Why India should not outlaw Huawei

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Ritesh Kumar Singh

In hot pursuit of the tech cold war, the Trump administration has been warning adversaries and friends alike not to do business with Chinese telecom giant Huawei Technologies and to avoid its fifth-generation mobile network equipment.

In Asia, some of Washington's partners, notably Japan and Australia, have succumbed to the pressure. Others have resisted so far, such as Singapore and South Korea.

India, which has yet to announce its decision, should reject the U.S.'s demands.

The U.S. claims that installing Huawei equipment in national networks represents a security threat. It risks creating a secret entrance for Beijing's spies to infiltrate foreign communications systems.

But Washington has so far not offered any clear evidence of breaches of privacy or security. It asks to be taken on trust. New Delhi should not cooperate.

Cooperation would go against the sprit of the World Trade Organization's rules on national treatment, which India backs strongly. New Delhi, as a decadeslong supporter of multinational institutions, should not betray the WTO at a time when it is under great pressure, not least from Washington.

India rejigs plans for conflict with Pakistan, China

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By SAIKAT DATTA

India is undertaking major military reforms to enhance its capability to fight possible wars with Pakistan and China as Prime Minister Narendra Modi settles into his second term.

The reforms are redrawing military concepts and formations and junking plans that have prevailed for more than 80 years in institutions that have been slow to reform. They are also moving forces up much closer to the front lines for quicker mobilization. Previously, this used to happen only when war was imminent.

Over the last four years, key military units that are part of India’s three Strike Corps – I Corps, II Corps and XXI Corps – have shifted and moved closer to the border with Pakistan and China. Meanwhile, India’s top military hierarchy is also examining the effect of these changes will have on the current rank structure and the morale of its officers.

India inherited its military structures from the colonial British, policies initially created to keep the natives in check. But the two world wars changed how the British Empire looked at its colonies. Between the two big wars, the British Indian Army expanded exponentially.

As historians have noted, if anyone other than the British and the Americans fought in every theater of the war, it was the Indians, who were part of the Allied troops on every continent. In 1947, after the British divided India into two countries, the army also split and immediately plunged into war with each other, with both sides led by British generals.

How the Growing Gulf Crisis Impacts Pakistan

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By Ammad Malik

As the specter of war looms once more over the Middle East, a wary Pakistan calls for restraint.

Tensions in the Persian Gulf escalated dramatically after Iran’s elite Revolutionary Guard shot down a U.S. surveillance drone over the Strait of Hormuz. The Americans threatened military strikes in retaliation but pulled back at the last moment, after senior officials in the Pentagon had warned that such a response could endanger American troops deployed throughout the Middle East. The June 20 incident was preceded by a series of different attacks on oil tankers operating in the Strait of Hormuz, all of which were allegedly sponsored by Iran. Although the breakout of immediate hostilities seems to have been halted for now, saber-rattling by senior members of the Trump administration and Iran’s announcement that it plans to breach the limit set on its enriched uranium, means that war in the region still remains a realistic possibility.

Myanmar: Current Developments – Analysis

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By Dr. S. Chandrasekharan.

The unilateral cease fire ordered by the Army ends Sunday and there is as yet no sign whether the ceasefire will be further extended by the Army. 

For the first time, there were fewer incidents of fighting between Tatmadaw and the Arakan Army in June. However an incident near Sittwe port and the destruction of construction materials of an Indian project for Kaladan Bridge should be of concern to India. 

The Chinese are now back in their attempts to revive the Myitsone dam but the local leaders do not seem to be convinced! 

It is now learnt that Sheikh Hasina in her visit to China in the first week of July is likely to press China to intervene and persuade Myanmar to start taking back Rohingya refugees.

Will the Unilateral Ceasefire be Extended by the Myanmar Army?

The unilateral ceasefire ordered by the Tatmadaw (except in Western Command in Rakhine State) ends today. The first cease fire was from December 21, 2018 to April 30 2019 and the second one extended at the behest of China was between April 30, 2019 to June 30 2019. There is no information as yet whether the Chinese would move again for another extension as they should as most of the conflict areas are on the Chinese border.

Getting the World to Comply With the US Huawei Ban Won’t Be Easy

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By Robert Farley

Is the U.S. already struggling to force companies to comply with its ban on trade with the Chinese firm Huawei? A recent New York Times article suggests that the answers is yes, and that U.S. firms are already trying to find loopholes and work-arounds to continue trade with Huawei.

That the U.S. would run into enforcement problems isn’t surprising. The U.S. government has long struggled to force companies to abide by technology transfer rules. Firms typically choose to cooperate with China because they see some gain, whether access to workers, markets, or resources, and very often price concerns about technology theft into the deals they’re making. Forcing compliance with rules is difficult, because U.S. regulators don’t have much access to what actually happens on Chinese factory floors, and U.S. companies have little incentive to be transparent about their activities. Moreover, the U.S. government has long been loath to punish companies for suspected transgressions, and American companies have lots of tools for getting around the rules imposed by the Trump administration.

U.S., China: Trump and Xi Agree to Pick Up Where Stalled Trade Talks Left Off

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What Happened

It feels like deja vu all over again as the 2019 G-20 summit ends the same way as the 2018 G-20 summit: With China and the United States agreeing to a truce in their trade war and vowing to restart trade negotiations. As a part of Washington and Beijing's truce, the United States has agreed to indefinitely delay placing more tariffs on Chinese imports — including the current threat to put tariffs on about $300 billion worth of goods — as long as the trade negotiations make progress.

In addition to the tariff cease-fire, the United States has reportedly agreed to lift some of its export controls on Chinese technology giant Huawei Technologies. In exchange, China has promised to buy more American agricultural products. What's not clear is when such activity will take effect. During his news conference wrapping up the G-20, U.S. President Donald Trump said the United States would save the Huawei issue until "the end," implying that removal of export controls may not occur until China and the United States seal their elusive trade deal. But Trump noted that the U.S. Commerce Department would begin holding meetings on July 2 to discuss what kinds of American exports to Huawei the United States could allow.

China’s Front Door to America’s Backyard

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By Don Giolzetti

China’s rising influence in Panama is a case study of its ambitions in Latin America.

Recently, China has expanded its presence in the Latin America and the Caribbean (LAC) region. This increasing influence was crystallized during a state visit to Panama by Chinese President Xi Jinping in December 2018. Xi’s 24-hour state visit to Panama, the first by any Chinese head of state, culminated in 19 cooperation agreements in trade, infrastructure, and other areas.

On the economic front, China secured agreements on significant infrastructure projects such as the building of a high-speed train as well as financial service deals between banking institutions to presumably fund such projects. These agreements were not just economic and geopolitical victories for China; Xi’s visit also embodied China’s ambition to pull Taiwan’s remaining diplomatic allies into their orbit. In 2017, Panama shunned Taiwanin favor of relations with China, a shift that caused a ripple effect around the region. The Dominican Republic and El Salvador both cut ties with the island nation in 2018.

Xi’s state visit also had significant geopolitical importance, specifically regarding the Panama Canal. The canal acts as a strategic gateway between the Atlantic and Pacific Oceans and is an essential passage for the world’s commodities. The country of Panama itself links Central and South America.

This Isn’t About Iran. It’s About China.

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By Robert D. Kaplan

Whether or not Trump realizes it, the current standoff in the Middle East is about something much bigger than the Gulf.

In a world of global financial markets, 5G networks and cyberwar, geography still rules. The two shipping lanes in the Strait of Hormuz, each two miles wide, hold the key to the Persian Gulf and roughly half of the world’s proven oil reserves and production capacity. That is why the recent attacks, widely assumed to have been ordered by Iran, on tankers in the Gulf of Oman, a strategic waterway just outside the Strait, have frayed geopolitical nerves the world over.

The Iranians understand that because geography is so precious in the Gulf region, small actions have magnified effects. Likewise, the Americans know that in the constricted waters of the Gulf, their large warships are prone to attacks by Iranian swarm boats, even as Iran’s proximity to Saudi Arabia threatens that fragile kingdom and American ally. Truly, the Middle East faces a crisis of room.

Yet geography tells a more important story in the Gulf region: The current tensions are less about Iran and the Persian Gulf than about China and the Indian Ocean. Whether the Trump administration realizes it or not, what is occurring in the American-Iranian standoff is about something much vaster.

Can the US-China crisis be stabilized?

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Paul D. Gewirtz

This week President Trump will meet with China’s leader Xi Jinping at the G-20 summit meeting in Japan. The media is focusing on whether the two leaders can restart trade talks or at least call a “trade war” truce. But far more is at stake. The entire U.S.-China relationship is now in a dangerous downward spiral. Can the Trump-Xi meeting stabilize things?

Unfortunately that’s unlikely because the crisis in U.S.-China relations now exists in virtually every part of the relationship. Even more troubling and dangerous, there is a growing sense in each country’s government that the other is a pervasive adversary. Here are just a few areas of conflict:

Trade war: The current trade war is having large negative consequences in both countries—with huge tariffs in place, more tariffs promised, and collapsed negotiations that have become so publicly politicized in both countries that a deal will be very difficult to achieve.

Tech rivalry: The U.S. and China have escalated their tech rivalry, each believing that hi-tech will determine who dominates the future global economy and military power. The Chinese leadership believes that U.S. actions like placing Huawei on the “Entity List” (banning it from buying components from U.S. companies without U.S. government approval) reveals a U.S. goal to gravely wound China’s economy. Many in the U.S. government favor “decoupling” our two economies to protect us, in spite of radical effects this would have.

Ian Easton On Taiwan: Compete to defeat the PLA

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China’s growing military power is a source of shared concern in Washington and Taipei. To avoid an enemy attack and the catastrophe of a great power war, the United States and Taiwan should work together to balance against Beijing’s offensive buildup.

It is increasingly clear that Xi Jinping (習近平) has become a brutal dictator. He intends to turn China into a nightmarish surveillance state. To ensure his personal security, Chairman Xi has poured rivers of cash into lethal armaments programs and bizarre science experiments. The same technology used to scan checks on mobile banking apps is now being twisted by China’s secret police to track the faces of human rights lawyers. School children in China are now being fed propaganda amplified by medical-grade brain monitoring devices.

Chairman Xi’s appetite for power has grown with the eating. He wants to dominate the Indo-Pacific region. His ultimate killing machine, the People’s Liberation Army (PLA), is programmed not just to rule China, but also to expand that nation’s borders outward. To achieve his dark vision for the future, Xi seeks to export Beijing’s repressive governance model around the globe, by force when necessary.

How China Really Sees the Trade War

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By Andrew J. Nathan

When Presidents Xi Jinping and Donald Trump meet on the margins of the G-20 summit in Osaka later this week to seek a trade deal, Xi is likely to soften the customary formality of Chinese diplomacy by calling the U.S. president “my friend.” Beneath the cordial surface, however, Xi will yield nothing. Trump must then decide whether to accept the Chinese offer that has been on the table ever since early 2017 and end the trade war or to allow the U.S. and Chinese economies to drift further toward decoupling.

“We’re going to win either way,” Trump likes to say. But according to two Chinese colleagues who contributed to this article but cannot attach their names, Beijing policymakers believe he is either misinformed or bluffing.

CHINA'S BOTTOM LINE

The basic Chinese position on the trade war has not changed since 2017. Under its proposal, China would buy more U.S. products in an effort to narrow the trade deficit, and it would reaffirm its long-standing commitment to the legal protection of intellectual property rights. But if foreign firms voluntarily decide to share trade secrets with Chinese firms in order to gain access to the Chinese market—a practice the United States characterizes as “coercive transfer”—China would do nothing to interfere. China would continue on its established trajectory of opening its market to foreign banks and businesses, but it would not accelerate the pace of opening. Its currency would remain pegged to a basket of foreign currencies, and Beijing would not artificially deflate it, since China sees no benefit to a currency war. The Chinese government has already lowered the volume of propaganda about its Made in China 2025 program, which pushes for Chinese dominance of modern technologies such as robotics and artificial intelligence. But it is not willing to ramp down the research and development projects that form the substance of that program. In short, China has offered to change nothing structural in its development model, but it is willing to grant Trump a nominal victory he could use in the 2020 presidential campaign.

Is Iran Close to Collapse? Three Things You Need To Know about the U.S.-Iran Showdown.

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by Michael Rubin

Washington must hold its red lines while not giving in to Tehran's wishes or escalating into a shooting conflict.

Iran and the United States are as close to direct conflict as they have been for three decades, since Operation Praying Mantis in 1988 which was, at the time, the largest surface naval engagement since World War II.

A lot of ink has been spilled and oxygen expended discussing the matter, some of it good and some of it simplistic. Here a few thoughts, informed by being lucky enough to spend close to seven months studying in the Islamic Republic while finishing a doctorate in philosophy on Iranian history. I worked on the Iran desk at the Pentagon during the George W. Bush administration, frequently visit the Persian Gulf, and have followed Iran almost continuously for a quarter century.

1) Pressure can work on Iran. There has been, for more than a decade, a curious line of argument that pressure upon Iran is counterproductive. The Century Foundation’s Dina Esfandiary, for example, tweeted that “#Iran won’t talk as pressure increases because it would be suicide for the government. They will talk when they can get something tangible in return for concessions.” And, using numbers of centrifuges as a metric, Wendy Sherman, an Obama administration negotiator, has repeatedly argued that conciliation trumps coercion on Iran.

The U.S. and Iran Are Marching Toward War

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Afshon Ostovar

With each passing day, the United States and Iran draw each other deeper into conflict. So far, they have stopped short of war. But the likelihood of an armed conflict increases with every additional provocation, whether it is an attack on a civilian tanker ship or another round of sanctions. Both countries, with their all-or-nothing strategies, are to blame. President Donald Trump’s administration has pursued a “maximum pressure” campaign against Iran built on suffocating economic sanctions and a de facto oil and gas embargo. Iran has pursued a maximum resistance strategy, escalating into attacks on shipping lanes, downing a U.S. drone over the Persian Gulf, and rejecting out of hand all opportunities for de-escalatory talks with Washington. With both states unwilling to back down, the march toward war continues.

A DEEPER SOURCE OF CONFLICT

That relations could have deteriorated to this degree is remarkable. Only four years ago, Washington and Tehran signed a historic multilateral agreement that curtailed Iran’s nuclear enrichment program in exchange for U.S. sanctions relief. The deal didn’t end the mistrust between the two countries, nor did it solve long-standing disagreements about Iran’s foreign policy in the Middle East, but it created a much-needed mechanism for diplomatic engagement, which the deal’s proponents saw as necessary to avoid a war.

NATO Prefers a Weak and Peaceful Europe

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by Samo Burja, Matt Ellison

That was the point of Washington's extension of its sphere of influence after World War II.

The United States has a very large military—its budget is nearly four times greater than China’s (although China is four times as populous and maintains nearly twice as many active personnel). The U.S. military budget is nearly two and a half times greater than those of all of Europe’s North Atlantic Treaty Organization countries combined. Washington’s defense budget is greater than the combined defense budgets of China, Saudi Arabia, Russia, the United Kingdom, India, France and Japan. Furthermore, many of the soldiers in this enormous military are stationed outside of the American homeland.

The U.S. military maintains over eight-hundred bases in foreign countries—the largest number of any country in the world. Some were inherited from prior holdings of European empires such as Spain and Britain. Others were gained over the course of wars the United States fought. Some others were attained via negotiation with a host government as part of an alliance or in exchange for American security guarantees. 

Forget Putin’s ‘liberalism’ jibe. This man runs a war machine

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Natalie Nougayrède

Vladimir Putin is on a high. Kicked out of the G8 in 2014 after the start of his military operations in Ukraine, he’s been making full use of the G20 summit in Osaka to bask in meetings with world grandees and soak up all the international media attention he possibly can, complete with a not very challenging interview with the Financial Times.

Ever the opportunist, he takes what’s on offer, he glides, he smirks. And he watches with glee as we huff and puff at his provocations, whose over-riding purpose is to keep us on edge and play on our divisions.

This is now international showtime for Putin. After all, few people outside Russia paid much attention to his four-hour annual Direct Line TV show last week. I did watch part of it though, and what struck me was that Putin is getting older, and that he’s deploying particularly intensive PR work to try to neutralise a flurry of domestic tensions.

Russian friends tell me the country “feels like 2010, when things were starting to bubble up”, ahead of the street protests that broke out during the following two years. Russia’s economy isn’t doing brilliantly. Putin’s decision to have the investigative journalist Ivan Golunov released and the handing over of the initiative to local protesters in Ekaterinburg in a recent dispute over the building of a cathedral were unexpected developments. OK, this wasn’t the end of political repression, but these were gestures that seemed an attempt to signal a softer touch – if only for now.

Trump’s Confused Russia Policy Is a Boon for Putin

ANDREW S. WEISS

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The next Trump-Putin meeting in Osaka, Japan is only days away, but the White House is maintaining radio silence about what it hopes to achieve there. Meanwhile, three senior voices with experience of dealing with Russia, Chairman of the Joint Chiefs General Joseph Dunford, the NSC’s in-house Russia expert Fiona Hill, and, reportedly, U.S. Ambassador to Russia Jon Huntsman, are all on their way out.

These developments are not linked, but they tell us a lot about how Russia policy actually works in the Trump administration.

The conventional wisdom has long held that Trump’s bizarre brand of Russian policy (which he invariably describes as “getting along with Russia”) doesn’t matter all that much because the rest of the U.S. government is taking a tougher line on the Kremlin’s misbehavior. When it comes to sanctions, military cooperation with Ukraine, or cyber operations against Russian critical infrastructure, this argument goes, largely sensible day-to-day decisions are being made.

Trade war: US and China agree to tentative truce before G20 summit

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This story is part of an ongoing series on US-China relations produced jointly by the South China Morning Post and POLITICO, with reporting from Asia and the United States.

The US and China have tentatively agreed to another truce in their trade war in order to resume talks aimed at resolving the dispute, sources familiar with the situation said.

Details of the agreement are being laid out in press releases in advance of the meeting between Chinese President Xi Jinping and US President Donald Trump at the Group of 20 summit in Osaka, Japan, this weekend, according to three sources – one in Beijing and two in Washington.

Such an agreement would avert the next round of tariffs on an  additional US$300 billion of Chinese imports, which if applied would extend punitive tariffs to virtually all the country’s shipments to the United States.

The Trump administration has threatened to slap duties of up to 25 per cent on the remaining untaxed Chinese goods if this weekend’s talks go poorly.

Changing the Way America Goes to War

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by Michael J. Mazarr

The risk of war with Iran is now clearly imminent. An American president has reportedly ordered attacks on Iran—which could trigger massive escalation—only to walk them back. This intensifying confrontation has been compared to the path to war with Iraq in 2002–2003, with ultimatums, demands for essential changes in behavior, and regional military posturing.

But there is a much more profound message the two cases send about American democracy today: The process of national deliberation for “wars of choice” is fatally flawed.

On the surface, the road to war with Iraq seemed to reflect intense debate: Eighteen months of public discussion, a congressional resolution, United Nations sessions, presidential speeches. But this apparent activity hid ruinous limitations in the scope and rigor of the national dialogue.

Inside government, the debate over war was narrow and incomplete. I spent a decade researching the process, and my interviews confirmed a stunning fact: The Bush administration never convened a single Cabinet session to discuss whether going to war was actually a good idea.

Trump Once Again Assails America’s Friends as He Opens Overseas Visit

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By Peter Baker

OSAKA, Japan — President Trump plunged back into the world of international diplomacy on Friday with characteristic provocation, keeping some of America’s closest allies, including his hosts, off balance even as he sought advantage on an array of economic and security disputes with profound consequences.

Mr. Trump opened a series of high-stakes meetings with world leaders gathered in Osaka, Japan, for an international summit meeting after calling into question the very foundation of the relationship between the United States and two of its most important friends, Japan and Germany, and lashing out at a third partner, India.

The Japanese leaders hosting the meetings were still reeling Friday morning at the president’s attack on the mutual defense treaty that has been the bedrock between Washington and Tokyo for nearly seven decades.

Before arriving in Osaka, Mr. Trump complained that under the treaty, Japan would not come to the aid of the United States if it were attacked and instead would “watch it on a Sony television.”

What Trump Really Just Told the Iranians: He’s Out of Ideas.

By JARRETT BLANC

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The administration’s new Iran sanctions are symbolic. But that’s not the problem—it’s the message they’re sending.

Jarrett Blanc is a senior fellow in the Geoeconomics and Strategy Program at the Carnegie Endowment for International Peace. He was previously the State Department lead for the implementation of the Joint Comprehensive Plan of Action (JCPOA) on Iran’s nuclear program.

The Trump administration’s announcement this week of plans to impose new sanctions targeting Iranian leaders and organizations—including the Supreme Leader and his office, military commanders of the Islamic Revolutionary Guard Corps and Foreign Minister Javad Zarif—will have little practical effect, according to sanctions experts. Senior Iranian officials and their organizations are very unlikely to use international financial institutions or hold substantial assets abroad, and those are the major pathways through which the United States exerts coercive economic pressure. In other words, the new sanctions are more symbolic than effective.

This is not a bad thing. Symbolism is useful in international affairs, especially between adversarial countries like Iran and the United States, which lack formal diplomatic relations and need to find other ways to communicate. Intermediaries can be one option, symbolic measures another.

Pompeo’s Hollow Plan to Beef Up Security in the Gulf

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By Lara Seligman

In the wake of alleged aggression from Iran in the Persian Gulf, U.S. Secretary of State Mike Pompeo rolled out a new plan this week, dubbed “Sentinel,” to recruit U.S. partners to help enhance security for ships traversing the Strait of Hormuz and other choke points.

But experts are skeptical that the United States can get allies in the Gulf, Europe, or Asia to shore up the resources needed to make a significant difference to the commercial vessels facing threats from Tehran in the world’s busiest shipping lanes.

“It’s going to end up being mainly a U.S. project, with some burden sharing from European partners,” said Becca Wasser, an analyst with the Rand Corp.

The new initiative also raises the risk that the U.S. military could be dragged into conflict if the Gulf states engage in hostilities with Iran. Anthony Cordesman, an analyst with the Center for Strategic and International Studies, questioned the “competence” of some of the Gulf navies.

Trump’s Middle East Peace Plan Is in the Works. What Does the Region Think?

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Summary: The most obvious reason for the delayed release of Trump’s promised Middle East peace plan is Israel’s unsettled electoral politics. But Palestinian opposition and Arab apathy also limit its prospects.

Since taking office, U.S. President Donald Trump has said he wants to strike a peace deal between Israelis and Palestinians. Details about his on-again, off-again peace plan are sparse. Washington recently unveiled the economic component of its vision, which will be discussed at the Peace to Prosperity workshop in Bahrain this week. But neither the Israeli government nor the Palestine Liberation Organization (PLO) will be there.

What do the countries involved think of the latest attempt to resolve one of the world’s thorniest diplomatic challenges?

Gaining Competitive Advantage in the Gray Zone

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PDF file 2.4 MB 

The United States is entering a period of intensifying strategic competition with several rivals, most notably Russia and China. U.S. officials expect this competition to be played out primarily below the threshold of armed conflict, in what is sometimes termed the gray zone between peace and war. In this report, the authors examine how the United States might respond to Russian and Chinese efforts to seek strategic advantage through coercive actions in the gray zone, including military, diplomatic, informational, and economic tactics. The United States is ill prepared and poorly organized to compete in this space, yet the authors' findings suggest that the United States can begin to treat the ongoing gray zone competition as an opportunity more than a risk. Moreover, leaders in Europe and Asia view Russian and Chinese gray zone aggression as a meaningful threat and are receptive to U.S. assistance in mitigating it. In this report, the authors use insights from their extensive field research in affected countries, as well as general research into the literature on the gray zone phenomenon, to sketch out the elements of a strategic response to the gray zone challenge and develop a menu of response options for U.S. officials to consider.

The Global Data War Heats Up

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World leaders who gather in Osaka, Japan, for the G20 summit this week will begin a conversation on worldwide data governance—and though they are deeply divided on the question of who should control data, some nations could seek to devise a system that excludes China.

Japanese Prime Minister Shinzo Abe, who is hosting this year’s summit, says he sees data governance as a priority. Indeed, the fact that the internet has remained relatively global and open has enabled the growth of the digital economy. App stores on our phones, email accessible around the world, overnight shipping on our favorite goods, the sharing of news and medical research and stock information—they’re all part of this global connectivity. Underneath it lie data, 1s and 0s that form everything from bank ledgers to social-media posts. Exchanges of data between organizations (companies, universities, governments, etc.) across borders are what contribute to companies offering services around the world in near real time, or to allied countries sharing law enforcement and intelligence information.

Will Facebook’s Libra Bring Cryptocurrency into the Mainstream?

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Facebook, the world’s largest social network with 2.4 billion users, is developing a cryptocurrency that has the potential to reshape the global financial system. Called Libra, the cryptocurrency and blockchain system is backed by major companies and groups and scheduled to hit the market in 2020. Facebook wants Libra to become a global currency that could help the 1.7 billion ‘unbanked’ people get access to financial systems.

Unsurprisingly, the announcement was met with calls for tough scrutiny from regulators and skepticism from technologists and the cryptocurrency community. Congressional committee hearings already are planned. In an op-ed for The Financial Times, Facebook co-founder Chris Hughes called the prospect of Libra’s success “frightening.” Facebook’s practice of moving fast and breaking things works for a college social network, he said, but “it’s not appropriate for the global monetary system.”

Wall Street, however, gave a thumbs up to this endeavor because it adds a potentially big source of revenue for Facebook beyond advertising. The stock was up as much as 8.5% in the days after The Wall Street Journal reported that big backers have lined up behind Libra. “For Facebook, this is a big opportunity, obviously,” said Wharton finance professor Itay Goldstein on the Knowledge@Wharton radio show on SiriusXM. With more than two billion users, he said, Facebook can profit handsomely from consumers using Libra even if the transaction fees are low.

Three Hurdles Companies Face in Implementing AI Initiatives

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Many executives believe that all it takes for artificial intelligence to deliver great results is a combination of data and data scientists. But that is not true. Artificial intelligence is a lot more complex and there are many hurdles to be overcome, says Julien Blanchez, global head of data and analytics at SWIFT. For instance, there are operational issues, concerns around compliance and security, and ethical dilemmas. In a conversation with Knowledge@Wharton at a recent conference on artificial intelligence and machine learning in the financial industry organized in New York City by the SWIFT Institute, Blanchez discussed the power of AI, limitations in deploying it, and other related issues.

An edited transcript of the conversation follows.

Knowledge@Wharton: Could you share with us your experience of how senior executives think about AI?

Julien Blanchez: Well, this is how a practitioner explained it to me. His management was pushing him to do AI, and their argument was: “You just get a lot of data. Then you hire good data scientists. And then you do magic. So, 1+1+1= money flows.” When he told me this, my first thought was: “Yes, money does flow, but in the wrong direction. Money flows out.” AI is so much more complex than just getting lots of data and good data scientists. For instance, there is the issue of the quality of the data. There is also the technology piece that a businessperson might miss out on or get it completely wrong.

Facebook’s Libra: Does the World Need Frictionless Money?

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MICHAEL PETTIS

Facebook seems to think its new digital currency Libra will be used mainly for purchasing goods and services and for current account transactions. But it will probably be used mainly for capital account transactions. Do we really want to eliminate frictional costs on the capital account?

People typically think of money as something that exists mainly to facilitate the buying and selling of goods and services, or current account transactions. But in fact, one of the major uses, if not themajor one, is to facilitate debt, investment, and other capital flows, including across national boundaries. Digital money like Libra, in other words, won’t just be used to buy cups of coffee. Unless strictly regulated, its major use will probably be to facilitate capital flows. This has really important implications—both good and bad—that weren’t addressed in the Libra White Paper . The most important one is that as the digital currency is now structured, the more successful Libra is the more it may facilitate destabilizing capital flows.

I have never been terribly knowledgeable about digital and cryptocurrencies (although like most people living in China, I pay for a lot of things with my WeChat app), but I had drinks at my home earlier this week with the very smart Cristian Gil. He is an old friend who at the turn of the decade started a digital-currency trading company called GSR as a hobby, only to watch the firm morph into a serious business. After our interesting discussion on cryptocurrencies, I decided to read up on Facebook’s new digital currency and try to figure out how it might operate. Here is what the white paper says:

Bloody Lessons Learned at the Somme

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A tranquil river basin in northern France will forever be associated with some of the most vicious and costly fighting of World War I. The terrain around the Somme River provided the battleground for a confrontation between elements of the German army and an Allied force spearheaded by the French and British. At the beginning of 1916, the Western Front was locked in a stalemate, blocked by the opposing battlements running from the North Sea to the Swiss border. The Allies sought to break the German defenses and to relieve pressure on the French at Verdun, wearing down the Germans in preparation for a decisive victory expected in 1917. It was hoped the July 1 Somme offensive would provide that break and set the stage for the closing acts of the war.

While the French achieved some success on the opening day of the attack, the British Fourth Army suffered staggering losses — the worst ever in a single day of combat for the United Kingdom. Claiming around 60,000 British casualties, including almost 20,000 fatalities, the Battle of the Somme left an indelible mark on the psyche of a nation, no less diminished a century after the fact. By the offensive's conclusion on Nov. 18, 1916, over a million were dead or wounded. Yet for all its appalling losses, the armies and men who fought to the end of that particular battle ushered in new attitudes and approaches to warfare.

US Navy’s Railgun Entering New Testing Phases

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By Steven Stashwick

The prototype is being tested at advanced range and groundwork for at-sea testing is in place.

U.S. Navy environmental impact documents and government testing officials indicate that the navy’s electromagnetic railgun prototype is progressing toward eventual at-sea testing.

Railguns use bursts of massive electromagnetic energy to push solid projectiles at high speeds over great ranges without using gunpowder or chemical propellants. The U.S. Navy prototype is designed to push projectiles at six or seven times the speed of sound up to 100 nautical miles, far in excess of current navy cannon, which can shoot out to about 13 nautical miles.

Earlier this year it was reported that the railgun’s development was a declining priority for the Pentagon and emphasis would instead be put on developing its associated high-velocity projectile for use by conventional cannon, which could fire it at twice or three times the range of conventional explosive projectiles currently in use.

Rare-earths concern grows; F-35 news; Who’s acting now? And more…

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BY MARCUS WEISGERBER

As the Pentagon looks to remove Chinese-made parts from its weapons, Rep. Chrissy Houlahan, D-Penn., wants the Defense Department to come up with a plan to make sure it has access to critical rare earth minerals today supplied largely by China.

“When you think about everything that is made on the civilian side [and] on the defense side that requires many of these rare earths to be part of their construction, I think that it’s more of a global issue,” said Houlahan, a member of the House Armed Services Committee and a former chemistry teacher who boasts about being “somewhat infatuated with the periodic table.” 

Earlier this month, she added an amendment to the 2020 National Defense Authorization Act that would require the Pentagon “to develop guidance on the streamlined acquisition of items with rare earth materials and to prevent our adversaries, like China, from controlling the world’s supply of these key materials.” It would also add tantalum — an alloy used in semiconductors, turbine blades, and rocket nozzles — as “a covered material for purposes of disposition under the National Defense Stockpile program.” The bill must still pass the full House and Senate to become law.