GLOBALIZE THIS!

Friday, February 13, 2004

WHY BLAME TERRORISTS...

when the US government itself is so accomplished at dissemanating WMDs?

The US Dept. of Energy has spread 35,000 pounds of highly enriched uranium fuel around the world since the 1950s, the WSJ reports:

"Starting with the "Atoms for Peace Program" in the 1950s, the U.S. began leasing the uranium fuel, requiring nations to return it. After 1964, the U.S. began to sell the fuel."

Is the world getting more dangerous, or are we just getting dumber? Here's what the DOE Inspector General had to say on the matter.

Oh, and you have to love the creativity of government bureaucrats. This is the snappy name they chose for the program for recovering the errant nukes: Foreign Research Reactor Spent Nuclear Fuel Acceptance Program. That's really catchy...and fun to say.

¶ 2/13/2004 04:01:38 PM

SECURING LOOSE NUKES

After a presidency spent actively thwarting international non-proliferation efforts (not to mention turning a blind eye on the detriorating situation in Russia and the nefarious escapades of his dictatorial cronies), Bush is proposing to do something about the spread of nuclear technologies and fissile materials.

Here is how the Financial Times guages the plan:

"President George W. Bush's proposals for policing the global traffic in nuclear material would demand an unprecedented degree of international co-operation if they are to foil the sort of black-market network that was supplying Libya and North Korea, according to non-proliferation experts." (Emphasis added).

In what I hope can be the first ever Globalize This! readers' opinion poll, please post your comments on the likeliness of the Bush administration finding success in this cooperative effort.

¶ 2/13/2004 12:53:01 PM

THE YEAR IN TRADE 2003

Here is the rest of the complete, though abbreviated, picture of US trade.

¶ 2/13/2004 12:02:19 PM

THE NEW TRADE POLITICS

"I can already hear free-traders sigh. In the long run, they will say, free trade benefits everyone. But in the long run, as John Maynard Keynes once said, we are all dead. In the short run, the growing prosperity gap between investors and employees is altering the American landscape on trade questions...In Tennessee, 71 percent of the voters said that "U.S. trade with other countries" took more jobs from the state; only 12 percent said trade created more jobs. In Virginia the comparable figures were 55 percent and 19 percent."

Say what you will about E.J. Dionne, he tends to have his finger on America's political pulse. And unlike a lot of pundits and columnists, Dionne tends to resist the impulse to talk out of his ass about subjects on which he has no knowledge (unlike many of his cohorts at the Washington Post).

¶ 2/13/2004 11:36:12 AM

AY CARUMBA!

The 2003 US trade data were released this morning. The merchandise trade deficit is up 14% over last year to $549 billion.

Particularly troubling is the continued deterioration of the US trade deficit in advanced technology products, which fell from a $16.6 bn deficit in 2002 to a $27.4 bn deficit in '03. Trade with China led this decline in the advanced technology trade position, with the bilateral deficit falling from $11.8 bn to $21.1 bn. Yikes.

More to come...

¶ 2/13/2004 10:08:35 AM

Thursday, February 12, 2004

BUSH JOBS PROMISE AIMS TO BEAT THE STREET

While the Bush jobs forecast for 2004 has been widely characterized as delusionally unrealistic, a survey of economic forecasters conducted by the WSJ due out tomorrow paints a rather sober jobs picture. On average, they predict payroll employment will grow by 155,000 jobs a month through November 2004.

That's better than a swift kick in the nuts, but it won't be enough jobs to even absorb all the new entrants to the labor market, let alone to re-employ those who have lost jobs or to reinvigorate the droves of discouraged long time unemployed who have given up looking for jobs.

Maxspeak has the lowdown--and a great picture--on the Bush administration's diminishing jobs expectations.

¶ 2/12/2004 05:32:42 PM

GLOBALIZATION IN PICTURES

From the BBC:

"Bangladeshi police beat Ahsanullah Master, a senior leader of the opposition Awami League, during a general strike in Dhaka."

¶ 2/12/2004 03:29:37 PM

MAESTRO ON THE DOLLAR:

"Against a broad basket of currencies of our trading partners, the foreign exchange value of the U.S. dollar has declined about 13 percent from its peak in early 2002. Ordinarily, currency depreciation is accompanied by a rise in dollar prices of imported goods and services, because foreign exporters endeavor to avoid experiencing price declines in their own currencies, which would otherwise result from the fall in the foreign exchange value of the dollar. Reflecting the swing from dollar appreciation to dollar depreciation, the dollar prices of goods and services imported into the United States have begun to rise after declining on balance for several years, but the turnaround to date has been mild. Apparently, foreign exporters have been willing to absorb some of the price decline measured in their own currencies and the consequent squeeze on profit margins it entails."

Yes, but just who absorbs the cost of adjustment is wholly a political issue, as witnessed by last weekend's row over the crptic G7 ministerial statement. Yes, the dollar has come down, but nearly as much as it needs to. And the cost of this adjustment has been borne almost entirely by Europe (and to an extent Mexico and Canada). But the countries that are causing the imbalances are those in Asia with fixed and managed exchange rates, who incidentally account for about half of the overall US trade deficit (and even more if we net out oil imports).

Here is what the FT had to say about Japan today:

"The government last year spent an unprecedented Y20,000bn intervening in foreign exchange markets and made clear at last weekend's Group of Seven meeting that it was prepared to continue."

The Yen has hit a high of Y105 versus the dollar; I just heard a Japan analyst say at a brown bag lecture that by Japan's fundamentals the exchange rate should be around Y50 (a lower Yen value means a stronger currency).

In order for the dollar to return to sustainable levels and to stave off the threat of a dollar-induced global financial crisis, the dollar must fall against these Asian currencies, primarily the Yuan and the Yen. Unfortunately, the Bush administration continues to show its unwillingness (or perhaps ineptitude) at engaging in effective international financial diplomacy.

¶ 2/12/2004 02:36:37 PM

BUSH'S TEETH REPORTED FOR DUTY IN ALABAMA

The White House is in a losing battle over this whole AWOL thing. I don't have the time to fine-tooth comb all the evidence, so my observations are based more on the process as it unfolds rather than the veracity of particular pieces of evidence.

President pro tem Bush was emphatic in last Sunday's now monumental MTP interview that he did his duty in serving in the National Guard. More than whether he showed up or not, or used his family's political influence to doctor records, the interesting question American's should be asking themselves and the White House just how exactly George Bush defined his duty.

Bush's sense of duty seems to amount to showing up and getting a check for attendance next to his name. Contrast Bush with John Kerry, whose service in Vietnam and sense of duty has earned him widespread accolade from democrats and conservatives alike, inspired a veterans brigade to take up the cause of his presidential campaign, and brought out even lifetime Republicans alongside whom Kerry fought in support of the Senator. Kerry's sense of duty pervaded his service and earned him the respect of servicemen and women across the board.

How many of Bush's National Guard cohorts have come forward to validate his claims and to stand by the president's side at his time of need? Bush's performance and commitment was so lackluster that his superiors can't even remember if he showed up! But whether Bush showed up or not, that the service he offered and the commitment he expended has faded into oblivion demonstrate that the President took his duty lightly at best.

Which brings us back to this morning's Washington Post article: while some were giving their lives for this country and others were serving in the National Guard to avoid a war they opposed on principle (Bush supported the Vietnam war), Bush was galavanting around Alabama getting free dental exams on the taxpayers dime.

The more superfluous evidence the White House puts forward, the worse this is going to get for Bush. It makes him look desparate and insincere. Sincerity, after all, would have produced the men and women with whom Bush served and built lasting bonds of mutual respect, not dental records.

¶ 2/12/2004 10:58:59 AM

SPINNING YARNS WITH GREG MANKIW (AND JUST SPINNING WITH ROBERT ZOELLICK)

Brace yourself, this is a long post. I've been chewing on this one for a few days. Feel free to bookmark this one and come back later...

Busy day at work, what with the Economic Report of the President out earlier this week. CEA Chairman Greg Mankiw made quite a gaff in a press conference Monday afternoon:

"Outsourcing is a growing phenomenon, but it's something that we should realize is probably a plus for the economy in the long run...[just the] latest manifestation of the gains from trade that economists have talked about for centuries."

Oops! That may very well be what orthodox trade theory says, but damn...you say that in an election year--or at all--in politics.

This little gem is merely one among many in this year's ERP. I'll paraphrase two others:

1. The loss of manufacturing jobs is due to a cyclical downturn, productivity growth and a statistical anamoly that counts some service workers as manufacturing workers--not from offshoring.

2. Thought the trade deficit with China is growing, it has no effect on the overall trade deficit.

These two points, when viewed in context of Mankiw's statement, foreshadow the climax of Presdient Bush's 471 page novel of economic fiction at the end of the report: an outline of the Bush administration's international trade liberalization agenda. What's not on the agenda is perhaps more interesting than what is on the agenda--manufacturing.

The ERP's treatment of manufacturing jobs is rather misleading. The demise of manufacturing predated the onset of economic recession by two and a half years, amid the strongest economic expansion (fueled by massive investments in business IT equipment), when financial crisis enveloped Asia in April 1998, sending a flood of devalued imports our way.

Yes, manufacturing productivity is consistently higher than productivity in other (service) sectors of the economy (that's why so many people are concerned about keeping a mfg industry in the US--lose the productivity, lose the prosperity). Productivity comes from learning to do things more efficiently, or by applying new technology. Productivity can also come from reducing labor costs by producing things offshore, thereby reducing the number of hours it takes to produce the same output (someone else is making the input, though their hours don't count in the tally because one firm buys them from another firm).

The trend toward manufacturing firms outsourcing business services is true enough. Employment statistics comiled from the BLS's establishment survey makes it difficult to tell how much this is true. The BLS survey classifies workers by the industry in which they work, not by the occupation. So a lawyer working for Kubota tractors in Dearborne, MI is a manufacturing worker, and so on. Firms can focus on their core manufacturing competencies and simply contract out for all the other business functions that need to get done. By the ERP's argument, the total number of jobs remains relatively constant, although the mix between those classified as manufacturing and those as services are shifting. So don't worry about. (There is also a discussion of more manufacturing work being done by temporary workers--which is a service categroy--like that's good news for the economic security of American workers).

But wait, it turns out those service sector jobs being outsourced by manufacturing firms are actually geographically tied to manufacturing activities (called aglommeration economies). That is, without the manufacturing there is no need to have manufacturing services. This makes sense, why hire a firm to run your payroll when you have no employees?

On the issue of China trade, the ERP admits that China's share of the US trade deficit is rising, up to 22% in 2002 and going higher (the 2003 # comes out on Friday morning). But not due to offshoring? Over 47 percent of imports from China in 2002 was trade between "related parties"--that is between a multinational corporation and its subsidiary. In 1998, less than 18 percent of imports from China were between related parties. So you would have to be on crack to say that the increase inthe trade deficit with China has nothing to do with outsourcing.

But hold these thoughts for a moment.

While Mankiw was giving poetry readings over at the JEC , the White House dispatched Robert Zoellick, the USTR, over to the Pacific Rim for a little song and dance. On Sunday/Monday, the USTR announced completion of a new trade deal with Australia. The trade deal didn't make much of a splash--Australia has as good or better labor and environmental standards than the US. Who's to complain?

The USTR won't take any chances, though. They were touting: "More than 99 percent of U.S.
manufactured goods exports to Australia will become duty-free immediately upon entry into
force of the Agreement." Big deal. Exports to Australia are a whopping $13 billion, imports $6.5 billion. Tariffs were already wicked low. If anything, proximity to East and Southeast Asia might make Australia a major export platform for China, et. al.

So what did the US get, then? American pharmaceutical companies got a commitment that Australia wouldn't re-export to the US at below market prices prescription drugs purchased in bulk by its Pharmaceuticals Benefits Scheme (a la Canada). American investors will get new protections that make NAFTA's Chapter 11 look like a jaywalking ticket. Australia agreed to "state-of-the-art" intellectual property rights (here's a great article by Joe Stiglitz on IPRs and trade) that among other things will allow intellectual properties to trump internet domain name ownership rights (so if you owned the site www.disney.au, your're screwed).

Then why do it? For one, that's all that the Bush administration is trying to get out of international trade deals, which is made abundantly clear in Chapter 12 of the ERP. Another reason is that Zoellick needed a win, big time.

Brief digression on the role of the USTR:

The USTR's job is to negotiate trade agreements. Period. And their success is measured purely by the number and size of the agreements that are negotiated. The more trade agreements, the better--irrespective of any economic consequences.

Also, the USTR is notoriously riddled with conflicts of interest. Since the dawn of time (weell, the dawn of the USTR), the USTR was a key post for industry and foreign government lobbyists to do the work of their clients from within the walls of government. The smart USTRs even created cottage industries for themselves. Carla Hills, Papa Bush's USTR wrote Chapter 11 into NAFTA, and then set up a law firm to sue the US, Mexican and Canadian governments under Chapter 11 on behalf of big corporations who don't want to be bothered with public health, environmental and anti-trust laws.

Charles Lewis of the Center for Public Integrity has written an excellent history of conflicting interests in the USTR (America's frontline trade officials : Office of the United States Trade Representative, 1990), but this really pre-dates the era of big trade deals and the hijacking of the democratic process for making trade policy by moneyed interests.

Enter Robert Zoellick, the economic technocrat and Republican apparatchik who rode out the Clinton years by bouncing around a host of corporate and corporate-funded academic posts, a natural choice for the Bush administration's point man on trade. Zoellick epitomizes what is wrong with the governance of trade. Registered with the Department of Justice as a foreign agent to represent the interests of foreign governments and businesses before the U.S. government and consultant to major multinational corporations (including Enron), Zoellick is on the cutting edge of technocratic elites who waft between public service and private plundering.

Which brings us back to Australia, manufacturing and the economic fiction of the ERP. While the Bush administration is arguing that manufacturing is a dinosaur industry and that government should not pick winning industries. Instead, the Bush administration will pick fights at the behest of their patrons, at the expense of broader American economic interests.

¶ 2/12/2004 12:37:00 AM

Wednesday, February 11, 2004

MORE ON ELECTRONIC VOTING

A number of people have asked me for more information about this whole electronic voting scam that I've written about a few times (here and here).

True Majority is launching an organizing campaign around this issue and there is also a campaign underway at Verified Voting, who has a lot of information on the subject.

¶ 2/11/2004 04:30:01 PM

MILITARY MAN DOUBTS BUSH

Came across this interesting little opinion on military.com (credit the assist to Drudge--sort of--not one of my frequent reads).

There is a lot of room for optimism here. I think Bush will go down in a ball of flames in November (it's not going to be easy, though).

¶ 2/11/2004 03:01:17 PM

Tuesday, February 10, 2004

Came across this link today: a handy clearing house of information for those intending to invite themselves to the RNC 2004 convention in New York City:

Our simple goal is to make the demonstration, not the convention, the big story of "RNC 2004." Together, we can tell the Republicans not to even think about trying to get elected on the graves of 3,000 people!

We're all New Yorkers on August 29, 2004!

A number of other groups are gearing up to be uninvited guests of the Republicans:

United for peace and Justice
Counter Convention
RNC Not Welcome
Run Against Bush

¶ 2/10/2004 02:45:55 PM

CHILD LABOR: GOOD OR BAD?

Most people wouldn't bat an eye at the notion that societies would want to limit the exploitation of children as laborers. Not The Economist.

The International Labor Organization, and multilateral institution under the auspices of the UN, has outlined four core labor standards: prohibition of forced (slave or prison) labor, the right to free association and collective bargaining, prohibition of discrimination in pay and employment, minimum ages for work and protections against "the worst forms of child labor." These have been recognized in the UN's Universal Declaration of Human Rights some fifty years ago. Note that the United States even today has failed to ratify some of these rights.

While most see child labor as abjectly abhorrent, The Economist (and many neoclassical economists) are more sanguine on the topic:

"Child labour, of course, is as old as human history. Until relatively recently, parents viewed children as economically useful and, especially in farm-based economies, had them milking cows or sowing seeds as soon as they were old enough to do so."

Yes, but today's child laborer is not Ragged Dick shining shoes on the streets of New York. Milking the cows is markedly different than say operating industrial machinery in the manufacture of consumer electronics or Kate Spade hand bags (both of which rely on small, nimble fingers).

"Should rich countries attempt to enforce a ban in poorer countries as well? On the face of it, no."

The Economist argues that child labor is the best of a bad situation. Parents send their children to work to augment household income--it is an act of desparation. without work, children would be (and are) at risk of other forms of exploitation: prostitution, drug trafficking, military conscription, etc. While these are all prohibited by the ILO core labor rights with regards to child labor, the sad reality is that exploitation of children in all its forms still continue.

The question of whether to force a ban or not, then, is somewhat of a false dichotomy (though it fits quite nicely into their editorial agenda of unregulated globalization quite nicely--they would like to see all labor standards kept out of international economic agreements). Poverty and child labor are (in economic terms) endogenous--that is poverty is associated with child labor AND child labor is associated with poverty with mutual causality. Since economic theory sees child labor as retarding long term economic growth by impeding large sections of the child population from gaining the education (aka human capital accumulation) necessary to fuel innovation and increasing incomes, poverty and child labor create a viscious cycle.

The answer then is to end poverty, for which The Economist has a neat solution: more deregulation of international trade and capital flows, which have been so successful in ending poverty. Oh wait, no they haven't. This recommendation is based on the findings of a recent study out of Dartmouth University attempting to test the relation between trade and child labor. While the paper, I think, makes some promising headway in the empirics of measuring this relationship, it also has some problems with how it measures countries' "openness" to trade (see a longer discussion on this issue here) and the data it uses for child labor, which are rather unreliable measures (surprise, countries tend to lie about their incidence of child labor and therefore it must be measured by proxy through such things as primary school enrollment rates, etc.).

(Stay tuned for more on the openness issue later. It's a commonly misunderstood notion that is used indiscriminately in public and technical commentary on globalization to the advantage of pro-deregulation advocates).

¶ 2/10/2004 12:40:14 PM

WHAT HAPPENED ON SUNDAY'S MEET THE PRESS?

I have been digesting and discussing the President pro tem's appearance on MTP with my inside-the-beltway political operative friends for a few days now, and we're still struggling to assess the fallout.

As noted earlier, many conservative/Republican pundits were dismayed at Bush's performance. Here's a representative response from Peggy Noonan. My Spidey sense is so acute for Bush administration mischief that I don't feel I can get an accurate read on how regular people and less rabid critics of the President are reacting to his performance.

First instincts told me that the interview was neutral to slightly negative for Bush. Other friends more astute in the world of political communications argued that the interview was intended only to re-ignite Bush's political base left reeling after a few weeks of heavy coverage in the Democratic primaries and the major blow of David Kay's testimony that Iraq has no WMDs or WMD programs. He knew he would never satisfy detractors and that those who loved/hated him would still love/hate him no matter what he said. If this was the case, why not just send out a direct mail piece? Bush must have been reaching for the middle ground (if any still remains in the American polity)--and it seems to have slipped through his bumbling clutches.

Though the Bush stumbled and paused slack-jawed for uncomfortable periods of time before answering some questions, I am starting to see where his MTP performance is succeeding in establishing boundaries that will henceforth guide the public disourse on the Bush presidency.

Take the issue of intelligence leading up to the Iraq war. Bush has commissioned an inquiry into how the intelligence on Iraq went so wrong, spawning a debate about the politics of the commission and the date when the commission will report. His story is that he was presented bad intelligence, but made good judgements and leadership decisions in the interest of protecting the American people ("the most solemn responsibility" of his office) based on flawed intelligence.

But the intelligence is really a non-issue. It was previously well reported (both prior to the war and before the discourse shifted with the Kay revelations) that the intelligence on Iraqi WMDs was ambiguous, nuanced, inconclusive, etc. Yet Bush told the world that there was "no doubt that the Iraq regime continues to possess and conceal some of the most lethal weapons ever devised." So, it's not that the intelligence was bad, but that the intelligence wasn't really there or was manipulated or trumped up to sell the war. No matter how much the intelligence gathering and analysis process is scrutinized and tortured, it still won't reveal that the Bush administration pushed for war without evidence that would justify a war even under their murky doctrine of pre-emption.

Commissions are the best means available to Washington politicos to bury/kill an issue without looking like they are burying/killing an issue.

¶ 2/10/2004 11:20:20 AM

Monday, February 09, 2004

BUSH ADMIN BALKS AT SECURING LOOSE NUKES

What is holding up an agreement between Russia and the Bush administration to destroy weapons grade plutonium from decommissioned missiles? Two things, according to the NYT:

First, Bush wants to make sure that the companies contracted to build the facilities where plutonium is transformed into fuel for nuclear power plants are protected from "almost all liability in case of accidents involving the release of radioactive material." This is a non-starter for the Ruskies.

Then there is the money issue:

"The Bush administration's budget plan for the Energy Department, released last week, said groundbreaking for a conversion factory planned for South Carolina had been delayed from July of this year until May 2005."

How much would it cost? About $2 billion. Seems like a pretty sound investment, to me at least, when weighed against the potential cost of invading countries to seize WMDs or the cost of a nuclear attack by terrorists or rogue states.

¶ 2/09/2004 10:15:01 AM

Sunday, February 08, 2004

TREASURY SECRETARY JOHN SNOW REPORTS FROM THE G7

"Turning to the poorest countries, I emphasized today that creating an environment that allows private businesses to flourish should be a higher priority on the development agenda. We all agreed that the World Bank and regional banks should work to improve investment climates and direct more resources to the private sector."

...as opposed to directing resources at fighting poverty and AIDS, and at making critical investments in education and public infrastructure for water and sanitation.

"Our commitment to combating terrorist financing continues."

...including slaps on the wrist for Bank of America, Bank One, Barclay's Bank, Bank of New York, Deutsche Bank, and JP Morgan Chase for laundering money to the Sudan, Iran, Libya and North Korea. The stiffest fine: $34,623.25--a drop in the bucket for any of these multinational financial empires. Many of these fines were assessed after "voluntary disclosure," meaning that the companies knew it was wrong to launder money, knew that they may be aiding and abetting terrorists, but did so anyway because they knew they would make a healthy profit even with the fines. No criminal charges pending. Bang up job, John.

On the issue of China's ongoing manipulation of its currency for competitive advantage, Secretary Snow managed to marshall the G7 ministers into its strongest language yet condmening China's harmful beggar-thy-neighbor economic policies:

"We emphasize that more flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility to promote smooth and widespread adjustments in the international financial system, based on market mechanisms."

WOW! If I was China, I'd be quaking in my sandals. I can't believe they would just lay out this ultimatum in such bold, striaght forward terms. I guess the Bush administration really means business now when it comes to China's mercantilist ploy to siphon American jobs and productive capacity.

¶ 2/08/2004 10:06:47 PM

"I DON'T WANT TO SOUND LIKE A BROKEN RECORD, BUT..."

"...if I said anything more it would only confirm the very serious charges levied by my critics."

Okay, I made up that second part. If you happened to miss Bush's performance on Meet the Press this morning, you will also miss in the transcripts to the President pro tem stumbled through the hour-long interview with some pauses so uncomfortably long it left many conspiracy theorists wondering whether Karl Rove was prompting him through a hidden ear piece.

Bush offered the same canned answers we've heard dozens of times from him and other administration officials over the past few years. No surprise there. What surprised me was how readily Bush trembled under the uncharacteristically restrained questioning by Tim Russert. While not a softball interview, it was by no means a hostile one. Yet Bush's growing unease through the course of the interview was strikingly apparent even though it was conducted on Bush's terms and on his own turf. Given the way the President's house of lies is beginning to show cracks, I guess it's a moral victory for the White House that Bush didn't ground into a double play.

Even the conservatives at NRO were unimpressed by the President pro tem's performance on MTP this morning, Cal Pundit reports.

¶ 2/08/2004 09:08:25 PM