Weekend reading links

1. NYT has a story on how Heidelberg Materials, a Germany company, is trying to produce cement in Brevik in Norway, without carbon emissions by using carbon capture technology.

More than half a ton of the gas arises from every ton of cement that a plant like this turns out. Early next year, carbon dioxide from the facility will be chilled to a liquid, loaded onto ships and carried to a terminal near the city of Bergen, farther up the Norwegian coast. From there, it will be pumped about 70 miles offshore into rocks a mile and a half below the bottom of the North Sea... It helps that the Norwegian government is underwriting 85 percent of the up to 400-million-euro cost of what will be the first large, commercial-scale effort to strip carbon dioxide from cement and bury it... Hasan Muslemani, head of carbon management research at the Oxford Institute for Energy Studies, estimated that the cost of capturing the carbon dioxide would be up to double current cement prices. Heidelberg is counting on customers to be willing to pay more for a product that comes with green credentials...

Mr. Houg suggested during a presentation to journalists that the carbon-free cement might cost three times the market price for ordinary cement, around €130 a metric ton... Cement production, which accounts for nearly 7 percent of energy-related emissions, presents one of the knottiest problems for emissions reduction... Heidelberg estimates that cement accounts for only up to 2 percent of the expense of a large building project but for perhaps 50 percent of the emissions, so using carbon-free cement is a relatively inexpensive means of cutting emissions... Heidelberg says that when Brevik is up and running, it will reduce emissions by around half, or about 400,000 metric tons a year. That amount may seem like a big number, but it is a small portion of the 61 million tons that the company’s cement business produces.

2. Oren Cass has a provocative response to the critique of Trump's proposal to raise tariffs to level the playing field. 

In Economics, the industry-defining textbook first published in 1948, the Nobel laureate Paul Samuelson argued aggressively for free trade. He did not, however, deny that tariffs work; under the heading “Beggar-Thy-Neighbor Policies,” he listed the many ways that policies like “protective tariffs” could help “create a favorable balance of trade.” Rather, Samuelson urged that “any intelligent person who agrees that the United States must play an important role in the postwar international world will strongly oppose the above policies,” because to do otherwise would be to “attempt to snatch prosperity for ourselves at the expense of the rest of the world.” As C. Fred Bergsten, the founding director of the Peterson Institute, acknowledged in 1971, “The economic argument was always marginal” for free trade. “It was the foreign policy case which provided the real impetus for liberal trade policies in the United States in the postwar period.”

3. Ajay Srivastava points to an important trend with India's manufacturing and exports.

In FY14, India’s GDP was $2,010 billion, with merchandise exports at $314 billion and manufacturing accounting for 15 per cent of GDP. By FY24, GDP had grown to $3,900 billion, and exports reached $437 billion, but manufacturing’s share in GDP dropped to 13 per cent. With manufactured products making up 75 per cent of India’s trade in both periods, the share of manufacturing exports relative to manufacturing GDP fell from 78.1 per cent in FY14 to 64.6 per cent in FY24. This reflects a dual challenge: The shrinking role of manufacturing and its decreasing export contribution.

This about competitiveness compared to China

The cost of industrial electricity in India varies between $0.08 and $0.10 per Kwh, whereas in China, it’s $0.06 to $0.08. Additionally, lending rates in India average 9-10 per cent compared to 4-5 per cent in China. These cost differences make a product expensive. For instance, producing solar cells in India is 40 per cent more expensive than sourcing from China... India relies on foreign shipping companies for 90-95 per cent of its trade cargo, leading to higher freight costs and less control over shipping schedules. About 25 per cent of Indian cargo passes through hubs like Colombo and Singapore because many Indian ports lack deep waters for large ships, adding time and costs.

4. Japan softpower exports are competing with hard power ones.

In a report published in June the government gave figures on the value of exports by its content industry — a grouping that included anime, games, films and comics. In 2022, those exports were about $30bn. Pointedly, the report juxtaposed this with the $34bn exports of the steel industry and $38bn of its semiconductor sector.

This about the spectcular success of Japanese animation, or anime

There are currently an estimated 800mn fans of Japanese animation — known as anime — around the world, and key figures in the industry see those numbers rising towards a billion fairly soon. If achieved, that would be roughly equivalent to the global fan base of tennis... After years of growing ever more hungry for content, the overseas market for Japanese anime is now almost the same size as the domestic one and growing more rapidly... Unlike some other forms of entertainment, whose popularity expanded strongly during the pandemic but waned afterwards, anime consumption has continued growing past 2022. In 2023, the combined sales of Japan’s anime production companies surged almost 23 per cent from a year earlier to hit an all time record and, according to research group Teikoku Databank, are on course to break that again in 2024. Analysts at Jefferies cite industry projections that the global anime market will almost double from $31.2bn in 2023 to $60bn by 2030 because what was once a largely Japanese genre has comprehensively shifted into the mainstream culture of the US and Europe.

The Economist has a good description of anime

Anime is hand-drawn and usually two-dimensional, unlike the photorealistic 3danimation that has grown more common outside Japan. The characters often resemble hyper-caffeinated Tintins, with unusually large, expressive eyes, small noses, strange hair and easily decipherable emotions... Anime’s global growth has been made possible by its own evolution. Japanese comic books and graphic novels, collectively known as “manga”, have long provided the source material for anime. Unlike comic books in Britain and America, manga are not primarily or even mostly for children. Thousands of new manga are published every year, on virtually every subject imaginable, from pornography to reflections on war, which gives anime an inexhaustible range of sources.

But around 30 years ago, studios started producing more anime aimed at girls, such as “Sailor Moon”, that was less focused on fighting and robots and more on storylines and magic. And as the fan base got older, creators began making more sophisticated works, often with more adult themes... Around that time “Dragon Ball” and “Pokemon” were engaging a new generation of fans. Japan’s government noticed and eventually took action: in 2013 it launched an initiative called “Cool Japan”, in which it invested some ¥90bn to propel Japan’s creative industries abroad. It was a flop, because of poorly chosen investments, but that has not stopped the government from trying again: it wants to quadruple the value of Japan’s content industry by 2033. 

5. How the US is using the CHIPS Act money?

A good chunk of the chips money has gone into bolstering schools and vocational programmes in areas like upstate New York, where the US science department signed a memorandum of terms with Micron Technology, which plans to invest around $100bn in chip production over 20 years.

6. Ajay Kumar writes about the latest developments in quantum communications.

In August 13 this year, a significant milestone in quantum technology was achieved as the National Institute of Standards and Technology (NIST) announced the first three Post-Quantum Cryptography (PQC) standards. These standards open the door for the rollout of this technology in establishments worldwide, addressing concerns about quantum computers breaking current encryption protocols, and endangering the entire cyber landscape...

Two key technology trends have emerged. PQC and Quantum Key Distribution (QKD). PQC involves developing cryptographic algorithms resistant to quantum attacks, while QKD uses quantum mechanics to securely distribute encryption keys. Curiously, there is no consensus yet on which of these, or whether both, would become the norm. The world is split between the two approaches: The United States favours PQC, while China and Russia are investing heavily in QKD.

7. Is e-commerce worsening the Chinese deflation?

Because a growing portion of spending in China is happening online, the price reductions by the app and other e-commerce platforms copying its success have contributed to a deflationary downturn. About 60 percent of the country’s consumers buy through e-commerce, accounting for more than one-third of all retail spending, according to HSBC. “Pinduoduo is both the consequence and cause of deflation,” said Donald Low, a professor of practice in public policy at the Hong Kong University of Science and Technology. Founded in 2015, Pinduoduo has grown more quickly than its more established rivals, recently expanding abroad with its Temu brand. In its most recent quarter, Pinduoduo said revenue had risen 86 percent... 

Colin Huang, Pinduoduo’s founder and one of China’s richest men, has said that one of the company’s core values is not to sell cheap products, but to offer goods that customers will feel are less expensive than they should be. Earlier this year, Ms. Lin, the seller in Zhangzhou, said Pinduoduo had enrolled her in an “automated price tracking system” to allow the company to lower the price of her diapers whenever it detected similar products available for less. A few months after she opted out of the program, she discovered that the setting had been turned on again... Economists have studied the consequences of e-commerce on pricing for years. In the mid-2010s, economists started citing something called the Amazon Effect, for the influence wielded by the dominant online retailer Amazon.com to drive down prices across the web and at brick-and-mortar stores. Almost all retailers, including Amazon, track each other’s prices and then adjust their own using so-called dynamic pricing, when prices move according to market conditions...

Pinduoduo’s success has prompted its two largest rivals, Alibaba and JD.com, to join the low-price competition. Last year, Alibaba’s shopping site Taobao started a campaign to rate sellers based on how their prices compared to other e-commerce platforms, according to Chinese media. The sellers with better prices would receive more traffic and exposure for their products. JD.com, once known for selling high-end electronics, has also created a series of low-price campaigns.

8. The remarkable gold rally this year, from its sub-2000 low in February to the 35% rise till date.

10. Important facts about the global oil market

Nearly 60% of the world’s oil now comes from countries other than the cartel and its allies, up from 44% in 2019. America’s shalemen have become the biggest producers in the world by far. Brazil, Canada and Guyana have all increased their output in recent years. According to the International Energy Agency, production by non-opec countries will grow by 1.5m bpd next year.

11. The Economist points to the Trumpification of American policies, where the Republican candidate has set the agenda only.

Ms Harris’s immigration policy is to endorse the most conservative bipartisan reform proposal this century. Its provisions include shutting down asylum applications when the flow of irregular migrants is high. Her trade policy involves keeping, in modified form, most of the tariffs Mr Trump imposed in his first term. On tax, Ms Harris would keep most of the cuts Mr Trump signed in 2017 (raising rates only for those who earn over $400,000). On energy, she has become a convert to fracking and has been part of an administration that has seen America pump more oil and gas than ever before...

Mr Trump adopted a more confrontational approach to China than any recent president, even if his policies were in practice less scary than they sounded. The administration Ms Harris has been part of has been less verbally antagonistic but tougher in practice, banning technology exports to China and placing huge tariffs on imports of Chinese electric vehicles. On the Middle East, Ms Harris has not let Mr Trump outflank her on the right, despite pressure from within her own party to cut arms supplies to Israel. Nor does she seem in a hurry to revive the deal with Iran that Mr Trump tore up; this week she called the Islamist regime America’s greatest adversary.

12. Finally, the data centre rivalry between US and China in Asia.

There are four choke points: “internet exchange points” (IXPs), which let internet firms cut costs by routing traffic down the hallway rather than across the world; data centres; undersea fibre-optic cables; and telecoms firms. All are vulnerable to espionage. Tapping undersea cables has been a trick of spooks since the cold war. Landing stations are hubs for data interception. Back doors can be installed in infrastructure. America’s government has warned that Chinese presence at ixps creates “the capability to misroute traffic and, in so doing, access and/or manipulate that traffic”. Even if the data flowing through IXPs are encrypted, some experts think metadata could be exposed.