Category Archives: Global Economy

Google’s Holiday Gift To China

There are only three shopping days remaining until Christmas Eve! Have you purchased and wrapped all of the presents on your Gift List?

Some of us, of course, confront more difficult challenges than others in choosing appropriate gifts for recipients. But imagine how tough it must be to select a gift for the world’s largest communist nation!

In a sense, that’s exactly what Google may have delivered for the government of China. On December 13th, the internet services giant announced that it will open a center for basic Artificial Intelligence research in Beijing.

So why is this a gift? Because Google’s services, like Facebook’s, are banned in China. And on December 18th, just five days after Google’s announcement, a Chinese official confirmed the ban by declaring:

That’s a question maybe in many people’s minds, why Google, why Facebook are not yet working and operating in China. If they want to come back, we welcome (them). The condition is that they have to abide by Chinese law and regulations. That is the bottom line. And also that they would not do any harm to Chinese national security and national consumers’ interests.

It’s possible, of course, that Google’s decision will help it gain access to the Chinese market in 2018. If that occurs, its AI Center may be perceived in retrospect as a profitable investment in a new business market.

But what if the Chinese government doesn’t open its market to Google next year? Perhaps the center’s Chinese technology specialists will provide valuable developmental expertise to the American firm. And perhaps those same specialists will learn just as much from Google.

At the moment, though, Google has made a commitment to open an advanced research center in a nation that bans its services from its entire domestic economy. Unless Google’s commitment eventually “pays off” in some substantive manner, it isn’t very difficult to characterize its decision as a gift.

Goodbye, United States

Much has been made of the United States’ isolationist position regarding climate change at the recent G-20 summit. At the gathering of the national governments of the twenty largest economies on earth, nineteen spurned the United States and endorsed the Paris Accord.

Nevertheless, that was solely a political event. What about the business community? Will private corporations throughout the worlds’ leading economies spurn the U.S. market as well?

The jury is still out on that question, but a few days ago, one global financial organization offered an implicit response. Manulife, the insurance company and financial services organization that is headquartered in Canada, indicated that it is interested in spinning off its John Hancock subsidiary.

Manulife acquired the Boston-based John Hancock in 2004 to gain access to the United States financial services market. After thirteen years of disappointing returns, it is apparently considering a withdrawal from the U.S. market to focus on more promising opportunities elsewhere.

Where? They haven’t publicly declared their intentions. But Dow Jones reported that “the Canadian insurer is instead focusing on expanding in Asia.”

Dow Jones also reported that the spinoff transaction is being considered after “some months of work by investment bank Morgan Stanley to sell pieces or all of the John Hancock unit.” Apparently, these assets failed to prove attractive to potential buyers.

The Manulife story raises the possibility that global investors and businesses are no longer flocking to the shores of the United States to purchase its corporate assets. Is it possible that the current political environment in Washington DC is contributing to their disinterest?

NAFTA’s World Cup

After Presidential candidate Donald Trump repeatedly told the American people that the North American Free Trade Agreement is “the single worst trade deal ever approved in this country,” we might have presumed that it would be well on its way to extinction by now.

But guess what? NAFTA is alive! And it appears to be overwhelming all global competitors in a particular international endeavor.

That endeavor is the World Cup of global football, known as soccer in the United States. Apparently, the sport’s international governing body has placed its 2026 quadrennial championship tournament up for bid. And earlier this month, NAFTA partners Canada, Mexico, and the United States instantly became the overwhelming favorites to win the bid when they revealed their plan to jointly host the games.

So why is the soccer championship series such a popular target for NAFTA cooperation, when other economic targets — such as the automobile industry, for instance — generate such hostility between nations? One possible reason is that sovereign countries like the United States can easily produce quality automobiles without help from others, but cannot easily host World Cup tournaments on their own.

Naturally, critics may note that the United States did indeed host its own World Cup tournament more than two decades ago. But with the field of participating teams soon to expand to 48 competitors, many more host cities will be needed in 2026. And relatively few cities in the United States can match metropolises like Toronto, Vancouver and Mexico City for cosmopolitan glamour and passion for The Beautiful Game.

Is North America the only region where such an approach is beneficial? Could the bitter debates that now divide the European Union, for instance, be calmed by a pan-European World Cup? Perhaps any sporting event that is too large to be hosted by a single nation could help promote a spirit of globalism by adopting a multinational hosting strategy.

Unfortunately, it may be a very long time before the European Union can even consider such a venture. And thus, at the moment, the three nations of NAFTA possess a golden opportunity to lead the way.