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The Geopolitical Week Ahead: February 9 - 16, 2020: This week, a number of heads of state and foreign ministers gather in Munich for the annual Security Conference. Also this week, the enforcement period begins for Phase 1 of the recently inked US-China deal – but it remains unclear how the Coronavirus will impact the timing and deadlines. Also this week, the US Trade Representative meets with his Indian counterpart to discuss a free trade deal while NATO defense ministers meet in Brussels to discuss a host of issues. Here is what we are watching around the world this week: Enforcement period for US-China Phase 1 trade deal begins

• Phase 1 of the US-China trade deal takes effect February 14, amidst concerns by the Trump administration that the coronavirus crisis could affect China’s implementation. China appears committed to following through on the pledges “to the best of its ability”– suggesting it may need to invoke the “force majeure” clause and delay some promised purchases (China’s National Offshore Oil Corporation has already cancelled some LNG contracts). − Despite Trump’s claim that the agreement is a breakthrough in US-China bilateral

relations, the deal fails to address fundamental disputes over China’s state-run economy that motivated the administration to start the trade war in the first place. Questions remain whether China will be able to meet its commitments, and what a failure to do so would mean for the durability of the deal and the prospects for Phase 2 talks.

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The Geopolitical Week Ahead

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− China has committed to purchasing an additional $200 billion of US goods and services over the next two years, an amount that will have a dramatic impact on its trade relationships with other countries as it diverts purchases to the US. The largest Chinese annual purchase of American agriculture previously was $29 billion, but this deal requires China to increase its agricultural purchases to $40 billion. The other purchases reportedly are $75 billion in manufacturing goods, $50 billion in energy, and approximately $35 billion for services.

− China has also promised to protect intellectual property of US companies and increase

market access to US financial services firms (American Express has already benefited from China’s opening in the credit card area). The US, for its part, has pledged to cut tariffs on $112 billion worth of Chinese goods from 15% to 7.5%, which leaves US tariffs on nearly $370 billion worth of Chinese goods.

− Beijing will also keep tariffs on US energy exports. (As a result of the coronavirus

epidemic, China said February 5 that it would halve additional tariffs levied against 1,717 US goods last year, with additional tariffs levied on some goods cut to 5% from 10% and others lowered to 2.5% from 5%.)

− The Trump administration has praised the tariff enforcement mechanisms that can be

put in motion if China fails to meet its commitments. In such a case, the US can trigger a 90-day adjudication process between the office of the US Trade Representative (USTR) and its Chinese counterpart, but effectively the only real remedy for disputes is to withdraw from the agreement.

USTR Lighthizer meets India’s Commerce and Industry Minister Goyal • USTR Lighthizer meets Commerce and Industry Minister Goyal in New Delhi the

second week of February in an attempt to finalize a limited trade deal with India ahead of President Trump’s expected visit February 23-26. Lighthizer’s visit comes days after Finance Minister Sitharaman’s budget presentation for FY2020-21 unexpectedly included a new 5% duty on imports of medical equipment, which has threatened to upend bilateral negotiations that have been in train since last summer.

− Indian price-caps on imports of US medical equipment have been a key issue in the

ongoing negotiations. Although the Indians have reportedly pledged flexibility on medical equipment, the Lighthizer-Goyal talks may yet fail, which would lead to an embarrassing cancellation of Trump’s visit.

− Similar to the “Phase 1” trade deal signed by the US and China, a US-India limited

deal would focus on Indian commitments to increase purchases of American

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agricultural goods (e.g. poultry, almonds, dairy) and to widen market access to US firms in specific industries (auto exports, electronics, and medical devices). In exchange, the US would restore some of India’s GSP privileges; it is not yet clear if Washington has agreed to reduce steel and aluminum tariffs or make other concessions.

− Lighthizer and Goyal are not expected to tackle other issues in the bilateral

relationship, including the possibility of US CAATSA sanctions related to India’s planned purchase of the Russian S-400 air defense system.

− In addition to signing a trade deal, Trump’s visit to India – his first as president –

would likely include a major political rally similar to the “Howdy Modi!” event he participated in with Prime Minister Modi last September in Houston.

Grand Ethiopian Renaissance Dam (GERD) talks enter final stage • The foreign and irrigation ministers of Ethiopia, Sudan, and Egypt will meet in

Washington February 12-13 to approve the final draft of the Grand Ethiopian Renaissance Dam (GERD) agreement. US Treasury Secretary Mnuchin is expected to host the meeting. The agreement lays out terms for the dam’s construction and operation, and includes contingency measures for periods of drought.

− Central to the agreement is the dam filling schedule (including the amount and the

number of years to fill it), both of which can affect fresh water supplies for Nile river basin countries downstream of Ethiopia – notably Egypt and Sudan. In US-mediated talks in January, the three countries “reaffirmed the importance of trans-boundary cooperation in the development of the Blue Nile to improve the lives of the people of Egypt, Ethiopia, and Sudan.”

− The GERD agreement is expected to be signed by the leaders of the three countries

later this month. If successful, it will reduce the prospect of conflict by securing water rights for Sudan and particularly Egypt, which relies on the Nile for up to 90% of its fresh water supply. It could also serve as a model to restart talks within the Nile Basin Initiative (NBI), a dialogue for the Nile Basin countries to develop a new framework for how Nile water rights are shared.

− Currently, Nile water rights are apportioned along guidelines set in a 1929

agreement between Egypt and Britain, and a subsequent 1959 agreement between Egypt and Sudan. Egypt suspended its participation in the NBI after six of the ten Nile Basin countries signed the “Entebbe Agreement” in 2010, which Egypt and

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Sudan view as an effort by upstream countries to restrict their access to the Nile water supply.

− The dispute between Egypt, Ethiopia, and Sudan began in 2011 when Ethiopia

announced plans to build the largest hydropower plant in Africa on the Blue Nile. Egypt claims the dam threatens its national security given its reliance on the river. Interruption to the water-flow – intentional or otherwise – could critically affect agricultural production in a country that is already below the water scarcity limit of 1,000 cubic meters per person (Egypt is currently at 570 cubic meters per person). Ethiopia argues it has a sovereign right to develop its economy and electrical grid through the dam’s construction.

− The $4.8 billion project, financed by Ethiopia, will produce 6000 megawatts of

electricity, part of which Ethiopia plans to export. Sudan views the dam as a source of cheap electricity and a check on irregular water flows that have led to devastating floods. The dam – and the issue of Nile water rights in general – has been a point of contention for years, with Egypt periodically threatening military action against Ethiopia.

Germany hosts Munich Security Conference • The Munich Security Conference (MSC) February 14-16 in Germany will focus on

“the West’s withdrawal as a regulatory actor” in the face of uncertainly about its role in an era of great power competition. Over 35 heads of states, 50 foreign ministers, and 30 defense ministers are slated to attend. North Korea will send a delegation for the first time and Iranian Foreign Minister Zarif is also expected to attend.

− Both countries are targets of American and international sanctions for their nuclear

and ballistic missile programs, as well as for other destabilizing activities (support for terrorist organizations and cyberwarfare). The US delegation will be led by Secretary of State Pompeo, Defense Secretary Esper, and House Speaker Pelosi. Following the MSC, Pompeo will visit several African and Middle Eastern countries (September 15-22) for discussions on bilateral defense cooperation and regional security.

− This year’s MSC report, “Westlessness” – addressing the destiny of the West – is

designed to prompt discussions about challenges linked to the decline of the Western-led liberal world order, and what it means for the transatlantic relationship.

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− Other topics at the MSC include Huawei’s role in building global 5G networks (and US attempts to block its participation), the prospects for salvaging the JCPOA with Iran, and the security implications of Brexit. The leaders of the “Normandy Four” countries – Ukraine, Russia, France, and Germany – may meet on the sidelines for negotiations to end the conflict in eastern Ukraine.

− Facebook CEO Mark Zuckerberg is scheduled to discuss the future of European

technology regulation with EU leaders, particularly EU tech regulator Vestager, who last week stated that EU governments are considering introducing digital tax laws on tech companies, a measure that the Trump administration opposes strongly.

NATO defense ministers’ meeting

• NATO Defense Ministers will meet February 12-13 in Brussels to regional security issues, counterterrorism (with a focus on operations against ISIS in Iraq and Syria), and ways to enhance NATO cooperation and unity. − US Defense Secretary Esper is expected to reiterate US concerns about burden-sharing

and repeat calls for NATO members to reach the alliance’s goal of spending 2% of national GDP on defense (countries are supposed to be compliant by 2024, though the Trump administration wants them to take action sooner).

− European officials are likely to raise efforts to bolster security and economic

opportunities in the Horn of Africa, Sahel, and Libya as a means to deter the flow of migrants to Europe, counter Islamist insurgencies, and tackle transnational crime.

President Ramaphosa delivers State of the Nation Address • South African President Ramaphosa will deliver the annual State of the Nation

Address (SONA) February 13 in Cape Town at the opening of parliament. Given the country’s continued economic challenges and the endemic corruption and nepotism within the ruling African National Congress (ANC) party – a hangover from the era of former President Zuma, who is on trial over corruption charges –, Ramaphosa is expected to pledge economic and political reforms to calm investors and spur growth.

− It is unclear however if he will heed Finance Minister Mboweni’s call for urgent and

deep structural reforms. These would include privatizing parts of the state-run power giant Eskom (which has burdened the country with severe power cuts and is a major risk to strained public finances), reduce barriers for small businesses, immigrants, and investors, and redirect public spending to education, poverty reduction programs, and property rights reforms.

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− Without a serious reform drive and progress addressing Eskom’s debt and power

cuts, Moody’s may downgrade the country’s sovereign debt rating to junk (it is the only major agency that is yet to do so).

− Ahead of Ramaphosa’s address, South Africa’s main business lobby, labor unions and

other social partners are seeking to reach a framework agreement to rescue Eskom from its $31 billion debt-burden. The utility’s current debt is guaranteed by the government but the private sector is unlikely to risk more capital unless Eskom is restructured.

Airplane Reading

Munich Security Conference, "Munich Security Report 2020: Westlessness" In advance of this year’s conference, organizers of the Munich Security Conference released a report asking if the world is becoming less Western. And if so, what does that mean for the world?

Center for Strategic & International Studies: "Mind the Gaps: Russian Information in the United Kingdom" "Risks to the Japan-China 'Tactical Detente'" “"Russian Influence Operation in Germany and Their Effect" CSIS is doing a series of studies exploring the impact of Russian and Chinese

information operations in democratic states. Here are the first three focused on the UK, Japan, and Germany.

Washington Post, "Bernie Sanders's Foreign Policy is a Risk for Democrats Against

Trump" For decades, the Vermont senator has bucked the foreign policy establishment by

championing a foreign policy aligned with socialist regimes around the world. While the other apparent front-runner in the race are… running on a familiar, center-left foreign policy approach, Sanders’s vision would represent a stark departure from the platform Democrats have embraced since the end of the Cold War.

Kevin Rudd/Project Syndicate, "Has the 'Great Decoupling' Gone Viral?" The former Australian Prime Minister argues it is common to hear arguments warning of

a bifurcation of the global economy into mutually exclusive American and Chinese spheres of influence. But, 18 months after the first shots in the Sino-American trade war were fired, the situation is more complicated than that, owing not just to economic realities and the new coronavirus outbreak, but also each country's political priorities.

Center for European Policy Analysis, "Macron's Visit to Warsaw"

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French President Macron visited Warsaw this week. Here is how a Franco-Polish reset can strengthen European and Transatlantic relationships.

Peterson Institute for International Economics, "Trump's steel and aluminum

tariffs are cascading out of control" This study argues President Trump's move in late January to extend his previously imposed "national security" tariffs on steel was actually quite significant because for the first time, these new tariffs were placed to help an industry suffering because of President Trump’s previous tariffs.

Foreign Affairs, “The Digital Dictators, How Technology Strengthens Autocracy” Foreign Affairs breaks down how authoritarian regimes use technological innovations to tighten their grip on power, arguing that the US must take a leading role in AI to establish the rules of the road for the use of technology in a way that is consistent with democratic values.

The New York Times, “On a Greek Island, Migrants and Locals Are Wary Neighbors”

The New York Times provides a glimpse inside the refugee villages on the Greek island of Samos, and highlights the role of the government, locals and migrants in reducing tensions between the two groups.

Axios, "Bloomberg's Big Bet on the power of Money" Axios does a deep dive into the extraordinary campaign former New York Mayor Mike Bloomberg has launched for president – a campaign where he has already spent in one month more money than all his competitors combined and where he is expected to spend at least $600 million on advertising nationally.

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