Defence on the defensive: NATO under scrutiny

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Hello and welcome to the Intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. For the most part, gambling is illegal in Japan and the Japanese are wary of it. It can be addictive and has a whiff of the criminal underworld about it. But casinos are now legal and, and the government wants to let the world's biggest casino operators in. And globalization has ensured that most spirits can be found everywhere. But you won't find tequila in India. So one cocktail enthusiast on returning home from America has fired up a still and is making agave spirit. Just don't call it tequila. But first, today, NATO defence ministers will conclude their meetings in Brussels ahead of a security summit that starts in Munich tomorrow. The two day summit comes as the defense alliance is increasingly under the spotlight. President Donald Trump has long complained that European governments aren't pulling their own weight when it comes to spending and troop deployments.

They are really sort of letting us down in that one respect and, and we don't want people taking advantage of the United States.

He wants NATO to take a more leading role in the Middle East. In response, ministers have agreed in principle to take over some of the training in Iraq that's currently being carried out by a U. S Led coalition against Islamic State. It's not clear whether more NATO troops will be deployed or whether more NATO partners will be drafted into Iraq. What is clear is that the alliance is bending to international pressure.

NATO in the past two or three years has had a pretty difficult time of it, partly because of Donald Trump's pressures on it from the White House. He's been pushing very hard, harder than perhaps any previous president, for NATO members to be spending more money to carry their fair share of the burden, as he would put it.

Daniel Franklin is the Economist's diplomatic editor.

But also there have been other criticisms. Notably recently President Macron of France, in an interview with the Economist, talked of NATO experiencing brain death. So there's been a lot of questions about NATO's future.

So NATO came in for this kind of criticism even before the Trump era.

Before Donald Trump came to the White House, NATO was under pressure because of external reasons more than internal ones. It was under pressure because of Russia's actions in Ukraine. So there was always a bit of a disconnect between the level of activity of NATO in response to the increased pressure it felt from Russia and the criticism it was getting from the White House in particular when Donald Trump came to power.

Broadly then, the perception is of a NATO that is struggling.

Yes, I think that's right. But there have been changes of late which I think are more encouraging for NATO. First of all, Donald Trump himself has been changing his tone somewhat. He's been keen to trumpet NATO's increased spending promises as a triumph for his pressure, saying that no other president has achieved what he's achieved. He's turned into something of a NATO booster or boaster rather than a NATO basher. And a new big survey of attitudes to NATO countries by Pew Research center is reasonably encouraging, I think, for the organization.

In what way?

Well, the Pew survey suggests that support for NATO among populations among the NATO member states is reasonably strong. 53% say they have a favorable attitude towards NATO. Only 27% have an unfavourable attitude.

If it was an organization that was struggling with a perception problem, now it doesn't seem to be what's different?

Well, I think there are still perception problems. If you delve deeper into the Pew survey, there are also some less good signs for NATO. In certain countries. Support over a 10 year horizon has dropped quite sharply. In France, for example, there's been a 21 point drop over that period. In Germany, too, quite a sizable drop even in the United States. Although the level of support for NATO favorability rating of just over half is about the average over the period from 2009 to 2016. It's quite a sharp drop from the past couple of years where support had spiked. And there are a couple of NATO member states where unfavorable attitudes to the alliance remain very strong, and that's Greece and Turkey. So it's very much of a mixed picture. But I do think there has been a revival in NATO's fortunes, partly because the political sense pressures from America have eased somewhat in recent times.

So how much do you think these troop deployment promises and spending changes are down to pressure from the likes of Presidents Trump and Macron.

Well, NATO was going to be increasing its spending anyway, but the problem was that it was not living up to the promises that it itself had made. The. The pledge that the NATO members had made back after the Russian move into Ukraine and the annexation of Crimea was to spend, at a minimum, 2% of GDP on defense. And only a few countries were doing that. The promise was to do this by 2024. Some countries, in particular Germany, were not going to achieve that. America was complaining, as indeed American presidents have done repeatedly down the decades. But the difference this time was that Donald Trump did it with a vehemence, a persistence and, I think, a sense of threat, even to the point of threatening to pull out of NATO if the other allies didn't shape up. That was a degree of pressure that NATO had not faced before, and I think perhaps to some extent, that has accounted for at least some of the increased spending.

Mr. Trump's complaint seemed wholly focused on everyone paying their own fair share about money concerns. Is there more to it than that?

Yes, I think there is more to it than that. I think President Trump has also started to see that NATO can be useful to him in a number of ways. One way is by spending more. It's something that he can chalk up as a success for him, and he mentioned it in his State of the Union address. We are also getting our allies, finally, to help pay their fair share. I have raised contributions from other NATO members by more than $400 billion.

So it's not just what's fair and equitable. He's looking for NATO members to relieve pressure on America's forces in the wake.

Of the killing in January of Qassem Soleimani, a top Iranian general. He actually asked NATO, or said that he wanted NATO to do more in the Middle eas. So far from NATO being something whose existence was under threat, he wanted it to step up and come and do more. So ever since then, NATO itself has been busily looking at what it could do in Iraq in particular. But now defence ministers are meeting this week, and they're going to be looking at proposals to increase the NATO training operation in Iraq, perhaps quite substantially.

And as those defence ministers meet today, what else will they be trying to hammer out?

Well, there's a lot on the agenda for defence ministers. There's the question of Afghanistan. The intention, the Trump administration's intention, is to draw down America's presence in Afghanistan. President Trump would like to get those troops home, and that affects NATO, which also has a mission in Afghanistan. There's the broader question of how to respond to Russia's buildup of new weaponry. Vladimir Putin has been busily investing in his arsenal, and in particular with the ending of the Intermediate Range Nuclear Forces Treaty, the INF treaty, there are any lingering constraints about what he can put into place have really come off. And NATO is having to think not just about the INF implications, but also the broader response to the Russian buildup. So there's plenty for defense types to get their heads around, not only at the meeting of ministers in Brussels now, but also when the broader gathering at the Munich Security Conference starts on Friday.

Daniel, thank you very much for joining us.

Thank you.

In Japan, many forms of gambling are illegal. There are exceptions, among them the arcade game pachinko. And in 2018, casinos were legalized. The decision hasn't gone down well with many Japanese people who worry about gambling addiction and the influence of organized crime. That unease worsened in December when a cabinet minister was arrested over allegations of taking bribes from companies eyeing casino projects in the country. In spite of growing public concerns, the Japanese government still seems to think it's worth a roll of the dice.

Well, it sees casinos as a way to attract more foreign tourists and also as a way to reinvigorate local economies, particularly around places where the population is falling.

David McNeil reports for the Economist from Tokyo.

So they legalized casinos in 2018 partly because of those reasons. The problem for them at the moment is that public opinion is quite heavily against them. Now. The biggest casino operators in the world, that includes MGM Resorts and Las Vegas Sands, they're all jockeying for a license, and the sums that they're talking about are quite considerable. So Morgan Stanley released a report last year where they estimated that annual revenue could be around 15 to 16 billion dollars. And then there's a lot more money, of course, for the contracts to build these integrated resorts. And just to be clear, these are family resorts. This is the sort of thing that the Japanese government has in mind. They would have hotels, conference centers, restaurants, and the casinos themselves would be around 3% of the overall floor space. That's legally sort of binding, and that's the way that they're selling them to people. And for some local governments, those figures that I've just mentioned are irresistible. So I was down in Nagasaki a couple of weeks ago talking to the vice governor, Hirata Ken. He sees these integrated resorts as a way to sort of bring jobs to the prefecture and to stop young people leaving for Tokyo. And their problem is quite common in Japan. The prefecture of Nagasaki is going to shrink by about 100,000 people in the next decade. And what they propose to do down there is to put the casino in a sort of fading family resort, which is modeled on, believe it or not, on Amsterdam. They have a resort down there with canals, windmills, and cheese factories. And it's seen better days. And what they want to do is to bring the casino in there and hopefully bring in plenty of tourists, particularly from China.

But you say that the public sentiment towards casinos is not nearly as good as these local government officials seem to think.

Actually, Nagasaki is a bit of an exception. Down there. They have less opposition than most. But generally, the polls for the whole of Japan show that opposition is running at about two thirds, Relatively little public support. And the reason is partly because of gambling. People fear that these resorts could bring gambling addictions. And Japan already has a problem with gambling because of pachinko parlors. Pachinko is a variant of pinball. Everybody who's been to Japan sees these very noisy pachinko parlors on every high street. And those gambling addictions affect already about 3 million people. And then the other issue which people talk about is gangsters. Yakuza gangsters are very powerful organized crime groups here, although, we have to say, declining. Many people fear that they will muscle in on casinos and bring crime and so on. So when I was in Yokohama, for example, there was a demonstration outside of the conference, an integrated resort conference, with local people sort of citing those exact things. If we have these casinos, they'll bring in yakuza, we'll have more people with gambling addictions. There'll be more crime. And then the other thing they said was that all the money that we have in this country or a lot of the money that we have, will be siphoned off to these sort of rich American casinos. So they're not very happy.

And how's the government trying to tackle that negative public opinion?

Well, obviously, the attempt to sell casinos to an already reluctant Japanese public is not helped by the fact that there is now political scandal involving a minister who was at one point in charge of casino policy. On Christmas Day, Akimoto Tsukasa was arrested on allegations of bribery. What seems to have happened is that a Chinese company offered him bribes and gifts and so on to smooth the path for a casino in Hokkaido, in Japan's north. Akimoto says that he did nothing wrong. What he says is that he was remunerated for speeches by this company, and he says he instructed his staff to pay for the China trip or pay for the cost, but say they neglected to do so because of an oversight. The bribery scandal is still going on. Akimoto is still in prison, and it has also ensnared five or six other politicians. All of which seems to confirm for people who are already skeptical of casinos, that they spread corruption. And I don't think it will help the government's case as it tries to pursue this policy.

And do you think that in turn will have any sort of net effect on whether or not these things get built, these huge resorts?

Well, you could argue that it already has. In fact, some people do argue that. So it has already pushed back the timeline, and the government says it won't even begin considering those submissions until next year. And that's arguably a casualty of this bribery scandal. Some potential hosts are getting cold feet. Chiba and Hokkaido, the two places that have pulled out in the last month or so, they already had problems. Both of them have said that they want to focus resources on disaster management and that they feel that the casino issue is a distraction, political and economic distraction. But my sense, and I think the sense of the people I've talked to, is that the problems, the bribery scandals, the cost and the sort of issues that people talk about that I've just cited, they will slow the casino train, but they won't derail it. I think what will probably happen is that eventually these licenses will be awarded, but they won't come as soon as people would like. The initial projection was that people would actually start opening casinos in the middle of this decade. It's probably going to be pushed back now towards the end of the decade. That's what the best projections seem to say.

David, thank you very much for your time.

Thanks for having me.

Around the world, Mezcal is having a moment. Sales of the Mexican spirit are booming, increasing fivefold between 2011 and 2017. But it's still not available everywhere. Pushing one man to mix up his own local alternative.

In India, you drive over red, dusty plains through fencing of agave. It's in a bit of India that actually does look like the countryside of highland Mexico.

Alex Trevelly is our Asian news editor and went on a spirited reporting trip for 1843, the economist's sister magazine.

And then you see this bizarre, basically homemade water tower in the shape of a giant martini glass. Then you've arrived.

And what is it that they're making at this distillery?

At this distillery, they make a variety of craft distilled liquors. Actually, the one that drew me is Desmond and India's own and only 100% Indian agave spirits.

Agave spirit like Indian tequila or Mezcal.

You cannot call it either tequila or Mezcal because both of those things, by law and by custom, must be made in Mexico and Mexico only. But if you were allowed to, you might call it Indian tequila.

So why is anybody going to the trouble of making it, then?

Well, the Mexican stuff is not very widely available in India. For one thing, you have to pay horrific import duties for two. There's just not much of a local market for it. So your choices as a tippler in India are somewhat limited and expensive.

So how is it that these dusty plains of India should be host to essentially a tequila distillery?

Well, it all comes down to one man. It's the story of this somewhat eccentric, certainly very unusual character named Desmond Nazareth. He spent, I think, 18 years working in the US when he moved back to his native India in the year 2000, he was struck by the fact that it was hard to find a margarita or to make your own margaritas at home, because you had to import tequila and there just wasn't much of it going around. One thing led to another and all these years later, he's India's foremost expert in the stuff and certainly the only one who's reverse engineered the making of it.

And so have you tried India's answer to tequila, then? Is it any good?

Oh, absolutely, I'm a fan. It definitely competes with the best, if not the very, very best that I've had from Mexico.

And so if India has its own answer to tequila, then, and international options are eye wateringly expensive, then the market must be pretty good.

Yeah, insofar as there's a market for agave spirits, it's not so bad. But, you know, you face this problem, which is people ask you, what is this? And you have to say, indian agave spirits. Now, Mezcal hasn't really made it big in India yet, although urban drinkers might well know tequila. So you're sort of faced with a mouthful when it comes to explaining what Desmond G is. No one in the world, let alone in India, is looking for agave spirits.

So is the business going to survive? I mean, is there enough of a market for it to warrant having this big distillery in the desert?

Yeah, it's doing all right, actually, for the time being. It's chugging along. They do have an idea about how to grow the business, and that is to turn a different, actual heritage spirit of India, which is called Mahwa, into a bottled, commercially viable spirit that people in India would want to buy. It's a taste fresh from the Indian forests, from a sweet flowering tree. And also, it's a drink that people abroad who may never have heard of it before, might also like to try if they're at all curious about what the traditional, even ancient, drinking culture of India has to offer.

Alex, thank you very much for your time.

Thank you, Jason. Thanks very much.

You can find Alex's and more stories of an extraordinary world in the February March issue of 1843 on newsstands.

Now.

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