Europe Presses China on RMB; Gets Nowhere

♠ Posted by Emmanuel in , at 10/06/2010 12:04:00 AM
Just to remind you that the United States is not the only entity having issues with China's currency, here's a bit more on European efforts to prod the PRC into making its currency appreciate faster. Unnoticed by many, the eighth Asia-Europe Meeting (ASEM) recently took place between--obviously--Asian and European countries in Brussels. Now, the reason you don't often hear about ASEM is that, well, these biennial gatherings alternating between Asian and European venues don't count for much. However, with currency matters coming to a head the world over, China's yuan didn't escape attention this time around and ASEM finally got a bit of attention--but not much.

The Eurozone argument is that, with everyone else doing dirty tricks with their currencies--the US helicopter dropping greenbacks and developing countries attempting to counteract American quantitative easing via intervention in currency markets--the Euro is one of the few escape valves for currency pressures, driving the nominal value of the single currency upwards and supposedly threatening recovery:
Europe’s fledgling economic recovery could suffer if the euro is undercut by other currencies, the European Union’s economics chief warned as China rebuffed fresh pleas to allow the renminbi to strengthen. The warning from Olli Rehn, Europe’s commissioner for economic and monetary affairs, reflected a growing concern that moves by other nations to restrain their currencies in order to boost exports was taking its toll on Europe’s competitiveness...

“If the euro continues to bear a disproportionate burden in the adjustment of global exchange rates, the recovery of the euro area might be weakened,” Mr Rehn said in Brussels after meetings Wen Jiabao, China’s prime minister, during an EU-Asia summit.
It's certainly plausible, mind you. However, China (surprise!) doesn't buy into this line of argument:
Euro area policymakers pressed China on Tuesday for a faster appreciation of its currency to help rebalance the world economy but said Chinese Prime Minister Wen Jiabao had differed with them. The chairman of euro zone finance ministers, [Luxembourg's] Jean-Claude Juncker, told a news conference after talks with Wen on the sidelines of an EU-Asia summit in Brussels: "China's real effective exchange rate remains undervalued."

He said the 16-nation European currency area had urged an "orderly, significant and broad-based appreciation" of the yuan. Asked how Wen had responded, Juncker said the message came as no surprise to the Chinese delegation, but added in French: "The Chinese authorities do not share our view."
It will be interesting to see if the US rallies countries like those in the Eurozone to its cause prior to the G20. While Europeans may lend a sympathetic ear (nevermind quantitative easing), other developing countries that have also intervened in currency markets may not be so keen on siding with the US lest they too become branded as manipulators in the future. That's the slippery slope you must confront with dealing with these Yanks. Same as it ever was.

UPDATE: Wen Jiabao has now warned that yuan revaluation would be a "disaster for the world":
Forcing Beijing to revalue its currency would lead to a “disaster for the world”, Wen Jiabao, China’s premier, has warned amid increasing tensions over efforts by governments and central banks to hold down their exchange rates. Speaking in Brussels, Mr Wen hit back at international criticism of China’s currency policy, saying that acceding to demands for a faster rise in the renminbi could cause social unrest in China

“Do not work to pressurise us on the renminbi rate,” Mr Wen said, departing from prepared remarks. He said Chinese export companies had very small profit margins, which could be wiped out by actions such as the currency import tariffs the US Congress is threatening to impose. “Many of our exporting companies would have to close down, migrant workers would have to return to their villages,” Mr Wen said. “If China saw social and economic turbulence, then it would be a disaster for the world.”
Methinks this world is pretty disastrous as it already is. Everyone's cooperation is required--especially from the Chinese.
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Finance Bigwigs Call for Ceasefire in Currency War

♠ Posted by Emmanuel in at 10/05/2010 12:36:00 AM
Well this is pretty much self-explanatory. Many are wondering about whether the Washington Consensus-era vogue of free-floating currencies is cut out for today's world. With the US showing no intention of easing on easy money policies and screwing over holders of their debauched currency, many developing countries have taken to propping up the dollar in fear of an outright dollar swoon that will severely damage their export competitiveness. Meanwhile, those in search of higher yield use the dollar as a funding currency to obtain higher-yielding ones in the developing world as dollar savings rates are near zero. Brazil's FinMin recently grabbed a lot of headlines by declaring that we're in the midst of an "international currency war," but it's certainly not far from the truth.

And so those wary of the (foreign exchange) market's corrective ability now envision another 1985 Plaza Accord-style agreement hammered out in the eponymous hotel pictured above. Whereas that deal involved the US and major trading partners Germany and Japan, the surplus-running countries are now more plentiful. There would be many more places at the negotiation table circa late 2010. And, instead of weakening an overly strong dollar, the objective many participants will likely have in today's world economy is a stable dollar that isn't going to get routed as to preempt the need for masive intervention now going on. From the Financial Times:
The world’s leading countries should agree a new currency pact to help rebalance the global economy, a leading association of financial institutions has urged. The Institute of International Finance, which represents more than 420 of the world’s leading banks and finance houses, warned on Monday that a lack of such co-ordinated rebalancing could lead to more protectionism. Charles Dallara, IIF managing director, said: “A core group of the world’s leading economies need to come together and hammer out an understanding...”

Mr Dallara, who as a US official worked on the 1985 Plaza Accord which co-ordinated international action to strengthen the yen against the dollar, called for a more sophisticated updated version of such an agreement. This should include stronger commitments to medium-term fiscal stringency in the US and structural reform in Europe. “Exchange rate understandings are of little use on their own,” he said.

The institute also released its latest forecasts for net flows of capital to emerging markets, which showed a sharp upwards revision for 2010, with the previous estimate of $709bn rising to $825bn. The institute said that ultra-low monetary policy in rich countries was rapidly driving money into emerging markets in search of yield, risking destabilisation. “There is an environment of unilateralism and bilateralism, laced with contributions of isolationism and parochialism,” Mr Dallara said.

On Monday Robert Zoellick, World Bank president, said while a currency war was unlikely, “there are clearly going to be tensions” over the matter.
You needn't ask me who the villainous economolesters are in this story.
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Hugh Hefner, US Carriers, Boeing & Trade Finance

♠ Posted by Emmanuel in , at 10/05/2010 12:04:00 AM
Before getting to today's main feature, I must mention Playboy impresario Hugh Hefner stating something I truly believe has happened in today's age of mass commercialization of flight. Before, I've ranted in politically incorrect fashion about the prevalence of geezerized flight crew common among many (heavily unionized) European and American carriers. You see, once upon a time, travelling was something special. Not only did travellers dress for the occasion, but air crew were really good-looking. While that standard is still quite prevalent in Asia where (obviously politically incorrect) airlines reserve these jobs for the young and attractive, Hefner has it more or less right when he writes "Stewardesses used to look like Bond Girls; now they look like your mother." Ah, to be back in the day when stewardesses (and stewards for the ladies even?) were hot and jets were cool.

Just in time, I was browsing through today's WSJ when I came across a very interesting article concerning the bloviations of perpetually broke, outrageously lousy American airlines stuck with these near-geriatric flight crews. The Air Transport Association composed of these Yankee bankrupts is faulting the US government for offering generous financing terms to foreign buyers of Boeing jetliners but not domestic ones. Think of it as "Buy American" for the furriners. I've always thought that American carriers had crappy planes because they were flat broke in honest-to-badness national fashion, but the association begs to differ. As it turns out, the OECD is in the process of drafting new rules on what's allowed for export financing among members, but the thing is that many manufacturers are outside the OECD like Brasilia and China, Moreover, European carriers are also miffed that they cannot avail of export financing either from their own governments.

The story explains that both Boeing and the European Airbus consortium have not only been in a tussle over subsidizing aircraft production, but also in offering heavily financed terms to ensure a steady stream of customers post-credit crisis. Export finance care of America's Export-Import Bank or Exim Bank (as well as its overseas counterparts) is certainly a worthwhile thing to study for those interested in the state's role in trade finance:
Boeing Co. and some of its biggest customers—U.S. airlines—are in a deepening spat over billions of dollars in government aircraft-export loans. In a letter to members of Congress, Boeing fired back at criticisms of U.S. jetliner export subsidies that were leveled in August by the trade group representing most U.S. carriers, the Air Transport Association. ATA members include several of the leading buyers of Boeing planes: Delta Air Lines Inc., AMR Corp.'s American Airlines and Southwest Airlines Co.

ATA President James C. May in August sent a five-page letter on the issue to senior U.S. government officials, including Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton. The letter objected to U.S. government loan guarantees for airplane exports, which are offered to non-U.S. airlines—but not domestic ones—by the U.S. Export-Import Bank and similar agencies in other countries.

The airline group's letter blasted "undisciplined competition" among export-credit agencies to support airplane sales in their countries. The subsidies are contributing to excess airline capacity, "causing direct and substantial competitive harm to U.S. airlines," and should be sharply curtailed, the ATA letter said.

While not criticizing Boeing outright, the ATA letter indirectly said the U.S. aerospace giant is helping foreign airlines at the expense of U.S. carriers. Boeing and its rival Airbus, a unit of European Aeronautics Defence & Space Co., currently rely on export-credit guarantees to help finance more than one-third of their jetliner deliveries.

Boeing's letter, a copy of which was seen by The Wall Street Journal, was unusually blunt in rebutting the airlines. "ATA's claims are without merit," said the letter, which is dated Sept. 23. ATA's proposal to cut U.S. export subsidies "would seriously jeopardize the U.S. aerospace industry's ability to compete" internationally. Boeing said its production is driven by airlines' passenger demand, not government credits.

The U.S. Export-Import Bank has financed roughly $8 billion annually in Boeing exports the past two years. The aerospace giant's response to the ATA is a sharp break with the company's standard practice of not commenting about its customers or their views. It is a sign of how seriously Boeing, which is America's largest exporter, takes the issue of export credit guarantees.

"We normally don't take issue with our customers' views, but given the vital importance of export credit financing to the U.S. aerospace industry, we could not let ATA's assertions go unchallenged," said Ted Austel, Boeing's vice president for legislative and regulatory affairs in Washington, in an interview. Mr. Austel signed the letter.

ATA's general counsel, David A. Berg, said the situation is awkward for airlines. "We don't like being at odds with Boeing," Mr. Berg said in an interview. "But this is an issue where we're on different sides of the principle." Ex-Im Bank officials were unavailable for comment, but have previously said that the bank supports American jobs and international competitiveness while striving not to disrupt private markets.

The issue is coming to a head now in part because countries that build jetliners are negotiating new terms for export financing. The talks, at the Organization for Economic Cooperation and Development in Paris, are aimed at establishing one set of global rules and thus neutralizing export credits as a competitive factor in jetliner sales. An earlier OECD pact, reached in 1986, has proven unworkable as plane makers from Brazil, Canada, China, Japan and Russia have entered the jetliner market...

Until the financial crisis hit two years ago, commercial loans were less expensive than loans backed by government guarantees. That pricing difference meant U.S. and European airlines weren't troubled by export credit. Export-credit agencies, which charge fees for their guarantees and attach strict repayment conditions, worked mainly with carriers from emerging markets. After financial markets froze up in 2008, commercial loans to airlines became more expensive than government-backed borrowing.

Carriers from developed countries including Canada, Norway and the United Arab Emirates greatly increased their use of export subsidies for Boeing and Airbus orders. The shift initially angered airlines in France, Germany, Great Britain and Spain, the home countries of Airbus. Like U.S. carriers, they don't receive export-credit guarantees. In January, nine airlines from the four European countries sent their governments a common letter attacking export subsidies and the home-country rule.

U.S. carriers began to focus on the issue in spring, say industry officials, and over the summer formulated the position expressed in the ATA's letter, dated August 16. Airbus hasn't commented publicly on the European airlines' letter.
Methinks they doth complain too much as the name of the game is e-x-p-o-r-t finance. You know, selling stuff a-b-r-o-a-d to help close America's chronic trade d-e-f-i-c-i-t. Plus, don't forget that the US government has subsidized these habitual money losers for many years since 9/11. And there's probably no point in having brand-new jets if your flight crew looks like Mum (and Dad for that matter), but I digress. So not only do Asian carriers get better financing terms, but they also have younger crew. I know which I'd rather fly--and obviously so does the rest of the world.
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Don't Miss Fareed Zakaria's Wen Jiabao Interview

♠ Posted by Emmanuel in at 10/05/2010 12:01:00 AM
I am utterly befuddled as to why the blogosphere has, to my knowledge, entirely overlooked a recent interview of Chinese Premier Wen Jiabao conducted by none other than Fareed Zakaria on CNN's GPS. Premier Wen rarely gives out interviews, and it's only fitting that the interviewer to the world's political-economic who's who gets another chance to ask him some timely questions on currency, inflation, and China's place in the world economy.

The pre-interview profile is also interesting and reminds us that Wen tried to placate protesters in Tiananmen Square prior to the ill-fated events that followed. Which, of course, contrasts strongly with the Cambridge shoe-throwing incident where this mild-mannered and kind-hearted gentleman had to witness an ill-advised, Bush-inspired foot attack.

As I like to say, you're nobody in this world until people start throwing shoes at you. In the meantime, listen and learn from a global leader at the top of his game. Come 2012, we all know there will be another one in his stead.
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How Liverpool FC Shows Globalization's Downside

♠ Posted by Emmanuel in , at 10/04/2010 12:28:00 AM
I suppose in the larger scheme of things the rightful protests of Liverpool FC fans against the club's rapacious and quite frankly appalling Yankee owners George Gillett and Tom Hicks don't count for much. Last week, public sector workers throughout Europe voiced their objections to great perceived unfairness. You see, the bulk of Western European states have poured lots of state money into troubled financial institutions to prevent their collapse in fear of wider contagion effects a la Lehman Brothers. What many public sector workers believe is that their monies were used to bail out bankers who took on too many risks in the expectation that, if push came to shove, governments would step in. In turn, labour critics of austerity measures claim governments are now hacking away at public spending when it was bankers, not those employed in the public sector, who brought on this mess in the first place.

However, the telltale artefacts of American-style casino capitalism are not limited to banks or the public purse alone as the fingerprints of the culprits here are familiar ones. Nosiree Bob, Yankee disease has gone global in sport as well. Earlier on, I covered the much-reviled Stateside stinkers at the helm of Manchester United and their brethren at Liverpool FC. Unfortunately for the latter club, things have gotten worse. Much worse. On Sunday, Liverpool were beaten at home by the just-promoted from second division minnows Blackpool (I was of course rooting for Blackpool whose home stadium capacity is 15,000). Before this unlikely thrashing, protests erupted from concerned fans of the Spirit of Shankly movement.

You see, these Yanks have done virtually nothing to improve fortunes at the storied club. To begin, they didn't pay much of the £218.9 million it cost to buy Liverpool in 2007 with their own money but via a leveraged buyout (LBO) when credit conditions were easier. Since then, they've piled on an appropriately US-sized debt load of £351.4 million (about $555 million) due to their inability to generate revenues. Liverpool hasn't won any hardware under George Gillett and Tom Hicks, but that's secondary to leaving it in very poor financial health--just like the USA, eh? The current coach of European champions Inter Milan and formerly of Liverpool Rafael Benitez has said the American pair "knew nothing about football."

These Yanks have even turned to feuding with each other. I believe the reason why Americans like Gillett and Hicks hate each other so much is because they're so alike. Simply put, they don't appreciate seeing (obviously unappealing) virtual reflections of themselves: bloated, debt ridden, and with no money management chops whatsoever. Like modern-day America, it's not a pleasant picture. These Yankee carpetbaggers represent so much about what's wrong with sport--too much debt, too little talent, and an attitude not of nurturing a fanbase and building a franchise but of waiting to sell on Liverpool FC at a tidy profit despite mismanaging it into a £350+ M hole.

Recently, Tom Hicks has tried to lengthen his tenure at the Kop via the time-tested American tradition of refinancing massive loads of debt with the Royal Bank of Scotland--an ironic funder to say the least. It probably won't work, and there are now big name fans--some of them Hollywood A-listers, mind you--lined up to kick these bums out via a video campaign that I certainly shall be supporting:
Hollywood producer Mike Jefferies has returned to his hometown with Daniel Hubbard, casting director of The Bourne Ultimatum, to begin a weekend of filming for a viral video campaign to highlight the reasons why the American duo's time with the Reds has to come to an end.

Comedian John Bishop and Lightning Seeds front man Ian Broudie will be joined by various Anfield A-listers, with Samuel L Jackson and Sex in the City star Kim Cattrall, who was born in Mossley Hill, both heavily tipped to feature in filming at the Hope Street Hotel on Saturday.

Jackson is believed to be in the North West as part of filming for the new Captain America film, most of which is being shot in Liverpool and Manchester, and may rekindle his love affair with the club, which began when he starred in The 51st State on location in the city in 2000.

Shrek and Austin Powers star Mike Myers, whose parents both hailed from Liverpool, is also rumoured to be joining the ever-growing list of high profile names that will back the effort to see Gillett and Hicks ousted from Anfield.
There are more thanks but no Yanks-style videos in the works. I'm no Liverpool fan, but I definitely want to see these ghastly bums thrown out pronto and sent back to where they came from. Enough is enough. It's sad but true: with the ownership of this club unsecure, the storied Liverpool FC is currently not fighting for a Champions League berth but to stave off relegation. It's Americana in excelsis. Make no mistake: these two guys walk alone.

5/10 UPDATE: The BBC reports that Boston Red Sox owner John Henry is looking to take over the club before RBS calls in its loans. Would that necessarily be an improvement, though?

15/10 UPDATE: The deal is done. We'll see if the new Yank is better than the old ones.
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LSE Events Tues: Ballmer, Ha-Joon Chang, KGB

♠ Posted by Emmanuel in at 10/04/2010 12:05:00 AM
I sometimes wonder if we here at the LSE have a monopoly on having the most intriguing speakers coming to campus to deliver a talk. Is there any place you'd rather be if you're at all interested in the social sciences? I certainly can't think of one as an embarrassment of riches always seems to occur, especially at the start of term.

Sometime last term, I wrote about a day that had both Paul Collier and Adam Posen deliver interesting talks that I unfortunately wasn't able to attend since there was a third I was more interested in. Well, this Tuesday, there's going to be Microsoft CEO Steve Ballmer and longtime critic of development orthodoxy Ha-Joon Chang coming to speak who I probably won't be able to see because there are other presentations I'm keener on. You see, there are another four events occurring that should hold interest to a general audience. Incredible.

Once more, London readers are invited to come along and listen to any of these presentations. Those who can't make it can hear the podcasts as we make them publicly available, too. I guess part of what makes LSE unique is its ability to draw so many interesting authorities discussing a myriad of topics. If you're thinking of a place to get an MA for a year, it's certainly an unparalleled draw. On Tuesday, let me count the ways:

(1) Steve Ballmer, CEO of Microsoft, needs no introduction. While Bill Gates has dedicated his life to good causes, the often-combative tech supremo is still keen on growing the software giant. Microsoft almost famously missed the Internet wagon due to Gates' reluctance to recognize its potential. Apparently, Ballmer & Microsoft are keen on not missing out on possibly the Next Big Thing--cloud computing. He's spoken about it at length before, and now it's his turn to address a British audience:

Seizing the Opportunity of the Cloud: the Next Wave of Business Growth
Department of Management public lecture

Date: Tuesday 5 October 2010
Time: 8.30-9.30am
Venue: Sheikh Zayed Theatre, New Academic Building
Speaker: Steve Ballmer

The pervasive nature of technology and the ever increasing pace of development are rapidly changing the way we work, live and play. These changes bring enormous opportunity for individuals, organisations and society. For more than three decades, Microsoft, and current CEO Steve Ballmer, have played a vital role in leading a technology industry that has transformed the world of business in dramatic fashion. In one of the opening public lectures of the LSE term, Ballmer will discuss what's next, how cloud computing is radically altering paradigms, and new business opportunities enabled by the cloud.

Steve Ballmer is Chief Executive Officer of Microsoft Corporation. He joined Microsoft in 1980 as the first business manager hired by Bill Gates. Since then, Ballmer's leadership and passion have become hallmarks of his tenure at the company. Ballmer and the company's business and technical leaders are focused on continuing Microsoft's innovation and leadership across each of the company's core businesses. Variously described as ebullient, focused, funny, passionate, sincere, hard-charging and dynamic, Ballmer has infused Microsoft with his own brand of energetic leadership, vision and spirit over the years.

(2) There' s also a promising looking engagement dealing with how Spain's third largest savings institution is dealing with Europe's trying times. Financial institutions are likely the focal point in whether the EU gets out of this episode alive, and among EU nations, Spain is definitely too big to fail. So, if the survival of Spain and, indeed, European Union interests you, do come along:

Some thoughts on the macroeconomic situation: the role of La Caixa
LSE Enterprise and the Catalan Observatory

Date: Tuesday 5 October 2010
Time: 11.30am-12.45pm
Venue: Thai Theatre, New Academic Building
Speaker: Juan Maria Nin

Juan Maria Nin will be discussing the financial crisis with reference to the Spanish economy.
Juan Maria Nin is President and CEO of La Caixa.

(3) For those interested in how former KGB have assumed positions of political-economic power in Russia and beyond, we also have an interesting talk for you courtesy of Andrei Soldatov who's followed the rise of the likes of Vladimir Putin:

The New Nobility: The Restoration of Russia's Security State and the Enduring Legacy of the KGB
LSE public lecture

Date: Tuesday 5 October 2010
Time: 6.30-8pm
Venue: Hong Kong Theatre, Clement House
Speaker: Andrei Soldatov
Chair: Dr Roy Allison

Andrei Soldatov – a journalist who has covered Russia's security services for more than a decade – penetrates the secret world of the FSB to illustrate how, abetted by their most famous alumnus Vladimir Putin, the security services were given unprecedented rein, and emerged a more shadowy and powerful force than the Soviet KGB.

Andrei Soldatov and his The New Nobility co-author Irina Borogan are-founders of Agentura.ru, a highly respected website covering the Russian security services. Soldatov and Borogan worked for Novaya Gazeta from January 2006 to November 2008

(4) Negotiation is a very interesting and important field of study. At the global level, trade agreements and peace pacts are forged. At the corporate level, deals are done and contracts must be negotiated, At the individual level, you and I need to haggle prices with vendors and hammer out salary details with employers. Stuart Diamond, one of the experts in this area, has a new book he's introducing that he will talk about:

Getting More
Department of Management public lecture

Date: Tuesday 5 October 2010
Time: 6.30-8pm
Venue: Sheikh Zayed Theatre, New Academic Building
Speaker: Professor Stuart Diamond

You're always negotiating. Whether making a business deal, talking to friends or even driving a car, negotiation is going on. And most of us are terrible at it. Experts tell us to negotiate as if we live in a rational world. But people can be angry, fearful and irrational. To achieve your goals you have to be able to deal with the unpredictable.

Negotiation expert Stuart Diamond reveals the real secrets behind getting more in any negotiation - whatever 'more' means to you - in his new book Getting More|, published on the 7th October by Portfolio Penguin, and joins us at LSE to offer accessible, jargon-free and innovative insights into negotiation.

Stuart Diamond is Practice Professor of Legal Studies and Adjunct Professor of Law at Wharton. He has taught and advised on negotiation to corporate and government leaders in more than 40 countries. He teaches negotiation and entrepreneurship at Wharton Business School, where he runs the most popular course. Diamond is President of Global Strategy Group which advises companies and governments on negotiating, and also CEO of Four Star Airlines. He has consulted extensively for the United Nations, and worked as a journalist for the New York Times.

(5) Development students are undoubtedly familiar with Ha-Joon Chang who believes globalization is rigged in favour of developed countries via Friedrich List's metaphor of "kicking away the ladder." (More on him in a recent post.) Not only did the likes of the US freely violate intellectual property of European powers when it was in its infancy, but it also made frequent use of subsidies and tariffs to promote activity earlier on. However, today's international regimes prohibit such practices, allegedly disfavouring the rest of us latecomers. Chang is here to promote his new book 23 Things They Don't Tell You About Capitalism:

23 Things They Don't Tell You About Capitalism
Department of International Development public lecture

Date: Tuesday 5 October 2010
Time: 6.30-8pm
Venue: Old Theatre, Old Building
Speaker: Professor Ha-Joon Chang
Chair: Professor Robert Wade

We may like or dislike capitalism, but surely we all know how it works. Right? Wrong. Today, most arguments about capitalism are dominated by free-market ideology and unfounded assumptions that parade as 'facts'. This lecture in which Ha-Joon Chang will talk about his new book 23 Things They Don't Tell You About Capitalism| tells the story of capitalism as it is and shows how capitalism as we know it can be, and should be, made better.

Ha-Joon Chang is a professor in the faculty of politics and economics at Cambridge University where he has taught since 1990. In addition to numerous articles in journals and edited volumes, he has published seven authored books (three of them co-authored) and eight edited books (six of them co-edited). His most recent books include Bad Samaritans: Rich Nations, Poor Policies and the Threat to the Developing World (2007), Kicking Away the Ladder - Development Strategy in Historical Perspective (2002), which won the 2003 Myrdal Prize, Restructuring Korea Inc. (with Jang-Sup Shin, 2003), Globalization, Economic Development and The Role of the State (2003), and Reclaiming Development - An Alternative Economic Policy Manual (with Ilene Grabel, 2004). His writings have been translated into 13 languages.

Ha-Joon Chang has worked as a consultant for many international organisations, including various UN agencies such as UNDP (United Nations Development Program) and UNCTAD (United Nations Conference on Trade and Development), the World Bank, the Asian Development Bank, and a number of governments on development policies. He was awarded the 2005 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.

(6) And lastly we at LSE IDEAS are hosting Philip S. Golub, the French journalist who's (surprise!) not keen on American bossiness post-Cold War:

Power Profit and Prestige: A History of American Expansionism
5 October 2010, 6.30pm, COL.B212

Power, Profit and Prestige applies incisive historical and sociological analysis to make sense of the United States' post-Cold War imperial behaviour.

Philip Golub argues that an embedded culture of force and expansion has shaped American foreign policy. He will show how these deeply rooted assumptions about American primacy, in a world where America is no longer able to set the global agenda, may lead the US empire into a crisis of its own making.
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It's a mind-boggling line-up of interesting events, I'm sure you'll agree. I'd go to all of them if I could but I'm afraid I can't separate myself into four!
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F1: Dr Mahathir Wades Into Lotus Racing v Proton

♠ Posted by Emmanuel in , at 10/02/2010 05:52:00 PM
And now for another weekend feature. Former Malaysian Prime Minister Mahathir Mohamad should be no stranger to IPE Zone followers. One of the most outspoken Asian leaders of recent decades, he has long championed regional solidarity--and I must give him props for that. He's also the brains behind several Malaysian vanity projects to show it has arrived on the world stage. Among others, these include the Petronas Towers--for a long time the world's tallest building--and the Sepang F1 racetrack designed by Hermann Tilke that has hosted the Malaysian GP since 1999. (I went to the inaugural race won by Ferrari's Eddie Irvine after Michael Schumacher let him through, but that's another story.)

It should be obvious that Mahathir is something of a car buff. However, not all his auto-related projects have been as successful as hosting the grand prix. Take Proton (please). This would-be national champion has been haemorrhaging lots of government funds due to its continuing inability to, well, complete with Japanese and Korean makes. I've written about Proton before, and with Chinese makes like Chery reaching Malaysia as well, the competition isn't getting any easier in the exceedingly competitive auto market.

Thus, some may be surprised that Proton has owned the rights to the venerable British sports car maker Lotus since 1996. As car buffs and racing fans know, Lotus is a storied marque in Formula One, having won seven constructor's championships between 1963 and 1978. In recent years, Lotus had encountered much leaner times--especially those under GM ownership. However a renaissance of sorts occurred a year ago when it was announced that the Lotus name would return to the world's premier racing series in 2010. With implicit state backing and having top-class, race-winning drivers Jarno Trulli and Heikki Kovalainen signed on, expectations were high for this Malaysian-led comeback.

However, things have not quite turned out that way. Lotus still has zero points this season. It recently terminated its engine deal with Cosworth over these decidedly unpromising results. And now we get news that there is an quarrel between principals of the F1 team and the supposed name holders Proton. It's a quarrel over who holds the rights to the name. Like in the good ol' days, Dr. Mahathir has waded into the fray. Perhaps the prospect of ruining Malaysian racing involvement as well as the comeback of Lotus didn't sit well with the former PM:
Lotus Racing [the F1 team] has agreed to conduct the rest of its dispute with Group Lotus [owned by Proton] over the rights to the ‘Team Lotus’ name behind close doors after the former Malaysian prime minister stepped in to diffuse the row. An increasingly bitter public slanging match between Lotus Racing and Proton broke out earlier this week after the Malaysian carmaker – which owns Group Lotus and licensed the ‘Lotus’ name to Tony Fernandes's F1 squad before opting to terminate the deal for 2011 – made it clear it would block Fernandes’s bid to rebrand his outfit as 'Team Lotus' next season.

Lotus F1 issued a lengthy rebuttal in which it argued that it now owned the rights to the ‘Team Lotus’ brand and would prove that was the case in the High Court. With the argument threatening to degenerate further, Lotus Racing on Thursday revealed its deputy team boss Dato’ Kamarudin Meranun had met with Proton adviser Mahathir – Malaysia’s prime minister from 1981-2003 and who oversaw the creation of the state-backed manufacturer – to air its grievances and work out a way forward for the dispute.

Lotus Racing remains adamant that it is “acting within its own rights” in planning to run as ‘Team Lotus’ in F1 but, having taken advice from the ex-prime minister, it has agreed to refrain from any more public comment on the issue until the matter is resolved. “Lotus Racing believes it is acting within its own rights, and as a result of this meeting, the team will now refrain from making any further comments on the matter,” Lotus’s statement read.

“This action is upon advice from Tun Dr Mahathir, and it is out of our respect for him that we will act upon his wishes as he has supported us since our inception, and his backing has been invaluable in our growth...We are very grateful for having had the opportunity to put forth our case and have complete trust that a fair review will be made, and a decision on the matter will be announced in due course.”

The dispute between the two sides has had potentially damaging consequences for the Malaysian government, given both receive some level of state support and backing. Mahathir played a key role in promoting motorsport in Malaysia and securing the country’s first grand prix, and also opened Lotus Racing’s new Norfolk factory in February.
In essence, the government bankrolls both Lotus Racing and Proton. However, the latter's principals have supposedly decided to not renew rights for the former to use the Lotus name for the 2011 season. Tony Fernandes of the F1 squad is claiming that it has purchased the rights to use the name nonetheless. Meanwhile, Lotus(-Proton) is introducing a whole raft of new models, making some believe that it wants to get into motorsports itself. So there--Mahathir has been called in to mediate this conflict in the meantime.

It's interesting how this "former" PM still weighs in heavily on such matters. I guess he's like Lee Kuan Yew--Dr M cannot help coming on strong if he thinks it's necessary.
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Tired of Austerity? Gas Your Leader (in Ecuador)

♠ Posted by Emmanuel in , at 10/01/2010 12:42:00 AM
Here's another nifty IPE-related article I found just on the front page of Yahoo! It seems that enforcing austerity is difficult all over the world. Here in Europe, there were demonstrations across the continent yesterday over axes falling over and over on the public sector as plotted by EU bigwigs. In Latin America, however, public sector workers have come up with an ingenious strategy to (literally) Stick It to the Man.

A few months back, I wrote about the leftist stylings of Ecuador's President Rafael Correa. However, some on the Ecuadorean police force have apparently not taken kindly to imminent reductions in their pension plans. Where art thou workers of the world uniting and so forth? From the Associated Press comes this remarkable story of the gendarmes beating the stuffing out of Correa:
Hundreds of police angry over a law that would cut their benefits plunged this small South American nation into chaos Thursday, roughing up and tear-gassing the president, shutting down airports and blocking highways in a nationwide strike. Incensed officers shoved President Rafael Correa around, pelted him with water and doused him in tear gas when he tried to speak at a police barracks in the capital. Hours later, surrounded by rebel cops in a hospital, Correa declared himself "practically captive." Correa, 47, was hospitalized after being nearly asphyxiated by the tear gas.

The government declared a state of siege, putting the military in charge of public order, suspending civil liberties and allowing soldiers to carry out searches without a warrant. The insurgent police took over police barracks in Quito, Guayaquil and other cities. Some set up roadblocks of burning tires, cutting off highway access to the capital.
This police-led disturbance is being called a coup by some, though others are more reluctant to do so. Meanwhile, Colombia and Peru have locked down borders in sympathy for Correa. Colombia doing so is remarkable given its right-leaning government:
Colombian President Juan Manuel Santos said on Thursday Bogota was closing the border with neighboring Ecuador where unrest erupted over austerity measures. "I spoke with (Peru's president) and the two countries decided to close the borders with Ecuador as a political sign of solidarity with President Correa and with Ecuador's democracy," Santos told reporters before getting on a flight for a regional meeting in Argentina on Ecuador's unrest.
Now that's what I call real "militant labour." Say what you will, but it certainly looks like a novel manoeuvre to catch the attention of deficit cutters. With law enforcers like these, who needs criminals?

UPDATE: It looks like the military is at least still loyal to Correa as they helped liberate their beleaguered leader:
Ecuadorean soldiers stormed a hospital early today and rescued Rafael Correa from mutinous police who had besieged the president and plunged the country into anarchy. Army units blazed their way into the hospital with automatic gunfire and stun grenades in a battle which left at least two dead, dozens injured and enabled Correa's swift and triumphant return to the presidential palace.

The leftist leader, emotional and euphoric, addressed crowds of cheering supporters from the balcony. "What loyalty, what support," he shouted to loud applause. "This will serve as an example for those who want to stop the revolution not through the ballot box but with weapons..."

The protests were triggered by a law passed by Congress on Wednesday that would end the practice of giving medals and bonuses with each promotion, part of Correa's effort to save costs and slim bureaucracy.
Coming from another country with a long history of these sorts of stunts, I must say it's amazing how vulnerable many states are to such petulance. It only takes a few to seriously threaten any number of governments with existential crises. I feel like having a banana right about now.
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What'd Justin Bieber Do About America's Deficits?

♠ Posted by Emmanuel in at 10/01/2010 12:10:00 AM
Dear readers, I must confess to knowing nothing about the teen pop sensation Justin Bieber until reading about him under very strange circumstances. However, since I do understand that part of this blog's readership is a look-what-Emmanuel-dragged-in sort of appeal, let me elaborate. To begin with, note that Bieber is, er, Canadian, so he probably can't run for public office as an American deficit hawk. So the post title is a trick question of sorts.

For reasons I can't recall, though, I recently visited the site of Congressman Jeff Flake (R-AZ). There, he used the unlikely example of the aforementioned teenybopper to explain...So, Just How Broke Are We?:
Republican Congressman Jeff Flake, who represents Arizona’s Sixth District, today illustrated the size and scope of the growing national debt.

Sunday night at the Video Music Awards, MTV crowned teen mega-sensation Justin Bieber as 2010’s “best new artist.” With more than 4 million albums sold in just about a year, the 16-year-old is a very rich guy. With his new-found wealth, he might consider helping pay down some of our nation’s staggering $13 trillion worth of debt [fat chance of that since he's Canadian so there's nothing in it for him]. The U.S. is so broke that more than 1.3 trillion Justin Bieber CDs would need to be sold in order to bring us back into the black.

“The thought of having 1.3 trillion Justin Bieber CDs in circulation is almost as frightening as America’s $13 trillion debt,” said Flake [my emphasis].
Ouch! Watching some YouTube clips of Justin Bieber, I can't say what makes Flake so dismissive of this fairly innocuous looking and sounding kid. But, Flake then reaches for the real punch line. Together with his fellow Arizonan John McCain, Flake is proposing a scheme wherein taxpayers can designate part of the their taxes to help pay down the national debt--with Congress then asked to reduce federal spending by a similar amount. Social marketing or PR gimmick?
Along with Senator McCain, Congressman Flake introduced the Debt Buy-Down Act of 2010, which allows taxpayers to designate up to 10 percent of their federal income tax liability to reduce the national debt. The bill then requires Congress to reduce federal spending by that amount.
And here's a lengthier backgrounder. It turns out others have proposed something similar before:
Federal spending is out of control, and Congress is either unable or unwilling to pursue meaningful steps toward reining in the national debt. Congress may not be ready to tackle the debt, but taxpayers are. In order to let taxpayers directly affect the process, Congressman Flake, along with Senator John McCain, has introduced H.R. 5536, the Debt Buy-Down Act of 2010...

The Debt Buy-Down Act would require the IRS to include a check-off on tax forms providing taxpayers the flexibility to voluntarily designate that up to 10% of their tax liability be put toward debt reduction. In order to ensure that reductions in the debt are protected, the bill also requires an equal amount of permanent reductions in federal spending.

The bill requires spending reductions for the coming year (in order to ensure that gains in debt reductions are protected in the coming year). Congress has an opportunity to pass spending reductions equal to the amount of debt reduction designate by taxpayers. Otherwise, the spending reductions are gained via an across-the-board cut in program spending levels.

The bill provides several exemptions in the event of an across-the-board cut, including Social Security benefits, benefits for the uniformed services, and payments for net interest.
What's exempted gives a clue of Republican priorities for the upcoming midterm elections. Yes, Social Security is still a third rail issue even for the GOP, but Medicare and Medicaid go unmentioned. Ditto for raising taxes which is par for the course. It's good to see Arizona's Republicans haven't lost their sense of humour. They're definitely poorer than they were before the housing bubble burst--Arizona was a real-estate magnet until then--but at least they're entertaining themselves in the desert.
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Reviewing the Many, Many US-China Trade Battles

♠ Posted by Emmanuel in ,, at 10/01/2010 12:03:00 AM
I thought it proper to take stock of where we are in terms of trade frictions between the US and China after US legislators finally decided to stick it to the PRC. This news has dominated the airwaves for two days straight, but unbeknownst to many, China has actually won a ruling lately at the WTO Dispute Settlement Mechanism (DSM) concerning US limitations placed on chicken parts coming from China. This poultry brouhaha stems from US non-removal of import restrictions after the bird flu scare came and went. These restrictions are still in effect today. So, about this same time last year, China took the US to the WTO. Our favourite official publication, China Daily, has a neat summary:
The World Trade Organization (WTO) issued a report of the panel on Wednesday, supporting China over its complaint against measures taken by the United States which have affected imports of poultry from China. The panel ruled that Section 727, the Omnibus Appropriations Act of 2009, applied by the US had effectively prohibited the lifting of the ban on poultry imports from China, and inconsistent with the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement).

The panel concluded that the United States trade regime has not acting in accord with the specified provisions of the SPS Agreement and the GATT 1994, and has "nullified or impaired benefits accruing to China under those agreements." In 2004, China and the United States stopped importing poultry products from each other for fear of the bird flu. China had called off the ban on poultry import from the United States when the situation was relieved.

Access of Chinese poultry to the US market is still blocked, because of the application of Section 727 passed by the US congress, which restricted the United States Department of Agriculture (USDA) and its agency, the Food Safety and Inspection Service (FSIS) from using funds allocated by the US Congress to create a rule to lift the poultry ban on China. At the request of China, a panel was established by the WTO on 23 September 2009 to investigate the case.
So chalk one up for China. For trade completists, you can also visit the WTO site for further details about the ruling. Let me also take this opportunity to commend China Daily for writing such a detailed yet easily understood summary of this dispute. Chinese state media is improving all the time and their command of English is becoming impeccable. Meanwhile, Reuters offers a comprehensive summary of the myriad of other trade disputes between these two countries (I've omitted the two above for brevity's sake)...
SPECIALTY STEEL

The United States filed a case with the World Trade Organization to challenge anti-dumping and countervailing duties China placed on a U.S. specialty steel product called grain-oriented flat-rolled electrical steel. U.S. Trade Representative Ron Kirk accused China of imposing these duties to "harass U.S. exports."

CREDIT CARDS

The United States accused China of creating a monopoly in its electronic payments market, allowing China Union Pay to handle most credit and debit card transactions made by Chinese consumers. In an attempt to open up access for U.S. credit and debit card companies, the United States filed a complaint with the WTO.

COATED PAPER

The United States set combined duties ranging up to 313.8 percent on coated paper from China. The duties come after accusations were made that Chinese paper companies were receiving government subsidies and selling their goods to the United States at unfairly low prices. The paper is used in the printing of corporate annual reports, high-end catalogs and magazines, and in other prestigious applications.

SEAMLESS STEEL PIPE

The United States imposed anti-dumping duties ranging from 48.99 percent to 98.74 percent on seamless steel pipe from China. It also slapped countervailing duties of 13.66 percent to 53.65 percent on the pipe. The U.S. Commerce Department levied the steep duties to offset below-market pricing by Chinese exporters and Chinese government subsidies. The Chinese Ministry of Commerce called preliminary anti-dumping duties set in November 2009 protectionist and launched its own investigation into imports of U.S.-made automobiles.

TIRES

China has taken its case over U.S. tire duties to the WTO, arguing that the 35 percent additional duty imposed is unjustified protectionism. The Obama administration imposed safeguard duties on Chinese-made tires in September after a complaint by unions that low-priced Chinese imports were forcing U.S. factories to close.

RAW MATERIALS

The European Union and the United States are arguing to the WTO that Chinese export restrictions, including taxes and quotas, on several raw materials unfairly raise international prices, while keeping input costs lower for manufacturers in China. [No case yet, but review the goings-on over rare earth elements.]

COPPER PIPES

The United States has set final duties ranging up to 61 percent on hundreds of millions of dollars of copper pipe and tube from China. The U.S. International Trade Commission will vote in November on whether to uphold the duties or strike them down.

DISTRIBUTION SERVICES AND INTELLECTUAL PROPERTY RIGHTS

In December 2009, China lost an appeal against a WTO ruling that its curbs on importing and distributing foreign publications and audiovisual products violated its WTO commitments. The case was initially brought by the United States. Beijing accepted the ruling in July and U.S. industry groups are closely watching how it complies.
Currency, steel, credit cards, steel pipes, copper pipes, coated paper, tires, rare earth elements, poultry...the list goes on and on. And we're far from done.
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