I am hugely reassured to hear that, in this era of global crisis, British diplomats are focusing on the really important issues:

An agreement has been signed to bring two giant pandas to Edinburgh Zoo, the first to live in the UK for 17 years.

The deal was signed at Lancaster House in London by the Royal Zoological Society of Scotland and the Chinese Wildlife Conservation Association.

It was witnessed by Deputy Prime Minister Nick Clegg and Vice Premier of China Li Keqiang.

Tian Tian and Yangguang, a breeding pair born in 2003, will be under the custodianship of the zoo society.

The project represents the culmination of five years of political and diplomatic negotiation at the highest level and it is anticipated the giant pandas will arrive in their new home as soon as a date is agreed.

The Chinese government is said to charge around $2m a year to rent a pair of pandas. Apparently though, “the Giant Panda Project will be funded through sponsorship, offering unparalleled opportunities in terms of international corporate, commercial and diplomatic relationships between China and the UK.”

Happy days.

First there was BRICs. Then came CIVETS. Then we were presented with BASIC, CRIM, BRICK, CEMENT, BEM, N11 and the 7% Club. Now barely a week goes by before someone tries to float another ‘useful’ investment acronym.

Behind the dense forest of exotic acronyms is a simple fact: the catch-all classification ‘emerging markets’ has lost much of its usefulness. It was invented in the 1980s, by World Bank economist Antoine van Agtmael, to replace the now-defunct acronym LEDCs (or ‘less economically developed countries’) by which the West had until then blithely referred to the rest of the world. The term ‘emerging markets’ served as a useful way to refer to fast-growing although crisis-prone markets like Russia, China and Mexico.

Within the term ‘emerging markets’ was quite a 1980s-assumption: these markets would follow the development route laid down by ‘developed’ economies, until they arrived in the neo-liberal end point reached by the US, the UK and other western countries. And the phrase also came to have strong associations with the currency and debt crises of the 1980s and 1990s.

But things have changed. The bigger emerging market countries have now overtaken the weaker developed markets, not just in total GDP, but also in the pricing they pay on their sovereign debt. Emerging market countries like China and Russia have accumulated trillions of dollars in foreign exchange reserves, and are now the main creditors of western sovereigns. In the 1980s, emerging markets depended on the west for capital inflows. Now the situation is reversed, and the US and EU depend on China to buy their sovereign debt.

It was partly to recognize this shift in economic power to emerging markets that Goldman Sachs economist Jim O’Neill introduced the now-famous acronym BRICs (Brazil, Russia, India and China) in 2001. It was a runaway success. A decade on, and MSCI has launched a BRIC index, there are several BRIC-focused funds, BRIC-focused blogs, BRIC conferences, and the leaders of the BRIC countries even held their own BRIC summit in 2009. 

However, the success of the acronym, and the increase in capital flows to BRIC markets that followed, quickly led to questions and criticisms of the BRIC tag. In 2008, for example, when Russia’s economy slid into recession following the war with Georgia and the Credit Crunch, some analysts suggested Russia should be dropped from the grouping. This suggestion was sufficiently alarming to Russia that it organized not one but two BRIC summits in Russia in 2009. . (more…)

Two years ago, Georgian forces shelled the capital of the breakaway region of South Ossetia hitting the base of Russian peacekeepers as well as civilian housing. Russia responded immediately with a massive ground and air assault and in five days inflicted a heavy defeat on its tiny neighbour, occupying a band of Georgian territory into the bargain.

The conflict had several immediate results.

Already fraught relations between Moscow and Tbilisi plunged to new depths and diplomatic relations were severed.

Russia and three other countries recognised the independence of the breakaway Georgian regions of South Ossetia and Abkhazia.

And relations between Russia and the West – the US and the EU – deteriorated to their worst level since the collapse of the USSR – there was even talk of a new Cold War from western politicians.

The Cold War analogies led some commentators to argue Russian foreign policy had taken a decisive anti-western turn and things could and/or should never be the same again

Two years later, the one thing that seems unlikely to ever be the same again is the shape and size of Georgia. If recognition from Russia was not enough, the recent International Court of Justice opinion that Kosovo’s unilateral declaration of independence was not against international law, makes it even less probable Tibilsi could regain control of its lost regions. (more…)

- Over at The Diplomat, Thomas Wright explores how China’s self-confidence in initial relations with the Obama administration may prove the “catalyst for a more competitive – and geopolitically savvy – US multilateralism.” Der Spiegel, meanwhile, highlights the extent of Chinese soft power, while Charles Grant sees a chance to enhance the EU’s relations with the emerging superpower.

- Focusing on Chinese domestic society, the Economist highlights the growing activism and changing dynamics of the country’s vast labour force, with its associated implications for the global economy. Analysis over at VoxEU, meanwhile, assesses evidence of a potential Chinese property bubble.

- Elsewhere, with David Cameron back from his visit to India, Adrian Hamilton and Geoffrey Wheatcroft offer their views on his approach to international affairs. Kim Sengupta meanwhile remarks that the new Prime Minister “has started his foreign policy journey with a series of very deliberate steps”.

- Finally, Sir John Sulston talks to the New Scientist about the implications of global population change for sustainable development – the subject of a new initiative that he’s leading for The Royal Society.  Prospect Magazine‘s blog, meanwhile, highlights favourable demographic trends in the developing world, while figures this week confirm that the EU’s population has now passed the 500 million mark.

- Writing in the The New York Review of Books, Paul Krugman and Robin Wells highlight the importance of historical perspective in understanding the financial crisis. Experience, they suggest, shows that a failure to implement significant post-crisis reforms leads to “a resurgence of financial folly, which always flourishes given a chance.”

Michael Pomerleano explains the need for a new institution with the necessary legitimacy to provide global financial stability, arguing that “[n]ational public policies can no longer be independent of global collective-action problems”. Amartya Sen, meanwhile, explores the continuing significance of the 18^th Century ideas of Adam Smith to contemporary global economic troubles.

- Elsewhere, in an interview with The Christian Science Monitor, Henry Kissinger offers his views on Obama’s recent nuclear initiatives, US-China relations, and coherence among the BRICs. Over at World Politics Review, Nikolas Gvosdev reports on the lack of support forthcoming among BRIC countries for strict sanctions on Iran and highlights some of the other options open to the US administration in dealing with Tehran. Jonathan Holslag, meanwhile, assesses China’s recent diplomatic “charm offensive”, concluding that this will yield little over the long-term if words aren’t backed up by meaningful action.

- Finally, two television debates and nearly three weeks into the British general election campaign, David Marquand explains why this is “a moment for careful historical reconnaissance”. Assessing the rise of Nick Clegg and the Liberal Democrats, he explores comparisons with the three-party politics of Britain in the early 1920s. The FT’s Philip Stephens, meanwhile, assesses the impact of the debates and the implications of a hung parliament for the British electoral system.

- With Moscow still smouldering in the wake of the metro bombings, Sam Greene assesses how the Kremlin might respond, suggesting that recourse to further authoritarianism is unlikely to prove productive. The Economist, meanwhile, highlights the need for greater awareness across Russia of the fragile situation in the north Caucasus and notes the lack of a measured political discourse in response to the attacks.

- Francis Fukuyama talks to former US Treasury Secretary, Henry Paulson, about China’s approach to the financial crisis. Daniel Drezner, meanwhile, reports on the discontent of leading G20 countries at Beijing’s apparent insouciance over implementing agreed economic reforms.  Elsewhere, Patrick Messerlin charts the actions of the emerging G20 powers across economics, trade, and climate – suggesting that while much progress has been made, they still require leadership from OECD countries. Oxfam’s From Poverty to Power blog, meanwhile, offers a progress update on the financial transaction tax.

- Elsewhere, Der Spiegel interviews the man that headed Obama’s transition team, John Podesta, who offers his thoughts on the healthcare debate, the Washington political process, and Obama’s engagement with the rest of the world. The FT’s Edward Luce and Daniel Dombey, meanwhile, assess the centralised nature of foreign policy decision-making in the Obama White House – highlighting the emphasis placed on improving the inter-agency process compared with the Bush years, but also the lack of a grand strategic thinker to which the President can regularly turn (à la Kissinger).

- Finally, Prospect Magazine has an interesting article on “seasteading” – described as involving “a future in which the high seas will be increasingly commandeered for unconventional purposes” (such as medical tourism, gambling, sanctuaries for minority groups etc.) – and the opportunity it may present for the creation of “micronations” populated by libertarian-minded groups.

- The FT has news that London’s position as the dominant global financial hub is slipping, with the UK capital now tied with New York for top spot in the latest rankings. Elsewhere Barry Eichengreen and Kevin H. O’Rourke examine the latest economic data comparing the present crisis with the Great Depression across a range of indicators (including global output, world trade, and equity markets). Robert Shiller, meanwhile, explains the difficulties of using past experience to predict the course of the current crisis.

- European Geostrategy suggests that EU security and defence policy is like a jazz band and explains why a White Paper providing a “grand strategy” is needed. EUobserver, meanwhile, has news on the emerging shape of the European diplomatic service – its structure and staffing – as member states gear up to secure the important EEAS secretary general post.

- Elsewhere, Constanze Stelzenmüller takes an in-depth look at the travails of German security policy, offering insights into how it might evolve. Highlighting the lack of strategy, she argues that “fundamental decisions regarding German security policy have been repeatedly forced into the Procrustean bed of moral necessity, domestic imperatives, or the demands of external alliances.”

- Finally, over at openDemocracy, Andy Yee explores the “hedgehog’s dilemma” between China and the West, highlighting a gradual acceptance of different core values. TIME magazine, meanwhile, assesses the slow progress toward democracy in Hong Kong and the possible wider implications from Beijing’s perspective.

Yale’s Jeffrey Garten thinks America needs to face up to a key fact: it doesn’t have the leverage to deal with China on its own. So, he says, it needs to partner up with others:

It doesn’t take a genius to see that America needs more help in dealing with China. That’s why we must shift from what is primarily a bilateral and at times unilateral, pound-the-chest approach to one involving more support from other key countries, many of whom are also having big problems with China, including the European Union and India.

This enhanced multilateralism must be based on at least two premises that are hard to discern in U.S. policy today. The first is that China is not just bursting on the global stage, but rather is changing the world as it does so. Put another way, we can forget about trying to force China into conforming to Western rules and institutions without allowing the country a big voice in reshaping those arrangements to serve its own needs. Secondly, the U.S. and its partners are better off compromising with China on these arrangements so long as they have rules and enforcement mechanisms. The key goal must be to encourage China to obey laws and regulations that are agreed upon.

Not sure I’m wholly convinced that Van Rompuy and his travelling circus are the missing link in getting China to be a constructive world citizen – but hey, we can dream.

There are disturbing reports floating around today that the Chinese government has “ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee.”

The FT, and the city analysts it has spoken to, are speculating that the move may be in retaliation for US arms sales to Taiwan and Obama’s decision to meet the Dalai Lama.

In other cheery news, Iran is promising the ‘demise’ of the liberal capitalist system. But that’s supposed to be tomorrow.

One of the most significant developments at Copenhagen was the emergence of the BASIC coalition – Brazil, South Africa, India and China – which negotiated the final details of the Copenhagen Accord with the United States.

My understanding is that BASIC was formed at China’s instigation. China agreed a Memorandum of Understanding with India in October 2009, committing the two countries to working closely together at Copenhagen. It then invited Brazil and South Africa to join the party, at a meeting in Beijing a week before Copenhagen started. Sudan was also invited to represent the G77.

According to Jairam Ramesh, India’s environment minister, the four countries decided that they’d walk out of Copenhagen together if necessary:

We will not exit in isolation. We will co-ordinate our exit if any of our non-negotiable terms is violated. Our entry and exit will be collective.

During Copenhagen, China worked extremely closely with India, with the two delegations meeting up to six times a day. It also engaged intensively with the other members of BASIC. In the final meeting with the Americans, China agreed to accept a limited international monitoring of its targets (India claims to have pushed China on this point).

The decision was also taken to drop language, setting a deadline for turning the Copenhagen Accord into a legally binding agreement. South Africa and Brazil both appear to have been unhappy with this decision.

Since Copenhagen, the BASIC countries have met once and have agreed to continue to get together on a regular basis. They want the Copenhagen Accord to set the stage for a ‘twin track’ agreement – with tough and binding targets for developed countries through Kyoto #2 and voluntary commitments for themselves under a new agreement.

No-one really knows how the US would fit into this picture. It is also increasingly clear that they and the US left Copenhagen with quite different impressions of what will happen next. The US believes that large emerging economies now have “very explicit activities and obligations”. I don’t think they believe they are committed to anything significant, beyond what they agreed at Bali or put on the table on a voluntary basis before Copenhagen started. (more…)

- With President Obama embarking on his visit to Asia, John Plender examines the nature of China’s challenge to US dominance. Cheng Li and Jordan Lee suggest what the President has to do in striking the right tone for US-China relations going forward. Kishore Mahubani, meanwhile, views Asia’s rise through the prism of Francis Fukuyama’s End of History twenty years on.

- In a wide-ranging interview with Der Spiegel, Russian President, Dmitry Medvedev talks about Stalin, democracy and the rule of law, his relationship with Vladimir Putin, and ongoing Western entanglement in Afghanistan.

- Elsewhere, Stefan Theil argues that, aided by the financial crisis, the EU’s global standing is on the rise:

“The EU’s modus operandi — sharing power, hammering out agreements, resolving conflict by endless committee — can be boring and even frustrating to watch”, he argues, “[b]ut in an increasingly networked and interdependent world, it has become the global standard.”

Julian Priestley, meanwhile, suggests four conditions if the EU is to get the most from its “institutional architecture”.

- Finally, writing in the New Yorker, Seymour Hersh explores US concerns about the safety of Pakistan’s nuclear arsenal amid growing instability.

On climate, campaigners are unbelievably craven when it comes to the big emerging economies. China, in particular, gets treated with kid gloves. Within NGO circles, it is now more or less obligatory to kowtow to Beijing’s domestic track record on clean energy. Which is all very well – but I see absolutely no signs of Chinese leadership internationally (although its track record in the G20 shows how quickly it can pull out its finger when hard economic issues are at stake).

Weakness on China is especially egregious now that the country is above average global per capita emissions. Campaigners should be demanding that China ties itself to a date when its emissions will peak and then to commits to deep cuts by mid-century. (Armed with such a commitment, of course, China itself could then begin to turn the heat up on America – rather than allowing the US congress to bleat about US competitiveness.)

A failure to ask hard questions of China is bad for lower income countries. Not only will they suffer worst as the climate changes, they are going to wake up in ten years’ time to find that most of the global carbon budget for 2 degrees has been spent. Their interests are being sacrificed on the altar of G77 solidarity, with the global NGO community helping sharpen the knife.

The problem is similar, if less extreme, for the world’s other rising powers. Their per capita emissions may be lower than China’s and NGOs less terrified of offending them. But still, a country like India has 17% of the world’s population – which gives it quite a stake in our collective future. It is also massively vulnerable to a changing climate (especially as a lack of water disrupts food production).

But yet India is notoriously rubbish at international climate talks. So all the more credit to Malini Mehra, from the Center for Social Markets, for her persistent (and unusual) attempts to shine a light on India’s failings.

“In recent months, India has sought to challenge its image overseas, and in growing quarters at home, as recalcitrant and obstructionist on climate change,” she writes in her latest critique.

“[But] in a showdown this week with the old guard, the reformist environment minister, Jairam Ramesh, had to tone down his climate advice to India’s Prime Minister, Dr. Manmohan Singh. Political correctness won, but the loser was India’s climate security.”

Here’s the rest of her analysis: (more…)

As the spotlight shifts from the UN General Assembly and world leaders converge on Pittsburgh for the G20, there’s been much debate about the prospects for success and the competing agendas of member countries.

- The core negotiations seem set to finalise agreement over a “framework for balanced and sustainable growth” – particularly critical from US and Chinese perspectives – that seeks to give the IMF a greater reporting role in policing global imbalances. The FT’s Money Supply blog offers a sceptical comparison of the leaked draft agreement with the IMF’s current role.

- As to the Europeans: Gordon Brown seems to be adopting a broader focus, calling in an NYT op-ed for “a new system of governance” to form the “next common economic goal”. (He also announced that UK Business Minister Shriti Vadera would be going on secondment to the South Korean government to help develop proposals on global financial architecture ahead of their G20 presidency next year.) For Angela Merkel, the “most important subject” is financial regulation; she argues that “we must not search for substitute issues”; and for Sarkozy too, the top priorities look to be bankers’ bonuses and agreement over capital requirements for banks.

- Trade and protectionism are sure to form another important aspect of negotiations, particularly for China and India. VoxEU takes an interesting look at trends in world trade since the November 2008 Washington Summit,  highlighting how G20 states’ oft-proclaimed commitment against protectionism has been broken by member governments approximately once every three days since last year’s commitments. “No other statistic”, Simon Evenett argues, “better demonstrates the paucity of global leadership on contemporary protectionism”.

- Robert Zoellick, President of the World Bank, calls for the summit to focus on the world’s developing economies, highlighting the positive contribution they can make to the health of the global economy. Pittsburgh, he argues, can mark the advent of a more “responsible globalisation” founded on “multiple poles of growth”. Brazilian President, Luiz Inácio Lula da Silva, meanwhile, presents his take on the G20 grouping in the LA Times.

- Around the think tanks, finally: Brookings has an in-depth report focusing on some of the broader implications of the G20 agenda, from the protectionism issue to African and Latin American perspectives, as well as assessing the G20’s approach to climate change. The Carnegie Endowment, meanwhile, has an interesting take on Saudi Arabia’s approach to the summit, given its increasing exposure to instability in the financial markets and vulnerability to shifts in oil and food prices.

Elsewhere, Chatham House has analysis of some of the key short-term economic indicators, as well as long-term GDP forecasts – arguing that it is still to early too be coordinating exit strategies. The Canadian-based Centre for International Governance Innovation, meanwhile, takes a comprehensive look at some of the challenges facing the G20 as a forum for global economic governance, with contributions from policymakers and academics alike.

- Writing in the New Yorker, Malcolm Gladwell explains how “the roots of Wall Street’s crisis were not structural or cognitive so much as they were psychological”. Overconfidence among bankers, he suggests, in addition to the more familiar arguments about poor regulation and simple incompetence, played a significant role in the financial crisis.

- The Prospect blog, meanwhile, discusses how “the Indian Ocean is emerging as a focus for Chinese logistical and naval expansion” – something being felt acutely in Washington and New Delhi. Staying with the US and India, WPR takes an interesting look at Hillary Clinton’s recent trip to South Asia.

- Elsewhere, the Channel 4 News blog has more details about the UK’s upcoming Iraq War Inquiry – suggesting that it is due to hear “mountains of evidence” and, given the expansive nature of its remit, is unlikely to have lawyers present.

- Finally, Adam Roberts has an interesting piece in The World Today assessing the current state of the Geneva Conventions. Sixty years later, he ponders, are the laws of war still relevant to the changing nature of conflict?

US climate envoy, Todd Stern has tried to clarify exactly what the Obama administration wants from China on climate at Copenhagen (see post from Leo and me on the confusing signals the US has been sending out).

So here it is:

• “Very considerable” reductions on China’s business as usual emissions.
• These reductions to be binding, transparently measured and verifiable.
• No absolute emissions reductions but (preferably at least) a designated year when China’s emissions should peak.
• China’s commitment to be consistent with the world stabilising its emissions at around 450 ppm (“we don’t know whether it’s 445 or 460 or… but in that general range”).
• The package to be backed up by carbon offsets from the US to China – but these offsets should have “real environmental integrity” – and technology cooperation.

Obvious questions to ask Stern -

1. Do you believe that President Obama’s domestic commitments on climate are consistent with a 450ppm stabilization target?
2. Will the United States be pushing for a 450ppm target to be enshrined in the Copenhagen agreement?
3. When does the United States think Chinese emissions should peak to meet 450ppm?
4. When does the United States expect global emissions to peak?