The Economist 20010317 SEARCH RESEARCH TOOLS Economist.com Choose a research tool... advanced search » Subscribe Activate RS Monday July 16th 2007 Welcome = requires subscription My Account » Manage my newsletters LO » PRINT EDITION Print Edition March 17th 2001 Previous print editions Subscribe Bush’s Asian challenge Finding safe ways to manage America’s friendship with Japan Mar 10th 2001 Subscribe to the prin and its competition with China … More on this week's lead Mar 3rd 2001 Or buy a Web subsc article Feb 24th 2001 full access online Feb 17th 2001 Full contents Subscribe Feb 10th 2001 RSS feeds News Summaries Enlarge current cover Receive this page by More print editions and Past issues/regional covers covers » Business this week NEWS ANALYSIS The world this week POLITICS THIS WEEK Leaders BUSINESS THIS WEEK OPINION Bush’s Asian challenge Leaders A Balkan lesson in defence Letters to the editor Blogs Columns Britain off the rails Kallery Foot, mouth, farm, subsidy WORLD No excuses United States The Americas Scrap affirmative action Asia Middle East & Africa Europe Letters Britain International Country Briefings On displaced persons, China’s lobbyists, “Eurocrats”, America’s taxes, energy, European agriculture, Cities Guide Michelin, Falun Gong, censorship, SAT tests, Iraq and sanctions, Bagehot’s maths SPECIAL REPORTS BUSINESS Special Business Management Business Education The uneasy triangle That falling feeling FINANCE & ECONOMICS Asia Pulp & Paper United States Economics Focus In shreds Economics A-Z Primary colours Jewellery industry SCIENCE & TECHNOLOGY All that glitters Jesse Jackson Technology Quarterly Blessed are the tax collectors Face value BOOKS & ARTS The oracle strikes back Legal language Style Guide Mind the gap Artists of the floating world PEOPLE Correction: Dale Earnhardt Regional jets Obituary Small is beautiful Grapeshot MARKETS & DATA South African industry The national debt Minefield Weekly Indicators Imagine if it disappeared Currencies Big Mac Index Lexington Business Special Chart Gallery Stopping soft money DIVERSIONS Churning at the top Down and (almost) out in New Orleans Correspondent’s Diary Finance & Economics The Americas RESEARCH TOOLS The challenge from up north AUDIO Guyana’s closely observed election DELIVERY OPTIONS Colombia Soaring Saigon The outside world looks in E-mail Newsletters Japan’s financial markets Mobile Edition Crunch time RSS Feeds Women’s rule Screensaver America’s stockmarkets Canada The bear essentials CLASSIFIED ADS It’s tough on the left Economics focus Chile Measuring flexibility Riding the rails Economist Intelligence Unit Economist Conferences Banking for the well-off The World In The Zapatour at ground zero Mad for the mass affluent Intelligent Life CFO Argentina Britain’s Prudential Roll Call Case not closed Pond-leaping European Voice EuroFinance Conferences Economist Diaries and Asia Cash in your chips Business Gifts European economies Japan’s long goodbye France 1 Germany 0 Debate in China, within strict limits Science & Technology Indonesia Advertisement Holy war in the Spice Islands Cloning around Not so sunny in the Koreas The end of Mir Mongolia Solid-state physics The zud strikes again Superduperconductivity India Climate change Dotcom coup Getting real Books & Arts Wonderful Will Playing with politics English authors Auden’s passion New fiction from Russia Speech therapy Business and the Nazis Trading with evil How corporate bosses think Conventionally Thalidomide Good stuff Russia’s disputed transition Europe No other way Muddle in Moscow Obituary Germany The cheque isn’t in the post Ninette de Valois France Local lessons Economic Indicators Charlemagne OUTPUT, DEMAND AND JOBS Otto Schily puts the cuffs on Germany’s far right COMMODITY PRICE INDEX Ireland It’s those Brits again LIVING STANDARDS EU regulation PRICES AND WAGES We’ll do better next time Portugal Financial Indicators A flood of misery MONEY AND INTEREST RATES Italy’s voters say what matters STOCKMARKET TURNOVER Britain TRADE, EXCHANGE RATES AND BUDGETS A better way to run a railway STOCKMARKETS London Underground Ken has all the aces Emerging-Market Indicators Barely sensational WOMEN IN PARLIAMENT Agriculture FINANCIAL MARKETS The carcasses pile up Bagehot ECONOMY More sinned against than spinning The wealth effect Unemployment Hard Labour Education Operation Kangaroo The politics of fishing Battered Articles flagged with this icon are printed only in the British edition of The Economist International Congo’s new president meets the world The Palestinians Waking up to life under Sharon Zambia Glued to the throne Uganda Tarnished victory Advertisement Classified ads Sponsors' feature About sp Jobs Business / Tenders Property Jobs Business / About Economist.com | About The Economist | Media Directory | Staff Books | Advertising info | Career opportunities | Contact us Copyright © The Economist Newspaper Limited 2007. All rights reserved. Advertising Info | Legal disclaimer | Accessibility | Privacy policy | Terms & Conditions | Help Produced by = ECO PDF TEAM = Thanks xxmama Business this week Mar 15th 2001 From The Economist print edition Pursued by a bear Stockmarkets around the world tumbled. America’s high-tech Nasdaq Composite index fell below 2,000 for the first time since December 1998 as profit warnings and other bad news pushed down shares in high-tech companies. The Dow Jones Industrial Average suffered too—a disturbing new development. Europe’s and Japan’s stockmarkets also crumbled. See article: American bears America’s slowing economy claimed victims at Cisco Systems, a vast communications-equipment company. The firm announced the lay-off of up to 5,000 full-time and 3,000 temporary workers from its staff of 44,000. See article: The technology slump Ericsson, a giant telecoms-equipment maker, issued a profits warning, causing its shares to plummet 20%. Flagging handset demand also hit Motorola, America’s mobile-equipment leader. It said that 7,000 jobs would go in addition to the 11,000 announced since December. See article: The technology slump Siemens, a huge German engineering and telecoms-equipment maker, issued a profit warning. It blamed falling demand for memory chips, a big earner. The European company’s news followed similar bad tidings from America’s big chip makers. See article: The technology slump Razorfish, a once high-flying American Internet consultancy, was said to be planning more job cuts. It recently shed 20% of its staff of 1,800. MarchFirst, another web consultancy, lost three leading executives. Cable & Wireless, a formerly somnolent British telecoms company, said that it would cut 11% of its workforce—some 4,000 employees—over the next year and that profits would be below its own forecasts. The company’s shares fell 20%. Sage knew his onions Warren Buffett, dubbed the sage of Omaha for his stock-picking acumen, reclaimed his title after two bad years. The oracle’s reputation suffered when he declined to jump on the tech-stock bandwagon; it was restored with the news that his Berkshire Hathaway investment company had made profits of $3.3 billion in 2000, more than double the previous year’s earnings. See article: Face value: Warren Buffett, an oracle back in form Prudential, a British life insurer, agreed to acquire an American counterpart, American General, for $20 billion-plus. Prudential described the purchase as “transformational”. Investors thought the cost too high, transformed holdings into cash and wiped 14% off Prudential’s shares. See article: A British insurer in America Smoking and health Derek Bonham, chairman of Imperial Tobacco, will step down from the board of GlaxoSmithKline, the world’s third-largest drug company, after pressure from executives at the company. They sensed a conflict of interest between his role at a cigarette company and his non-executive directorship at a firm that makes anti-smoking aids and drugs. Antitrust regulators and private-sector lawyers agreed in principle to establish a “global competition committee”. The idea is to improve co-ordination among national competition authorities. An American bankruptcy court dismissed rival offers for Trans World Airlines leaving the way open for a $742m bid for the bankrupt airline from American Airlines. American will become the world’s largest airline and control a large slice of the home market. BFGoodrich, an American aerospace and engineering company, won a contract worth up to $3 billion to design and make the main landing gear for Airbus Industrie’s new A380 “superjumbo”. European rivals did not lose out completely; Messier Dowty, a French firm, landed a less lucrative contract to supply the nose wheel. BAE Systems, a British defence and aerospace company, made its latest attempt to sidestep competing for valuable defence contracts. The government reportedly rejected a suggestion that it hand straight to BAE a contract for a £13 billion ($19 billion) in-flight refuelling system. BAE has also tried to avoid competing with Thales, a French company, to supply aircraft carriers, and Vosper Thornycroft, a British shipbuilder, for destroyers. EM.TV, a debt-ridden German TV company, admitted that it was thinking about selling the Jim Henson Company, creator of the Muppet Show. The sale was said to be a condition of a rescue deal by Kirch Group, another German TV outfit. It is unlikely that Kermit, Miss Piggy and the rest will fetch anything like the $680m that they cost. Deutsche Telekom’s Ron Sommer and Klaus Esser, former boss of Mannesmann, joined the ranks of managers undergoing investigation by German prosecutors. Mr Esser is accused of warming to the sale of his firm to Vodafone to secure handsome payoffs for his board and himself; Mr Sommer of undervaluing his company to ensure the success of a recent share offering. Mixed economy Japan avoided slipping into recession. Its economy grew by a sluggish 0.8% at an annual rate in the fourth quarter, giving growth of 1.7% for the year to the end of December. Despite this, bankruptcy figures for the year to the end of February set a record, the current-account surplus fell 64% in January and the Nikkei 225 hit a 16-year low. See article: Japan’s battered markets Turkey announced an economic-recovery plan. The collapse of its exchange- rate policy had forced it to drop an earlier IMF-backed programme. The new package includes privatisations and banking reforms. The authorities showed they meant business next day, seizing control of Iktisat, a medium-sized bank. Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved. The world this week Mar 15th 2001 From The Economist print edition Cattle fever As foot-and-mouth disease swept Britain, the government claimed it was Reuters under control. Some cases were discovered in France. The EU banned movement of live animals from that country. Canada and the United States banned all meat imports from the EU. Argentina admitted to its first case. See article: More foot-and-mouth Clashes in Macedonia between ethnic-Albanian guerrillas and police spread across the country. Fighting in a suburb of Tetovo, the country’s second-largest city, left at least one dead and another 13 wounded, most of them policemen. Meanwhile, hundreds of Yugoslav soldiers moved, with NATO’s permission, into a buffer zone on the border with Kosovo to quell similar fighting involving ethnic Albanians there. See article: A Balkan lesson in defence Italy’s parliament was dissolved for an election on May 13th. The pollsters’ favourite: centre-right Silvio Berlusconi, over the centre-left’s Francesco Rutelli. See article: What do Italy’s voters want? French municipal elections failed to produce the “pink wave” that pollsters had expected. But no clear comfort for the centre-right either—except that the extreme right failed miserably. See article: France’s municipal voting Just before Chancellor Gerhard Schröder’s visit to Washington, German companies came up with promises of enough money, about 30% of the total needed, to complete a $2.3 billion fund to compensate people forced into slave labour by the Nazis. See article: Compensating Hitler’s slave labourers After curious manoeuvres, a parliamentary vote of no confidence in Russia’s prime minister got nowhere. President Vladimir Putin left the squabblers to themselves and took off for a mountain resort; “to polish a big speech,” said aides. The one he will give to an EU summit in Stockholm on March 23rd? See article: Wavering Putin A matter of face In a face-saving move for Japan’s embattled prime minister, Yoshiro Mori, it AP seems likely that he will stay on until he has had summit meetings with the American and Russian presidents. However, once the budget has gone through parliament, Mr Mori will probably go. See article: Japan’s prime-ministerial hopefuls India’s ruling coalition was in disarray after a number of politicians and bureaucrats were named in a bribes scandal. Bangaru Laxman resigned as president of the BJP, the main party in the coalition, but said allegations against him were “baseless”. See article: India’s “dotcom” scandal China said it hoped that the United States would abandon its plan to build a missile shield but was willing to discuss the issue to “narrow our differences”. North Korea, smarting over criticism of its government by President George Bush, called the missile plan a “blatant challenge”. See article: Bush’s Asian challenge Afghanistan’s ruling Taliban expelled Kate Clark, a BBC correspondent, for reporting criticism of the destruction of the country’s Buddhist statues. Uganda’s “no-party” Yoweri Museveni was re-elected in Uganda’s “no-party” presidential poll with nearly 70% of the vote. Most observers thought that the result largely reflected voters’ wishes, but the president’s chief challenger, Kizza Besigye, refused to accept it, claiming intimidation and fraud. See article: Museveni stays on in Uganda Burundi’s defence minister said that 200 rebels and 20 government soldiers had been killed in two weeks of battles in a suburb of Bujumbura, the capital. Southern African governments removed the chairmanship of their regional defence body from Zimbabwe’s President Robert Mugabe. In future it will be held on a rotational basis. Up to 80,000 people have been displaced by floods in Mozambique. So far, 52 people have been killed. A British charity, Christian Aid, accused Sudan’s government of systematically depopulating oil-rich areas to allow in international oil companies. The charity’s report says tens of thousands of people have been displaced. Welcoming Iran’s President Muhammad Khatami to Moscow, Russia confirmed that it would resume conventional arms sales to Iran, and also help it to complete a nuclear-power plant. The United States called on Russia not to supply advanced conventional weapons to Iran. In the past, Russian companies have been accused of helping Iran to build increasingly long-range missiles. Fearing bomb attacks in Israel, the Israeli army sealed off several West Bank towns. After reports of people dying on their way to hospital, some of the blockades began to be eased. See article: Palestinian life under Sharon Friendly fire Five American soldiers and a New Zealand major were killed in an accidental bombing by a US Air Force jet in Kuwait. President Bush retreated from a campaign promise to regulate American power plants’ carbon-dioxide emissions. He wants to increase domestic energy production. The new United States census, for 2000, showed the country’s fast-growing Latino population nearly overtaking blacks. Nearly 7m people said they belonged to more than one race. See article: The changing shape of America The Zapatist rebels, under Subcomandante Marcos, arrived in Mexico city. Reuters There they planned to stay until Congress passed a bill allowing more autonomy for Mexico’s Indians. They refused however to enter discussions with congressmen. See article: Marcos gets to Mexico city A judge in Argentina overturned the country’s amnesty laws, which had allowed members of the armed forces to escape prosecution for human-rights abuses that were committed during the years of military rule. See article: Argentina reopens the books Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved. Bush’s Asian challenge Mar 15th 2001 From The Economist print edition IF ONLY Asia’s problems were as easy to rearrange as the White House visitors book. George Bush wants to team up more closely with America’s allies, Japan and South Korea, rather than spend time, as Bill Clinton did, chasing an illusory “strategic partnership” with China. But early plans to accord a symbolic first Asian handshake to Japan’s Yoshiro Mori, as ally-in-chief in the region, fell victim to the hapless Mr Mori’s political troubles. That honour then fell last week to South Korea’s Kim Dae Jung. Next week the handshake diplomacy repeats itself as farce. Though in deeper trouble than ever, Mr Mori is to be rushed in to see Mr Bush a few steps ahead of China’s foreign-policy mandarin, Qian Qichen. That puts China in its place (see article). Up to a point. Whether as partners or competitors—as the Bush team would more accurately have it—America and China have a testy agenda to work through, from China’s troubling proliferation habits and patchy human-rights record, to America’s missile-defence plans and its arms sales to Taiwan. Rows already loom, leaving Mr Bush and China little time for small talk. But Mr Bush can at least be sure of his allies: an enfeebled Japan absorbed with its own troubles, and a South Korea preoccupied with North Korea. Anyway, weighty Japan and rising China are not alternative choices around which America can construct its Asia strategy. Relations with both will need careful tending. Despite its current fragility, Japan is America’s friend and Asia’s leading regional power: its economy is second only to America’s and it is Asia’s most generous supporter of poorer countries (including China) both near and far. This helps a lot, since, unlike Europe, Asia is not criss-crossed with stability-preserving alliances. Yet, despite their own strengthened security alliance, in a conflict that drew in America’s forces, Japan’s pacifist-sounding constitution would still have Asia’s best equipped armed forces doing little but holding America’s coat and carting away its casualties. Mr Bush needs to persuade a reluctant Japan to share more of Asia’s military burdens. It might help if he and China, which might someday be tempted to test America militarily, can get off to a reassuring start, by keeping talking, not shouting at each other. In other words, while Mr Bush’s problem with Japan will be to manage their co-operation, with China it will be to manage their competition. China does not always make that easy. Despite the changes that have so dramatically opened up its economy in recent decades, China is still, after all, a communist dictatorship. It is unhappy with the territorial status quo in the region and occasionally kicks out at it, in the South China Sea and over Taiwan, both of which it claims as its own. It wants respect as a great power, and tends to see America as the chief threat to its ambitions. Hence the importance of Mr Qian’s visit to Washington. Some long-standing irritations between the two— over human rights, trade and proliferation issues—can probably now be more safely managed on the basis of agreements Mr Clinton negotiated: the conditions for China’s accession to the World Trade Organisation; its published promises to limit nuclear and, most recently, missile exports. Implementation will be tough. With China it always is. But at least there are some agreed rules, and others, including Japan and Europe, can help America keep up the pressure for China to stick to them. There are no such accepted ground rules to help deal with the two issues that could most easily pitch America and China into a new crisis: Taiwan and Mr Bush’s plans for missile defences. The two are linked closely in China’s mind, since it worries that America’s plans for national defences could undermine China’s small nuclear deterrent, while less capable regional ones developed to help defend, say, American troops in Japan, could also someday be used to protect Taiwan from China. The issues are linked in other ways too, since China’s own behaviour—helping the missile ambitions of dodgy regimes and firing off its own missiles when it wants to intimidate Taiwan’s voters—has helped drive the search for new defences. Yet both problems offer opportunities, not just dangers, if the two sides will reach for them. One China, two problems For years China, Taiwan and America could all agree on one thing: that there is but one China. This allowed them to disagree in relative safety about what sort of China it might be: one country, two systems, as China has long proposed; or one nation, two states, as many Taiwanese might now prefer. But the ruse works less well now that Taiwan is a democracy, and its voters can reject China’s increasing insistence that the only alternative to negotiated unity is forced unity. America, committed to help Taiwan defend itself, has a dangerous balance to keep. But it could be made less dangerous. Mr Clinton leaned a little too far China’s way. His mention of the “three noes” for the first time on Chinese soil in 1998—no two Chinas, no independence for Taiwan, and no support for its membership in organisations of sovereign states—both offended Taiwan and emboldened China. Mr Bush needs to draw the line more clearly, making the three noes five: no use of force by China to settle the issue and no political deal without the support of Taiwan’s people. But at the same time he needs to temper the enthusiasm of his pro-Taiwan lobby for selling all the arms Taiwan can buy. Ultimately, Taiwan’s security depends on America’s support, rather than on any particular ship, missile or radar. As a way of exploring new possibilities for restraint on both sides, Mr Bush could usefully strike off next month’s arms list items like America’s top-of-the-line Aegis anti-missile system. Even Aegis could not defend Taiwan against a determined assault from China’s missiles, and holding back gives Mr Bush extra room to explore a new pattern of mutual restraint with China. If China will not play, he can change his mind. If America and China could avoid an early clash over Taiwan, they just might find a way to defuse the missile defence issue. Taiwan’s interest in missile defences will decline only as China’s threats to the island subside, and only China can do anything about that. But China’s concerns about its own small nuclear deterrent offer America and China the opportunity to open a stabilising new dialogue. Mr Bush is determined to explore defences. China can go on shrilly opposing them, and make good its threat to tear up the few international weapons-limiting agreements it has signed. Or it could sit down with America and work out a stable balance between any future missile defences and the future size of China’s own long-range nuclear arsenal. China this week signalled an encouraging readiness to talk first and keep its powder dry. The handshakes over, Mr Bush and Mr Qian will have plenty to talk about. Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved.