Friday13 March 2020 ★ FINANCIAL TIMES 9

SOCIETY

Andrew

Hill

Opinion

T

o his many achievements —

film producer, philanthro-

pist, serial sex offender —

Harvey Weinstein an addc

failedlobbyistforleniency.

His 23-year jail sentence or sexualf

assault and third-degree rape is six

years short of the maximum sought by

prosecutors, but 18 years more than his

lawyershad requested n an extraord-i

inary plea for leniency. Weinstein “like

most people, is complicated”, they

wrote this week. The trial “did not fairly

portraywhoheisasaperson”.

As a fallen Hollywood mogul, Wein-

stein knows a good biopic cannot

includeeverything.Butthenperhapshe

haslosthisself-awareness(aswellashis

marriage, company, privacy, and

“means to earn a living”). That explains

his lawyers’ attempt to persuade the

judge to take account of his “commer-

cial success and contribution to the arts

andentertainmentindustry”.

Weinstein’s appeal for clemency was

unusual, though, only for its flagrancy.

When the great-but-not-so-good find

themselves in very hot water, they big

up “prior good works” and call in all the

favours they can. In 2004, domestic

diva Martha Stewart received a five-

month prison sentence for lying about a

suspicious stock sale. Her judge

received more than 1,500 letters from

fans and arambling missive rom Msf

Stewart describing how as a child she

had loved Willa Cather’s frontier novels

and decided that “even if I could not be

a pioneer... I could attempt to forge

newterritoriesforAmericanbusiness”.

Alfred Taubman, Sotheby’s former

chairman, convicted in 2002 for leading

a price-fixing conspiracy with other

auction houses, sent the judgea bound

book f character references, fromo

Queen Noor of Jordan and former presi-

dent Gerald Ford among others. One

note, from his housekeeper, explained

how Taubman had graciously declined

to fire another member of staff who had

accidentallykilledhisprizedgoldfish.

Like the lawyers for Weinstein, who

was in a wheelchair for sentencing,

Taubman’s team cited age and poor

health in mitigation. They pointed out

thebusinessman,then78,mightnotlive

beyond the maximum three-year term.

He was imprisoned for 10 months and

livedforafurther12years.

Then there is the miracle recovery of

Ernest Saunders, convicted over share

price manipulation during the Guinness

takeover of Distillers. Mr Saunders, now

84,wasdescribedbyhisbarristerattrial

in 1990 as “a shambling figure of a man,

a man prematurely aged”. He success-

fullyappealedandhadhisfive-yearsen-

tence halved, after convincing the court

he suffered from pre-senile dementia.

After serving 10 months, hepursued a

career saconsultantandinvestor.a

Sometimes business leaders-turned-

felonspromisefuturegoodworksinlieu

of jail time. In 2012, lawyers for Rajat

Gupta, former McKinsey managing

partner, suggested he do community

service in rural Rwanda as penance for

securities fraud. Federal judge Jed

Rakoffjokedthepropositionwas“Peace

Corps for insider traders” and sen-

tencedhimtotwoyearsinprison.

In such trials, judges face what is

known as the paradox of leniency and

severity. A1982 study f white collaro

crime sentencing found that “the higher

[the offender’s] social position, the

greater their blameworthiness if they

violate the trust shown in

them... [But] persons who occupy

such positions often have impeccable

records”. As Weinstein’s lawyers tried to

argue,hewas“afirst-timeoffender”.

The gravity of Weinstein’s crimes sets

him apart. His spokeswoman claimed

numerous friendsoffered to write refer-

ences. All preferred to stay anonymous.

Judge Rakoff’s comments on Mr Gupta’s

sentencing are relevant. Reviewing his

contributions to society, the judge

observed that while he was doubtless a

good man, “the history of this country

and the world... is full of examples of

goodmenwhodobadthings”.

[email protected]

Weinstein’s

lobbying for

leniency is a

tired old trick

When the great-but-not-so-

good find themselves in

hot water, they big up

all their ‘prior good works’

be renewed annually in line with a

neuralgic view of sovereignty. As for

Britain’s demand for a no-tariffs, no-

quotas regime for trade in goods and

agricultural products, the EU should

expect nothing in return. Brussels

should simply accept that the arrange-

mentwouldbetomutualadvantage.

The government refuses to publish its

assessment of the economic impact of

its stance. Michael Gove, the minister in

charge of negotiations, says such an

analysis might be misunderstood. So

much for the Brexiters’ claim to “trust

the people”. Mr Gove does plan, though,

to translate his demands into the

languageofadrafttreaty.

MrBarnierwillthenhaveachoice.He

could press on in search of a wide-rang-

ing deal. Much better would be to take

thegovernmentatitswordandspellout

what the EU would offer in a minimalist

deal. This, of course, would fall far short

of Mr Johnson’s hope of unobstructed

trade. It would have the great advantage

ofrevealingthecostofself-isolation.

[email protected]

agency answers ultimately to the

European Court of Justice. Ergo, it

diminishes sovereignty. The same is

true apparently of a slew of agencies

from which Britain will depart — over-

sight groups for medicines, chemicals,

atomic energy and data sharing for

example.

The government says it wants to

negotiate bilateral deals on such mat-

ters, but only on its own terms. The EU

must accept theyexclude “any obliga-

tions or our laws to be aligned with thef

EU’s, or for the EU’s institutions, includ-

ing the Court of Justice, to have any

jurisdiction in the UK”. Lest there be

anydoubt,Britainwillnotsignupeither

to “institutionalised” arrangements for

foreign or defence policy. Law enforce-

ment and judicial co-operation “must

not constrain the autonomy of the UK’s

legalsysteminanyway”.

Addtothistheintentiontodropoutof

EU road transport, space, navigation,

educational and energy programmes,

andtheruptureiscomplete.MrJohnson

will accept a fishing deal allowing access

toBritain’sterritorialwaters,butitmust

the UK government explains in its goals

for the negotiations, is for Britain to

“fully recoverits economic and political

independence”. Nothing in the future

relationship can impinge in any dimen-

sion or to the slightest degree on

Britain’ssovereignty.

Ministers gave a glimpse of what this

means in practice when they

announced last week that Britain is

leaving theEuropean Aviation Safety

Agency the organisation that certifies—

the safety of the skies. Membership of

the agency, they averred, “is not com-

patible with the UK having genuine

economicandpoliticalindependence”.

Most people will be puzzled as to how

shared rules to keep flying safe could

threatenBritain’snationhood,butthisis

where identity politics leads. The

Asthetwosideshavearguedaboutso-

called“dynamic alignment” f competi-o

tion policy, labour standards, climate

rules and other regulatory regimes, the

real story has been hiding in plain sight.

The skirmishes are a diversion. Mr

Johnson has a plan. To borrow a phrase

from the Covid-19 crisis, it is called self-

isolation. All traces of the EU are to be

expungedfromBritain’spublicrealm.

The EU side has not yet caught on. It

has laid out a prospectus for a compre-

hensive agreement, reaching well

beyond trade and investment flows to

judicial co-operation, climate change,

regulationofmedicines,chemicals,data

transfers and such like, and foreign and

defence collaboration. As the European

Council statement approving theEU’s

negotiatingstanceputit:“Thisconfirms

our readiness to offer an ambitious,

wide-ranging and balanced partnership

totheUKforthebenefitofbothsides.”

You cannot blame Michel Barnier, the

EU’s chief Brexit negotiator, and his

team for the ambition. Theresa May’s

government repeated over and again

that, although it was leaving the single

market and customs union, Britain

wanted just such a “deep and special

partnership”. For his part, Mr Johnson

signed up to the same sentiment when

he endorsed the political statement of

intent accompanying the Brexit with-

drawalagreement.

What has happened since is that

the prime minister has decided that

an e lection victory ives him the rightg

to tear up past commitments and

aspirations. The irreducible aim now, as

O

f course there will be a

Brexit rade deal. The twot

sideshavetoomuchtolose

fromfailure.BorisJohnson

has form on this. Britain’s

prime minister will quietly submit to

Brussels while claiming a famous

victory. The EU will bend just enough to

supplythefigleaf.

The counter case is just as easily

made. Mr Johnson has a large and stable

majority in parliament. His party is

united in wanting to raise the draw-

bridgeonitsowncontinent.Itsdevotion

to a narrow interpretation of national

sovereignty has become an obsession.

Addicted as he is to grand gestures, and

never troubled by facts, the prime min-

isterwilldrivetheUKoverthecliff.

What unites the two sets of pred-

ictions, offered interchangeably by

well-intentioned commentators, is

the absence of anything beyond, well,

a cloudy crystal ball. Sure, logic points

to a fudge on, say, policing the level

playing field that is needed for a

comprehensive trade deal. But Brexit

is a project ruled by emotion. The

Conservatives were once hard-headed

pragmatists. Now they are the cham-

pionsofEnglishnationalism.

Johnson’s covert

Brexit plan is

self-isolation

The real story is that

ll traces of the EU area

o be expunged fromt

Britain’s public realm

H

ow badly will the corona-

viruspandemichurtglobal

trade flows? That is a ques-

tion many investors are

nervously asking, as coun-

tries includingthe US nda India mposei

travel bans and companies everywhere

brace for supply-chain shocks. But as

fear spreads, there is a second issue that

investorsshouldalsocontemplate:what

will happen to the financial flows that

normallybackthesesupplychains?

The answer may be alarming. As

Credit Suisse analystspoint out, these

issues could create big dislocations

in demands for dollar funding. The US

Federal Reserve can try to offset the

impact by intervening dramatically in

its domestic repurchase “repo” markets

— as it didon Wednesdayand

undoubtedly will do again — that may

not be enough to offset all the global

stress. “Our main concern is about

missed payments for dollars globally,”

the analysts wrote, adding that missed

payments will force “firms to become

deficit agents [consuming more money

than they generate]; as this cascades,

banks and regional banking systems

willbecomedeficitagents[too].”

Predicting how this might play out is

fiendishly hard because these trade

financingflowsarealmostascomplexas

manufacturing supply chains — and as

lamentablyopaqueastheshadowbank-

ingworldwasbefore2007.

Nevertheless, the Bank for Inter-

national Settlements surveyed the

landscape in 2014, in what shockingly

seems to be the ast serious studyl. It

madefourpointsthatmatternow.

First, the bank-intermediated trade

finance sector is large, between $6.5tn

and $8tn. Second, more than a third of

it, around $2.8tn, occurs via letters of

credit from banks. These borrowing

lines aretypically not recorded on the

banks’ books unless or until the client

activates them. That, unnervingly,

means “for the most part, L/Cs repre-

sent off-balance sheet commitments”,

the BIS wrote. Third, since mostglobal

trade is invoiced in dollars, more than

80 per cent of L/Cs are settled in them

as well. The BIS says, “a key condition

for the ability of many banks to provide

trade finance is their access to US dollar

funding”. Fourth, dollar access is un-

even. US banks can tap the Fed’s financ-

ing tools and big players can cut deals in

the repo markets. But only a quarter of

trade finance comes from major inter-

national banks, so much of the funding

goesthroughintermediaries.

Thus far, these financing chains do

not seem to be too stressed. It has

become markedly more expensive

recently to raise dollars from yen-based

markets.ThismattersbecauseJapanese

banks became the dominant non-US

provider of dollars after European

banks retreated. Thankfully this swing

isstillmodestcomparedto2008.

However, that may just reflect a time

lag. Credit Suisse notes that when trade

is disrupted, companies initially need

less funding, not more, as they use the

stocks they have on hand. But after a

few weeks, payments start getting

missed and create a dash for funding.

Regional banking systems may be ill-

prepared, since they typically assume

that letters of credit will only be tapped

inanidiosyncratic,notsystemic,way.

There are ways for the Fed to offset

this. It can pour liquidity into the US

repo market, and hope it trickles out. It

can also make dollars available to other

central banks, so they can support their

ownprivatesectors.TheFeddidexactly

thatbackin2008bycuttingswapsdeals

with its counterparts in Canada, UK,

Switzerland,JapanandtheEU.

Pierre Ortlieb, economist at the

Official Monetary and Financial Instit-

utions Forum, argues that the

pandemic means US policymakers

“shouldbringbackdollarswaplines”.

It is unclear how President Donald

Trump would react if the Fed did so. “Is

the White House going to demand a

quid pro quo from places like Europe or

Japan” for the swap lines, frets a former

central banker who helped cut the 2008

deals. In addition, the central bankers

involved in those talks have mostly left.

Jay Powell, Fed chair, is forging com-

mendably collaborative relations, but

theyarenotbattletested—yet.

More worrying, the 2008 swaps deals

did not include China or Taiwan. But

today, Chinese companies and banks

have big dollar needs. And Taiwanese

life assurance companies have arge for-l

eign exchange exposures through the

country’s role in the semiconductor

industry, as Brad Setser of the Council

onForeignRelationsnotes.

The key point is this: what the Fed

does next with interest rates matters;

but what it does with repo markets and

central bank swaps matters even more.

Asin2008,itpaystowatchthefinancial

plumbing, even if its twists and turns

are once again fiendishly hard to track.

[email protected]

Federal Reserve could

be forced to bring back

dollar swap lines

o stabilise trade financet

Pandemic threatens to start a dash for cash

I

n the never-ending war between

humans and microbes, the smaller

ofthosetwocombatantsisperpetu-

allyprobingfortheweakestlink.

That could be a wet market in

Wuhan where a virus jumps from a bat

or a pangolin into people. It could be the

gig economy in the US, where infected

people might be too financially

stretched to self-isolate and forgo two

weeks’ pay. Or it could be a health sys-

tem in an impoverished country, say in

Africa,wheretestingisinadequate,doc-

tors and nurses in short supply and hos-

pitalsatbreakingpoint.

In the unfolding coronavirus drama,

Africa has been the dog that doesn’t

bark, or in this case perhaps the bat that

doesn’t squeak. There have been rela-

tively few reported cases. Egypt, where

dozens of Nile cruise passengers are in

quarantine, is the worst affected. About

10 other countries have confirmed

cases.But that only makes just over 100

cases, mostly in north Africa, in a conti-

nent of 1.2bn people. Italy, with 60m

people, has more than 12,000 cases. If

the numbers are to be believed, Africa

hasbeenremarkablylucky.Sofar.

There are several plausible explana-

tions. One is that the numbers are not

credible. When the outbreak began in

China, there were only two labs in sub-

Saharan Africa able to test for the virus.

That situation has improved. More than

40countrieshavesometestingcapacity.

Still, it is not enough. If the number is

low, one explanation may be that many

cases have gone undetected in a popula-

tionwithamedianageof19.

Another is that African health sys-

tems, however under-resourced, are

used to dealing with infectious diseases.

When, in 2014 a Liberian man with

Ebolacollapsed n the arrivals hall ofi

Lagos airport, Nigerian authorities

did a remarkable job of tracing his

contacts and quarantining them, snuff-

ing out the outbreak. Last month,

when an Italian businessman became

Nigeria’sfirst case f coronavirus, theo

authorities — already dealing with a far-

worse Lassa fever outbreak — sprang

into action. So far, the number of

reportedinfectionsisjusttwo.

The third explanation is one that few

scientists would dare suggest for lack of

robust evidence: that the virus doesn’t

do well in hot weather. If that is true,

there could be respite on the way in the

northern hemisphere as winter turns to

spring and summer. Although that

would not end the epidemic, it would

buy time for health systems to prepare

andresearcherstotestavaccine.

Africa may have been spared the

worst of the coronavirus outbreak, for

the time being at least. More often, it is

at the forefront of the fight against

infectiousdiseases.Onlythismonth,the

last Ebola patient in the Democratic

Republic of Congo wasdischarged. That

starts a 42-day countdown to declaring

an end to an outbreak that has killed

2,264 of the 3,444 people infected — a

“kill rate” that makes coronavirus look

benign.

The war againstEbola, fought in the

hardest conditions imaginable —

including a real, low-level war — is a vic-

tory not only for Congo but for the

world. If coronavirus has taught us any-

thingitisthefactofourinterconnected-

ness.

These issues have been brilliantly

highlighted by the author Laurie Gar-

rett, who has written for decades about

our eternal vulnerability to microbes.

InBetrayal of Trust: Collapse of Global

Public Health, s he warned against a glo-

balshiftfrompublictoprivatehealth.

In an age when the perceived threat is

greater from non-communicable dis-

eases — such as cancer, hypertension

anddiabetes—thetemptationistoview

health through a personal lens. The

individual with the best medical insur-

ance or est fitness regimen will beb

the healthiest. That ignores two facts.

One is that the most effective health

interventions, from clean water to anti-

biotics and vaccines, have all been

collective. The second is that infectious

diseases have not been defeated. They

have,atbest,beenkeptatbay.

This has implications for rich and

poor regions alike. For countries such as

the US or the UK, it means you ignore

public health — and the health of the

most vulnerable in society — at your

peril. In poorer parts of the world,

it means that anyone’s battle against

diseaseiseveryone’sbattle.

Last week, the US Congress approved

roughly $8bn to fight coronavirus at

home. A few days earlier, the UN

had released meagre $15m to help thea

world’s most vulnerable countries fight

thesameoutbreak.

Suchaskewedresponsesuggeststhat,

collectively, we have not listened to

what global health experts have been

telling us for years. In the fight against

infectious disease, your problem is also

verymuchmyproblem.

[email protected]

From clean water to

antibiotics and vaccines,

the most effective

interventions are collective

Only public health can win the battle against infectious diseases

AFRICA

David

Pilling

POLITICS

Philip

Stephens

MARKETS

Gillian

Tett

MARCH 13 2020 Section:Features Time: 12/3/2020- 18:15 User:dana.prince Page Name:COMMENT USA, Part,Page,Edition:USA, 9, 1