Posts of May 2007

China Protects Sudan from Sanctions

♠ Posted by Emmanuel in Africa,China,Security at 5/31/2007 03:19:00 AM

To America’s chagrin, China has taken a realpolitik stance towards the task of securing resources needed by its fast-growing economy by cultivating ties with states that America has iffy relations with. In line with its professed policy of non-intervention in other states’ domestic affairs, China makes for a desirable partner for these African, Asian, and Latin American states by making no demands for political transparency, economic reform, or human rights; providing markets for their raw materials; and supplying investment, trade, training, and weapons. Last but not least, China is also there to water down UN sanctions on these countries.

Today's case in point is Sudan. After we last saw this topic, China became more willing to work on the matter of prodding Sudan after Mia Farrow tagged the upcoming 2008 Olympics in Beijing the "Genocide Olympics." Apparently, the largely world opinion-insensitive China has a weak spot in the Games being sullied by such accusations:

For the past two years, China has protected the Sudanese government as the United States and Britain have pushed for United Nations Security Council sanctions against Sudan for the violence in Darfur.
But in the past week, strange things have happened. A senior Chinese official, Zhai Jun, traveled to Sudan to push the Sudanese government to accept a United Nations peacekeeping force. Mr. Zhai even went all the way to Darfur and toured three refugee camps, a rare event for a high-ranking official from China, which has extensive business and oil ties to Sudan and generally avoids telling other countries how to conduct their internal affairs.
So what gives? Credit goes to Hollywood -- Mia Farrow and Steven Spielberg in particular. Just when it seemed safe to buy a plane ticket to Beijing for the 2008 Olympic Games, nongovernmental organizations and other groups appear to have scored a surprising success in an effort to link the Olympics, which the Chinese government holds very dear, to the killings in Darfur, which, until recently, Beijing had not seemed too concerned about.
Ms. Farrow, a good-will ambassador for the United Nations Children's Fund, has played a crucial role, starting a campaign last month to label the Games in Beijing the ''Genocide Olympics'' and calling on corporate sponsors and even Mr. Spielberg, who is an artistic adviser to China for the Games, to publicly exhort China to do something about Darfur. In a March 28 op-ed article in The Wall Street Journal, she warned Mr. Spielberg that he could ''go down in history as the Leni Riefenstahl of the Beijing Games,'' a reference to a German filmmaker who made Nazi propaganda films.
Four days later, Mr. Spielberg sent a letter to President Hu Jintao of China, condemning the killings in Darfur and asking the Chinese government to use its influence in the region ''to bring an end to the human suffering there,'' according to Mr. Spielberg's spokesman, Marvin Levy.
China soon dispatched Mr. Zhai to Darfur, a turnaround that served as a classic study of how a pressure campaign, aimed to strike Beijing in a vulnerable spot at a vulnerable time, could accomplish what years of diplomacy could not.

However, China is now signaling that further sanctions on Darfur like those recently applied by the United States may be rather unwelcome. If these measures don't work, then the UN can always call on its ultimate resource for prodding China on the Darfur issue--UNICEF rep Mia Farrow. But first, here is the People's Daily:

China said yesterday that it opposed expanded sanctions against Sudan as the United States unveiled tough new restrictions against the African country and pushed for another UN resolution on Darfur.
"Imposing new sanctions only makes the problem more difficult to resolve," China's recently-appointed special envoy to Africa Liu Guijin told a news conference after a fact-finding trip to Sudan.
Expanding sanctions is the last thing that should be done, especially at a time when signs of progress can be seen in Darfur, including talks between Khartoum, the African Union (AU) and the UN, Liu said.
"In these circumstances, why can't the international community give more time for a peaceful settlement of the problem?" he asked.
China is encouraging Sudan to be "more flexible" about implementing a peace plan, and also wants fragmented opposition forces in Darfur to join talks and reach a unified negotiating position, he added...

Political negotiations should go hand in hand with the implementation of former UN chief Kofi Annan's three-phase peace plan, Liu said.

Liu also urged some countries not to politicize Sino-Sudanese energy collaboration, saying it was normal business activity and has, indeed, helped social and economic development in the poverty-stricken country.

Liu said poverty is the real cause of the problems in Darfur; and development is the solution.

Over the past years, China has donated more than $10 million to the region, some in the form of humanitarian aid such as rice, and the rest in development aid such as building schools, water projects and power generators.

In brief remarks at the White House yesterday, US President George W. Bush followed through on a threat made six weeks ago to pursue tougher action against Sudan.

Bush directed Secretary of State Condoleezza Rice to consult with Britain and other allies on pursuing new UN Security Council sanctions against Sudan.

The aim of a new resolution, he said, would be to impose new sanctions against the Sudanese government and officials found to be violating human rights or obstructing the peace process, and to enforce an expanded embargo on arm sales to the government of Sudan.

"It will prohibit the Sudanese government from conducting any offensive military flights over Darfur. It will strengthen our ability to monitor and report any violations," he added.

As part of the tightening of US sanctions, Bush said the US Treasury Department will bar 31 companies owned or controlled by Sudan from doing business in the US financial system, including a company he said that has been transporting weapons to the Sudanese government and militia forces in Darfur.

"Al Qaeda Strikes Back"

♠ Posted by Emmanuel in Security at 5/31/2007 03:07:00 AM

In the current issue of Foreign Affairs, the Brookings Institution's Bruce Reidel warns of a resurgent Al Qaeda that may be planning yet another attack on the United States after focusing its attention on Iraq and elsewhere in recent years.

Summary: By rushing into Iraq instead of finishing off the hunt for Osama bin Laden, Washington has unwittingly helped its enemies: al Qaeda has more bases, more partners, and more followers today than it did on the eve of 9/11. Now the group is working to set up networks in the Middle East and Africa -- and may even try to lure the United States into a war with Iran. Washington must focus on attacking al Qaeda's leaders and ideas and altering the local conditions in which they thrive.
A FIERCER FOE
Al Qaeda is a more dangerous enemy today than it has ever been before. It has suffered some setbacks since September 11, 2001: losing its state within a state in Afghanistan, having several of its top operatives killed, failing in its attempts to overthrow the governments of Egypt, Jordan, and Saudi Arabia. But thanks largely to Washington's eagerness to go into Iraq rather than concentrate on hunting down al Qaeda's leaders, the organization now has a solid base of operations in the badlands of Pakistan and an effective franchise in western Iraq. Its reach has spread throughout the Muslim world, where it has developed a large cadre of operatives, and in Europe, where it can claim the support of some disenfranchised Muslim locals and members of the Arab and Asian diasporas. Osama bin Laden has mounted a successful propaganda campaign to make himself and his movement the primary symbols of Islamic resistance worldwide. His ideas now attract more followers than ever.
Bin Laden's goals remain the same, as does his basic strategy. He seeks to, as he puts it, "provoke and bait" the United States into "bleeding wars" throughout the Islamic world; he wants to bankrupt the country much as he helped bankrupt, he claims, the Soviet Union in Afghanistan in the 1980s. The demoralized "far enemy" would then go home, allowing al Qaeda to focus on destroying its "near enemies," Israel and the "corrupt" regimes of Egypt, Jordan, Pakistan, and Saudi Arabia. The U.S. occupation of Iraq helped move his plan along, and bin Laden has worked hard to turn it into a trap for Washington. Now he may be scheming to extend his strategy by exploiting or even triggering a war between the United States and Iran.
Decisively defeating al Qaeda will be more difficult now than it would have been a few years ago. But it can still be done, if Washington and its partners implement a comprehensive strategy over several years, one focused on both attacking al Qaeda's leaders and ideas and altering the local conditions that allow them to thrive. Otherwise, it will only be a matter of time before al Qaeda strikes the U.S. homeland again.
ONE LOST, TWO GAINED
The al Qaeda leadership did not anticipate the rapid collapse of the Taliban regime in Afghanistan in the fall of 2001. Up to that point, Afghanistan had been a fertile breeding ground for the organization. According to some estimates, al Qaeda had trained up to 60,000 jihadists there. Al Qaeda leaders welcomed the invasion by U.S. and coalition forces on the assumption that they would quickly get mired in conflict, as the Soviets had two decades earlier. Al Qaeda and the Taliban thought they had decapitated the Afghan opposition and severely hampered its ability to fight by assassinating the Northern Alliance commander Ahmed Shah Masoud two days before 9/11.
But in December 2001, Mullah Muhammad Omar, the Taliban leader and self-proclaimed "commander of the faithful," to whom bin Laden had sworn allegiance, lost Kandahar, the capital of the Taliban's fiefdom. The Taliban had already lost considerable support among Afghans by the time of the invasion because of their draconian implementation of fundamentalist Islamic law and their harsh crackdown on poppy cultivation, the mainstay of the Afghan economy. But the key to their defeat was the defection of Pakistan. According to Ahmed Rashid, the top expert on the Taliban, up to 60,000 Pakistani volunteers had served in the Taliban militia before 9/11, alongside dozens of active-duty Pakistani army advisers and even small Pakistani army commando units. When these experts left, the Taliban lost their conventional military capability and political patronage, and al Qaeda lost a safe haven for its operational planning, training, and propaganda efforts.
The senior members of al Qaeda and the Taliban recovered quickly. In early 2002, they hid in the badlands along the Pakistani-Afghan border. Fighters went underground, and the trail for the top three men (bin Laden, Mullah Omar, and Ayman al-Zawahiri, bin Laden's top deputy) went cold almost immediately. For the next two years, al Qaeda focused on surviving -- and, with the Taliban, on building a new base of operations around Quetta, in the Baluchistan region of Pakistan.
Al Qaeda also moved swiftly to develop a capability in Iraq, where it had little or no presence before 9/11. (The 9/11 Commission found no credible evidence of any operational connection between al Qaeda and Iraq before the attacks, and the infamous report connecting the 9/11 mastermind Mohamed Atta with Iraqi intelligence officers in Prague has been discredited.) On February 11, 2003, bin Laden sent a letter to the Iraqi people, broadcast via the satellite network al Jazeera, warning them to prepare for the "Crusaders' war to occupy one of Islam's former capitals, loot Muslim riches, and install a stooge regime to follow its masters in Washington and Tel Aviv to pave the way for the establishment of Greater Israel." He advised Iraqis to prepare for a long struggle against invading forces and engage in "urban and street warfare" and emphasized "the importance of martyrdom operations which have inflicted unprecedented harm on America and Israel." He even encouraged the jihadists in Iraq to work with "the socialist infidels" -- the Baathists -- in a "convergence of interests."
Thousands of Arab volunteers, many of them inspired by bin Laden's words, went to Iraq in the run-up to the U.S. invasion. Some joined the fledgling network created by the longtime bin Laden associate Abu Musab al-Zarqawi, who had fled Afghanistan and come to Iraq sometime in 2002 to begin preparations against the invasion. (Zarqawi had been a partner in al Qaeda's millennium plot to blow up the Radisson Hotel and other targets in Amman, Jordan, in December 2000. Later, in Herat, Afghanistan, he ran operations complementary to al Qaeda's.) Zarqawi's network killed an officer of the U.S. Agency for International Development, Laurence Foley, in Amman on October 28, 2002 -- the first anti-American operation connected to the invasion...

Viewpoints on BMW Buying Volvo

♠ Posted by Emmanuel in Marketing at 5/31/2007 02:38:00 AM

The rumor mill is working overtime in this time of merger mania that BMW is in talks to purchase Volvo from Ford. If you will remember, Ford is in dire financial straits and has already sold Aston Martin to David Richards of Prodrive. Will Volvo be next on the auction block? BMW has denied that it is interested. We'll see if this is so. BMW did not have so much luck with its previous acquisition of MG Rover, so this new rumored deal leaves some scratching their heads in wonderment. From MarketWatch:

"I don't really think it's a good fit," said David Healy, an auto analyst at Burnham Securities commenting Tuesday on reports in the Financial Times and online edition of Sweden's Goteborgs Posten over the weekend that the German car maker is taking a hard look at Volvo's balance sheet.

"There would be an awful lot of overlap in the models, especially at the high end," he added.

Healy also doubted BMW (DE:519000: news, chart, profile) and Volvo would be able to mesh what he called their very tight organizational structures, raising the specter of a corporate culture clash akin to the one seen when Daimler-Benz's took over Chrysler.

Analysts also question whether BMW would take the plunge given its ill-fated acquisition of Rover back in 1994. BMW eventually quit its money-losing foray into British car-making by splitting up the company, with the luxury brand Land Rover ending up alongside Volvo and Jaguar in Ford's Premium Auto Group.

Meanwhile, BMW sold the trademark Rover name to a company in China, keeping the Mini brand for itself. BMW has since steered clear of the mergers and acquisition frenzy that marked the auto industry over the past decade, mindful that most deals failed to meet investors' expectations.

If Ford were to sell Volvo, Healy said Renault/Nissan would likely make a better match than BMW. The French-Japanese car maker has long been seeking to build up its presence in the top end of the market, and Volvo would complement its current stable without squeezing out existing models.

Others mentioned as possible Volvo buyers include France's Peugeot, Tata Motors of India and even Magna International/Russian Machines - a Canadian-Russian alliance forged earlier this month. See full story.

And then, there's always the possibility of a private equity group lurking in the wings like Cerberus Capital Management, which two weeks ago secured an 80% stake in Chrysler for a cool $7.4 billion. See full story.

Businessweek raises similar issues over the possible merger:

Executives at both Ford Motor (F) and BMW said on May 29 that there have been no formal discussions between the two companies about the German carmaker acquiring the ailing U.S. automaker's Volvo car business. The possible sale was initially reported by Swedish daily newspaper Göteborgs-Posten and then Financial Times of London.

Executives talked to BusinessWeek on and off the record about the reports, insisting that there have been no deal discussions at the top of the company. But a BMW executive speaking not for attribution said it was "certainly possible that BMW had been studying an acquisition of Volvo as a matter of normal business planning when we know a business is potentially for sale."

Ford spokesman Tom Hoyt said: "Ford is not in discussions with BMW or any other company regarding Volvo. We have seen this kind of speculation for the past year, as Ford has been assessing our operations and portfolio—as any good business does and we will continue to do."

Ford is undergoing a massive restructuring after losing $12.6 billion last year. Its Premier Auto Group (PAG), which is made up of Volvo, Jaguar, and Land Rover, lost $327 million last year. Last year's results also included Aston Martin, but Ford sold 90% of that brand to an investment group, Prodrive, earlier this year (see BusinessWeek.com, 3/13/07, "After Aston, Could Jaguar Be Next?"). Ford does not break out profit figures for its individual brands, but Ford executives say privately that Volvo closed out last year around break-even. Jaguar lost money. Land Rover posted an operating profit.

Executives at Ford and BMW described any communication between the two companies as "exploratory." Of the three PAG brands, Volvo is the most valuable to Ford, according to industry consensus. Merrill Lynch (MER) estimates that all three brands could bring Ford more than $9 billion. Between $7 billion and $8 billion of that would come from Volvo.

The reasons for potentially low prices for Jaguar and Land Rover are their expensive labor contracts as well as a strong currency in Britain, where all the vehicles are all made. That makes them undesirable from a financial standpoint to Ford as well as to potential suitors...
While it is somewhat surprising that Ford would be interested in selling Volvo, it is far more surprising that BMW would entertain buying it. BMW, one of the steadiest and most consistently profitable automakers in the world, nearly came undone in the 1990s over its purchase of the British Rover Group. BMW acquired Rover, Land Rover, and Mini, and lost, by some estimates, in excess of $10 billion before jettisoning Rover to an investment group for no money and Land Rover to Ford. It retained Mini, which has been a huge sales hit for BMW worldwide as the Munich-based automaker remade the Mini Cooper runabout and brand with German know-how (see BusinessWeek.com, 5/29/07, "Super Duper Mini Cooper").

BMW Chairman Norbert Reithofer, who took over from Helmut Panke last year, is facing sales-growth issues. There are differences of opinion as to how the iconic German brand will increase sales and profits in the future. Though the company has added 1 Series small cars to its lineup over the past three years and is planning to launch a multiactivity vehicle, there is worry in some quarters that the BMW brand is getting filled out, and that jamming more vehicles into the lineup could water down its valuable brand equity in the premium price categories.

Acquiring Volvo would give BMW a relatively healthy global brand that needs financial discipline, manufacturing efficiencies, and brand marketing know-how in order to make it more profitable. Volvo cars and SUVs are engineered to be front-wheel drive, while all BMW vehicles are rear-wheel drive. While it is unlikely that BMW would ever build a Volvo and BMW off the same engineering platform, there could be enormous savings from co-developing engines, electrical systems, telematics, and the like. BMW, too, would not hesitate to build Volvos outside of Scandinavia, a move Ford has not yet done to save on manufacturing costs.

Huh? The Cold War is Over?

♠ Posted by Emmanuel in Energy,Europe,Security at 5/30/2007 04:54:00 AM

The increasing hostility of Vladimir Putin's Russia to just about everyone else has been widely noted. [WARNING: A lump of ~~coal~~ polonium might end up in your Christmas stocking for trumpeting this observation too loudly.] In any event, Putin is boasting about a new intercontinental ballistic missile (ICBM) that can overcome the USA's proposed missile defense system, purportedly safeguarding against an Iranian attack. Put it down to another cockamamie military-industrial complex scheme to get more defense spending, but Russia is taking it seriously enough--as if the Cold War never ended. With Russia's massive export receipts from elevated oil prices, it can certainly indulge in such shenanigans. To what end, however, we can all ponder. From the Associated Press:

Russia tested new missiles Tuesday that a Kremlin official boasted could penetrate any defense system, and President Vladimir Putin warned that U.S. plans for an anti-missile shield in Europe would turn the region into a "powder keg."

First Deputy Prime Minister Sergei Ivanov said Russia tested an intercontinental ballistic missile capable of carrying multiple independent warheads, and it also successfully conducted a "preliminary" test of a tactical cruise missile that he said could fly farther than existing, similar weapons.

"As of today, Russia has new tactical and strategic complexes that are capable of overcoming any existing or future missile defense systems," Ivanov said, according to the ITAR-Tass news agency. "So in terms of defense and security, Russians can look calmly to the country's future."

Ivanov is a former defense minister seen as a potential Kremlin favorite to succeed Putin next year. Both he and Putin have said repeatedly that Russia would continue to improve its nuclear arsenals and respond to U.S. plans to deploy a missile defense system in Poland and the Czech Republic _ NATO nations that were in Moscow's front yard during the Cold War as Warsaw Pact members.

Russia has bristled at the plans, dismissing U.S. assertions that the system would be aimed at blocking possible attacks by Iran and saying it would destroy the strategic balance of forces in Europe.

"We consider it harmful and dangerous to turn Europe into a powder keg and to fill it with new kinds of weapons," Putin said at a news conference with visiting Portuguese Prime Minister Jose Socrates.

Russian arms control expert Alexander Pikayev said the new ICBMs appeared to be part of Russia's promised response to the missile defense plans and, more broadly, an effort to "strengthen the strategic nuclear triad _ land-based, sea-based and air-based delivery systems for nuclear weapons _ which suffered significant downsizing" amid financial troubles after the 1991 Soviet collapse.

China's Latest Market Cooling Effort

♠ Posted by Emmanuel in Casino Capitalism,China,Music at 5/30/2007 04:39:00 AM

With a price-to-earnings ratio of 48, valuations of Chinese stocks are becoming more unrealistic than reality show TV. With that in mind, the government has tried various measures to curb speculation such as raising interest rates and reserve requirements, to no avail so far. Its latest effort involves raising taxes on stock transactions threefold:

China's stocks dropped from a record after the government tripled the tax on securities transactions, halting a rally that's made the shares Asia's most expensive.
The CSI 300 Index fell 110.61, or 2.7 percent, to 4057.68 as of 10:30 a.m. in Shanghai, after initially tumbling as much as 6.3 percent. The measure has almost doubled this year, the best performance of 90 global benchmarks tracked by Bloomberg, as an influx of new investors stoked demand. China's brokerage accounts this week topped 100 million for the first time, according to the China Securities Depository & Clearing Corp.

Stamp duty on share trades has been increased to 0.3 percent, effective today, ``to promote the healthy development of the securities market,'' the finance ministry said on its Web site. The central bank this month raised interest rates for the second time this year, encouraging people to save rather than invest in stocks, and brokerages were ordered to make investors sign a declaration acknowledging risks when opening accounts.

``The government is doing something real to curb speculation and prevent the market from overheating,'' said Li Xuewen, who manages about $284 million at Invesco Great Wall Fund Management Co. in Shenzhen. ``If the market doesn't cool down, more measures to stem the gains will probably follow.''

Based on yesterday's closing price of 64 yuan, investors now have to pay 192 yuan ($25.1) in tax when buying or selling 1,000 share of Citic Securities Co., up from 64 yuan before the increase. Citic Securities, the nation's biggest publicly traded brokerage, has the biggest representation in the CSI 300.

A record 455,111 accounts to trade mainland shares and mutual funds were opened on May 28, China Securities Depository & Clearing said yesterday. More than 20 million accounts have been opened at brokerages so far this year, four times the amount in all of 2006, according to the clearing house.

So far today, this effort actually seems to be working as Chinese stocks are going down like a Led Zeppelin [you need coolin', baby I'm not foolin'!]:

Chinese stocks plummet more than six percent on Wednesday after an announcement of a hike in stamp tax on stock trading.

The benchmark Shanghai Composite Index has lost 6.08 percent to 4,071.27 points at the end of morning trading after opening 5.78 percent lower.

The Ministry of Finance announced Tuesday night the stamp tax on stock trading will rise to 0.3 percent from 0.1 percent starting from Wednesday, in the authorities' latest move to cool down the country's runaway equity market.

Bob Zoellick: Next Neocon WB Chief?

♠ Posted by Emmanuel in Bretton Woods Twins at 5/30/2007 12:04:00 AM

When I last talked about the matter of possible neoconservative-leaning World Bank heads, I ended with this: Who's next from these guys? Ahmed Chalabi for World Bank chief? My wish list for the next World Bank chief was simple: First, s/he should not be a neoconservative. Second, s/he should have previous experience with development. Your faithful correspondent thought he was being crafty with suggesting that the next nominee would be another neoconservative, but it turns out that the next nominee from Bush isn't far away from the neocon creed [sigh]. I greatly regret having raised the possibility [a thousand lashes onto me]. Nor does it appear that the nominee has a record of working on development matters.

Bob Zoellick, former US Trade Representative and Deputy Secretary of State, has been suggested as the next nominee for the post of World Bank president. By convention, the US gets to select the nominee for World Bank head, whereas the EU gets the same privilege for the IMF head. So, the US gets to try its luck again after the Wolfowitz debacle. Unfortunately, it seems Zoellick isn't that much different than Wolfowitz in his political leanings. Zoellick was a signatory in the New American Century letter to then-President Clinton on "implementing a strategy for removing Saddam's regime from power" alongside neoconservative luminaries such as Donald Rumsfeld, Paul Wolfowitz [we're not surprised to see you here], Richard Perle, William Kristol, and John Bolton [yipes!] On the neoconservative front, then, Zoellick's credentials are for real. Will he start blabbering about corruption all the time while shoveling wads of cash Iraq's way like Wolfowitz did? Again, it's an open question.

Nor does Zoellick have much development experience as far as I can tell. Really, the Bushites could have made a far less questionable choice than Zoellick, who comes with question marks on his neoconservative leanings and lack of development experience. If this bit of news is true, then the matter heads to the World Bank for his approval. There's a possibility that the other member countries of the Bank will raise their hackles over Zoellick, though I doubt it. They got their scalp with Wolfowitz. Rest assured that if Zoellick turns into a Wolfowitz-lite, then he too will be turfed in short order. Again, though, this choice does not really erase concerns about another rehash of the sad Wolfowitz episode. Bad choice, Bushy.

UPDATE: Here is Zoellick in his pre-W sidekick years in Foreign Affairs on "Campaign 2000: A Republican Foreign Policy"...for the World Bank? We'll soon see whether the two are synonymous. For the Bank and world development's sake, let's hope not:

A primary task for the next president of the United States is to build public support for a strategy that will shape the world so as to protect and promote American interests and values for the next 50 years [again...at the World Bank?].

Military-Industrial Complex & China

♠ Posted by Emmanuel in China,Security at 5/29/2007 01:17:00 AM

The 2007 edition of the United States Department of Defense's Military Power of the People's Republic of China recently came out, and it once again raised concerns about China's growing military capabilities:

China’s near-term focus on preparing for military contingencies in the Taiwan Strait, including the possibility of U.S. intervention, appears to be an important driver of its modernization plans. However, analysis of China’s military acquisitions and strategic thinking suggests Beijing is also generating capabilities for other regional contingencies, such as conflict over resources or territory.

The pace and scope of China’s military transformation has increased in recent years, fueled by continued high rates of investment in its domestic defense and science and technology industries, acquisition of advanced foreign weapons, and far reaching reforms of the armed forces. The expanding military capabilities of China’s armed forces are a major factor in changing East Asian military balances; improvements in China’s strategic capabilities have ramifications far beyond the Asia Pacific region.

China’s strategic forces modernization is enhancing strategic strike capabilities, as evidenced by the DF-31 intercontinental range ballistic missile, which achieved initial threat availability in 2006. China’s counterspace program - punctuated by the January 2007 successful test of a direct-ascent, anti-satellite weapon - poses dangers to human space flight and puts at risk the assets of all space faring nations. China’s continued pursuit of area denial and anti-access strategies is expanding from the traditional land, air, and sea dimensions of the modern battlefield to include space and cyberspace.

Last year, however, Fred Kaplan of Slate noted that the US military-industrial complex made China into its latest bogeyman after years of placing the Soviet Union in the same category. Summarizing Kaplan, the US military-industrial complex needs to frame a threat that justifies spending on even more weapons even if America already has by far the world's largest stockpile of these weapons:

Every day and night, hundreds of Air Force generals and Navy admirals must thank their lucky stars for China. Without the specter of a rising Chinese military, there would be no rationale for such a large fleet of American nuclear submarines and aircraft carriers, or for a new generation of stealth combat fighters—no rationale for about a quarter of the Pentagon's budget. In Secretary of Defense Donald Rumsfeld's Quadrennial Defense Review, released this past February, the looming Chinese threat is the explicit justification for all the big-ticket weapons systems that have nothing to do with fighting terrorists or insurgents.
But is the threat real? In each of the last four years, Congress has required the Defense Department to issue a report titled Military Power of the People's Republic of China. The latest edition, issued this week, starts out ominously, but as you read through its 50 double-columned pages, you gradually realize that claims of emerging Chinese superpower are way overblown...
Take the budget. China officially says it's spending $35 billion on its military, a 14.7 percent increase over last year's budget, amounting to 1.5 percent of its gross national product. (The U.S. military budget is nearly 15 times as large and amounts to 4 percent of our GNP; Japan's and South Korea's defense budgets are larger than China's, too.) The report says that China's growth "sustains a trend that has persisted since the 1990s of defense budget growth rates exceeding economic growth"—but read on—"although the growth of defense expenditures has lagged behind the growth in overall government expenditures over the same period of time." (Emphasis mine.)

The Chinese are not exactly happy with being made into a big threat to global security. The Foreign Ministry had this to offer in response to the report:

Q: Recently the United States Department of Defense has issued 2007 annual report on Chinese military power. Do you have any comment on that?

A: The report of the US Department of Defense continues to spread myth of the "China Threat" by exaggerating China's military strength and expenses out of ulterior motives. It is a grave violation of the norms governing international relations and brutal interference in China's internal affairs, to which China expresses strong dissatisfaction and resolute opposition.

As a peace-loving country, China steadfastly follows a road of peaceful development, adopting a national defense policy that is defensive in nature. Universally recognized by the international community, China is a major force for peace in the Asia-Pacific region and the world at large. Each sovereign state has the right and obligation to develop necessary national defense strength to safeguard its national security and territorial integrity. It is totally erroneous and invalid for the US Report to play up the so-called "China Threat".

Taiwan is an inalienable part of the Chinese territory. China resolutely opposes interference in China's internal affairs by any country with whatever manifestation. The Chinese Government will continue to uphold the basic principles of "peaceful reunification" and "one country, two systems"and exert the utmost sincerity and efforts to strive for a peaceful reunification. However, we will never tolerate the "Taiwan Independence" or any attempt by anyone to separate Taiwan from China by whatever means. We urge the United States to strictly abide by its commitment to the One China policy, the three Sino-US Joint Communiqués and opposing "Taiwan Independence" by stopping its arms sales to and military ties with Taiwan, avoiding sending wrong signals to the splittist forces for "Taiwan Independence".

The Competition State circa 2007

♠ Posted by Emmanuel in Neoliberalism at 5/29/2007 12:21:00 AM

Just out is Swiss business school IMD's World Competitiveness Yearbook (WCY) 2007. It brings to mind exactly what Paul Krugman wrote about a few years back in "Competitiveness: A Dangerous Obsession." Here's a Krugman excerpt, though you can read the whole thing online:

After all, the rhetoric of competitiveness -- the view that, in the words of President Clinton, each nation is "like a big corporation competing in the global marketplace" -- has become pervasive among opinion leaders throughout the world. People who believe themselves to be sophisticated about the subject take it for granted that the economic problem facing any modern nation is essentially one of competing on world markets -- that the United States and Japan are competitors in the same sense that Coca-Cola competes with Pepsi -- and are unaware that anyone might seriously question that proposition. Every few months a new best-seller warns the American public of the dire consequences of losing the "race" for the 21st century.ffi A whole industry of councils on competitiveness, "geo-economists" and managed trade theorists has sprung up in Washington. Many of these people, having diagnosed America's economic problems in much the same terms as Delors did Europe's, are now in the highest reaches of the Clinton administration formulating economic and trade policy for the United States. So [former European Commission Chairman] Delors was using a language that was not only convenient but comfortable for him and a wide audience on both sides of the Atlantic.

Unfortunately, his diagnosis was deeply misleading as a guide to what ails Europe, and similar diagnoses in the United States are equally misleading. The idea that a country's economic fortunes are largely determined by its success on world markets is a hypothesis, not a necessary truth; and as a practical, empirical matter, that hypothesis is flatly wrong. That is, it is simply not the case that the world's leading nations are to any important degree in economic competition with each other, or that any of their major economic problems can be attributed to failures to compete on world markets. The growing obsession in most advanced nations with international competitiveness should be seen, not as a well-founded concern, but as a view held in the face of overwhelming contrary evidence. And yet it is clearly a view that people very much want to hold -- a desire to believe that is reflected in a remarkable tendency of those who preach the doctrine of competitiveness to support their case with careless, flawed arithmetic.

This brings me to the results of the 2007 derby. It's a win for the US, narrowly pipping Singapore to the finish line with Hong Kong coming in third. Singapore and Hong Kong swapped places this year. Here's an explanation of WCY methodology:

And here are a blurb and the results for WCY 2007:

World Competitiveness has never been as dynamic as this year! None of the 55 economies covered in the WCY is in recession (average growth is 5%).

The US is still number one but other nations are catching up quickly - Switzerland, The Netherlands, Sweden, China and Germany are on the way up. Looking at the past 10 years’ evolution of competitiveness performance, new competitive powers clearly emerge and will shake up future rankings. Who are they?

The IMD World Competitiveness Yearbook 2007 (WCY) analyses and ranks the ability of nations to create and maintain an environment that sustains the competitiveness of enterprises. Considered the worldwide reference point to world competitiveness, it has been published without interruption since 1989 and ranks 55 national economies using 323 crieria. The WCY is an indispensable tool for business leaders, government and academia.

(Click on image to view rankings. Note that numbers to the left of the countries are last year's rankings. The entire scoreboard file is available here.)

London Cab: Made in China

♠ Posted by Emmanuel in China at 5/28/2007 11:56:00 PM

Pretty much everything is "Made in China" nowadays, so I suppose this was inevitable: The London Cab has moved production to the Middle Kingdom. That ubiquitous symbol of Britishness has been sold to Geely, a Chinese automaker keen on spearheading the Chinese automakers' charge into overseas markets. But first these cabs will be sold in domestic Chinese markets as taxis and--get this--luxury cars. ("OK kids, it's down to either the urbane E-Class, stylish 5-Series, or hulking London Cab.") It lends a whole new meaning to "giving the family a lift." From Reuters:

London's iconic cabs will soon be picking up fares on the streets of China, costing half as much as they do back home.
Geely Automobile Holdings, the Chinese company which bought British manufacturer Manganese Bronze in 2006, plans to sell the firm's taxicabs in China in 2008 and to begin exporting the vehicle to Asia and beyond soon afterwards.
Ambitious Geely, which makes no secret of its eventual plans to expand globally, may start its export drive with Hong Kong -- bringing a common London sight to the former British colony more than a decade after it reverted to Chinese rule.
"We estimate the production cost can be lowered at least by half," Geely executive director Lawrence Ang told reporters on Monday after showing the firms' newest London cab to pre-selected Hong Kong taxi drivers.
Prices had not been finalized but Ang said British-made models sold at nearly 40,000 pounds ($79,000). [That's a lot of money for a taxicab if you ask me.] Geely and Manganese have set up a joint venture in Shanghai that can crank out 10,000 cabs a year in about a dozen colors apart from the familiar black, tailored to specific markets and customer demand, and another 30,000 intended for private limousine or sedan use.
It will eventually serve as a global base for production and export to Southeast Asia and, eventually, other regions.
Manganese's U.K. production arm, London Taxi International (LTI), sold about 2,850 taxis in the United Kingdom last year and exported a very small number of the cabs to overseas markets, such as South Africa, France and Germany.

Wolfowitz on BBC Radio Four

♠ Posted by Emmanuel in Bretton Woods Twins,Development at 5/28/2007 09:00:00 PM

I sincerely hope that this is the last Wolfowitz post I will ever have to make. Somehow, though, I think this guy won't be taking it easy with a well-deserved retirement sipping pina coladas in the Bahamas. BBC Radio Four interviewed Wolfowitz today. This clip is in RealPlayer format. Wolfowitz's bottom line: it's the media's fault, and the World Bank's as well. He takes umbrage to the interviewer's line of questioning as one would expect. After the interview, Kiwi economist Robert Wade offers his afterthoughts on the matter. Perhaps surprisingly, Wade is somewhat sympathetic to Wolfowitz, particularly his perceived "passion" on the matter of African development. However, Wade views the emphasis on corruption that Wolfowitz took to be excessive as developing countries are almost "by definition" afflicted by corruption.

The Reinvention of Singapore

♠ Posted by Emmanuel in Migration,Southeast Asia at 5/28/2007 03:19:00 AM

Singapore fears that it may be losing its attractiveness as a destination for highly-skilled global knowledge workers by remaining a dowdy place where sticking chewing gum is a punishable offense. Accordingly, it has tried to become more bling by inviting two large casino operators to set up shop. Also, it has loosened immigration restrictions as birth rates in the city-state fall. Give me your smart, your rich, your Gucci-shod emigres, etc. This article from TIME has the scoop on Singapore's remaking into Las Vegas via Silicon Valley via Monaco of the Orient:

There was something a bit unusual about Lee Kuan Yew's annual Chinese New Year speech this year. The words of Lee, Singapore's former Prime Minister and founding father, are heeded by the public, because they provide a road map for the city-state's economic development. Hewing to custom, Lee spoke dryly of free-trade agreements and strengthening economic ties with the region. But then he started talking about art exhibitions, jazz bands, museums and alfresco dining. In fact, eating outdoors was mentioned no fewer than three times as Lee laid out the government's vision for a multibillion-dollar residential and commercial real estate project located near the downtown core. The Marina Bay development would transform the way people live and work in Singapore, the Minister Mentor said. Electric golf buggies will whiz by diners as they gaze from the water's edge upon the "sailing, boating, windsurfing and fishing." Singapore aspires to be "a tropical version" of New York, Paris and London all in one, Lee said, adding "the Marina will be like the St. Mark's Piazza in Venice."

Say what? It was hard to tell if the architect of Singapore's rise from third world to first was charting an economic course or making a sales pitch for a master-planned leisure community—because he was, in a way, doing both. Marina Bay is just one part of a government-orchestrated effort to change the face of Singapore. This is no Botox job. Work is underway on an epic facelift, one that could within a few years render Singapore nearly unrecognizable: the financial district will have a striking new skyline while casinos and other amusements will dot the city. Even sleepy Sentosa Island, a 500-hectare tourist hangout located 15 minutes from the city center, is slated for overhaul via a 10-year, $5 billion plan to turn it into a world-class playground for the wealthy, with multimillion-dollar seafront homes, a megayacht marina and a Universal Studios theme park. The point of this real estate renaissance: change Singapore's image as a prosperous but rather dull commercial hub into that of a vibrant, fun destination—a place people will want to live in or at least visit on holiday, not merely transit on their way to more exotic Southeast Asian locales such as Bangkok and Bali. "Our entire nation is focused on a self-transformation," says Lim Neo Chian, CEO of the Singapore Tourism Board. "Singapore is changing its image in the eyes of the world."

Change it must. Faced with challenging long-term economic prospects and a flagging birth rate, Singapore's leaders have determined that the future of its 4.4 million citizens depends upon attracting multinational corporations along with hundreds of thousands of ambitious, educated (and preferably wealthy) foreigners to work and live there. Like other Asian tigers such as Taiwan, Singapore is losing high-tech manufacturing jobs—once crucial to economic growth—to lower-cost countries such as China. Manufacturing now provides work for just 20% of the island's 2.5 million workforce, down from 33% a decade ago, a decline reflected in people's paychecks. The poorest 30% of Singaporeans have seen their wages drop consistently for the past five years, according to United Nations data. This economic predicament is complicated by flagging demographics. Younger Singaporeans—the most productive workers—are increasingly seeking employment overseas, while the ones who remain are having fewer children. At the current birth rate, the population will begin to shrink in 2020. And that portends stagnating economic growth and a declining standard of living.

The antidote: open the gates to immigration. The city aims to boost its population by 25% to 6.5 million over the next few decades. Due to the flagging birth rate, that goal can be reached only by admitting up to 1 million foreigners, more than doubling the current expat population of 875,400. Drawing in so many worker bees will require a lot of honey, in the form of good jobs, recreational opportunities, decent housing—the myriad elements that factor into a city's lifestyle. It will also require a certain amount of buzz—and Singapore is not currently thought of as an exciting city. Not that it isn't a model in many ways. It's admired for its efficient government, first-world infrastructure, solid educational system—a real plus if it is to attract high-income talent from overseas—and clean, crime-free streets. Singapore is regularly named in regional surveys as one of the best places in Asia for expats to live. Per capita income last year was $30,900, equal to that of Japan, and the economy is popping; GDP grew 7.9% last year...

Gambling is fine if you've got the time:

The other casino, to be developed by Malaysia's Genting International, will stand on Sentosa Island, which is connected by bridge, light rail and cable car to the main island. Using land it had been reclaiming since the 1970s, the government several years ago began auctioning Sentosa plots to the private sector, but only to be developed under its careful guidance and marketing. Beaches that ringed the island were spruced up, and two golf courses modernized. Thirteen hotels containing about 3,500 rooms are planned, providing lodging for tourists drawn to the beaches, the casino and a Universal Studios theme park, which is also being built by Genting International and is slated to open in 2010.
Then there's what is arguably the capstone of the Sentosa initiative: Sentosa Cove, Singapore's first waterfront property development and also its first gated community. Each of its approximately 600-sq-m lots will soon sport luxury homes costing up to $20 million, each with infinity pools and private boat berths. Mixed in with the single-family homes will be four condominium complexes, a five-star hotel and a megayacht marina.

Pretty racy, but Singapore won't be Brisbane. Big Brother still wants to charge you a fee for gambling. I don't think this regulation will sit well at all with casual gamblers if it is enforced. It seems that the controlling instincts of Lee Kuan Yew cannot be fully eradicated:

Singapore's government has said it will not offer another casino license for at least a decade. It also says the casinos will be heavily regulated, and is imposing measures to curb problem gambling, including a 100-dollar-a-day levy on citizens and permanent residents entering the gambling rooms.

John Bolton for World Bank Chief

♠ Posted by Emmanuel in Bretton Woods Twins at 5/28/2007 02:25:00 AM

Well, not really. However, Kevin Hassett of the neoconservative American Enterprise Institute (AEI) suggests in a Bloomberg op-ed that another Wolfowitz-lite persona would best serve as the United States' next nominee for World Bank head honcho. Remember when Bolton said that the top ten floors of the UN could be blown away and no one could tell the difference? Hassett says that blowing away the entire World Bank could be done and no one would care. Talk about the World Bank having enemies (on the political) Left and Right.

The complaints Hassett makes are boilerplate neoconservative stuff: the World Bank is a waste of money, it is corrupt, etc. In fact, his rhetoric is indistinguishable from that of Bolton, which is no surprise as Bolton is another AEI character. Given how poorly received Wolfowitz was, nonetheless, Hassett proposes all sorts of folks who aren't that much different--with the possible exception of Larry Summers. Of course, Summers didn't exactly endear himself with the infamous World Bank memo he wrote while serving as chief economist there, but that's another story for another time. Here's Hassett:

Now that World Bank President Paul Wolfowitz has resigned, the Bush administration has two options: It can appoint a new bank president who will continue the tough work Wolfowitz began of reforming the bank. Or it can refuse to name a president and withdraw U.S. support for the institution.
Before he can decide which path to take, President George W. Bush must decide whether the World Bank is worth saving.

On the face of it, the answer seems to be a clear ``no.'' The bank has deviated so far from its original, worthy mission that its founders would hardly recognize it. It has become a generous welfare program for bureaucrats that finances itself by drawing money away from the world's poorest and neediest people.

When the bank was founded in 1944 it was intended to fill a gap caused by a market imperfection. Developing countries often had little access to capital, so they couldn't borrow the money they needed to pursue key economic projects. It was a worthy endeavor for developed countries to pool their resources and lend money to them.

But today, the World Bank hands out subsidized loans to relatively rich countries. My colleague at the American Enterprise Institute, Adam Lerrick, recently wrote that the proportion of loans going to countries without international bond ratings plummeted to 1 percent between 2001 and 2005 from 40 percent in 1993.

The major borrowers of the bank have ready access to credit elsewhere. World Bank loans accounted for a measly 0.4 percent of the capital flow to its top 10 borrowers, according to Lerrick.
What's worse, these borrowers aren't even poor. Lerrick reports that six of the top 10 borrowers, accounting for 52 percent of bank loans over a recent five-year period, had average per capita incomes of $8,000. That places them comfortably in the top quarter of developing countries. To top it off, the money has a nasty habit of disappearing along the way.

A U.S. News & World Report investigation reported that Glenn Ware, a former senior bank investigator, said his unit had uncovered ``a recurring pattern of bribery, kickbacks, front companies (and) shell companies.'' How bad is it? U.S. News quotes Northwestern University professor Jeffrey Winters, who estimated the bank has likely lost $100 billion to corruption over the years.

And it's not just Third World dictators who are running off with the money. World Bank employees often graduate from their cushy salaried positions to become consultants. Consultant fees can run into the millions...
Adding to the problem is that borrowers are required to adjust their domestic policies according to the advice of World Bank ``experts'' when they accept loans. The economic damage caused by World Bank advice may exceed the benefit of the bank's loan subsidies.

In other words, no rational country should be willing to take the loan packages that are offered. Why do the loans still exist at all? A big reason is there are enough bureaucrats the world over who put their own interests above those of their country, and take a slice for themselves.

Many countries have decided not to play that game at all, and there are signs the World Bank's business is drying up. Loans are being retired at a fast enough rate that the bank's total portfolio is dwindling.

So the Bush administration must look at this mess and decide whether it's possible or desirable to save this sinking ship. Or should the U.S. wash its hands of this sorry institution once and for all?
My vote would clearly be for the latter, but if a last rescue is desired, then the president must pick a replacement for Wolfowitz who has the organizational savvy and intellect to go to war against the bureaucrats who finished off Wolfowitz [poor, poor Paul. Sniff].

Four candidates come to mind. The best choice for the job would be Martin Feldstein [!] of Harvard University. Feldstein, a confidant of presidents and giant of the economics profession, is a no-nonsense economist with ample executive experience, both in Washington and in business.

His gravitas would immediately put to shame opponents within the bank, and he would have the intellectual wherewithal to separate the wheat from the chaff in the bank's own analyses.

A second choice would be Glenn Hubbard [!!], dean of the Graduate School of Business at Columbia University. Hubbard is as smart as can be, was perhaps the most successful of all economic appointees in the Bush administration, and has experience running a large organization.

My third choice would be former Clinton administration Treasury Secretary Larry Summers. Summers has the intellectual heft of the other two and Democratic credentials that might help him overhaul the bank from within with less opposition from the staff.

The final choice would be former Tennessee Senator Bill Frist [!!!]. Frist has been extremely active delivering aid that works to developing countries, and has the executive experience, and Teflon skin, necessary to take on the old guard at the bank...

It would be a lot easier, however, to take the money now devoted by the U.S. to the World Bank -- roughly $1.5 billion a year -- and use it to start a new aid organization from the ground up.

Feldstein...Hubbard...Frist? Needless to say, this is the most mind-bogglingly awful op-ed I've read in a while. Who's next from these guys? Ahmed Chalabi for World Bank chief?

Quantifying International Migration

♠ Posted by Emmanuel in Migration at 5/28/2007 02:10:00 AM

Have I got a paper for you migration aficionados, data freaks, and completists. Migration data is spotty on source and destination countries as well as the number of persons involved because there is no standardized worldwide system for recording and classifying migration (though there should be one, it goes without saying). However, this almost heroic paper attempts to collate as much data as possible. Whatever has been left uncollected has been subject to advanced missing data techniques to provide perhaps the most comprehensive picture yet on global migration patterns. The paper is available for download in its entirety from the Social Science Research Netrwork (SSRN):

CHRISTOPHER R. PARSONS
Affiliation Unknown
RONALD SKELDON
University of Sussex
TERRIE LOUISE WALMSLEY
Purdue University - Center for Global Trade Analysis
L. ALAN WINTERS
World Bank - Department Research Group (DECRG); Centre for Economic Policy Research (CEPR)

March 1, 2007

This paper introduces four versions of an international bilateral migration stock database for 226 by 226 countries and territories. The first three versions each consist of two matrices, the first containing migrants defined by country of birth, that is, the foreign-born population; the second, by nationality, that is, the foreign population. Wherever possible, the information is collected from the 2000 round of censuses, though older data are included where this information was unavailable. The first version of the matrices contains as much data as could be collated at the time of writing but also contains gaps. The later versions progressively use a variety of techniques to estimate the missing data. The final matrix, comprising only the foreign-born, attempts to reconcile all of the available information to provide the researcher with a single and complete matrix of international bilateral migrant stocks. The final section of the paper describes some of the patterns evident in the database. For example, immigration to the United States is dominated by Latin America, whereas Western European immigration draws heavily on Eastern Europe, Central Asia, and the Mediterranean region. Over one-third of world migration is from developing to industrial countries and about a quarter between developing countries. Intra-developed country and intra-FSU (former Soviet Union) flows each account for about 15 percent of the total. Over half of migration is between countries with linguistic ties. Africa accounts for 8 percent of Western Europe`s immigration and much less of that to other rich regions.

Pesticide Case Comes to the US

♠ Posted by Emmanuel in Latin America at 5/27/2007 01:02:00 AM

The longstanding controversy over Central American workers who claim to have been affected by the use of the pesticide DBCP is coming to the United States. The companies involved have settled some cases abroad, although this is the first time the matter is being contested Stateside. One of the accusations is that the chemical has resulted in male impotence among field workers. From the LA Times:

After years of toil in Central American fields where they say pesticide use made them sterile, they're suing Dow, Dole and other firms in L.A. — The people crammed into the stifling basketball gym. They filled the court, lined the walls and tumbled beyond the doors onto the sun-blistered streets.

They had gathered to hear a promise of justice.

Many had spent their lives toiling on banana plantations that U.S. companies operated in this region some 30 years ago. By day, the workers had harvested bunches of fruit to ship to North American tables. At night, some had sprayed pesticide into the warm, humid air to protect the trees from insects and rot.

As the decades passed, the workers came to believe that the pesticide, called DBCP, had cost them their health. Prodded by U.S. lawyers, thousands joined lawsuits in the U.S. and Nicaragua alleging that the pesticide made them sterile.

The U.S. firms that sold and used the pesticide have never faced a U.S. jury trial over its use abroad. Last month, a Los Angeles attorney named Juan J. Dominguez stood before a sea of nearly 800 dark, hard faces and predicted that the day of reckoning was at hand.

"We are fighting multinational corporations. They are giants. And they are going to fall!" Dominguez thundered.

The crowd exploded. They leapt to their feet, waved their hats, shook fists in the air. "Viva! Viva!" they chanted.

The scene last month foreshadowed a legal drama set to play out in a Los Angeles courtroom this summer, when a lawsuit filed by Dominguez and his partners could end a struggle that has sprawled across three decades and courtrooms on four continents.

For the first time, a U.S. jury will have the chance to weigh the accusation that Dole Food Co. knowingly used a pesticide manufactured by Dow Chemical Co. that sterilized workers in Latin America three decades ago.

The complexity, history and geographic spread of the case demonstrate how legal systems have failed to keep pace with the rapid movement of goods across international borders. Jurisdictional and procedural issues have repeatedly impeded attempts to sue U.S. companies in the United States. for alleged wrongdoing in other countries.

"The question is where do we litigate these issues," said Alejandro Garro, a Columbia University law professor and expert in international law. "The answer is that we don't have a global law. We are building it on a case-by-case basis."

Dole, the Westlake Village-based food giant, and Dow, of Midland, Mich., deny the allegations. Both companies acknowledge that the pesticide DBCP has been linked to sterility in men exposed to it while manufacturing it in factories. And both companies acknowledge that the product was used in Nicaragua's banana fields.

But the companies contend that there is no proof that DBCP (dibromochloropropane) sterilized any field worker. The quantities of DBCP used were too small, and the open-air conditions too diffuse, to cause harm, the companies say...

DBCP's toxicity first made news in 1977, when about three dozen factory workers at an Occidental Petroleum Corp. subsidiary in Lathrop, Calif., where pesticides were mixed, reported problems having children. Tests showed the factory workers had zero or below-normal sperm counts.

Within months, the EPA had suspended most uses of DBCP. Government hearings revealed that Dow and Shell Chemical Co., then a subsidiary of Shell Oil Co., the primary makers of DBCP, had long known about its dangers. Tests dating to the 1950s showed the chemical atrophied lab animals' testes.

Workers began filing lawsuits. In 1983, Duane Miller, a young Sacramento attorney, won a $4.9-million judgment against Dow on behalf of six Occidental workers. Two years later, the EPA permanently banned the use of DBCP in the United States.

It was the first skirmish in a legal war that soon spanned the globe.

U.S. law firms began suing in U.S. courts on behalf of workers in other countries — more than 50,000 plantation workers over 30 years in countries from the Philippines to Nicaragua to Costa Rica to Ivory Coast. The defendants have been the manufacturers of DBCP — Dow and Shell — and the fruit companies that used it: Dole, Del Monte and Chiquita.

India's Chronic Power Shortages

♠ Posted by Emmanuel in Energy at 5/27/2007 12:55:00 AM

Bloomberg's Andy Mukherjee has more on the challenges facing India's dilapidated power generation infrastructure as summer rolls in and demand for air-conditioning stretches power availability:

In most Indian cities, being middle- class means owning your own power company.
As summer temperatures approach 40 degrees Celsius (104 degrees Fahrenheit), energy demand from electric fans and air- conditioners is putting stretched utilities under stress.

Against a peak demand of 104,000 megawatts last month, supply was 90,000 megawatts. That's a shortfall of 14 percent.

Rationing of power, which goes on throughout the year, becomes unbearable during the summer months. People resign themselves to blackouts that sometimes last all day, even longer if overburdened cables burn or aging transformers collapse.

Households and businesses create their own electricity by burning diesel in noisy, inefficient, polluting generator sets. Those who can't afford to be power producers buy inverters: chargeable batteries that store utility power for later use.

Businesses have it worse.

An all-India survey of small enterprises in 2002 cited power shortages as one of the top reasons for industrial sickness, far ahead of labor strife or mismanagement.

Why has India allowed itself to get into this mess?

At the end of last year, China had 622,000 megawatts of generation capacity. A fifth of this -- almost equal to India's total capacity built up over decades -- was added in 2006 alone.

Why does India not invest more in energy, which is emerging as a major bottleneck for sustaining the current pace of 9 percent economic growth?

Blame the politicians for this mess:

The seed of India's power crisis was sown in 1977. That's when politicians first came up with the idea of subsidized electricity for farmers to win their votes. Then free power for agriculture became the norm, pushing state-run electricity boards into financial ruin.

Not that free power did much for the really poor.

A small farmer in a backward area of Punjab, the second- biggest grain-producing state in India, typically won't have any power connection on his land; he will have to burn diesel. It is a costly proposition.

Had the farmer used electricity instead of diesel to irrigate a rice crop, which is sown around this time of the year, he could have enjoyed one harvest of wheat absolutely free even after paying a reasonable user charge to the utility, according to a study by Varinder Jain, a researcher at India's Centre for Development Studies.

The link between electrical and political power goes beyond farmers. In cities such as Mumbai and New Delhi, where private operators -- Reliance Energy Ltd. and Tata Power Co. -- are in charge of distribution, squatters steal power from the grid with impunity because politicians need their votes.

Stealing power is also a widespread practice:

Every third Reliance Energy customer in Mumbai lives in a shantytown, where, according to the company's own regulatory submission, pilferage ranges from 15 percent to 70 percent.

No one denies that the poor must get electricity, and perhaps for free. But this isn't the way to provide it. Every year, there are reports of electrical short-circuits in illegal wiring causing fires in unauthorized slums. It won't be any different this year.

India has to adopt a multipronged strategy to end its power drought.

The country has to make better use of the 10,000 megawatts of idle generation capacity. Half of it is lying unutilized largely because of feedstock unavailability.

Natural-gas prices have tripled in the past five years. At $7.80 per million British thermal units, they are double what Indian gas-fired power plants can afford, given limits on how much consumers can be charged for electricity.

Pending a meaningful reduction in subsidies, more expensive power must still be produced, but its cost must be passed on to those who can bear it.

For now, the solution to this lack of power availability is to generate your own power.

The Safety of Chinese Consumables

♠ Posted by Emmanuel in China at 5/27/2007 12:41:00 AM

As the world comes to rely more on consumer goods coming out of China, concerns are rising that Chinese quick-buck artists are scamming these goods by including unsafe chemicals as substitutes. Witness the 41 deaths that occurred in Panama due to tainted cough syrup traced to China. Now, the resource-strapped US Food and Drug Administration (FDA) has troubles of its own in monitoring Chinese products of this ilk. China leads the FDA import refusal list by a wide margin:

Toothpaste from China is the latest official worry. This week, the Food and Drug Administration began testing it at U.S. ports of entry after contaminated Chinese toothpaste began showing up in other countries. It contained a chemical used in antifreeze — the same chemical that killed people in Panama last year when it turned up in cough syrup, mislabeled by Chinese manufacturers as a harmless sweetener. An FDA spokesman says no test results are available yet on the toothpaste at U.S. ports.
The FDA is still watching vegetable proteins from China for signs of melamine contamination, a chemical that turned up in pet food and animal feed earlier this spring.

U.S. officials are asking the Chinese to do more to safeguard the food and drugs they export to America. And Thursday, Secretary of Health and Human Services Mike Leavitt warned that any nation that loses U.S. trust in its exports will suffer economically.
"Assuring the safety of food in large nations is a demanding proposition, whether it's China or the United States," Leavitt said. "And neither of our countries has perfected this process."

Many experts say the problems are a consequence of globalization, and especially of America's growing dependence on China for food ingredients.

The FDA lists on its Web site food imports its inspectors have refused at U.S. ports. Last month, FDA inspectors blocked 257 food shipments from China, according to the list.

"That's by far the most of all the countries of the world," says William Hubbard.

He knows the FDA inside out; Hubbard used to be its deputy commissioner and now works with the Coalition for a Stronger FDA.
Even when the volume of Chinese imports is taken into account, that's a far higher reject rate than other trading partners.

In the past year, the FDA rejected more than twice as many food shipments from China as from all other countries combined.
The rejected shipments make an unappetizing list. Inspectors commonly block Chinese food imports because they're "filthy." That's the official term.

"They might smell decomposition. They might see gross contamination of the food. 'Filthy' is a broad term for a product that is not fit for human consumption," Hubbard says...
When Hubbard was at the FDA, he heard all kinds of stories about foreign food processors, like the one a staffer told him after visiting a Chinese factory that makes herbal tea.

"To speed up the drying process, they would lay the tea leaves out on a huge warehouse floor and drive trucks over them so that the exhaust would more rapidly dry the leaves out," Hubbard says. "And the problem there is that the Chinese use leaded gasoline, so they were essentially spewing the lead over all these leaves."

That lead-contaminated herbal tea would only be caught by FDA inspectors at the border if they knew to look for it, Hubbard says.

"The system is so understaffed now that what is being caught and stopped is only a fraction of the food that's actually slipping through the net," he says.

The FDA normally inspects about 1 percent of all food and food ingredients at U.S. borders. It does tests on about half of 1 percent.

Neoliberalism and Income Mobility

♠ Posted by Emmanuel in Neoliberalism at 5/26/2007 04:22:00 AM

The US and the UK are supposed to be countries following an "Anglo-Saxon" or "neoliberal" economic model. According to this model, the gap between the haves and have-nots is tolerable for it rewards those who work hard enough with upward mobility. As Margaret Thatcher famously said, "It is our job to glory in inequality and see that talents and abilities are given vent and expression for the benefit of us all." But, the evidence suggests this is not so. The US has the highest Gini (inequality) coefficient of all OECD countries, while the UK has the highest for Western European countries. So far, there's no surprise. Worse yet, it also turns out that the US and the UK not only have highly unequal societies, but also are bound to stay that way. From the Economic Mobility Project's "American Dream Report" (they're kidding, right?) we have this figure comparing relative income mobility in a number of industrialized nations:

If that weren't depressing enough for Americans, have a look at this figure:

The same pattern is noted in this paper by a number of Nordic researchers. The UK and the US are highly unequal and offer little room for bettering your fate. And people wonder why spreading the "American system" gets so much resistance in developed and developing countries worldwide. If social justice is your benchmark, neoliberalism fails bigtime. The American dream is dead, my friends.

Fallujah Lynchings Revisited

♠ Posted by Emmanuel in Neoliberalism,Security at 5/26/2007 04:03:00 AM

The image of four lifeless private security contractors hanging from a bridge in Fallujah remains one of the signature images of the Iraq conflict, along with those from Abu Ghraib and "Mission Accomplished." The controversial role of these soldiers of fortune from firms like Blackwater, Titan, and CACI has been explored in the documentary "Iraq for Sale" as well as the book "Licensed to Kill: Hired Guns in the War on Terror." When you sign up to work for these firms for a fat paycheck, your life is obviously at risk. However, the families of the four contractors hanged in Fallujah beg to differ as they have filed a case on the matter which has now gone behind closed doors:

After years of high-stakes legal wrangling, a lawsuit stemming from the gruesome deaths of four U.S. contractors in Iraq is moving behind closed doors in an action seen as an important precedent for the booming private security industry.
The suit, for wrongful death and fraud, was filed in January 2005 against Blackwater Security Consulting, one of scores of companies now fielding close to 130,000 civilians who work alongside the U.S. military in Iraq. Generally their contracts stipulate the contractors assume all risks -- injury, death, disability -- and waive their right to sue.

The risks are considerable: the latest government figures say 916 civilian contractors have been killed from the beginning of the war in Iraq in March, 2003 to April 30, 2007.

Despite the risks, security companies say there is no shortage of applicants attracted by high pay and a taste for adventure.

Contractors -- Americans, Iraqis and nationals from more than 30 other countries -- perform jobs from guarding senior U.S. officials to translating, cooking meals, driving trucks, cleaning toilets and servicing weapons systems and computers.

Contract language is explicit and in the case of Blackwater, it releases the company from "any liability whatsoever" even if it is "the result of negligence, gross negligence, omissions or failure to guard or warn against dangerous conditions."

The suit was brought by the families of four civilian contractors shot in March 2004 by Iraqi insurgents, who burned their bodies and hung the charred remains from a bridge across the Euphrates river in the city of Falluja.

Televised images of the scene, with jubilant Iraqis shaking their fists in triumph, shocked the U.S. and prompted an all-out military assault on the city.
In an unusual decision last week, James Fox, a senior district court judge in North Carolina, where Blackwater is based, ordered the case out of the courts and into arbitration...
"This is a very important decision," said Jeffrey Addicott, a retired Special Forces lawyer and director of the Center for Terrorism Law at St. Mary's University in San Antonio. "It is a recognition that the contract is iron-clad and that its terms absolve the company of liability. In future cases, this will be cited as a precedent."

But some legal experts see the removal of the Fallujah case from the judicial process as an ominous development.

"This may be a victory for the Blackwater legal team but it is a defeat for the principle of transparency," said Eugene Fidell, an expert on military law and president of the non-profit National Institute of Military Justice.

"This means that the shadow army (of contractors) will slip even further into the shadows..."
The suit alleged that Blackwater broke explicit terms of its contract with the men by sending them to escort a food convoy in unarmored cars, without heavy machine guns, proper briefings, advance notice or pre-mission reconnaissance, in teams that were understaffed and lacked even a map.

Since the case began making its slow way through the legal system and eventually to arbitration, the number of contractors working alongside the U.S. military in Iraq has increased by an estimated 30,000 and some experts say the rapid growth has tempted companies to cut corners.

"Standards have been slipping, not for all but for some, in training and the quality of staff," said Robert Young Pelton, author of the book "Licensed to Kill," on the private security industry drawn from three years of travel through conflict zones.

China Lays Out NGO Welcome Mat

♠ Posted by Emmanuel in China at 5/26/2007 03:52:00 AM

A widely-held view is that NGOs start becoming popular when and where governments or markets are unable to provide for people's needs. If so, this may not so such a good sign as China encourages more NGOs to operate there--as long they don't have political aspirations, that is. No Falun Gong folks should apply. Take a look at this table of civil disturbances in China over the years, then read the story about China encouraging more NGOs to operate in the country. I suspect these two stories are related. Got social problems? Let those NGOs take care of them:

China will revise laws and policies to encourage the development of foreign and domestic non-governmental organizations (NG0s), a senior official has been quoted as saying
Among the key changes are a simplified registration procedure for all NGOs and better communication with governments, said Sun Weilin, director of the bureau for NGO administration affiliated to the Ministry of Civil Affairs.

A foundation will also be set up to recognize and reward NGOs with good performance.

"The ministry is drawing up a detailed draft for revising laws and regulations, with the main objective of giving more room for NGOs to grow," Sun told China Business News.

He was speaking at a recent ceremony where the European Union and the United Nations Development Programme signed an agreement to support a large-scale initiative aimed at strengthening the rule of law and enhancing civil society participation in China. The program will be implemented by the National People's Congress, the Supreme People's Court and the Ministry of Civil Affairs.
"If the registration procedure is simplified for domestic NGOs and foreign NGOs can register as NGOs, it will make it easier for them to operate and raise funds for their programs," Li Jianghua, the deputy representative of the China branch of Handicap International, told China Business News.
Experts said the changes will create a better legal framework for foreign NGOs to have a wider presence in China and provide a platform for better coordination with government agencies.

"Foreign NGOs operate in China but their presence has no legal basis, which makes it impossible for them to recruit members or raise funds," Jia said.

As a result, the China operations of some foreign NGOs, including the World Wild Fund for Nature, have been registered as commercial organizations and thus cannot raise funds or recruit volunteers. They also have to pay taxes.

Jia also told China Daily that the unfavorable policy environment has become a major bottleneck for the development of domestic NGOs.