GLOBALIZE THIS!

Saturday, May 01, 2004

EUROPE GETS TRADE POLITICS SAVVY

FT:

"A final WTO decision on whether the EU and its seven co-complainants may retaliate against the US is expected in June. However, the European Commission has already told members that it plans to introduce punitive sanctions on the same list of goods it targeted in the trade row over US steel safeguards last year.

The list was designed specifically to hurt the economies of politically sensitive states such as Florida, Ohio, Pennsylvania and Virginia - some of which could prove crucial swing states in the presidential elections. It includes fruit, vegetables, rice and tobacco, textiles, clothes and shoes as well as a vast range of steel products."

¶ 5/01/2004 10:52:52 AM

CONNECTING THE DOTS TO THE US-LIBYA DETENTE

From the FT:

"Libya? Absolutely we're interested," Pat Mulva, ExxonMobil vice-president of investor relations, responded to analysts on a conference call on Thursday. "We're getting actively involved." Previous comments by the Texas-based oil company about Libya had been far more muted.

ChevronTexaco, the second biggest US oil and gas group after ExxonMobil, is also keen to move in.

"As a company with a substantial prior history in Libya, we support the US government's decision to ease sanctions and now look forward to the full opening of Libya for all international investors," said Stan Luckoski, ChevronTexaco spokesman.

Indeed, the California-based company has been preparing for such a decision. "We have been involved in discussions with Libyan officials to understand what opportunities might exist there," Mr Luckoski said. "For business reasons, we cannot comment on the nature of those discussions, nor will we speculate about our future plans."

¶ 5/01/2004 10:52:43 AM

Thursday, April 29, 2004

LIES OF THE BUSH ECONOMY

This snappy little Flash piece propagandizing the Bush economic record flashed across my desk yesterday. I'm uncertain of its origins, though it does not appear to be connected with the official Bush-Cheney '04 campaign.

A quick survey of right-of-center blogs and other websites shows that Republican-leaners are going ga-ga over this piece as, on its face, it seems to validate what they have long believed, but have never seen substantiated in the public dialogue (most likely because of that pesky liberal media bias): that George W. Bush's economic policies are not a miserable failure and are not a royal screw job for most Americans, but that Bush has done as well as or perhaps better than Clinton.

It's a great, powerful spot. But unfortunately its almost all bunk. The economic "facts" it boasts are either simply not true, disingenuously misleading, or entirely irrelevant. But all of it is disturbing, for it reminds us of the viral characteristics of mis-(or dis-)information. So let me take a crack at it.

GDP:
This spot claims private sector GDP grew 2.5% in the two years before Bush's tax cut and 5.3% after the tax cut. My first question: Which tax cut? There have been successive rounds of tax cuts in each year of Bush's presidency. I have no idea how this foolio is calculating these numbers (if in fact s/he attempted to calculate anything legitimately at all).

I don't know why you would only be interested in looking a private sector growth rates, rather than the growth of the overall economy, unless perhaps you are some market fundamentalist ideologue who thinks government is bad for the economy, and you believe government spending reduces growth even when it is for such economically important public investments as education, transportation and telecommunications infrastructure, basic science and applied R&D, etc. But I can tell that the numbers are not so kosher--their either using nominal figures, not accounting for compound growth rates, or making some other rookie mistake.

So let's assume s/he means one occuring after the first two years, and before the third year. Since the 2004 Q1 GDP numbers only came out today, we're talking about the growth in the economy (private economy) that occured between Jan 1, 2001 and Dec 31, 2002, compared with growth between Jan 1, 2003 and Dec 31, 2003. In real terms, GDP grew $266 billion in the first period (or $150.7 in the private sector). This is a simple total growth of 2.7% (1.9%) or average annual growth of 1.3% (0.9%). In the latter period, real GDP did grow 3.12% (3.07%). This shouldn't be too aurprising because the economy was in recession for most of 2001.

Dividing the periods like this really tells us nothing about the effects of the Bush tax cuts. More importantly it doesn't tell us why or why not Joe Citizen should vote for George Bush. As the Maestro said, (paraphrasing) zero wage growth and strong productivity growth means huge growth in pre-tax profits. Economic growth does not necessarily mean that people's actual living standards are improving.

Which brings us to Jobs:
I've written a lot about this topic, and Job Watch pretty much has this subject covered and debunked. This particular piece touts "500,000 new jobs created in the first three months of 2004." Of course, it says nothing about the more than 2 million jobs lost even after the end of the recession, nor does it tell us what effect the here lauded tax cuts have had on job creation (which, on balance, is a zero to negative-gain, see Job Watch).

Unemployment:
True, after three years the unemployment rate stood at 5.6% in both the Clinton and Bush administrations. Most people get the reason that the unemployment rate is so low under Bush is because so many people have given up looking for work (exiting the labor force) in frustration over the worst job market this country has seen since the Great Depression. Right now there are some 8 million people out of work in this country. If we put back in those phantom unemployed, those who are no longer being counted as unemployed because they are sooo despondent, Bush's unemployment rate jumps up to a whopping 7.1%. YIKES!

Stock Market:
I calculate an increase of 24.7% in the DJIA between April 28, 2003 and April 27, 2004, not the 45% reported in the Flash. Of course, the DJIA only covers 30 out of thousands of stocks. In searching the web for other references to this Flash piece, I found that most postings were dated around March 30, 2004. Fair enough. From March 28, 2003 to March 30, 2004, the DJIA was up 27%.

How about this...Bush came to office as the 1990s stock market bubble was bursting, then 9/11 threw the stock market into a tail spin and the DJIA fell to a way, way low 8,235.81 pts. before climbing back 25% to today's closing price. Then came a wave of corporate accounting scandals beginning with Enron and trickling throughout much of corporate America. The Dow plunged to a low of 7,286.27 on Oct 2, 2002. From this nadir, the DJIA has climbed back 41% to today's price. Now matter how you slice it, the DJIA has not gone up 45% during Bush's presidency.

In any event, I'm wondering why stock prices should be an explicit goal of a president's economic policies rather than, say, the livelihood and living standards of regular Americans...

On that note, I'll wrap up with Poverty:
The average poverty was lower in the Bush reign than under Clinton (9.6 vs 10.5). This is untrue and stupid. It's untrue because the annual poverty numbers are calculated from the March CPS. That means, for example, that the 2001 number is calculated on March 2001, or only a little over a month after Bush took office. It's unreasonable to think that Bush should be responsible for could have influenced the poverty rate in such a short time. So whoever cooked up these numbers is using the wrong endpoints. The Census Bureau only recently released the data for 2002, so there is really only one year of data showing how poverty fared under Bush. If s/he used the right endpoints, the average poverty rate under Clinton would be 9.9% and Bush's would be 9.6%.

It is stupid because who cares what the average poverty rate is over time? The reason we calculate rates is to see the direction of the trend. When Clinton assumed the presidency in 1994, the US poverty rate was 11.6%. After three years, where Bush is now, it had fallen 1.3 percentage points. By the time Clinton left office and Bush usurped the election, the poverty rate had fallen from 11.6% to 9.2%. In the one year of poverty data that is available for the Bush era, the rate increased 0.4 percentage points to 9.6%.

'Nuff said.

¶ 4/29/2004 05:28:07 PM

BUSH: COMMUNIST CHINESE SYMPATHIZER?

Here's a picture you don't get to see too often, thanks to the FT. I knew there was something suspect about this guy: he's a Chinese agent!

Why else would he reject out of hand trade petitions to defend the US economy against China's mercantilist ploys?

BTW, I heard trade apologist Gary Hufbauer being interviewed on the news last night about the Bush administration's decision to back away from these petitions. According to Hufbauer, there was no legal basis for these claims to be made at the WTO.

I'm left to believe that Hufbauer is completely oblivious. The claims are not being made under WTO rules, they are being made under US trade law. The legal briefs devote ample discussion to how US trade law (Section 301 of the Trade Act of 1974, ammended 1988) is written to prevent currency manipulation, to uphold social standards and to prevent human rights and labor abuses.

Even accepting Hufbauer's glaring ignorance of the facts, WTO rules actually do allow for such a suit in Article XX of the GATT. And I quote:

"...nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures...relating to the products of prison labour."

This measure, however, has never been tested before a WTO dispute settlement tribunal. One of the flaws with the WTO, of course, is that only nation-states have the power to levy unfair trade suits in its quasi-judicial tribunal. Without the will of the Bush administration, citizens and civil society are powerless to take this issue further.

Keep in mind that Hufbauer ain't a lawyer (nor am I). He's an economist. Hufbauer should stick to making egregiously ridiculous predictions about job creation from trade. At least he knows how to do that.

¶ 4/29/2004 11:22:49 AM

HOW NOT TO RECONSTRUCT IRAQ

Matthew Yglesias points us to a recent CPA Powerpoint briefing on the state of progress in reconstructing Iraq with less than 100 days to go until scheduled "handover."

Lowlights:

Electricity Peak Production Goal for June 2004: 6,000 Megawatts; Actual Production, week of March 26: 3,896 Megawatts

Iraqi Police Forces
Required: 75,000; as yet untrained: 54,573; training on the job: 13,286

Dept. of Border Enforcement
Required: 25,727; as yet untrained: 14,070; training on the job: 9,177

Iraqi Armed Forces
Required: 40,000; on duty: 3,005; in training: 2,169

Captured Weapons, March 2004
RPG Launchers: 293; Small Arms: 1,173; WMDs: 0

Jobs created by the CPA for Iraqi's: 395,000; Promised US jobs created by Bush tax cuts: 5.5 million; US private sector jobs created to date under Bush (through March): -1.84 million.

Governance (see p. 29): "Place Holder Place Holder For Governance Notes Page"

Crude Oil Production Output Goal: 2 million barrels per day; actual prodcution: approx 2.45 million barrels per day.

---
Oh vey. This is just going to get uglier.

¶ 4/29/2004 09:24:45 AM

Wednesday, April 28, 2004

GREENSPAN: OIL, THE FINAL HURDLE

One month of good job numbers, one month of slight price increases and one quarter of strong growth, while promising, do not an economic recovery make. While the markets may be anticipating a rate hike to stave off a resurgent economy (quick, before we create any more jobs and spark inflation!), looking deeper at the CPI shows that price increases are not coming from wagepush inflation (what with some 8 million people out of work), but from skyrocketing energy prices (we knew it was a war for oil, but we didn't know it was a war to drive up oil prices).

At a seasonally adjusted annual rate, energy prices grew 38.6% in 2004 Q1; petroleum-based energy prices rose 82.5%. In sum, the increase in energy prices accounted for half of the overall increase in the CPI. Also a big price mover was transportation (last I checked, transportation was heavily dependent on petroleum fuels), which grew 15% in the first quarter.

Speaking at CSIS yesterday, the Maestro warned of the threat that oil and other energy prices pose to the US (and the world) economy:

The dramatic rise in six-year forward futures prices for crude oil and natural gas over the past few years has received relatively little attention for an economic event that can significantly affect the long-term path of the U.S. economy. Six years is a period long enough to seek, discover, drill, and lift oil and gas, and hence futures prices at that horizon can be viewed as effective long-term supply prices.

These elevated long-term prices, if sustained, could alter the magnitude of and manner in which the United States consumes energy. Until recently, long-term expectations of oil and gas prices appeared benign. When choosing capital projects, businesses could mostly look through short-run fluctuations in prices to moderate prices over the longer haul. The recent shift in expectations, however, has been substantial enough and persistent enough to influence business investment decisions.

The rise in prices, coupled with the miasma in Iraq, questionable relations with Saudi Arabia, fraudulent reserve estimates from some global oil producers, and ongoing violence and opposition to the United States in much of the oil producing world combine to create conditions of uncertainty that are anathema to financial markets. This market uncertainty, and the US economy's perennial oil dependence, blurs the economic outlook and jeopardizes the budding but not yet crystalized economic recovery.

C'est la guerre.

¶ 4/28/2004 04:18:57 PM

ZOELLICK ROSE TINTED LENSES IN RED CHINA

Trade envoy Robert Zoellick, Agribusiness ambassador Ann Veneman, and general schill Donald Evans returned late last week from a fact finding mission to China (finding out how they can better exploit Chinese workers and screw American ones, no doubt).

Upon return, the USTR's office released a number of "fact sheets" to dress up the largely one way Sino-American trade relationship. I love reading these fact sheets because they are always so patently propagandistic as to stand up to scrutiny like a double-wide in a tornado.

USTR fact: China entered the World Trade Organization (WTO) in 2001 – opening its large and growing market to American goods and services and committing to a series of sweeping economic reforms. -- The United States did not reduce a single tariff or make any other market-opening
concessions to China as a result of China’s WTO accession.

The US did not reduce a single tariff because China already had been accorded "most favored nation" (MFN) trade status. MFN means that imports from China get treated the same as imports from the countries with the most open access to the US market. WTO entry did not change this. What China's WTO entry did achieve was forcing China into the rules-based trading system and making it subject to dispute settlement, which on balance, given that China already enjoyed unfettered access to the US market, is a good thing. I would hope that the government agency responsible for managing US trade affairs would understand this, in which case the statement above is merely disingenuous.

USTR fact: Opening the motor vehicle financing sector and easing auto import quotas, paving the way for increased sales of U.S.-designed and produced automobiles and parts.

The US runs a substantial trade deficit with China in auto parts (with about $3 of imports for every $1 export). Meanwhile, almost all of the world's automakers have been lavishing China with massive direct investments in plants producing finished autos. While currently, automakers are importing parts into the US for final assembly of cars, soon most production--at least for the Chinese market and probably for the world market--will all take place in China. Opening the financial sector should help stimulate domestic demand for aspiring drivers in China (though the ripples of capital market liberalization may spark other economic problems), but to think that US production will benefit from this is entirely misguided.

USTR fact: In 2003, the United States exported nearly $5 billion in agricultural goods to China...cotton exports reached a record of nearly $740 million.

As we learned earlier this week, the level of cotton exports has been driven by ill-conceived and dammaging US agricultural policy, that has been found in violation of WTO rules. (More on this later: The issue of ag subsidies is much more complex than the cursory treatment it is given by the media and trade punditocracy. While the subsidies are now largely illegal according to the WTO ruling, it is not the subsidies per se, but the failure of overall US agriculture policy which is the main culprit of impoverished farmers around the world. Simply axing subsidies will do little to fix the problem. See this great article for more details). Why is China importing so much cotton? Because it is booming in textile and apparel exports. In other words, America is now exporting (heavily subsidized) raw materials and importing processed, finished manufactured goods in a sort of backwards mercantilism.

USTR fact: Strong U.S. exports of transportation and education services contributed to a $2 billion U.S. services trade surplus with China in 2002.

This means we are training Chinese engineers and scientists in American universities and graduate schools. Educational and cultural exchanges are a good thing for bringing our countries together, but it also means that much of the advanced science and research work once done in the US can now easily be done, and for much less money, in China.

USTR fact: The Bush administration's major US trade concerns with China include protecting the technological monopolies of pharmaceutical manufacturers, opening China to genetically modified crops, and so on. Major priorities of the Bush administration DO NOT include (by absentia) egregious human rights abuses in export industries in violation of the WTO and a number of international treaties, nor do the Bush administration's priorities include China's manipulation of its exchange rate for competitive advantage, also in violation of WTO rules as well as the IMF Articles of Agreement.

¶ 4/28/2004 11:07:23 AM

Tuesday, April 27, 2004

US AG TRADE, NO BULL

Sorting through some agriculture trade data today for work and stumbled across one of the many perversities of the globalized food chain.

Mmmmmmmmmmmeat!

The United States is a major exporter of bull semen, enjoying a healthy trade surplus of some $30.4 billion ($46.1 X -$15.7 M). Bull semen, of course (I'm hoping), is used to produce more baby cows in order to expand capacity for producing things like meat, hides, and--you guessed it--more bull semen.

While American farmers may be comparatively advantaged at artificially stimulating bull cows, farmers in other countries are comparatively advantaged at raising cows. In 2002, the United States ran a substantial trade deficit in cattle. After buying our bull semen and producing more cows, foreign countries sold us over 2.5 million head of cattle while we exported a mere 243,394 head (for an overall deficit of 2.26 million head of cattle).

This is somewhat puzzling given that the US is also the world's largest producer of most cattle feed (primarily corn and soybeans). In other words, the US is producing all the inputs of cattle, but outsourcing the rearing of cattle.

Meanwhile, once the cattle get back here, we are quite skilled at turning them into the end product: meat. (See the post below). In 2002, the United States ran a $143.5 billion surplus in beef and veal.

¶ 4/27/2004 04:51:35 PM

OVERHEARD ON NPR'S MARKETPLACE MORNING REPORT: AMR

Or the common acronym for less pleasantly named Advanced Meat Recovery Systems.

Taste the meaty goodness!

From the USDA: AMR systems remove the attached skeletal muscle and edible tissues from carcasses without breaking or crushing bones. This machinery separates meat by scraping, shaving or pressing the muscle and edible tissue away from the bone. However, unlike traditional mechanical separation, AMR machinery cannot break, grind, crush or pulverize bones to separate muscle tissue. Bones must emerge essentially intact and in natural physical conformation.

In January 1995, USDA’s definition of meat was amended to include product from advanced meat/bone separation systems. Meat derived from this method is comparable in texture and composition to meat trimmings and similar to hand-deboned products so it does not require special labeling. AMR product is labeled as “meat” on product labeling (i.e., “beef,” “pork,” “beef trimmings,” etc.). Since spinal cord tissue falls outside the definition of “meat,” product produced using AMR systems cannot contain spinal cord tissue.

...Except that inspections indicate that AMR prepared meat too often does contain spinal cord tissue and other nervous system components, the parts which harbor BSE. Such automation obviously reduces the need for crippling repetitive motion labor (not to mention those pesky Teamsters and UFW union members), not to mention eliminating the need for this cheery little tool. However, the use of AMRs does increase the risk to the public of a mad cow disease epidemic.

Beef brains, it's what's for dinner.

¶ 4/27/2004 10:56:34 AM

Monday, April 26, 2004

THE IRAQ RECONSTRUCTION IS A JOKE

According to the clips and blurbs amalgamatted by Flagrancy to Reason.

¶ 4/26/2004 05:25:33 PM

IT'S WEBBY TIME

Place your vote. Might I suggest for A World Connected.

¶ 4/26/2004 04:29:10 PM

THE FACE OF CHINA TO COME

To those who believe free markets create democracy, behold the future of China. At its 1997 handover to the Reds, Hong Kong was one of the most economically liberal countries in the world. Hong Kong is nothing if not a political-economic harbinger of what is to come as mainland China develops. Beijing continues to push Hong Kong backwards on the path to democracy. Despite middle class citizens burgeoning aspirations for electoral democracy, Beijing will not let Hong Kong directly elect its next leader in 2007, some ten years later.

As a rule, governments resist democracy for the threat it presents to entrenched powers, no matter what the political system (witness Florida 2000). Economic actors often have no incentive or interest in ceding powers they hold under undemocratic political systems or other power structures. In Hong Kong, for example, the Chief Executive of the "semi-autonomous region," Tung Chee-Hwa, a former international shipping tycoon, was hand picked by Beijing to advance the interests of the Reds in China's Politburo. When economic actors in a free market, undemocratic society already enjoy access to the political influence they need to conduct their economic affairs, democratice reform is elusive.

¶ 4/26/2004 11:29:45 AM