Our long international nightmare is over. The U.S. and EU have reached an agreement to end the world's most entertaining trade dispute, which began with George W. Bush's lame-duck decision to raise import duties on Roquefort cheese:
The new US administration has now agreed to drop the import duty threat, due to come into force this week, and which would have affected to a lesser degree a range of EU products, from truffles and mineral water to chewing gum.
Under the provisional deal, the EU will keep the hormone-treated beef ban, which it claims poses a health threat, but will quadruple imports of non-hormone treated American beef in four years.
Cheese farmer and lefty icon Jose Bove (above) described the deal as evidence that the U.S. has "accepted that health is more important than trade," even though this is actually an expansion of trade and between all this beef and cheese, I'm not sure who's getting healthy.
But in any event, kudos to negotiators for ensuring that neither American populism nor European ludditism will bring down the transatlantic alliance. Time for a celebratory cheeseburger.
JACQUES DEMARTHON/AFP/Getty Images
I'll start with the bad news for anyone with a pet guinea pig: this blog post is not about pets. It's about food staples -- the guinea pig being a major one for Peru, with 65 million of the critters eaten each year. In addition to genetically engineering the perfect pig, Peru celebrates its culinary tradition in splendid a guinea pig festival.
Alas, despite a bull market at home, exporting the creature has proven difficult in a world where guinea-pigs are at times more associated with cages and hampster wheels than with fine cutlery. But now from the blogosphere a rather brilliant suggestion: export to China. No qualms about pet vs. platter there. And guinea pigs are remarkably economical -- at just $3.20 to feed half a dozen people. Sounds like guinea pigs are a recession proof (even countercyclical) market. I'm investing now.
Hat tip: Double Handshake.
STAN HONDA/AFP/Getty Images
One European company seems to be surviving the global economic downturn just fine. EADS, the pan-European aerospace conglomerate best known as the parent company of Airbus, has recovered from a dismal 2007 to record a $2 billion profit in 2008.
Travis Sharp's new piece for FP, might offer a hint for why things are looking up for EADS. While the world's economy contracts, countries everywhere are investing in expensive military systems like those built by EADS:
Despite its overwhelming dominance in overall spending, the United States did not have the fastest growing defense budget in the world between 2005 and 2007, the most recent period for which an accurate assessment is possible. That distinction belongs to Kazakhstan, which saw its defense budget increase by 84 percent. Other countries with booming budgets during this period included Angola (80 percent), Ukraine (57 percent), Jordan (57 percent), and Slovakia (55 percent). The United States, China, and Russia had more modest growth rates of 17 percent, 27 percent, and 33 percent, respectively.
But EADS's good times may not last forever, particularly if U.S. Democrats enact "Buy American" policies to limit the amount of equipment the U.S. military buys from overseas. The main flashpoint for this debate is an Air Force refueling tanker contract that Airbus and U.S. rival Boeing have been fighting over for years with Congress acting as an increasingly incompetent referee. Former Undersecretary of Defense Jacques Gansler believes military protectionism is bad for dense and ultimately bad for the economy:
The Defense Department is not a social welfare organization, and its sole responsibility is to supply U.S. war fighters with the best equipment at the best price. Luckily, though, these two goals aren't mutually exclusive: Military globalization is in fact a blessing for Americans.
The United States is still the world's largest military customer, and it's in the interest of international weapons manufacturers to do business where the buyers are. In the past decade, a number of major international firms have set up shop in the United States. In fact, the Northrop deal would have created tens of thousands of U.S. jobs.
JOEL SAGET/AFP/Getty Images
Via Matthew Yglesias, it seems that there's at least one U.S. politician brave enough to fight for Americans' God-given right to enjoy fancy French cheese. Minnesota Congressman Jim Oberstar has written a letter to the president protesting the United States's relatiatory tariffs on Roquefort cheese:
“Freedom fries and “freedom toast” did serious damage to U.S.-French relaions. We both want to reestablish America’s moral authority in the world under your presidency; a very noble gesture toward that goal would be to remove or reduce this mean-spirited and unproductive punitive duty on Roquefort cheese.
Though I am a supporter of “buy American”, it is for unfairly subsidized foreign products when they are identical or comparable to ours. Roquefort cheese is not in this category. I know from my own experience that if such retaliatory action were taken on products produced in small communities in my district, as Roquefort cheese is in a small French town, it would have a serious adverse local economic impact.
Even here at Passport, we realize that the Roquefort controvery is not one of the more pressing issues Obama faces. But all the same, it's impressive when a congressman from an agricultural state is willing to come out against counterproductive protectionism, and for something French. Though a quick Getty Images search reveals that Oberstar is a longtime French sympathizer.
Cato's Daniel Griswold catches an interesting provision in the omnibus appropriations bill passed by the house:
Buried in the $410 billion catch-all appropriations bill now before the U.S. Senate is a provision that would end a program that has allowed Mexican truck drivers to deliver goods to destinations inside the United States....
Under current restrictions, goods coming into the United States from Mexico by truck must be unloaded inside the “commercial zone” within 20 miles or so of either side of the border and transferred to U.S.-owned trucks for final delivery. U.S. goods going to Mexico face the same inefficient and unnecessary restrictions.
The Bush administration established a pilot program that allows certain Mexican trucking companies that meet U.S. safety and other standards to deliver goods directly to U.S. destinations, while the Mexican government has agreed to allow reciprocal access to its market. But the Democratic Congress and the new Democratic president have vowed to finally kill the program, and the provision inside the appropriations bill will probably deliver the final blow.
So much for being "very careful about any signals of protectionism." Maybe that only applies to Canada.
(Hat tip: Hit & Run)
First George W. Bush tripled the duty on Roquefort cheese as a farewell gesture to France. Now the U.S. Department of Agriculture has doubled it for jamon iberico, a prized ham which comes with the leg bone still inside. What's more, the hams will have to be sold without a black hoof attached, their defining characteristic.
I won't pretend to understand why it's so important that the hoof be included, but apparently it's VERY important:
There was a scandal in Madrid 9 or 10 years ago when a company was caught painting the hooves on its white Serrano hams black in order to pass them off as the far more valuable Iberico Pata Negra. Apparently, some of the paint finally rubbed off on an unsuspecting shopper and there was public outrage.
The newspapers followed the story, chronicling the plight of the duped ham lovers and the evil doers who had sold them a faux Ibérico ham with a painted hoof. The government finally intervened, and the populace was calmed. Even today, you can spot the occasional ham shopper in Spain rubbing the hoof to make sure that its color is natural.
U.S. afficionados apparently paid up to $200 per ham and waited up to seven years for them to become available. Could this all be a massive government experiment to see how much Americans will pay for snooty European food products?
Financial tips aren't usually our thing here at Passport. But in today's wintry economic climate, stockpiling blood sausage, escargot, and Nutella is starting to seem like a sound strategy.
Photo: PHILIPPE DESMAZES/AFP/Getty Images
Mr Khalil said Gaza used to export as many as 40 million flowers a year, so he dismissed the shipment of 25,000 carnations as "insignificant".
"We had to feed the flowers to the animals because we couldn't export them," he said.
"We are afraid of losing our reputation in Europe and are afraid to plan ahead."
For more on the miracle of globalization that is the international flower industry, check out Amy Stewart's 2007 FP article, "Flower Power."
SAID KHATIB/AFP/Getty Images
Those cheese-eating French are already giving Barack Obama a hard time. No...really.
Apparently one of George W. Bush's last acts as president was to triple tariffs on French roquefort cheese. This was meant as retaliation for the longstanding French ban on U.S. beef imports. But as Charles Bremner notes, many French were quick to see it as Bush's final shot at the "cheese-eating surrender monkeys" who had so aggravated him during the run-up to the Iraq war.
French roquefort producers, including anti-globalization icon and dairy farmer Jose Bove, are protesting the move to "hold roquefort hostage" and are demanding that Obama reverse Bush's decision. The French parliament is debating a measure to slap tariffs on Coca-Cola in "symbol against symbol" retaliation. As a not-so-subtle hint, the governor of the roquefort-producing Mid-Pyrenees region even sent Obama a deluxe box of roquefort (shown above) as a welcoming gift. Repealing the beef ban is out of the question for health reasons, say officials.
The last thing Obama wants right now is to get into a trade war with France over a last-minute decision by his predecessor, particularly when he's looking for French cooperation on far more pressing issues. But even the farmers seem to realize that the "cheese wars" are not particularly high on Obama's list right now. "The boy must have a lot of priorities," acknowledged the head of one agricultural union.
Umm...yeah. I would say so. And you probably shouldn't be calling him "boy" either.
Photo: PASCAL PAVANI/AFP/Getty Images
Call it a virtual thrown shoe at the United States. Yesterday, 33 countries in Latin America met in Brazil to discuss regional cooperation and the financial crisis. Here's the flying one-two punch: The summit condemned the U.S. embargo on Cuba, blamed the United States for the financial crisis, and refused to let the northern neighbor attend. Ouch.
Like Muntadar al-Zaidi's famous act of protest, the shoe flew -- but may have missed the mark ever so slightly. Leaders were dismissive of Bolivian President Evo Morales's call for the region to expel U.S. ambassadors unless the Cuba embargo was lifted. And though host Brazil asserted its regional dominance, bickering prevented solid agreements on trade issues and further regional cooperation.
By the way, the strained shoe analogy is not entirely mine. Brazilian President Luiz Inácio Lula da Silva found the metaphor too good to pass up -- threatening to throw his slipper at Venezuela's Hugo Chavez if he overspoke his podium time.
And then there were the instructions to press: "Please, nobody take off your shoes."
Photo: ANTONIO SCORZA/AFP/Getty Images
Remember the massive protests against U.S. beef that took place in South Korea last summer?
Well, last Thursday, while Americans were feasting on Thanksgiving turkey and the world's attention was drawn to the Mumbai terrorist attacks, South Korea's supermarket chains resumed selling U.S. beef. The 2003 ban on U.S. beef, prompted by fear of mad cow disease, was lifted in June. Until last week, though, only tiny butcher shops and some restaurants had been selling beef from the United States.
Were the supermarkets finally swayed by President Bush's endless paeans to the delicious taste of American cattle? "I'm more than willing to eat U.S. beef, and do -- eat a lot of it," he told a Japanese TV station in 2005.
Nope. It's about consumer demand in tough economic times. U.S. beef costs 60 to 70 percent less than Korean beef. As one satisfied customer told the Associated Press, "It's cheap -- that's all we consumers care about."
Photo: Chung Sung-Jun/Getty Images
Curious about what's going on in the photograph above? To find out, check out FP's latest photo essay, "Gaza's (Literal) Underground Economy."
Photo: Abid Katib/Getty Images
Impressive. Somali pirates have now succesfully hijacked a Saudi oil tanker -- their biggest, though apparently not their first, such vessel. A crew of 25 is on board. This is just one of several pirate incidents this week.
Even more impressive? All this goes on under the watch of U.S., Russian, NATO, Indian, and now South Korean and EU ships.
The world's largest shipping line, Odfjell SE, owns the ransomed tanker and now says that its shipping route will change -- steering around Africa's cape rather than across the perilous Gulf of Aden. Since 4 percent of the world's oil supply passes through the pirate-infested route, a change of direction would be no small shift. Two million barrels of oil were lost to pirates today, and now shipping costs -- and probably oil prices, to some extent -- will go up.
Under normal circumstances, the world would be pressuring the Somali government to reign in the renegade ship-lifters. But that government is no shape to do so. It's falling apart as Islamic insurgent groups gain terrority.
I can think of a few pirates who are smiling right now.
In what is being billed as an "historic" agreement, Chinese and Taiwanese officials concluded a pact today that increases the number of cross-strait airline flights and establishes new trade and postal links. The goal is to eliminate the hassle of making travelers stop in Hong Kong on their way between the mainland and Taiwan and to ease similar restrictions on cargo and mail. To be sure, the lead-up to today's deal was a gradual process. Direct charter flights first took off in 2005 and regularly scheduled direct flights began in July of this year.
What all this means for Taiwanese sovereignty, though, is unclear. Does breaking down barriers between Taiwan and the Mainland increase Taiwan's stature as a sovereign state? Or does it expose itself to greater control from Beijing should the Communist Party leaders ever decide to use new economic ties as leverage? Some half a million protesters took to the streets of Taipei a week and a half ago, fearful that Taiwan President Ma Ying-jeou's engagement policies could lead the small island state right into Beijing's hands.
This is a relationship built on ambiguity though. So long as Taiwanese politicians aren't beating the drum for independence and economic ties continue to strengthen, it is hard to imagine what kind of catalyst could induce Beijing to demand immediate reunification. Taiwan's independence would be a humiliating defeat for Beijing, but forcing its hand on reunification would spark a major, and needless, international incident. Thus, a continuation of Taiwan's muddled identity with ever closer economic ties to the mainland seems to be viable indefinitely.
Photo: SAM YEH/AFP/Getty Images
This autumn, an ancient trade route that crosses the disputed Kashmiri border between India and Pakistan opened after being closed 61 years ago, when the two countries broke free of the British Empire. Many hope the opening of the trade route, in a bitterly disputed Himalayan region, will boost the economy on both sides of the “Line of Control” that divides the territory. In the photo above, the first truck carrying goods from the Pakistani side rumbles across the bridge to the Indian side.
For Kashmir's artisans, famed for their rugs, copper bowls, and other handicrafts, the opening of the trade route is a sign of hope. Check out some of their beautiful creations and learn more about the trade route in this week's photo essay, "Making Peace, One Trinket at a Time."
TAUSEEF MUSTAFA/AFP/Getty Images
It makes sense that the British government would want to smooth over relations with Russia by sending a cabinet minister to visit Moscow, the first such visit in over a year. But couldn't the Brits have sent someone -- anyone -- other than Business Secretary Peter Mandelson, who is currently at the center of a scandal over his relationship with a Russian oligarch?
Mandelson's friendly overtures to the Kremlin have been entirely overshadowed by questions from the British press. At issue is whether favors from metals magnate Oleg Deripaska played a role in Mandelson's decision to reduce aluminum tariffs while he was EU trade commissioner, a decision that greatly benefited Russia's richest man. Months after the change, Deripaska entertained Mandelson and other VIPs on his yacht in the Mediterranean.
Mandelson angrily brushed aside a question about the scandal during a press conference Wednesday, telling the reporter, "You have wasted your question." Mandelson has been cleared by the British government of any wrongdoing, but during a BBC interview, also yesterday, he noticeably failed to deny that he and Deripaska had discussed lowering the tariffs prior to the decision being made.
The tabloids have been having a field day with the $9,000-a-night hotel suite where Lord Mandelson is staying during his Moscow visit, a questionable PR move during an economic crisis. The Daily Mail proclaimed the room, "Fit for an Oligarch." It also can't help Mandelson that Deripaska is back in the headlines for the $4.5 billion bailout he received from the Russian government this week.
The Brits might want a do-over on this one.
Photo: Alexey SAZONOV/AFP/Getty Images
As I sip my coffee this morning, the Financial Times has given me new reason to appreciate my Robusta roast. Stung by the falling price of coffee, exporters -- particularly Southeast Asian exporters like Vietnam and Indonesia -- have started hoarding their stocks. Other big exporters, such as Colombia and Brazil, also look worried.
The coffee industry took a quick and nasty turn when markets fell last month and credit froze up. Traders found it harder to get credit to buy supplies, so demand -- and prices -- plummeted. Prices for Robusta have fallen anywhere from 20 to 40 percent in just two months. Some say the problem is less hoarding than the fact that traders are purchasing cautiously small sums at a time.
That's bad news for my wakeup call. Before the crash, the United States imported over 2 million 60kg bags of coffee in just 5 months. It's even worse news for the farmers whose crops are now worth less. Coffee plants don't produce beans for two to three years after planting -- meaning the newest converts to the crop are the hardest hit; their first payoffs are naught.
That could be hard to swallow.
Still think the global credit crunch is all about the TED spread and collateralized debt obligations? Think harder. Export-bound grain has started piling up in Canada as sellers have begun refusing to trust the credit lines and financial institutions linked to their foreign buyers.
The problem is that Canada's export cargoes don't get loaded until buyers can prove their ability to pay -- proof that has been increasingly hard to come by in the wake of bank defaults and shrinking credit markets worldwide. Unable to get credit lines, many buyers have left the grain market, generating big losses for Canadian shippers. Add to this the greater costs that shippers now shoulder because of delayed payments, and the picture starts looking pretty bleak.
And Canada isn't the only country suffering from the crunch. U.S. and South American shippers are taking even harder hits. Los Angeles and Long Beach -- home to two of the biggest ports in the United States -- have already seen a 9 percent drop in imports this year. Global shipping rates are down 74 percent from last May.
With 90 percent of the world's trade in goods going by ship, credit access is key to trade's survival. It's also key to investment in product development, which surely will fall as manufacturers face greater declines in profits. Moldy grain looks like small peanuts by comparison, but don't tell that to Canadian shippers. Grain is their country's biggest agricultural export.
Pistachio farmers in Iran are going nuts: Colder-than-normal weather has harmed this year's crop, whose harvest could end up being 75 percent lower than last year's. If so, the United States could dethrone Iran from its proud position of being the world's top producer of pistachios.
There's reason for Iranian optimism, though: If Mother Nature cooperates, the Islamic Republic could reclaim the top spot next year. Plus, Iranian farmers say their pistachios taste the best.
This week's map is the centerpiece of The Box, a new multimedia project from the BBC. The producers have painted an ordinary shipping container with the BBC logo, outfitted it with a GPS transmitter, and released it into the wilds of global shipping routes. Along the way, the Beeb will be producing video and text content on trade and globalization, based on the box's activities.
You can follow the progress with only a few hours delay here. After its launch last Monday, the box picked up a shipment of scotch whisky in Glasgow and is now back in the South of England waiting to be shipped off to East Asia.
Also be sure to watch Declan Curry's feature on how the standardization of shipping containers made much of what we call globalization possible. It's truly one of the more underrated technological innovations of recent history.
(Hat tip: Ethan Zuckerman)
On this August Friday afternoon, you're surely looking for a distraction or two if you are unlucky enough to be at the office like the rest of us. Look no further than FP's latest (first?) interactive quiz: Spot the Fake Drug. Given a choice between real medicines and counterfeit ones, can you recognize the dangerous fakes?
And check out Roger Bate's fascinating -- and disturbing - (subscribers-only) look at the growing global fake drug trade in the latest issue of FP. He reveals how counterfeiters in India and China mix chalk and dust into phony Viagra pills and cancer meds that are sold around the world. After taking the quiz, you may be more worried than ever about these fakes winding up in your neighborhood pharmacy.
Tuesday's collapse in negotiations in the Doha trade talks was not a complete surprise, yet seemed to amplify the dour mood recently regarding the global economy. As always is the case with trade talks, there were winners and there will be losers.
Despite arguments from some development groups that no deal was better than the one on the table, the Financial Times reports today that poorest countries are the big losers from the breakdown in talks:
The impact of failure is going to be substantial," said Uhuru Kenyatta, Kenya's trade minister. "It's always the poorest of the poor who carry the biggest burden."
Among the hardest hit are African cotton farmers, who had hoped for a cut in U.S. cotton subsidies, as well as a contingent of banana-exporting countries hoping for a cut in tariffs from the EU. On the other hand, a rival banana bunch from West Africa, the Caribbean, and the Canary Islands pay no EU import tariff and are happy to see the competition miss out on a deal.
Other winners include, of course, developed-country agriculture interests, who remain shielded against foreign competition by a phalanx of tariffs and subsidies. Some farmers in the United States, however, as well as those in the developing world, will miss out on new markets for their products.
That said, before the recent talks began, some poor countries expressed concern that trade liberalization would open markets too quickly. All in all, the cost to the global economy from the Doha round's demise is hard to quantify and, in the end, not all that large. It's not like trade is going to suddenly dry up. But the talks' failure definitely doesn't do much to improve the mood.
Despite the recent biofuel backlash, there is one place still singing the praises of ethanol. It's estimated that Brazil has cut fuel costs by 30 percent since switching to fuels based on sugarcane -- an agricultural commodity that the country produces in droves. And the country hasn't just saved money from its biofuel habit: it has been turning some profit too, exporting several million tons of its crop to the United States, Europe, and even Japan this year and last.
Brazil's happiness with the ethanol boom underlies an important point about biofuel production: namely, that a regional or country-tailored approach works best. For a nation with a high production of sugarcane -- which packs more than five times the energy of corn and hasn't resulted in major environmental degradation -- it's understandable why biofuel is so popular and promising.
The sugarcane situation in Brazil isn't without its shortcomings: some sugarcane workers face slave-labor conditions, while some worry that their jobs will be replaced by more mechanized cane-cutting. But sugarcane production is an overwhelming boon for Brazil, and other countries would do well to learn from it's success -- and to benefit from it themselves.
The U.S. could step up its imports of cheaper, greener Brazilian fuel rather than continuing to subsidize domestically produced corn-based ethanol. The anti-biofuel crusaders could also stop lumping together Brazil's sugarcane with other "bad" ethanols so that countries like the U.S. will continue to lower trade barriers. That'll be a sweet deal for everyone.
Disneyland it's not, but war-torn Afghanistan is still hoping to lure international tourists -- at least those who don't mind venturing off the beaten path. Eight hours by car from Kabul, the country's Bamiyan province boasts the country's first National Park, complete with several crystal-blue lakes and Afghanistan's own picturesque "Grand Canyon."
The area is no secret to local Afghans, who have been coming to the Band-e Amir area for years. Local families come on the weekends to picnic, swim and rent boats, as do a few more adventurous foreigners.
While the area is beautiful and much safer than other parts of the country, violence in surrounding areas has cut into the tourist flow. So has a lack of funds according to provincial Governor Habiba Serobi, the country's only female governor:
Unfortunately the aid is always going to the more difficult areas where there are problems and conflict - that's where the international community puts more money."
While addressing the country's security situation is a necessary reality, it's sad to see it hamper development in other parts of the country like Band-e Amir--especially after all the effort and hope that went into the park's creation. The US government still strongly warns its citizens against traveling to Afghanistan, but hopefully, in time, we'll see more foreigners in Afghanistan with cameras rather than rifles.
Though it's the one remaining member of the "Axis of Evil," the value of U.S. exports to Iran has reportedly increased tenfold since George Bush took office. While there are reportedly strict rules about what the U.S. can ship over there, they apparently aren't too limited--US tobacco companies have reportedly exported $158 million worth of cigarettes to the nation since 2000, more than any other product. The U.S. has also sold Iran about $12.6 million worth of bull semen. You're welcome, Mr. Ahmadinejad.
The value of yearly trade with Iran has skyrocketed from $8 million in 2001 to $146 million in 2007, totalling $546 million since the president's tenure began. Yet Bush keeps pushing multi-country sanctions on Iran. Looks like he either hasn't been paying attention to this trade increase or has just turned a blind eye.
For more, check out this video.
Here are some wild scenes from the ongoing beef protests in South Korea:
Apparently, the South Korean riot police have been working in shifts, as some of the most violent protests have happened overnight. The protesters failed to convince South Korean President Lee Myung-bak, who moved Thursday to lift the ban on American beef. Read the backstory here.
As the general election heats up, John McCain is adamantly proclaiming himself a free trader while attempting to paint Barack Obama as a protectionist. But the attempted hostile takeover of Anheuser-Busch by Belgain brewery InBev may place McCain in a precarious political position.
McCain, who sided with the Bush administration during the Dubai Ports World controversy two years ago, has been mum on the issue so far. The spotlight instead has focused on his wife, Cindy, who owns beer distributor Hensley & Co. and some $1 million in Anheuser-Busch shares and would stand to benefit from a deal.
With tradition and patriotism on one side, and financial gain and free trade principles on the other, McCain faces a tough choice. Although his reputation as a straight-talking maverick precedes him, I wouldn't be suprised if politics won out, just as it did with McCain's support of offshore drilling and Obama's decision to forgo public campaign financing.
The reason? Missouri, which went Republican the past two presidential elections, could be in play this year. Missouri politicans from both sides are lining up against the deal, and saveAB.com, which has garnered over 59,000 signatures on its online petition offers the following message, dripping in election year rhetoric:
Like baseball, apple pie and ice cold beer (wrapped in a red, white and blue label), Anheuser-Busch is an American original. ... With your help we can fight the foreign invasion of A-B. We will fight to protect this American treasure. We will take to the Internet, to the streets, to the marble halls of our capitals, whatever it takes to stop the invasion.Stay tuned to see what McCain and Obama have to say. Anheuser-Busch has rejected the takeover bid, but don't think InBev is going to give up without a fight.
If you're a struggling American newspaper trying to maintain quality and improve local coverage, what's one possible solution?
Outsource to India, says the deputy editor of the Orange County Register, California's fifth-largest newspaper. On a one-month trial basis, Mindworks Global Media, an India-based company, will copy-edit some of the Register's stories and lay out pages for a community newspaper at the same company that owns the Register.
This isn't the first time an American news outlet has outsourced to India. Last year, Passport blogged about a Pasadena, California, news Web site that hired Indian journalists to cover meetings of the Pasadena City Council, which are broadcast over the Internet.
There are bound to be some hiccups and gaffes along the way, but it could work better than expected. Mindworks says on its Web site that its workers are "trained thoroughly to become familiar with the client publication and the region," and some employees are bound to have been educated at American universities. And perhaps articles about India and other countries will include more nuance and context.
For American editors and reporters, increased outsourcing is understandably scary. But what if it's key to fundamentally reinventing newspapers, whose U.S. circulation and advertising revenue have been plummeting? Those of us who work in journalism will have to up our game and make ourselves relevant. It's creative destruction at work.
I see that some in the U.S. Congress are gearing up to crack down on "speculators" accused of driving up prices for key commodities like oil and corn. Connecticut Sen. Joseph Lieberman is seeking to ban institutional investors from investing in commodities markets at all, and his colleague, Michigan Sen. Carl Levin, is urging the Commodity Futures Trading Commission, which regulates commodities trading in the United States, to take action.
As Diana Henriques explains for the Times, there's a risk the proposed cure would be worse than the disease. Not only is it tough to identify who is engaging in "excessive speculation" versus merely "speculation," it's also completely legal to try to make money from trading commodities. What's more, some analysts argue that speculators actually make the markets function more smoothly by keeping them liquid. (Here's an example of one such argument.)
There's also a fierce debate about to what extent speculators are, in fact, to blame for the high prices. Fatih Birol, chief economist at the International Energy Agency, put the matter thusly in a recent interview:
I believe the main reason for the high prices [is] the growing perception in the markets that the growing demand growth may not be met by the supply growth. And this provides fertile ground for the speculators... [T]he main issue here is the fundamentals but the speculators play an amplifying role in that respect.
The Financial Times provides some support for this view today:
Refiners are paying record premiums for the high-quality crude oil they use to produce diesel and petrol, a sign of strong demand in the physical oil market that calls into question claims that soaring oil prices are being driven by speculators.
Refiners are paying up to $5-$6 a barrel on top of current record prices to secure high-grade oil, traders said, double the level of a year ago. The mark-ups are four times higher than the 2000-2008 average. The movement in prices paid for physical barrels of oil has gone largely undetected outside the refinery industry because financial markets pay almost exclusive attention to the price of oil futures traded in London and New York.
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