Posts of November 2009

China Lashes Out at Its European Currency Critics

♠ Posted by Emmanuel in China,Europe,Trade at 11/30/2009 04:14:00 PM

There's this saying that those who are reflective begin to ponder their actions when many begin to complain about them. Then again, there's another saying about there being a genius in the midst when the dunces start gathering against him. Which of these two it is in the case of new complaints by the European Union against China on the never-ending trade front is likely somewhere in between.

Tensions have been building up between the European Union and China for quite some time now. For one thing, China re-pegging the dollar and the dollar in turn depreciating against the euro means that the single currency has borne the brunt of a lot of largely non-existent global reblancing in currency terms. That is, old Europe has become the pressure release valve in a world where the Middle East and Asia are still busy propping up the greenback. Then there's also the not-so-negligible matter of the EU engaging in a tariff-slapping frenzy against our PRC friends. Add these up--perceived Chinese intrasigence on the currency front and EU activism on the trade measures front and you have a recipe for trouble.

It is thus unsurprising that things have blown up at an EU-China summit in Beijing as neither side is in much of a mood to give in. We begin with Shoeful Wen Jiabao, who has previously described China's economy as "unbalanced, unstable, uncoordinated, and unsustainable. In giving the PRC's European critics a tongue lashing, he seems to hew to the party line of gradual revaluation when circumstances permit (nevermind that the RMB has been stuck at the same level since June 2008) and, er, keeping things as they are--unbalanced, unstable, uncoordinated, and unsustainable. From the FT:

China’s premier Wen Jiabao on Monday lashed out at the growing number of countries pressuring Beijing to strengthen its currency, making it clear that European officials made little headway in their efforts over the past two days to persuade the country to allow the renminbi to appreciate.

Speaking at the conclusion of an EU-China summit in the eastern Chinese city of Nanjing, Mr Wen said: “Some countries on the one hand want the renminbi to appreciate, but on the other hand engage in brazen trade protectionism against China. This is unfair. Their measures are a restriction on China’s development.”

The premier repeated the standard form of words Beijing uses to describe its currency policy. Mr Wen said: “We will maintain the stability of the renminbi at a reasonable and balanced level ... maintaining the basic stability of the renminbi exchange rate has benefited China’s economic development and benefited world economic recovery.”

The EU's representatives didn't even bother to counter Shoeful Wen's tirade:

Mr Wen’s candid tone contrasted with the conciliatory note struck by European leaders who addressed the same press briefing. They did not mention the renminbi after Monday’s talks, and abruptly cancelled a press briefing in which they would have faced uncomfortable questions about Mr Wen’s aggressive tone.

Speaking on Sunday, after senior eurozone officials met Premier Wen and other Chinese policymakers, European officials made clear they had made little progress with Beijing. Jean-Claude Juncker, Luxembourg’s prime minister, who chairs eurozone finance minister meetings, said “I can’t say I am more optimistic than I was before I came here” about China’s plans to strengthen its currency.

José Manuel Barroso, European Commission president, who met Premier Wen for a private dinner on Sunday night, said: “The Chinese reiterated their position on the matter … They are telling us exactly what they told President Obama – exactly the same.”

Being cynical old me, I predict this latest outburst and non-reaction from the Chinese will likely set the stage for the US and China joining forces to engage in China-bashing actions. Certainly, that's the conclusion the FT article would suggest giving its framing of the outburst. The advantage here is that it becomes harder to single out a party as unfairly picking on China when many express similar concerns about currency undervaluation. Heaven knows, they already have a blueprint for beginning the beguine.

BTW: Chinese official media has articles on trade missions being opened (a traditional gesture for appeasing critics during economic summits and the like) and this not being cause for the outbreak of trade war.

LSE Students: Proto-Commies or -Capitalists?

♠ Posted by Emmanuel in Education at 11/26/2009 03:45:00 PM

Whenever you log into your computer here at the London School of Economics, there pops up this message board thingamajig with current goings-on: announcements, seminars, conferences, events, job fairs...you know, the regular stuff of school life. As most people know, LSE was founded by Fabians, folks with a socialist disposition. Among the notables who have worked at this august institution is no less than William Beveridge, the man commonly known as the founder of the modern welfare state. If you want to debate states and markets, you know where to go.

As with many big name institutions, however, ideals often give way to the lure of dreaded wonga [British slang for money]. Given the institutions reputation and the generally high calibre of its graduates, many denizens of high finance have come a-callin' to the LSE for recruitment. In past years, LSE has been a big lure for financial firms seeking investment bankers. You know, "God's work." However, I was glad to note in the pop-up message that our students may not have yet lost every ounce of idealism. We have to honour the Fabians, dammit. Have a look at the header and note what our kids regard as an appropriate university for twinning:

Yes, the Islamic University of Gaza. I wonder what the [politically incorrect Z-word]-loving Yankcrusaders would make of that. There's even a Facebook webpage looking for supporters that it's an "Israel hating" action. Even if I'm zero percent inclined to join a union at this point in time, I find it heartening that ours is the only institution that still retains a weekly Union General Meeting. After all, a university is about diversity. Here is the text of the motion if you're interested:

Union believes:

1. Any government that gives one group of people it governs rights over another based on race, religion, ethnicity, or nationality is morally wrong and anti-democratic;
2. Israel is an Apartheid state;
3. Apartheid is racism and we should oppose it;
4. Equality and human rights should be upheld;
5. Israel should be a state for all its citizens and stop discriminating against the indigenous Palestinian population;
6. The Palestinians have the right to return to their homeland and receive just compensation and Israel should implement all international law that it is currently violating;
7. The Occupation is illegal and it should end immediately;
8. Palestinians should have free access to their holy sites including the Al-Aqsa mosque and the Church of the Holy Sepulchre.

Union resolves:

1. Establish an LSE SU campaign to lobby the school and NUS to divest from Apartheid Israel and companies that a) provide military support for or weaponry to support the occupation b) facilitate the building or maintenance of the illegal “annexation” wall or the demolition of Palestinian homes or c) operate on illegally occupied land and within Jewish-only settlements, with the goal of maintaining the divestment, in the case of said companies, until they cease such practices, and, in the case of Israel, until Israel stops its regime of apartheid and the oppression and colonization of Palestinians;
2. Actively support and work with Palestine solidarity organisations such as “Jews for Justice for Palestinians” (JfJfP) , BRICUP , Zochrot , ICAHD , and PSC that campaign to stop Apartheid and racism in Israel;
3. Affiliate our Union to the “the international campaign to end the siege on Gaza” and engage in education campaigns to publicize the injustice of Israeli apartheid.

Whew, that's pretty racy stuff from our kiddos. Shouldn't they be learning about IS-LM models or something? I guess I'm somewhat relieved that further down the message board we have more normal fare largely devoid of activism and idealism:

Office slaving for a law firm may not quite be as exciting, but hey, it still lands food on the table. And that's not something to be taken lightly in this day and age. It's too bad the former Patrice Lumumba Peoples' Friendship University in Moscow has set an even worse example for the comrades. Business courses? For shame. Still, it may be worth proposing to the LGU for twinning for old time's sake. Dreams die hard around here.

UPDATE: Comrades, we are now twinned with the Islamic University of Gaza.

Asia Moving Up World University League Tables

♠ Posted by Emmanuel in Education at 11/23/2009 07:15:00 PM

A while ago, I featured a World Bank publication concerning how to create institutions of higher learning. While there are still strenuous debates about whether creating universities with high international standing should be a goal for developing countries, there is no doubt that many Asian ones have made significant strides in competing with the best of the best in the world. Singapore has always been notable in that its highly educated workforce has been the envy of the region if not the world in propelling development via "human capital."

There is, however, a rapidly rising newcomer to the scene that you all know of - China. Aside from placing three universities in the Times Higher Education Top 100 (if you include Hong Kong, that is), the PRC has made it an objective to become a destination for students--an importer of them instead of an exporter. Talk about the only area where the Chinese are keen on more imports save for Western "dual use" technologies! [also the previous post on that point] While I still have some reservations about the Times' methodology, there is no doubting the expenditures Asian countries are putting into education for both national development and to attract fee-paying foreign students. Interesting stuff; perhaps the changing balance of educational prestige will help signal the advent of the long-awaited Pacific century:

The top universities of the Asia Pacific region – Australian National and Tokyo - have been prominent in these rankings since they were first released in 2004. This year they are in 17th and 22nd place respectively, a rough level from which they have varied little between the years.

The real story about Asian universities, however, concerns the lower reaches of the rankings. In September 2009, the European Union warned that India and China are likely to become the world’s leading research powers by 2025. The World University Rankings suggest that these, and other Asian nations, are already building university systems to support this transition.

Japan’s postwar rise to economic success, based on innovation and exports, has long been the model for other Asia Pacific nations. In the 2009 World University Rankings we find 11 Japanese universities, a total which is unlikely to grow substantially.

Many other Asian universities now have plans to enter these rankings. China has six universities ranked this year and there are five more in Hong Kong, which we count as a separate entity while it retains its status as a Special Administrative Zone of China. At the moment, China’s top two institutions, Peking and Tsinghua, are at 49 and 52 in the rankings, while its other universities are more modestly ranked. By contrast, the University of Hong Kong is in 24th position, making it an altogether more serious world player.

China is now expanding its entire education system rapidly, from primary schools to research centres. It intends to become an importer rather than an exporter of students, threatening the business plans of many universities around the world that depend on Chinese students. In our work on these rankings, we have encountered big increases in the amount of research being published by Chinese academics. Not all of it is world class, but over time it is likely to improve, as is teaching quality in Chinese universities. There is certainly a stark contrast between China’s placing here and the very modest showing by India. No mainstream Indian universities appear in our top 200. As in 2008, India is represented by only two of the Indian Institutes of Technology.

Other Asian nations, lacking the sheer scale of China, seem to be taking a more tactical and less brute-force approach to expansion. South Korea has had a recent spurt of high-technology growth which is reflected in the success of its universities in these rankings. Seoul National has long been a major world institution. It is joined this year by Yonsei, a major private university. Perhaps more importantly, two science and technology-based institutions in Korea, KAIST and Postech, have risen sharply in position this year. This is a common theme across Asia, with higher places for Tokyo Institute of Technology and Hong Kong University of Science and Technology (HKUST).

Many other Asian nations, such as Taiwan, regard it as a priority to have at least one university in the THE – QS World University Rankings. (National Taiwan University is up 29 places this year to 95). For this reason, there will be enthusiasm in Malaysia over the reappearance of the University of Malaysia at place number 180. But Malaysia still lags far behind its smaller neighbour Singapore, which has made high technology, such as nanotechnology and robotics, a national priority. Heavy investment in these areas is part of the reason why the University of Singapore is a world leader, 30th in our rankings, and Nanyang Technological University also shows well at 73.

Now, if only the writer mentioned my alma mater, things would be absolutely hunky-dory.

Out Now: America's Blueprint for Bashing China

♠ Posted by Emmanuel in China,Trade at 11/19/2009 05:04:00 PM

As you can probably tell, I pretty much got it right when I said that nothing much would come from Obama visiting China. Trade, human rights, climate change...there wasn't much assent between these two budding antagonists. Most of the interaction was highly scripted and the broadcast limited. So much so that I didn't even bother to post since I found nothing newsworthy. As Morrissey once sang, "Why do I smile at people who I'd much rather kick in the eye?" applies equally to both parties outside the dog-and-pony shows of diplomatic meetings.

However, something has just come out that is far more interesting and possibly broader-reaching as far as the mock-happy relationship of these two in concerned. Every year, the US-China Economic and Security Review Commission comes out with its report to Congress that typically bashes China over trade, human rights, and its relations with Taiwan. This year is no different. My colleague here at the LSE from the PRC Foreign Ministry says he regularly interacts with this body and downplays the aggressive tone often taken in the report.

Anyway, the rather large 5 MB, 367-page (wow, that should satisfy the reading interests of the most avid China-basher) report is available for download. I'll take it home and have a read to see if there's anything of interest. Meanwhile, here are 10 of the (count 'em!) 42 recommendations that are deemed particularly actionable:

- Employing World Trade Organization trade remedies more aggressively. The Commission recommends that Congress urge the administration to employ more aggressively all trade remedies authorized by World Trade Organization rules to counteract the Chinese government’s practices. The Commission further recommends that Congress urge the administration to ensure that U.S. trade remedy laws are preserved and effectively implemented to respond to China’s unfair or predatory trade activities.

- Responding effectively to China’s currency manipulation. The Commission recommends that Congress urge the administration to press China to allow the RMB to become flexible and responsive to market forces, thereby contributing to the correction of global economic imbalances. The Commission further recommends that Congress consider legislation that has the effect of offsetting the impact on the U.S. economy of China’s currency manipulation.

- Evaluating the impact of China’s value added tax. The Commission recommends that Congress urge the United States Trade Representative to evaluate the use of selective value added tax rebates by China and their trade-distorting effect and determine what steps, if any, should be taken to address the issue.

- Reporting on the implications of Chinese subsidies to the U.S. clean energy sector. The Commission recommends thatCongress urge the Department of Energy, in consultation with other appropriate agencies, to report to Congress on the impact of Chinese subsidies and other elements of China’s industrial policy on U.S.-based companies manufacturing clean energy products.

- Ensuring adequate funding to limit China’s antiaccess capabilities. The Commission recommends that Congress assess the adequacy of planning and resourcing of Department of Defense programs that would limit China’s antiaccess capabilities. In particular, Congress should focus on antisubmarine warfare and ballistic missile defense programs. Congress should also assess the adequacy of funding and resources for the Department of Defense’s Pacific Command.

- Meeting the rising challenge of Chinese espionage. The Commission recommends that Congress assess the adequacy of resources available for intelligence, counterintelligence, and export control enforcement programs to ensure that U.S. government agencies are able to meet the rising challenge of Chinese human intelligence and illicit technology collection.

-Ensuring adequate funding to respond to computer exploitation and computer attacks. The Commission recommends that Congress assess the effectiveness of and resourcing for law enforcement, defense, and intelligence community initiatives that aim to develop effective and reliable attribution techniques for computer exploitation and computer attacks.

-Encouraging China to draw down the number of forces opposite Taiwan. The Commission recommends that Congress urge the administration to take additional steps to encourage the People’s Republic of China to demonstrate the sincerity of its desire for improved cross-Strait relations by drawing down the number of forces, including missiles, opposite Taiwan.

-Assessing the adequacy of U.S. export control policy in Hong Kong. The Commission recommends that Congress examine and assess the adequacy of U.S. export control policy for dual-use technology as it relates to the treatment of Hong Kong and the PRC as separate customs entities. The Commission further recommends that Congress urge the administration to consider ways to collaborate more closely with the authorities in Hong Kong in order to prevent the transshipment of controlled technologies from Hong Kong into the PRC.

- Monitoring the role of U.S. companies in Internet censorship. The Commission recommends that Congress continue to monitor and assess the development and progress of industry and other efforts to create and implement an effective code of ethics and best practices related to the operations of U.S. hightech firms in China and other authoritarian countries where Internet content and activity are controlled and monitored by the government.

Again, my opinon is that the severity of US sanctions at China will depend on how bad things get Stateside. Readers probably know that I consider America a prime example of How to Run Your Country Into the Ground and Screw Over Future Generations. At this point in time, there is no surer fire way of guaranteeing misery for your citizens than following America's benighted example. While the report does mention that the US-China trade imbalance to date is down about seventeen percent from last year, don't expect that to be a major hindrance to more China-bashing measures as the US deservedly reaps more of what it has sowed. As they say, garbage in, garbage out--and China will inevitably be on the receiving end of more of this sort of thing as the nearest available scapegoat.

...And Now for Weak Dollar Policy

♠ Posted by Emmanuel in Cheneynomics at 11/19/2009 04:37:00 PM

I am somewhat surprised that regional Fed presidents would go against the grain in not objecting to a characterization of the US following anything but a strong dollar policy, but here it is. Dallas Federal Reserve President Richard Fisher didn't go into the rigmarole of stating that the US had such a policy. Nor did the Philly Fed President Richard Plosser.

However, we begin with last Monday when the foreign exchange markets were somewhat surprised that the Fed chairman mentioned the dollar's value when it's traditionally been the Treasury secretary's role to do so. Here was Bernanke addressing the Economic Club of New York:

We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability.

In any event, the statement was greeted with a yawn as Bernanke didn't mention any intention of raising interest rates to support the godforsaken and wretched greenback. Today, however, we get news of Dallas Fed President Richard Fisher and his Philly counterpart Richard Plosser confirming what is evident to practically all:

Federal Reserve officials on Thursday downplayed the consequences of the falling U.S. dollar, underscoring that deflation is still a threat, especially with commercial real estate prices falling. Dallas Fed President Richard Fisher said in an interview with Market News International that the weakening dollar, which hit a 15-month low against major currencies on Monday, is only one of the factors the Fed watches when setting policy.

"You pay attention to this," Fisher said in reply to a question about the effects of a weaker dollar. "On the other hand, in terms of its inflationary input, unless it becomes disorderly, a depreciating dollar -- a gradually depreciating dollar -- doesn't necessarily add an enormous inflation impulse." Fisher will become a voting member of the Fed's policy-setting committee in 2011...

Philadelphia Fed President Charles Plosser, answering journalists' questions after a speech in Singapore, was also not worried about dollar weakness. "There's no particular reason you wouldn't expect the dollar to go back to where it was before the panic set in -- that is essentially all it has done at this point. I don't view that as anything particularly of concern," he said. Plosser will also in 2011 become a voting member...

In the MNSI interview, Fisher acknowledged there are what he called "trade-offs" between the Fed's policy of keeping interest rates very low for an extended period and a strong dollar [my emphasis].

Such refreshing candor. Maybe the Yanks can be more honest about going from "benign neglect" to "abject molestation" of the dollar. Now, if only we could get B-B-B-Bennie of the Feds and Tim "Deficits Still Don't Matter" Geithner to sing from the same hymn sheet. You can say I'm a dreamer, but I'm not the only one.

Obama's Quite Pointless ASEAN [Mis]Adventures

♠ Posted by Emmanuel in Southeast Asia,Trade at 11/16/2009 04:37:00 PM

And so it has come to pass: the American president made his way to Singapore in order to enlighten its leaders in the ways of peace, freedom, and democracy. However, things haven't gone as convincingly as they could've been IMHO. Let's go about things in order.

First was Obama getting together with the heads of the ASEAN member countries, including Thein Sein of Myanmar--the man chosen by the military junta to be its prime minister. This meeting provided the US with an opportunity to reaffirm its joining of the Treaty of Amity and Cooperation (TAC)--which it signed on to rather late but did so anyway during the Obama administration. Somewhat expected is US approval of ASEAN's efforts to establish a human rights body in the region. Again, not all members are participating but the US views it as a welcome move and invites the organization to visit America to get better ideas about this process. Here are some choice quotes from the joint statement of the 1st ASEAN-US Leaders' Meeting:

7. The President of the United States also expressed U.S. support for the establishment of the ASEAN Intergovernmental Commission on Human Rights, which demonstrates the commitment of the ASEAN Member States in the promotion and protection of human rights. The United States invited the members of the Commission to visit the United States in 2010 to consult with international experts in this field. The United States also supported the Human Rights Resource Centre for ASEAN, a track 2 initiative, with a university in Jakarta as the hub of the Centre and including a network of universities throughout ASEAN.

Then it gets to the funner stuff about Myanmar and human rights:

10. The Leaders of ASEAN welcomed the high level dialogue and the policy of the United States to engage with the Government of Myanmar, as indicated by the recent visit of U.S. officials to Myanmar. We expressed our hope that this effort, as well as ASEAN’s, would contribute to broad political and economic reforms and the process will be further enhanced in the future. We also underscored the importance of achieving national reconciliation and that the general elections to be held in Myanmar in 2010 must be conducted in a free, fair, inclusive and transparent manner in order to be credible to the international community. We called on the Government of Myanmar to help create the conditions for credible elections including by initiating a dialogue with all stakeholders to ensure that the process is fully inclusive. We also reiterated our continued support to the good offices of the United Nations Secretary-General in the democratization process in Myanmar. We also noted the Joint Communiqué of the 42nd ASEAN Foreign Ministers Meeting in Phuket, 20 July 2009.

Being cynical old me, the human rights stuff isn't as important as economic matters as the US seeks to shore up its political-economic authority in the region as China is asserting its influence. The important thing to keep in mind is that the US now poses no real objections to Myanmar's presence in forming a free trade area (preferential trade area, to be exact) with ASEAN. That in itself is, of course, a climbdown from the Bush administration:

13. We were pleased to note that economic relations between ASEAN and the United States continue to be strong and dynamic. We applauded the sizeable increase in trade and investment between ASEAN and the United States over the past several years. Two-way goods trade reached $178 billion in 2008, and, ASEAN is host to U.S. foreign direct investment of $153 billion, making it the favoured U.S. investment destination in Asia. We stressed the need to further enhance economic cooperation and partnership through new initiatives under the ASEAN-U.S. Trade and Investment Framework Arrangement (ASEAN-U.S. TIFA), to be agreed upon by the ASEAN Trade Ministers and the United States Trade Representative. We tasked the officials to initially focus on trade and customs facilitation. We also welcomed the meeting of ASEAN Finance Ministers and the U.S. Secretary of the Treasury on 12 November 2009 in Singapore as another element of broader engagement of ASEAN and the United States.

Bloomberg adds some colour on the latter point:

His [Obama's] predecessor, George W. Bush, scrapped a meeting with the bloc two years ago after Myanmar’s junta crushed the biggest anti-government protests since 1988. “That the meeting took place at all” was “very significant” given U.S. concerns over Myanmar, said Singapore’s Prime Minister Lee Hsien Loong, whose country hosted the gathering after the annual Asia-Pacific Economic Cooperation summit.

Obama said he reaffirmed at the meeting that Myanmar should release detained opposition leader Aung San Suu Kyi along with other political prisoners. Myanmar expressed appreciation for Obama’s decision to engage and said little else, Malaysia’s Prime Minister Najib Razak told reporters yesterday.

“We expected a bit more, but it was not forthcoming,” Najib said. “We hope this problem of national reconciliation and principles of democracy as a system to be adopted in Myanmar will become a reality sooner than later.”

Next up, we cover Obama's China visit which is still in progress.

China Overdose: PBoC Hints at Refloating Yuan

♠ Posted by Emmanuel in Cheneynomics,China at 11/12/2009 05:14:00 PM

OK, this Sinocentric focus is getting a bit too much even for my tastes. (The fine fellow working next to me, BTW, is from the PRC foreign ministry. The LSE is, if nothing else, the real deal.) However, since keeping IPE Zone readers better informed than your average blog reader is one of my goals--ignorance and stupidity always gnaw--I thought I should relay the following news. US administration officials has been making noises about asking China to follow "currency flexibility"--official speak for letting the renminbi or yuan revalue. Since June of 2008 to the present time, the PRC has maintained its currency at the $1/6.83 yuan level. (Clink on above chart for larger image.) This, of course, contradicts China's stated adoption of a "managed float" in July of 2005 from a hard peg. Take a trip down memory lane and view this blog post by Cynic's Delight.

What exactly is a "managed float"? An old IMF description says "a managed float, in which a country’s monetary officials will occasionally intervene in international currency markets to buy or sell its currency to influence short-term exchange rates." That sounds about right, although some "managed" or "dirty" floats are less subject to official machinations than others. In China's case, I think it's "we let it revalue somewhat when political pressure is being applied by foreign devils but re-peg it when the pressure's off." Now is the time when the Yanks are bellyaching once again, so what you see is what you may get. From the Times of London:

China moved yesterday to head off a currency row with President Obama by hinting that it would allow the renminbi to rise after keeping the exchange rate on ice for 16 months. Mr Obama has said that he would raise the issue of the Chinese currency, widely seen as undervalued, when he visits Beijing next week. The cheapness of the renminbi is one reason that Washington has slapped duties recently on steel, tyres and other Chinese imports.

The People’s Bank of China, the central bank, did not say explicitly that it would allow the renminbi to start to climb again — but conspicuously it omitted to repeat its well-worn language on the subject, which in Beijing’s opaque system can be interpreted as equivalent to a policy change.

In its third-quarter monetary policy report, the central bank departed from its mantra of keeping the yuan “basically stable at a reasonable and balanced level”, which it has repeated at every opportunity for more than a year. Instead, it hinted at a shift from an effective dollar peg that has been in place since July 2008, pinning the currency at about 6.83 yuan to the dollar.

Some traders are voicing doubts, however:

Yet not everybody was convinced that yesterday’s statement foreshadowed an imminent policy shift. Peng Wensheng, of Barclays Capital, said: “I think it probably reflects increasing capital inflow pressure on the currency. But I think it is unlikely they will make any move in the near term. The language is somewhat different from before, that’s true.” He was unsure that a change was around the corner, even with Mr Obama due in town. “Usually, when they say something and when they do something — the timing is uncertain, I should say.

Note that the foreign exchange markets are pricing in further revaluation in non-deliverable forwards (NDFs). Since the yuan is not freely traded, NDFs are the means by which traders bet on the yuan's direction without actual delivery of renminbi on the maturity date. Trust me. Unlike a certain financial yellow journalist, I actually know a thing or two about this. Anyway, from Alibaba:

The yuan rose slightly against the dollar in benchmark offshore one-year non-deliverable forwards (NDFs) on Thursday as the overseas market expected the yuan may appreciate after the Chinese central bank said it will consider major currencies in guiding the yuan, dealers said.

In a departure from past language, the central bank said on Wednesday it would improve the yuan exchange rate mechanism based on changes in capital flows and fluctuations in the values of major currencies when guiding the value of the yuan. "The wording change in the central bank's report hints that the central bank will allow the yuan to appreciate sooner or later," said a dealer at an Asian bank in Shanghai. "So, that has guided the overseas market's increased expectations for yuan appreciation."

Offshore, benchmark one-year dollar/yuan NDFs hit 3-week lows at 6.5850 bid on Thursday compared with Wednesday's close of 6.6075. Twelve-month yuan appreciation implied by NDFs, which moves inversely with the forwards, rose slightly to 3.67 percent measured from the Chinese central bank's daily mid-point, compared with 3.32 percent implied at Wednesday's close.

We'll see...

Is PRC Net Censorship a Trade Barrier? Revisited

♠ Posted by Emmanuel in China,Internet Governance,Trade at 11/12/2009 03:32:00 PM

Sometime ago our colleagues over at the International Economic Law and Policy blog posed the question of whether the infamous "Great Firewall of China"--manned by an alleged 30,000 censor prevented capitalist filth like what you read here from polluting the minds of the Chinese people--constituted a trade barrier. This argument for censorship being a trade barrier stems from an earlier case the US filed and has subsequently won against China concerning state-owned entities being given exclusive rights to distribute Western media (books, magazines, movies, TV programmes, etc.) This victory at the WTO has thus emboldened those who want to take PRC Internet censorship to the WTO dispute settlement mechanism as well.

Certainly, I do miss my Chinese readers lost via intermittent censorship. (I am Catholic; I love all people equally regardless of race, creed, or colour). While they are able to access this blog once in a while and even feature it--for some reason, they particularly liked my Frank Zappa post concerning the new cultural revolution and listed Frank's discography--I am still undecided on the merits of this case. Personal opinion aside, Reuters has commented on the ominous possibility of such litigation in the near future. Bang on schedule, the US-China Economic and Security Review Commission recently held a hearing on China's "Media and Information Controls."

Our dear old cyber-friend Iana Dreyer works for the European Centre for IPE whose head, Razeen Sally, is an instructor here at the LSE. Let's just say that the ECIPE's output is rather more liberal--in the classic sense--than I am. Hence, their latest publication makes the case for hitting China hard with a censorship case at the WTO. The blurb I've repeated below; you can download the PDF online:

Internet is a global market place. The rapid development of the Internet, and especially of Internet-based commerce, has largely taken place outside the standard trade-regulatory frameworks that cover most other forms of cross-border commerce. As the size of the Internet markets has grown, and as their contribution to the overall economy has become more pronounced, more attention has been given to regulatory concerns, such as trade-restrictive measures, damaging the climate of trade and investment in the fields of e-commerce, information-based services and online transmissions. One such measure is the blockage of access to websites.

This paper suggests that many WTO member states are legally obliged to permit an unrestricted supply of cross-border Internet services. And as the option to selectively censor rather than entirely block services is available to at least some of the most developed censorship regimes (most notably China), there is a good chance that a panel might rule that permanent blocks on search engines, photo-sharing applications and other services are inconsistent with the GATS provisions, even given morals and security exceptions. Less resourceful countries, without means of filtering more selectively, and with a censorship based on moral and religious grounds, might be able to defend such bans in the WTO. But the exceptions do not offer a blanket cover for the arbitrary and disproportionate censorship that still occurs despite the availability to the censoring government of selective filtering.

Obama Said Knock China Out

♠ Posted by Emmanuel in China,Trade at 11/11/2009 12:02:00 PM

Some folks think I exaggerate US-China quarrels. Well, perhaps this will give me more breathing space as US President Barack Obama talks trash prior to embarking on a tour across Asia extolling the virtues of the American way of life (or not). Something all of us are undoubtedly excited about is "China Currency Coalition" Obama visiting Beijing as both try to stare each other down in a game of chicken. Of course, America's champion Obama is seeking to placate domestic audiences by showing the burghers of Beijing who's boss (cue YouTube clip above) -

Don't call it a comeback
I've been here for years
Rockin' my peers and puttin' suckas in fear
Makin' the tears rain down like a monsoon

In an interview with Reuters, Obama is warning China that strains may become more obvious between the antagonists if global economic imbalances aren't resolved. (Read: China must allow the renminbi to revalue or face the consequences):

The United States sees China as a vital partner and competitor, but the two countries need to address economic imbalances or risk "enormous strains" on their relationship [time to sign up at Gold's Gym and put on some mitts, eh?], President Barack Obama said on Monday. Three days before leaving on a nine-day trip to Asia, Obama said the world's two most powerful nations need to work together on the big issues facing the globe, and any competition between them has to be fair and friendly...

Speaking in the Oval Office, he warned that the economic relationship between the two countries had become "deeply imbalanced" in recent decades, with a yawning trade gap and huge Chinese holdings of U.S. government debt. Obama said he would be raising with Chinese leaders the sensitive issue of their yuan currency -- which is seen by U.S. industry as significantly undervalued -- as one factor contributing to the imbalances.

"As we emerge from an emergency situation, a crisis situation, I believe China will be increasingly interested in finding a model that is sustainable over the long term," he said. "They have a huge amount of U.S. dollars that they are holding, so our success is important to them. The flipside of that is that if we don't solve some of these problems, then I think both economically and politically it will put enormous strains on the relationship."

Obama is saying that China must open up more of its markets to US exports to facilitate global rebalancing. True enough:

The Obama administration has resisted domestic pressure to brand China a currency manipulator, but has slapped tariffs on Chinese tires, steel pipes and other products.

Obama said he would be telling Beijing it needed to do more to open its markets. "Our manufacturers, I think, would have legitimate concerns about our ability to sell into China," he said, emphasizing that boosting U.S. sales oversees was a crucial part of his strategy to revitalize the economy and create jobs. "It is particularly important for us when it comes to Asia as a whole to recognize that in the absence of a more robust export strategy it is going to be hard for us to rebuild our manufacturing base and employment base in this country," Obama said in the 21-minute interview.

Like Obama, most Americans view China as more of a foe than a friend. In geopolitical terms--competition for Asiawide influence; competition in securing natural resources (especially energy); and treatment of rogue regimes--this is true. In the case of Burma, of course, it's all three but that's a story for another time...

A Thomson Reuters/Ipsos poll published last week showed that while Americans view China as important, many are wary. Thirty-four percent of Americans chose China as the "most important bilateral relationship" -- ahead of Britain and Canada. Yet when asked to characterize China, 56 percent saw it as an adversary while only 33 viewed it as an ally.

America sees competition as welcome as long as China plays by the rules. The question, of course, is who set those rules? Given its (now-ebbing) predominance in setting up international institutions--your WTOs, IFIs, etc., the answer is clear. This holds true as well for the Guantanamo Ghraibing nation's tireless espousal of human rights jibba-jabba:

"I see China as a vital partner, as well as a competitor," Obama said. "The key is for us to make sure that that competition is friendly, and it's competition for customers and markets, it's within the bounds of well-defined international rules of the road that both China and the United States are party to but also that together we are encouraging responsible behavior around the world."

Obama has been accused by some of soft-pedaling on China's human rights record, criticism he rejected. "We believe in the values of freedom of speech, freedom of press, freedom of religion, that are not just core American values but we believe are universal values," he said.

Pretty tough talk, Barack. But what are you going to do when China inevitably refuses to revalue the yuan, deal on climate change, and soften its human rights stance? Perhaps you're right and you know you must fight. Enough turkey punching already. As LL Cool J sang (rapped?):

Shadow boxin' when I heard you on the radio
I just don't know
What made you forget that I was raw?
But now I got a new tour
I'm goin insane, startin' the hurricane, releasin' pain
Lettin you know that you can't gain, I maintain

BNP: The Hard Bigotry of Terrorist Expectations

♠ Posted by Emmanuel in Europe,Migration at 11/11/2009 10:08:00 AM

There was a media firestorm here in Britain a few weeks ago when Nick Griffith, head of the far-right British National Party, was invited to speak on the popular political programme Question Time [1, 2, 3]. The argument was that, having placed two European members of parliament, the BNP had a right to represent its views in this public forum. (The BBC famously charges all UK TV viewers £139.50 or about $230 annually.) I suppose it's the equivalent of the Ku Klux Klan--which he is unsurprisingly supportive of, by the way--appearing on Nightline. Naturally, he tried to backtrack from his racist views practically all programme long.

For some reason, I visited the BNP's webpage concerning immigration and was not in the least surprised to find the tasteful and subtle graphic above. So immigrants bring rocket launchers into the immigration queue, eh? For some weird reason, I don't think the graphic artist here was the brightest of chaps. Along with the text, I guess it's all you need to know about what the party stands for.

The last I checked, migration applications to the UK were falling for expected economic reasons.

Still, there may be circumstances when such naked racism is preferable to mainstream parties eliciting similar sentiments but painting a veneer of respectability over it [1, 2]. All I can say is that sour times generally elicit similar sentiments as it's always easy and convenient to blame politically marginal foreigners. It certainly isn't a noble sentiment but a pervasive one seemingly hard-wired into human nature.

White Man's Burden 2009: "Enlightening" SE Asia

♠ Posted by Emmanuel in Southeast Asia at 11/09/2009 04:43:00 PM

There is an inbuilt streak which dies hard in many Anglo-Saxons to enlighten us backward coloured people who haven't seen the obvious advantages of capitalist liberal democracy. Nevermind, of course, rather contradictory episodes of subrime frivolity and Guantanamo Ghraibing misadventures as not-so-shining examples of both. While the date on the calendar says 9 November 2009, it might as well be 1899 as far as the FT's Asia correspondent Kevin Brown is concerned--the year in which Rudyard Kipling wrote of "The White Man's Burden: The United States and the Philippine Islands" in the pages of McClure's. Then, as now, the Great White Master is "burdened" with bringing civilization to Southeast Asia.

The context Brown writes about is diplomatic wrangling over the future of Asia. He believes that the US should flex its muscles in the region just as China is, in its own way, gradually vying for political-economic primacy there. In what he describes as "stultifying" diplomatic summits, the PRC is pushing for regional economic cooperation that disincludes the Yanks. Such efforts include ASEAN+3 which has the ASEAN 10 and China, Japan, and South Korea:

Asia’s annual series of regional summits is rarely calculated to stir the blood. This year, though, the stultifying communiqués conceal a battle for influence between China and the US that could hinder progress on human rights and democracy across much of the region.

The issue is the extent to which the US and its Asian friends can participate directly in multilateral regional institutions. Although there are a lot of these, only two really matter. One is the 10-country Association of South East Asian Nations, which holds annual summits with China, Japan and South Korea, known as Asean + 3, and with those countries plus India, Australia and New Zealand – known as the East Asia Summit. The other is the Asia Pacific Economic Co-operation grouping, a looser caucus with 20 countries (plus Hong Kong).

These summits have a meagre record. Asean has delivered some trade liberalisation successes. Apec has produced a useful travel card that helps business people avoid queues at airports. But much of their summitry verges on farce. Burma’s military junta, communist Vietnam and Laos, and Brunei, an absolute monarchy, happily signed the democracy and fundamental freedoms clauses of Asean’s human rights charter, knowing they could not be enforced.

Greater US engagement could force Asia’s democratic laggards to confront such issues. But Washington is in danger of being excluded by Chinese manoeuvring from plans to deepen and widen regional integration.

I doubt whether it has occurred to Brown and other modern Kiplings that us coloured people might actually have reasons to favour China over the US. During the Asian financial crisis, the Japanese offered to help Southeast Asian countries with an Asian Monetary Fund instead of having to deal with the IMF at the height of its "Washington Consensus" orthodoxy. (More here on this angle.) This proposal was promptly shot down by the US, but still. China also played a good neighbor by not competitively devaluing the yuan while many in the region struggled.

Instead of trumpeting a rehashed version of The End of History like Brown does, I think it would be better for the Anglo-Saxons to enumerate what they can offer the region instead of self-serving platitudes about the obvious benefits of capitalist liberal democracy. Certainly, American hypocrisy over dollar debasement does it no favours when eight of the world's top ten reserve holders are in Asia. In the end, there is little mystery about who the Yanks are screwing over via "strong dollar" misstatements. In all honesty, they have likely very little to offer compared to China and Japan.

On 15 November, the first ASEAN-US summit will be held in Singapore with Obama in tow. The interesting difference here is that Myanmar will be on hand. It is doubtful if the Yanks will dare bring up human rights given their Guantanamo Ghraibed recent history in that department. Rather, it's more likely that the US-ASEAN FTA will be discussed at greater length precisely to maintain political-economic relevance in the region. Just as Bill Clinton toned down his complaints over Chinese human rights, so too is Barack Obama likely to do so over Myanmar. While America's influence in the region is certainly not what it was before, it still wants to maintain a foothold. From Thailand's The Nation comes this insightful op-ed from Kavi Chongkittavorn

Whatever the US and Asean leaders choose to call their inaugural meeting would reveal deep down how they feel towards each other and their future relations. The previous plan would be a one-off summit to mark the three-decade cooperation. It is an open secret that the Asean leaders would like to have a regular and stand-alone summit on a yearly basis with the US leader...

After Asean's repeated diplomatic overtures to the US State Department and National Security Council, the grouping has lowered its expectation of an annual summit at its year-end meeting akin to the Asean+3 (China, Japan and Korea) to a mere commitment for follow-up meetings in the future. Now the ball is in the US court whether Washington wants to project enthusiasm and enhance its relationship at the highest level. But in the end it would be Obama who would make the difference...

The message came right after Senator Richard Lugar proposed the negotiation of an Asean-US free trade agreement (FTA) as part of a comprehensive strategy towards Asean. He reiterated that China, India, Australia, New Zealand and South Korea have already finalised FTAs with Asean and are sharpening their competitive edge over the US in Southeast Asia.

Obviously, at the top on the summit's agenda will be a discussion on the feasibility of an Asean-US FTA and other initiatives that would enhance economic cooperation. Singapore, which was the previous country coordinator of Asean-US relations, is keen to push for a joint study so that details of modalities can be worked out.

Perhaps some humility would do the Yanks some good in a world where there are others offering a better deal than simply accumulating junk Treasuries without limit. It would be interesting if Kipling could be time-warped to the present when the coloureds are, with some much-needed cooperation, better poised to show their erstwhile "masters" the errors of their ways.

I'm a Sucker for $ Doom Stories Episode 5,341

♠ Posted by Emmanuel in Cheneynomics at 11/09/2009 03:57:00 PM

A few days ago I questioned the empirical basis for determining whether dollar shares of global reserves were falling as the currency once again entered a full-on swoon. Lo and behold, it seems that there are more folks coming out of the woodwork with even more outre stories. Again, I would very much like to believe that countries around the world no longer believe in the usual American "strong dollar" hypocrisy. Kick those Yankee econocrusaders and greenbackjihadists where it hurts, I say. Drive interest rates stateside to kingdom come. Punish them for fouling up the world economy with the largest deficits it has ever seen. Bad behavior should be punished with extreme prejudice.

Anyway, that rant aside, the latest round of dollar kicking today which has seen the euro rise above $1.50 is being attributed to two things. First, the bad jobs numbers last Friday when unemployment in the US climbed into double digits likely means American near-zero interest rate policy will remain in place for some time. Next, US Treasury Secretary Tim "Deficits Still Don't Matter" Geithner didn't even bother to try and fool anyone with "strong dollar" talk at the G-20 over the weekend. The end result is an effective "kick me " sign posted on the (very wide) backside of the US. From TIME:

So has the dollar finally used up the last of its nine lives? There are worrying signs that the world is losing its appetite for dollars. The International Monetary Fund announced on Nov. 2 it was selling 200 metric tons of gold to India's central bank for $6.7 billion. News of the purchase sent gold prices to an all-time high. The move was widely seen as part of an effort by central banks around the world to diversify their extensive U.S. dollar holdings. Steven Englander, chief U.S. currency strategist at Barclays Capital in New York City, figures that in the second quarter, dollars accounted for only 37% of new reserves accumulated by central banks worldwide. That's the lowest proportion on record for any quarter during which reserves increased significantly. At a time when many central banks are boosting their reserves, they are choosing to buy euro and yen instead. "Central banks are doing more than talking about reducing the concentration of [the U.S. dollar] in their reserve portfolios. They are actually acting on their statements," Englander wrote in an October report.

37% of new reserves? I sure would like to ask Englander where he gets these truly Armaggedon-like figures. Surely, he must have some empirical basis for these eye-opening figures. Keep tempting fate, Yankee econocrusaders and greenbackjihadists. Sooner or later your time in gonna come, and I certainly don't want to be stuck with your toilet paper when it does.

Super Turkey Punchers: China, US Trade Blows

♠ Posted by Emmanuel in China,Litigation,Trade at 11/06/2009 04:10:00 PM

Well, well, well, this latest joint Sino-American hypocrisy over trade is interesting. Those of you who've played Doom 3 know what I'm talking about in the title. Prior to blasting aliens to kingdom come, the protagonist in Doom 3 has the opportunity to play an in-game arcade feature called Super Turbo Turkey Puncher 3. As you can gather from the video above, it is entertaining in a dumbly morbid way. The same holds true here with China and the US feigning trade amity.

Let's first set the stage for some prime time fowl play. At the end of last month, China and the US pledged that they would no longer engage in tit-for-tat combat on the trade front at the 20th China-US Joint Commission on Commerce and Trade. There was US Trade Representative Ron "Cap'n" Kirk and Commerce Secretary Gary Locke doing the diplomatic equivalent of kumbaya. Also there was Chinese Commerce Minister Chen Deming vowing that "Both sides agreed on not introducing any new trade protection measures against each other as both vowed to oppose trade and investment protectionism and observe the related consensus of the G20 summit." I, of course, found this quite amusing and thought it wouldn't be long until one side started whacking the other once again.

To no one's real surprise, the US was the first to break this lovey-dovey nonsense. On Wednesday, the USTR in tandem with Mexico and the EU delivered a long-awaited punch to the proto-Marxist-Leninist-Maoists over raw materials export limitations. The point of which is to keep China well-stocked with domestically sourced raw materials in alleged contravention of WTO rules. After not making progress in consultations with China during the preliminary 60 day period, the complainants have now requested the WTO to form a dispute settlement panel:

China imposes quotas on exports of bauxite, coke, fluorspar, silicon carbide, and zinc, as well as certain intermediate products incorporating some of these inputs. China also imposes export duties on several raw materials and imposes other export restrictions through its export procedures, including via certain charges (unrelated to any services rendered) that must be paid before certain products can be exported. In addition, China administers its export procedures unfairly in other respects, including, for example, by not publishing relevant measures in a manner that allows them to be readily available to governments and traders.

Article XI:1 of the General Agreement on Tariffs and Trade (GATT) generally prohibits restrictions on exports other than taxes, duties, and charges. GATT Article X requires China to administer its measures in a uniform, impartial, and reasonable manner, and GATT Article VIII requires that any charges in connection with export be limited to the cost of services rendered. Further, China's WTO Accession Protocol contains broad commitments not to restrict the right to export goods. Specifically, China committed as part of its WTO accession to eliminate export duties for all products other than those listed in a specific annex. China also committed to limit any export duties on the listed products to specified levels. The export duties being challenged are on products not listed in the annex or are imposed at rates that exceed the annex limits.

Requesting a panel is the next step in the WTO dispute settlement process after requesting consultations. The WTO's Dispute Settlement Body will consider the U.S. panel request at its meeting scheduled for November 19.

So, there's no tit-for-tat with this foregone US act of trade aggression, right? Lo and behold, today we have news that China is engaging in more punch-ups with the Yanks over oil well pipes that's been some time coming. From our favourite official publication, China Daily:

China's Ministry of Commerce (MOC) Friday branded the United States imposition of anti-dumping duties on Chinese oil well pipes as protectionist and vowed to take measures to protect its own domestic interests. The United States denied China's market economy status and took discriminative measures to impose anti-dumping duties, bringing serious impacts to China's steel sector exports, said MOC spokesman Yao Jian in a statement on the ministry's website.

"We hope the United States can get rid of the bias and admit China's market economy status soon to tackle the double standards thoroughly and give Chinese enterprises equal and fair treatment," Yao said.

The US Commerce Department on Thursday set preliminary anti-dumping duties on imports of Chinese-made oil well pipes. The department said it had "preliminarily determined that Chinese producers/exporters have sold OCTG (oil country tubular goods) in the United States at prices ranging from zero to 99.14 percent less than normal value." As a result, a 36.53-percent levy was imposed on OCTG from 37 Chinese companies, while some other Chinese companies received a preliminary dumping rate of 99.14 percent.

The emphasis above is mine and is quite funny given the "no more tit-for-tat" vows. With friends like these...Anyway, the we're-not-vengeful Chinese have now initiated an anti-dumping, anti-subsidy (wow, a double) investigation on US automobiles in response:

China's Ministry of Commerce (MOC) said Friday it had launched anti-dumping, anti-subsidy investigations into US-made off-road vehicles and sedans with engine displacements of 2.0 liters and above. The decision was made after the China Association of Automobile Manufacturers (CAAM) filed an application for the investigations, the MOC said in a statement posted on its website.

CAAM, representing Chinese car-makers, said US car makers had unfairly benefited from 31 government subsidy programs. The MOC decided to investigate into 24 of them. The ministry said it held consultation with its US counterpart on Tuesday and made the decision in accordance with China's anti-dumping and anti-subsidy laws. The investigations would commonly be ended before November 6, 2010, but might be extended by another year if necessary, the MOC said.

The M0C announcement came one day after the US Commerce Department set preliminary anti-dumping duties on imports of Chinese-made oil pipes, which was the biggest US trade action against China.

I have more background information from a previous post on the controversy over classifying China as a market economy or not. As for US subsidies for American automakers, the bailouts of GM and Chrysler immediately come to mind and how those may be tied to their Chinese exports. Given that China is now the world's largest car market and GM vies for top sales honours there with Volkswagen, this could have the makings of a really nice exchange of blows if the automaker is hit hard. (Then again, the WSJ notes GM makes most of its cars in the PRC.) Also don't forget that Obama is set to visit China this upcoming week.

So you see, boys and girls? No tit-for-tat here. None whatsoever. Now, if you'll excuse me, this turkey of a trade exchange has inspired me to play some Super Turbo Turkey Puncher 3 for old time's sake. As before, I suggest that these two jokers just cut the crap and started fighting already instead of giving fodder to would-be blogging comedians.

Euroskeptics, Lisbon Treaty's Wonderful Tonight

♠ Posted by Emmanuel in Europe at 11/05/2009 04:37:00 PM

With a slight delay due to computer woes, it brings me a great deal of pleasure to announce that the Lisbon Treaty has finally been inked by all 27 member states of the European Union. Hallelujah! The Czech Republic's Jurassic Euroskeptic (and global warming denier, naturally) Vaclav Klaus received enough sweeteners so that all he could do was mutter something about how he's had to sign due to an unfavourable ruling. The road to this momentous occasion has certainly been a rocky one. Lisbon's predecessor, the EU Constitution, was turned down in referenda by both France and the Netherlands in 2005. These events prompted a rethink by the powers-that-be which eventually resulted in the repackaging job called the Lisbon Treaty. The main difference this time around was that almost all EU countries did not subject it to referenda--with the most notable exception of Ireland. After turning it down once, the Irish eventually came to their senses and passed it after a second referendum.

What is important to note is the landslide victory the second Irish referendum obtained on the Lisbon Treaty. My intuition is that the difference the second time around was heavy marketing by pro-Europe (pro-intelligent) forces including virtually all major Irish parties. At the same time, and this is the kicker I believe, they did a better job of explaining it to ordinary folks. I honestly do not see repeating referenda as "undemocratic" as Euroskeptics have it but rather a victory over shallow debate where poisoned mass media phobia over a European superstate and similar nonsense is relentlessly hammered into the minds of those who haven't really investigated what Lisbon entails. For, the Lisbon Treaty is not about surrendering powers to some supranational monster. Instead, it's about streamlining the EU which has now grown to 27 members so that it can be more effective in dealing with internal and external affairs.

I am thus amused by the comments of the Euroskeptic press here in Britain hoping for a delay in the signing of the Lisbon Treaty that would allow the Tories' David Cameron--PM Gordon Brown's assumed successor--to subject it to a UK referendum that'd likely result in a "no" vote given the Murdoch media machine's unabashed hatred of the EU. His Sun tabloid says Britain has joined the "Chumpions League" (har-har) in Labour's betrayal while the somewhat more respectable Telegraph opines that a 20o-year-old experiment in modern Western democracy has ended [!] I refer you to an old article in the New Statesman on Murdoch's self-serving twaddle as he fears Brussels' anti-monopoly powers being deployed against his media empire:

If The Sun took the democratic rights of the British people seriously, then it should be campaigning for the influence of foreign tycoons like Murdoch to be extirpated from British political life. Needless to say, we shouldn’t be expecting this to happen anytime soon.

Murdoch and the other proprietors are rational enough. They fear the EU because it has the potential to develop the political confidence and regulatory heft to break up their cosy little empires. Concerned at the terrible prospect of the balance of political power slipping away from him, Murdoch will do whatever he can to maintain the status quo.

Nuff said, In the meantime, this turn of events has put PM-in-waiting David Cameron and the Conservatives in a difficult position. After all, he wrote in the Sun in 2007 (natch) that "Today, I will give this cast-iron guarantee: if I become PM a Conservative government will hold a referendum on any EU treaty that emerges from these negotiations." Apparently, Cameron is now backtracking on this statement by attempting to change the subject--it's the economy, stupid, not Europe--and making more half-baked promises about stopping further EU inroads into UK sovereignty. Either way, there will be no such referendum. I was also amused by France's Europe Minister Pierre Lellouche having to apologize after saying the Tories had a "very bizarre sense of autism" over Europe and the Lisbon Treaty, calling them "pathetic" and their MEPs "castrated". (Murdoch's Times of London reports on this, naturally.) Not the most diplomatic way of dealing with Euroskeptic double-talk perhaps, but it's a refreshingly honest opinion.

Ultimately, it comes down to information bettering disinformation. I ultimately believe that the EU cause would be served better by the former. Unfortunately, there are few outlets at the curent time for patiently explaining what Europe really is about aside from the nonsensical tabloid scaremongering peddled here day in and day out. To give you an example, the BBC's fine programme The Record Europe is only shown during the weekends when people are likely out or asleep. Again, political marketing plays a role: if Europhiles want to get their message across better, they had better put in some marketing muscle and create a simple, easily comprehended message that the person on the street can identify with. It's that simple and that complex.

In the meantime, Europa is wonderful tonight.

Holy War Lite: Pope Poaches Anglican Priests

♠ Posted by Emmanuel in Religion at 11/05/2009 03:08:00 PM

I have a massive backlog of possible posts I haven't been able to attend to due to not having an Internet connection at home. Lest I pay highway robbery rates to have my British Telecom line activated, this will have to continue for a while. Nonetheless, the ongoing brouhaha between the Anglican and Catholic churches certainly merits attention. Tonight being Bonfire Night which Britons celebrate by burning effigies of Catholic conspiracist Guy Fawkes is certainly appropos. Why exactly are they damning whwat is now Britain's largest religion when the one Fawkes was trying to dismantle is self-destructing?

It is no secret that the Catholic church has eclipsed its Anglican counterpart in terms of attendance here in Britain. Once more, this is no mean achievement in that the former has shrunken at a slower rate than the former. Heck, Tony Blair's even become my co-religionist. The Anglican church has been riven by internal conflict these last few years over efforts at "modernization" by enlisting women and gay priests. This internal turmoil has certainly played a role in losing some of the faithful.

Adding insult to injury, however, the Catholic church recently offered a sort-of conversion [1, 2] for Anglican priests and their flock to our bastion of religious conservatism (where it's unlikely that the Scissor Sisters will be saying mass anytime soon). Making it easier for Anglicans to switch over has raised accusations of opportunism. In contrast to jihadis and crusaders going at it, these Christian faiths have what I call "holy war lite" or a religious cold war. It's certainly interesting stuff that demonstrates that proselytizing always involves a bit of--you guessed it--marketing.

The not-so-politically-correct US General William G. Boykin once famously remarked that "my God is bigger than yours." I, however, make a smaller claim that should not arouse any sort of mischief by declining to assign moral valence: "My Pope's craftier than the Archbishop of Canterbury [!]" And that, dear friends, is not usually a characteristic associated with a staunch defender of tradition often perceived as being trapped by it.

Are They Dropping Dollars for Euros as Reserves?

♠ Posted by Emmanuel in IPE 101 at 11/02/2009 04:23:00 PM

This is a wonky post that I believe needs to be made anyway. I have made it plenty clear that I am no fan of the dollar and that anyone dumb enough to hold it--including myself, of course--should not complain when the Fed decides to "create some inflation" as now-chairman Ben Bernanke (AKA B-B-B-Bennie of the Feds) puts it. Recently, I've come across articles that make noises to the effect that reserve holding countries are shifting in a significant way towards the euro. Let's start with Bloomberg:

While the dollar dropped in global currency reserves, holdings of euros rose to a record, the IMF report shows. The U.S. currency’s portion declined to 62.8 percent from 65 percent in the first quarter. The euro’s share rose to a record 27.5 percent from 25.9 percent while the pound and yen gained.

Martin Wolf also makes similar noises:

Finally, what can replace the dollar? Unless and until China removes exchange controls and develops deep and liquid financial markets – probably a generation away – the euro is the dollar’s only serious competitor. At present, 65 per cent of the world’s reserves are in dollars and 25 per cent in euros. Yes, there could be some shift.

You'd think I'd be overjoyed about this turn of events in which central bankers are fleeing Yanqui economolesters as fast as peaceniks from Dick Cheney, but no. These statements are most likely inaccurate unless these sources are privy to exclusive information the rest of us don't have. The main source for this data is the IMF Composition of Foreign Exchange Reserves or COFER. See here for the latest report. Actually, the Bloomberg report is accurate as of Q2 2009 if we consider only the reported holdings of countries that give the IMF the currency breakdown of their reserves. As you can see, however, only 62.8% of all reserves are denominated (I originally typed "demoninated"; it sound about right).

The biggie, China, holder of two trillion or so in reserves, does not report the composition of its reserve holdings. Nor do many Mideast countries that are also large reserve accumulators due to currently elevated oil prices. Hence, the best we can do is cite the abovementioned figures but say that they are only for reserves whose denomination is known--less than two-thirds of total global reserves. As for the overall move from dollars to euros, your guess is as good as mine as more than a third of the world's reserve holdings are of undetermined breakdown.

Unfortunately, the honest answer to this question is "I don't know" based on the available data.

US Intrafirm Trade: When MNCs Rule the World?

♠ Posted by Emmanuel in Anti-Globalization,Trade at 11/02/2009 03:58:00 PM

Sometime ago I read an exceptionally bad anti-globalization book by David Korten entitled When Corporations Rule the World. Ridden with factual errors such as the corporate revenues versus GDP apples-and-oranges fallacy, it was, to say the least, a laborious read. The anti-globalization movement claims to be environmentally friendly unlike the folks they criticize, but all I can say is that I am hugely appalled that so many trees were cut to print this amateur nite rubbish. At any rate, I was reminded of this amateurish screed while reading the latest summary statistics from the WTO's annual International Trade Statistics report for 2009.

The above chart caught my eye depicting the growing share of intrafirm trade in US service exports. America is, of course, by far the world's largest exporter of services. What is noticeable here though is that while the ultimate share of intrafirm trade in US service exports is growing, the base it starts with is relatively low. Trade is certainly not yet becoming the exclusive domain of monolithic corporations divvying up their operations worldwide for its inevitable corporate conquest. Certainly, it's nothing to set the anti-globalization set afire, though they're welcome if they want to give it a try. When Intrafirm Services Trade Rules the World doesn't have the same snap IMHO.

Without further ado, here is the accompanying the writeup:

The globalization of business and the firms’ increasing ownership of different stages of the production process have increased the role of intermediate goods in merchandise trade over the last decade. A similar fragmentation of production has been emerging in the field of services. The United States has recorded an increasing share of trade between multi-nationals and their majority-owned foreign affiliates, growing from 21.5 per cent to more than a quarter of its total trade (27.5 per cent) in 2007 (covering only nonbank affiliates, and excluding transportation services and travel).