Small, homemade submarines have become the preferred means of transport for the Colombian drug cartels -- and a completely new challenge for the Joint Interagency Task Force South (JIATFS), a group consisting of members of the United States Navy, Coast Guard, CIA and drug control agents from 12 other countries.
The boats, made of plastic or steel, can carry up to 10 tons of cocaine each. Because they cannot submerge completely, the correct term for the boats is semi-submersibles. They are used primarily on the drug trafficking routes between Colombia and Guatemala or Mexico. The cartels have devised a complete logistics system, with fishing boats stationed along the way to warn the crews against patrols and provide them with food and water.
The drug boats have to be piloted almost blindly. They sit low in the water, and the crews rely on a type of GPS system used by yachts for navigation. The smugglers spend up to two weeks at sea. They move slowly during the day to avoid creating the telltale wake. But under cover of darkness, they crawl northward at six knots. In 2006, the vessels are believed to have carried between 500 and 700 tons of cocaine from South America toward the United States. About two-thirds of the drugs reached the United States along a western route in the Pacific, while the rest passed through the Caribbean. The number of submersibles is on the rise.
The drug cartels' new mode of transport is a serious threat, says Rear Admiral Joseph Nimmich (read the full interview with Nimmich here
(more...)), the director of the JIATFS, which is headquartered in Key West at the southern tip of Florida. Even senior US military officials are concerned. "The crooks are faster than we are," admits Admiral Mike Mullen, the chairman of the Joint Chiefs of Staff. "Putting a stop to this new threat is a central objective of the Armed Forces, and they are working hard at it."
The tough battle between drug cartels and investigators has always been a race to acquire the most effective technical innovations. In the past, the Colombians used small aircraft, but drug agents soon managed to gain the upper hand. Fishing trawlers were the next vessels of choice, but today these cutters are required to be outfitted with homing devices so that their locations can be carefully monitored. Finally, the cartels began using speedboats that were often fast enough to escape during chases. The Navy's response was to use helicopters to fire at the speedboats' engines. So now the traffickers are using submarines.
To be sure, smaller crowds are expected this year compared to the estimated 30,000 who were in Germany for last year's G8. Whether a similar level of carnage will result remains to be seen. Regardless, I think a less confrontational approach would be more effective than the usual anti-globalization hooliganism. Reflecting the increasing marginalization of the anti-globalization movement, there wasn't even a World Social Forum meeting held this year. Hooliganism may make for fleeting TV coverage of foolhardy folks getting gassed, hosed, or arrested, but there is little to show for beyond such acts. Face it: anti-globalization is getting pretty lame. From Reuters:
Anti-G8 summit protesters danced to blaring music and marched down the streets of Tokyo in heavy rain on Sunday, accusing the Group of Eight rich nations of causing poverty and world instability.
The protests, which have become a fixture at Group of Eight summits, came as Japan tightened security ahead of this year's July 7-9 gathering in Hokkaido, northern Japan.
Two separate rallies in the nation's capital gathered over 1,000 people, including anti-capitalists, labour union members and protesters from abroad, such as Spain and South Korea.
Security was heavy with hundreds of anti-riot police guarding the streets as protesters walked down Tokyo's central shopping districts, carrying signs proclaiming various agendas such as "shut down G8 summit" and "G8=hunger".
Some protesters scuffled with the police. Japanese broadcaster TV Asahi said two people were arrested. Police could not confirm the report.
"Issues like environmental destruction and poverty in Africa, these are all caused by the G8 governments," said Yu Ando, a 31-year-old working for a municipal government in western Japan.
"I can't stand that they are proclaiming to solve these issues."
For the summit at Lake Toya, about 760 km (470 miles) north of Tokyo, domestic and international NGOs such as Oxfam plan to protest a range of topics including globalisation, the food crisis and wars.
Protests are expected near the summit venue -- where protesters are expected to gather at three camp sites -- as well as in Tokyo and Sapporo, capital of Hokkaido.
But tight security and the sheer cost of travel to the vicinity of the remote summit site could dampen turnout.
Human rights lawyers have said Japanese immigration authorities are making it tough for some activists to get visas by complicating the application process, and media reports said some activists were detained for hours at immigration.
At last year's G8 summit in Heiligendamm, Germany, an estimated 30,000 protesters flocked to the area and entered a restricted zone set up for the summit, as well as blocking land routes into the area.
[If you have a copy of Messiah at home, cue "For behold, darkness shall befall the Earth"] -
SAVING DOHA: Why an obscure Frenchman may be the the last hope for global free trade.Sometimes, the Amerocentrism of the US media gets to me. Of all people, how can WTO Director-General Pascal Lamy be called "obscure"? Isn't this the same guy who is attended to by the anti-globalization set nearly wherever he goes like in the picture above? Also, isn't this the same guy whose name returns over a million search results on Google? Although many Americans are famously ignorant of the rest of the world until events with global repercussions hit their shores, that one of America's newspapers of record needs to point out the identity of the WTO D-G is surely an indictment of American incuriosity about world affairs. Worse, depicting him as the potential savior of the Doha agenda is surely hyperbole. True, the beleaguered round started before his term, yet he hasn't done much in moving it forward.
You have probably never heard of Pascal Lamy, but he might be able to save the world. The only question is when he should do it. Okay, so we're exaggerating a bit. Not about Mr. Lamy's obscurity: The veteran French bureaucrat is director general of the World Trade Organization (WTO), which hardly makes him a household name, even though he is a remarkably talented and persistent international public servant. It's not precisely true that he is the only person who can save our troubled planet. But he might just be the last possible savior of global trade liberalization.
[Cue "Why do the nations so furiously rage together?"] -
The latest "round" of tariff-reducing talks began in Doha, Qatar, in 2001; it was billed as the "development round," because it was supposed to lead to a grand bargain between rich and poor countries that would open the former's markets to the goods of the latter, especially in agriculture. At a time of rising food prices, a successful Doha round could add billions of dollars to the earning potential of farmers in the developing world -- as well as to that of businesses and workers around the globe. The vast majority of poor countries are on board for an agreement.!!!--developing countries have definitely not been "on board for an agreement" or we wouldn't be so far away from a deal. Moreover, the USTR during Clinton's term, Charlene Barshefsky, has insightfully suggested that the "development" designation for the trade round was made under essentially false pretences. Unlike Hogwood's performance on authentic instruments, Doha was a faker from the get-go. Between the WaPo editorial team's puffery and Barshefsky saying there is little enthusiasm for the round, I believe few would dispute the latter conviction. Let us move on...
[Cue "And I know my Redeemer liveth"] -
That's where Mr. Lamy comes in. If the participants in the round cannot bridge their differences in the trade ministers' meeting that he envisions for this month or July, he would have the option of devising a proposed settlement of his own, backed by the knowledge and authority of his office. Until now, Mr. Lamy has, reasonably, stayed neutral, preserving his political capital. But the time is fast approaching when he must step in, lest the Doha round fail, taking the once-promising World Trade Organization down with it.Can Lamy take the trade bull by its horns that's loose in the WTO china shop (sometimes I think "china" should be capitalized) all by his lonesome? I doubt whether Lamy can. If one man can singlehandedly save Doha from an ignominious end, certainly there should be oratorios written for Pascal Lamy. Until then, I am afraid the WaPo op-ed writers have gone off the deep end. Very bad show, WaPo.
[Cue "Then shall be brought to pass"]
Current World Bank President Robert Zoellick offered a good reply to that question. Zoellick invoked the potential benefits of these countries participating more in global governance matters. That is, as a prominent international organization, the World Bank can use its clout to engage China with projects such as green ones whose benefits may accrue not only China but the entire world:
There are some 70% of the poor in middle-income countries. If we are going to deal with the poverty agenda, we need to be engaged with these countries.While visiting the China Daily website, I came across the following article that reiterates Zoellick's basic points. (BTW, lending to China by the World Bank is marginally down to $1.51B in FY 2008 as compared to $1.64B in 2007). Insofar as projects have environmental and social benefits, there is perceived value in the World Bank funding such projects in China:
[Also] if you look at what's happening in the fields of diplomacy and political and security affairs, one of the big challenges is how we integrate the Indias, the Chinas and the Brazils [of the world] in the multilateral system? It strikes me as illogical that you would be trying to engage them in creating a new multilateral order, and not do it in the multilateral economic system.
The third point [is], let's think of the other big issues of the day, like climate change. Well, China and India and Brazil and others have huge energy needs, so if we are going to be able to contribute to the big economic environmental challenges of the day, we've got to be partners with these countries. I can put skin into the financial game to help make this happen.
The World Bank's lending to China reached $1.51 billion in the 2008 fiscal year dating from June 30, 2007 to June 30, 2008, said the WB Beijing office on Wednesday. The WB's Board of Executive Directors approved four new projects in China on Tuesday, the last four for the fiscal year of 2008, said the WB Beijing office.
These four projects were excellent examples of how the WB could help China with its environmental and social challenges, said David Dollar, World Bank Country Director for China. The new rural health project, getting [a] WB loan of $50 million, sought to support and extend the rural health reforms carried out by the Chinese government by testing a series of new innovations in financing, delivery of services and basic public health.
The WB would lend $50 million to the new rural migrant skills development and employment project. The project would support China to deal with the human skills challenge rising from its huge rural migration during urbanization. The WB would work with local governments of northwestern Ningxia Hui Autonomous Region, East China's Shandong and Anhui provinces, and the Ministry of Human Resources and Social Security to improve skills development programs for migrants.
Through the new Xi'an sustainable urban transport project, with a WB loan of $150 million, bus prioritization, bicycle routes, traffic calming and speed-reducing strategies would be introduced in an effort to foster better road use and access to cultural sites in the northwestern city renowned for Terracotta Army and other cultural relics.
The WB would also lend $300 million to help construct a new 355-km dedicated high-speed passenger rail line between Shijiazhuang, capital of north China's Hebei Province and Zhengzhou, capital of central Henan Province. The rail line is part of the new 2,100-km dedicated high-speed passenger rail line linking Beijing with Guangzhou, capital of South China's Guangdong Province. Upon completion in 2010, the rail line is expected to provide a major boost in rail transport capacity while reducing the travel time for passengers from present 24 hours to less than 10 hours.
China continues to be one of the largest borrowers with the World Bank during the fiscal year 2008. Most WB projects approved this year aim to address environmental challenges through improvement of public transport systems, expansion of urban wastewater treatment and pollution control, and strengthened approaches to energy efficiency, said the WB Beijing office.
In the aftermath of the May 12 earthquake in southwest China, the WB offered China a 1.5-million-dollar grant to support technical assistance for recovery and reconstruction efforts as well as expertise assistance.
However, high gas prices can counteract visions of Chinese automotive hell on Earth. Recently, the government decided to reduce fuel subsidies, making consumers bear more of the brunt of dear gas worldwide. Xinhua reports that automotive sales are down for two consecutive months. Certainly, it's hard to extrapolate from two months' worth of data, but a stalling or even declining trend may be in store:
China's motor vehicle sector realized a production against sales ratio of 97.82 percent in May. Both output and sales, however, declined month-on-month for the second consecutive month, the China Association of Automobile Manufacturers said on June 12.Furthermore, a survey reported in Xinhua suggests that the Chinese are relying more on public transportation. Moreover, even those who do own automobiles already have cut down on their mileage as motoring becomes increasingly uneconomic due to high fuel prices and persistent traffic snarls impeding forward progress:
China produced 854,100 motor vehicles in May, down 12.96 percent from April but up 20.2 percent over the same month of last year. It sold 835,500 vehicles, down 9.44 percent month-on-month but up 17.04 percent year-on-year.
The total output included 591,400 passenger vehicles, down 10.2 percent from the previous month but up 20.03 percent over a year earlier. The output of commercial vehicles was 262,700 units, down 18.61 percent month-on-month but up 20.58 percent year-on-year.
The monthly sales included 564,600 passenger vehicles, down 6.66 percent from a month ago but up 15.59 percent over a year earlier. Monthly sales of commercial vehicles was 270,900, down 14.74 percent month-on-month but up 20.18 percent year-on-year.
May saw 434,700 cars produced and 415,200 cars sold nationwide, down 11.49 percent and 6.6 percent, respectively, from April.
Beijing resident Zhuang Yan uses her car mostly on weekends, for drives to the outskirts of the capital. On weekdays, the 29-year-old public servant simply forgets that she has a car. She and her husband seldom drive to work, "because it sometimes takes longer by car than on foot, especially during rush hour".These are interesting times. I really think that the next wave of innovation in automotive design will arise in meeting the Chinese challenge: It isn't appropriate to deny them private transportation if they want it, but alternative energy sources are necessary that cost and pollute less. The days of the internal combustion engine as we know it may be numbered.
What is more, car maintenance costs too much, Zhuang told China Daily over the phone. "As oil prices soar, public transport is a wise choice for avoiding traffic jams and parking problems in the capital," she said. Zhuang is part of a group researchers call "owners of idle cars" - people who have cars but seldom drive them. One in 10 car owners in the country belongs to such a group, the 2008 Foton Chinese Index for Mobility released on June 11 showed. The index was derived from a mobility survey jointly conducted by Beijing-based Beiqi Foton Motor Co Ltd and the Horizon Research Consultancy Group.
The two groups started releasing the index in 2005, offering an insight into the transport habits of the Chinese. It showed the extent of people's reliance on motor vehicles in social and economic activities, and how private cars could further influence people's lifestyles and way of thinking. The latest study polled 4,545 people aged between 18 and 60 in 36 cities and towns nationwide.
It saw the Chinese scoring 61.42 points out of a maximum 100 for this year's index, 3.09 points higher than in 2005, showing great strides taken in mobility, the survey said. However, corresponding developments in the automobile industry have also had negative impacts such as serious traffic congestion and greater strain on limited oil resources in the country.
These factors have prompted more motorists to become owners of idle cars, researchers said. Four out of 10 of such owners had done so because of spiraling gasoline prices, researchers found. The surveys showed that about half of urban private car owners thought the fees for car maintenance and oil consumption were "affordable" in 2005, but only one out of five in the 2007 index thought so.
"Driving is a kind of burden to me. Last Friday, fuel prices started to rise again, which means every month I have to pay an additional 300 yuan ($44). I believe more than 20 percent of car owners will use public transport by next week," said Chen Daping, a 30-year-old worker in Beijing.
"It costs me only 1.8 yuan to take the bus from Tian Tongyuan in Changping district to Anzhenli in Chaoyang district, but more than 20 yuan for gasoline to drive a car. What a deal!" wrote an Internet user under the name of "tyy Ma" on news portal Sina.com.
The high costs were not the only reason for the increasing number of owners of idle cars. Traffic jams also played a role, researchers found. The economic loss caused by traffic jams in Beijing was the highest among the cities in the country, about 375 yuan per person per month, followed by Guangzhou at 273.8 yuan and Shanghai at 228.2 yuan. The researchers said convenient public transport networks should be developed to help solve the problem effectively.
Beijing has reportedly done a good job in developing a convenient and affordable public transport system, which was ranked first in the survey. The survey showed that about 21.3 percent of respondents suggested improving public transport routes to help alleviate traffic congestion, while 14.3 percent said special lanes should be arranged for buses. The rest suggested improving road conditions and limiting private car usage.
The agencies’ output influences the global distribution of money, jobs, and economic opportunity. Hence, they are highly consequential actors in the global economy (p. 63).It seems that the US government in the form of the Securities and Exchange Commission (SEC) is now busy undermining the already sodden of these credit rating agencies. Whereas the massive market for institutional investment relied much on the agencies' ratings in the past, the SEC appears keen on returning to a more caveat emptor-like approach that predominated before the ascendance of these agencies. That is, due diligence is to once again become more the province of the purchaser than the (potentially biased agencies as) assessor. If these credit rating agencies were so powerful to begin with, then why is it that mere regulators can set into motion changes which will likely result in these agencies becoming even punier than they are now? From the Wall Street Journal:
The position taken here is that, in the first instance, rating is a US phenomenon. But rating becomes transnational in character as the agencies acquire both allies and opponent in new territories. The transnational view affirms the agencies’ US origins, norms, and practices. Even if rating is increasingly transitional the mental framework of rating remains largely American (p. 120).
The Securities and Exchange Commission plans to propose rules that may diminish the longstanding importance of credit ratings across various markets, including the $3.4 trillion money-market industry, in the latest blow to the rating business stemming from the credit crunch.
The most significant portion of the rules, to be proposed Wednesday, would make it possible for U.S. money-market funds to invest in short-term debt without regard to ratings put on those securities by firms such as Moody's Investors Service and Standard & Poor's, people familiar with the matter said. Currently, SEC rules generally require that money-market funds purchase only short-term debt with high investment-grade ratings. The new rule would put more discretion in the hands of money managers to determine whether the debt is investment grade.
The SEC also will propose rules that may diminish the importance of credit ratings in determining the amount of capital that investment banks are required to hold. In all, the proposal will put about a dozen changes on the table that could touch on the role of credit ratings for investors and banks. An SEC spokesman couldn't be reached for comment.
The renewed effort is part of a wide-ranging regulatory push in the U.S. and Europe amid the credit crunch that has devastated many banks and investors. Major rating services -- Moody's Corp.'s Moody's Investors Service, McGraw-Hill Cos.' Standard & Poor's and Fimalac SA's Fitch Ratings -- have been blamed by some for underestimating the risk of default on hundreds of billions of dollars of mortgage debt.
The dirty secret of some bond investors is that they simply bought securities with the highest yield for a given rating, which is why they snapped up complicated securities tied to subprime mortgages. Those securities often got high ratings but yielded more than other, more standard securities with the same rating.
In 2003, the SEC asked the industry and investors for comment on similar changes to money-market funds and capital rules, but the ideas never went anywhere and were shelved amid mixed reviews.
As the current credit crisis has unfolded, regulators have grown concerned that the reliance on ratings in various market rules gives investors a sense of false comfort, discouraging them from doing their own research when assessing the riskiness of bonds in their portfolios. By diminishing the role of ratings, they hope to reverse that. S&P, Moody's and Fitch declined to comment on the pending proposal. The proposals are expected to generate divided comments from investors and also may affect a range of other SEC provisions.
"My initial reaction is, what's the alternative?" to using rating firms for the rules, said Hal Scott, a Harvard University law professor specializing in capital-markets regulation. "What we need to do is have more assurance that these ratings will be accurate."
SEC Chairman Christopher Cox said at a recent hearing on rating firms that their role in the regulatory apparatus "may have played a role in encouraging investors' over-reliance on ratings."
Despite the backlash against rating firms, their assessments of bonds still play a central role in decisions made by banks and investors. Last week offered the latest example, when Moody's downgraded the debt of bond insurers MBIA Inc. and Ambac Financial Group, triggering a selloff in the companies' stocks and fears of forced sales of bonds insured by the two companies.
Regulators also depend on them. The Federal Reserve, after it arranged a sale of Bear Stearns Cos. to J.P. Morgan Chase & Co., said the Federal Reserve Bank of New York would take as collateral some illiquid, beaten-down assets from investment banks, but only if the assets were rated highly by rating firms. Other international codes such as Basel II also use ratings to determine how global banks manage their balance sheets.
Investors have had similar rules on their books for decades that require they only buy bonds the major rating firms grade at a certain level or above. Some may now expand the list of rating firms they can use for such rules to include new firms. In an effort to create more competition in the rating industry, on Monday the SEC recognized a 10th bond-rating firm, Realpoint LLC, a former unit of GMAC.
Institutional investors such as pension funds are looking to make changes in their ratings-based rules. The Illinois State Board of Investment, for example, recently requested more information from its money managers about their approach to buying bonds such as mortgage-backed securities. William Atwood, executive director of the $12 billion fund, said he would be reluctant to give new money to those managers who rely heavily on the ratings firms.
"We've got to pay closer attention," said Richard Metcalf, director of corporate affairs at the Laborers' International Union of North America, which advises pension funds. "If that means creating additional levels of scrutiny of the process, we will do that."
If regulatory changes succeed, ratings would become more of a guide, but not a quasi-regulation from the government on what investors can or cannot hold. Rating firms haven't protested this line of thinking, saying that they don't want their ratings to be misinterpreted as a catch-all recommendation to buy a security.
While many investors and large institutions say they don't rely on ratings, recent lawsuits from holders of battered mortgage-related debt show that at least some used them extensively. In a lawsuit filed this month against Deutsche Bank AG, Buffalo, N.Y.-based M&T Bank Corp. said it had written down the value of two collateralized debt obligations by more than 90%.
"The AAA and AA ratings were major considerations in M&T's determination to invest," the bank argued in its suit, "because they indicated that the notes were safe, stable, and nearly risk-free investments." M&T didn't sue the rating firms, saying they were misled. Deutsche Bank declined to comment.
For years, Thomson was the information giant that rarely talked about its own business. But since its acquisition of Reuters, which closed this year, that reticence has softened. Thomas Glocer, the head of the combined company, is very candid about where he is aiming next. "For a long time, Bloomberg had it too easy," he said during a recent interview.
Thomson Reuters is going hard after Bloomberg, which has for some time been the marquee name on Wall Street for financial information. The companies are in a dead heat: Thomson Reuters has 34 percent of the market for financial data and Bloomberg 33 percent.
But Thomson Reuters is a far larger, more diverse company: Its strength is delivering electronic data and services to professionals, including lawyers, doctors and scientists. It was Bloomberg, however, that defined the market by providing information unmatched in scope by any other company, married to a disciplined and customer-driven culture.
Glocer concedes that there is some symmetry in the challenge by Thomson Reuters to Bloomberg. After all, it was Bloomberg in the early 1980s that revolutionized financial information, stealing the market away from established companies like Reuters and Dow Jones. "Reuters used to be BOAC," Glocer said, referring to one of the airlines that later formed British Airways. "Along came Richard Branson and Virgin and suddenly British Airways became a much better airline. Bloomberg is that Virgin that forced Reuters to sharpen up."
The point is not lost on Peter Grauer, who was appointed chairman of Bloomberg when the company's founder, Michael Bloomberg, became the mayor of New York in 2001, that the takeover of Reuters by Thomson might be a first step reclaiming a business that Bloomberg redefined and now dominates. "My job is to worry, to take nothing for granted and make sure that we think about things in terms of humility," said Grauer, a close friend of Michael Bloomberg and a former investment management executive. "Great companies have begun to believe their own press and hubris has killed them. My mission in life is to never let that happen."
It was in the early 1980s that Bloomberg, a former trader at Salomon Brothers, took the high pressure atmosphere of the trading floor, imported it to the newsroom and delivered the result through proprietary, advanced technology backed with exceptional customer service.
"This company has, in many ways, the most powerful business model I've ever encountered," said Daniel Doctoroff, who stepped down in December as Bloomberg's deputy mayor for economic development to become the company's president.
The roots of Thomson Reuters go deeper. Thomson, which is controlled by the Toronto-based family of the same name, began with a newspaper empire that the company abandoned to concentrate on electronic data.
Reuters, which has a business news partnership with the International Herald Tribune, is best known for its news service. The company turned to financial information in the 1980s and is now the leading provider of some types of trading data.
While Glocer may have to deal with all the usual problems that mergers bring, he has the advantage of running a significantly bigger company.
The combined revenue of Thomson and Reuters last year was $12.5 billion, more than double that of Bloomberg, and Thomson Reuters has about five times more employees.
Glocer thinks he can go after Bloomberg on price but, more importantly, flexibility. While privately held Bloomberg generated about $5.4 billion in revenue last year and has about 10,000 employees, it still offers, for the most part, a single product: the Bloomberg terminal coupled with its vast array of data.
For clients, Bloomberg is a take-it-or-leave-it proposition that supplies everything the company generates for a monthly fee of $1,500 a user ($1,800 a month for the small number of firms that use only one terminal). Traders who have no interest in, say, debt markets cannot reduce their Bloomberg costs by subscribing to a service that drops that data.
Bloomberg's price and packaging may not have mattered as much during a bull market, but with Wall Street firms looking to cut costs, the fourth Bloomberg terminal on a trading desk could start to be seen as a luxury.
The combined Thomson Reuters has its own terminal products (some of which are delivered through proprietary computers). Glocer said that the "blended price point" of Thomson Reuters' terminals was about $1,000 a month, well below Bloomberg's.
Indeed, some Thomson Reuters terminals offering minimal information cost just $25 to $50 a month, depending on volume, according to Douglas Taylor, managing partner at Burton-Taylor Consulting and a former executive at both Thomson Financial and Reuters.
"Bloomberg has a real problem finding new business. They priced themselves at the top of the market," Taylor said. "There are different points on a pricing curve that Bloomberg can't hit but that Thomson Reuters can deliver. It's going to be hard to figure out where Bloomberg's new growth opportunities will be that don't cannibalize its current pricing."
Grauer and Doctoroff both dismissed suggestions that the Bloomberg terminal was too costly, arguing that the price was offset by the returns subscribers generated by using it. "Price is really not the issue for the vast majority of customers," Doctoroff said. "It's not how cheap you are."
Price, however, may be a factor in emerging markets, particularly Asia, which both companies agree is the next battleground in their war for financial information supremacy. Thomson Reuters has been traditionally stronger outside of North America than Bloomberg, especially in India, and has been aggressive in China.
While the market downturn has yet to significantly affect either of the two competitors, Thomson Reuters serves its data and services to a broader range of customers - like physicians and scientists - giving it some protection from financial industry cycles.
Even Reuters' founding business - the news agency that supplies stories and photos to newspapers and Web sites as well as news video to broadcasters and publishers - is growing. But some journalists in the Reuters newsroom in London have been protesting against planned job cuts stemming from the merger.
Meanwhile, the growth of the Internet can cut both ways. Both Thomson Reuters and Bloomberg face common enemies in sites like Yahoo Finance and Google Finance, which offer less sophistication, but are free.
Ireland has been an oft-cited example of the benefits of European economic integration. Nicki Smith, a colleague here at the University of Birmingham, even pondered the question of whether Ireland was Showcasing Globalisation. Before embarking on its modernisation programme, Ireland was more famous for its sizeable diaspora leaving its moribund economy. More recently, Wolfgang Munchau has pondered the question of what would happen if the Irish went further down the Eurosceptic road and decided to abandon the EMU altogether. Surely, if Ireland turns down another referendum, that path cannot be far in the distance. As I heartily approve, he gives the idea two thumbs down (plus two big toes down to boot). Below are some excerpts, but do read the whole thing if you're interested in the terrible fate that will surely befall the Emerald Isle should it decide to go it alone. Even the Lone Ranger needs Tonto:
So within a couple of weeks, the chances of Ireland ending up outside the EU have turned from zero to a distinct possibility. The same goes for the Czech Republic, another potential non-ratifier. I do not want to get into the legal details of how a country’s departure from the EU could be accomplished. Suffice it to say that it can be done within European law as long as there is political will.
What strikes me the most about this extraordinary turn of events is the perception in Ireland that a break with the EU would be no big deal. I received a large number of letters from Ireland last week from readers who steadfastly maintain that the country’s economic success had nothing to do with the EU and everything to do with domestic policy – in particular with low corporate taxes and skilled labour.
The view expressed by those correspondents is as wrong as it is revealing. If so many people are delusional about their country’s economy, then we should perhaps not be surprised about the outcome of the referendum. It is therefore perhaps worth looking in some detail at the nature of Ireland’s economic success over the last 30 years to gauge what life might be like outside the EU...
Ireland was one of the early and enthusiastic members of the European Monetary System in 1979, which brought much needed macroeconomic stability. Membership of the eurozone in 1999 led to lower interest rates, which have contributed to the economic growth ever since. Low corporate tax rates certainly helped Ireland attract foreign investors. But never forget that Ireland is also the only English-speaking member of the eurozone, the one place where eurozone and Anglosphere meet.
The country naturally benefited from membership of the EU’s internal market. Without it, Ryanair, the Irish low-cost airline, would not be able to offer its popular flights across Europe. The Irish have also proved influential in the management of the internal market, not least through Charlie McCreevy, the Irish commissioner in charge of the EU’s internal market and financial services. As a member of the EU, Ireland has been in a position to veto motions that would have impaired the country’s economic success. Without steadfast opposition from Ireland, the EU would have made more headway in imposing corporate tax harmonisation...
So what would happen if Ireland were to leave the EU? As an associate member of the single European market, Ireland would probably attract less foreign investment than it does today. Dublin’s financial centre would be demonised as an offshore tax haven and treated on par with Liechtenstein. We would see lots of Ryanair flights between Dublin and Cork and the EU would put even more pressure on Ireland to raise corporate taxes.
Oh, and by the way, Ireland would no longer be a member of the eurozone. The Irish could use the euro if they wanted to but this would be like Panama using the dollar – a little sad, really. There would be no Irish voice in the European Central Bank’s governing council warning that this is not a good time to raise interest rates. Leaving the EU involves a huge loss power and influence.
To put it mildly, the No vote is highly risky. Considering that the country is now on the verge of a severe economic slowdown, brought on by a downturn in the real estate market and the credit market crisis, it could not have come at a worse time. Not only does the No vote carry risks, it is a highly asymmetric gamble that brings no material benefit under the best of circumstances. The No vote put Europe’s most impressive economic miracle at stake, and the cards are not looking good.
(1) The government does not provide as many health and education services as in the past, necessitating more savings for out-of-pocket expenses on these expenditures;
(2) China lacks a financial infrastructure that permits more to buy on credit;
(3) The Chinese, like many other Asians, are frugal by nature (the cultural explanation);
In this paper, Marcos Chamon and Easwar Prasad use Chinese survey data to come up with some preliminary fundings. The authors find (1) and (2) account for the increased savings, although (3) is harder to use as justification for increasing savings rates as opposed to just high observed savings rates. Here are a few key lines, although the entire article is well worth downloading if you are interested in either China or global economic imbalances. Here is the abstract:
From 1995 to 2005, the average urban household saving rate in China rose by 8 percentage points, to about one quarter of disposable income. We use household-level data to explain why households are postponing consumption despite rapid income growth. Tracing cohorts over time indicates a virtual absence of consumption smoothing over the life cycle. The age profile of savings has an unusual U-shaped pattern, with saving rates being the highest among the youngest and oldest households. We find that financial underdevelopment, as reflected in constraints on borrowing and low returns on financial assets, partially accounts for this pattern. Moreover, overall saving rates have increased across all demographic groups. We argue that this can be explained by the rising private burden of expenditures on housing, education, and health care.And here is a key passage:
These various strands of evidence suggest that rising macroeconomic uncertainty, coupled with financial repression--which has resulted in the lack of instruments for borrowing against future income, limited opportunities for portfolio diversification, and low real returns on bank deposits--has driven the increase in household saving rates. The appendix provides a simple stylized model (drawing on Jappelli and Pagano, 1994) to illustrate how the interaction of rapid income growth and borrowing constraints due to financial underdevelopment can drive up saving rates.
There are other factors that may be relevant as well. The overall macroeconomic uncertainty associated with the transition to a market economy has contributed to precautionary saving motives, although we do not find strong evidence that this effect has been quantitatively important. Economic growth may affect savings through habit formation considerations (Carroll and Weil, 1994); our results, however, suggest a limited role for that channel in urban China. Finally, cultural factors are often considered an explanation for the high saving rates in many East Asian countries, including China. But they cannot account for the trend in saving rates, which is the primary focus of this paper.
When Boston Red Sox co-owner Martin Trust first visited the southern Indian village of Achyutapuram three years ago, a pot-holed road ran through the stretch of bare land dotted with thatched huts.The rest of the article correctly notes that India has dabbled with SEZs as long ago as the mid-sixties. For a number of reasons, though, dedication to the programme has not been sustained through the years. More importantly, characteristic problems with SEZs such as expropriation of land claimed by farmers and, down the road, inegalitarian income distributions compared to regions excluded from SEZs are larger concerns in a democratic country such as India. Whereas an authoritarian regime like the Communist Party isn't really subject to scrutiny of this sort in China, the ruling Congress Party in India can ill afford to be perceived as pro-bourgeoisie. Aside from that issue, the rise of Indian SEZs is also making for some colourful cultural contrasts as women of modest means and demeanour are now making thongs for Victoria's Secret (cue up a silly Sisqo tune):
That didn't deter Trust from investing $12 million in a special economic zone being created there by Brandix Lanka Ltd., which makes lingerie for Victoria's Secret. His bet may now be paying off as workers finish constructing roads, a power plant and helipad, and companies including Quantum Clothing Group, a U.K. supplier to Marks & Spencer Group Plc, sign up to build factories in the 1,000-acre industrial site.
The change ``is startling,'' said Trust, 73, who is also founder and president of Brandot International Ltd., a Salem, New Hampshire, investment firm with stakes in 18 textile and apparel companies in seven countries including China, Israel and Mexico. ``It's an inviting place for any investor.''
India's economic zones are finally taking root after more than four decades, laying the foundation for Prime Minister Manmohan Singh's plan to increase manufacturing to a quarter of the economy by 2012 from 17 percent now. That's vital for a nation that needs to find jobs for the 150 million people who will join its workforce in the next 10 years.
There is ``real momentum'' behind the zones, said Alastair Newton, senior political analyst at Lehman Brothers International in London. ``Governments, both at the central and state level, realize they have the potential to create good, long-term employment.''
While farmer resistance continues in some states, including West Bengal, Haryana and Goa, India now has 42 zones, including the original eight, creating an estimated 176,000 jobs in the past two years, the Commerce Ministry says.There have been fatal clashes already over the creation of more SEZs such as in West Bengal:
Another 229 zones are under construction and an additional 210 proposals await final government approval, according to the ministry, which forecasts the zones will attract $75 billion in investment by 2013 -- almost a third of India's industry.
To convince local villagers that it's serious about creating employment in Achyutapuram, Sri Lanka-based Brandix set up a trial factory close to its zone that currently employs about 1,500 local women. Ladies ``who never had proper clothes are today making thongs for Victoria's Secret,'' said Reshan Wickramasinha, chief executive officer at Brandix India Apparel City Ltd.
Kanak Mahalaxmi, 19, says her life ``has changed dramatically'' since she got a job as a sewing operator a year ago. ``We just finished building a brick house after living in a thatched one all our lives,'' said Mahalaxmi, who earns 2,500 rupees ($59) a month. ``We just bought our first television set as well.''
Were it not for the evidence of death, the scene in this outpost of West Bengal is that of the perpetual rural idyll, with glowing green rice paddies, jute-thatched roofs and children splashing in the village pond.
However, last week, in a clash with police that cost 14 lives, the villagers of Nandigram district won a victory that threatens to derail the biggest push for economic and industrial development since India won independence 60 years ago.
It came after six months of resistance against government compulsory purchase plans on the villagers' land to make way for a 10,000-acre industrial park meant for an Indonesian chemicals giant.
The same thing is happening in a number of other locations where plans for SEZs have been slowed down such as the state of Goa, India's smallest by land area:
India's controversial special economic zone (SEZ) policy continues to go through various twists and turns. The latest setback came on December 31st 2007, when Goa became the first Indian state to scrap all of its existing SEZ projects. On a more positive note, the central government has recently taken steps to ease the acrimony surrounding SEZs by reviewing its policies on land acquisition.Thus, PM Singh has had to rethink the process of SEZ implementation:
Protests against SEZs, largely because of issues relating to land acquisition, have been vociferous in several Indian states--most notably in West Bengal. The agitation recently spread to the tiny state of Goa, best known for its balmy beaches and hordes of tourists. As of December 2007 Goa had just seven SEZ projects, of which three had been formally approved and officially "notified", meaning that the central government had acknowledged their eligibility for all the applicable incentives under India's SEZ Act. However, opposition to the SEZ policy from political parties and other local organisations simultaneously reached a crescendo late last year, threatening to disrupt the state's crucial tourism industry.
The groundswell of opposition found its formal expression in the report of a task-force set up by the state government (and headed by the chief minister). While preparing recommendations for a long-term regional plan, the task-force argued that SEZs are detrimental to Goa's overall interests because land is being speculatively acquired for product-specific SEZs, crowding out genuine entrepreneurs who are not merely seeking government incentives. The task-force also concluded that local people rarely have the skills to benefit from the employment opportunities SEZs provide. Instead, it claimed, SEZs attract migrants from other states, putting pressure on Goa's already strained resources.
The central government's Board of Approvals only gives the green light to SEZs supported by state governments, so all seven of Goa's SEZs must have had the backing of the state government. But Goa's government now seems to have changed its stance, perhaps sensing the vehemence of opposition from local people and political parties. The chief minister's decision to scrap all of Goa's SEZs is unprecedented; while opposition to SEZs in other states is also widespread, it has mainly been targeted at specific zones.
SEZ is an instrument of economic policy and it has come to stay. But in the process of implementation, we have been exposed to certain problems that cannot be dismissed. It is the strength of our democracy. If we find there are some flaws in our policy, we can set in motion a mechanism to redress those gaps in our policy.In the meantime, yet more protests are being held over these SEZs and the government intends to bolster the provision of social services in these zones to counter its critics. Sometimes, the Congress Party probably wishes India was under an authoritarian regime. In a world where SEZs are an instrument of national development, perhaps "market socialism" may have a leg up.
A few weeks ago, I came across a feature by the New York Times on the awe-inspiring efforts of the Chinese national team to put together a world class group of rowers. Unlike, say, table tennis, China does not have a long, distinguished history in rowing. (Famously, China even mounted a reality show to attract performers to this sport.) However, the powers-that-be in China's vast sports training apparatus decided to train athletes hard in this area for there are many medals on offer, giving the PRC a good chance to run up their medal tally in Beijing. I found it pretty interesting and thought nothing more about it until the NYT came up with another two articles on Chinese athletes being forced to train despite the possibility of incurring long-term injuries and being unable to quit under official pressure. While I do understand that interest ought to be high in the run-up to the Olympics, these articles are getting repetitive and make very similar points:
(1) The Beijing Olympics will showcase China's growing sporting prowess to complement its increasing economic clout;
(2) The PRC has spared nothing in athletic selection, training, facilities, and coaching to ensure that it stands a good chance of topping the medal league tables in Beijing 2008;
(3) Youngsters from the provinces showing athletic promise have been separated from their parents beginning at a very young age to train in isolation;
(4) The uni-dimensional focus of Chinese sporting officials on winning at all costs has not allowed these athletes to lead normal lives;
(5) Consequently, these athletes are torn between demonstrating national pride in their sporting achievements and resenting the normalcy which has been taken from them;
(6) Having done little other than train, these athletes are ill-equipped for life after their sporting careers are over;
(7) Promises of fame and fortune in the event of victory makes athletes from families of modest means persist despite the undeniably harsh training regimen;
(8) Western competitors who have been blown away by the Chinese in international competition have resorted to accusations of doping.
Where have we heard this before? A robotic, nearly superhuman man-machine is used for propaganda purposes to instill fear into the hearts of competitors the world over. If it sounds like a hackneyed plot for a Sylvester Stallone movie, well, that's because it's already been the plot to such a movie. Rocky IV was released in 1985 at a time when Reaganite anti-Soviet rhetoric was at a fever pitch, sandwiched somewhere between the "evil empire" and "Mr. Gorbachev, tear down this wall" speeches. Some of you may recall that He-Man himself, Dolph Lundgren, played Ivan Drago, the Russian heavyweight killing machine. Literally, he killed off Carl Weathers playing ex-champ Apollo Creed in an exhibition boxing match, compelling Rocky Balboa to avenge the death of his longtime friend and ring rival. Nevermind that the Swede Lundgren didn't look very Russian, nor did his screen wife Ludmilla played by Brigitte Nielsen [Danish!]--but you must be extremely willing to suspend disbelief while watching this movie. Yes, Rocky beat the tar out of the Soviet killing machine by movie's end, though that was a foregone conclusion from outset.
Has the NYT reprised the role of Sylvester Stallone in creating a stereotypical image of Chinese instead of Soviet athletes with this batch of articles? It certainly seems so to me: "Heck, we Americans may not be as all-out competitive as the Chinese, but we treat our athletes like humans and they have real lives which will continue long after the Games are over." Just as there is trade protectionism, what we have here may be an incipient brand of, er, athletic protectionism. Yo Adrienne, those Chinese rowers sure are fast...
For some time, environmental campaigners such as Friends of the Earth and the Heathrow expansion opposition group HACAN have been pressing the government to encourage more rail travel instead of short-haul flights. Given the increasingly favourable economics for rail travel, the tide is turning quickly against Baroness Thatcher. I sure am glad to be a rail-travelling loser! From the BBC comes this note:
Five new high-speed main lines crossing the width and breadth of the UK may be built as part of a review of the rail network, Network Rail says. The network operator will announce on Monday it is to commission a study looking into what could be the largest track build since the 19th century. The study will consider laying new lines alongside five of the UK's busiest routes by 2025. They include the East Coast main line and West Coast main line. The review will also assess the need for high speed trains similar to the French TGV to cope with Britain's growing number of rail users.
In the last decade, passenger numbers have risen by about 40% with more people travelling by rail than at any time since 1946. In addition, numbers are expected to swell by a further 30% in the next 10 years.
The study being commissioned by Network Rail will look at the service in the post-2014 period, with all options "on the table". If given the go-ahead, the new lines are likely to run alongside some of the UK's busiest existing routes.
They include the West Coast line to Birmingham, Manchester and Glasgow, the East Coast main line to Edinburgh, the Great Western main line to Cardiff and Penzance, the Midland main line to Sheffield and the Chiltern route to Birmingham.
A spokesman for Network Rail said: "We are looking at these five strategic routes. We are possibly looking at new lines. "There is a huge case to be made for an expansion of the rail network. All options are on the table looking at how we address capacity issues."
Richard Dyer, transport campaigner at Friends of the Earth, said: "Expanding Britain's railways by building new high speed lines is potentially very exciting - and could play an important role in weaning Britain off fossil fuels and developing a low carbon economy. "But the overall impact that this would have on local people and the environment must be carefully considered. "The UK needs a modern, comprehensive and affordable rail network to provide a real alternative to cars, lorries and short haul flights, and help cut Britain's contribution to global climate change. "Our creaking railway system desperately requires huge investment to bring it into the 21st century."Ashwin Kumar, passenger director of independent watchdog for rail users Passenger Focus, said: "We welcome the study. It is extremely important the rail industry anticipates future growth."
On the "yes" side we have Mindy Lubber, president of Ceres, which bills itself as "a national [American] network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change." Her opening statement is somewhat predictable--subprime, SUVs, Nike, etc:
On the "no" side, Bjorn Stigson, president of the World Council for Sustainable Development (WBCSD), makes a more compelling argument from my POV:
The recent subprime mortgage meltdown is a painful example of how companies and whole industries can delude themselves into ignoring even the most fundamental issues. If anyone outside the financial markets had been scrutinising the risks from easy mortgages, they could have helped avert millions of foreclosures and an economic recession, and saved themselves a fistful of dollars.
It is the same with global climate change, which presents far-reaching risks and opportunities that many companies—their heads stuck in the sands of the quarterly business cycle—are not grasping on their own. Outsiders warned Ford and General Motors for years that their gas-guzzling high-polluting cars were too big, but the carmakers did not listen. Now their large sports utility vehicles sit unsold in car lots and the companies' very survival is at stake.
Outsiders—investors, environmentalists, public interest groups, other industry experts—have an essential role in pressuring companies on their handling of environmental and social threats. They should be asking tough questions; they should be offering creative, out-of-the-box ideas; they should be demanding real action; and they should be holding companies accountable.
Going out of business is never a good move in the quest for sustainability.
Not only is it impossible to imagine business without external pressure, it is increasingly difficult to make out a clear line between what is external and what is internal. It may be too early to say that the internet, open-source technologies, extended value chains and network marketing have turned the corporation inside out, but certainly it is becoming harder to find, with precision, the fence-line.
It is not only in commercial relations that boundaries have become entangled. The World Business Council for Sustainable Development is a coalition of some 200 leading international companies. Our members recognise that rising temperatures, damaged ecosystems and the exclusion of 3 billion people from prosperity are business issues. They know that they cannot solve these problems alone, but have to work with others to develop solutions, even when this means learning to listen to their critics and those who oppose their actions.
While I am more sympathetic to the arguments of the WBCSD, the phrasing of the question is not so ideal that I may actually vote "yes" despite the weaker arguments offered by Ceres. It will be interesting to see how this debate evolves, though it looks like the "yes" vote has either convinced more people or their legions of voters are in rather larger numbers. With online polls, it's difficult to say.
What sayeth thee? Head over to the Economist site and cast your vote.
In the meantime, expect the Chinese to issue their usual "disappointment" at this ruling. The Chinese are threatening to take the matter to the WTO. Also, Candidate Obama approves of this ruling, saying it's "the only responsible response" to
U.S. steel pipe manufacturers, who have been battling a surge in imports from China, won a major victory Friday when the International Trade Commission cleared the way for the imposition of stiff penalty tariffs for the next five years.
The commission voted 5-0 that the U.S. industry was being harmed by the import of circular steel pipe. The decision marked the first time a U.S. industry has won a decision to impose tariffs on a Chinese product based on the argument that the Chinese government was unfairly subsidizing a Chinese industry.
The ruling means penalty tariffs ranging from 99 percent to 701 percent will be imposed on Chinese imports of circular welded pipe, a form of pipe used in a variety of construction jobs, such as home plumbing and sprinkler systems.
For more than two decades, the U.S. government had refused to consider subsidy cases against the Chinese government because China was classified as a non-market economy.
However, the Bush administration, facing increasing anger over soaring trade deficits with China, reversed course last year and announced it would treat China in the same way as other countries in disputes involving government subsidies.
The pipe case is the first to clear all the government hurdles for the tariffs to go into effect. Last year, the Commerce Department imposed penalty tariffs on imports of Chinese glossy paper, but the trade body blocked the tariffs by ruling that the domestic industry had not proven it was being materially harmed by the imports.
In the pipe case, the Commerce Department found the Chinese government was providing unfair subsidies. It also found that the pipe was being sold in this country below the cost of production, a practice known as dumping. The penalty tariffs for the government subsidies, known as countervailing duties, and the antidumping tariffs were upheld by the trade commission vote.
Chinese exports of circular pipe have exploded since 2002, rising from 10,000 tons that year to 750,000 tons in 2007. The U.S. industry said the increase in imports had resulted in the loss of 500 pipe worker jobs, representing about one-quarter of the work force.
Plants making circular welded pipe, also known as standard pipe, are located in 13 states — Alabama, Arizona, Arkansas, California, Illinois, Iowa, Kansas, Missouri, Ohio, Pennsylvania, Tennessee, Texas and Wisconsin.
The case before the government was filed by six pipe producers and the United Steelworkers union, whose president, Leo Gerard, called the commission ruling a major victory that should send a clear message to China and to politicians in this country.
"China is a trade cheat," Gerard said in a conference call with reporters. "They undermine the market, depress prices and destroy jobs."
Gil Kaplan, a lawyer representing the pipe companies, predicted the ruling could be the first of a wave of victories by U.S. companies battling Chinese imports.
"This decision marks a fundamental turning point in the U.S.-China trade relationship," Kaplan said. "The subsidies that the Chinese are giving a whole host of their manufacturing industries are a big reason the U.S. trade deficit has been growing so rapidly. This is the first time the United States is standing up and saying we are not going to put up with this and we will impose duties to offset the subsidies."
Wang Baodong, a spokesman for the Chinese embassy in Washington, said China had not decided what its next step would be. One possibility would be for China to file a case challenging the penalty tariffs before the World Trade Organization.
"The Chinese government will study the latest development carefully and take appropriate action," Wang said.
The companies bringing the pipe case were Allied Tube & Conduit, IPSCO Tubulars Inc., Northwest Pipe Co., Sharon Tube Co., Western Tube & Conduit Corp. and Wheatland Tube Co.
Reps. Phil English, R-Pa., and Jason Altmire, D-Pa., who are sponsoring legislation that would increase the power of Congress in similar trade cases, said it was disappointing that it had taken so long for the domestic companies and workers to win protection.
"There are other workers who are going to continue to face the risk of losing their jobs to Chinese mercantilism unless Congress looks at this issue and decides to strengthen U.S. trade laws," English said.
Since joining the World Trade Organization in 2001, China has boosted steel-making to the point where by some estimates it has more production capacity than the United States, Japan and the European Union combined. United States Steel Corp. and AK Steel Holding Corp., two big steel companies not involved in the pipe case, said they were encouraged by Friday's decision.
"There's no question that Chinese producers have engaged in unfair trade on a massive scale," said John Armstrong, a spokesman for U.S. Steel in Pittsburgh. "There's also no question that dumped and subsidized imports from China have caused material injury to domestic producers."
The circular welded pipe case is one of a number of cases that have already been filed accusing the Chinese of providing their manufacturers with unfair subsidies. Other cases involve different types of pipe as well as tires, lightweight thermal paper and laminated woven sacks.
The U.S. trade deficit with China hit an all-time high of $256 billion last year, an amount equal to one-third of the total U.S. trade deficit and the largest imbalance ever recorded with a single country. Critics contend that the soaring trade deficits have played a major role in the loss of more than 3 million U.S. manufacturing jobs since 2001.