guidance

Jan 12, 2019 | 18:19 GMT

7 mins read

The Weekly Rundown: The Moment of Truth for May's Brexit Deal, U.S.-China Trade Talks and Huawei's Bad Week

News footage of North Korean leader Kim Jong Un, left, and Chinese President Xi Jinping is shown above a Beijing restaurant on March 28, 2018.
(GREG BAKER/AFP/Getty Images)
Stratfor's geopolitical guidance provides insight on what we're watching out for in the week ahead.

On the Record

The age of self-inflicted American shame is over, and so are the policies that produced so much needless suffering.

U.S. Secretary of State Mike Pompeo during a speech in Cairo


On Our Radar

Brexit Vote Looms. The moment of truth is about to arrive for British Prime Minister Theresa May, as the House of Commons will vote on her Brexit plan on Jan. 15. May has been trying to win support from rebel members of the opposition Labour Party while seeking reassurances from the European Union about the temporary nature of the controversial plan to keep Northern Ireland in the customs union, but she is still expected to lose the vote. A defeat does not necessarily mean a disorderly Brexit, as May will have the chance to present an updated plan to Parliament and hold new votes. Moreover, she can ask the European Union for an extension of the negotiation period. The European Union is only likely to accept delaying Brexit if London offers a concrete course of action, which could include a different Brexit agreement, an early election or even a second referendum.

Trade Talks Take Small Steps Forward. Three days of trade talks between midlevel officials from China and the United States ended Jan. 9 with hints of progress on easier concessions and follow-up talks involving chief negotiators — possibly by the end of January. China's market access and purchases of U.S. agricultural and energy products are areas where differences narrowed. Still, solutions around China's structural reforms, such as better protection of intellectual property and reduction in Chinese subsidies, remain ambiguous. And members of U.S. President Donald Trump's administration remain divided on how far and how fast they want to press China on these issues. A volatile stock market and multiple domestic stumbling blocks might make the White House more willing to cut a deal. We are watching closely to see how far China seizes this opportunity to deliver on its promises and how the U.S. side — particularly trade hawks — shapes its narratives leading up to the next phase of negotiations.

Mr. Kim Goes to China. North Korean leader Kim Jong Un paid a surprise visit to Beijing this week, his fourth trip to China in the past year. In 2018, Kim was careful to conspicuously visit China around key meetings with the United States and South Korea. The trips served to shore up North Korea's negotiating position and to reassure China that it is still a key North Korean partner. With discussions for a second Trump-Kim summit underway, North Korea is again looking to strengthen its negotiating hand. From China, it is also looking for economic support and backing for relief from sanctions to buoy its ailing economy.

Fuel Theft, Fuel Shortages. A Mexican government strategy to curb fuel theft from state-owned refineries and terminals caused widespread shortages of gasoline and diesel across central Mexico this past week. The government used the armed forces to begin audits of all major refineries and fuel terminals in the country, and shut down major pipelines as part of its audit. Now, cities such as Guadalajara and Mexico City have long lines at fuel stations, and fuel tankers are piling up at the country's ports. Though the offensive against fuel theft will likely disrupt fuel theft networks and benefit the state's finances in the long run, it will cause economic pain, business disruptions and possibly social unrest if shortages last several more weeks.

A Democratic Transition in Question. The Democratic Republic of the Congo's presidential election took an unexpected turn this week when opposition figure Felix Tshisekedi was proclaimed the winner. The news kicked off celebrations in Kinshasa but also raised eyebrows in Paris, Brussels and elsewhere as the results do not comport with the findings of the Catholic Church, which has over 40,000 election observers throughout the country. Tshisekedi's surprise victory has sparked rumors that he cut a deal with the outgoing president, Joseph Kabila, to protect Kabila's vast financial interests in exchange for ensuring a transfer of power. Looking ahead, opposition candidate Martin Fayulu — whom the Catholic Church asserts actually won the contest — will take legal action before calling for more drastic action. For now, the fate of the election rests with the Congo's constitutional court, which is packed with Kabila allies.

Taliban's Unwillingness to Talk. Last week, the Taliban withdrew from peace talks with U.S. officials scheduled to take place in Saudi Arabia and Qatar to avoid speaking with Afghan government officials. The Taliban first wants to negotiate a withdrawal from Afghanistan of NATO and allied troops before publicly talking with Afghan President Ashraf Ghani's administration to end the 17-year war. Reports also surfaced this week that the White House is considering a smaller troop withdrawal over a longer period of time than the 7,000-troop figure reported in December. It's unclear what course President Trump will choose, but a smaller troop withdrawal suggests he will balance his desire to pull out of the conflict with the Pentagon's insistence of staying the course to bolster the Afghan security forces in their enduring stalemate against the Taliban, as talks continue in search of a breakthrough.


On Our Minds

Huawei's Struggles Continue. The Chinese technology giant Huawei had another bad week this week. The United States just concluded its comment period on proposed rules to restrict exports on emerging technologies and revelations emerged that the United States did not renew an export license of Huawei's research and development subsidiary in Silicon Valley. Then reports on Friday said Polish authorities had arrested a Huawei executive and charged him and a Polish national with espionage. These developments indicate Huawei faces continued pressure on its global image and its access to both Western markets and components — and research — and this pressure will force Huawei, and all of China's tech companies, to develop more technology in house.

Pompeo's Middle Eastern Tour. U.S. Secretary of State Mike Pompeo will wrap up his nine-nation reassurance tour of the Middle East early next week, trying to convince allies that the United States remains committed to their security and to its anti-Iran strategy. U.S. allies remain unnerved by the sudden announcement of an American withdrawal from Syria. To that end, Pompeo is pushing for a summit in Poland in mid-February focused on advancing Middle Eastern security. Though creation of an Arab NATO may remain a symbolic dream, connections like the ones emerging between Israel and the Gulf states are a more realistic possibility.

Can a Fragmented Europe Compete in the 21st Century? Europe's fragmented nature, the strength of its privacy and competition rules, and its separate environmental regulations have made it difficult for Europe to develop "European champions" in either heavy industry or technology. There are no European Googles, Alibabas or Amazons. This week, the Federation of German Industries, an industrial lobby group, put out a plan to try to boost European competitiveness. It called for competition rules to be toned down to help promote pan-European mergers so European companies could be more competitive globally. The proposal is not the first. We have seen several attempts in recent years to boost the size and scope of European companies, but Europe's fragmentation continues to be a stumbling block.


In Case You Missed It

Europe's Four Big Challenges in 2019

What Brazil's New Administration Means for Business

The World's Oil Producers Prepare for a New Era of Low Prices


On Our Calendar

In the coming week, the United Kingdom's House of Commons will vote on Prime Minister Theresa May's Brexit deal with the European Union, U.S. Secretary of State Mike Pompeo wraps up a tour of the Middle East and Lebanon hosts the 2019 Arab Economic and Social Development summit. For more, see our Geopolitical Calendar.


Join the Discussion

Will China and the United States reach a trade agreement, or extend their trade truce, by their self-imposed March 2 deadline?

How will recent protests in Kyrgyzstan against China's presence there affect China's expansion into Central Asia?

Visit The Daily Round-Up to join more discussions with Stratfor members.

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