Author Archives: Lily Fleur

As Cuba Opens, Can Baseball Drafts Be Far Behind?

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Opening Cuba.   When US Secretary of Commerce Penny Pritzer arrived in Cuba, she invited her hosts to watch her team, the Chicago Cubs, in post season.  Fidel Castro was reportedly a very good baseball pitcher.  If he and George W. Bush had been able to sit down and arrange for Cuban baseball stars to play for American teams, Cuba might have opened for US business more than a decade ago.

Teams meeting in Washington “have made important advances in negotiating a memorandum of understanding on establishing regular flights between Cuba and the United States, and shortly they will be ready to announce a preliminary agreement on this issue”, Josefina Vidal, head of North American affairs for Cuba’s foreign ministry, told reporters in Havana. So is the expanded public Internet access that Cubans now enjoy, something the Cuban government agreed to as part of the deal struck between President Obama and Cuban President Raúl Castro a year ago. This deal is the result of months of negotiations between the two countries and paves the way for US airlines to eventually sell flights to Cuba directly from their websites for greater tourism which is still barred by USA law. It said a stronger USA civil aviation relationship with Cuba is a “critical component” of Obama’s effort to normalize relations between the two countries, which have already reopened embassies in Havana and Washington.

Some members of Congress marked the first anniversary of Obama’s opening to Cuba by hailing the impact of the “small steps” that Cubans and American have taken toward each other. American has operated charter service to Cuba since 1991, flying from Miami, Tampa and Los Angeles to the Cuban cities of Camaguey, Cienfuegos, Havana, Holguin and Santa Clara. Diplomatic exchanges between the USA and Cuba came to a screeching halt in 1961 when Washington announced that it would be breaking off its ties with Havana. “This is as much a political document as it is a transportation document”, he said.

Tony Castro, the youngest son of former Cuban president Fidel Castro, says baseball is helping Cuba and the United States to reunite. “We look forward to offering service between our global gateways and Cuba as soon as we have approval to do so”, airline spokesman Charles Hobart said in an email. This oversight is now managed by licensed People-to-People tour operators who use charter companies for their air travel to Cuba. “The atmosphere of relaxation makes it easier for Cuba to diversify its economic relations beyond just Venezuela”, its main ally and trade partner, said Jorge Duany, an expert at the Florida International University’s Cuban Research Institute. Other U.S. airlines – American Airlines Group Inc, Delta Air Lines Inc and United Continental Holdings Inc – have expressed interest in scheduling flights to Cuba. Since Obama eased restrictions on travel, USA visits to Cuba have climbed more than 70 percent, with 138,000 arrivals in the first 11 months of 2015. 

Flights to Cuba

Entrepreneur Alert: Extra Virgin Olive Oil?

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Two Spanish businessmen were sentenced to two years in prison in Cordoba for selling hundreds of thousands of litres of supposedly extra virgin olive oil that was, in fact, a mixture of 70-80% sunflower oil and 20-30% olive.

In 2008, Italian police arrested over 60 people and closed more than 90 farms and processing plants across the south after uncovering substandard, non-Italian olive oil being passed off as Italian extra virgin, and chlorophyll and beta-carotene being added to sunflower and soybean oil with the same aim.

Most alarmingly, a study last year by researchers at the University of California, Davis and the Australian Oils Research Laboratory concluded that as much as 69% of imported European olive oil (and a far smaller proportion of native Californian) sold as extra virgin in the delicatessens and grocery stores on the US west coast wasn’t what it claimed to be.

Extra virgin oil is mixed with a lower grade olive oil, often not from the same country. Meanwhile, the chemical tests that should by law be performed by exporters of extra virgin oil before it can be labelled and sold as such can often fail to detect adulterated oil, particularly when it has been mixed with products such as deodorized, lower-grade olive oil in a sophisticated modern refinery.

The olive, in more than 700 varieties or cultivars, has been grown for its oil in the Mediterranean since 3000 BC. Unlike most vegetable oils, which are extracted from seeds or nuts, good olive oil is made using a basic hydraulic press, or more modern centrifuge, so it is more a fruit juice than an industrial fat.

Like any fresh product, olive oil deteriorates over time. The public are just not aware of what’s going on. There’s plenty of oil out there that’s rubbish: last year’s oil or older. Or not even olive oil.

How to buy olive oil: Find a seller who stores it in clean, temperature-controlled stainless steel containers.   topped with an inert gas such as nitrogen to keep oxygen at bay, and bottles it as they sell it. Ask to taste it before buying.  Favor bottles or containers that protect against light, and buy a quantity that you’ll use up quickly. Don’t worry about color. Ensure that your oil is labelled “extra virgin.”  Try to buy oils only from this year’s harvest – look for bottles with a date of harvest. Failing that, look at the “best by” date which should be two years after an oil was bottled..

 

Bringing the Islamic World Into the Banking System

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Kyrgyzstan will open a new bank, operating on Islamic principles of financing, the National Bank of the Kyrgyz Republic reported.

During an international financial conference “Islamic Finance: Response to the global aspirations” the meeting of the head of the National Bank Tolkunbek Abdygulov and the President of the Islamic Development Bank (IDB) Ahmad Mohamed Ali Al-Madani was held. They discussed prospects for the development of the economy of the Kyrgyz Republic, the establishment of a joint commercial bank which will work according to the principles of Islamic finance and the possible opening of IDB representative office in Kyrgyzstan.

“Tolkunbek Abdygulov and the Managing Director of the International Monetary Fund Christine Lagarde also discussed directions of further cooperation between Kyrgyzstan and the IMF. Christine Lagarde noted the concerted actions of the National Bank and the Government of the Kyrgyz Republic in the conduction of monetary and fiscal policy. A plan of possible joint actions amid the crisis was drawn up,” the National Bank of the Kyrgyz Republic says.

Islamic Banking

Migration: A Global Issue for the Group of 20

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The Rocky Road to Globalization

As the Group of Twenty leaders gather in Turkey this weekend, they will have on their minds heartbreaking images of displaced people fleeing countries gripped by armed conflict and economic distress.  The surge of refugees in the last few years has reached levels not seen in decades. And these numbers could increase further in the near future. 

The immediate priority must be to help the refugees — who bear the heaviest burden, and too often tragically — with better access to shelter, health care and quality education.

No country can manage the refugee issue on their own. We need global cooperation.

Cross-border migration, of course, comes in several forms. It includes both refugees who are forced to leave their country and economic migrants who voluntarily leave in search of opportunities. This total number of migrants has risen significantly in recent years, now accounting for over three percent of the global population.

Regardless of the motivation, the decision to uproot and leave one’s home is difficult and can be risky. But once people pass through the journey, resettle and find stability, migration can — with the right policies — have an overall positive economic impact: for migrants, their host country, and their country of origin (as shown in forthcoming staff analysis).

Migrants can boost a country’s labor force, encourage investment and boost growth. Preliminary IMF calculations show a modest positive impact on growth from migrants in EU countries, for example.

More importantly, migration can also help address the challenges from aging populations in a number of advanced countries.  What about countries experiencing an outflow of migrants?  Certainly, these countries often lose their youngest and brightest, with important implications for growth. This has been the case in Caribbean countries, for instance, which lost over 50 percent of their high-skilled labor between 1965 and 2000.

Remittances help to counterbalance some of these effects.  Indeed, they can be a very important source of income — which has been shown to lead to higher education and health spending.  In 2014, remittance flows to developing countries amounted to $436 billion, more than half of total net foreign direct investment and well over three times as much as official development assistance.

 

What does a well-designed integration policy include?

  • First, strengthening the ability of labor markets to absorb migrants — by enabling immediate ability to seek work and providing better job matching services.
  • Second, enhancing access to education and training — by providing affordable education, language and job training.
  • Third, improving skill recognition — by adopting simple, affordable and transparent procedures to recognize foreign qualifications.
  • Finally, supporting migrant entrepreneurs — by reducing barriers to start-ups and providing support with legal advice, counseling and training.

In Sweden, for instance, an introduction program for refugees provides employment preparation and language training for up to 24 months, together with financial benefits. The program is beginning to help the latest inflow of refugees to find jobs — even though it will inevitably take time to fully succeed.

Demographic forces, globalization and environmental degradation mean that migration pressures across borders will likely increase in the coming decades.  And cross-border challenges demand cross-border solutions.

Global policy efforts, therefore, must focus on better cooperation and dialogue among the affected countries.

The IMF will also do its part, including through our financing and capacity building. In addition, over the next few months, our analysis on this issue will feed into our policy advice to countries in Africa, Europe and the Middle East dealing with massive population movements.

Migration is a global issue. We must all work together to address it.

Drug Pricing: Market Conundrum?

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Pricing in the pharmaceutical markets is dicey.

When the new owners of a life-saving AIDS drug raised its price by 5,000%, an online backlash forced the CEO to change his mind. While the public might have been outraged, this was hardly the first time the pharmaceutical industry the failed to make a cheap-to-produce but essential medicine easily available to those who need it.

Experts warned that a vital snakebite antidote had been withdrawn from the market by its manufacturers and that soon there would be no equivalent treatment available at all.

Too often the knowledge and the means to save lives are put at risk by problems with the pharmaceutical market. When these medicines are already developed and can be produced at modest cost, it is all the more frustrating and morally questionable.

We live in a world where the economic system can generally be relied upon to produce things that people want or need – even when those wants and needs could be viewed as trivial.

The arrangements in the markets for life-saving medicines – – especially those that target diseases prevalent in low-income countries – – are complex. They are characterised by powerful interests, on the sides of both producers and purchasers.

One obvious way we can see this is in how a drug’s developer is granted a legal monopoly over its sale through patents and licenses, preventing other companies from reproducing the same drug at a cheaper price. Producers then can (and do) sometimes target very high prices.

Some producers point to the very high costs and substantial risks associated with developing new drugs to justify these prices. They argue the patent system is a means of generating the necessary finance for these risky investments.

Through the patent system we are inherently relying on prices to generate incentives for investments. This makes life-saving drugs often unaffordable and skews investment in favour of those drugs that can command the highest prices rather than those that may save the most lives.

More is spent on R&D for minor ailments in high-income countries, such as for hair loss, than for major global killers afflicting mainly the poor, such as malaria.

Against this backdrop, big purchasers such as governments and aid agencies try to steer a course between negotiating lower prices and encouraging investment in new drugs – and keeping existing ones on the market. They too have limited budgets and cannot know for sure what prices they can afford in the long run.

This means the availability of drugs and the direction of R&D expenditures depend upon the actions of multiple agencies across different countries. If the negotiations go wrong or buyers don’t signal enough demand to manufacturers, vital drugs such as snakebite antidotes may cease to exist.

Drug Pricing

Devil’s Financial Dictionary: More True than Devilish?

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A Credit Suisse banker flew all over the place to meet with clients. He reported:

“Never have we seen so many clients who just do not know what is happening and have cashed up.”

People cash out now because they want to wait until things are “clearer.”  What’s odd is that the market is just a few percent off its all-time high. It would be a strange bull market where so many people cashed out at the top. Normally, people rush to cash out at the bottom.

Jason Zweig’s The Devil’s Financial Dictionary makes fun reading and may be more useful than we know: it recommends speaking plainly and listening to those who speak plainly.

Here’s what it says about uncertainty:

“Certainty, n. A state of clarity and predictability in economic and geopolitical affairs that all investors say is indispensable – even though it doesn’t exist, never has and never will… Whenever turmoil or turbulence becomes obvious, pundits proclaim again for the umpteenth time that ‘Investors hate uncertainty’… “Uncertainty is the most fundamental attribute of financial markets… hating the unknowable is a waste of time and energy. You might as well hate gravity or protest against the passage of time.”

“Cynic, n. A blackguard whose faulty vision sees things as they are, not as they ought to be.”

A broker:  “a negotiator between two parties who contrives to cheat both.”

“Day trader, n. See IDIOT.”

An anecdote about an English proverb“to sell the bear’s skin before one has caught the bear,” which is an apt description of selling a stock short. (You sell the stock first and hope to buy it back later at a lower price.

“PAREIDOLIA, n. The compulsive human tendency to see patterns or meaningful trends in random events and images.”

Fancy words may be a coverup. They hide thefts, lies, cons and ulterior motives. Speak plainly and seek those who speak plainly to you.  Quantitative easing, we now know, is printing money.Skinning a Bear?

Financing Infrastructure

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Financing infrastructure is one of the most important challenges faced by governments worldwide.

Thomas Maier writes: Infrastructure – from roads and railways to ports and bridges – and economic growth go together. That is why international financial institutions need to answer appeals for greater investment to help close a $1 trillion global “infrastructure gap.” Our best chance of meeting the world’s growing infrastructure needs is to use multilateral development banks’ unique relationships with governments and the private sector to coordinate our response.

Consider, for example, the progress already being felt in emerging markets. In the past year, the World Bank Group, the Asian Development Bank (ADB), the Inter-American Development Bank (IADB), the African Development Bank, the European Investment Bank, and the European Bank for Reconstruction and Development (EBRD) have all created “project preparation facilities” (PPFs) to improve the quality of project development, while also strengthening the local capacity needed to ensure lasting results.

The various PPFs that have been launched can act as a model for public officials in emerging markets to emulate. The Infrastructure Project Preparation Facility, launched by the EBRD last year, is one example: by using pre-selected “framework consultants,” the facility can accelerate high-quality project preparation for both public-sector projects and public-private partnerships (PPPs). This dual focus is important: private-sector finance is critical, but the public sector still finances some 90% of all infrastructure investment worldwide.

Another important innovation is the online “PPP Knowledge Lab,” launched in June with support from multilateral development banks

Then there is the International Infrastructure Support System (IISS), an online tool directly supported by a number of international financial institutions during its initial start-up phase in 2015 and early 2016.

But any system is only as good as its participants. Responding to the need for more systematic and “standardized” learning, the World Bank Group, supported by the ADB, IADB, EBRD, and the Islamic Development Bank, has commissioned a new Global Certification Program for PPP Professionals. Emerging-market officials will earn accreditation by demonstrating the ability to apply their knowledge practically.

One useful tool in the effort is “Infrascope,”a benchmarking index created by the Economist Intelligence Unit that assesses the capacity of emerging-market countries across the Asia-Pacific region, Latin America, Africa, Eastern Europe, and the former Soviet republics in the Commonwealth of Independent States to deliver sustainable PPPs.

Another is the G-20’s new Global Infrastructure Hub, which shares international good practice and comprehensive data on infrastructure. The Hub has a four-year mandate to focus on five main areas: a network to share information on infrastructure projects and financing; better data on infrastructure investment; the G-20’s recommendations for voluntary lending; government officials’ capacity to share best practices; and a database to match infrastructure projects with potential investors.

It is easy to be daunted by the vast sums needed to close the gap between the infrastructure the developing world has and the infrastructure it needs to support sustainable, inclusive economic growth. But compare the world today with the world a century or more ago, and it is clear that the gap is so much narrower than it was. What will narrow it still more, and so sustain the gains in global growth, will be the spread of infrastructure know-how at the local level in emerging markets. We and our fellow multilateral institutions have a clear duty not just to increase our expertise, but also to share it.

Infrastructure

 

Central Banks Fixated on Inflation?

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A reason why the central banks should not have as big as role as they now do.  Their focus on inflation may well be mistaken.

Stephen S. Roach writes:  Targeting in a world without inflation, central banks have lost their way. With benchmark interest rates stuck at the dreaded zero bound, monetary policy has been transformed from an agent of price stability into an engine of financial instability. A new approach is desperately needed.

The US Federal Reserve exemplifies this policy dilemma. After the Federal Open Market Committee decided in September to defer yet again the start of its long-awaited normalization of monetary policy, its inflation doves are openly campaigning for another delay.

For the inflation-targeting purists, the argument seems impeccable. The headline consumer-price index (CPI) is near zero, and “core” or underlying inflation – the Fed’s favorite indicator – remains significantly below the seemingly sacrosanct 2% target. With a long-anemic recovery looking shaky again, the doves contend that there is no reason to rush ahead with interest-rate hikes.

Of course, there is more to it than that. Because monetary policy operates with lags, central banks must avoid fixating on the here and now, and instead use imperfect forecasts to anticipate the future effects of their decisions. In the Fed’s case, the presumption that the US will soon approach full employment has caused the so-called dual mandate to collapse into one target: getting inflation back to 2%.

Here, the Fed is making a fatal mistake, as it relies heavily on a timeworn inflation-forecasting methodology that filters out the “special factors” driving the often volatile prices of goods like food and energy. The logic is that the price fluctuations will eventually subside, and headline price indicators will converge on the core rate of inflation.

This approach failed spectacularly when it was adopted in the 1970s, causing the Fed to underestimate virulent inflation. And it is failing today, leading the Fed consistently to overestimate underlying inflation. Indeed, with oil prices having plunged by 50% over the past year, the Fed stubbornly maintains that faster price growth – and the precious inflation rate of 2% – is just around the corner.

Missing from this logic is an appreciation of the new and powerful global forces that are bearing down on inflation. According to the International Monetary Fund’s latest outlook, the price deflator for all advanced economies should increase by just 1.5% annually, on average, from now to 2020 – not much higher than the crisis-depressed 1.1% pace of the last six years. Moreover, most wholesale prices around the world remain in outright deflation.

But, rather than recognize the likely drivers of these developments – namely, a seemingly chronic shortfall of global aggregate demand amid a supply glut and a deflationary profusion of technological innovations and new supply chains – the Fed continues to minimize the deflationary impact of global forces. It would rather attribute low inflation to successful inflation targeting, and the Great Moderation that it presumably spawned.

This prideful interpretation amounted to the siren song of an extremely accommodative monetary policy. Unable to disentangle the global and domestic pressures suppressing inflation, a price-targeting Fed has erred consistently on the side of easy money.

This is apparent in the fact that, over the last 15 years, the real federal funds rate – the Fed’s benchmark policy rate, adjusted for inflation – has been in negative territory more than 60% of the time, averaging -0.6% since May 2001. From 1990 to 2000, by contrast, the real federal funds rate averaged 2.2%. In short, over the last decade and a half, the Fed has gone well beyond a powerful disinflation in setting its policy interest rate.

The consequences have been problematic, to say the least. Over the same 15-year period, financial markets have become unhinged, with a profusion of asset and credit bubbles leading to a series of crises that almost pushed the world economy into the abyss in 2008-2009. But rather than recognize, let alone respond to, pre-crisis excesses, the Fed has remained agnostic about them, pointing out that bubble-spotting is, at best, an imperfect science.

That is hardly a convincing reason for central banks to remain fixated on inflation targeting. Not only have they failed repeatedly to get the inflation forecast right; they now risk fueling renewed financial instability and sparking another crisis. Just as a few of us warned of impending crisis in the 2003-2006 period, some – including the Bank of International Settlements and the IMF– are sounding the alarm today, but to no avail.

To be sure, inflation targeting was once essential to limit runaway price growth. In today’s inflationless world, however, it is counterproductive. Yet the inflation targeters who dominate today’s major central banks insist on fighting yesterday’s war.

In this sense, modern central bankers resemble the British army in the Battle of Singapore in 1942. Convinced that the Japanese would attack from the sea, the British defenses were encased in impenetrable concrete bunkers, with fixed artillery that could fire only to the south. So when the Japanese emerged from the jungle and mangrove swamps of the Malay Peninsula in the north, the British were powerless to stop them. Singapore quickly fell, in what is widely considered Prime Minister Winston Churchill’s most ignominious military defeat.

Central bankers, like the British army in Singapore, are aiming their weapons in the wrong direction. It is time for them to turn their policy arsenal toward today’s enemy: financial instability. On that basis alone, the case for monetary-policy normalization has never been more compelling.

Measuring Inflation

 

Resurrecting Glass-Steagall

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Part of the problem with the candidacy of Hillary Clinton for President is that she is not free to set policy.  Surprisingly she has been supported by sophisticated banking Senator from Ohio, Sherrod Brown.  But can she ever resurrect Glass Steagall (if she gets the chance?)  Probably not.  A serious glitch in her potential Presidency.

SImon Johnson writes:  A major shift in American politics has taken place. All three of the remaining mainstream Democratic presidential candidates now agree that the existing state of the financial sector is not satisfactory and that more change is needed. President Barack Obama has long regarded the 2010 Dodd-Frank financial-reform legislation as bringing about sufficient change. Former Secretary of State Hillary Clinton, Senator Bernie Sanders, and former Governor Martin O’Malley want to do even more.

The three leading Democratic candidates disagree, however, on whether there should be legislation to re-erect a wall between the rather dull business of ordinary commercial banking and other kinds of finance (such as issuing and trading securities, commonly known as investment banking).

This issue is sometimes referred to as “reinstating Glass-Steagall,” a reference to the Depression-era legislation – the Banking Act of 1933 – that separated commercial and investment banking. This is a slight misnomer: the most credible bipartisan proposal on the table takes a much-modernized approach to distinguishing and making more transparent different kinds of finance activities. Sanders and O’Malley are in favor of this general idea; Clinton is not (yet).

Some prominent former officials argue that not all of the financial firms that got into trouble in 2008 were integrated commercial-investment banking operations. For example, Lehman Brothers was a standalone investment bank, and AIG was an insurance company.

This argument is, at best, irrelevant. What happened “last time” is rarely a good guide to fighting wars or anticipating future financial crises.

At worst, the argument is just plain wrong. Some of the greatest threats in 2008 were posed by banks – such as Citigroup – built on the premise that integrating commercial and investment banking would bring stability and better service.

Second, leading representatives of big banks argue that much has changed since 2008 – and that big banks have become significantly safer. Unfortunately, this is a great exaggeration.

Ensuring a financial system’s stability is a multifaceted endeavor – complex enough to keep many diligent people fully employed. But it also comes down to this: how much loss-absorbing shareholder equity is on the balance sheets of the largest financial firms?

In the run-up to the 2008 crisis, the largest US banks had around 4% equity relative to their assets. This was not enough to withstand the storm.

Now, under the most generous possible calculation, the surviving megabanks have on average about 5% equity relative to total assets – that is, they are 95% financed with debt.

Consider all the instances of money laundering and sanctions busting with evidence against Credit Agricole last week, Deutsche Bank this week, and almost every major international bank in the past few years.

This is the equivalent of near misses in aviation. If the US had the equivalent of the National Transportation Safety Board for finance, we would receive detailed public reports on what exactly is – still, after all these years – going wrong. Sadly, what we actually get is plea bargains in which all relevant details are kept secret.

The best argument for a modern Glass-Steagall act is the simplest. We should want a lot more loss-absorbing shareholder equity.

Building support for legislation to simplify the biggest banks would greatly strengthen the hand of those regulators who want to require more shareholder equity and better regulation for the shadows. These policies are complements, not substitutes.

Glass-Steagall

 

Japan and the TPP

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Considerations for Japan as they participate in TPP.

Yuriko Koiki writes:  After years of exhausting – and exhaustive – haggling, a dozen Pacific Rim countries finally signed up to the Trans-Pacific Partnership (TPP), an agreement that promises everything from more trade to a cleaner environment. The negotiations were such that the hair of Akira Amari, Japan’s economic and fiscal policy minister, turned completely grey. His solace, however, is that the TPP will prove to be a key foundation stone of the “Asian Century.”.

China’s exclusion was no accident. Its huge and complex economy would have injected insuperable problems.  In response, China has launched its “Silk Road” initiative to create an economic zone that will favor its own priorities. It is also seeking greater trade cooperation with European countries. One example is President Xi Jinping’s recent visit to the United Kingdom – which in essence is also an attempt to weaken Britain’s “special relationship” with the US by creating a cat’s cradle of trade, financial, and investment ties with Britain.

But, as Japanese Prime Minister Shinzo Abe’s recent call for talks with China on the issue confirm, the TPP is not off-limits to China – or to other Asian economies. South Korea is warming to the idea of the TPP, as is Indonesia, following President Joko Widodo’s recent visit to Washington, DC.

For Japan, the TPP is vital to achieve economic liberalization – the third arrow of “Abenomics,” the government’s program to revitalize the country’s ailing economy. The legislation to enact the TPP will simply push aside the lobbies and vested interests that have been so effective in slowing down or diverting piecemeal reforms.

The promise of greater exchange of goods, services, and capital across the Pacific, as well as the creation of international standards (for example, for intellectual-property rights), is simply too appealing to ignore. When Japan and other Asian countries weigh the risk of implementing the TPP against the risk of not participating, the risk of not participating is overwhelmingly higher.

Japan’s political challenge will be to sell the TPP to its voters, especially the farm lobby. The customs duty on beef imports, for example, is currently 38.5%. It will be 27.5% in the first year after the TPP takes effect, and will then be gradually lowered to 9% in the agreement’s 16th year.

That should surely provide more than enough time for Japanese beef ranchers to prepare themselves for foreign competition (of the 870,000 tons of beef imported annually, 520,000 tons come from Australia, the US, and New Zealand). And it will certainly be a boon for consumers, as the price of their beef-noodle soup and sukiyaki falls dramatically.

Japan’s ranchers do need time to adjust. Because they deal with animals, shortcuts cannot be taken, and there are limits to mechanization, particularly in creating the type of beef that Japanese consumers demand. Whereas ranchers in Australia and the US have huge herds of cattle, Japanese ranchers raise each individual cow on beer and massages.

The same applies to rice. Rumor has it that when the wife of a certain Chinese leader visited Japan, she bought a delicious variety of Japanese rice by the ton. Taking advantage of the worldwide sushi boom, Japan needs to emphasize that “real sushi requires Japanese rice,” branding it an exclusive product.

In fact, regardless of whether or not the TPP is implemented, Japan’s farmers must pursue this approach to secure their futures, rather than hoping that protective subsidies continue ad infinitum.

But now comes the truly hard part. The TPP has been signed – but it will not be implemented unless and until it is ratified by the legislatures of countries such as the US and Canada. That process could well be enough to turn Amari’s gray hair white.

Japan and TPP