Tag Archives: Amazon

Can’t Touch This! America FANG v. China BATX

The Economist magazine has considered four measures of Chinese corporate unfairness, using data from Morgan Stanley and Bloomberg. The first is the weight of China in the foreign sales that American firms bring in. It stands at 15%; if it was in line with China’s share of world GDP, it would be 20%. This shortfall amounts to a small 1% of American firms’ global sales (both foreign and domestic). America Inc is similarly underweight in the rest of Asia, but there is much less fighting talk about South Korea or Japan.

The second test is whether there is parity in the commercial relationship. Firms based in China make sales to America almost exclusively through goods exports, which were worth $506bn last year. American companies make their sales to China both through exports and through their subsidiaries there, which together delivered about $450bn-500bn in revenue. Again, there is not much of a gap. American firms’ aggregate market share in China, of 6%, is almost double Chinese firms’ share in America, based on the sales of all listed firms.

The third yardstick is whether American firms underperform other multinationals and local firms. In some cases failure is not China-specific. Walmart has had a tough time in China, but has also struggled in Brazil and Britain. Uber sold out to a competitor in China, but has done the same in South-East Asia. American consumer and industrial blue chips are typically of a similar scale in China to their nearest rivals. Thus the sales of Boeing and Airbus, Nike and Adidas, and General Electric and Siemens are all broadly in line with each other. Where America has a comparative advantage—tech—it leads (Facebook, Amazon, Netflix, Google (FANG)). Over half of USA Inc’s sales in China are from tech firms, led by Apple, Intel and Qualcomm. Overall, American firms outperform. For the top 50 that reveal data, sales in China have risen at a compound annual rate of 12% since 2012. That is higher than local firms (9%) and European ones (5%).

The final measure is whether American firms are shut out of some sectors. This is important as China shifts towards services and as the smartphone market, a goldmine, matures. The answer is clearly “yes”. Alphabet, Facebook and Netflix are nowhere, and Wall Street firms are all but excluded from the mainland. Chinese firms, however, can make a similar complaint. The market share of all foreign firms (incuding China’s Baidu, Alibaba,Tencent and Xiaomi popularly called BATX) in Silicon Valley’s software and internet activities, and on Wall Street, is probably below 20%. America’s national-security rules, thickets of regulation, lobbying culture and political climate make it inconceivable that a Chinese firm could play a big role in the internet or in finance there.

Far-sighted bosses know their stance on China must reflect a balanced assessment, not a delusional vision of globalisation in which anything less than a triumph is considered a travesty. But their voices are being drowned out. The shift of the business establishment to hawkishness on China has probably emboldened the White House and also led the Treasury and Department of Commerce to be more combative. Most big firms are blasé about tariffs; they can pass on the cost to clients. Few export lots to China. But soon China will run out of American imports to subject to retaliatory tariffs; in a tit-for-tar war, beating up American firms’ Chinese subsidiaries is a logical next step. USA Inc’s Sino-strop would then end up enabling the opposite of what it wants.

Excerpts from Raging Against Beijing, Economist,  June 30, 2018, at 58

Policing the Amazon Jungle

Transamazon Highway, image from wikipedia

The small town of Apui sits at the new frontline of Brazil’s fight against advancing deforestation…  The home of 21,000 people in southern Amazonas state was long protected by its remote location from illegal loggers, ranchers and farmers who clear the forest.  Now those who would destroy the jungle are moving in from bordering states, following the Transamazon Highway, which is little more than a red-dirt track in this part of the rainforest.

First come the loggers, who illegally extract valued lumber sold in far-off cities. The cattle ranchers follow, burning the forest to clear land and plant green pasture that rapidly grows in the tropical heat and rain. After the pasture is worn out, soy farmers arrive, planting grain on immense tracts of land…

Roughly 7,989 square kilometres (3,085 square miles) of forest were destroyed in 2016, a 29 percent increase from the previous year and up from a low of 4,571 square kilometers in 2012, according to the PRODES satellite monitoring system.

Then there are the fires.  Apui ranked first in the country for forest fires in the first week of August 2017, according to the ministry.

At their best the environmental agents can slow but not stop the destruction. They raid illegal logging camps, levy large fines that are rarely collected and confiscate chainsaws to temporarily impede the cutting.  Costa acknowledges that the roughly 1,300 environmental field agents who police a jungle area the size of western Europe have a difficult task, at the very least.

Excerpt from Brazil’s agents of the Amazon fighting loggers, fires to stop deforestation, Reuters, Aug. 20, 2017

Reversing Deforestation in the Amazon

amazon deforestation.  Image from wikipedia

Brazilian policymakers can take some of the credit for a dramatic slowdown in the deforestation rate in the Brazilian Amazon, say experts – but that’s not the whole story.  In November Brazil (2012) announced deforestation rates in the Amazon declined 27 percent from August 2011 to July 2012, reaching the lowest rates ever recorded for the fourth consecutive year.  According to Brazil’s National Institute for Space Research (INPE), 4656 square kilometres of Amazon rainforest were cleared over the twelve months, compared with 27,772 square kilometres in 2004.

Brazil’s government says this represents a 76 percent reduction since 2004 – coming close to the country’s commitment to reduce deforestation in the Amazon region 80 percent by 2020.  It has attributed the dramatic results to a package of policies known as PPCDAm (The Action Plan for Prevention and Control of Legal Amazon Deforestation) that were first implemented in 2004.

PPCDAm comprises more than 200 initiatives across 14 ministries that together aim to reduce deforestation in the Amazon…Over the last decade, the country has established new protected areas, indigenous lands and sustainable use areas covering 709,000 square kilometres.  This has decreased both deforestation and the incidence of fires – and crucially, more of them than previously are located near particularly threatened areas, making them more effective.We know every day where deforestation is going on in the Amazon…from detection to having people in the field stopping illegal loggers takes just five days….Brazil’s space agency, remote sensing centre, and law enforcement agencies collaborate to detect and precisely locate deforestation and forest degradation, and to apprehend perpetrators.  From detection to having people in the field stopping illegal loggers takes just five days….  Last year [Brazil]  confiscated 110 chainsaws, nine bulldozers, and 329 trucks…

Jorge Hargrave – who  worked with Wunder on the UNEP report (pdf) – and colleagues assessed the effectiveness of the PPPDAm policies.  They found that these policies were responsible for curbing deforestation – and that the command-and-control policies, particularly the issuance of environmental fines, had the most impact.  The government’s decision to focus on 36 specific municipalities where deforestation was most intense was also very effective, they found, as was the cross sector coordination and high-level political support for the program.

However, Hargrave also cautioned against over-confidence about the recent encouraging results. “It’s not clear that if the government changes or the policy changes, deforestation can’t go up again,” he said.  “In addition, the lack of land tenure security in the region was consistently identified as a key problem and the biggest bottleneck to further progress.”

In another recent study, Clarissa Costalonga e Gandour and colleagues from the Climate Policy Initiative showed that environmental policies are important – but are only part of the deforestation-reduction story.  The study found that agricultural prices – particularly meat and soybeans – had a significant impact on deforestation as well…The study makes special mention of a 2008 policy that made rural credit for agricultural activities in the Amazon conditional on proof of compliance with environmental regulations – with exceptions for smallholders.

Excerpts, KATE EVANS, How much credit can Brazil take for slowing Amazon deforestation – and how low can it go?, CIFOR, Jan. 15, 2013

Right to Participate in Decisionmaking: the indigenous peoples of Peru

Peru’s official human rights ombudsman, Defender of the People Eduardo Vega, is set to convene the first the first “prior consultation” with Amazonian indigenous peoples on oil development in their territory, under terms of a new law passed earlier this year setting terms for the process. The consultation concerns a planned new round of oil contracts planned for Bloc 1AB, currently held by Argentine firm Pluspetrol, in the watersheds of the Pastaza, Corrientes and Tigre rivers in the northeast of Loreto region. The Regional Organisation of Indigenous Peoples of the East (ORPIO), with an office in the city of Iquitos, it to represent the impacted indigenous peoples. Vega pledged the process would be carried out “with the utmost clarity so that rights of the indigenous peoples will be respected and the same process can serve for other consultations that will subsequently be carried out.”  But after years of conflict over resource extraction in the region and accusations of broken promises by the government, many indigenous residents remain skeptical about the process.

Peru: first “prior consultations” on Amazon oil development, WW4 Report, Sept. 15, 2012

Resisting Dams: Amazon Rainforest, Brazil

Two indigenous tribes in Brazil’s Amazon rainforest are holding hostage three engineers working for the company building the contested Belo Monte dam, the latest trouble to hit the $13 billion project.  The engineers working for Norte Energia, a consortium of Brazilian firms and pension funds, were being held in a village close to where the 11,233-megawatt dam is being built on the Xingu River, Brazil’s national indigenous institute, called Funai, said Wednesday.

Leaders of the Juruna and Arara tribes say construction of the dam, which has been opposed by environmental groups and activists like Hollywood director James Cameron, is already preventing them from traveling freely along the Xingu, a tributary of the Amazon River.  The dam would be the world’s third biggest, after China’s Three Gorges and Brazil’s Itaipu dam.

The three engineers, whose identities were not revealed, met with village leaders on Tuesday to discuss how to mitigate the impact of the dam, including a mechanism to allow boats to get around the construction site.  But the indigenous leaders were dissatisfied with the proposed solution and in protest prevented the engineers from leaving, environmental groups said. “The authorities report that the engineers are being prohibited from leaving the village but there is no use of force or violence,” Amazon Watch and International Rivers, two environmental groups opposed to the dam, said in a statement. Norte Energia declined to comment.

Funai said it did not know what the tribes were demanding in order to release the men. Funai representatives were with the Norte Energia employees to take part in talks with tribal leaders, the agency said.

Environmentalists and indigenous rights activists see the dam’s construction as the first step toward increased development of the Amazon basin, a hotly contested region that has seen violent and deadly conflicts between indigenous tribes and ranchers, miners and loggers.  The government of Brazil, a country which depends on hydroelectric power for more than 80% of its electricity, has said that it will build several dams in the Amazon to take advantage of the region’s ample hydroelectric potential, but has sought to minimize the impact of construction and operation of the dams.

In late June, members of several local tribes occupied the Belo Monte construction site to make similar demands, accusing Norte Energia of failing to carry out mitigation measures which the company is required to implement as part of its license to build the dam.  The company is required to invest about $1.6 billion in social programs such as building sanitation networks and relocating houses that occupy land to be flooded by the dam. In the past, the company has reiterated that it will carry out those investments, but that the investments will be completed as dam construction progresses…

Norte Energia is composed of government-controlled utility Centrais Eletricas Brasileiras, or Eletrobras, the pension funds of state-run oil company Petroleo Brasileiro and government lender Caixa Economica; as well as utilities Neoenergia and Cemig and mining company Vale. Eletrobras is the biggest shareholder, with a 49.98% stake.

Excerpt,PAULO WINTERSTEIN, Tribes Hold Engineers of Dam in Brazil, Wall Street Journal, July 25, 2012

See also Amazon Watch, International Rivers

Illegal Logging and Organized Crime

Every two seconds, across the world, an area of forest the size of a football field is clear-cut by illegal loggers.1 In some countries, up to 90 percent of all the logging taking place is illegal.2 Estimates suggest that this criminal activity generates approximatel US$10–15 billion annually worldwide—funds that are unregulated, untaxed, and often remain in the hands of organized criminal gangs. Thus far, domestic and international efforts to curb forest crimes have focused on preventative actions, but they have hadlittle or no significant impact. While prevention is an essential part of enforcement efforts to tackle illegal logging, it has not halted the rapid disappearance of the world’s old-growth trees. New ideas and strategies are needed to preserve what is left of forests.

This paper suggests that current practice be combined with a more targeted, punitive approach, through more effective use of the criminal justice system. It argues that the criminal justice system should form an integral part of any balanced and organized nstrategy for fighting forest crime. This strategy should include initiatives to enhance the efficiency of criminal justice in combating illegal logging—that is, the investigation, prosecution, and conviction of cases, as well as the confiscation of the proceeds of criminal activity. These initiatives should be deployed in parallel with preventive programs, and the two approaches should complement and reinforce each other.

The criminal justice system has been used in the fight against illegal logging, but only in very sporadic instances and in limited and ineffective ways. Moreover, in those few cases, it has tended to target low-level criminals whose involvement in illegal logging is due to poverty. As such, it has created no real deterrent and has encouraged skeptics to further discount the relevance of criminal justice methods. Large-scale illegal operations are carried out by sophisticated criminal networks, and law enforcement actions need to be focused on the “masterminds” behind these networks—and the high level corrupt officials who enable and protect them. Pursuing these important targets through the criminal justice system will require creativity and a clear focus on those criminal justice rules and procedures that prove most effective…..

Because the role of the criminal system in fighting illegal logging has thus far been minimal, there are few documented successes, and little data to explain why the criminal justice system has not been more widely used in this context. To find new ideas as to how the criminal justice system can be used against illegal loggers, this paper therefore draws on experience gained from dealing with other types of crime (money laundering, corruption, and so forth).

The policy and operational recommendations made in this paper are based on legal and operational frameworks that are already in place in almost every country in the world. By making good use of these existing frameworks, we can take an important step towards ensuring the preservation and the sustainable management of the world’s forests.

Policy recommendations:

■ Develop an integrated criminal justice strategy for illegal logging that adopts and implements clear and comprehensive policies. To be effective, the strategy must target high-level corruption and the companies that pay bribes. It must aim for successful investigations, prosecutions, and the confiscation of the proceeds of crime. The strategy should include clear objectives and an assessment process for tracking progress….

■ Improve domestic cooperation. Domestic cooperation between agencies involved at different stages of the fight against illegal logging should be strengthened….

■ Enlist the private sector. When looking into the financial dimension of forest crimes, financial institutions and other entities obligated to report suspicious transactions to financial intelligence units need to be fully mobilized. This can be done through implementing due diligence measures and by monitoring transactions made by politically exposed persons (PEPs) and actors in the forestry sector…  Enhanced due diligence applies to PEPs in recognition that by virtue of their position, there is an increased risk of money laundering.

■ Engage civil society actors. . .

■ Include criminal justice as part of development assistance programs to combat illegal logging. …The implementation of anti-money laundering measures, as well as other steps suggested in this paper, should be included as part of country assistance strategies.

Operational recommendations….

■ Follow the money. Illegal loggers can be convicted of money laundering related to many different predicate crimes. This can result in additional jail time and/or fines above those imposed for the underlying forest crime. Furthermore, asset confiscation deprives criminals of the fruits of their crimes and makes it more costly for them to continue their operation.

■ Enforce anti-money laundering and due diligence requirements. Regulators should strictly enforce know your customer and due diligence requirements— particularly those for enhanced due diligence in the case of transactions of PEPs and suspicious transactions within the forestry sector. Regulators should also enforce compliance with the Financial Action Task Force (FATF)

Excerpts from Executive Summary, “Justice for Forests Improving Criminal Justice Efforts to Combat Illegal Logging” by Marilyne Pereira Goncalves et al., (Wolrd Bank, 2012)

Chevron’s Amazon Rainforest Pollution, human rights and investment tribunals

Indigenous rainforest communities from Ecuador who recently won an $18 billion judgment against Chevron for environmental damage have filed  a petition before the Inter-American Commission on Human Rights strongly criticizing Chevron’s “egregious misuse” of the U.S.-Ecuador Bilateral Investment Treaty (“BIT”) to violate human rights protections. They are seeking an order requiring Ecuador’s government to protect their right to life, physical integrity, health, a fair trial, and equal treatment under the law as guaranteed by the American Declaration of the Rights of Man and other international human rights treaties.

The petition was filed against Ecuador’s government because Chevron is seeking an order from the private investor arbitration panel mandating that the country’s President freeze the court proceedings until the BIT panel can rule, a process which normally takes three years. Such an order would violate Ecuadorian and international law as well as the human rights protections that the Commission is sworn to uphold, said Pablo Fajardo, the lead lawyer for the Ecuadorian plaintiffs in the underlying environmental case.

The Commission, located in Washington, D.C., hears claims for emergency relief from individual human rights victims and derives its authority from the the multilateral international treaty that created the Organization of American States, of which Ecuador and the United States are members. Any order from the Commission is binding on the government against which it is issued.

“The threats are serious and urgent,” the plaintiffs wrote in their petition, referring to their own plight living near extensive levels of toxic oil contamination in the Amazon rainforest for almost 50 years. An Ecuadorian court in 2011 found Chevron liable for dumping billions of gallons of toxic waste into the Amazon when it operated under the Texaco brand from 1964 to 1992, causing dramatically increased rates of cancer and decimating indigenous groups. See here and here.

“The idea that an arbitral panel would even contemplate ordering a sovereign state to violate its human rights obligations is repugnant not only to the substance of international human rights law but to the very core of the international legal order,” the petition added.  The petition also argues that the relief sought by Chevron extends well beyond the scope of the BIT in that it does not authorize private investor arbitration panels to act as a “transnational” appellate court that can override decisions in a public court system of a sovereign nation. The BIT is normally limited to allowing investors to seek monetary damages directly from a government if it feels it has been treated unfairly, a claim that Chevron makes but that the indigenous communities reject.

The Ecuadorians believe the investor arbitral panel convened by Chevron violates international law in that it bars the rainforest communities from appearing before it, does not publish its decisions, and does not inform the public about when and where it meets. Further, its three members — all practicing lawyers — suffer from a conflict of interest in that they each stand to reap millions of dollars in fees paid in part by Chevron simply by granting jurisdiction over the case when there is little if any basis to do so.

“What Chevron is trying to with this secret arbitration is utterly offensive to anybody who believes in the rule of law,” said Fajardo, whose clients initially filed the environmental lawsuit against Chevron in 1993 in U.S. federal court in New York before it was shifted to Ecuador at Chevron’s request.  “Chevron is trying to convince the private arbitral panel to override the decisions of a public court in a sovereign country where Chevron chose to litigate, even as Chevron continues to pursue appeals in that country making the same arguments it makes before the secret panel,” he added. “It’s just an outrageous abuse of judicial process.”  “Any decision by the panel granting Chevron’s requests would violate international law and certainly would not bind the indigenous communities who are not a party to the proceedings,” he added. “We also believe it will backfire against Chevron if the company carries through on its threats to try to block enforcement of the legitimate Ecuador judgment in courts around the world.”

Ecuador’s government has argued that the oil giant has no right to even file the claim under the BIT given that the treaty did not take effect until 1997, or five years after Chevron left the country.  Chevron’s latest maneuver prompted renowned Latin American jurist Jose Daniel Amado to send a letter to U.N. Secretary General Ban Ki-moon asking for a review of what he called an “improper and illegal expansion of arbitral powers” by the panel.  The Amado letter gained immediate support from jurists around the world, who sent a separate letter backing Amado’s arguments to the U.N. official in charge of international arbitration, Renaud Souriel.

Excerpt, Ecuador Communities Target Chevron’s Secret Investor Arbitration in New Court Filing, Says Amazon Defense Coalition, PR Newswier, Feb. 10, 2012