Tag: Japan

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Indices the HUAWEI way

Huawei have published what they call the global connectivity index. It’s a global IT competitiveness index, basically. It uses 40 indicators to measure the relative performance of different countries in key areas of IT and the information society. They are grouped in four technology “enablers” which are broadband, cloud, AI, and IoT, and in four “pillars” which are supply, demand, experience, and potential.

This index has several attractive features. First of all it’s a comprehensive set of indicators in a crucial field of competitiveness. Secondly Huawei covers 79 countries, rather than spreading themselves over more countries and having to sacrifice some indicators. Thirdly, and this is the really interesting part, when they change the definitions of particular indicators or the combination thereof, they have recalculated the indices for preceding years. This allowing sensible comparisons of progress over time.

The index itself out to be less interesting, at least in the top ten. The United States is number one every year from 2015 to 2020. Singapore is always in second place, with Switzerland always in third and Sweden always in fourth place. Below this it gets more interesting: most notable is the case of Japan. For the first two years it’s in 5th place but then begins to slip: 6th in 2017, 10th in 2018, 7th in 2019 and 9th in 2020. It’s a shaky performance at best: contrast this with Denmark. This was in sixth place for the first two years but then jumped up to 5th and stayed there consistently for the remaining years until now. Note that the index value for Japan and Denmark increased each year, but the performance of Denmark was better. Places 6 to 10 in the rankings in 2020 were Finland, the Netherlands, the UK, Japan, and Norway.

You would expect Huawei to have good data on China. It puts its home country at position 22 in the rankings with an index value of 62. This is not very high compared to the US in first place at a value of 87. However it is one index point ahead of a country that has always been highly regarded in IT terms, Estonia. Also China has a population of maybe one and a half billion people. Parts of China on their own would score much more highly. And it has improved its position. In 2015 it was at position number 34 with an index value of43. The US has also been showing growth in the index while maintaining its number one position. But if China maintains this relatively stronger growth, it will overtake the US by 2031. At least in this ranking.

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Brexit and trade agreements for the UK

First of all,  Brexit doesn’t just mean that the UK is leaving the EU. It also means that the UK is leaving all the trade agreements that the EU made when the UK was a member, and we can assume that the UK had things to say all through those negotiations. For the partners, it’s also difficult. To understand why, think about how trade deals are negotiated. Lots of detail, industry after industry, commodity after commodity, the tariffs, the quotas, and the non-tariff measures. Tariffs are essentially taxes on the imports, and non-tariff measures are things such as technical regulations that can be used to block imports, or else impose painful testing on the imports to make sure that they conform to the rules. For the EU and its negotiating partners, a balance has to be struck, a balance between hope and fear: hope that they’ll be able to export more, fear that there’ll be more competitive imports from the other side. The important point to remember is that these agreements were based on hundreds of detailed calculations of costs and benefits, and the assumptions made on both sides were that the EU included the UK. Brexit has damaged the UK’s reputation for keeping agreements, and it has, in particular, undermined the logic of all the trade agreements that the EU has made up to now. This means that, even before the UK negotiates any new trade agreements with other parts of the world, there may already be negative perceptions of the UK on the other side.

Although the UK has managed to negotiate what are called trade continuity agreements with Switzerland, Chile, Israel, Eastern and Southern Africa, the Palestinian Authority and the Faroe Islands, it is a long way from replacing all the existing EU agreements, and even farther from more ambitious ones. Most recently, Japan was reported as being upset over the UK’s implied criticism of them for being slow in this regard. There was a suggestion that the UK saw it as a simple matter of “cutting and pasting” the existing EU-Japan agreement. (In fact “cutting and pasting” has been the general UK approach to all trade negotiations since they lack the human resources to renegotiate in detail).

As we have seen above, reaching a trade agreement requires the fine balancing of a lot of detailed considerations. For a third country, the calculations involved in reaching a deal with the UK cannot be the same as those that were involved in the negotiations with the EU. Those in the UK who supported Brexit tended to minimise the difficulties of replacing the EU’s trade agreements, and they have pointed to the possibilities of better agreements as a result of Brexit. But no such better agreements are yet in the pipeline.

A further issue is that of the UK’s future trade relations with the EU. To date there is only the “Political Declaration” which outlines in very general terms the priorities for the future. In the section on “Goods”, paragraph 20 states that “The Parties envisage having a trading relationship on goods that is as close as possible, with a view to facilitating the ease of legitimate trade”, paragraph 22 says ” the Parties envisage comprehensive arrangements that will create a free trade area…”, and paragraph 23 says “The economic partnership should ensure no tariffs, fees, charges or quantitative restrictions across all sectors”. Similarly, under “Services”, paragraph 29 states that “The Parties should conclude ambitious, comprehensive and balanced arrangements on trade in services and investment in services and non-services sector.” All these statements are positive, but none of them are commitments. The precise nature of the agreement that will be negotiated is not yet known. Third countries considering a trade agreement with the UK will wait until there is clarity.

Finally, consider the question of relative weights in negotiations. When the EU negotiates with most countries, it is usually the stronger partner because of its market size and economic clout. But if the UK is on its own, it is not necessarily in as strong a negotiating position. This is particularly so with regard to a proposed UK-US agreement.