The Week Ahead: 16-22 September

The Week Ahead: 16-22 September

Elections in the Maldives. Japan interest rates. Swiss food referendum. All in The Week Ahead.

SWITZERLAND: Popular referendum on food could violate international trade law.

  • On Sunday, Swiss voters will decide whether to approve a popular referendum initially proposed in 2016; the “food sovereignty” initiative would institute several changes in Swiss agricultural policy that could run afoul of both WTO law as well as Switzerland’s trade relationship with the European Union.
  • If passed, the initiative would ban the use of GMOs in Swiss food, require the national government to promote the storage, marketing and processing of food in local communities as well as increase the number of people working in agriculture, and also encourage the production of diversified agriculture.
  • The most important component, and the main reason it was opposed by most political parties, is the requirement that the national government ensure that all agricultural products imported to Switzerland comply with the vigorous standards in social and environmental policy set by the Swiss national government. If any imported products do not meet those standards, the Swiss government would be required to place import duties or bans on those products.

GRI Take: Such a policy, which would be difficult in and of itself to enforce, would also likely violate WTO regulations on discriminatory treatment of products, and could subject Switzerland to years of trade disputes with the EU, the United States, and other major agricultural exporters. Polling has been limited for the referendum, but another somewhat similar food sovereignty initiative (without the import duty and ban requirements) passed with a substantial majority last year.

JAPAN: Bank of Japan will keep interest rates unchanged.

  • On Wednesday, the Bank of Japan will issue its interest rate decision for September. There is almost complete certainty that the Bank will not raise rates, following Governor Kuroda’s comments in early September to Yomiuri that the Bank of Japan would not be raising rates for “quite a long time.”
  • This means short-term rates in Japan will be kept at -0.1% and long term rates will remain at around 0%. This decision will ensure that Japan’s central bank will continue to diverge from the Federal Reserve and the ECB, both of which are making moves to tighten their monetary policies.
  • A report from the Wall Street Journal suggests that, although the Bank will not be making any moves to increase rates, it will be discussing ongoing complaints from Japanese banks that the negative interest rates are severely hampering their ability to invest (and may inadvertently be causing riskier behavior).

GRI Take: It will be important to see any publications from the Bank following its interest rate decision to see if these concerns have been taken to heart by both the hawkish and dovish sides of the Bank. The July interest rate decision, and skeptical comments from the more dovish members, suggest that that concern has not yet extended throughout the Bank.

MALDIVES: On a contested backdrop, Maldives will hold first round of presidential election.

  • On Sunday, voters in the Maldives will vote in the first of (possibly) two rounds to select its president. Although the island nation is Asia’s smallest both in population and landmass, the Maldives represent an important strategic location. Southwest of Sri Lanka, the Maldives has received significant attention from India as well as China and the United States for its importance as a middle point between the Arabian Gulf region and southeast Asia.
  • Incumbent president Yaameen Abdul Gayyoom has held office since 2013 (the Maldives elects presidents and the parliamentary Majlis to 5-year terms), following the brief term of Mohamed Waheed, who had succeeded previous president Mohamad Nasheed following his resignation (he was allegedly compelled to resign in order to prevent violence and currently lives in asylum in Sri Lanka).
  • The Democratic Party has nominated Ibrahim Mohamed Solih as its candidate after former president Nasheed withdrew his bid. The opposition parties, in trying to unite around Solih, have contested that President Yameen has imprisoned several major political figures to preserve his reelection bid, aided by a state of emergency declared by the government in February after the Supreme Court rejected the convictions of several opposition leaders (the chief justice of the Supreme Court was later arrested under charges he was trying to overthrow the government).

GRI Take: There is substantial uncertainty regarding the fairness of the election, particularly as the Maldives’ Electoral Commission has been accused of being politicized after it threatened to dissolve the Democratic Party. Political uncertainty and potential spillover effects is likely to be the result, regardless of the final tally.

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