Dec-2010-International

INTERNATIONAL AFFAIRS

US Senate ratifies new arms control treaty with Russia
On December 23, 2010, the US Senate ratified the arms control Strategic Arms Reduction Treaty (START) with Russia to cut down the countries’ nuclear stockpile, after several Republicans broke ranks with their party to vote in its favour. The new Strategic Arms Reduction Treaty cleared the required threshold of two-thirds of the Senators present, and the Senate ratified it by an overwhelming vote of 71 to 26.

The New START would reduce the nuclear stockpiles of the two countries to 1,500, down from the current ceiling of 2,200, besides establishing a system for monitoring and verification. It will also replace a 1991 treaty and would pave the way for resuming weapons inspections that ended in 2009 with the expiry of the earlier treaty.

The treaty allows the two countries to conduct 18 short-notice, on-site inspections each year, with as many as 10 “Type 1” inspections, which focus on strategic systems, such as intercontinental ballistic missiles, submarines and bombers, and up to eight “Type 2” inspections, which cover storage sites, test ranges and other operations.

On-site inspections, data exchanges on the technical characteristics, locations and distribution of weapons are key components of the treaty.

“We will continue to advance our relationship with Russia, which is essential to making progress on a host of challenges—from enforcing strong sanctions on Iran to preventing nuclear weapons from falling into the hands of terrorists. And this treaty will enhance our leadership to stop the spread of nuclear weapons and seek the peace of a world without them,” President Obama said.

The development was also welcomed by Russian Foreign Minister Sergei Lavrov who said the ratification was signal of “efforts to ensure the dynamic development of bilateral relations” between Russia and the US.

Lack of risk management exposes BRIC economies
Rapidly growing BRIC emerging economies are vulnerable to external shocks as they lack adequate risk management and must synchronise fiscal and monetary policies, according to a survey of finance ministry officials by consultancy Booz & Company.

It said that the role of finance ministries has expanded far beyond their traditional fiscal mandate and they must reform so that they are not overly driven by interventions, near-term fiscal targets and benchmarking against local peers.

Booz polled more than 60 policy-makers in finance ministries in the Group of 20 and other key economies, along with officials from the IMF, World Bank, European Union and OECD, academic institutions and think tanks.

Brazil, China, India and Russia—the powerful BRIC group of emerging nations— rebounded fast from the financial crisis, but the survey warned of shortcomings which could pose risks in the future.

Russia is vulnerable to swings in the price of oil, Brazil to commodity prices, and India and China to global demand. China faces the additional risk of potential changes in currency policy, which could have ramifications for its trade position, says the survey.

It said these economies will face volatile swings within the economic cycle, often requiring corrective measures with high costs, unless the economic management functions within these countries are coordinated via a larger framework.

The survey also recommends that BRIC and other growth economies should quantify on- and off- balance sheet risks, including commodity prices, currency fluctuations, private demand, or financial exposure—and build them into policy decisions.

IMF Report on World Economy
A package of U.S. tax cuts should give a lift to a global economic recovery that had already begun to gain speed late in 2010, according to the IMF.

In an updated World Economic Outlook report, the International Monetary Fund said the global economy would likely expand 4.4 percent in 2011, a touch higher than the 4.2 percent it forecast in October 2010. It said it expected growth of 4.5 percent in 2012.

Advanced economies have been a drag on global growth since the financial crisis erupted in 2007. While they are beginning to offer a bigger contribution, the IMF said those economies still pose the biggest risk to the world recovery. In particular, it warned of downside risks from the debt crisis in Europe and the high debt levels in many other advanced economies.

It said "comprehensive, rapid, and decisive policy actions" were needed to tackle troubles in the euro zone. In a separate report on Tuesday, the IMF called for an increase in the effective size of Europe's financial rescue fund and rigorous stress-testing of the region's banks.

The IMF said rich nations needed to keep in place loose monetary policies to support growth. "As long as inflation expectations remain anchored and unemployment stays higher, this is the right policy from a domestic perspective," it said.

The Fund said the U.S. economy would likely grow 3.0 percent in 2011, a sharp upward revision from its 2.3 percent October 2010 forecast. The IMF expects growth in the world's largest economy to ease slightly to 2.7 percent in 2012.

For Japan, the IMF said growth was now expected to reach 1.6 percent in 2011, an upward revision from October, and 1.8 percent in 2012.

It maintained its October forecast for the euro zone at 1.5 percent and estimated growth would accelerate to 1.7 percent in 2012. It upgraded its 2011 growth forecast for Germany to 2.2 percent from 2.0 percent due to stronger domestic demand.

The IMF said it expects emerging and developing economies, which include China, India, Brazil and Russia, to keep up their brisk pace of growth, although it noted that inflation pressures were rising in these countries.

It revised up its 2011 growth figure for emerging economies to 6.5 percent from an October 2010 projection of 6.4 percent, and said it sees similar growth in 2012.

For China, the IMF maintained its 2011 growth forecast at 9.6 percent and said growth in 2012 would slow slightly to 9.5 percent.

The Fund revised up its 2011 forecast for Brazilian growth to 4.5 percent versus a previous projection of 4.1 percent. It said Brazil would likely grow 4.1 percent in 2012.

The IMF said the surge in private investment flows into emerging market economies would likely remain strong, buoyed by low interest rates in mature markets and a strong investor appetite.

It cited inflation as the key risk for emerging economies, and said tighter monetary policies were needed.

With emerging economies accounting for almost 40 percent of global consumption, a slowdown in these economies “would deal a serious blow to the global recovery,” the IMF warned.

Global economy in better shape
The health of the global financial system appears to have improved, with the economic clout of emerging nations on the rise even as developed countries continue to grapple with debt woes.

In signs of improvement, the world economy is estimated to have expanded by around 5 per cent in 2010, in sharp contrast to the lower output witnessed in 2009.

On either side of the Atlantic, the efforts to contain fiscal deficit and bolster economic growth have been in different trajectories. While crisis-hit Europe is clamouring for severe tightening measures, the United States continues to print more dollars.

In the wake of the ravaging crisis, power has shifted from the once-unshakable developed world to rapidly growing nations such as India and China.

In a testimony to their rising economic clout, India and China are all set to get more voting power at the International Monetary Fund (IMF). The G-20 grouping has emerged as the most influential voice, with increased focus on nations such as India and China, whose consuming power is leading the global recovery.

Meanwhile, the word 'stimulus' continues to remain the buzzword for the world's largest economy, the US. Apart from continuing with a near-zero interest rate regime for three years, the US is now exploring newer ways to boost the still-sluggish recovery.

Federal Reserve Chief Ben Bernanke has hinted at further quantitative easing measures, after unveiling a plan to buy $600 billion-worth of government securities. What is more, President Barack Obama has announced fresh tax cuts and initiated steps to discourage outsourcing.

With Uncle Sam pumping in more dollars to rejuvenate the over $14 trillion economy and create more jobs, the spill-overs are nightmarish.

The cheap dollar has fuelled excessive fund flows into emerging nations, including India and China, which in turn has stoked concerns of overheating and asset bubbles.

More efforts required to slow deforestation
World efforts to slow deforestation should do more to address underlying causes such as rising demand for crops or bio-fuels, according to a report by the International Union of Forest Research Organizations (IUFRO).

It said a series of projects to protect forests had had limited success in recent decades—U.N. figures show that 13 million hectares (32 million acres) of forest were lost every year from 2000-09, an area equivalent to the size of Greece.

The report also suggested that the current U.N.-led efforts to protect forests had too narrow a focus on promoting trees as stores of carbon dioxide, the main greenhouse gas.

Deforestation accounts for perhaps 10 percent of all emissions of greenhouse gases from human activities. Trees soak up carbon as they grow but release it when they burn or decay.

The IUFRO study said a key problem was that deforestation, from the Amazon to the Congo, was often caused by economic pressures far away. A popular global brand of cookies, for instance, uses palm oil grown on deforested land in Indonesia.

IUFRO has urged policies of "embracing complexity" to help protect forests, including educating consumers, rather than rely on a one-size-fits-all mechanism such as carbon storage.

Authors of the IUFRO study said that the U.N. plan, known as REDD+, was promising. But their worry is that this won’t be enough.

Greenland ice melts set record in 2010
Greenland’s ice sheet melted at a record rate in 2010, and this could be a major contributor to sea level rise in coming decades. The ice in Greenland melted so much in 2010 that it formed rivers and lakes on top of the vast series of glaciers that cover much of the big Arctic island.

Summer 2010 temperatures in Greenland were up to 3 degrees C above average, and there was reduced snowfall. Greenland’s capital had the warmest spring and summer since records began there in 1873. Average summer temperatures vary widely, but in coastal areas hover around freezing.

This is in tune with studies released by the U.S. National Oceanic and Atmospheric Administration and the World Meteorological Organization finding that 2010 was tied with 2005 and 1998 for the warmest year since modern global temperature record-keeping began in 1880.

With less snow cover, more bare ice was exposed to the sun, and because bare ice is darker than snow, it absorbs more solar radiation. So the more ice is uncovered, the more warming sunlight it absorbs and the more vulnerable it is to melting.

The study was sponsored by World Wildlife Fund, NASA and the National Science Foundation.

“Sea level rise is expected to top 3 feet by 2100, largely due to melting from ice sheets,” according to World Wildlife Fund climate specialist Martin Sommerkorn.

Cancun Climate Summit
The UN climate conference, held at Cancun, Mexico in December 2010, reached a “compromise” to set up a $100 billion “Green Fund” to fight global warming, a decision India described as an “important step forward”, but there was no agreement on extending the landmark Kyoto Protocol on emissions cuts beyond 2012.

“Confidence is back, hope has returned,” host Mexican President Felipe Calderon said, minutes after a set of decisions was adopted at the end of the two-week conference of ministers from nearly 200 countries.

Progress at the conference included a broad agreement on technology-sharing mechanism that will ensure that poor and vulnerable countries are able to access green technologies easily and in a cost-effective manner.

A “Green Fund” has been set up that is expected to mobilise $100 billion per year by 2020, which will be given to developing countries for adaptation and mitigation purposes.

The decisions reached in this conference will be followed up in negotiations in 2011, and it is hoped that a legally binding treaty emerges at the next climate meet in Durban, South Africa.

Bolivia was the sole country to oppose the decision in Cancun, but was eventually overruled.

Many of the contentious issues were by-passed to reach compromises in Cancun. For instance, no number has been given for further emission reductions under the Kyoto Protocol and there is no commitment to continue the Kyoto Protocol after it expires in 2012. According to some groups, it is a “weak” text that will eventually lead to the death of Kyoto Protocol, the only treaty that imposes legally binding cuts on developed countries. Others said that it is a workable “compromise” for the moment.

India's contributions have been incorporated in the text, including the International Consultation and Analysis, which is a transparency mechanism to review whether developing countries are carrying out their domestic mitigation actions.

The talks were hailed by observers as a boost for “multilateralism” in climate talks, which had waned following the negotiations in Denmark in 2009, after being marred by a great deal of mistrust between developed and developing countries.

The Cancun deal appears to have pacified the US and China, which had been at loggerheads throughout the meet on methods for monitoring and verifying actions to curtail greenhouse gases.

Other main components included promotion of efforts in poorer nations to protect their climate-friendly tropical forests, with the prospect of financial compensation from richer nations. The final text contained vague compromise language on financing, monitoring and oversight.

The meet also decided to establish a Technology Executive Committee under the treaty to analyse needs and policies for transfer to developing nations of technology for clean energy.

China, Pak ink trade deals
Pakistan and China signed economic deals worth billions during the visit of Chinese Premier Wen Jiabao to this impoverished, conflict-ridden nation in December 2010. The two nations also stressed the importance of cultural exchange by inaugurating a new centre dedicated to what Islamabad calls their “all-weather” friendship.

China is Pakistan’s closest friend in Asia, giving Islamabad military aid and technical assistance, including nuclear technology. Crucially, most Pakistanis view China as an ally that, unlike Washington, doesn’t make demands for its assistance. But Beijing is hardly left empty-handed from its ties with Pakistan, which serves as a close, cheap source of natural resources to fuel its growing economy.

During Wen’s trip, the first by a Chinese premier in five years, the two governments signed deals worth $14 billion for 36 projects in Pakistan, while businesses in the two countries agreed to deals worth another $10 billion.

The 13 agreements included a $229 million donation from China to help with reconstruction from the devastating floods Pakistan suffered earlier in 2010, as well as a $400 million soft loan for Pakistan.

Terror to be India’s focus at UNSC
Even as India re-enters the United Nations Security Council or UNSC in January 2011, it will use its seat on the apex body to focus attention and apply pressure on terrorist groups that have targeted the country in the past. Indian officials have described this as a “high priority” area for the country as it commences its two-year term as an elected non-permanent member of the Council from the Asia region.

India will “vigorously pursue” addition to the sanctions list of entities, individuals and outfits involved in acts of terrorism affecting the country. Obviously, this includes frontal organisations of Pakistan-based groups like the Laskar-e-Tayyeba and Jaish-e-Mohammed that have carried out attacks against India and Indian interests.

This would involve focusing on listing of such entities through the Al Qaeda and Taliban Sanctions Committee, which falls under the auspices of the UNSC. At present, some individuals and groups blacklisted by the United States Treasury and State Departments have not faced similar action from the UN. The UN effort is focused on cutting off funding for the entities and placing travel restrictions upon them.

At the same time, this will also involve future decisions regarding possible delisting of those associated with the Taliban as part of the political process in Afghanistan that some, like the Pakistan establishment, have preferred. However, India has objected to the Taliban in the past and this could play a role in how India addresses the Afghanistan issue on the Council.

In fact, India’s presence on the Council will also mean that India will have formal leverage to play a role in Afghanistan—a change from the last one year when, due to pressure from Pakistan, there had been efforts to reduce India’s role in that critical region. Afghanistan, of course, remains a major matter before the UNSC, although significant decision-making is undertaken by the US-led coalition forces in that country.

India will also be engaged in dealing with other global matters while on the Council, including flashpoints like Iran, North Korea and the Middle East.

India also hopes to play a constructive role in “shaping the Council’s response to the African agenda.” In fact, almost immediately after India assumes its seat, the major issue before the UNSC could be the scheduled referendum in the Sudan and the possible reconstitution of that nation.