Princeton University Global Governance Advocate Calls for New Wave of American Regulatory Socialism in the Image of European Protectionism

http://www.nytimes.com/2008/06/13/opinion/13krugman.html?em&ex=1213502400&en=a52b0be721dfaf26&ei=5087


Bad Cow Disease


By PAUL KRUGMAN


NEW YORK TIMES


June 13, 2008


“Mary had a little lamb / And when she saw it sicken / She shipped it off to Packingtown / And now it’s labeled chicken.”

That little ditty famously summarized the message of “The Jungle,” Upton Sinclair’s 1906 exposé of conditions in America’s meat-packing industry. Sinclair’s muckraking helped Theodore Roosevelt pass the Pure Food and Drug Act and the Meat Inspection Act — and for most of the next century, Americans trusted government inspectors to keep their food safe.


[WE MIGHT SUGGEST ANOTHER MORE APPROPRIATE 'LITTLE DITTY' THAT REFLECTS THE ESSENCE OF WHAT MR. KRUGMAN IS CALLING FOR - A RETURN TO EARLY 20TH CENTURY SOCIALISM: “Democracy and socialism have nothing in common but one word, equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.” Alexis de Tocqueville].

[MIGHT WE REMIND READERS THAT UPTON SINCLAIR WAS A MEMBER OF THE SOCIALIST PARTY AND WAS INFLUENCED BY EUROPEAN MARXIST POLITICAL THINKING. "The Jungle is a classic work of socialist realism. Critic Christopher Hitchens has described it as ‘the most fully realized instance of the genre, more telling and more moving than even the works of Dickens and Zola’. Sinclair’s objective was to expose the ways in which the capitalist class, in pursuit of maximum profit, exploits and discards the working people. Jack London called the book ‘the Uncle Tom’s Cabin of wage-slavery’...The Jungle was a bestseller in the United States and Britain, and its translation into 17 languages made Sinclair an international literary figure. The Jungle inspired scores of other successful social protest writers, including Iceland’s Halldor Kiljan Laxness (1902–98)...Upton Sinclair was born in Baltimore, Maryland, United States, on 20 September 1878. His father, an alcoholic, moved the family to New York in 1888. His parents were extremely poor but his grandparents, with whom he spent extended periods, were wealthy. He claimed that experiencing these extremes pointed him in the socialist direction. His outlook was influenced by the books of English Fabian Robert Blatchford, Russian anarchist Peter Kropotkin, American radicals Jack London and Frank Norris, and the investigative journalism of proud ‘muckrakers’ Ida M. Tarbell, Lincoln Steffens and Ray Stannard Baker...In 1915, Sinclair moved to California with his wife, Mary Craig, and in 1934 he won the Democratic Party’s pre-selection to contest the state’s election [FOR GOVERNOR]. For most of his life Sinclair defended communists, but his socialism was in the social-democratic mould. He parted company with Marxists in his belief that socialism could be achieved through electoral processes in America, without the need for the revolutionary overthrow of capitalism." See: Aiming for the Heart - Barry York describes how Upton Sinclair’s novel, The Jungle, shocked the American public and forced changes in legislation, National Library of Australia News (Jan. 2006), at:
http://www.nla.gov.au/pub/nlanews/2006/jan06/article3.html . READERS SHOULD NOTE THAT THE EUROPEAN UNION NOW REFERS TO ITSELF AS BEING IN THE 'SOCIAL-DEMOCRATIC MOULD'.]


Lately, however, there always seems to be at least one food-safety crisis in the headlines — tainted spinach, poisonous peanut butter and, currently, the attack of the killer tomatoes.


[IT IS ALWAYS HELPFUL THAT PUBLICITY-SEEKING CONSUMER & ENVIRONMENTAL GROUPS PROVIDE MEDIA WITH THE SENSATIONAL HEADLINES THAT WORRY THE AMERICAN PUBLIC ABOUT PRACTICALLY EVERYTHING IN THEIR DAILY LIVES. MR. KRUGMAN, WHY NOT ADMIT THAT THIS IS WHAT OCCURS? PLEASE ALSO BE HONEST ABOUT HOW SENSATIONALIST FEAR CAMPAIGNS SERVE THE INTERESTS OF SUCH GROUPS - i.e. IT PERMITS THEM TO 'POSTURE' TO ATTRACT FUNDING. FUNDING FLOWS IF THEY ARE SEEN AS 'SERVING THE PUBLIC INTEREST' BY PROVIDING IT WITH INFORMATION. ALTHOUGH CONSUMERS OFTEN HAVE LEGITIMATE CONCERNS ABOUT WHERE THEIR FOOD COMES FROM & HOW ITS SAFETY IS ASSURED, HOWEVER, WE QUESTION WHETHER THESE GROUPS PROVIDE MORE INFORMATION THAN DISINFORMATION.]


The declining credibility of U.S. food regulation has even led to a foreign-policy crisis: there have been mass demonstrations in South Korea protesting the pro-American prime minister’s decision to allow imports of U.S. beef, banned after mad cow disease was detected in 2003.


[MR. KRUGMAN CONVENIENTLY LEAVES OUT SOME IMPORTANT FACTS HERE, NAMELY, THAT THE KOREAN BEEF INDUSTRY AND NGO COMMUNITY DO NOT HAVE 'CLEAN HANDS'. KOREA'S BEEF INDUSTRY WAS PREVIOUSLY FOUND BY THE WTO TRIBUNALS TO VIOLATE INTERNATIONAL TRADE LAW THROUGH IMPOSITION OF 'FOOD SAFETY' REGULATIONS DEEMED TO ACTUALLY CONSTITUTE 'DISGUISED REGULATORY TRADE BARRIERS'. IN ADDITION, KOREAN NGOs HAVE BEEN STEADILY INFLUENCED BY THE EUROPEAN SOCIALIST NGOs TO BLOCK ALL KINDS OF FOODS, EVEN WHEN SCIENTIFIC RISK ASSESSMENTS HAVE PROVEN THE FOOD is 'SAFE'. HORMONE-INJECTED BEEF, IS ONE EXAMPLE THAT TIES BACK TO THE EUROPEAN BAN ON U.S. BEEF, IN PLACE SINCE THE MID '90's, NOTWITHSTANDING THE WTO'S RULINGS AGAINST THE EU CITING THEIR BAN AS ILLEGAL 'TRADE PROTECTIONISM'. IN ADDITION, KOREAN NGOs, WITH THE HELP OF EUROPEAN SOCIALIST-GREEN GROUPS, HAVE WORKED TO BLOCK THE INTRODUCTION OF GENETICALLY MODIFIED FOODS, FEEDS & SEEDS, NOTWITHSTANDING THE SCIENTIFIC RISK ASSESSMENTS IN BOTH THE U.S. & THE EU SHOWING THE PRODUCTS TO BE 'SAFE', AND THE WTO TRIBUNAL RULING FINDING THAT THE EU MORATORIA ON 'GMOs' WAS AN ILLEGAL DISGUISED PROTECTIONIST BARRIER TO TRADE. See: Lawrence A. Kogan, Discerning the Forest From the Trees: How Governments Use Ostensibly Private and Voluntary Standards to Avoid WTO Culpability, Global Trade and Customs Journal (Sept. 2007), at: http://www.itssd.org/GTCJ_03-offprints%20KOGAN%20-%20Discerning%20the%20Forest%20from%20the%20Trees.pdf ; Lawrence A. Kogan, World Trade Organization Biotech Decision Clarifies Central Role of Science in Evaluating Health and Environmental Risks for Regulation Purposes, Global Trade and Customs Journal (March 2007) at: http://www.itssd.org/Publications/GTCJ_04-offprints_Kogan[2].pdf .]


How did America find itself back in The Jungle? It started with ideology. Hard-core American conservatives have long idealized the Gilded Age, regarding everything that followed — not just the New Deal, but even the Progressive Era — as a great diversion from the true path of capitalism.


Thus, when Grover Norquist, the anti-tax advocate, was asked about his ultimate goal, he replied that he wanted a restoration of the way America was “up until Teddy Roosevelt, when the socialists took over. The income tax, the death tax, regulation, all that.”


The late Milton Friedman agreed, calling for the abolition of the Food and Drug Administration. It was unnecessary, he argued: private companies would avoid taking risks with public health to safeguard their reputations and to avoid damaging class-action lawsuits. (Friedman, unlike almost every other conservative I can think of, viewed lawyers as the guardians of free-market capitalism.)


[MR. FRIEDMAN WAS CORRECT IN HIS ASSESSMENT OF THE ROLE THAT TRIAL LAWYERS CAN CONSTRUCTIVELY PLAY IN A SYSTEM SHAPED BY FREE MARKET CAPITALISM. WE DON'T AGREE, HOWEVER, THAT GOVERNMENTAL REGULATORY BODIES, SUCH AS THE FDA, SHOULD BE DISMEMBERED AND/OR ABOLISHED. BUT, REGULATORY BODIES SHOULD BE CONSTRAINED BY PRAGMATIC OBJECTIVE BENCHMARKS OF GOVERNMENTAL ACCOUNTABILITY & DUE PROCESS, INCLUDING ECONOMIC CONSIDERATIONS OF THEIR PROPOSED PROMULGATIONS. THE 'SOCIALIST' APPROACH ADVOCATED BY MR. KRUGMAN WOULD PROVIDE GOVERNMENTAL REGULATORY AGENCIES UNFETTERED DISCRETION TO EXERCISE THEIR 'GATEKEEPER' AUTHORITY ON BEHALF OF THE 'PUBLIC INTEREST' THEY ARE 'CHARGED TO PROTECT'. BUT, WHO WILL WATCH THE GATEKEEPERS & HOLD THEM ACCOUNTABLE??]


Such hard-core opponents of regulation were once part of the political fringe, but with the rise of modern movement conservatism they moved into the corridors of power. They never had enough votes to abolish the F.D.A. or eliminate meat inspections, but they could and did set about making the agencies charged with ensuring food safety ineffective.


[THIS DISTORTION-PRONE AD HOMINEM RHETORIC DOES NO ONE ANY GOOD. IT EXAGGERATES THINGS FOR THE PURPOSE OF PROMOTING 'PET' POLITICAL/POLICY GOALS & PERSUADING THOSE UNFAMILIAR WITH THE MECHANISMS OF THE 'WASHINGTON ESTABLISHMENT' THAT THOSE GOALS AND POLICIES ARE 'GOOD'. THIS SOUNDS SO MUCH LIKE PLATO PHILOSOPHER KING-'TALK'.]


They did this in part by simply denying these agencies enough resources to do the job. For example, the work of the F.D.A. has become vastly more complex over time thanks to the combination of scientific advances and globalization. Yet the agency has a substantially smaller work force now than it did in 1994, the year Republicans took over Congress.


[MR. KRUGMAN, ONCE AGAIN, YOU DISTORT THE TRUTH. IS 'BIGGER' ALWAYS 'BETTER', CONSIDERING ALL OF THE BUREAUCRATIC WASTE, MISAPPROPRIATION, INEFFICIENCY & CORRUPTION THAT COMES ALONG WITH BIGGER GOVERNMENT??]


Perhaps even more important, however, was the systematic appointment of foxes to guard henhouses. Thus, when mad cow disease was detected in the U.S. in 2003, the Department of Agriculture was headed by Ann M. Veneman, a former food-industry lobbyist. And the department’s response to the crisis — which amounted to consistently downplaying the threat and rejecting calls for more extensive testing — seemed driven by the industry’s agenda.


[MR. KRUGMAN, ONCE AGAIN, DISTORTS THE TRUTH BY LEAVING OUT PERTINENT FACTS. CALLS FOR MORE EXTENSIVE CASE-BY-CASE TESTING & ANALYSIS WILL DETERMINE WHETHER PARTICULAR FOODS PRESENT PROBABLE HEALTH 'RISKS' TO CONSUMERS. GOVERNMENT MUST UTILIZE TOOLS THAT PROVIDE IT WITH METRICS & USEFUL INFORMATION THAT CAN THEN TRANSLATE INTO PRACTICES & PROCEDURES FOR INDUSTRY THAT WILL ENSURE GREATER FOOD SAFETY WITHOUT CAUSING COMPANIES (THE FOOD PROVIDERS) TO GO BANKRUPT, TO PASS THE HIGHER COSTS OF REGULATION TO CONSUMERS THROUGH PRICE INCREASES, OR TO OTHERWISE DEMAND HIDDEN GOVERNMENT TAXPAYER -FUNDED SUBSIDIES. MR. KRUGMAN'S PREFERRED REGULATORY 'FIX' WOULD BE TO PERMIT A CHANGE IN REGULATION THAT DISPENSES WITH THE EXTRA TESTING AND REPLACES IT WITH A A GENERAL RULE BASED ON A REGULATORY PRESUMPTION OF POSSIBLE FOOD 'HAZARDS', EVEN WHERE NONE ARE SHOWN TO EXIST. THAT FUNDAMENTALLY TRANSLATES INTO MORE UNNECESSARY COSTS, DELAYS & A MUCH BIGGER GOVERNMENT, AS IN THE EUROPEAN UNION. FISCALLY CONSERVATIVE POLITICIANS ON BOTH SIDES OF THE AISLE ARE CORRECT ABOUT ONE THING THAT ESCAPES MR. KRUGMAN - BIGGER GOVERNMENT IS USUALLY NOT THE ANSWER.]


One amazing decision came in 2004, when a Kansas producer asked for permission to test its own cows, so that it could resume exports to Japan. You might have expected the Bush administration to applaud this example of self-regulation. But permission was denied, because other beef producers feared consumer demands that they follow suit.


[MR. KRUGMAN, YET AGAIN, LEAVES OUT IMPORTANT FACTS. THE U.S. GOVERNMENT WAS OPPOSED TO PERMITTING U.S. INDUSTRY TO 'SELF-REGULATE' (i.e., to BYPASS U.S. DEPARTMENT OF AGRICULTURE HEALTH & SAFETY REGULATIONS BY HAVING EACH HEAD OF CATTLE INSPECTED & LABELED AS 'SAFE' & MAD COW-FREE), BECAUSE IN MANY CASES THE CATTLEMEN DID NOT HAVE ADEQUATE SAFETY LABORATORIES TO UNDERTAKE THE NECESSARY SAFETY ASSESSMENT AND TO ENSURE THE ACCURACY OF THEIR DESIRED MARKETING CLAIM THAT THEIR BEEF PRESENTED ZERO RISK, AND THUS WAS 'SAFE'. IN ADDITION, IT IS THE REGULATORY PHILOSOPHY OF THE UNITED STATES NOT TO ADOPT THE EUROPEAN PRECAUTIONARY PRINCIPLE, WHICH WOULD REQUIRE THAT EACH HEAD OF CATTLE BE TESTED WITHOUT REFERENCE TO TELLTALE SIGNS OF DISEASE. THE IMPOSITION OF THIS EXTRA COST & BURDEN UPON EUROPEAN BEEF EXPORTERS HAS MADE THEM LARGELY NONCOMPETITIVE WITH EXPORTERS FROM OTHER COUNTRIES, WITHOUT MAKING THE BEEF ANY 'SAFER'. MR. KRUGMAN WOULD LIKE TO HAVE THE EXPENSIVE & INEFFICIENT FOOD SAFETY SYSTEM IMPORTED INTO THE U.S.]


When push comes to shove, it seems, the imperatives of crony capitalism trump professed faith in free markets. Eventually, the department did expand its testing, and at this point most countries that initially banned U.S. beef have allowed it back into their markets.


[THE U.S. DEPARTMENT OF AGRICULTURE, LIKE OTHER U.S. AGENCIES, CONTINUALLY UPDATES ITS SCIENTIFIC EVALUATIONS, PROCEDURES & PRACTICES, TO REFLECT MORE CURRENT KNOWLEDGE, JUST AS THEY SHOULD. THIS RESULTED IN MORE EXTENSIVE & EFFICIENT TESTING.]


But the South Koreans still don’t trust us. And while some of that distrust may be irrational — the beef issue has become entangled with questions of Korean national pride, which has been insulted by clumsy American diplomacy — it’s hard to blame them.


[MR. KRUGMAN, THE GLOBALIST, TAKES IT UPON HIMSELF TO APOLOGIZE TO THE KOREAN GOVERNMENT AND THE KOREAN PEOPLE FOR THE AMERICAN OFFENSE OF TRYING TO HOLD THE KOREAN GOVERNMENT TO THE WTO RULES WHICH THEY HAVE AGREED TO FOLLOW, AND OF NOT HONORING THEIR 'CULTURAL PREFERENCE' FOR 'PURE' KOREAN BEEF & DISGUISED PROTECTIONISM . APOLOGY UNNECESSARY & INAPPROPRIATE. See: Lawrence A. Kogan, Looking Behind the Curtain: The Growth of Foreign Trade Barriers that Ignore Sound Science, National Foreign Trade Council (May 2003), at pp. 8, 12-13, at: http://www.wto.org/english/forums_e/ngo_e/posp47_nftc_looking_behind_e.pdf .]

[MR. KRUGMAN PREVIOUSLY LAUDED THE SOCIALIST REGULATORY SYSTEM OF THE EUROPEAN UNION THAT SEEMS TO PROVIDE A MODEL FOR KOREA AND OTHER COUNTRIES FROM TIME TO TIME, IN HIS PREVIOUS NEW YORK TIMES ARTICLE ENTITLED, The Comeback Continent. See: Why Has an Avowed Multilateralist Princeton Academic Been Recruited as a 'Spin-Doctor' to Improve Europe's Image Among Americans???, ITSSD Journal on Economic Freedom (Jan. 12, 2008) at: http://itssdeconomicfreedom.blogspot.com/2008/01/why-has-avowed-multilateralist.html .]


The ironic thing is that the Agriculture Department’s deference to the beef industry actually ended up backfiring: because potential foreign buyers didn’t trust our safety measures, beef producers spent years excluded from their most important overseas markets.But then, the same thing can be said of other cases in which the administration stood in the way of effective regulation. Most notably, the administration’s refusal to countenance any restraints on predatory lending helped prepare the ground for the subprime crisis, which has cost the financial industry far more than it ever made on overpriced loans.


The moral of this story is that failure to regulate effectively isn’t just bad for consumers, it’s bad for business. And in the case of food, what we need to do now — for the sake of both our health and our export markets — is to go back to the way it was after Teddy Roosevelt, when the Socialists took over. It’s time to get back to the business of ensuring that American food is safe.


[MIGHT WE REMIND MR. KRUGMAN AND HIS FELLOW 'SOCIALISTS' ABOUT A FAMOUS QUOTE FROM NONE OTHER THAN SIR WINSTON CHURCHILL? “Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.”]

US Presidential Politics Could Derail Mexican Economic and Social Progress

http://www.gfmag.com/index.php?idPage=777


NEIGHBORHOOD UNREST - MEXICO


Mexico’s recent economic progress could be derailed by turmoil in the US economy and the outcome of the US presidential election.


Global Finance Magazine


By Antonio Guerrero


March 2008


The last time the US economy posted a slowdown, after the 2001 terrorist attacks, the Mexican economy contracted by 0.2%, nearly crushing its industrial sector. With the threat of a US recession looming large and uncertainties over what US-Mexican relations will look like once a new occupant moves into the White House next year, the outlook is beginning to look gloomy south of the border. However, Mexican government officials say the country is better prepared this time around to meet the challenge.


Mexico’s finance ministry estimates assume the US economy will grow by a meager 1.8% this year, prompting officials to reduce their own 2008 GDP forecast in February to 2.8% from the 3.7% forecast the ministry included in the federal budget last September. This would be Mexico’s slowest expansion in three years, after posting 3.2% GDP growth last year. Local banks had already adjusted their forecasts ahead of the government. Banamex, Citi’s Mexican subsidiary, cut its 2008 growth outlook to 2.9% from a previous 3.6%, while BBVA Bancomer slashed its prediction to 2.7% from 3.4%.


With 80% of Mexican exports going to the United States and domestic capital markets moving nearly in tandem with their counterparts in New York, a US recession would have a swift impact on Mexico—and perhaps test many of the structural reforms implemented by the Felipe Calderón administration that have helped to at least partly decouple the two economies. Calderón has tried to ease Mexicans’ fears about a potential US slowdown, saying, “We will seek growth opportunities from within ourselves, in our internal market, in the strong productive apparatus and in the country’s competitiveness.”


Calderón’s reform package includes a fiscal overhaul launched last September that should boost federal revenues by 1.5% of GDP this year, as well as labor reform to introduce greater flexibility. The next hurdle is energy reform, which legislators say should be ready by April. The controversial plan would open the Pemex state-owned oil monopoly to partnerships with private investors to inject capital into a company struggling with rising debt and dwindling oil reserves. Oil accounts for 40% of federal revenues, and, with its output of 1.3 million barrels a day, Pemex is the United States’ third-largest oil supplier.


The Mexican government’s 2008 budget will boost investment by 45%, the biggest increase in 45 years, with most additional spending earmarked for infrastructure projects that will boost competitiveness and create jobs. The aim is to spark 5% annual GDP growth by 2012, falling short of the 6% growth that analysts say is needed to generate the 1.3 million new jobs Mexico requires each year to absorb workers entering the job market. But the Calderón administration counters that its $295 billion public-private infrastructure investment program approved last year should alone create 800,000 jobs.


According to a Merrill Lynch report, “A positive political agenda should create three positive effects in the medium-term: (1) reduce the country’s growth dependence on US activity and oil prices; (2) reinforce domestic engines for growth: credit, domestic consumption and productivity gains; and (3) promote GDP per capita growth, also addressing Mexico’s social agenda: improve social services and decrease poverty.” Merrill Lynch expects economic growth will be supported by 22% credit growth this year, along with a 4.1% expansion in domestic consumption.


US Election Raises Tension


While Mexico is hoping to shield itself from a US recession, it may be harder for it to stay out of the US presidential election as Republican and Democratic candidates alike tackle the issues of immigration, drug trafficking and free trade. Calderón recently asked US presidential candidates to tone down the anti-immigrant and anti-Mexican rhetoric in their campaigns. But candidates may be responding to genuine concerns, as a recent Zogby poll in the US shows more than 76% of respondents said a candidate’s position on immigration will be a “very important” or “somewhat important” factor in deciding whom to vote for this year. Another 36% said “job creation to stem migration” is the most important foreign policy measure the US should take toward Latin America.


The fight against drug trafficking, likely to be a key concern for the next US president, is already being tackled by the Mexican government, with the Calderón administration deploying more than 24,000 troops to regions with high drug production and trafficking activity, as well as extraditing drug lords to the US and seizing large amounts of illicit drugs. The moves have been well received in Washington, where the White House last October announced a $1.4 billion military and security package designed to help Mexico and Central America tackle drug cartels.“


Given the dimensions of the problem, cooperation with the government of the United States is indispensable,” Mexico’s foreign minister Patricia Espinosa told the press. The US aid package is made more politically palatable to Mexican authorities by, unlike the controversial Plan Colombia, not involving any deployment of US military personnel to Mexico.


Both governments may find themselves embroiled in a less congenial dialogue this year over the future of trade between the two nations. In January the last remaining exceptions to the North American Free Trade Agreement (Nafta) were lifted, allowing US corn, sugar, beans and milk to enter Mexico under the pact. While the measure could help lower food prices, Mexican farmers are less than thrilled and not only have unleashed street protests but have called on their government to renegotiate the treaty, which went into effect in 1994.


According to Lawrence Kogan, president and CEO of the Institute for Trade, Standards and Sustainable Development (ITSSD) in Princeton, New Jersey, the controversy may lead to “managed” trade, which he feels is a euphemism for quota-like restrictions on trade in selected agricultural products. “Mexican farmers may end up receiving the short end of the stick here,” says Kogan. “We must wait and see what is ultimately agreed to and then wait to see how it is actually applied in practice.”


Kogan, also a professor of International Trade Law and Policy at Seton Hall University, says the impact on Mexican exports to the US could be determined by who wins the presidency. “A Democratic Congress would likely become emboldened if a Democrat were in the White House. Assuming the Republicans fail to retake Congress, Congress would be more inclined to impose new environmental, health and safety, and labor standards through Nafta and the WTO to raise the cost of Mexican goods and services so that they no longer could compete effectively with US products,” he says.


Meanwhile, capital market investors remain cautiously bullish on Mexico. Merrill Lynch predicts a 23% total return on Mexican equities this year, below the 26% Latin American average and 28% for Brazil, but higher than Chile’s 22% and Argentina’s 19%—adding that the appreciation will be driven by 16% earnings growth (in US dollars) in 2008 and 11% in 2009. Citi upgraded Mexican shares to overweight, arguing that a US recession has been nearly fully priced into Mexican stocks. The sovereign also set a new fixed-income benchmark in January that extended its yield curve to 2040 and saw the order book soar to $3 billion for a $1.5 billion issue that had been upped from an initial $1 billion.


Mexico’s central bank governor Guillermo Ortiz remains more cautious, saying at the World Economic Forum in Davos that Mexico has not yet felt the full impact of the global economic crisis, and there could be more pain ahead. “We’re in round one or two,” he said, “but this is a 15-round fight.”

Russian Regulatory Roulette: The Raising of Disguised Technical Barriers to Trade??

MOSCOW NEWS


Breaking Barriers

http://mnweekly.rian.ru/business/20080221/55311414.html

21/02/2008


Last Friday, Chairman of the Association of European Businesses, Reiner Hartmann, and a delegation from the AEB, held a meeting with EU Commissioner for Trade, Peter Mandelson on customs, visas, taxation and intellectual property rights issues - the four main concerns identified by European businesses operating in Russia.


Specific challenges regarding customs barriers included customs clearance procedures and different interpretations of customs regulations. A spokesperson from AEB told The Moscow News on Wednesday that "there are numerous documents that need to be provided as well as high custom costs for imports of certain goods, more particularly for cigarettes, chemicals, electronics, machine building equipment and textiles."


Concerning taxation, European businesses said they were concerned about transfer pricing, criticizing the practice of "black listing" certain countries - among others Malta and Cyprus - using the sole criterion of the tax rate applicable in that country.


According to the Draft Law on Transfer Pricing, this rate should not be less than half the tax rate applicable in the Russian Federation, which means it should not amount to less than 12 percent. The AEB stated that "a special clause of information between the countries for tax rate difference shall be introduced. However, there could be possible discrimination between EU member states." The AEB did however welcome President Vladimir Putin's recent announcement that the VAT rate will decrease significantly in coming years, which will benefit European business as well as others.


In the area of Intellectual Property Rights, difficulties abounded. In particular, representatives from pharmaceutical and agrochemical sectors reported experiencing excessive red tape and "extremely protracted and messy procedures for the registration of new products and re-registration of existing products," the AEB said.


Moreover, software manufacturers detailed barriers for importing their products into Russia. The first step entails receiving approval from the Federal Security Service (FSB) to import the software. Following approval, the Ministry of Economy issues a license to the company, but the license remains valid only for that particular shipment.


As a result, software manufacturers currently find themselves repeating the entire application process each time anew. Additional disadvantages are incurred while waiting in line for import approval: the importer must pay a service fee while customs holds the product (which on average takes three weeks), Russian authorities may keep reference samples of items used to conduct tests, and yet another fee is levied for the test analysis from an FSB-recommended lab.


The meeting served as a continuation of AEB and European Com­mission cooperation within the framework of the EU Market Access Strategy, the goal of which consists of ensuring fair trade conditions for European companies doing business not only in Russia, but any third-party state. European businesses operating in Russia will take advantage of this channel for collectively communicating their hardships on a policy level.


In order to address some of these concerns, Commissioner Mandelson emphasized the importance of feedback from European companies in offering concrete cases of discriminatory trade barriers from their experience on the ground.


AEB Chairman Reiner Hartmann indicated AEB intentions to "intensify its participation in [this] process."

By C. Anne Shupe

China Concerned About America's Protectionist Trade Talk

International Herald Tribune

China's ambassador to the US chides America for its protectionist trade sentiments


http://www.iht.com/bin/printfriendly.php?id=10322428


The Associated Press


Saturday, February 23, 2008


INDIANAPOLIS: China's ambassador to the United States chided America for its protectionist trade sentiment while touting China's contributions throughout the world.


Ambassador Zhou Wenzhong, speaking Friday before about 200 people at Indiana University-Purdue University Indianapolis, also reiterated his country's hardline stance against Taiwan, saying its independence is out of the question.


"The 1.3 billion people on the mainland and the 23 million people in Taiwan are of the same blood and share a common destiny," he said. "We are willing to make every effort with the utmost sincerity to achieve peaceful reunification of the two sides ... but we will never allow anyone to separate Taiwan from the motherland in any name or by any means."


China claims Taiwan as its own and resists anything that appears to give the self-governing, democratic island the trappings of sovereignty. Officials in Beijing vow to attack at any declaration of Taiwanese independence and have stationed hundreds of missiles opposite Taiwan.


Zhou also noted that many "China-related" trade protection bills have been introduced in the U.S. Congress.


Americans are worried by claims that Beijing's low valuation of the yuan, its currency, makes Chinese goods cheaper in the United States and American products more expensive in China. U.S. lawmakers are considering bills that would punish China for what they contend are predatory trade practices blamed for contributing to the loss of millions of manufacturing jobs.


"The growing protectionist sentiments and the tendency to politicize economic and trade issues are especially worrisome," Zhou said.


Most of Zhou's roughly 40-minute talk focused on China's contributions to a number of world affairs, including negotiations between the two Koreas and improved relationships with Japan, India and Russia.


"We are ready to join hands with people across the world to promote the building of a harmonious world of enduring peace and a common prosperity," he said. "This is China's policy and long-term strategy."


He also noted that China has contributed more than 9,000 peacekeepers to United Nations operations around the globe.


"Working together, China and the United States effectively safeguard and enhance the peace, stability and the prosperity in the Asia-Pacific region and the rest of the world," he said.


Two protesters were quickly escorted out of the auditorium when they stood up while Zhou answered an audience question about human rights abuses in China.

The French Protection: The Resurgence of Colbertian Statist Economics

http://www.pinr.com/report.php?ac=view_report&report_id=367


Economic Brief: French Protectionism


Report Drafted By:


Erich Marquardt, Dr. Federico Bordonaro


15 September 2005


On August 31, France announced that it would protect from buyouts by foreign companies domestic industries it considers as strategic. French Finance Minister Thierry Breton stated that the country's "very sensitive sectors" would be shielded from foreign bids. While the complete list of protected industries has not been made public yet, some of the protected industries were leaked to the media. As reported by Les Echos, the protected industries include defense, biotechnology, space technology, telecommunication companies, casinos, encryption, IT security, and antidote production.



France's turn toward protectionism follows a global pattern where states with advanced economies are shielding their domestic industries from foreign competition and from potential state rivals.


French Protectionism Returns


For many observers, the ongoing wave of "economic patriotism" advocated by French Prime Minister Dominique de Villepin is nothing else but the renewal of French-style protectionism marked by the Colbertian tradition of statist direction of the national economy.


After rumors circulated in the summer of 2005 about a possible bid from U.S. drinks giant PepsiCo Inc. for French food giant Danone, and a Wal-Mart bid on supermarket chain Carrefour, many in the French political landscape called for an immediate reaction by the current administration so that France's industrial gems could be saved from American takeover. Therefore, on July 27, de Villepin announced that he would gather all available forces to launch a new economic patriotism.


Additionally, France bailed out its major engineering company Alstom in order to promote the French idea of creating "national champions," and avoided Switzerland's Novartis from buying out the French and German pharmaceutical company Aventis by backing Sanofi's merger with Aventis to create Sanofi-Aventis.


E.U. Concern


Protectionist acts from one of the leading states of the European Union have caused justifiable concern in Brussels. Gregor Kreuzhuber, spokesman for the E.U. Commission, told the press that the E.U. does not "want to see any disguised protectionism" and that the E.U. would review France's proposed economic policy.


Paris, predicting the concern in Brussels, quickly argued that its actions would comply with E.U. economic laws. French Budget Minister Jean-Francois Cope explained to the press, "Our move is completely consistent with community law. … Each country is allowed to define 'strategic' sectors in accordance with national interests -- for example in the defense or sensitive technology sectors." Cope further stated, "It's strictly within this framework that the government is considering measures which would be comparable to those in other European Union countries."


While it is obvious that France will try to argue that its protectionist measures abide by E.U. rules and regulations, there is concern that Paris' actions could set an example for other E.U. states to take similar protectionist measures. The fact that the French have casinos listed as one of their strategic industries -- under the notion that casinos could be used for money laundering -- exemplifies E.U. concern that France's actions are "disguised protectionism."


In its attempt to avoid the E.U. from blocking the passage of the new legislation, France will no doubt try to protect only its most vital industries so as to not draw the scorn of Brussels, but also to protect enough industries so as to appeal to domestic interests at home.


Why Protectionism?


French protectionism partly emanates from Paris' concern with foreign companies purchasing major firms in strategic or pivotal industries. Similar to the way that the U.S. Congress reacted to China National Offshore Oil Corporation's attempted purchase of the U.S. energy company Unocal, Paris does not want to see vital industries owned by outside companies tied to the governments of foreign states.


Additionally, however, Paris also wants to protect its domestic industries so that the country does not sustain a loss of jobs, such as factories closing down and moving operations to Eastern Europe or Asia. It provides the French government popularity in time for the upcoming presidential and parliamentary elections in 2007; tackling unemployment and successfully coping with globalization's challenges are vital to enhance the administration's credibility. In fact, without appreciable results in reducing the jobless figure in the country, de Villepin will hardly get the necessary support to achieve his ambitious industrial and energy policy. [See: "Intelligence Brief: French Energy Policy"]


As previously mentioned, de Villepin made the protection of French manufacturers a major policy goal after the PepsiCo Inc. bid was announced. After the bid was presented, President Jacques Chirac was reported saying that "the splitting up and the instability of the capital of certain large French businesses are risk factors for employment and for our industrial strength." It was then that de Villepin boldly announced it was time for France to display "real economic patriotism," or, in other words, economic nationalism. He argued, "When times are hard, when the world is changing, it is a question of gathering our strengths … and defending France and things French."


While Paris' rhetoric is very bold, in the end the French policy is similar to unspoken protectionist policies in other states with advanced economies, as was most recently seen in the protectionist bid by the U.S. and the E.U. against Chinese textile imports.


The important difference, however, is that the protectionist actions in the face of increased Chinese textile imports were taken by the E.U. as a whole, whereas Paris' "economic patriotism" idea is distinctly French. [See: "Economic Brief: Textile Quotas"]


Despite this concern, Les Echos reported that the list of protected industries it acquired did not list any food companies or, for instance, oil companies. However, the French Industry Ministry did state that it would reserve the right to prevent foreign takeovers of companies that had subsidiaries involved in any of the listed "sensitive sectors" and that the government would make the decision to bar a foreign takeover on a case-by-case basis.


The Bottom Line


After decades of dominating political discourse, economic liberalism looks now in a crisis because important decision-makers (such as in France) perceive it as fiction that conceals the hard reality of economic warfare and power relations among states. If France's republican and social-democratic traditions form an axis with the neo-Gaullist right-wing and prevail in the short/medium term over the neo-liberal reformists, look for a new social and political bloc to take shape around the "economic patriotism" policy in France, with considerable consequences for the European Union as a whole.

The Time For Doha Is Now

http://www.merinews.com/catFull.jsp?articleID=129745


2008 is ‘make or break’ for Doha trade talks: World leaders


MeriNews, India

Mineguruji, 27 January 2008,

Amidst fears of a worldwide fiscal depression mounting, trade leaders at the WEF pressed businesses to push their governments to seek a successful conclusion to the Doha Round of trade talks this year or risk rise in new barriers to international business


WITH FEARS of a global economic recession growing, trade leaders at Davos urged businesses to press their governments to seek a successful conclusion to the Doha Round of trade talks in 2008, or risk seeing a rise in new barriers to international commerce.


“If it’s not concluded this year, it won’t be concluded next year - and by 2010 the caravans will have moved on elsewhere,” Peter Mandelson, commissioner, Trade, European Commission, Brussels, told participants at the World Economic Forum Annual Meeting 2008. “Not only will the caravans have moved on in different directions of trade negotiations, but what has already been on the table, which in my view is quite substantial, will have been put into deep freeze.”


After more than six years of stop-start negotiations, the Doha talks between members of the World Trade Organization have ground to a halt. With less than a year before US President George Bush leaves office, time is rapidly running out for reaching an agreement to reduce tariffs, subsidies and promote freer and fairer trade, panelists said.


The plenary session “Threats to the Global Trading System” followed an informal lunch meeting of trade ministers in Davos. Despite important progress on technical issues over the past six months, panelists revealed, the group remains no closer to an agreement and scepticism is high. Concerns persist among developing countries that lower tariffs will unfairly expose poor rural farmers to global competition and jeopardise growth that would be a potential buffer against a global slowdown.


“The content of this Round must deliver to healthy economies in Asia, in Africa, in the Pacific and in Latin America because that’s the goose that’s laying the golden egg,” said Kamal Nath, minister of Commerce and Industry of India.


But the cost of failure is rising, panelists said. Failure in the Doha Round would be likely to increase protectionist pressures around the world and result in a rollback from the progress already made towards freer global trade. Mandelson said the negotiations had become a prisoner to some extent of the American political calendar. Campaigning is already underway for elections to replace Bush next January, and a new president is unlikely to be able to put the Doha Round at the front of the US policy agenda, he said. The new President is likely to want to review any commitments that have already been made.


President Bush remains strongly committed to reaching a trade deal, insisted US representative Susan Schwab, and bipartisan support for a deal in the US Congress means there is still time to ratify a deal if one can be reached, she said.


Pascal Lamy, director general, World Trade Organization (WTO), Geneva, said a failure in the talks could exacerbate the impact of a slowing global economy and heighten geopolitical tensions. Celso Amorim, minister of Foreign Relations of Brazil, echoing these concerns, said failure to reach a deal in 2008 would “give the wrong signals to the global economy. And this will be detrimental to everybody, most of all the developing economies.”


Indeed, continued delays had lost the negotiators’ credibility among voters and companies, said Doris Leuthard, federal councillor of Economic Affairs of the Swiss Confederation. “When we don’t get a result, national protectionism is a big threat,” she said.


While businesses may be frustrated with the lack of progress in the Doha Round, companies still have a great deal to gain from it, Mandelson stressed - and a great deal to lose if a deal is not reached. “There is very significant economic value in binding the existing openness in the global economy,” he said.


Companies, therefore, most overcome their scepticism to push for a successful deal, panelists said. “The capacity of any one of us to deliver such a package through our political systems will depend in large measure on what the private sector is doing and saying, and whether they hold accountable leaders in their countries,” said Schwab.

110th Congressional Majority Adopts EU Position: Supports US Presidential Candidates With Anti-Liberal Trade Protectionist Agenda

http://ipsnews.net/news.asp?idnews=40856

CHALLENGES 2007-2008: U.S. Election Fever May Delay Doha Talks


Analysis by Aileen Kwa


IPS News


GENEVA, Jan 21 (IPS) -


A busy negotiating schedule is lined up for this year at the World Trade Organisation (WTO). The question remains whether negotiators will have to continue passing the time as the powers-that-be in Washington are consumed by pre-election politics, or if the technical solutions which they have been working on could, in fact, lead to a conclusion of the Doha Development Round.



The chairs of the negotiations on agricultural and industrial products are expected to release another round of draft texts at the end of January. This will be followed by intense text-based negotiations.



If things go according to WTO Director General Pascal Lamy’s Plan A, modalities (new rules and commitments) for agriculture and non-agricultural market access (NAMA) are to be concluded by March or April.



There could even be what an African delegate termed a ‘‘medium-sized’’ ministerial meeting to endorse the modalities at this time, with a fully fledged ministerial meeting at the end of 2008 to conclude the Round.



There are varying opinions as to the likelihood of Plan A materializing. As 2007 slipped away and the U.S. entered both a recession and an even fiercer stage of partisan pre-election frenzy, it seems unlikely that Washington is in any mood to liberalise trade.



Lori Wallach of Public Citizen, based in Washington, told IPS that ‘‘there is no appetite for a Doha Round here. The only Doha deal that could possibly break this mood would have to be something so lopsidedly pro-U.S. big corporations that it would not be a feasible outcome.


[MS. WALLACH AND HER GROUP ARE ACTIVISTS THAT WISH FOR AMERICA TO ADOPT EUROPEAN NON-SCIENCE & NON-ECONOMICS PRECAUTIONARY PRINCIPLE-BASED ENVIRONMENTAL & HEALTH REGULATIONS AND STANDARDS] **


‘‘That is, if there was some sudden windfall pile of trade goodies to harvest without the U.S. having to give much, then that would get things moving here. We’re heading into a recession and trade is increasingly politically toxic, given our 800 billion dollar trade deficit and its effect in slowing our growth by two percentage points’’, she added.


[WHAT MS. WALLACH IS REFERRING TO IS PROTECTIONISM]


Referring to the increasingly unpopular North American Free Trade Agreement (NAFTA) between the U.S., Canada and Mexico, Wallach observed, ‘‘the Democratic presidential candidates are all trying to ‘out anti-NAFTA’ each other. Remarkably, even half of the Republican presidential candidates are anti-NAFTA and anti-WTO.’’


[MS. WALLACH AND HER GROUP SUPPORT ANTI-LIBERAL TRADE RHETORIC BECAUSE IT PROMOTES EUROPEAN & WTO DIRECTOR PACAL LAMY'S EFFORTS TO INCORPORATE MORE PRECAUTIONARY PRINCIPLE & CULTURAL PREFERENCE EXCEPTIONS TO LIBERAL TRADE INTO THE WTO AGREEMENTS]**


See "Polluting the Future of the WTO", at: http://www.itssd.org/Publications/PollutingtheFuture.pdf


Then there is the issue of the Trade Promotion Authority (TPA), the authority granted by the U.S. Congress to the U.S. president to negotiate trade agreements that Congress could approve or reject but not amend. President George W. Bush’s administration requires the TPA to conclude the Round.



According to Wallach, ‘‘Bush has a 5 percent chance of getting a Doha-only TPA. If there had been a broader window of opportunity, that was shut down at the end of last year when Bush vetoed or threatened to veto every single Democratic priority initiative passed by Congress.’’



According to a WTO negotiator from West Africa, ‘‘I have not seen any sign or commitment that 2008 is a definitive date. It is an aspiration, but I won’t be surprised if it will go to 2009. And if it does, the election in the U.S. would be over and they would be able to test the waters.’’



He said that within the Group of 33 (or G33, a coalition of developing countries which has been calling for the protection of food security and rural livelihoods), ‘‘we have criticized ourselves for being too flexible, and the flexibility should not be one-sided. We are waiting for reciprocity from the developed countries.



‘‘At the end of the day, we will have a blame game. Developed countries will ask for more liberalisation in NAMA and services and they will blame developing countries for not showing signs of flexibility. Developing countries will say that our interests have not been taken seriously,’ he added.



From his point of view, the U.S. and the EU are now very obviously working closely together, and ‘‘just from seeing that, I think that there will be no movement on their side.’’



However, not all negotiators share his prognosis for 2008. An East African negotiator underscored that ground has been covered on some technical issues. ‘‘The possibility of a conclusion looks positive, not completely, but more positive than before.’’ (END/2008)