BOBO DOES KARL

That is, David Brooks pens an information age manifesto.

WHO WANTS CAFTA?

Business, for one. The FT.com reports:

In addition to the Chamber of Commerce, the effort is backed by the Business Roundtable, an association of chief executives, the National Association of Manufacturers and the National Council of Textile Organisations...Thomas Donohue, president of the US Chamber of Commerce, warned that those members who stood in the way of a deal could jeopardise their financialsupport from business.

CAFTA: A policy with real broad-based popular appeal.

NYT: DETAINEES CITED ABUSE OF KORAN

Duh. With the pandemic of human rights abuses throughout US military prisons in Afghanistan, Iraq, and the "Gulag", did anyone truly believe defamation of the Koran was off the table? They would have gladly done such acts before 9/11.

President Bush and Scott McClellan's feigned indignation at the Newsweek report of US military interregators flushing a Koran reminds me of Police Captain Renault's famous line from Casablanca, "I'm shocked, shocked to find that gambling is going on in here!" as he is handed a pile of roulette winnings.

CHINA OVER US BY 10

The Bush admin is calling on China to revalue the Renminbi up by 10 percent. This is a long, ongoing affair in international monetary relations upon which people smarter than I have written tomes.

(EDITOR'S NOTE: Once and for all, here is the difference between the yuan and the Renminbi. Renminbi, loosely translated as the people's notes, is the official name of China's currency. Yuan is the unit of account. This distinction confuses Western journalists to no end. So it would be proper to say that, "China may revalue the Renminbi," or that, "Average wages in Chinese manufacturing are 917 yuan per month." But not that, "China may revalue the yuan," or, "This bun bao costs 3 Renminbi." Get it? Okay. Now you know, and feel free to correct people--especially know-it-all journalists--when they screw it up.)

The question is, "Why 10 percent?" Even Washington's rabid pro-globalization cheerleaders see China's currency as undervalued by 15-25 percent by conservative estimates. If you've ever been in any kind of negotiations (salary, nuclear disarmament, whether you or your older sister gets the last cinnabon, etc.), then you know that your opening position should be inflated above the level of settlement that you hope to achieve. That way you have room to negotiate down. In this case, the Bush administration's opening position is way below what even sanguine globalizers believe to be prudent. By this logic, what the Bush administration deems a "substantial alteration" of China's exchange rate policies is less than a 10 percent appreciation.

What gives? This latest overture is little more than monetary saber rattling. The Bush administration doesn't want China to revalue. Many, many multinational corporations who have been investing in fixed capital in China (factories, etc.) or have been building business relationships with domestic producers are cleaning up on the deal. Imagine you are a manager and you have the opportunity to buy all your inputs in a currency that is 30 percent undervalued, but then still sell all your output in dollars and euros. Pretty sweet deal. Another reason the Bush administration might not really want a revaluation is for its short term effects on US interest rates. If China revalues, all of the sudden the $610 billion China is holding in US treasuries won't be worth as much. The price and the yield of bonds are inversely related, so when the price of those bonds falls, the interest rate goes up. If interest rates go up, it raises the cost of servicing US government debt, raises the cost of home mortgages, and generally puts the brakes on the economy--all combined this makes it difficult for Bush to do things like deficit finance imperial wars and privatize social security.

On the other hand, the Bush administration can't appear to be doing nothing, which pretty much has been their strategy up until last week when Treasury Secretary John Snow delivered this obscure report to the Senate Banking Committee. But doing nothing is no longer politically feasible. Growing and deserved outrage over the Bush administration's inaction and indifference to China's currency manipulation is fueling calls for retaliation, which could end both of Bush's China gambles.

NO MORE GOOGLE ADS

My experiment with selling y'all out to Google is over. Apparently no Globalize This! readers cares to buy Dakota beef or Nixon watches. So they're gone.

VAST RIGHT-WING CONSPIRACY

More goodness about Grover Norquist. Who is Grover Norquist? Well, he has close links to known terrorists; and he is the evil mastermind behind the conservative ascendency of the last 20 years. But really, I hear he's a nice guy.

"FREE" TRADE AND PUBLIC HEALTH

Yeah, beef is yummy. Excepting when said beef is all mixed up with cow spinal cord and nervous system tissue. Oops. Who wants to eat that?

Well, Mike Johanns, President Bush's Secretary of Agriculture, for one. Or at least he wants you to eat it. Why else would he push to throw open the border to Canadian cow imports when we still don't know how BSE arrived in Canada and what risks this might pose to the safety of our agro-food system?

Simple. Americans eat a lot of beef. But so do people in other countries (read as "major export industry"). Unfortunately, American firms aren't that good at growing cattle, but they are good at killing cows, chopping them up, and assembling the pieces in freezer packs for shipment to Japan. So if the companies can't import the cattle from Canada and elsewhere, there's nothing for them to chop up. They Canadians may wake up and say, "Hey, we can kill cows. We don't need those stinking Americans to do it for us." And, presto, no more beef export industry in the U.S. (Okay, in reality the food processing industry is highly monopolistic and integrated across North America. That's right Tyson/IBP, I'm talking about you. The likely effect, then, would be that the same firms would relocate slaughter and packaging facilities from the Great American Desert to the Great White North).

This story is a good illustration of how "free" trade is not free, but the outcome of contestation between different industrial groups within the political economy. One one side are domestic livestock producers. On the other side is the processing industry. Of course left outside this contest over trade policy are you and me: the glorious citizen-consumer meat eaters. We just get to clean the scraps from the plate.

EFFICIENCY WAGES

Two finals down...two papers and one final to go.

The good news is that now I am officially earning efficiency wages, at least as far as Gov. Mitt Romney is concerned. Huzzah!

OUR BANKRUPT CULTURE MARCHES ON

SACRILEGE!

So why do I want one?

NIXON WATCHES

Who knew there were so many places selling "Nixon watches" on the web?

**UPDATE: Apparently Nixon is a brand of watches. Shows how much I know. The things one can learn when one doesn't spend 14 hours a day steeped in matrix algebra and solving systems of differential equations...

GT! FLASH BACK: FLASH POINT CHINA?

Digging way back for this week's syndicated Globalize This! repeat...Last week's Beijing summit between Chinese President Hu Jintao of China and president Lien Chan of the other China's (ROC) KMT party gives hope to some of my earlier fears. However, at least one editorial observer in the region is describing the meeting as an entente. Certainly a landmark moment in cross-Strait relations, but not one to wipe away the fears and threats of military conflict.

Originally "aired" January 23, 2004:

Forget Iraq, China may be the biggest threat to U.S. national (and economic) security.



In 1949, ousted president of the Republic of China, Chiang Kai-Shek (affectionately known as 'Mr. Peanut'), led his Nationalist Party (KMT) dominated Republic of China government (ROC) and droves of capitalists and freedom loving Chinese to the island of Taiwan, some 70 miles southeast of the Chinese mainland. With the ascent of Communist China, the exiled KMT--previously viewed as corrupt and incompetent--took on great importance in the Cold War (remember the domino theory?) as 'Free China.' Mao Tsetung's People's Liberation Army was closing in fast on Taiwan, so U.S. President Harry Truman ordered the Seventh Fleet to the Straits of Taiwan, which made Mao think twice about trying to take the island by force.

Brief digression on Taiwan: After years of often brutal Japanese colonization (1895-1945), Taiwan's economy was about the size of that of the entire mainland at the time of the KMT's retreat. The Taiwanese were doing okay in the post-WWII years and were not too keen on playing host to the mainlanders exiled on their island (which is only about 250 miles long). Opposition to their arrival was easy for the KMT to handle. They slaughtered Taiwan's indigenous elites, paving the way for 25+ years of one-party rule with the tacit military and economic support of the U.S. government.

This standoff persists over the status of Taiwan persists to this day, and negotiating the diplomatic path between China and Taiwan is growing increasingly tenuous. Ever since, China has maintained, in the words of Chou En-Lai "the fact that Taiwan is part of China will remain unchanged forever." This is the 'One China Policy.' Despite Taiwan being a de facto independent nation, any disruption to the 'One China' as such smacks the mainland as akin to an attack on Fort Sumter.

Richard Nixon and Henry Kissinger added another layer of complexity to this conundrum when, in 1972, as a ploy against the Soviet Union, they decided to stop recognizing Taiwan and to recognize the People's Republic of China instead, allowing the PRC to assume a whole host of powers at the United Nations Security Council, and other institutions throughout the international system.

Tensions between Taiwan and China rank probably just behind global tinder boxes like the 38th Parallel dividing Korea, the disputed Kashmir region of India and Pakistan, the West Bank, and anything coming between Rush Limbaugh and a fresh batch of Krispy Kremes. There have been a number of skirmishes over the years, but all out war has always been averted thanks to U.S. intervention and an unrelenting drive to sell Taiwan more arms than an NRA wet dream, thus elevating the cost of war for China.

But eventually, something has to give. And when it does, the United States will be caught smack in the middle of the increasingly important economic powerhouse of the PRC and our democratic ally (and another critical economy) in the ROC, not entirely unlike the bind in which Great Britain found itself when Germany decided to invade Poland back in 1939. And you know how that turned out.