to break the Brexit impasse in parliament.

Employers took some comfort from the postponement, even if it did little to settle the wide range of Brexit outcomes that has led to many of them putting their expansion plans on hold. "Businesses will accept a short extension because it’s a better alternative to no deal," Seamus Nevin, chief economist at Make UK, an engineering trade group, said.

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22-03-2019 09:45:32 AM

UK business unions demand 'Plan B' to avert no-deal Brexit risk

UK business unions demand 'Plan B' to avert no-deal Brexit risk

The heads of Britain's biggest employers' grouping, the Confederation of British Industry, and union umbrella organisation the Trades Union Congress urged PM Theresa May to change tack and find a "Plan B" to avert no-deal Brexit scenario.

"Our country is facing a national emergency. Decisions of recent days have caused the risk of no-deal to soar," read the letter from CBI director-general Carolyn Fairbairn and TUC general secretary Frances O'Grady. "Firms and communities across the UK are not ready for this outcome. The shock to our economy would be felt by generations to come," added the pair, who have demanded an "urgent meeting" with May.

"The current deal-or-no-deal must not be the only choice," added Fairbairn and O'Grady in their joint letter. "A 'Plan B' must be found -- one that protects workers, the economy and an open Irish border, command a parliamentary majority, and is negotiable with the EU.

"A new approach is needed to secure this -- whether through indicative votes or another mechanism for compromise," they added. "We cannot overstate the gravity of this crisis for firms and working people."

May's Brexit deal has twice been resoundingly rejected by British lawmakers, and a third vote the premier hoped to hold this week was cancelled by the House of Commons speaker on procedural grounds.

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21-03-2019 01:22:21 PM

EU plans to seek increased access to Chinese market amid trade woes

EU plans to seek increased access to Chinese market amid trade woes

The European Union will discuss a more defensive strategy on China, potentially signalling an end to the unfettered access that Chinese business has enjoyed in Europe but which Beijing has failed to reciprocate. Caught between a new US-Chinese rivalry for economic and military power, EU leaders will try to find a middle path during a summit dinner in Brussels, the first time they have discussed at the highest level how to deal with Beijing.

"We are fully open," European Commission Vice President Jyrki Katainen said of the EU's economy. "China is not, and it raises lots of questions," Katainen said, arguing that the world's second-largest economy could no longer claim special status as a developing country. 

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18-03-2019 09:56:11 PM

China seeks 'fair competition' for its companies amid Huawei row

China seeks 'fair competition' for its companies amid Huawei row

China's foreign minister lashed out Monday at "abnormal, immoral" attacks on Huawei amid growing concern, led by the US, that the telecom giant poses a security risk to the West. Wang Yi demanded a "fair and just competition environment" for Chinese firms as he met EU foreign ministers and officials for talks in Brussels. His call comes as Washington steps up pressure on allies, particularly in Europe, to shut Huawei out of tenders for fast fifth-generation, or 5G, telecom networks, because of the firm's ties to the Chinese government.

"China hopes all countries will create a fair and just competition environment for companies of all countries," Wang told reporters. "What we oppose is groundless accusations out of political purposes and attempts to bring down a foreign company. We think such practices are abnormal, immoral and have no support from other countries." 

Huawei strenuously denies allegations its equipment could be used for espionage and Chinese Premier Li Keqiang insisted Friday that Beijing would "never" ask its firms to spy on other nations.

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16-03-2019 09:24:31 PM

Malaysia may approach WTO if EU restricts use of palm oil

Malaysia may approach WTO if EU restricts use of palm oil

Malaysia on Saturday threatened to bring a World Trade Organisation (WTO) challenge if the European Union goes ahead with recommendations to phase out palm oil from transport fuel used in the bloc. In a list of criteria published on Wednesday, the European Commission concluded that palm oil cultivation results in excessive deforestation and its use in transport fuel should be phased out.

Indonesia, the world's largest palm oil producer, has already threatened to bring a challenge to the WTO over the Commission's plan. Malaysia's foreign ministry described the recommendation as a "calculated political act" aimed at removing its palm oil exports from the EU marketplace.

"Such an aggressive trade barrier targeted at Malaysia's national interests, and our 650,000 small farmers, cannot pass without a strong response," the ministry said in a statement. Malaysia is the world's second-largest palm oil producer behind Indonesia. Both countries have been battling with EU governments and the EU parliament over attempts to curtail exports in a bid to address rampant deforestation linked to palm oil cultivation.

Malaysia's foreign ministry said the country had consistently provided evidence of the sustainability of its palm oil, highlighting the implementation of the Malaysian Sustainable Palm Oil (MSPO) certification standard. "The Malaysian government does not accept that the Delegated Act is justified on scientific or environmental grounds. No convincing explanation or data have been provided to justify the discrimination against Malaysian palm oil," the ministry said.

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15-03-2019 10:02:12 PM

US general criticizes 'predatory' Chinese debts owed by Sri Lanka, Pakistan

US general criticizes 'predatory' Chinese debts owed by Sri Lanka, Pakistan

Pakistan owes its "all-weather friend" China at least USD 10 billion debt for the construction of the Gwadar port and other projects, the top US general has said, as he underlined Beijing's "predatory economics" to expand its global influence. The strategic Gwadar Port in Balochistan province on the Arabian Sea is being built by China under the multi-billion China-Pakistan Economic Corridor (CPEC) and is considered to be a link between Beijing's ambitious One Belt, One Road (OBOR) and Maritime Silk Road projects.

"Let us look at just a few examples. Saddled with predatory Chinese loans, Sri Lanka granted China a 99-year lease and 70 per cent stake in its deep-water port," General Joseph Dunford, Chairman of US Joint Chiefs of Staff, told a Senate Armed Services Committee on Thursday. The Maldives owes China roughly USD 1.5 billion in debt - about 30 per cent of its GDP - for construction costs, he said.

"Pakistan owes China at least USD 10 billion in debt for the construction of Gwadar Port and other projects," Dunford said. "China is diligently building an international network of coercion through predatory economics to expand its sphere of influence," he said, adding that nations around the globe are discovering the hard way that China's economic "friendship" via OBOR can come at "a steep cost" when promises of investment go unfulfilled and international standards and safeguards are ignored.

In Africa, Djibouti owes China over 80 per cent of its GDP and in 2017, the country became host to China's first overseas military base. In Latin America, Ecuador agreed to sell 80 to 90 per cent of its exportable crude oil to China through 2024 in exchange for USD 6.5 billion in Chinese loans, he said. And after leasing land tax-free to China for 50 years, Argentina is denied access and oversight to a Chinese satellite tracking station on its sovereign territory, unwittingly allowing the facility's use for military purposes, the US general said.

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15-03-2019 09:36:36 PM

Indian authority says exports won't be hampered as US withdraws GSP benefits

Indian authority says exports won't be hampered as US withdraws GSP benefits

The US decision to scrap concessions to India under the Generalised System of Preferences will not adversely impact seafood exports to that country as most marine food products, including high-in-demand shrimps, enjoy zero tariffs under GSP, says a top export development authority. "There is widespread apprehension that the US decision will affect seafood exports from India to America, which is a major importer of our marine products. But such apprehension is unfounded," said K S Srinivas, Chairman of the Marine Products Export Development Authority (MPEDA).

MPEDA made a detailed analysis and found that there would not be any immediate setbacks anticipated due to the withdrawal of GSP benefit in seafood exports, he said in a release here. "The exports of prepared and preserved shrimps and crab to America will not be adversely affected as these enjoy zero tariffs at present under the GSP regime," Srinivas said.

India usually exports seafood worth USD 2,300 million to the U.S.A., with frozen shrimp being the flagship item of exports. However, frozen shrimp currently enjoy zero tariffs and is not covered under the GSP regime.

"Moreover, exports of other items such as frozen fish and frozen cephalopods are also not currently benefitted under the GSP. Hence the withdrawal of GSP will not affect our seafood exports to the US," he noted. In the 2017-18 fiscal, India shipped 13,77,244 Million tonnes of seafood that earned USD 7.08 billion (Rs 45,106.89 crore), with frozen shrimp and frozen fish continuing to be the principal export items.

The USA, the leading destination for Indian seafood in value terms, imported seafood worth USD 2,320.05 million. The overall shrimp export during 2017-18 was 5,65,980 MT worth USD 4,848.19 million, with USA continuing to be the largest market (2, 25,946 MT) for frozen shrimp and accounting for 53 per cent of total Vannamei shrimp exports.

Frozen shrimp was the principal item of exports to the USA with a share of 95.03 per cent in Dollar value. The GSP scheme, launched in 1974, aims to assist developing countries to increase their exports by facilitating duty-free entry for thousands of products from designated beneficiary countries.

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15-03-2019 04:22:35 PM

Honda seeks business stability as UK lawmakers vote for Brexit delay

Honda seeks business stability as UK lawmakers vote for Brexit delay

Japanese carmaker Honda said any delay to Brexit must be "purposeful" and long enough to give business stability after British lawmakers voted to seek a delay to Britain's exit from the European Union.

"We are now looking to the government to deliver a clear, legally certain, path forward to avoid no deal and to reach an agreement with the EU that delivers the conditions that support the continued competitiveness of our European operations," said a spokesman. "Any extension of Article 50 must be purposeful and long enough to give business stability."

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15-03-2019 09:33:39 AM

Chinese Premier underscores importance of trade deal with US

Chinese Premier underscores importance of trade deal with US

It is not realistic to decouple the economies of the United States and China, Premier Li Keqiang said on Friday, adding that common interests between the world’s two largest economies far outweigh disputes.

China hopes trade talks between the two countries can achieve results, Li told reporters at a news conference at the conclusion of the annual parliament meeting.

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12-03-2019 11:38:37 PM

UK's Cox hints that Brexit reassurances don't address legal risks to backstop

UK's Cox hints that Brexit reassurances don't address legal risks to backstop

UK Attorney General Geoffrey Cox said last-minute new agreements "reduce the risk" of Britain being "indefinitely and involuntarily" held in the so-called Irish border backstop. However, "the legal risk remains unchanged" that Britain, without being able to prove bad faith on behalf of the European Union, would have no legal means of exiting the backstop without the agreement of Brussels.

The backstop, designed to keep the land border between the UK and Ireland free-flowing after Brexit, would see Britain stick to EU trade arrangements unless a new trade deal is struck. The backstop would essentially mean that the trade between Ireland (part of EU) and the UK will remain free-flowing even after Brexit.

Prime Minister Theresa May rushed to Strasbourg on Monday for last-minute talks with European Commission president Jean-Claude Juncker in a bid to salvage the Brexit deal, with British MPs set to vote Tuesday on whether to accept the withdrawal agreement. The two sides then announced a three-part package of legally-binding changes to the old deal.

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