Chinese Quote Sun Tzu, Is Trump Listening?

By: Subhadeep Bhattacharjee

Sun Tzu the famed Chinese General had stated “The supreme art of war is to subdue the enemy without fighting.” For years this has been China’s strategy in dealing with the United States as it aims to topple Uncle Sam as the global leader in economic and military might.

The aggressive trade and diplomatic stance of the Chinese in the last three decades had paid them well, allowing them to make major dents in U.S. economy and slowly locking up its manufacturing industry. The bilateral trade in 2015 stood at little over 600 billion dollars with 367 billion dollars in favour of China is a testament to this success.

The surprise victory of Republican Donald Trump in one of the most anticipated US Presidential Elections has had alarm bells ringing in China. Even before the November 8 shock had sunk in the President elect dropped a bombshell by declaring that he would withdraw from Trans-Pacific Partnership on first day in office. Although China, the second largest economy in the world barring the European Union won’t be directly affected by this decision there are fears that the maverick Republican President-elect make declare a major trade war with the country.

As a part of his campaign he had covertly and overtly (more overly in real terms) promised to payback the Chinese whose currency devaluation has become a major cause of concern across the globe. His popularity among in the White community was a direct result of his attack on the Chinese and other countries that significantly export to the United States resulting in major loss of domestic manufacturing jobs.  

There are rumours in Beijing and Washington that Trump could impose an absurd 45% levy in tariffs and in such a scenario the Chinese could see their exports to United States cut to half and this could bring down the country’s GDP by as much as 2%. A rather realizable 10% levy would also hurt the Chinese exporters significantly and bringing down exports by as much as 15-17%. The Chinese aren’t likely to take this lying down and the multi-billion dollar American enterprises that have heavily invested in China are likely to bear the brunt for such a decision back home.  

 

Analysts are however sceptical about Trump embarking on any major economic war given the collateral damage it would have on his country’s own economy. Three weeks since his victory Trump the real-estate mogul known to carry his foot in his mouth has flip-flopped on several of his campaign promises. They believe that Trump is aware about the retaliation that is expected to come from Xi Jinping and this would remain another of his unfulfilled election rhetoric. There are growing fears in the US that such a trade war would further push trade dependant nations in China’s basket and may signal the downfall of the United States as the most dominant power in the world.  

According to Sun Tzu’s text “You can kill 1,000 enemies, but you would also lose 800 soldiers” Is Trump willing to bear such a high cost to stand by his election rhetoric. The Chinese don’t quite believe so.  

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Is the American auto dream over?

By: Subhadeep Bhattacharjee

It was a sad day in American automotive history when the one of the world's largest automobile company General Motors filed for bankruptcy. It is the third-largest filing in U.S. History. Only beaten by Lehman Brothers Holdings’s in 2008 and WorldCom’s in 2002. The U.S. government has pledged up to $30.1 billion USD to restructure the company and provide the financing for it to emerge within the next two to three months.

General Motors had led the American auto revolution along with its competitors Ford and Chrysler. The auto giant which had given world several marvellous brands such as Cadillac, Opel, Chevrolet, Hummer, Pontiac and Saturn has crushed under its own burden of credit. This downfall was inevitable for GM as the company has been on a continuous down slide since the start of the millennium. The 101 year old company is more than just a brand to the Americas, it a symbol of pride.

Post World War II brands like the Ford and General Motors have always been the flag bearers of the Great American Dream. They have shown to the world the American flamboyancy, the need for speed, the liking for big gas guzzlers and above all the style statement. They have been testament to the aspiration of the Americans to be the greatest superpower in the world. They were America's answer to the Mercedes, the Fiats, the Hondas and the Nissasn.

General Motors is another episode in the chain of events that has hit the American economy as a whole and automotive industry in particular. With Chrysler already having filed for bankruptcy in April and Ford having mortgaged all of its assets in 2006 to borrow money from the market American automobile industry is going through its darkest hour. With sales touching record lows due to the global financial meltdown it has been bumpy ride for the auto makers in the last year in particular.

The American auto industry also faces external threats mainly from Japan and South Korea with brands like Toyota, Hyundai, Nissan and Honda faring better in the market. One reason why brands like GM have had slump in the last decade has been the change in markets. Buyers around the world are moving towards energy efficient cars a fact that most American brand were in denial of. The flamboyant gas guzzlers are no longer popular with the American masses who at one point of time did not care about fuel bills as long as it made a style statement.

Another thing that hit the American auto industry was freezing of demands in the domestic markets. The markets in North America which accelerated the growth of the GMs and the Fords has seen freezing in sales in the last two decades. It is not surprising that operations of General Motors and Ford in countries like India has been a complete different story. In fact GM India is one of the rare subsidiary for the auto giant whose books are in still in green.

The bailout by the government will surely save the lives of thousands of workers in these companies. It is too early to write off brands like the GM and Chrysler and they surely will not land up in the history books of automobile engineering. But the bailout also means that the American auto dreams will never be the same again.

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Zardari wants peace with India

By: Subhadeep Bhattacharjee

In the heat of the ongoing election and the Indian Premiere League we seem to have forgotten our neighbour Pakistan. Since the Mumbai terror attack last November the two countries have been engaged in allegations and counter-allegations. Now Pakistani President Asif Ali Zardari said in Washington that he wanted peace with India and hoped for new dialogue to start after his country's historic rival completes national elections.

Zardari who is in Washington for a three-way summit involving Afghanistan said Pakistan always wanted peace with India. He added that he will work with India towards the peace process once the new government is formed in New Delhi. One thing Zardari clearly knows that his government is in danger of being run over by the extremists and he needs his army to focus on the Taliban and not be obsessed about fighting a proxy war with India.

Zardari also attempted to pressurize the US to convince India for a troop pullout. His argued that in such a case Pakistan can mobilise more troops to fight the Taliban in the SWAT valley and the Pak-Afghan Border. This argument fell into deaf years as Washington did not see Pakistan having any serious threat from India even with a massive troop pullout. Pakistani Army recently pulled out 6000 troops from the Indian border and posted them on the western sector.

From India's perspective the big question arises can we trust Pakistan? Going by previous records a ordinary Indian would say a straight 'NO'. Pakistan over the last two decades has always taken interest in the composite dialogue with India and talked about peace between the tow countries . But at the same time supported terrorist activities in India through its notorious spy agency the ISI.

The recent peace call by Zardari seems to be filled with selfish motive. Islamabad is now facing the monstrous Taliban which once created, trained and supported to fight a Jihad in Afghanistan. The grimness of the situation can be understood from the fact that Pakistani government and the army is slowly loosing its grip over the nation and is being forced to sign peace deals with the Taliban at its own terms and conditions.

In such a scenario Pakistan cannot afford to fight wage a war against India and thus extending us its hand of friendship. But what should be India's stand in such a case. We definitely cannot close our eyes and let Taliban run over entire Pakistan. In that situation we will have to directly talk to the terrorists rather than talking to the educated people who support terrorism.

India should treat this as a opportunity to flush out more terrorists from the valley as it can afford to withdraw some troops from the borders. But New Delhi cannot afford to completely trust Islamabad and Mr Zardari as he is not the real centre of power but it General Kayani who calls the shots in what remains Democratically Administered Pakistan.

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Obama sings the 'Bangalore' jingle again

By: Subhadeep Bhattacharjee

What does the President of the world's greatest superpower do after completing 100 days in office. Well looks back at his election campaign promise and hums the same tunes which brought him to the White House. In an expected move US President Barack Obama promised lesser tax rates for companies which create more jobs in the US than outsource it to countries like India.

In a White House event attended by many industry leaders Barack Obama said “It’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.” Bangalore is no longer a city it has become a metaphor. The growth that this city has seen in the last two decades is good enough to make a person in Manhattan jealous.

Barack Obama might have created history by becoming the first black President of America but he seems to have forgotten the biggest idea around which his nation is built CAPITALISM. American companies know the profit and loss theory better than anybody in the world and that is why they are biggest economy on the world. They have been smart when it came to acquiring offshore business and smarter when it came to dumping such businesses.

Business is driven by logic and not by emotion and more so in a capitalist country like the US. Obama might want US industry giants to believe in his election promise but there will be very few takers. Many MNCs like the GE, IBM and Citi Group employ a large number people in India. These companies get quality labour at a fraction of the cost which they would have spend employing people in Buffalo as Obama wants them to.

What this Harvard law graduate doesn't seem to aware of is Bangalore without tax intensives is still far cheaper than Buffalo. No mater what is the percentage of tax he levies on MNCs outsourcing jobs to India it will still be cheaper than running operations in Buffalo. Secondly American MNCs never came to India to do charity a thing which is least expected of a country where hiring and firing are the two sides of the same coins.

Obama's speech may bring some relief to an unemployed person in California and sound like a victory speech but it is unlikely to have any major impact on the outsourcing. The reaction of the India Inc. on the issue has shown that Obama's Bangalore to Buffalo call is unlikely to sound alarm bells in Bangalore or any center of outsourcing in India.

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Obama makes CEO's accountable

The Barack Obama administration is planning to cap the pay of the top executives before announcing the $700 billion financial bailout. Under this any company which seeks a bailout cannot pay more than $400,000 in total compensation to any of its top executives until it refunds the bailout money to the government. The logic applied by the Obama administration is simple, the tax payers money cannot be used to bail out companies whose top executives do not show any sense of responsibility.

There was an argument that it will have a negative effect in the industry with talented executives likely to stay from companies seeking bailout. Obama's chief economic adviser, Larry Summers has provided a solution that firms which plan to pay executives above the threshold can provide them with stocks which cannot be liquidated till the the time firm pays back the money to the government.

Taxpayers money in the form of loans at negligible interest rates cannot be given to allow CEO's to buy duplex apartments in Manhattan and chatter private jets. Jokes were running around that top CEO's would come in chattered jets to asking for a bailout. They would drink the most expensive wines and champagnes at regular parties which were never hit by recession.

It may come as a shock to many but in the past year when people were being fired from across sectors in the US a whopping $1.8 billion was pocketed by the top executives in the name of bonuses. Some of the people taking home this money included people from Lehman Brothers, Citi Group and AIG. How many job cuts took place at the executive levels to reduces loses? Well the answer is known to all.

So Obama's stand on the issue needs to be appreciated as he is willing to bail out the US economy but not by filling the pockets of CEO's with taxpayers money. Well it seems Obama is dynamic with the Presidency as he was with this Presidential Campaign.

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Obama's tightens screws on Pakistan

If Barack Obama's inaugural speech is anything to go by Pakistan might not have it easy dealing with the 44^th President of the United States of America. Obama clearly said that Pakistan will be responsible for the security along its Afghan border. For long Pakistan has tried to portray itself as a victim of terror and supported terrorist activities in India and Afghanistan.

This will bring in some relief for New Delhi as US policy on Pakistan can make a huge difference in the geo-political situation in the Indian sub-continent. After the recent terror attack in Mumbai US has has championed Indian cause and constantly kept pressure on Pakistan to take action against the perpetrators of terror operating from within its territory.

Since September 11 2001 US has given Pakistan a whopping sum of 7.5 billion dollars to fight the war against terror. The global community is aware of the fact that a huge chunk of this money has been diverted to purchase military equipment to be used against India. In spite of being aware of this US hasn't been able to do much as Pakistan is a key ally in the war against the Taliban and Al Qaida

Barack Obama has however had made his policy clear right from the start that US will pull out of Iraq and take on the terrorists in Afghanistan. He had even gone on to say that if needed US forces might conduct operations inside the Pakistani territory. He is also planning to send 30000 more troops to Afghanistan after they pull out of Iraq.

Obama is aware of the fact that the tribal areas of Pakistan is where most of the terror leaders run their campaign. Unless these areas are sanitised sending more forces to Afghanistan will be of little help. Its an uphill task for the US President to make sure that nuclear armed Pakistan does not become its enemy from ally in this process of fighting the “War on Terror”

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