13、Mobile e-mail

　　Nascent

　　May 12th 2005 | SAN FRANCISCO From The Economist print edition

　　The battle for the mobile e-mail business has barely begun

　　SUDDENLY, it seems, everyone is realising that the next big thing in telecoms and technology could be mobile e-mail. On May 10th, Microsoft, the world's largest software firm, unveiled a new version of its Windows operating system designed for mobile phones. This will be able to run programs from independent software firms, such as Silicon Valley's Visto, Good Technology, SEVEN and Intellisync, that will let mobile-phone users send and receive e-mail on their handsets. This follows a very busy April, when SEVEN bought Smartner, a Finnish rival, and Visto reached deals with the largest mobile operator in the world, Vodafone, and, in Canada, with Rogers Wireless, to start rolling out mobile e-mail services.

　　In the short term, this would seem to be bad news, above all, for Research in Motion (RIM), a Canadian firm that now dominates mobile e-mail with its BlackBerry handheld device (nicknamed “CrackBerry” for its addictive nature). Unlike the smaller software firms snapping at its heels, RIM offers employers a complete service that includes both software and hardware. Controlling everything in this way let RIM establish an early lead.

　　The bigger picture is more intriguing. RIM has been stunningly successful, but even it has only around 3m users, mostly itinerant corporate executives. This compares with an estimated 150m employees worldwide who rely on e-mail but do not yet have a mobile service for it—not to mention the 1.5 billion consumers who have mobile phones, love text messaging and might also love e-mail. Of the 680m handsets sold last year, only 20m were so-called “smartphones” that double as calendar, contact book and e-mail device.

　　“It is still early, early, early in this—dare we say nascent?—trend,” says Pip Coburn, an analyst at UBS. He expects mobile e-mail to be a “killer application” because it taps into people's strongest psycho-emotional needs—the urge to connect with others (and simultaneous fear of social isolation if they cannot), as well as the desire to be mobile—while asking relatively little of them by way of new learning, as they already know how to send e-mail via their PCs. Indeed, e-mail is likely to blow away a lot of the other fancy services that mobile operators are hoping to push over their third-generation wireless networks. Andrew Odlyzko, a telecoms guru, once did a survey in which he asked people to choose, hypothetically, between having either e-mail or the entire content of the world wide web: 95% chose e-mail.

　　This has several implications. First, as Mr Coburn argues, the trend toward “Swiss Army knife” handsets that do absolutely everything may not go very far, whereas simple and cheap “dumb smartphones” that stick to connecting people via voice, text messaging and e-mail may ultimately win in the mass market. Second, for the software industry, the field is still wide open. Woody Hobbs, the boss of Intellisync, draws an analogy to PCs in the early 1980s. Apple was then ahead with a winning product bundle of proprietary hardware and software. But eventually it lost out to a host of hardware makers whose products were compatible with Microsoft's operating systems. Today, RIM might be cast as Apple; auditions have only just begun for all the other roles.

　　14、Chinese tourists

　　Footfall

　　Jun 16th 2005 | BICESTER, OXFORDSHIRE From The Economist print edition

　　An early indication of what Chinese tourists like about Britain

　　JAPANESE tourists bearing credit cards loaded with yen transformed the fortunes of British tourism in the 1980s, and also rescued a handful of rather fusty British luxury brands. So the arrival of a new supply of Asian tourists, this time from China, is arousing some excitement. At the moment, Chinese visitors can travel to Britain only on business or student visas. But from the end of July, they will be allowed to visit Britain as tourists, thanks to an agreement signed by the British and Chinese governments earlier this year.

　　What might these people want to do when they are here? An early and rather bizarre indication came this week, when a group of 2,000 door-to-door salespeople who hawk Amway household cleaning products in China were brought to Britain as a reward for flogging exceptional quantities of bottles containing stuff for cleaning sinks. They were not on tourist visas, but their itinerary—London, Oxford, shopping—was more like that of tourists than of the wealthy businessmen and cash-strapped students who can already visit.

　　The trip took 700 of them to Bicester Village, a collection of designer-outlet stores near Oxford. Though many of the most expensive fashion brands have shops at Bicester, the only place where it was difficult to get through the door was Clarks, makers of frumpy but sensible shoes for British adults and schoolchildren. Some of the shoppers were filling suitcases with the shoes. During a previous Amway visit, the store had to hire security guards to restrict entry to the store. Why the crush?

　　Oddly, Clarks shoes are apparently seen as luxury items in China. The company reckons that the brand, which has been around since 1825, may be helped by its lingering colonial associations. Its presence in Hong Kong when the Chinese market was opening up may also have allowed it to get its products into smart department stores before the competition: although many of the shoes are made in Guangdong, they are pricier there than in Bicester. Evidently much planning had gone into the shopping expedition: some shoppers brought pieces of string cut to the length of a friend's shoe to get the size right, others brought cardboard cut-outs of a child's foot.

　　The Britons present were bemused by this frenzy, but the incomprehension may be mutual. Market research by Visit Britain, a government agency, says that along with beautiful scenery and bits of castle, Chinese tourists coming to Britain expect to find friendly local people and delicious regional cooking.

　　15、Boeing gets back on track

　　Jun 2nd 2005 | LOS ANGELES AND SEATTLE From The Economist print edition

　　As America goes on the offensive over subsidies to Airbus, Boeing, its biggest exporter, is learning valuable lessons from its rival's success

　　ANOTHER week, another twist in the eternal struggle between Airbus and Boeing. On May 30th, the American government began the latest round by announcing that it will take a case challenging European government subsidies to Airbus to the World Trade Organisation (WTO). The next day, the European Union (EU) filed a counter claim against the American government's aid to Boeing. The two sides had been trying (sort of) to settle the dispute in bilateral talks since late last year, but the Americans broke them off after Airbus applied for further aid to launch its new mid-sized A350 aircraft, designed to compete with Boeing's great white hope—the 200-300-seat 787, aimed at the fast-growing long-haul market.

　　This dispute has rumbled on since the late 1980s, when Airbus first started to weaken America's dominance of the commercial aircraft market. A truce in 1992, limiting “refundable launch aid” to Airbus to one-third of development costs and Boeing's subsidies from government to 4% of its turnover, lasted until 1998. By then Airbus was steadily approaching 50% of the market. Last week Boeing's chairman, Lew Platt, conceded that, with hindsight, he wishes that Boeing had gone ahead in 1998 with a case it had prepared, supported by the Clinton administration, challenging subsidies to Airbus before the launch of the European firm's super-jumbo, the A380. But Boeing and its allies backed off. The new plane was successfully launched, with over 150 orders so far and at least 50 more to come at the Paris air show, which opens on June 13th (though the plane is six months behind schedule).

　　Now Boeing is gunning for the latest Airbus, the A350. An early buyer is supposed to be the new airline to be formed by the merger of America West and US Airways; indeed Airbus is pumping $250m of unsecured finance into the merger to land the deal. But the possibility that 100% import duties might be levied by America on Airbuses following a WTO ruling may deter further American purchases. The WTO is thought likely to find that both sides have breached subsidy rules. That prospect may create pressure for the two firms to—again—seek a negotiated bilateral settlement, if only to avoid a wider trade war.

　　16、Charlemagne

　　The euro is no cure-all

　　Apr 28th 2005 From The Economist print edition

　　French voters are right to fret about Euro-economics

　　HOW dare those materialistic French fret about unemployment and other bread-and-butter questions as they contemplate the lofty issues posed by the forthcoming referendum? That is what an irate Euro-establishment in Brussels is asking as it watches the Gallic debate. The electorate in France, Eurocrats complain, seems to be ignoring the topic in hand—and anyway, what have job losses to do with the Union's defining document?

　　In fact, it is not unreasonable for the French and other Europeans to express their anger about the economy when voting on the constitution. For the last decade and more, the signature projects of the EU have been economic ones: in particular the launch of a single market in 1992, and a single currency in 1999. Each of these was sold on the basis of their economic benefits. And yet average unemployment in the 12 euro-area countries is almost 9% and growth is slow. It is not terribly surprising if politicians—seeking to promote the latest brilliant idea from Brussels—now get a fairly cool reception.

　　Criticism of the economic policies promoted by Brussels may be unsurprising—but is it fair? Economists reckon that the single market has increased growth, albeit by less than promised. And the euro has promoted trade and price transparency—as well as being a huge practical boon. But it is also true that many of the questions raised about the single currency before it was launched have yet to receive a satisfactory answer.

　　How would less productive economies cope with competition in the euro area when devaluation was no longer an option? Would a single interest rate for such different economies cause problems? Could Europe have a single currency without effective controls on national budgets? And is a monetary union ultimately sustainable without a political union to back it up?

　　The problems of the Italian economy raise the first question in an acute form. Since the single currency was born in 1999, Italian labour costs have risen by about 20% relative to Germany, because German firms have been much more effective at controlling wages and boosting productivity. While German exports have risen steadily, Italy's are struggling—and the Italian economy is the slowest-growing of the big countries in the euro-area. If Italy had its own currency, devaluation would be a way to restore competitiveness, at least temporarily. But in a monetary union that is impossible. EU policymakers are worried.

　　In a speech last week at the Brussels Economic forum, Klaus Regling, the senior civil servant in the European Commission's economic directorate, commented that Italy's “loss of competitiveness does not bode well for the country's economic prospects.” The audience waited for the soothingly optimistic balancing sentence that usually follows any such official comment—but it never came. Some EU economists argue that only a wrenching recession—involving bankruptcies and cuts in nominal wages—can now restore Italian competitiveness. And they point out that Italy is not the only country in the euro-area to have a growing problem with competitiveness. Spain, Portugal, Greece and even Ireland, that paradigm of European success, face similar challenges.

　　But if Italy is suffering a decline in its competitive position, why is Germany not booming? In his speech, Mr Regling hinted that this too might have something to do with inappropriate policies caused by the euro. Strong German exports, he observed, had been offset by stagnating domestic demand. He added: “Unavoidably in a monetary union, countries with below-average costs and prices experience relatively high...real interest rates.” Translation: when Germany needed lower interest rates to boost domestic demand, it did not get them because rates were set for the euro-area as a whole. Worse, Germany may now be stuck in a rut, because, as Mr Regling explained: “Low growth expectations...have become entrenched.”

　　A commission's credibility

　　There is nothing the European Commission can do about the side-effects of a fixed exchange rate and a single interest rate for the euro area—they are inherent to a single currency. But when it comes to controlling budget deficits, the commission is determined to assert itself. Italy is again in the firing line. The commission intends to open an “excessive-deficit procedure” against the Italian (and Portuguese) authorities, for repeatedly breaching the 3% limit on government deficits set for EU countries. Eurocrats see their credibility is at stake. Both Germany and France evaded commission action, by insisting on a rewrite of the EU rules governing government deficits. Many analysts have concluded that the new rules are worthless. Senior figures at the European Central Bank say that it is critical to the future of the single currency that the EU shows it can still enforce budgetary discipline.

　　But it is far from clear that the commission will win its Italian test case. After seeing the French and Germans escape sanctions, the Italians may see little point in co-operating—all the more so since Silvio Berlusconi, the Italian prime minister, is desperate to push through tax cuts ahead of an election. The difficulty in enforcing budgetary discipline on national governments illustrates why some have always argued that monetary union needed to be followed by political union. Dominique Strauss-Kahn, a former French finance minister who played a crucial role in launching the euro, told last week's Brussels forum that it should not assume that the creation of the single currency was irreversible. If Europe did not advance further towards political union, he argued, there would come a time when political tensions between EU members became so high that they threatened the future of the euro. Unfortunately for Mr Strauss-Kahn, his own country's voters may soon be sending a message that makes life harder, putting it mildly, for political union's keenest advocates. What then happens to monetary union may be the next big question those people must face.