Guardian blogger Richard Silverstein has posted a translated excerpt from the Swiss newspaper Sonntag that explores Israel's apparent oil purchases from Iran:
Israel imports Iranian oil on a large scale even though contacts with Iran and purchasing of its products are officially boycotted by Israel. Israel gets around the boycott by having the oil delivered via Europe. A reliable Israeli energy newsletter, EnergiaNews, reported this last week [March 18] ...
EnergiaNews got the information about the Iran trade from sources with ties to the management of Israeli Oil Refineries Ltd ... According to EnergiaNews the Iranian oil is liked in Israel because its quality is better than other crude oils.
The report by EnergiaNews editor Moshe Shalev states that the Iranian oil reaches various European ports, mainly in Rotterdam. It is bought by Israelis and the necessary European bill of lading and insurance papers are supplied. Then it is transported to Haifa in Israel. The importer is the Eilat-Ashkelon Pipeline Co (EAPC), which keeps its oil sources secret.
Silverstein also links to a Haaretz article from last October which reports that Israel planned to import oil from Iran to sell to the Palestinian Authority. It seems that despite its stated boycott of Iranian products, Israel doesn't actually formally define Iran as an "enemy nation" so this deal isn't technically illegal. Still, it's a bit hard to reconcile with the apocalyptic rhetoric of some Israeli politicians. I'm also curious to see how Iran's leaders justify trade with the "Zionist entity."
I must admit, I'm puzzled as to why it's supposed to be such a big deal that Hillary Clinton's chief strategist Mark Penn (right) met with Bogotá's ambassador to Washington about the controversial U.S.-Colombia Free Trade Agreement.
The key point to remember about this and other FTAs in Latin America is that they're much more about politics than they are about economics. Ninety percent of U.S. imports from Colombia have already been entering the United States without any tariff, thanks to prior agreements. Peterson Institute analyst Jeffrey J. Schott estimated in 2006 that any welfare gains (GDP boost) from a U.S.-Colombia FTA would be positive, but "relatively small" -- roughly half a percentage point for the Colombians, and a negligible amount for the United States. If anything, the agreement is about lowering Colombia's tariff barriers to U.S. goods, solidifying trade relations, and lowering the risk that President Álvaro Uribe's successor will have a different economic philosophy. So, claims by U.S. labor activists that the FTA would be bad for U.S. manufacturers are little more than dishonest fearmongering.
That said, I'm not on board with U.S. Trade Representative Susan Schwab's hyperbole, either. Can it really be that the dangling FTA, not the drug war, is the root of Latin America's problems today?
Leaders in the hemisphere and Latin America have said that the single most destabilizing factor in Latin America today may be the U.S. Congress's failure to ratify the Colombia Free Trade Agreement. That is more destabilizing today than anything that Colombia's neighbor Venezuela is doing or threatening to do— and that is saying a lot.
Last week, Serbia announced it would refrain from placing an embargo on Kosovo, whose economy has already suffered under eight years of undefined status.
Despite the announcement, legal trade between Kosovo and Serbia has dropped by an estimated 50 percent since Feb. 17, a noticeable loss as Serbia has otherwise remained Kosovo's biggest source of imports over the last 8 years.
High on the list of goods in short supply are the tasty, strangely addicting, Serbia-made treat known as the Plazma cookie. Plazma cookies and other goods have reportedly disappeared from Kosovar markets due to strict product label requirements. Since independence, Kosovo has required all products distributed in Kosovo to say "Republic of Kosovo." This is a problem under Serbian law:
A company, Serbian or foreign, can face fines of up to 1.0 million dinars ($19,000) if it mentions Kosovo as a separate territory on labels used on products sold in Serbian stores. Terms allowed are 'UNMIK/Kosovo', referring to the United Nations mission that took over the province in 1999 after NATO expelled Serb forces, 'Kosovo, Serbia' and 'Kosovo/1244', the number of the Security Council resolution that put Kosovo under U.N. administration."
According to Reuters reporters Ivana Sekularac and Shaban Buza, such discrepancies send a message of market uncertainty, curbing trade and regional investment. But Plazma has found a solution. The cookie company has simply opted to list the Kosovo distributor as in
Plazma are one of the most wanted and best-selling Serbian products, people really like them," said Tahir, an employee at a big supermarket in Pristina. "We tried with some similar Italian cookies, but in the end sold only two packs."
Not too surprising -- I bet the Italian cookies don't have quite the same effect.
Barack Obama and Hillary Clinton may think they have their hands full with NAFTA, but just wait until it's time to renegotiate DSFTA, the Deep Space Free Trade Agreement. In the latest issue of Astropolitics, political scientist John Hickman thinks where no social scientist has thunk before in his new article, "Problems of Interplanetary and Interstellar Trade."
Hickman believes that interplanetary trade could be one of the primary economic drivers for space exploration in the future. The potential problems are by no means minor, however. First of all, the vast distances between solar systems would probably prohibit the transportation of tangible goods. (Though, as Hickman points out, transatlantic trade probably seemed just as fanciful to traders in renaissance Europe.) There may however be potential for trade in non-tangible goods such digital entertainment, or scientific information with newly discovered alien species. But even this is not without dilemmas that would give Austan Goolsbee a migraine.
How will we enforce contracts or copyright laws on a civilization 20 light-years away? How will we set up a banking system or transferable currency without any tangible goods to trade? How will we protect ourselves from strange new ideas and ideologies that may destroy the fabric of our society? Worst of all, how will we trade with a species that may not even have a concept of trade?
Economic exchange itself might be "alien" to the aliens. Members of an alien species may not experience the same intense sense of self that is exhibited in rationally self-interested economic exchange among humans. Instead, a collective identity could be dominant. Money might not exist and without it neither would complex markets or banking. If they do engage in economic exchange it might take a form akin to potlatch, the competitive gift-giving for status solely among members of the same tribe traditional among societies in Melanesia and the Pacific Northwest. Moreover an alien species might not live in separate societies and could thus have no conception of trade between different societies with different cultures.
Can we maintain our free-market values and still trade with these hippie space communists? Hickman proposes establishing a "solar system monetary union" or publicly administered "planetary clearinghouse" under which interplanetary merchants could operate. The good news is, even after discovering alien life, we would still need to decode their language and acquire a basic cultural understanding before we can even think about initiating trade. This should give us enough time to bone up on all 285 Ferengi Rules of Acquisition.
Travis Daub contributed to this post.
UPDATE: Tyler Cowen weighs in --
[R]eciprocal, tit-for-tat exchange would work just fine, provided that a) relativity did not slow down the exchange of information too much, and b) not too many Ohio voters watched that movie where the aliens send us their genetic information, embedded in an apparently innocuous transmission, and trick us into downloading those instructions and then cloning them en masse... In other words, we probably cannot trade with aliens.
Columbia University economist Jagdish Bhagwati, author of In Defense of Globalization and other fine works, sallies forth in today's Financial Times to say that Barack Obama would be a better free trader than Hillary Clinton. He offers five main arguments:
It seems like the sort of argument that Obama -- who is under attack for Goolsbee's alleged "wink and nod" to the Canadians over NAFTA -- would want to see aired after today's Ohio primary.
Barack Obama's campaign has been fighting reports that one of its economic advisors, University of Chicago Professor Austan Goolsbee (above), told Canadian officials what we all know anyway -- that Obama's rhetoric on NAFTA won't amount to much if the candidate wins in November. Goolsbee says a memo about his conversation with the Canadians mischaracterized what he said, but he agrees he told them this:
On NAFTA, Goolsbee suggested that Obama is less about fundamentally changing the agreement and more in favour of strengthening/clarifying language on labour mobility and environment and trying to establish these as more 'core' principles of the agreement."
So, is the Obama campaign now claiming that this "strengthening/clarifying language" is going to bring manufacturing jobs back to Ohio? Give me a break.
Likewise, Barack Obama who voted along with Clinton for recent trade agreements with Peru and Oman is also outraged by NAFTA. Please.
Cooper is comparing apples and watermelons. The Peru deal, as noted here, is a miniscule agreement that is primarily about lowering Peruvian trade barriers to U.S. goods. Similarly, the Oman deal includes a lot of language about opening the financial sector there to U.S. firms. Annual bilateral trade between the United States and Oman is not much more than $1 billion, and the two countries are not major trading partners. In both cases, the stated rationale for the deal was primarily geopolitical, not economic. So, it might be perfectly consistent to see the far larger NAFTA as a bad deal and yet support Peru and Oman.
Of course, neither Obama nor Clinton want to actually repeal NAFTA, mind you. They just want to "renegotiate" it -- a promise you can safely file in the same category as "closing tax loopholes" and "cracking down on wasteful government spending."
The Politico's Ben Smith blogs about the above anti-Obama mailer that's making the rounds and makes a good point:
The odd thing here is that both Clinton and Obama come from the pro-trade wing of the party. Both have, in less heated moments, defended free trade in theory, and neither wants to repeal Nafta.
But when in Ohio, you argue about who hates trade more.
Politicians pandering to voters? Shocking.
One issue that has been heretofore lurking quietly in the background of the 2008 campaign has been China. No more. As Barack Obama and Hillary Clinton set their sights on Midwestern states hid hard by job losses, China has begun to crop up more frequently on the campaign trail. Here's a union supporter of the Obama campaign today, in a statement condemning the granting of "permanent normal trade relations" (PNTR) to China:
Ohio workers know the truth about NAFTA — Ohio ranks 5th among all states in the number of jobs and opportunities lost due to the rising trade deficit with Canada and Mexico since the passage of NAFTA. Ohio lost nearly 50,000 jobs due to NAFTA alone. And they know that PNTR did not create leverage for the U.S. over China, it led the way to a massive trade deficit, unenforced trade laws, and more Americans looking for work.
This is just the tip of the iceberg. A number of other tough issues for China's PR machine are only going to gain prominence as the campaign progresses. You can expect boilerplate language from any of the candidates about the need to "engage" China, followed by some cathartic bashing of China's human-rights record, its relationship with Sudan, its currency manipulation, its military spending, etc. So, are the Chinese big enough to shrug it all off as political rhetoric?
Toys. Pet food. Dumplings. None of these potentially dangerous products with Chinese components has really scared me thus far. But this LA Times story sent a chill down my spine:
The Food and Drug Administration is investigating whether an ingredient from China may be the source of problems with a blood thinner linked to hundreds of reports of severe allergic reactions and possibly several deaths. [...]
As with food ingredients, China in recent years has become a major exporter of active pharmaceutical ingredients. Medicine Economic News, citing China's customs statistics, reported that the nation's exports of heparin and its components totaled $57.8 million in the first half of 2007, a 13.7% increase from the same period a year earlier. The Guangzhou-based publication said 49 companies exported heparin and its ingredients.
Baxter announced Monday that it was suspending manufacture of multiple-dose vials of heparin. The injectable drug, which is derived from pig intestines, is used to prevent dangerous blood clots from forming during certain types of surgery, including heart bypass. Baxter accounts for about half the U.S. market for the drug.
Assuming the FDA's suspicions are confirmed, how many other commonly used drugs have ingredients made in China? We know there have been problems with fake anti-malaria pills and fake glycerin used in cough syrup. Anything else out there?
As Blake pointed out earlier, Barack Obama has taken aim at free trade in the run-up to the upcoming blue-collar-dominated primaries in Ohio and Wisconsin. The attack that began in earnest last night in Obama's Potomac Primary victory speech will continue at noon today in Janesville, Wisconsin, where Obama is promising to deliver a detailed speech on economic policy. The Illinois senator, who is big on hopes and dreams but not so big on details, apparently plans to tell suffering Americans that globalization is to blame for their plight. Here's a sneak preview:
The fallout from the housing crisis that's cost jobs and wiped out savings was... the culmination of decades of decisions that were made or put off without regard to the realities of a global economy and the growing inequality it's produced...
[D]ecades of trade deals like NAFTA and China have been signed with plenty of protections for corporations and their profits, but none for our environment or our workers who've seen factories shut their doors and millions of jobs disappear...
I also won't stand here and accept an America where we do nothing to help American workers who have lost jobs and opportunities because of these trade agreements...
I will not sign another trade agreement unless it has protections for... American workers."
This is the same guy who keeps promising to heal America's relationship with the world, right? Maybe it's just me, but forcing protectionist agreements down our trading partners' throats doesn't sound like such a good start. Neither does blaming them for America's subprime fiasco, a home-grown crisis fueled by Alan Greenspan and the Fed, which now threatens to wreak havoc on many of the globe's biggest economies. Good luck with that line, Barack.
Delivering his victory speech last night, Barack Obama gave his usual spiel about the "Washington game," and then took aim at U.S. trade policies:
It's a game where trade deals like NAFTA ship jobs overseas and force parents to compete with their teenagers to work for minimum wage at Wal-Mart.
This is the highest-profile attack Obama has launched on this issue, and it comes ahead of primaries in Wisconsin and Ohio, two states where the Democratic base is very angry about trade. Obama's remarks are a preview of the critique he'll be launching against Hillary Clinton, whose husband pushed hard for NAFTA's passage over the objections of many in his own party. (Hillary has called for taking a second look at the treaty, and voted against a number of free-trade agreements in recent years.)
So, what about the factual claim? Has NAFTA shipped U.S. jobs overseas? Well, it doesn't make a lot of sense, since Mexico and Canada share land borders with the United States. But in the United States, there was never the "giant sucking sound" of jobs heading south that Ross Perot railed against. Most economists will tell you in general that technology has a lot more to do with lost manufacturing jobs than trade does.
As for NAFTA, it was intended primarily to help Mexico, and on that score it has been a mixed bag. The Mexican business community loves it; small farmers hate it (see the above photo). Berkeley economist Brad DeLong, a big NAFTA booster in the Clinton Treasury Department, discusses some of went wrong in this YouTube video from October 2006:
Mexico is now further behind the United States in relative terms than it was in 1992, and the distribution of income within Mexico has become much more unequal.... Perhaps we would have been better off advising Mexico in the 1990s to focus its attention on fixing its education system and cleaning up its public-sector corruption than in going for free trade with America. I'm still a believer in NAFTA, yes, but my belief is relatively shaky now.
Tyler Cowen, who strongly supports NAFTA, adds:
The more globalized parts of Mexico -- most of all the north -- have done extremely well since NAFTA passed. The biggest problems remain in the least globalized parts, most of all the south and big chunks of the interior.
Here's Mike Huckabee last night in the Republican debate, explaining why he opposes the tax rebates that are the centerpiece of the "stimulus plan" being debated by Congress:
Well, if we end up with the rebates, we're going to borrow the $150 billion from China. And when we turn it into rebates, most people are going to go out and buy some consumables, like a pair of shoes that they probably don't even need, but they're going to buy them, and they're most likely an import from China. My point is, whose economy are we stimulating when we do that?"
Huh? By this logic, Americans shouldn't be buying things at all. As a top U.S. Commerce Department official put it recently, "China is the single-largest supplier of inexpensive products purchased by American consumers." So, should Americans stop buying Chinese goods altogether? That's not so easy to do. And besides, millions of Americans are employed at businesses, such as Wal-Mart, that sell Chinese products. Should those businesses be shunned?
The whole point of a stimulus package, as Harvard economist Martin Feldstein put it in an interview with FP, is to offset "the risk of an economic downturn." With growth in U.S. consumer spending grinding to a halt, it sounds to me like some offsetting would be a good idea right now.
Remember all the fuss earlier this year about contaminated food products coming from China? Well fear no more. At least, that's the word from the U.S. government. Earlier this week, U.S. and Chinese officials signed an agreement on food safety that will allow U.S. regulators to inspect Chinese food processing facilities and, they hope, keep unsafe products from reaching U.S. shores.
It sounds deliciously promising. That is, until you look at the plan's details.
As reported, the inspection regime does not cover all food products. The new inspection rules cover preserved foods, pet food, and fish. Increased inspections of meats or other fresh foods is apparently not in the cards. The U.S. Food and Drug Administration doesn't have the budget to keep up with such a demanding inspection regime. Currently, only 1 percent of imported food is inspected. Nor is the FDA's budget set to rise drastically: The agency is getting about $100 million next year above its current budget level of $1.5 billion. That increase barely keeps up with rising operational costs and is not nearly enough to cover all the new overseas inspections that need to be performed.
U.S. officials are quick to point out that the inspections are targeted at those products that pose the greatest risk, and the agreement leaves room for expansion in the types of products tested. Well, I feel better already. Now it seems like all I have to worry about is practically everything else labeled "Made in China."
Presidential hopeful Mike Huckabee has been making great strides in Iowa polls over the last several weeks, and now he's starting to make a surge in national polls as well. A new CNN poll released Monday found that the Huckster has doubled his support among likely Republican voters in the whole country, bringing him into a a statistical dead heat with GOP frontrunner Rudy Giuliani. With a higher national profile, Huckabee has to start paying more attention to higher profile issues, too.
In the case of Cuba, it means a flip-flop. A few years ago, Huckabee joined a bipartisan crowd calling for an end to the U.S. trade embargo against Cuba, saying it was bad for business. He even wrote a letter to President Bush in 2002 saying that it hurt Arkansas rice growers. On Monday, though, he took a hard right turn and said in a Miami speech that he supports the embargo and would not hesitate to veto any effort to end sanctions against Havana. Has he really had a change of heart? Or is this simply political move designed to appeal to voters of Cuban origin in Florida? Here's the presidential wannabe, in his own words:
Rather than seeing it as some huge change, I would call it, rather, the simple reality that I'm running for president of the United States, not for reelection as governor of Arkansas."
Credit where credit is due—Huckabee may be a flip-flopper, but at least he's being brutally honest about the reasons why.
Relations between the United States and members of the European Union, by all accounts, have improved in recent years. French President Nicolas Sarkozy, in his recent speech to Congress, professed his outright "love" for America. Following Sarko's speech, President Bush and German Chancellor Angela Merkel had what was by most accounts an amicable meeting in Crawford. And relations with British PM Gordon Brown, while not as warm as those Bush had with former PM Tony Blair, are progressing.
Most attribute the improvement in U.S./Euro relations to Bush's departure from his "with us or against us" attitude surrounding the Iraq war. It also doesn't hurt that Gerhard Schröder and Jacques Chirac—no fans of the U.S. president—are no longer around.
But other, deeper factors might be at work. A new survey from the German Marshall Fund of the United States, released Wednesday morning, finds that majorities in America and Europe share many of the same economic worries—immigration, currency fluctuations, fear of the Chinese economy, and job losses due to globalization—and would "support a new initiative aimed at deepening transatlantic trade and investment." Interestingly, (non-British) Europeans feel even more threatened by China's rise than Americans do.
While we should always be wary of polls that support an organization's raison d'être, I do wonder what such an "initiative" would look like. Most likely, it would mean an expansion of existing trade and investment relationships—probably nothing as grandiose as Mitt Romney's proposal for a "Reagan Zone of Economic Freedom." But doesn't this also, on some level, sound like those polled favor a transatlantic partnership similar to the European Union? A U.S./EU trading block, perhaps?
I know this sounds far-fetched, and admittedly it is. But the European Union evolved into a trading block for many of same reasons cited by those polled: immigration, currency, competitiveness, and weak individual economies. Decades from now, when China has the most powerful economy in the world, will a similar union between the United States and Europe be the only way to stay competitive? Like I said, far-fetched. But 60 years ago, so was the European Union.
Yesterday, I noted that hiring virtual personal assistant (VPAs) from India and other developing countries was becoming increasingly popular in Western countries. I asked whether employing a VPA in India to respond to your every whim is a neo-imperial, exploitative phenomenon, or whether it is just a new and novel way for trade to give us what we want, while providing entrepreneurs in emerging markets with ways to expand their businesses.
Sunder P., the director of GetFriday, one of the best-known providers of VPAs, wrote in with a response. Exploitative and neo-imperial? Resoundingly not, says Sunder P. Here's what he had to say:
In the scenario of a service economy, I think Indians are more imperialistic than the Westerners, because we can't do without our nannies, cooks, house-maids and all the paraphernalia. Westerners in general are not used to such comforts and hence are more likely to feel pangs of guilt. The other factor triggering it could be that Indians workers are generally hardworking, polite and a little docile. They are not used to frequent appreciation and endorsement which is common with Westerners. Hence when they get genuine appreciation from clients, they try their best to reciprocate and may sometimes end up doing more than they should. So you end up making the client feel guilty with all the attention rather than good. […]
Does such a service pamper your ego and soul? Yes, it would to some extent and I think it should. But so would a salon, a spa, a concierge service, an exclusive premium credit card do that to your ego. Does the client or the person rendering the service feel guilty about it? I guess not.
The only things we constantly ask ourselves whenever we get any weird requests are 1) Is it unethical? 2) Is it illegal? 3) Is it derogatory to our staff? If the answer is NO, then we take them on. If YES, then we politely decline. […]
Business apart, the positive aspect of this story for us has been that we have been able to provide employment to more than 100 people from B-cities (smaller cities) in India after training them to handle international clients. That translates to 100 success stories of small town people getting groomed to take on the global market. And they are immensely proud of what they do and they would be deeply offended if someone remarked that they are triggering imperialistic fantasies. Hence, I am firmly of the opinion that it is a genuine win-win situation for both sides, notwithstanding the fear and paranoia about loss of jobs in the West. We are staring at a world where work will flow to places that have the right talent to get quality work done at the most economical prices.
This sounds pretty convincing. I have to admit, though, the name "GetFriday" does have an imperial-sounding, Robinson Crusoe kind of ring to it.
Millions of Westerners fear their jobs may be offshored as the Internet and cheap telephony make it easier for countries with abundant supplies of labor, such as India and China, to compete with Western service firms. The world is flattening, you might say, and it makes many people nervous.
So, should we be afraid that our jobs are all going to be sent to India? On the contrary, I see yet another opportunity for trade to give us what we want, whether it's extra leisure time or getting things done more efficiently. Thousands of ordinary Americans, for instance, are embracing the use of affordable "virtual personal assistants" (VPAs) in India via sites like GetFriday.com for such tasks as booking dinner reservations, helping the kids with their homework, or even playing "World of Warcraft."
And they love it. Take Michael Levy, a U.S. lawyer who employs a VPA in India. He relishes his new-found freedom: "You become lazy... It's just wonderful." And Web sites such as IwantaPA.com offer "empowerment" not only for independent professionals, but also for small to medium enterprises and large enterprises, 24/7, and without the burden of office space or paying out benefits. All for a third the price of regular PAs.
That said, having a VPA is not all gumdrops and lollipops. Two years ago, A. J. Jacobs of Esquire wrote a humorous account of his experience outsourcing his life to a number of VPAs in India, including a woman named Honey. Jacobs writes:
I THINK I'M in love with Honey. How can I not be? She makes my mother look unsupportive. Every day I get showered with compliments, many involving capital letters: "awesome Editor" and "Family Man." When I confess I'm a bit tired, she tells me, "You need rest. . . . Do not to overexert yourself." It's constant positive feedback, like phone sex without the moaning.
Sometimes the relentless admiration makes me feel a little awkward, perhaps like a viceroy in the British East India company. Another cucumber sandwich, Honey! And a Pimm's cup while you're at it! But then she calls me "brilliant" and I forget my guilt.
Sounds great, right? But Jacobs's story raises some interesting questions: Is employing a VPA in India to respond to your every whim a neo-imperial, exploitative phenomenon? (Jacobs did experience other pangs of guilt as he found himself making stranger demands simply because he could.) Or is it a genuine win-win transaction, where clients in the West make the most of their purchasing power while entrepreneurs in the East expand their markets?
Sounds great, right? But Jacobs's story raises some interesting questions: Is employing a VPA in India to respond to your every whim a neo-imperial, exploitative phenomenon? (Jacobs did experience other pangs of guilt as he found himself making stranger demands simply because he could.) Or is it a genuine win-win transaction, where clients in the West make the most of their purchasing power while entrepreneurs in the East expand their markets?
The folks at the Cuba Transition Project at the University of Miami send along this interesting report (not yet online). Turns out it's not so much Hugo Chávez or Hu Jintao that are underwriting the Castro government, but European financiers:
From processing Havana's secretive international business transactions to providing lucrative high-interest loans to the Cuban government, European Union-based institutions have collectively bankrolled the Castro regime since the fall of the Soviet Union.
Today, quietly and behind the scenes, more hard currency flows in and out Cuba via European financial capitals than through Beijing or Caracas. While Venezuela's and China's multi-billion dollar credit lines for Cuba have done much to offset the loss of Soviet-era subsidies, such politically-driven deals are largely in the form of in-kind aid (oil and refined fuels from Venezuela and "soft" trade credits from China for the purchase of Chinese-made goods) rather than in convertible currency.
With more than US$1.6 billion in hard credit lines from European lenders, Cuban authorities have been able to conduct strategic international transactions ranging from policy-motivated imports of agricultural products from U.S. Congressional farm districts to financing the expansion of the island's nickel industry, in turn a major source of foreign revenue for the regime.
And Spain, as you might expect, is leading the way:
European capital also sustains foreign direct investment. Of 185 foreign-financed joint ventures with the Cuban government, two-thirds originate in Europe. The strong correlation between foreign financing and foreign investment is best exemplified by Spain's leading role in the Cuban economy. Home to nearly 40 percent of all joint ventures currently operating in the island, Spanish lenders are also the largest source of private capital -- upwards of US$581 million -- for the Castro regime.
It turns out also that the Netherlands and Spain are among Cuba's largest export markets.
I have to say, though, that I'm underwhelmed by the amounts here. $1.6 billion simply isn't a lot of money, and $581 million is even less impressive. Of course, nothing could be sillier than the unilateral U.S. embargo, which has failed to accomplish anything other than making Cubans worse off. If even a few hundred mil from the Europeans can prop up the Castro brothers, what's the point?
The Wall Street Journal passes along a frightening statistic:
The latest Wall Street Journal/NBC News poll conducted earlier this month found that 60% of voters nationwide agreed with the statement that "foreign trade has been bad for the U.S. economy."
It's no surprise, then, that many politicians, especially Democratic presidential contenders, are starting to sound like old-school protectionists. Economists can cite chapter and verse as to why this astonishingly large majority of Americans is deeply, deeply wrong about trade. The basic argument is familiar: The benefits from trade (e.g. cheaper, better, and more varied products at Wal-Mart) are dispersed and hidden, while the losses (e.g. layoffs in textile mills in South Carolina) are far more concentrated and easier for people to see. But perhaps a little philosophy is in order. What is the real purpose of trade? As Russell Roberts put it in a recent Web exclusive for FP, we trade in order to buy things we want:
We don't export to create jobs. We export so we can have money to buy the stuff that's hard for us to make—or at least hard for us to make as cheaply. We export because that's the only way to get imports. If people would just give us stuff, then we wouldn't have to export. But the world doesn't work that way.
Read the whole thing, especially if you're on the fence about trade.
But what about how Chinese and Indian workers are pushing down wages, you might ask? In the same WSJ article mentioned above, another FP contributor, former Secretary of Labor Robert Reich, has an answer:
The truth is that trade is good for the U.S. but that some people are burdened by it far more than others. We've got to make them all winners, but you don't make them winners by attacking trade," he says.
Remember the scandal surrounding tainted toys from China? Guangdong province does, and its officials think they may have a libel case against giant toymaker Mattel:
Mattel recalled more than 21 million Chinese-made toys this summer, but later said that 85% of the recall was due to its own design faults. Many of the toy factories involved were based in Guangdong in southern China...
"The incident has stained the reputation of Chinese toy manufacturers and made a large number of toy factories in Guangdong lose a great deal of money," Chen Lipeng, director of the province's fair trade bureau, was quoted as saying.
"A simple apology cannot compensate for the losses," he added.
What's more, Guangdong may file the lawsuit in U.S. court. There's no word yet on how much the aggrieved party will be demanding, but watching China learn to love U.S. plaintiff's lawyers is priceless.
I see that Democratic presidential candidate John Edwards is now taking potshots at the U.S.-Peru trade agreement that is now going through Congress and due to hit the Senate in November. Speaking on Saturday in Newton, Iowa, Edwards summed up his reasons for opposing the deal:
In short, this agreement does not meet my standard of putting American workers and communities first, ahead of the interests of the big multinational corporations, which for too long have rigged our trade policies for themselves."
This is his big strategy for victory in Iowa? As FP documented in June, bilateral trade between Peru and the United States is small potatoes: barely $2.5 billion in 2005. And most of that trade, $2 billion, was exports from the United States to Peru.
In fact, the dirty secret about the new agreement is that it would benefit U.S. exporters the most, as this summary of the deal (pdf) from the U.S. Trade Representative's office makes clear:
Eighty percent of U.S. exports of consumer and industrial products to Peru will become duty-free immediately, with remaining tariffs phased out over 10 years. Key U.S. exports will gain immediate duty-free access to Peru. Peru has agreed to allow trade in remanufactured goods, and will join the WTO Information Technology Agreement.
Peru already enjoys good access to the U.S. market thanks to previous trade agreements, so it's not as if the United States is suddenly going to be flooded with cheap chicha, alpaca wool, and mahogany. Edwards may think that spreading this silliness is going to help him win the Democratic nomination, or at least earn him points in protectionist Iowa. My guess is that Edwards knows better. That's probably why he chose Peru rather than, say, the South Korea deal, which is on a different scale altogether.
Treasury Secretary Hank Paulson is looking a bit frazzled these days, but he isn't exactly choosing a relaxing place to get away from all the domestic pressure about subprime mortgages and Chinese imports. He's going to India next week with a big to-do list. In a speech Wednesday at the Council on Foreign Relations, he talked about his agenda. Here are a few highlights:
Nukes: It's not exactly within the portfolio of the Treasury, but considering as how it's topic #1 in the U.S.-India relationship, Paulson reiterated the Bush administration's support for the pact. That's all well and good, but tell that to the leftists in India, who think that the deal makes India too cozy with the United States. PM Manmohan Singh may have to scuttle the pact in order to maintain his ruling coalition.
Trade: Paulson wants India to help break the deadlock on the Doha round of trade talks. Last week, India and Brazil complained that rich countries are holding the talks hostage because they are unwilling to give ground on agriculture and manufacturing. But Paulson will try to convince India that Doha is the "most effective thing we can do to raise living standards in India and around the world" and that "we must resist protectionism."
Economic reform: It will cost India an estimated $500 billion over the next five years to improve the country's physical infrastructure, with one third of the funding coming from the private sector. Paulson said it was a prime opportunity for U.S. businesses to invest. Singh wants to turn Mumbai into a new financial capital of Asia, and Paulson agrees: "I believe it is the right path, considering India's stake in global financial services."
Paulson was also generous in his praise for India's monetary policy. Currency flexibility and the appreciation of the rupee, he said, has allowed the country to resist inflationary pressure without sacrificing economic growth. These weren't just words of flattery designed to extract concessions on his trip next week (although maybe they were that, too). They were also words aimed squarely at China to let its currency float too. It was a nice way of sending a message to one country while talking about another.
Back in June, just as President Bush's fast-track trade authority was about to expire and Congress started to flex it's protectionist muscles, FP predicted that securing approval for pending U.S. bilateral trade deals with Peru and Panama would be a cinch. That is, at least compared to similar, but more complicated deals with Colombia and South Korea.
But we may have spoken too soon. Recently elected as head of Panama's National Assembly, Pedro Miguel González holds a less esteemed title here in the U.S.—he is a wanted man for the murder of an American soldier. González was indicted for the 1992 death of U.S. Army Sgt. Zak Hernandez in the Canal Zone, but acquitted by a Panamanian court in 1997. He still faces an outstanding warrant for his arrest in the United States, however.
González, who enjoys the support of President Martin Torrijos and is described by colleagues as a "great patriot," has some harsh words for los yanquis' meddling in Panamanian affairs:
The era in which the U.S. has the last word in determining who governed our nation and how they did so is over.
But for all his brave talk, The Guardian reports, González is leaving the possibility open of stepping down from his position if it threatens the trade agreement. And all this comes right as Panama has struck ground on a $5.25 billion expansion of the Canal. You don't have to look hard to see that the U.S. footprint is still there: Two thirds of all cargo that passes through the Canal is coming from or headed to the United States. Even González can't ignore that.
Twenty-seven years ago this month, 17,000 striking workers at Poland's Gdansk shipyard won the right to establish Eastern Europe's first free trade union. The founding of Solidarity would prove to be a pivotal moment in the struggle against Communism in the 1980s. However, the free market has not been kind to the workers of Gdansk, who are once again fighting for their survival. The European Union claims that Gdansk is propped up by government aid in violation of EU regulations and is demanding that the struggling port close down two of its three slipways to cut costs. The port had until the end of Tuesday to accept the proposal or hand back the billions it has received in government aid. But at the 11th hour, the Polish government countered with its own proposal, which likely includes a plan to privatize the shipyard and sell it to a Ukrainian and Italian consortium. The EU has not yet responded, but one official told EU Observer that the Poland's actions were not sufficient:
They should close capacity and then build back up. Poland wants to do it the other way round [to avoid job losses]."
Workers from Gdansk are planning a demonstration in Brussels on Aug. 31, the anniversary of the Solidarity Agreements, which won the union the right to organize. The ruling Law and Justice party traces its roots back to Solidarity, so the closure of the shipyard would be a major blow to Poland's president and prime minister, the staunchly nationalist Kaczynski twins, who may face an early election next year.
Former Solidarity leader and Polish President Lech Walesa has also been outspoken in his defense of the shipyard where he made his name:
This shipyard is like a mother to us ... Do you liquidate your own mother?"
As Hurricane Dean rips through the Caribbean and now Mexico, commodity traders who made contrarian bets on sugar--futures contracts for the commodity are down some 20 percent this year--are licking their lips:
While there's a projected surplus of 11 million metric tons of the sweetener, bad weather may cause the global stockpile to shrink, said Greg Smith, founder of Global Commodities Ltd. in Adelaide, Australia, manager of a $210 million commodities fund.
"The risk is now mostly in the upside as wild weather season approaches,'" said Smith, who said storm damage may send sugar prices doubling to 20 cents a pound, from 9.4 cents a pound as of Aug. 17 on the Nybot. "We consume a lot of sugar both for food and now energy, while unfortunately the weather patterns are becoming more extreme.''
The storm has wrecked sugar crops in places like Belize and Martinique, and may cause damage in Mexico. Still, there's reason to be skeptical of Smith's optimism. The economies of sugar-producing countries in the Caribbean depend heavily on sugar, but they're still only a small piece of the global trade. Brazil, Thailand, and India, some of the world's largest producers, are expecting bumper crops this year. And with India looking to dump excess sugar on world markets next year, the contrarians may be in for a bitter financial harvest in 2008. So far, the futures markets look unshaken by Hurricane Dean. Prices for Caribbean rum, however, could well skyrocket. Bad news for Jimmy Buffet.
Back in July, Passport speculated that the yen-carry trade was not sustainable. But I don't think any of us thought it would unravel so quickly. The Dow Jones industrial average sank another 300-plus points this afternoon, but the yen is having a banner day. For those of you who bought Japanese currency last month, congratulations. It was a smart bet.
As for the rest of you investors out there, we feel your pain.
UPDATE: A late rally saves the day!
Corruption in North Korea is shocking even to Chinese visitors, who are not exactly used to a clean government.
A Korean-Chinese who occasionally goes to visit his relatives described his usual experience: "They are so greedy. Officials take bribes in China, too. But perhaps nowhere in the world are the officials so hungry for bribes as they are in North Korea. At customs, they slowly go through the luggage and sometimes put aside a few things they like, and then they say that those things are not allowed into North Korea. This is the hint, and I have no choice but to tell them to take those things, some clothing or small items. And it is a tradition that everybody who checks you should be given some foreign cigarettes. Last time I took five cartons of cigarettes with me, and only one carton reached my relatives. All others I had to give away to the officials."
Lankov's real point, though, is that information about China, which looks to North Koreans "like a perfect paradise," is seeping back across the border. And those North Koreans lucky enough to make it to the promised land—be it as refugees or businessmen known as chogyo—soon learn that South Korea isn't the hell on Earth they've been taught to hate, but is even richer than China. This can't be a sustainable situation.
That's a quote from a very distraught Andreas Jacobs, the chief owner of one of the world's largest chocolate manufacturers, Barry Callebaut of Switzerland. Marc Kowalsky explains why for Der Spiegel, which is becoming kind of obsessed with stories like this one:
Globalization has now hit the chocolate sector with full force. Just like Barry Callebaut, other chocolate producers are also suffering from the poor hazelnut harvest in Turkey, the growing demand for milk in China and the wheat shortage in the United States -- this last caused by more and more of the grain being used to produce biofuel. Meanwhile packaging and transport costs have increased at the same time.
Germany's critical gummy-bear industry is in trouble, too. The escalating drumbeat of stories about rising food prices around the world is enough to make Niall Ferguson pen a somber ode to Thomas Malthus. But if the upshot of this trend is less consumption of gummy bears, chocolate, and beer, perhaps everything will balance out in the end.
It has been many years since rival kingdoms sent each other messages via homing pigeon, but the latest development in the killer-export dispute between the United States and China offers a new take on that old-fashioned method of communication.
According to a Chinese government website, officials recently seized a shipment of 41 pigeons and executed every last one of them. The pigeons, which originated in the United States, were destined for use as both pets and gourmet food. Chinese inspectors, however, cited a litany of problems with the shipment, including an infestation of "parrot fever," a bird-disease that can cause mild symptoms in humans. So the birds were slaughtered and incinerated.
I have, in the past, defended the Chinese from allegations that they're out to poison us; I still think Americans tend to overreact when it comes to China. On the flip side, this pigeon business is utter silliness. It's clearly just tit-for-tat escalation of a dispute that need not cause any serious trouble. If China wants to keep an open, friendly market for their exports, they're better off acknowledging problems and working to promote safety, rather than going on the offensive to find flaws with U.S. exports.
Plus, think of the innocent pigeons.
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