While there will always be those who would rather chuck those chalky candy hearts than eat them with their sweetheart on Valentine's Day, anti-V-Day sentiments usually focus on how big, evil corporations make couples spend unnecessary cash on each other and how single people hate themselves. But how about the global implications of the holiday?

While examples of romantic gifts gone wrong like conflict diamonds are unfortunately already ubiquitous, some groups are spending this Valentine's Day raising awareness about the global impact of the cocoa trade. This year the focus on cocoa is especially relevant thanks to an ongoing political crisis in the world's biggest cocoa supplier: the Ivory Coast, which produced 1.2 million tons of chocolate's main ingredient last year. Avaaz, an activist group, has been pushing Hershey, Nestle, Cargill, and Cadbury, to boycott Ivorian cocoa, the trade in which is helping to prop up President Laurent Gbagbo's pariah regime.

The European Union's sanctions on the Ivory Coast's ports extend to cocoa. Last month, Alassane Ouattara, the internationally recognized winner of the most recent presidential election, embargoed cocoa exports for a month, in an attempt to cut off support to Gbagbo. He's threatened to extend the ban if Gbagbo doesn't leave office.

Another activist group, Green America, is pushing for increased awareness of the use of child labor in cocoa production. According to the U.S. State Department's 2009 Human Rights Report on the Ivory Coast, nearly a quarter of children between the ages of 5 and 17 who lived in cocoa-growing regions had worked on a cocoa farm, often in hazardous conditions. Green America suggests that buying Fair Trade chocolate can help combat child labor, as well as support small farmers and lessen environmental impacts.

Meanwhile, according to Reuters, cocoa futures prices have risen more than 20 percent since Ivory Coast's disputed Nov. 28 election. And the continuing ban in the Ivory Coast means prices are likely to continue to rise.

This year, instead of blood diamonds, chocolate … whatever, try giving your special someone a hug instead. It just might be sweeter.

Just in time for Hu Jintao's visit to Washington next week, economist Arvind Subramanian of the Peterson Institute for International Economics is coming out with a new set of GDP estimates showing that the Chinese economy may have actually surpassed the United States some time in 2010.

Subramanian's estimates rely on purchasing power parity (PPP) estimates, which take differing labor costs in rich and poor countries into account. While the IMF also produces PPP estimates, Subramanian believes these are flawed, overstating price increases between 2005 and 2010 to the detriment of China. Therefore:

The latest version of the Penn World Tables (version 7 to be released in early February 2011) have corrected these biases, which result in an upward revision for China’s PPP-based GDP by about 27 percent and for India by about 13 percent for the year 2005. I use the new PWT corrections as the starting point for computing new estimates for PPP-based GDP and GDP per capita.

A second correction relates to developments between 2005 and 2010. For this period, if the IMF data are taken at face value, they suggest an increase in the real cost of living in China relative to that in the United States (which is equivalent to a real appreciation of the Chinese currency) of about 35 percent. This seems implausible because three alternative ways of assessing currency changes point to a much smaller appreciation.[…]

These two adjustments increase China’s GDP from the current estimate of $10.1 trillion to $14.8 trillion (an increase of 47 percent, of which 27 percent is due to the revision in the 2005 estimate, and the rest due to smaller-than-assumed increases in the cost of living between 2005 and 2010). This $14.8 trillion figure exceeds US GDP of $14.6 trillion. It must be emphasized, of course, that the difference is small enough to be within the margin of error.

Applying the same adjustments to GDP per capita increases the estimate for China from $7,518 (the current estimate in the IMF’s World Economic Outlook) to $11,047. The GDP per capita (the average standard of living) is now about 4.3 times greater in the US than in China compared with a multiple of 6.3 without my corrections (and compared with a multiple of 11 if GDP is computed using market exchange rates).

Subramanian argued for FP in June that by discouraging high-skilled immigration from countries like India, the United States was only taxing its own international competitiveness. These new numbers should serve as a stark reinforcement for that point. 

According to official government figures, China's economy is still the second largest, having overtaken Japan in the second quarter of last year. 

Hat tip: Chris Blattman

Speaking  in Winston-Salem, North Carolina on Monday, President Barack Obama lamented America's stubbornly high unemployment and promised to outline for the gathered students a "vision that will keep our economy strong and growing and competitive in the 21st century."

There was applause as the students sat on the edges of their chairs in anticipation. Unfortunately, what followed only proved that the president should have gone to his eye doctor instead of the Winston-Salem. It was at best, a case of partial vision.

It began with a "recognition" that in the past few decades revolutions in technology and communications and the integration into the global economy of two billion new people in India and China had touched off fierce competition among nations for the industries and jobs of the future to replace the auto mechanics and machinists that Forsyth Technical Community College, where he was speaking, had been founded many years ago to produce. It continued with the argument that the winners of the competition would be the countries with the most educated workers, the most serious commitments to research, the best roads, bridges, high speed trains and airports, the fastest Internet connections, and the most innovation.

The president emphasized that the most important competition the United States faces is not the competition between Republicans and Democrats, but the competition between America and its economic competitors around the world. "That's the competition we've got to spend time thinking about," he stressed.

He went on to reassure the audience that America will win this competition because it has the world's best universities, smartest scientists, best research facilities, and most entrepreneurial people. Indeed, entrepreneurialism is "in our DNA" he said.

But then the vision became a bit cloudy. Despite the reassurances of American superiority, the president said the country is in danger of, indeed is, falling behind -- in high school graduation rates, the quality of math and science education, in the proportion of science and engineering degrees we hand out, in attracting research and development facilities compared to India and China, in R&D spending, and in Internet speed and connections.

Are you a little confused by how we could be falling so badly behind if we have the best universities, best research facilities, smartest scientists, and most entrepreneurial people? All I can tell you is that the president says we are facing in "Sputnik Moment", calling to mind the shock America felt in 1957 when the Russians launched the first earth satellite. To respond to this challenge, he emphasized that we must set the goal of "Made in America."

Hey, nothing wrong with that. At this point, I was cheering. He's the first president in my memory who has dared to say that we need to compete by actually making things. So I give the first half of the vision an A.

But then Obama turned to how we're going to come back and regain leadership by increasing education and R&D spending, improving our infrastructure, and doubling our exports by negotiating more free trade agreements like the one just concluded with Korea.

Aside from the Korea deal (which I'll address in a moment),these are all good things to do and we should do them. But doing them will not by itself reverse the decline in our competitiveness. Actually, the Korea deal illustrates both why this is true and why the president's vision is still impaired. South Korea's workforce is not better educated than America's. Nor does it spend more on R&D, nor is its labor inexpensive like that of China, and nor is it nearly as entrepreneurial. Yet the United States a growing trade deficit with South Korea and is far behind it in areas like liquid crystal displays, various kinds of semiconductors, cell phones, and much more.

What the Koreans do is target development of key industries with special financing and regulations and manage their currency to be undervalued versus the dollar as a kind of protection of the domestic market cum subsidy of exports, impede foreign penetration of domestic markets through a wide variety of formal and informal non-tariff barriers, fail to enforce intellectual property rights of foreign enterprises operating in South Korea, and make foreign investment in Korea extremely difficult as a practical matter.

I am not saying these things to attack South Korea. If these policies work, and they obviously do, South Korea has every right to keep them in place. But obviously Korea is engaging in a different kind of globalization than we are. And equally obviously, the president doesn't recognize that. Thus the president expects that this new free trade deal is going to increase U.S. exports to Korea and create 70,000 jobs in the U.S. But any deal that allows currencies to be managed in such a way as to stimulate exports and inhibit imports - to mention just one factor -- is not going to result in surging U.S. exports or in surging U.S. job creation.

The White House eye doctor needs to prescribe glasses that will allow the president to see the other half of the playing field and to recognize that he must play with a full deck of cards. More education and R&D? By all means, bring them on. But he also needs to respond to the industrial targeting, exchange rate, investment, and getting realistic about the globalization policies and practices of our economic competitors.

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.  

The FT's Martin Wolf managed to find some encouragement in the final communiqué from the Seoul G-20 meeting. In a column earlier this week, he said that language describing the use of various measures of global imbalances and suggesting the need for action to rebalance chronic current account surpluses and deficits suggested that, under the radar, the U.S. and China are moving toward consensus on a way out of the apparent impasse reached in Seoul.

I told him that I marvel at his optimism. But let's say, for the sake of argument, that he's right and that the U.S. will move toward trying to produce more of what it consumes and exporting more of what it produces while China does the opposite. I think there remains the major question of whether either side can actually, physically do what is necessary to achieve rebalancing.

This question occurred to me last night after a chat with a friend from FedEx who mentioned that while his planes fly fully loaded from Asia to America, they return to Asia almost empty. Well, of course, that makes a lot of sense because we don't make much here in the United States that FedEx can take back. Of course, we do export to China, but in recent years our biggest or second biggest China bound export items have been waste paper and scrap metal, and those items go by ship. In the high-value, low-volume, high-tech category of goods that fly well, the United States, despite its self-image as the  world's high tech leader,  has a trade deficit that will likely exceed $150 billion this year.

Let's take a few major products to see how things might work. Steel, for example, is a key product for any industrial economy. The United States imports about 30 percent of the steel it uses while China has more steel making capacity than the rest of the world combined. So, in a rebalancing scenario, Washington would try to find ways to encourage U.S.  companies to buy more of their steel from American producers. But the government would run into the problem that there may not be enough actual production capacity left in the United States to allow a substantial reduction in imports.

Of course, more production capacity can be built, but not in any short period of time. Construction of a new steel mill, even if anyone would have the courage to build one in the United States knowing that China's producers could at any moment unleash a flood of cheap exports into the market,  would take one to two years.

At the same time, China already produces virtually all of the steel it uses and has enough production capacity to fulfill domestic demand many times over for a long time to come, even without increasing production capacity. So China's steel industry really can't rebalance. It can't sell a lot more than it already does at home, and if for some reason it stopped its overseas shipments it would be left with massive excess production capacity that could easily bankrupt its companies.

As another example, take the Apple iPad. Apple is an American based company to be sure, but virtually nothing in the iPad is made in America. Of course, the product is conceived, designed, marketed, and sold in the United States, but the components are mostly made in Japan, South Korea, Taiwan, and Singapore, and the assembly takes place in China. So rebalancing implies that maybe some iPad production would be switched to America.

In principle, there is no reason why the semiconductor chips, displays, and other key components of the iPad couldn't be made competitively in the United States and inexpensive assembly could, perhaps, be done in Mexico or elsewhere in Latin America. But that would mean that the major factories and investments that have been made in iPad production in Asia would have to be at least partly abandoned. That would result  huge financial and job losses to which Asian governments would object.

I sometimes wonder if economists consider these structural, nuts and bolts issues when they talk blithely of rebalancing. These are not things that can be turned on and off like a spigot. It takes a couple of years to build a new semiconductor plant and costs $5-8 billion. Once that investment is made, it is not quickly abandoned unless there is some major change in circumstances.

In his column, Wolf insisted that the U.S. and China must achieve rebalancing fairly quickly in order to avoid protectionism. But is it possible that the action actually runs in the opposite direction -- that some degree of protection might be necessary in order to create the change in circumstances necessary to achieve big shifts in the location of production and thereby also achieve the holy grail of rebalancing?

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.

Those are the three unfortunate major economies projected to see negative GDP growth in 2010-2011, according to the IMF's new World Economic Outlook. (The small Carribean nations of Antigua & Barbuda and St. Kitts & Nevis are also in the red.) Greece, at -3.3 percent, has by far the most dramatic contraction of the bunch.

The outlook is most grim for Western Europe, much of which will see between 0 and 2 percent growth. Politically unstable Kyrgyzstan seems to be the only Asian country with less than 2 percent growth while similarly unstable Madagascar is Africa's outlier.

Iraq is still paying the world back for Saddam's actions -- literally. The Christian Science Monitor reports that the Iraqi government has agreed to pay $400 million to American citizens who claimed to have been tortured or traumatized by the Iraqi regime following Saddam's 1990 invasion of Kuwait. With a 15-30 percent unemployment rate, ubiquitous violence, and a still lacking infrastructure, why is the new Iraqi regime paying so much money to American citizens when it was all Saddam's fault? Because the payment may help Iraq's case to end U.N. sanctions that have lasted since Saddam Hussein's rule: 

Settling the claims, which were brought by American citizens, has been seen as a key requirement for Washington to be willing to push for an end to the UN sanctions.

"There was a lot of pressure on the Iraqi government to do something that gets Congress off their back," says one senior Iraqi official, adding that the settlement cleared the way for US efforts to bring Iraq out from under the UN sanctions.

That's right, Saddam is long gone but sanctions on the still rebuilding country aren't. In fact, Iraq has already paid Kuwait $27.6 billion in reparations and continues to devote five percent of its oil revenues in accordance with the U.N. sanctions resulting from Saddam's invasion. While many countries have cancelled a lot or all of Iraq's debt to them, Kuwait continues to support Iraqi reparations -- regardless of the $22 billion Kuwaiti budget surplus for the last fiscal year.

So if U.S. citizens get paid by the Iraqi government for Saddam's "traumatizing" from 20 years ago, what will the United States pay the families of Iraqi citizens that are actually killed by U.S. forces? Well, the U.S. government is trying to find ways for Iraq to pay for that too.

This week's quiz question:

The volume of global trade decreased how much in 2009?

a) 3 percent    b) 12 percent    c) 23 percent

Answer after the jump …

Read on

Quiz question for the week:

Which country had the lowest rate of economic growth in 2009?

a) Latvia    b) Lithuania    c) Iceland

(For those of you who don't subscribe to the bimonthly print edition of Foreign Policy, you're missing a great feature: the FP Quiz. It has eight intriguing questions about how the world works.)

Answer after the jump …

Read on

Quiz question for the week:

Quiz: How much did new-car registrations change last year globally? 

a) 14 percent decrease    b) no change    c) 7 percent increase

(For those of you who don't subscribe to the bimonthly print edition of Foreign Policy, you're missing a great feature: the FP Quiz. It has eight intriguing questions about how the world works.)

Answer after the jump …

Read on

Tough times call for tough sacrifices. Economies everywhere, desperate to continue their uphill climb out of the global recession, have imbibed this sound logic, however grudgingly. The French, however, don't seem agree with the conventional wisdom: strikes erupted this morning across the country in response to President Nicolas Sarkozy's proposal to bump the retirement age from 60 to-gasp!-61 or 62.

Sarkozy has defended the new measure as a reasonable adjustment given increasing life expectancy. Indeed, he might be excused for merely following in the footsteps of his European colleagues-Germany recently raised the retirement age from 65 to 67. (Then again, these days any comparison to Angela Merkel may do more harm than help.)

So far, the French aren't buying the President's explanations, bringing the country to a near stand-still.  14 percent of teachers and 8 percent of hospital workers left work today to participate in protests, airport travel was disrupted, and even news agencies took a hit. NPR reported that "because there aren't enough journalists available to deliver news bulletins, the main public radio news channel in Paris is playing pop music intermittently."

It seems like just yesterday that we were asking ourselves if the United States was Rome. In light of the financial collapse in the other great cradle of Mediterranean civilization, the New York Times' David Leonhardt poses the inevitable follow-up question:

It’s easy to look at the protesters and the politicians in Greece -- and at the other European countries with huge debts -- and wonder why they don’t get it. They have been enjoying more generous government benefits than they can afford. No mass rally and no bailout fund will change that. Only benefit cuts or tax increases can.

Yet in the back of your mind comes a nagging question: how different, really, is the United States?

The U.S.'s national debt, Leonhardt notes, is projected to rise to 140 percent of GDP within the next twenty years -- Greece's is 115 percent today.

Elsewhere at the Times, Paul Krugman questions the credibility of that long-range projection and argues that the U.S. shouldn't worry:

Basically, the United States can expect economic recovery to bring the deficit down substantially; Greece, which has a larger structural deficit and also faces a grinding adjustment to overvaluation with the eurozone, can’t.

About that eurozone: in a phenomenally awkward bit of timing, Estonia happened to be trying to join it today, and succeeded. Other countries like Poland and Bulgaria, however, are having second thoughts. Greece's current predicament, and the looming crises in Spain, Portugal, and elsewhere, have offered a cautionary tale. The Associated Press looks at the divergent experiences of Hungary and Romania, which are members of the European Union but not the eurozone, and Greece, which is in both: When the IMF bailed out Hungary and Romania in 2009, the countries were able to make the necessary adjustments quickly, if painfully, by letting their currencies fall. Greece, however, can't, and is now looking at far harsher, more drawn-out austerity measures attached to its 110 billion euro bailout.

Raul Castro has made some modest reforms since taking over in July 2006. A few token changes, including the introduction of cell phones, DVD players, microwaves and computers, have been made - but access to these amenities has been prohibitively expensive. New salary incentives were also introduced in 2008, although such moves are not completely new.

All in all, the expected moves towards a market-oriented economy have been lacking. But now  there are some small signs that the leadership is planning to liberalize some sectors of its economy. Where will they start, you ask? It might not be where you would expect: barber shops and beauty salons.

According to the measure -- which state run media has not yet announced -- all barbers and hairdressers in small shops will be allowed to charge market prices and pay taxes (15 percent of average revenue) instead of getting a set monthly wage:

Daisy, a hairdresser in an eastern Guantanamo province, told the Reuters news agency that under the old system the government took in 4,920 pesos per month per hairdresser.

Now she will pay the government 738 pesos per month and keep any earnings above that.

‘We have to pay water, electricity and for supplies but it seems like a good idea,' Daisy said.

She said that while the plan did not turn the shops into co-operatives, employees would have to join forces to decorate and maintain the establishments."

At his State of the Union address, President Barack Obama swore to double U.S. exports in five years. At the time,  some pundits (including one here) scoffed at the idea. Doubling exports, of course, means convincing the world to buy twice as much of the stuff the U.S. produces. That will be no easy feat, particularly given that just about every high-income economy is looking for an export-led recovery.

But it is a feat that has been accomplished before. I used Commerce Department trade data to make the above graph. It turns out, the last time the United States had a year that doubled its trade level from five years before was 1981; the average five-year increase is around 140 percent. 

Still, Obama's plan to double the number by 2015 does not seem so far-fetched. For one, trade has fallen due to the recession, meaning the United States needs to double a lower-than average number. 

Obama started to detail how he plans to double exports at the annual conference of the Export-Import Bank today. First: panels. He is creating an "export promotion cabinet" including representatives from state, treasury, agriculture, commerce, and other agencies, and creating an "export council" with adivsers from the private sector. Second: trade regulation reform, to make it easier for businesses to put products and offer services on the global market. Third: better governmental  promotion of small- and medium-sized businesses.

Yesterday, the Greek government announced a spate of emergency austerity measures, designed to help the country close its yawning budget gap. Half are new taxes, and half are spending cuts, including:

• Hiking the VAT from 19 percent to 21 percent (worth 1.3 billion euros)
• One-off corporate tax (1 billion)
• Cutting "holiday bonuses" by 30 percent (740 million)
• 2 percent supplemental gas tax (450 million)
• Freeze on state pensions (450 million)
• Reducing bonuses and pay by 7  percent for public sector employees (360 million)
• 2 percent supplemental cigarette tax (300 million)
• Supplemental electricity tax (250 million)
• One-off tax on vacation homes and oversized properties (200 million)
• Cuts to pension subsidies (150 million)
• Supplemental tax on luxury goods, e.g. yachts and cars worth more than 35,000 euros (100 million)

Other measures include: an additional 1 percent tax on income over 100,000 euros, reducing government overtime hours by 30 percent, cutting public-sector benefits 10 percent, and taxing the commercial activities of churches. And it's still not quite enough -- Greece needs an additional bailout to help it pay off debt due this spring.