White Man's Burden 2009: "Enlightening" SE Asia

There is an inbuilt streak which dies hard in many Anglo-Saxons to enlighten us backward coloured people who haven't seen the obvious advantages of capitalist liberal democracy. Nevermind, of course, rather contradictory episodes of subrime frivolity and Guantanamo Ghraibing misadventures as not-so-shining examples of both. While the date on the calendar says 9 November 2009, it might as well be 1899 as far as the FT's Asia correspondent Kevin Brown is concerned--the year in which Rudyard Kipling wrote of "The White Man's Burden: The United States and the Philippine Islands" in the pages of McClure's. Then, as now, the Great White Master is "burdened" with bringing civilization to Southeast Asia.

The context Brown writes about is diplomatic wrangling over the future of Asia. He believes that the US should flex its muscles in the region just as China is, in its own way, gradually vying for political-economic primacy there. In what he describes as "stultifying" diplomatic summits, the PRC is pushing for regional economic cooperation that disincludes the Yanks. Such efforts include ASEAN+3 which has the ASEAN 10 and China, Japan, and South Korea:

Asia’s annual series of regional summits is rarely calculated to stir the blood. This year, though, the stultifying communiqués conceal a battle for influence between China and the US that could hinder progress on human rights and democracy across much of the region.

The issue is the extent to which the US and its Asian friends can participate directly in multilateral regional institutions. Although there are a lot of these, only two really matter. One is the 10-country Association of South East Asian Nations, which holds annual summits with China, Japan and South Korea, known as Asean + 3, and with those countries plus India, Australia and New Zealand – known as the East Asia Summit. The other is the Asia Pacific Economic Co-operation grouping, a looser caucus with 20 countries (plus Hong Kong).

These summits have a meagre record. Asean has delivered some trade liberalisation successes. Apec has produced a useful travel card that helps business people avoid queues at airports. But much of their summitry verges on farce. Burma’s military junta, communist Vietnam and Laos, and Brunei, an absolute monarchy, happily signed the democracy and fundamental freedoms clauses of Asean’s human rights charter, knowing they could not be enforced.

Greater US engagement could force Asia’s democratic laggards to confront such issues. But Washington is in danger of being excluded by Chinese manoeuvring from plans to deepen and widen regional integration.

I doubt whether it has occurred to Brown and other modern Kiplings that us coloured people might actually have reasons to favour China over the US. During the Asian financial crisis, the Japanese offered to help Southeast Asian countries with an Asian Monetary Fund instead of having to deal with the IMF at the height of its "Washington Consensus" orthodoxy. (More here on this angle.) This proposal was promptly shot down by the US, but still. China also played a good neighbor by not competitively devaluing the yuan while many in the region struggled.

Instead of trumpeting a rehashed version of The End of History like Brown does, I think it would be better for the Anglo-Saxons to enumerate what they can offer the region instead of self-serving platitudes about the obvious benefits of capitalist liberal democracy. Certainly, American hypocrisy over dollar debasement does it no favours when eight of the world's top ten reserve holders are in Asia. In the end, there is little mystery about who the Yanks are screwing over via "strong dollar" misstatements. In all honesty, they have likely very little to offer compared to China and Japan.

On 15 November, the first ASEAN-US summit will be held in Singapore with Obama in tow. The interesting difference here is that Myanmar will be on hand. It is doubtful if the Yanks will dare bring up human rights given their Guantanamo Ghraibed recent history in that department. Rather, it's more likely that the US-ASEAN FTA will be discussed at greater length precisely to maintain political-economic relevance in the region. Just as Bill Clinton toned down his complaints over Chinese human rights, so too is Barack Obama likely to do so over Myanmar. While America's influence in the region is certainly not what it was before, it still wants to maintain a foothold. From Thailand's The Nation comes this insightful op-ed from Kavi Chongkittavorn

Whatever the US and Asean leaders choose to call their inaugural meeting would reveal deep down how they feel towards each other and their future relations. The previous plan would be a one-off summit to mark the three-decade cooperation. It is an open secret that the Asean leaders would like to have a regular and stand-alone summit on a yearly basis with the US leader...

After Asean's repeated diplomatic overtures to the US State Department and National Security Council, the grouping has lowered its expectation of an annual summit at its year-end meeting akin to the Asean+3 (China, Japan and Korea) to a mere commitment for follow-up meetings in the future. Now the ball is in the US court whether Washington wants to project enthusiasm and enhance its relationship at the highest level. But in the end it would be Obama who would make the difference...

The message came right after Senator Richard Lugar proposed the negotiation of an Asean-US free trade agreement (FTA) as part of a comprehensive strategy towards Asean. He reiterated that China, India, Australia, New Zealand and South Korea have already finalised FTAs with Asean and are sharpening their competitive edge over the US in Southeast Asia.

Obviously, at the top on the summit's agenda will be a discussion on the feasibility of an Asean-US FTA and other initiatives that would enhance economic cooperation. Singapore, which was the previous country coordinator of Asean-US relations, is keen to push for a joint study so that details of modalities can be worked out.

Perhaps some humility would do the Yanks some good in a world where there are others offering a better deal than simply accumulating junk Treasuries without limit. It would be interesting if Kipling could be time-warped to the present when the coloureds are, with some much-needed cooperation, better poised to show their erstwhile "masters" the errors of their ways.

I'm a Sucker for $ Doom Stories Episode 5,341

A few days ago I questioned the empirical basis for determining whether dollar shares of global reserves were falling as the currency once again entered a full-on swoon. Lo and behold, it seems that there are more folks coming out of the woodwork with even more outre stories. Again, I would very much like to believe that countries around the world no longer believe in the usual American "strong dollar" hypocrisy. Kick those Yankee econocrusaders and greenbackjihadists where it hurts, I say. Drive interest rates stateside to kingdom come. Punish them for fouling up the world economy with the largest deficits it has ever seen. Bad behavior should be punished with extreme prejudice.

Anyway, that rant aside, the latest round of dollar kicking today which has seen the euro rise above $1.50 is being attributed to two things. First, the bad jobs numbers last Friday when unemployment in the US climbed into double digits likely means American near-zero interest rate policy will remain in place for some time. Next, US Treasury Secretary Tim "Deficits Still Don't Matter" Geithner didn't even bother to try and fool anyone with "strong dollar" talk at the G-20 over the weekend. The end result is an effective "kick me " sign posted on the (very wide) backside of the US. From TIME:

So has the dollar finally used up the last of its nine lives? There are worrying signs that the world is losing its appetite for dollars. The International Monetary Fund announced on Nov. 2 it was selling 200 metric tons of gold to India's central bank for $6.7 billion. News of the purchase sent gold prices to an all-time high. The move was widely seen as part of an effort by central banks around the world to diversify their extensive U.S. dollar holdings. Steven Englander, chief U.S. currency strategist at Barclays Capital in New York City, figures that in the second quarter, dollars accounted for only 37% of new reserves accumulated by central banks worldwide. That's the lowest proportion on record for any quarter during which reserves increased significantly. At a time when many central banks are boosting their reserves, they are choosing to buy euro and yen instead. "Central banks are doing more than talking about reducing the concentration of [the U.S. dollar] in their reserve portfolios. They are actually acting on their statements," Englander wrote in an October report.

37% of new reserves? I sure would like to ask Englander where he gets these truly Armaggedon-like figures. Surely, he must have some empirical basis for these eye-opening figures. Keep tempting fate, Yankee econocrusaders and greenbackjihadists. Sooner or later your time in gonna come, and I certainly don't want to be stuck with your toilet paper when it does.

Super Turkey Punchers: China, US Trade Blows

Well, well, well, this latest joint Sino-American hypocrisy over trade is interesting. Those of you who've played Doom 3 know what I'm talking about in the title. Prior to blasting aliens to kingdom come, the protagonist in Doom 3 has the opportunity to play an in-game arcade feature called Super Turbo Turkey Puncher 3. As you can gather from the video above, it is entertaining in a dumbly morbid way. The same holds true here with China and the US feigning trade amity.

Let's first set the stage for some prime time fowl play. At the end of last month, China and the US pledged that they would no longer engage in tit-for-tat combat on the trade front at the 20th China-US Joint Commission on Commerce and Trade. There was US Trade Representative Ron "Cap'n" Kirk and Commerce Secretary Gary Locke doing the diplomatic equivalent of kumbaya. Also there was Chinese Commerce Minister Chen Deming vowing that "Both sides agreed on not introducing any new trade protection measures against each other as both vowed to oppose trade and investment protectionism and observe the related consensus of the G20 summit." I, of course, found this quite amusing and thought it wouldn't be long until one side started whacking the other once again.

To no one's real surprise, the US was the first to break this lovey-dovey nonsense. On Wednesday, the USTR in tandem with Mexico and the EU delivered a long-awaited punch to the proto-Marxist-Leninist-Maoists over raw materials export limitations. The point of which is to keep China well-stocked with domestically sourced raw materials in alleged contravention of WTO rules. After not making progress in consultations with China during the preliminary 60 day period, the complainants have now requested the WTO to form a dispute settlement panel:

China imposes quotas on exports of bauxite, coke, fluorspar, silicon carbide, and zinc, as well as certain intermediate products incorporating some of these inputs. China also imposes export duties on several raw materials and imposes other export restrictions through its export procedures, including via certain charges (unrelated to any services rendered) that must be paid before certain products can be exported. In addition, China administers its export procedures unfairly in other respects, including, for example, by not publishing relevant measures in a manner that allows them to be readily available to governments and traders.

Article XI:1 of the General Agreement on Tariffs and Trade (GATT) generally prohibits restrictions on exports other than taxes, duties, and charges. GATT Article X requires China to administer its measures in a uniform, impartial, and reasonable manner, and GATT Article VIII requires that any charges in connection with export be limited to the cost of services rendered. Further, China's WTO Accession Protocol contains broad commitments not to restrict the right to export goods. Specifically, China committed as part of its WTO accession to eliminate export duties for all products other than those listed in a specific annex. China also committed to limit any export duties on the listed products to specified levels. The export duties being challenged are on products not listed in the annex or are imposed at rates that exceed the annex limits.

Requesting a panel is the next step in the WTO dispute settlement process after requesting consultations. The WTO's Dispute Settlement Body will consider the U.S. panel request at its meeting scheduled for November 19.

So, there's no tit-for-tat with this foregone US act of trade aggression, right? Lo and behold, today we have news that China is engaging in more punch-ups with the Yanks over oil well pipes that's been some time coming. From our favourite official publication, China Daily:

China's Ministry of Commerce (MOC) Friday branded the United States imposition of anti-dumping duties on Chinese oil well pipes as protectionist and vowed to take measures to protect its own domestic interests. The United States denied China's market economy status and took discriminative measures to impose anti-dumping duties, bringing serious impacts to China's steel sector exports, said MOC spokesman Yao Jian in a statement on the ministry's website.

"We hope the United States can get rid of the bias and admit China's market economy status soon to tackle the double standards thoroughly and give Chinese enterprises equal and fair treatment," Yao said.

The US Commerce Department on Thursday set preliminary anti-dumping duties on imports of Chinese-made oil well pipes. The department said it had "preliminarily determined that Chinese producers/exporters have sold OCTG (oil country tubular goods) in the United States at prices ranging from zero to 99.14 percent less than normal value." As a result, a 36.53-percent levy was imposed on OCTG from 37 Chinese companies, while some other Chinese companies received a preliminary dumping rate of 99.14 percent.

The emphasis above is mine and is quite funny given the "no more tit-for-tat" vows. With friends like these...Anyway, the we're-not-vengeful Chinese have now initiated an anti-dumping, anti-subsidy (wow, a double) investigation on US automobiles in response:

China's Ministry of Commerce (MOC) said Friday it had launched anti-dumping, anti-subsidy investigations into US-made off-road vehicles and sedans with engine displacements of 2.0 liters and above. The decision was made after the China Association of Automobile Manufacturers (CAAM) filed an application for the investigations, the MOC said in a statement posted on its website.

CAAM, representing Chinese car-makers, said US car makers had unfairly benefited from 31 government subsidy programs. The MOC decided to investigate into 24 of them. The ministry said it held consultation with its US counterpart on Tuesday and made the decision in accordance with China's anti-dumping and anti-subsidy laws. The investigations would commonly be ended before November 6, 2010, but might be extended by another year if necessary, the MOC said.

The M0C announcement came one day after the US Commerce Department set preliminary anti-dumping duties on imports of Chinese-made oil pipes, which was the biggest US trade action against China.

I have more background information from a previous post on the controversy over classifying China as a market economy or not. As for US subsidies for American automakers, the bailouts of GM and Chrysler immediately come to mind and how those may be tied to their Chinese exports. Given that China is now the world's largest car market and GM vies for top sales honours there with Volkswagen, this could have the makings of a really nice exchange of blows if the automaker is hit hard. (Then again, the WSJ notes GM makes most of its cars in the PRC.) Also don't forget that Obama is set to visit China this upcoming week.

So you see, boys and girls? No tit-for-tat here. None whatsoever. Now, if you'll excuse me, this turkey of a trade exchange has inspired me to play some Super Turbo Turkey Puncher 3 for old time's sake. As before, I suggest that these two jokers just cut the crap and started fighting already instead of giving fodder to would-be blogging comedians.

Euroskeptics, Lisbon Treaty's Wonderful Tonight

With a slight delay due to computer woes, it brings me a great deal of pleasure to announce that the Lisbon Treaty has finally been inked by all 27 member states of the European Union. Hallelujah! The Czech Republic's Jurassic Euroskeptic (and global warming denier, naturally) Vaclav Klaus received enough sweeteners so that all he could do was mutter something about how he's had to sign due to an unfavourable ruling. The road to this momentous occasion has certainly been a rocky one. Lisbon's predecessor, the EU Constitution, was turned down in referenda by both France and the Netherlands in 2005. These events prompted a rethink by the powers-that-be which eventually resulted in the repackaging job called the Lisbon Treaty. The main difference this time around was that almost all EU countries did not subject it to referenda--with the most notable exception of Ireland. After turning it down once, the Irish eventually came to their senses and passed it after a second referendum.

What is important to note is the landslide victory the second Irish referendum obtained on the Lisbon Treaty. My intuition is that the difference the second time around was heavy marketing by pro-Europe (pro-intelligent) forces including virtually all major Irish parties. At the same time, and this is the kicker I believe, they did a better job of explaining it to ordinary folks. I honestly do not see repeating referenda as "undemocratic" as Euroskeptics have it but rather a victory over shallow debate where poisoned mass media phobia over a European superstate and similar nonsense is relentlessly hammered into the minds of those who haven't really investigated what Lisbon entails. For, the Lisbon Treaty is not about surrendering powers to some supranational monster. Instead, it's about streamlining the EU which has now grown to 27 members so that it can be more effective in dealing with internal and external affairs.

I am thus amused by the comments of the Euroskeptic press here in Britain hoping for a delay in the signing of the Lisbon Treaty that would allow the Tories' David Cameron--PM Gordon Brown's assumed successor--to subject it to a UK referendum that'd likely result in a "no" vote given the Murdoch media machine's unabashed hatred of the EU. His Sun tabloid says Britain has joined the "Chumpions League" (har-har) in Labour's betrayal while the somewhat more respectable Telegraph opines that a 20o-year-old experiment in modern Western democracy has ended [!] I refer you to an old article in the New Statesman on Murdoch's self-serving twaddle as he fears Brussels' anti-monopoly powers being deployed against his media empire:

If The Sun took the democratic rights of the British people seriously, then it should be campaigning for the influence of foreign tycoons like Murdoch to be extirpated from British political life. Needless to say, we shouldn’t be expecting this to happen anytime soon.

Murdoch and the other proprietors are rational enough. They fear the EU because it has the potential to develop the political confidence and regulatory heft to break up their cosy little empires. Concerned at the terrible prospect of the balance of political power slipping away from him, Murdoch will do whatever he can to maintain the status quo.

Nuff said, In the meantime, this turn of events has put PM-in-waiting David Cameron and the Conservatives in a difficult position. After all, he wrote in the Sun in 2007 (natch) that "Today, I will give this cast-iron guarantee: if I become PM a Conservative government will hold a referendum on any EU treaty that emerges from these negotiations." Apparently, Cameron is now backtracking on this statement by attempting to change the subject--it's the economy, stupid, not Europe--and making more half-baked promises about stopping further EU inroads into UK sovereignty. Either way, there will be no such referendum. I was also amused by France's Europe Minister Pierre Lellouche having to apologize after saying the Tories had a "very bizarre sense of autism" over Europe and the Lisbon Treaty, calling them "pathetic" and their MEPs "castrated". (Murdoch's Times of London reports on this, naturally.) Not the most diplomatic way of dealing with Euroskeptic double-talk perhaps, but it's a refreshingly honest opinion.

Ultimately, it comes down to information bettering disinformation. I ultimately believe that the EU cause would be served better by the former. Unfortunately, there are few outlets at the curent time for patiently explaining what Europe really is about aside from the nonsensical tabloid scaremongering peddled here day in and day out. To give you an example, the BBC's fine programme The Record Europe is only shown during the weekends when people are likely out or asleep. Again, political marketing plays a role: if Europhiles want to get their message across better, they had better put in some marketing muscle and create a simple, easily comprehended message that the person on the street can identify with. It's that simple and that complex.

In the meantime, Europa is wonderful tonight.

Holy War Lite: Pope Poaches Anglican Priests

I have a massive backlog of possible posts I haven't been able to attend to due to not having an Internet connection at home. Lest I pay highway robbery rates to have my British Telecom line activated, this will have to continue for a while. Nonetheless, the ongoing brouhaha between the Anglican and Catholic churches certainly merits attention. Tonight being Bonfire Night which Britons celebrate by burning effigies of Catholic conspiracist Guy Fawkes is certainly appropos. Why exactly are they damning whwat is now Britain's largest religion when the one Fawkes was trying to dismantle is self-destructing?

It is no secret that the Catholic church has eclipsed its Anglican counterpart in terms of attendance here in Britain. Once more, this is no mean achievement in that the former has shrunken at a slower rate than the former. Heck, Tony Blair's even become my co-religionist. The Anglican church has been riven by internal conflict these last few years over efforts at "modernization" by enlisting women and gay priests. This internal turmoil has certainly played a role in losing some of the faithful.

Adding insult to injury, however, the Catholic church recently offered a sort-of conversion [1, 2] for Anglican priests and their flock to our bastion of religious conservatism (where it's unlikely that the Scissor Sisters will be saying mass anytime soon). Making it easier for Anglicans to switch over has raised accusations of opportunism. In contrast to jihadis and crusaders going at it, these Christian faiths have what I call "holy war lite" or a religious cold war. It's certainly interesting stuff that demonstrates that proselytizing always involves a bit of--you guessed it--marketing.

The not-so-politically-correct US General William G. Boykin once famously remarked that "my God is bigger than yours." I, however, make a smaller claim that should not arouse any sort of mischief by declining to assign moral valence: "My Pope's craftier than the Archbishop of Canterbury [!]" And that, dear friends, is not usually a characteristic associated with a staunch defender of tradition often perceived as being trapped by it.

Are They Dropping Dollars for Euros as Reserves?

This is a wonky post that I believe needs to be made anyway. I have made it plenty clear that I am no fan of the dollar and that anyone dumb enough to hold it--including myself, of course--should not complain when the Fed decides to "create some inflation" as now-chairman Ben Bernanke (AKA B-B-B-Bennie of the Feds) puts it. Recently, I've come across articles that make noises to the effect that reserve holding countries are shifting in a significant way towards the euro. Let's start with Bloomberg:

While the dollar dropped in global currency reserves, holdings of euros rose to a record, the IMF report shows. The U.S. currency’s portion declined to 62.8 percent from 65 percent in the first quarter. The euro’s share rose to a record 27.5 percent from 25.9 percent while the pound and yen gained.

Martin Wolf also makes similar noises:

Finally, what can replace the dollar? Unless and until China removes exchange controls and develops deep and liquid financial markets – probably a generation away – the euro is the dollar’s only serious competitor. At present, 65 per cent of the world’s reserves are in dollars and 25 per cent in euros. Yes, there could be some shift.

You'd think I'd be overjoyed about this turn of events in which central bankers are fleeing Yanqui economolesters as fast as peaceniks from Dick Cheney, but no. These statements are most likely inaccurate unless these sources are privy to exclusive information the rest of us don't have. The main source for this data is the IMF Composition of Foreign Exchange Reserves or COFER. See here for the latest report. Actually, the Bloomberg report is accurate as of Q2 2009 if we consider only the reported holdings of countries that give the IMF the currency breakdown of their reserves. As you can see, however, only 62.8% of all reserves are denominated (I originally typed "demoninated"; it sound about right).

The biggie, China, holder of two trillion or so in reserves, does not report the composition of its reserve holdings. Nor do many Mideast countries that are also large reserve accumulators due to currently elevated oil prices. Hence, the best we can do is cite the abovementioned figures but say that they are only for reserves whose denomination is known--less than two-thirds of total global reserves. As for the overall move from dollars to euros, your guess is as good as mine as more than a third of the world's reserve holdings are of undetermined breakdown.

Unfortunately, the honest answer to this question is "I don't know" based on the available data.

US Intrafirm Trade: When MNCs Rule the World?

Sometime ago I read an exceptionally bad anti-globalization book by David Korten entitled When Corporations Rule the World. Ridden with factual errors such as the corporate revenues versus GDP apples-and-oranges fallacy, it was, to say the least, a laborious read. The anti-globalization movement claims to be environmentally friendly unlike the folks they criticize, but all I can say is that I am hugely appalled that so many trees were cut to print this amateur nite rubbish. At any rate, I was reminded of this amateurish screed while reading the latest summary statistics from the WTO's annual International Trade Statistics report for 2009.

The above chart caught my eye depicting the growing share of intrafirm trade in US service exports. America is, of course, by far the world's largest exporter of services. What is noticeable here though is that while the ultimate share of intrafirm trade in US service exports is growing, the base it starts with is relatively low. Trade is certainly not yet becoming the exclusive domain of monolithic corporations divvying up their operations worldwide for its inevitable corporate conquest. Certainly, it's nothing to set the anti-globalization set afire, though they're welcome if they want to give it a try. When Intrafirm Services Trade Rules the World doesn't have the same snap IMHO.

Without further ado, here is the accompanying the writeup:

The globalization of business and the firms’ increasing ownership of different stages of the production process have increased the role of intermediate goods in merchandise trade over the last decade. A similar fragmentation of production has been emerging in the field of services. The United States has recorded an increasing share of trade between multi-nationals and their majority-owned foreign affiliates, growing from 21.5 per cent to more than a quarter of its total trade (27.5 per cent) in 2007 (covering only nonbank affiliates, and excluding transportation services and travel).

Save the Fish! Save WTO Doha!

Here's an interesting article for those who think that the WTO is anti-environment. (I should also mention that those interested in matters dealing with trade and global warming should see the United Nations Environmental Programme / World Trade Organization publication appropriately entitled "Trade and Climate Change." The folks at Reuters bring us an interesting side-story about the never-ending Doha round that involves incompletion of trade talks waylaying new measures aimed at curbing overfishing. The European NGO Oceana figures big in this story, too:

Proposals to rescue collapsing fish stocks by restricting fisheries subsidies are under threat because of the lack of progress in global trade talks, environmental campaigners said on Thursday.

The talks on fisheries subsidies are part of the World Trade Organisation's Doha round to reform global commerce rules, which is showing few signs of movement despite an intensive work programme agreed by negotiators for the final months of 2009. "We're very concerned," said Michael Hirshfield, chief scientist at Oceana, a U.S.-based group that campaigns to protect the world's oceans.

"We're in a sense hostage to the broader negotiation," he told Reuters while in Geneva to lobby trade negotiators whose talks this week have been focused on fisheries subsidies.

According to the U.N.'s Food and Agriculture Organisation [FAO], more than 80 percent of the world's fisheries are overexploited, fully exploited, depleted or recovering. [NGO] Oceana says that 63 percent of fish stocks worldwide require rebuilding, while more than 1 billion people depend on fish as a key source of protein...

A 2006 study by the University of British Colombia found that global fisheries subsidies amount to $30-34 billion a year. Of that total, about $20 billion increases the capacity of fleets to fish longer, harder and further away.

The WTO fisheries negotiations aim to restrict such subsidies. But countries with large industrial fishing fleets -- such as China, Japan and South Korea -- are reluctant to cut their supports. Many developing nations with subsistence fishermen such as India and African states are also wary.

Hirshfield said it was important to distinguish between different types of fishing. Helping someone in an un-motorised craft fishing in coastal waters for himself or for sale locally by providing ice or docks would not add to overfishing. But providing cheap fuel to industrial fleets to go around the world for fish as an economic commodity was more dangerous.

The article continues by noting that age-old conundrum of international diplomacy, "we want to get moving but we can't till the US gets on board":

Geneva negotiators told Oceana the overall Doha talks would not move until the United States got more involved, he said. "The question is whether it's sufficient for the United States to re-engage or whether other countries or other obstacles will magically appear once the U.S. is eliminated as an excuse," he said. "We just think that it's critical for the WTO to include real reductions in global fishery subsides in any deal that is reached," he said.

Julie Packard, head of the Monterey Bay Aquarium, said growing consumer awareness of overfishing was leading food processors and retailers, like Wal-Mart Stores Inc and Aramark Inc, to commit to source food from sustainable fisheries.

Is the environmental community at odds within when it comes to trade and the WTO? On one hand, you have the WTO-is-the-root-of-environmental-hell-on-Earth set. On the other hand, you have these folks willing to give WTO mechanisms a try but are still being delayed. Still, this new change of emphasis appears welcome to the WTO in improving its "green" image given contentious rulings such as tuna-dolphin and shrimp-turtle, crappy money-losing movies aside. The interesting thing politically is that the dynamics here are somewhat different as this environmental concern is not strictly a North-South issue.

Free Trade: "Supply Side" International Economics?

I've just read a timely and on-target book about dealing with America's fiscal woes which I intend to write about in greater length soon, Bruce Bartlett's The New American Economy: The Failure of Reaganomics and a New Way Forward. In the meantime, a more or less throwaway idea Bartlett made has caught my attention. In the book, Bartlett compares tax cuts promoted by "supply side" economists with the tariff cuts promoted by "free trade" economists. In a sense, this comparison is apt since we're talking about instruments for raising revenue being reduced to--in theory at least--encourage economic activity.

Not to reveal too many spoilers but the gist of Bartlett's argument--remember that he was one of the most recognizable proponents of implementing "supply side" policies in the Reagan era--is that changing conditions require changing policy prescriptions. To any reasonable observer, this is self-obvious. However, the recent Bush years have put Reaganomics in a bad light as Dubya continuously invoked the idea that tax cuts paid for themselves without considering the important flip side of the deficit equation: spending. Bartlett has disowned what he views as the bastardized version of "supply side" economics still being peddled by mainstream Republicans that any economic problem can be addressed by, well, ever-greater tax cuts. Outside of the situation of stagflation, such calls have lost their meaning as the challenges facing America today are vastly different than the start of the Eighties.

This, of course, brings me to the "free trade" set. Just as the "supply side" set or whatever passes for it nowadays proposes tax cuts as an all-purpose solution for what ails America, these folks tend to see tariff reduction as doing the same for what ails the world economy. Think of WTO Director-General Pascal Lamy or even Jagdish Bhagwati. This despite already low tariffs by historical standards. Indeed, the downfall of both appears similar: Bartlett strongly criticizes current "supply side" economics in its Bushian iteration as only looking at one part of the fiscal equation in revenues without delving into expenditures. Starve the beast, they say. Similarly, the "free trade" set tends to look at increased trade volumes as an unbridled good without thinking much about how capital account balances--the opposite of current account balances--affect the health of the world economy. When goods do not cross borders, soldiers will they say.

I have argued that global economic imbalances need to be meaningfully addressed--especially among the "free trade" set. Are they utterly unconcerned with the distributional consequences of poor countries lending money to rich countries at ripoff rates? Certainly, some of Bhagwati's boilerplate arguments in favour of trade need reexamining. I am thinking of the overused "China's opening up to the world economy has brought millions of people out of poverty" line of argument. As Yasheng Huang's insightful Capitalism With Chinese Characteristics explains, poverty reduction in China was much greater in the 80s when the emphasis was on generating entrepreneurial activity in rural areas; actual income gains then were widely-shared and had very little to do with international trade. Contrast this to the 90s when projects by urbanized coastal regions to attract FDI and trade did so but at the expense of rapidly growing income inequality in a supposedly "socialist" state while those in the rural areas were largely left behind. Particularly galling is the fact that illiteracy in China has risen in recent years--some achievement. And, of course, there is the not quite negligible matter of the Chinese state using the people's money to fund American hyperprofligacy.

Just as mindlessly championing tax cuts at every instance makes limited sense in a for all intents and purposes bankrupt country like the US, perhaps free traders should rethink their support for tariff cuts without understanding its consequences on the capital account side. Has reverse Robin Hood globalization--taking from the poor (Chinese peasants) to give to the rich (spendthrift Yanks) really done either a world of good? I am afraid that many of our Chinese friends are unable to speak for themselves--especially in an evil fora like the blogosphere. Meanwhile, America is pretty much the farthest thing you can get from a land of opportunity. A short, sharp shock in the form of a concentrated US-China war could even do the trick.

Like "supply side" economics circa 2009, perhaps "free trade" in our day and age needs a fundamental reappraisal in a world where tariff rates are already quite low, with better consideration of the much-neglected capital account side of the equation.

Damn Right Blair Shouldn't be First EU President

Rumours that Tony Blair wants to become the first European Union President have now taken shape as the newswires report that Foreign Secretary David Miliband is keen to raise the former PM's case in Luxembourg, saying that Europe needs a strong political counterweight in international politics to the US and China. With EU bigwigs pressing hard and offering sweeteners so the recalcitrant Euroskeptic Czech President Vaclav Klaus signs on to the Lisbon Treaty, this issue is beginning to be earnestly debated.

However, it is also noted that the Benelux countries (Belgium, Netherlands, and Luxembourg) are doggedly determined not to see Blair assume this post despite obviously being the candidate with the best international name recognition. It is no secret that the United Kingdom has been not been a team player on matters of European integration since the time of Margaret Thatcher, the grandma of all British Euroskeptics. From asking for rebates on the Common Agricultural Policy (CAP) to engaging in Mortal Kombat with the continent's leaders, the EU has several grievances with how the UK has treated its presence in the EU--literally neither here nor there.

While it is certainly the UK's right to exist on the periphery of EU membership, this status certainly doesn't merit it placing an EU president. The Benelux countries are right in pointing out that the UK has neither adopted the euro nor joined the Schengen visa area--two of the principal European instruments for integrating economic and immigration policy. More importantly, Blair has not made any significant moves to ensure British adopts either of the two. Recall how he shunted off the question of joining the eurozone to then-Chancellor Gordon Brown of "five tests" fame. As for joining Schengen, forget about it.

As an economic migrant in the UK, I am annoyed by both these oversights. Not only am I being paid in play money (the British pound) when I could have been earning real money (euros), but I also cannot freely travel in Continental Europe with a British visa. Benelux is damn right to say no to Blair. While the anti-war set has its own objections, mine are based on less esoteric grounds. If the UK doesn't want to be a full member of Europe, then one of its own should not be allowed to become the EU president, period.