64 Finance & economics The EconomistMay 16th 2020
21Free movement would be especially
helpful for countries such as Thailand and
Greece that rely on tourism. Factory Asia
and Factory Europe also rely on workers
shuttling back and forth. Before the pan-
demic, on a normal day up to 3.5m people
would cross an internal border in the Euro-
pean Union, and 700,000 would go be-
tween Hong Kong and mainland China.
The bubbles would have spillovers be-
yond their boundaries, positive and nega-
tive. Much trade these days is in services,
not goods, requiring less of a physical pres-
ence. Britain would be outside the Baltic-
to-Adriatic bubble, but London’s financiers
would still hope for business, even if they
could not visit their clients. Or if, for in-
stance, Vietnam enters the Asia-Pacific
bubble and Indonesia does not, invest-
ment that might have flowed to the latter
could be diverted to the former.
In any case, the public-health require-
ments for creating the travel bubbles will
be vexing. In trade terms, they resemble an
extreme version of non-tariff negotiations:
countries will need to harmonise their ap-
proaches to managing the pandemic. That
is a tall order when America and Europe
cannot even agree on whether it is safe to
wash chickens with chlorine.
Consider the question of whether coun-
tries that have high but similar infection
rates might form travel bubbles. This in ef-
fect describes Britain and France for now:
recording hundreds of deaths a day but not
quarantining each other’s citizens. This
could, however, pose two problems. First,
given that both countries still call for social
distancing, they do not actually want to see
people crowd onto the Eurostar. Second, if
one starts to vanquish the virus, it might
opt to close its borders to the other. “Con-
taminated” travel bubbles are thus likely to
be less productive and less stable.The ideal is “clean” bubbles. For these to
work, countries first have to control infec-
tions domestically, says Teo Yik Ying, dean
of the Saw Swee Hock School of Public
Health at the National University of Singa-
pore. Then they have to be open with their
partners: sharing data about infection lev-
els and testing, and disclosing how they
trace and isolate those who might have the
virus. “This will all be underpinned by trust
between governments,” Mr Teo says.
The need for trust immediately puts the
Asia-Pacific bubble into doubt, as under-
lined by the region’s latest spat: China sus-
pended some beef imports from Australia
after it called for an inquiry into the origins
of covid-19. Poorer nations might also be
excluded. Laos and Cambodia have report-
ed few infections, but wealthier countries
have little faith in them.
More robust testing could help over-
come the trust deficit. Take the fast track
between South Korea and China. So long as
business travellers test negative for the vi-
rus before departure, they are quarantined
for just one or two days and are tested once
more before being allowed out. But that is
cumbersome, which helps explain why
China admitted only 210 South Koreans in
the first ten days of the agreement.
The upshot is that there are no real
shortcuts. Michael Baker, an epidemiolo-
gist at the University of Otago in Welling-
ton, sees developed countries splitting
into two blocs: those like New Zealand and
South Korea that aim to eliminate the coro-
navirus and those like America and Britain
that merely want to suppress it. These
blocs could, in time, resolve into two travel
zones, he says. Goods and money would
still flow between them. But people would
find their horizons dictated by whether
they were on the clean or contaminated
side of the divide. 71,000km 2,000km0 1 5 10 25 50 75100Sources: Johns Hopkins University CSSE; UN; World Bank; The EconomistHealth clubs
Hypothetical travel “bubbles”*, new confirmed covid-19 cases per
1m people, May 7th-13th 2020*Including Monaco, Malta, Hong Kong, MacauP
olicymakers inemerging markets fre-
quently complain that foreign capital is
fickle. But foreign capital could be forgiven
for having a similar gripe about emerging
markets. On a conference call on May 6th
Turkey’s finance minister, Berat Albayrak,
was solicitous and reassuring, telling ner-
vous overseas investors that the country’s
dollar reserves were adequate and its com-
mitment to market principles was firm.
But the next day the banking regulator
turned cold, reprimanding three foreign
banks, bnp Paribas, ubs and even Citi-
group, which helped host the call, for fail-
ing to meet their lira obligations on time.
As punishment, it barred them from the
country’s currency market. Four days later,
the mood changed and the ban was lifted.
These shifts in official demeanour,
from hospitality to hostility to something
in between, all reflect a consistent concern
about the currency. The lira has lost about
15% of its value against the dollar so far this
year, the most among big, commodity-im-
porting emerging markets. In trading on
May 7th it briefly weakened to 7.27 against
the dollar, beyond the point it reached in
August 2018, after America imposed sanc-
tions on Turkish officials in retaliation for
the detention of an American pastor.
To stop the lira’s slide, regulators have
tightened limits on the amount of lira local
banks can provide to foreign financial in-
stitutions, making it harder for foreigners
to bet against the currency. And they have
imposed new restrictions on the spread of
“misleading or wrong information” in fi-
nancial markets. “They want to discourage
people from talking about these issues,”
says Mustafa Sonmez, an economist. Peo-
ple are “not to criticise”. He ought to know.
He and dozens of others, including two
Bloomberg journalists, were indicted last
year on charges of seeking to “destabilise
the economy” during the 2018 crisis.
The authorities have intervened in
more conventional ways as well. Global-
Source Partners, a consultancy, estimates
that the central bank, often acting through
the state banks, has burned through
roughly $35bn in foreign reserves this year
trying to prop up the lira. How much more
it can spend is a matter of controversy. The
country’s “gross” foreign assets (including
gold) stood at over $87bn on May 12th. But
on the other side of its balance-sheet, the
central bank reports foreign liabilities
worth $71.3bn. It has also entered into cur-ISTANBUL AND HONG KONG
The defence of the lira has been
unorthodox, unwise and ineffectiveTurkey in troubleA host of
difficulties