The Missile Man Behind China's 1 Child Policy

♠ Posted by Emmanuel in ,,, at 7/31/2008 12:27:00 AM
If this story sounds like a scene out of the world of Dr. Strangelove, it does: while doing some research on the origins of China's one-child policy, I came across this article in the well-regarded journal China Quarterly by Susan Greenhalgh. In her article, she identifies Chinese missile scientist Song Jian as the progenitor of China's one-child policy. If it weren't for his strong backing of the idea while having the ear of Deng Xiaoping, it probably is little exaggeration that China would be a significantly different place from how it is like today. It is a story of mind-boggling proportions, combining elements of cybernetics, the Club of Rome (Limits to Growth), and massive state coercion to make the one-child policy a reality. Who needs conspiracy theories when you can follow one of the largest social experiments of all time?

The entire article is a very good read, but here are some key sections, anyway. The military roots of social policy in the post-Mao era owe a lot to a past emphasis on defence policy:
In the revolutionary turmoil that was Maoist China, most of the social sciences were abolished, the natural sciences decimated. Yet because of Mao’s military view of the world and the very real threats of attack from the United States and, after 1960, also the Soviet Union, military science became a privileged site of knowledge and technology production. Most privileged of all was the strategic weapons community of scientists and engineers charged with building the atomic bomb and the missile systems to deliver the payload.
Deng Xiaoping identified runaway population growth as an obstacle to progress:
In 1977–78, Deng Xiaoping was reducing investment in military R&D and urging defence scientists to turn their energies to solving the nation’s many economic problems. One of China’s most serious problems was its huge and still swiftly growing population. After Mao’s death in 1976, a strong consensus had emerged at the highest levels of government that the rapid growth of a largely rural population was a major obstacle to the achievement of the “four modernizations.”
One of the most prominent missile scientists, Dr. Song, believed that he could apply his expertise in the area of population control. With scientism in vogue, he caught the zeitgeist of the moment very well:
Song immediately saw the promise of the systems science approach. Based on mathematics, this Western cybernetics of population would produce what seemed to him a precise, scientific solution to the population problem. Such a solution appeared far superior to the Marxian social science perspectives that had dominated for so long, leaving population control vulnerable to ideological attack. In the West, the Club of Rome work had provoked an outcry from social scientists concerned about the application of cybernetics’ mechanistic models to the solution of human problems. Song apparently did not encounter such critiques. Quite the contrary, the congress at which he discovered the new approach was infused with a spirit of scientific certainty, progress and messianic fervour about the potential of control science to solve the world’s problems.
Unconstained by Mao's periodic purges of social scientists, the engineers were far more emboldened to make large-scale changes:
Finally, in their years in the weapons development community, the physical scientists and engineers had imbibed that community’s culture of bold experimentation and risk-taking. Whereas the social scientists were encumbered by an ingrained caution and fear borne of years of political persecution, the military scientists possessed the self-assurance to enter an entirely new field, borrow a set of foreign techniques they had encountered only briefly, modify them in significant ways, and then employ those techniques to quickly develop and press for a radically new solution to social problems that had vexed the nation for decades. Of course, these bold manoeuvres carried risks and dangers. But those would emerge only later.
They went about casting population science as analogous to missile science:
In devising a scientific solution to the problem, Song and his colleagues (especially Yu) turned to the cybernetic techniques of optimal control whose use Song had pioneered in the development of missile guidance systems. From a mathematical point of view, missile control techniques lent themselves readily to population control problems, because the trajectories of missiles and populations charted over time followed similar lines, and because the optimization problems for controlling the two objects took functionally similar forms.
Once approved, Song's ideas about the one-child policy needed to be implemented by the state. Akin to a centralized missile programme, directives emanated from above. The rest is history:
As a defence scientist, Song had devoted his career to working on huge, complex and costly weapons projects that not only served statist ends but also required state-centric solutions. In an atmosphere of urgent threat to China’s national security, many of those projects were pursued with a “big-push” thrust that entailed total leadership commitment and massive mobilization of the nation’s resources. Song himself was a proponent of big-push approaches to weapons development...

The inappropriateness of the policy solution became painfully clear in 1983, when, in a changed environment, policy makers undertook a very big-push solution, a massive, nation-wide campaign aimed at jump-starting one-childization by sterilizing one member of all couples with two or more children and aborting all unauthorized pregnancies. Ordered to enforce this policy and reach targets no matter what, rural cadres had little choice but to use coercion against the people. The results were a record level of demographic achievements – 21 million sterilizations, 14 million abortions and fertility rates that dropped to just over 2.0 – and unexpected magnitudes of social suffering, as baby girls were killed, women’s bodies were damaged, and village life was torn by violence and fear.
In China at least, population control was rocket science. One of the ironies here given China's current environmental woes was that reaching environmental limits was one of the reasons touted for population control a la Limits to Growth. Despite worrying concerns over China's warped demographics, the policy thought up by a rocket man remain largely in place.

A Quickie Doha Post-Mortem

♠ Posted by Emmanuel in ,,, at 7/29/2008 07:29:00 PM
It comes as no surprise to probably anyone that the mini-ministerial did not produce much in the way of results, let alone a conclusion to the long-running Doha round before collapsing yet again. Perhaps the anti-globalization protesters kept away in droves because they knew that nothing would come out of this process, anyway. Save the plane fare and just catch the gory details of how all the negotiators' efforts came to naught in the end. Geneva may be lovely in the summertime, but that is not good reason enough to watch yet another sorry episode of the Doha World Tour, which will go on and on. Although I wished that I would be proven wrong, I am afraid that such is not the case here. There were some rumblings of hope, but they did not account for the multitude of conflicts which Reuters provides the talking points of below. As Viktor Chernomyrdin once famously said about dashed expectations in another context, "We hoped for the best, but it turned out like always."
Talks at the World Trade Organization (WTO) to salvage the seven-year-old Doha round foundered on Tuesday on differences between rich and poor countries and developing importers and exporters.

Here are the issues that proved insuperable.


* The deal broke down over a relatively obscure but complicated proposal to protect farmers in developing countries from a surge in imports.

* No one expected the "special safeguard mechanism" (SSM) to be the rock on which the talks foundered [these were over rice, cotton, and sugar--the WSJ has a podcast].


* Going into the talks the main issues seemed to be the level of U.S. trade-distorting farm subsidies and the scope of exceptions for developing countries on industrial tariff cuts.

* This month's talks focused on agriculture and industry subsidy and tariff cuts, leaving most other areas until later.

* The United States made an early offer to cut its farm subsidies to $15 billion, and accepted a further cut to $14.5 billion in a compromise proposal last week.

* The new figure is less than one third of the current ceiling, but twice current outlays, so developing countries said it was not enough.

* Rich countries such as the United States and European Union members remained at odds with emerging nations such as China and India over proposals to shield developing countries' infant industries from the full force of industrial tariff cuts.

* One difference was the U.S. push to encourage developing countries to take part in voluntary agreements to slash or eliminate tariffs in individual industrial sectors such as cars or textiles in return for smaller overall tariff cuts.

* The United States said sectoral deals would create real market opening. India and China said the proposed tariff "credit" undermined the voluntary nature of the deals.


* In the end it was the safeguard that blocked the talks. The way the safeguard proposal was framed failed to reconcile the vital interests of three important groups:

-- the United States, which sought assurances that market opening in other areas would compensate them for other concessions such as farm subsidy cuts

-- developing country exporters, which need growing farm exports to other developing countries

-- big developing countries, which need to protect subsistence farmers from a flood of imports that renders them uncompetitive.

* The safeguard proposal would allow importers to raise tariffs temporarily to counter a sudden surge in imports or collapse in prices.

* Developing importers such as India and Indonesia said this was necessary to stop their subsistence farmers being overwhelmed by market opening agreed in the talks [also see Indian Commerce Minister Kamal Nath's earlier statements highlighting the importance of Indian farmers' votes to the ruling coalition].

* The first volume trigger for the rise in tariffs was a 10-percent rise in imports. This led developing country importers such as Uruguay and Costa Rica to say the safeguard would stifle normal trade growth, not just deal with emergencies, and could even shut off existing trade.

* Another proposal would allow importers in some circumstances to raise tariffs temporarily above current levels agreed in the 1994 Uruguay round if imports grew more than 40 percent -- a deterioration in conditions for the exporters.


* Even if WTO members had agreed on the safeguard, there were still big differences on a host of other sensitive issues.

* The United States is under pressure to make big cuts in its cotton subsidies, but has not yet made a proposal.

* Developing country exporters are also unhappy with proposals shielding developing imports from the full impact of farm tariff cuts on certain products for reasons of food and livelihood security or rural development.

* The European Union wants to tighten rules protecting the use of place names on wines and spirits, like Champagne. They also want to extend this protection to other products linked to regional names, like Parma ham. A big group of developing countries supports the EU, and also wants to protect the use of indigenous plants and folk wisdom in products such as drugs.

We should add three things to this list. First, despite--ho-hum--earlier hopes for a conclusion to the never-ending banana wars, the failure of this effort means that the associated deal for, erm, banana peace will need to be negotiated separately:
Ecuador, Costa Rica and other Latin American countries stand to lose a new deal with the EU which would have seen the bloc's import tariffs on their bananas fall sharply. That bilateral agreement was linked to a broader WTO deal.

Rival exporters in West Africa and the Caribbean whose bananas pay no EU import tariff, plus some small producers in the French territories of Guadeloupe and Martinique and Spain's Canary Islands, were deeply opposed to the EU-Latin America banana deal struck over the weekend.

Second, the momentary progress made in having industrialized countries at least begin to consider Mode 4 or the temporary migration of skilled service workers such as those from India is back on the back-burner [see here also]:
Representatives of the services sector hailed signs that countries were willing to make long-awaited moves on services, including a willingness by the United States and the EU to give more temporary visas for IT experts and other foreign professionals and by some developing countries that they were willing to relax restrictions on foreign investors. Progress in turning those signals into concrete offers is now on hold.
Third, the EU wasn't even negotiating coherently. Trade Commissioner Peter Mandelson remains at loggerheads with French President Nicolas Sarkozy over the matter of rich agricultural subsidies. Like many others, Sarkozy has a cushy farm electorate to consider:
French President Nicolas Sarkozy has complained to European Commission head Jose Manuel Barroso about a proposed deal on offer at crucial World Trade Organization talks here, a diplomatic source said Monday. Sarkozy called Barroso over the weekend and also demanded that the European Union's chief trade negotiator Peter Mandelson travel to Paris to explain his position - a demand that was refused, the source said.

France currently holds the rotating presidency of the E.U. The French government said Monday it wouldn't sign proposals for a trade pact as they stand because they show no progress on "essential" matters.

Mandelson is negotiating at the talks here in Geneva on behalf of all 27 members of the E.U., but the former U.K. cabinet minister is viewed with suspicion in Paris as a so-called "neo-liberal" who would be willing to sacrifice France's hefty agricultural sector for the sake of a deal. Any final deal must be approved by all 153 members. Within the E.U., all 27 members must also agree to support an accord.

Last Chance Saloon at the WTO

♠ Posted by Emmanuel in at 7/29/2008 02:07:00 PM
I have to run but the BBC has a video clip featuring the Indian, Chinese, and European negotiators commenting on what should be the last day at the mini-ministerial in Geneva attempting to salvage a deal. A big sticking point is over the so-called "Special Safeguard Mechanism" (SSM). Should India or other LDCs experience a surge of imports, tariffs can be applied to certain agricultural goods. What is on the table is for this SSM to come into effect given a 40% increase in such imports. India, joined by that other major LDC, China, argues that a 20% increase should be sufficient to trigger the SSM. More in a's going down to the wire.

Fritz Hollings: US Was Built on Protectionism

♠ Posted by Emmanuel in at 7/29/2008 12:06:00 AM
Former US Senator Fritz Hollings had some interesting things to say in an interview with Bill Moyers of PBS. One of the things you often hear from heterodox economists sympathetic to Third World concerns is that, oftentimes, countries that are now developed widely used protectionist policies to nurture their own industries in the past. As a matter of historical fairness, then, it is only proper that developed countries not demand LDCs to lower their trade barriers so rapidly a la the Washington Consensus recipe of liberalize, privatize, and deregulate (e.g., the work of Ha-Joon Chang [1, 2]). Of course, the current state of WTO negotiation deadlock attests to the timelessness of this debate. With LDCS still holding out on protections developed countries want curtailed, we are going nowhere rather quickly.

Here, Hollings makes the case that the US should once again adopt protectionist policies [!] because, among other things, the country's founding fathers built the United States on protectionist practice. It's fun stuff to read even if you're not exactly on board:

BILL MOYERS: They would call you protectionist, they would call you--

FRITZ HOLLINGS: Yeah, I am a protectionist. You-- you got Social Security to protect you from the ravages of old age, Medicare to protect you from ill health. You got food and drugs and clean air, the water we drink, the food we eat, antitrust to protect the openness of the market and everything else. Before I open up Moyer Manufactory, you gotta have clean air, clean water, Social Security, Medicare, Medicaid, plant closing notice, parental leave, safe working place, safe machinery, antitrust. You can go to China for 58 cents an hour. They'd get you the plant, they own the workers, and you don't have any investments so you don't have to worry about it.

BILL MOYERS: You say all we need to do to make the country work, is follow the lead of the forefathers to compete in globalization. To build the country's economy Washington, Hamilton, Jefferson, and Madison, made sure the first bill to pass the Congress in its history on July 4th 1789--

FRITZ HOLLINGS: Seventeen eighty nine.


FRITZ HOLLINGS: Protectionist bill, tariff bill on 60 articles. We financed the country's development with tariffs. That's how we--that's the Treasurer's Building is the best building here in Washington. The best building in Charleston is the custom house. The best building in Brooklyn is the custom house. Treasury had the money. Teddy Roosevelt said, "Thank God I am not a free trader." Oh, Lincoln, everybody says, I'm either for Roosevelt, I'm a Lincoln Republican. He was a big protectionist. Oh, he raised tariffs. They were gonna build a transcontinental railroad on the Abraham Lincoln. And they said we could get the steel cheap from England. He said, ah - wait a minute, we're gonna build our own steel mills, and then we'll have not only a steel capacity, but we'll have the railroad. And so he was a builder. Everybody was a builder. Eisenhower, he protected oil. Jack Kennedy, I went to him, and he protected textiles. Ronald Reagan, he protected computers and Harley Davidson. He saved it. I saw George W. the other day about three weeks or a month ago, he was at the Harley Davidson plant, but protectionism saved it. That's why they were making money at Harley Davidson. Oh, he got--

BILL MOYERS: That's because of--

FRITZ HOLLINGS: Voluntarily restraint. Reagan got on steel, computers, machine tools, and automobiles. He got voluntary restraint and that's the only way to do it. Sober up.

Obama: (Trade) Nightmares of My Half-Brother

♠ Posted by Emmanuel in ,, at 7/28/2008 12:06:00 AM
Barack Obama's first bestselling book was entitled Dreams of My Father. It seems, however, that he may not find some of his other relations so, well, dreamy. The press on this side of the Atlantic has been all agog over Obama coming over to enlighten us primitives. Nonetheless, while the Times is mock-extolling Europe's undeniable choice for next American leader, it currently features another article with decidedly sinister undertones. I haven't the slightest idea about how this article became the Times' most-read, but that it is at the moment: there is a feature in the newspaper on Obama's half-brother, Mark Ndesandjo. Potentially embarrassing relations better left unmentioned are not exactly novel in American politics. Think Roger Clinton. As a commenter to the Times article questioned, why is it that Americans should be any more concerned about Obama's half-brother when Roger Clinton was jailed prior to Bill Clinton's term? What can make Mark Ndesandjo a bigger electoral liability than an ex-con half-brother?

The answer is devastating: Remember America's much-vaunted scepticism about trade? Obama has, at least more so in the recent past, championed tacking on environmental and labour regulations to trade agreements, renegotiating NAFTA, and, this is verbatim--"stop[ping] countries from continuing unfair government subsidies to foreign exporters and nontariff barriers on U.S. exports." Hmm, sounds like China-bashing to me. Well, far worse than being an ex-con, Mark Ndesandjo has--get this--been acting as a middleman promoting cheap Chinese exports, and whose main export market is...the United States. There's a famous tagline for American bumper stickers that begin with, "I'd rather have a sister in a whorehouse than..." In this day and age of American trade hatred and the sport of China-bashing, perhaps the continuation for Obama is "...have a half-brother pimping Chinese goods to America." Oh [feigning indignation], for shame!

The Wrath of Nath: Deciphering India's WTO Stance

♠ Posted by Emmanuel in , at 7/24/2008 01:22:00 AM
Many pundits (including yours truly) were surprised when the then-ruling BJP party was booted out by Indian voters in 2004. With its mantra of "India Shining," the BJP thought it could capitalize on the emergence of the Indian economy from the self-deprecatory "Hindu rate of growth" to something decidedly more pacey. Left out of the BJP's calculation were the many marginalized who felt that the benefits touted by the BJP did not reach them. In contrast, the Congress Party has typically adopted more egalitarian rhetoric. The Gandhian legacy remains strong, and Indian Commerce Minister Kamal Nath is surely not one who is outside this mold. The so-called G4 spearheading the WTO negotiations are led by, respectively, US Trade Representative Susan Schwab, EU Trade Commissioner Peter Mandelson, Brazilian Foreign Minister Celso Amorim, and India's Nath. Among these four, Nath strikes me as the most colourful (in a good way); cutting a distinctive figure. Is it just me or does he have a passing semblance to Tom Jones? Maybe it's not unusual.

Anyway, while searching for something else, I came across a transcript of a presentation by Nath at the Carnegie Endowment for International Peace on the very topic of WTO negotiations. There are many insightful comments from Nath in the transcript on India's stance at the WTO (or, at least the Congress Party's). Unsurprisingly, one of the points of emphasis is that agriculture, particularly subsistence agriculture, remains a widespread feature of Indian economic life:
We do talk of poverty, we talk of the LDCs, but sometimes when one sees numbers, the numbers of India’s growth...India’s prowess in the IT sector, one overlooks that India has 300 million people [living on] less than one dollar a day...India still has 650 million people engaged in agriculture, with about 80 percent – over 80 percent having land holdings of less than one hectare or one and a half hectares, which is not commerce but is subsistence agriculture. While we talk of India’s strengths in the manufacturing sector, in the high-tech manufacturing sector, we also look at the enormous cottage industries, the small-scale industries. We look at the large infant industry.

That is the picture of India, which has to be looked at in real terms, because sometimes I hear these words of large, developing countries, large, emerging countries. Of course we are large. Of course we are emerging. Well, what does that mean? That doesn’t mean we don’t have 300 million people [living on] less than one dollar a day. That doesn’t mean we don’t have 650 million people in agriculture, in subsistence agriculture, and I’m reminded that in Potsdam, telling the United States that you are one million people engaged, employed in agriculture – I have 1.5 million in my district. So that’s what you are talking about, and I said, you are batting for the protection and promotion of prosperity, and I am batting for the protection of livelihood. Now you don’t require any rocket science to understand what you should – what really should prevail.
OTOH, he seems to be asking for the impossible in liberalizing trade without downsides for those in the developing world:
We are growing at 9.4 percent. I want a formulation where I grow at 11 percent. I don’t need a formulation to grow at five percent. That is the crucial thing. And that’s what all the developing countries are saying: please give us a formulation which increases trade flows but does not dislocate because if you are going to dislocate in developing countries where there is no social net, in the ultimate analysis, you’re not going to have healthy economies, and that is the crucial thing which we must take note of.
And, of course, there's his case for greater Mode 4 migration:
We’ve got to be looking at services. I understand services is difficult. I understand services is – immigration is a sensitive issue. I don’t want to talk about immigration. But certainly I want to talk. I want to talk about contractual service providers. I want to talk about the one-month or the two-week or a five-week visa which is not immigration, where our software engineers cannot even integrate software development because they can’t get a visa for one month or three weeks. That’s not immigration. And if you don’t do that and if you have a domestic regulation which frustrates it, it’s a non-tariff barrier.
Nath also develops a theme on why the lack of Western corporate interest pushing the round has helped it falter:
If you compared it with the Uruguay round, the big difference with the Uruguay round was that there was strong private sector corporate interest in the United States and the EU pushing for the round, someone who really wanted the round. That’s not the case in this round. I mean, the private sector is almost conspicuous by its absence. So nobody really wants the round that badly, one.

Two, the whole thing about the Doha development agenda is a bit of a myth, I would say, because if you look at any study done on what the impact would be on the least-developed countries, even a study done recently by Carnegie, it’s completely ambiguous. The poorest countries tend to lose from preference erosion, food prices could go up by subsidy reductions, so it’s very mixed. So the whole Doha development agenda has been a bit of a sell and a myth.

So given all this and the electoral pressures and the timing pressure that you spoke about, isn’t the world and your efforts as well should be devoted to actually quietly laying this beast to rest and planning for the post-Doha world? I mean, it could be a very different world, and we have some ideas on what the world should look like, but carrying on with this trying to raise this beast that has no breath in it anymore, plan for – I mean, let’s be realistic, let’s be honest and say the Doha round is dead. Let’s get back to the drawing board and think creatively about what the drawing board should come up with.
There's a lot more in the transcript, though you can read it at your leisure. It's worth reading insofar as it does clarify some of his negotiating positions as perhaps the most important negotiator at the current WTO talks.

Unexpected: US Mulls India's Mode 4 Proposals

♠ Posted by Emmanuel in ,, at 7/24/2008 12:32:00 AM
After the seemingly endless stream of negative rhetoric which has poured forth from Geneva thus far, this news is potentially welcome: The United States has actually begun to consider India's proposal to allow freer migration of service professionals to perform temporary contract work in the US. What's more, the EU signals that it too may be amenable to such overtures. Needless to say, this development could be something big. In the past, the US has treated so-called "Mode 4" migration of the sort described above as a migration and not a trade issue (see earlier post for an overview). However, it seems to be softening its stance here. I suspect that while India with its large pool of knowledge workers stands to benefit a great deal, the US is also considering repeated requests by American technology firms to allow more skilled foreign workers to ply their trade Stateside.

One of the things I keep telling my students is not to treat the "Third World" as a monolithic bloc. Divergence in their economic fates means that their interests by no means coincide on a multitude of issues. In the context of "green room" service negotiations, the Latin left of Bolivia, Cuba, Nicaragua, and Venezuela is not quite keen on availing of South-North Mode 4 migration in exchange for concessions on national treatment and market access for services. The Economic Times notes that the Latin left felt ambushed when developing countries which stand to gain on Mode 4 migration agreed to a services negotiation text that went beyond what the Latins felt comfortable with. In any event, here is the an update on the state of services care of Reuters:
The United States is prepared for the first time in world trade talks to discuss allowing more service professionals from India and other developing countries to work there, a U.S. industry official said.

U.S. trade officials were given permission to discuss the visa issue this week after months of consultation with White House national security officials and key members of Congress, Coalition of Service Industries president Bob Vastine said. "Whether they are in position to make an offer or even signal a specific kind of offer, I don't know. It may partly depend on the dynamic of the meeting," he told reporters on the fringes of a trade ministers meeting trying to reach a breakthrough in the nearly 7-year-old Doha round.

The Doha talks aim to open markets for farm, manufactured goods and services around the world but have struggled to overcome differences between rich and developing nations and they risk being put on hold for a couple of years unless a breakthrough is reached soon.

The issue of granting more temporary-entry visas for information technology engineers and other professionals from poor countries has been controversial in the U.S. Congress since the Bush administration did so several years ago in free trade pacts with Singapore and Chile. Many lawmakers objected to inclusion of what they said were "immigration" provisions in a trade agreement.

The new move addresses a key demand of developing countries as the United States tries to persuade India and others to open their markets in sectors like financial services, distribution, telecommunications and computer-related services.

The EU is expected to make an improved offer to open its market to foreign professionals on Friday, when discussions in Geneva are scheduled to turn to services after several days of negotiations on agriculture and manufacturing. "They're (the EU) probably not going to give the final figure because that's probably going to be the last thing they give in the negotiations in this round," said Pascal Kerneis, managing director of the European Services Forum.

Although India has made "very good offers" to open its market in areas such as telecommunications, distribution, computer-related services and energy services, it has not done so in financial services, Vastine said.

Indian Commerce Minister Kamal Nath told a news conference India needed to see what the United States and the EU were prepared to do on the visa issue before he could make his offer on financial services. "Let me make it clear India has no demand on immigration," Nath added, saying New Delhi only wanted to make sure burdensome rules do not block Indian professionals from performing contract work in the United States and the EU. At the same time, he said the outcome of services negotiations would be critical in India's assessment of proposed deals on agriculture and manufacturing.

The services talks suffered a setback on Wednesday, however, when Bolivia, Cuba, Nicaragua and Venezuela blocked adoption of a report laying out the future path for the negotiations, a participant in the meeting said. The four Latin American countries argue that a separate formal negotiating document on services is not needed.

The WTO's mediator on services, Mexican ambassador Fernando de Mateo y Venturini, had submitted a draft to the meeting which called on members to submit revised offers on services by Oct. 15 and final commitments by Dec. 1. Mateo will now report to the final session of this week's meeting of ministers, which may still decide to adopt dates for new services offers.

LDCs to EU/US: Take Your Ag Proposals and Shove It

♠ Posted by Emmanuel in , at 7/22/2008 07:51:00 PM
Day 2 at the Doha mini-ministerial came and went with nary a trace of improvement as negotiations continue to fray along North-South lines. Earlier on, the EU tried to get the ball rolling on agricultural issues by offering to cut current tariffs on agricultural products by 60% instead of just 54%. LDCs weren't impressed by this, however. Next, the US said that it was now willing to cap agricultural subsidies to $15 billion per annum from a previous ceiling of $48.2 billion. This would look impressive were it not for the fact that the US is currently spending about $7B on agricultural subsidies. This figure appears low since agricultural commodities currently command high prices. However, if and when these prices fall back to being in line with more historic trends, then all sorts of support would kick in once again. In any event, the LDCs weren't impressed by the US offer, either.

As an aside, Indian Finance Minister Kamal Nath returned to India on Tuesday to vote on a motion of confidence over PM Manmohan Singh's leadership. This was sparked by the ruling coalition's erstwhile Communist allies showing their displeasure over nuclear cooperation with the United States. The motion in support of Singh passed 275-256, and Nath should be back in Geneva by tomorrow. From the Economic Times/Agence-France Presse:
Industrialised and developing economies failed to find common ground in global trade liberalisation talks Tuesday, with Brazil shooting down a US proposal a day after a European initiative went nowhere. The United States offered Tuesday to cut official aid to its farmers by two billion dollars to 15 billion dollars a year in a bid to spur movement at WTO trade talks but found no support from key player Brazil.

"Nice try," said a member of the Brazilian delegation, adding that the proposed new subsidy level was "still too high." Brazil has been acting here as an unofficial spokesman for developing countries. Brazil's chief WTO negotiator Celso Amorim subsequently struck a slightly more positive note, saying the US move "proves the engagement of US in the negotiations but with a low level of ambition."

Tuesday's exchange, highlighting a gulf between developed and emerging market countries, came as ministers from some 35 nations met in Geneva to try to break a seven-year deadlock in the Doha round of World Trade Organisation liberalisation negotiations.

Developing countries have voiced deep frustration at what they say have been inadequate offers on market-opening measures from rich participants such as the United States and the European Union.
But on Tuesday, US Trade Representative Susan Schwab said the world's largest economy was now prepared to cut its farm subsidies in exchange for an "ambitious market access outcome." She stressed that the offer was conditional on improved access for industrial products in emerging countries and a guarantee that US farm subsidies would not face any further legal action at the WTO. "These reductions are not offered in isolation and must be accompanied by significant market openings" in both agriculture and industrial products, she told reporters.

The EU welcomed the US move but said there was still room for more flexibility from the Americans as talks continue throughout the week. "This is a reasonable offer at this stage," said EU trade spokesman Peter Power. "It is not the furthest the US could go but we assume this depends on the remaining negotiations and a balance being achieved in other sectors," he added.

Non-governmental organisations were scathing in their reactions however, with the Geneva-based Institute for Agriculture and Trade Policy (IATP) branding it "absurd" and Oxfam International saying it was "vastly inadequate." Fifteen billion (dollars) is around twice what the US is (really) spending at the moment. They would not have to cut a penny off current subsidies as a result of this offer," said Jeremy Hobbs, executive director of Oxfam International. Hobbs also denounced the US bid to secure immunity from any further WTO legal action as "tantamount to admitting intention to break the rules in the future. It adds insult to injury."

The US overture came after an abortive attempt by EU Trade Commissioner Peter Mandelson to jolt the talks into movement on Monday with an announcement that the European Union was ready to extend tariff cuts on agricultural products to 60 percent from 54 percent. But even Mandelson's fellow EU commissioner Mariann Fischer-Boel said the offer was "nothing new" and Brazil dismissed it as "propaganda."

The EU, as is the United States, is linking concessions in farm trade to steps by emerging countries to open up more to manufactured goods.
Argentine negotiator Nestor Stancanelli said he saw "real negotiations" as beginning only Tuesday, pointing to the Doha round's NAMA component -- covering industrial products -- as a main sticking point. "The NAMA text, for many of us, does not reflect the positions of many members ... The NAMA text is presented as if it were already a result," he said.

Meanwhile, the negotiating process was further hampered by the absence of Indian Commerce Minister Kamal Nath, an important participant who was in New Delhi for a crucial government no-confidence vote sparked by left-wing opposition to a nuclear energy deal with the United States. The Indian government narrowly won the vote and Indian Commerce Secretary Gopal Pillai told AFP that Nath was due in Geneva early on Wednesday.

The Doha round of negotiations was launched amid high hopes in the Qatari capital in November 2001 but it has foundered ever since as developed and developing countries bicker over how to cut agricultural subsidies and tariffs on industrial goods.

Good Fun: The Varieties of NGOs

♠ Posted by Emmanuel in at 7/22/2008 01:05:00 AM
The current issue of the European Journal of International Relations features an article by Norbert Gotz concerning how the field of International Relations (IR) has largely neglected non-governmental organizations (NGOs) in relation to more standard IR fodder. As the field of International Relations has been quite state-centric in the past--inter-national--there has been some debate on how these organizations should be entered into the mainstream study of IR. As Gotz so aptly describes, IR is marked by "Westphalian nomeclature." The paper is quite a good read even if I don't really agree that it's mainly a matter of definition via negative language claims ("non-government") which require consideration. In particular, I am struck by this rather gratuitous passage on the proliferation of NGO forms as well as NGO catchphrases on pp. 232-33:
Best established of the sub-concepts is probably the INGO, the international non-governmental organization. The same phenomenon as projected by the GONGO [government organized NGO] has been insinuated by the interpretation of NGO as standing for ‘next government official’. Interestingly, there are multifarious subconcepts that question the non-governmental character of NGOs. Similar in content to the GONGO are the GINGO, the government-inspired NGO, and the GRINGO, the government regulated/run and initiated NGO. To a somewhat lesser degree, sub-concepts such as QUANGO (quasi NGO), PANGO (party-affiliated NGO), RONGO (retired officials NGO), DONGO (donor-organized NGO), DINGO (donor international NGO), and CONGO (co-opted NGO) are also closely tied to the sphere of government. However, the acronym CONGO is also used to denote both the Conference of NGOs in Consultative Relationship with the United Nations and commercially oriented NGOs, which brings us to the field of BINGOs (business interest NGOs), BONGOs (business-organized NGOs) and the MONGO (my own NGO), terms used to pin down for-profit or individual private interest NGOs. Both MONGO and MANGO can be used to denominate mafia(-organized) NGOs, but the latter acronym has been given several meanings and might also stand for manipulated NGOs or, value-neutral, for Macedonian NGOs.

Given this background, it is hardly surprising that the Tuvalu Association of NGOs is not unrivalled in using the acronym TANGO. While a regional anchoring is open in character, most of the sub-concepts mentioned above obviously exhibit tension vis-a-vis what still seems to be the main association with the plain concept of NGOs, namely the PINGO (public interest NGO) in general, and the RINGO (religious international NGO), the ENGO (environmental NGO), and the NGDO (non-governmental development organization) in particular. A specific variant of the latter is the Development Justice and Advocacy NGO (DJANGO). The acronym NGO has facetiously been interpreted as standing for En-J-Oy in regard to the staff of aid-receiving organizations, alluding to their special privileges that are unavailable to the surrounding communities. Similarly, such an interesting bird as the FLAMINGO, the ‘Flashy Minded NGO (representing the rich)’ has been suggested for adaptation.

The Lameness That is Doha, T-Shirt Edition

♠ Posted by Emmanuel in at 7/21/2008 08:53:00 PM
Oh dear, it's not a very good sign when the gift shop at WTO headquarters is now taking part in poking fun at the Canterbury Tales-length negotiation process officially known as the Doha Development Agenda. Agence-France Presse has cleverly entitled its feature on the T-shirt sales as "been there, done that, got the T-shirt." Actually, it's "been there, done that, saw the movie, bought the T-shirt." Unfortunately, I highly doubt that there are enough dramatic elements to make much of a box office hit out of the Doha round [zzzzzzzzzzzzzzz]. Even the anti-globalization protesters have been resolutely lame in the busting up property / attacking riot police departments. If they decide to make a picture anyway, I'd like to play Pascal Lamy despite looking absolutely nothing like the WTO Director-General and not speaking any French besides. My recurring line? "Mon ami, the deal ees jus round se corner" [rimshot!] Thank you, thank you, take my wife please, etc.

Lame jokes aside, this story nonetheless reminds me of Pietra Rivoli's book The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade. Take it out of the library if you have the chance.

Ministers suffering from "negotiation fatigue" as the World Trade Organisation tries yet again to break the deadlock on the Doha round can at least get a new outfit in the form of commemorative T-shirts. One such shirt distributed by the WTO, yours for a mere 35 Swiss francs (22 euros), reads: "The right Doha deal at the right time." [What does this say about the WTO when it tries to rip off delegates with a 22 T-shirt? The symbolism is not lost on me.]

Another bears the legend "Doha Round World Tour" on the front while the back included dates and location of previous ministerial meets -- not perhaps the most auspicious roll-call given the WTO's history of inconclusive and fractious meetings since the Doha round was launched in 2001.

Ministers from around 35 key countries are meeting in Geneva this week in a bid to hammer out a global trade deal which has so far proved elusive.

The Doha round of negotiations was launched with great fanfare in the Qatari capital in November 2001 but remains deadlocked as developed and developing countries haggle over concessions on issues such as agricultural subsidies and tariffs on industrial goods.

Cancunized: Brazil Says 4 More Years of Wait OK

♠ Posted by Emmanuel in , at 7/21/2008 12:09:00 AM
Whoa, this latest salvo from the Brazilian Foreign Minister and chief negotiatior on behalf of the LDCs prior to the upcoming WTO mini-ministerial meeting in Geneva makes me even more curious about what will happen. Figuratively speaking, the Doha round has been traumatized, anesthesized, lobotomized...and now, perhaps deeply Cancunized after that legendarily tragicomic ministerial meeting in 2003. In the event that the rich industrialized countries are unwilling to move on agriculture, Celso Amorim is saying it would not be an especially big deal if the round were delayed for another four years [and the crowd chants, "four more years!"] if it takes that long to gain a better deal. Is it just me or are things going nowhere fast? It would be a minor miracle if a deal that advances matters significantly is brought to pass given the rancorous nature of the pre-meeting rhetoric from all sides involved which I have been posting on these past few few days. From Agence-France Presse:
Brazil is willing to wait until 2012 in order to secure a better deal on the negotiating table at the World Trade Organisation (WTO), its Foreign Minister Celso Amorim said Saturday.

Speaking to journalists in Geneva, where WTO talks are set to enter a crucial new phase on Monday, he said a failure next week would put back the conclusion of an agreement by another three or four years.

The Geneva meeting will bring together around 30 big WTO players in a bid to salvage the so-called Doha Round of trade liberalisation talks, launched in the Qatari capital in 2001 and which has struggled ever since with developed and developing countries alike refusing to budge on their core interests.

"If we wait, we will obtain a better agreement" than the one currently on offer, said the minister, adding that public opinion was "changing in our favour." Amorim is the developing world's main representative in the WTO talks and the public face of the G20, the grouping of developing countries co-led by Brazil and India.

He is seen as a hard negotiator committed to seeing wealthy countries cut agricultural subsidies that are barriers to farm imports from Brazil and other nations. Amorim accused developed countries of demanding too much from other countries. "One cannot snatch the maximum from the weakest and give only the minimum in exchange," he said.

French President Nicolas Sarkozy said at the end of May that the European Union, which is negotiating with the WTO, had "nothing" to gain from emerging countries on industrial products and services and had already made too many concessions over agricultural issues.

On this, Amorim said the agreement on the table with the WTO would oblige Brazil to reduce its customs duties on half its imports and that its highest duties would come down by a third from around 35 to 25 percent. On services he said that Brazil would make an offer on Thursday in Geneva after three days of negotiation dedicated to agriculture and industrial products.

Amorim, who had talks on Saturday with WTO head Pascal Lamy, said he had asked him to allow enough time for states to negotiate possible changes to draft agreements on the table. "Otherwise you may have a Cancun-like scenario," he warned, referring to WTO talks that collapsed in Mexico in 2003. He added: "I come here to have a deal. Of course, this is not an easy task and certain things will have to be clarified before we know if we have a deal."

At issue in next week's talks are agricultural and manufacturing trade barriers. The industrialized countries are seeking greater access to developing markets for their manufactured goods, while in return developing countries want lower farm subsidies and agricultural tariffs in the developed world.

Pre-Hyperinflation Zimbabwe: Mugabe, A Love Story

♠ Posted by Emmanuel in at 7/20/2008 08:50:00 AM
Where do I begin to tell the story of how great a love can be? In the not-so-distant past, Robert Mugabe was regarded as a hero of the global independence movement from the shackles of colonial rule and its offshoots. His struggles against white minority rule in what was then known as Rhodesia under Ian Smith, who unilaterally declared independence from British rule, are well-known and need little recounting here. At the current time, however, sympathies for Mugabe have largely disappeared in light of his attempts to establish a stranglehold on Zimbabwe. In particular, the severity of Zimbabwe's current bout of hyperinflation has attracted much discussion. While official figures peg it at a "conservative" 2,200,000%, others place the figure somewhere between 10-15 million percent. The BBC reports that a Z$100,000,000,000 note is on the way that can barely buy a loaf of bread. I suspect even that won't buy you a loaf of bread for long:

Zimbabwe is to introduce a bank-note worth Z$100bn in response to rampant inflation - but the note will barely cover the cost of a loaf of bread.

Some Zimbabweans are already calling for higher denominations in a country where the official annual inflation rate has exceeded 2,200,000%. Independent economists believe the real rate is many times higher. Zimbabwe's meltdown has left at least 80% of the population in poverty, facing mass shortages of basic goods.

The country's central bank has introduced several new notes already this year in response to the hyperinflation. In January, a Z$10 million note was issued, followed by a Z$50 million. By June the denominations had reached tens of billions.

In a notice in the state-controlled Herald newspaper, central bank governor Gideon Gono said the Reserve Bank of Zimbabwe would introduce the new notes - known as special agro-cheques - to help consumers. "This new $100 billion special agro-cheque will go into circulation on Monday," the notice said.

But Zimbabwe residents say the latest note is already worthless, and does not even cover their daily lunch. "Nowadays, for my expenses a day, I need about Z$500 billion," one resident said. "So Z$100 billion can't do anything because for me to go home I need Z$250 billion, so this [note] is worthless."

Zimbabwean hyperinflation has become the butt of Internet jokes, but the lives of Zimbabweans affected by these shenanigans are a gravely serious matter. This latest feat of economic history in the making jogged my memory of an article I read earlier in the Independent which potentially ties up some loose threads. First, why does Mugabe have such an intense hatred of all things British? Second, how did the "good" Mugabe of the independence movement turn into the "bad" Mugabe we know today? It is often said that truth is stranger than fiction, and the newspaper offers an explanation as good as any I've heard: like Darth Vader, the man has been love.

The late wife of Robert Mugabe, Sally, is known as the mother of Zimbabwe. The Independent highlights the Home Office's threatened expulsion of Sally Mugabe due to a lapsed visa while she was in Britain to escape political persecution in Rhodesia. Then, as now, immigration was very much a political hot potato in Britain. The flip-flopping of the British government during an obviously trying time for Robert and Sally Mugabe is blamed for ultimately turning him against Britain:

The political climate made it too dangerous for [Sally Mugabe] to stay in Salisbury [today's Harare] and so, in 1963, she escaped the security services by fleeing first to Ghana with her son and then, in 1967, to self-imposed exile in London, where she found work as a secretary at the Africa Centre in Covent Garden. From the safety of Britain, she campaigned tirelessly for the release of her husband and other Rhodesian dissidents. She also supported her husband's studies by researching documents that the Salisbury Prison authorities had banned. Sometimes this meant transcribing very dry texts line by line and then posting them to her husband in prison.

There is no doubt that Sally Mugabe's support for her husband helped sustain him during his time as a prisoner in Salisbury. But, in 1970, while still locked up, Mugabe discovered his wife's immigration status was at risk and that the British government was planning to throw her out of the country because her visa had expired.

Now, documents released at the National Archives show that Mugabe was so enraged by the decision that he went to extraordinary lengths to help her. In March of that year, he wrote to James Callaghan, the then-Home Secretary [later PM], about his wife's situation. This letter went unanswered, prompting Mugabe to send a telegram to Harold Wilson on 8 June, asking the Prime Minister to grant his wife British citizenship. Again, there was no official response.

Ten days later, he pursued this request with a three-page, handwritten letter to Wilson setting out the case for reconsideration on the grounds of exceptional circumstances, pleading with the Prime Minister to understand his wife's predicament: shortly before Sally had come to England in 1967, tragedy struck the Mugabes when [their son] Nhamodzenyika died after succumbing to a severe attack of malaria. He was just three years old. With her husband in prison, Sally was left to bear the emotional burden of the loss alone. The confidential papers show that she later suffered a mental breakdown while living in London.

One of her supporters, Tony Hughes, secretary of the African rights group Ariel Foundation, wrote at the time that the strain of the bereavement, combined with the stress of her imminent deportation, had taken a great toll on Sally's mental state, and in a letter to the government, he wrote of the proposed deportation: "It is certainly unfair for the British government to add to the misery of her already broken life."

In his letter, Mugabe had told Wilson of the effect the death of his son had had on his wife, explaining that: "My wife, whose health has never been satisfactory since the loss of our son in 1966, is at present suffering serious emotional upset as a result of the decision by the Home Office. Surely then, the fact of my detention is enough suffering for her already. As I stated in my letter to Mr Callaghan, the reason my wife decided to work for the year (September 1969-June 1970) was to enable her to earn a little money for herself until October when she should enter university to do a degree in Household Science. The Home Office decision wrecks even this wholesome plan."

The Mugabes were caught up in domestic political football:

A confidential memo written by a Foreign Office diplomat set out the situation in plain terms: "We know very little about Mr Mugabe except that he is in detention and is the former founder and secretary general of Zanu." Nevertheless, the Foreign Office urged the Home Office to adopt a sympathetic approach on the grounds that they could ill-afford to alienate a potential ally in the road to black independence in Rhodesia: "If Mrs Mugabe has to leave Britain this would have a bad effect on her husband and could be politically embarrassing"...

Despite mounting pressure, the new Home Secretary, Reginald Maudling, refused to budge, and it was not until after a high-profile media campaign, and a petition signed by more than 400 parliamentarians, that the government finally relented and allowed Sally Mugabe to stay.

Yet, Robert Mugabe would never forget the attempts by the British to deport his wife at a time when she was at her most vulnerable. When his personal entreaties to Britain went unacknowledged for almost a year, the suspicion that neither a Labour nor Conservative government would be prepared to help him topple the Smith government, and install black-majority rule in Zimbabwe, must have hardened. (Indeed, [Tory PM Harold] Wilson later famously recounted that he knew the British public would never have countenanced an armed conflict with its "kith and kin" in Rhodesia.)

Although it is not mentioned at all in the article, I suspect that Mugabe's Marxist leanings did little to endear him to the British at the height of the Cold War. The handwritten correspondence of Robert Mugabe with the Home Office has been collated by the Independent and can be viewed online. As a piece of history, it is priceless.

As for the second question as to why Mugabe's more extreme, tyrannical instincts got the better of him in his later years, Sally Mugabe is portrayed as a counterbalance to Comrade Bob's excesses. With her passing away in 1992, the stage was set for him turning Zimbabwe into the basket case of a country that we know today. Love means never having to say you're sorry, indeed:

In the early years of Mugabe's rule, it was his wife who was credited with helping to temper his excesses. She could lighten his mood, said one of his former colleagues, just by entering the room. But the relationship began to falter when they discovered they were unable to have any more children and, as Sally's health failed, Mugabe began to have affairs.

Sally Mugabe died on 27 January 1992 from kidney failure and four years later Mugabe married his South African mistress, Grace Marufu. Without his first wife there to caution him against his extreme politics, Mugabe began to emerge as a tyrant. But that has not stopped Sally Hayfron from still being remembered affectionately, as the founding mother of the nation of Zimbabwe.

I Hereby Invoke Godwin's Law for the WTO Talks

♠ Posted by Emmanuel in at 7/20/2008 08:14:00 AM
Those hoping for a breakthrough in the upcoming WTO mini-ministerial meetings had better look away: Brazilian Foreign Minister Celso Amorim has launched a definite low blow on the upcoming WTO trade negotiations by comparing developed countries' rhetoric on agricultural subsidies to propaganda strategies employed by Nazi propagandist Joseph Goebbels [!] Those who have engaged in, shall we say, "heated" Internet discussions know Godwin's Law as that wherein flame wars degenerate into Nazi references somewhere down the line. To avid international economic diplomacy junkies like yrs. truly, this development is not a surprising one. Frustrations all around have led to cheap potshots. US Trade Representative accused Brazil and India not so long ago of trying to "destroy the Doha Round." Perhaps returning fire, Amorim now makes this analogy according to the Associated Press:

Some pre-negotiation jabbing turned into a potentially damaging diplomatic incident Saturday when Brazil's foreign minister said rich countries' deception in trade talks reminded him of tactics used by Nazi propaganda chief Joseph Goebbels.

His comments drew a sharp rebuke from the United States, whose chief trade negotiator, Susan Schwab, is the daughter of Jewish Holocaust survivors. Her spokesman described the reference to Goebbels as "incredibly wrong."

The controversy threatens to overshadow next week's last-ditch effort to save seven years of frustrating talks on a new global trade pact toward alleviating poverty around the world. The so-called Doha trade round is already teetering on the brink of collapse. President Bush has made a Doha deal a key part of his trade agenda.

Brazilian Foreign Minister Celso Amorim said the U.S., Europe and other wealthy economies have so frequently misrepresented the talks launched in Qatar's capital in 2001 that public perception has become totally warped. "Goebbels used to say if you repeat a lie several times it becomes a truth," Amorim told reporters at the World Trade Organization, where top negotiators from over two dozen countries are expected Monday for the official start of the talks.

Poorer countries have demanded cuts in the farm tariffs and subsidies used by wealthy countries, saying they hinder Third World development. In exchange, rich countries have insisted on better market access in developing countries for their manufacturers and service providers.

Amorim implied that rich countries were employing Goebbels' lying tactics in describing the agricultural concessions they claim they are willing to make, while criticizing poorer countries for refusing to liberalize their industrial markets. "I am reminded of Goebbels," said Amorim, whose country has co-led with India a broad coalition of developing countries at the WTO talks. Later, his spokesman qualified the remarks and apologized to Schwab.

Sean Spicer, spokesman for the Office of the U.S. Trade Representative, said he was horrified by the "personal venom" of Amorim's words. "We came here to Geneva to negotiate on substance," Spicer told The Associated Press. "For him to make remarks like this is so incredibly wrong. They are insulting."

Spicer noted that Schwab visited Amorim to soothe tensions immediately after negotiations collapsed in acrimony in 2006.

In an interview with the AP, Amorim's spokesman Ricardo Neiva Tavares said the minister "regrets if Susan Schwab or anyone else was upset by his comments on a historical fact. He certainly did not intend to hurt anyone's feelings, which he deeply respects.

The Joyless Economy: Roubini is Our Scitovsky

♠ Posted by Emmanuel in , at 7/19/2008 01:11:00 AM
I have followed Nouriel Roubini's rise from a well-regarded academic whose speciality is international economics to one of the world's "Top 100 Public Intellectuals" according to Foreign Policy. Although economics blogs can be somewhat dry, Roubini's has always been a pleasure to visit with its incorporation of rich cultural references and its unabashed crankiness setting it apart from most. It is not much of a stretch to think of the American economy in terms of a Greek tragedy. Like all good stories, the relative decline of the United States which he catalogues has the ingredients of a good tragedy according to Aristotle: Plot, Characters, Diction, Thought, Spectacle, and Melody. What sets Roubini apart from your humdrum econo-blogger is his incorporation of these elements in his blog musings. Some may fault him for implying that the parlous state of America's finances is a moral failing as Americans rack up onerous future obligations to buy goods and services that don't seem to make them happy, anyway. I say he's right: unsustainable deficits, whether on a personal or a national basis, are welfare-reducing.

In his most recent post, Dr. Roubini looks upon the current follies of the American lifestyle with unconcealed contempt. Among other things, he takes aim at investment in huge McMansions that require excessive heating bills and are located too far away from urban centres; SUVs that consume way too much gas; and, of course, IOUs piled up from here to eternity on consumer debt, housing loans, auto loans, educational loans, and what else have you. The sad part of it all is that this glorious overspending hasn't resulted in many--if any--sustainable gains in consumer welfare. To the contrary, declining prices of McMansions and SUVs coupled with rising gas prices and heating bills are foreseen to end this subprime iteration of the American dream. In the end, what was the point of it all, really?

"Money can't buy happiness" is an adage that is generally well-understood. However, one of the things that has never been adequately explained by social scientists, psychologists, and the rest is why so many people still act as if money can buy happiness. Nouriel Roubini's latest missive is, in searching for clues as to why Americans engage in a seemingly endless jihad on consumer sanity, reminiscent of the earlier work of the late Tibor Scitovsky on The Joyless Economy. Here is a blurb on the book that I found which captures its pre-Roubini essence:

Scitovsky's book, The Joyless Economy (1976), received scant recognition when it first appeared, but some now are hailing it as a prophetic masterpiece. It is among "The Hundred Most Influential Books Since World War II," according to a survey of prominent scholars by the Times Literary Supplement (Oct. 6, l996). More recently, in Critical Review (Fall 1996), seven sympathetic critics and Scitovsky himself revisited the book's critique of consumer capitalism.

"Drawing on research in physiological psychology," Scitovsky began with the human inclination to avoid discomfort and seek pleasure, note Jeffrey Friedman and Adam McCabe, Critical Review's editor and research assistant, respectively. But he contested the notion that the dynamic is so simple. "In Scitovsky's view, there are two sources of displeasure: not only too much stimulus--pain, but too little--boredom." Affluent societies had produced widespread comfort--but too much comfort resulted in ennui. By seeking excessive comfort rather than stimulation, or by turning to such fleetingly satisfying types of stimulation as TV or shopping, people made "wrong" choices and got less enjoyment than they could out of life. "The remedy," Scitovsky said, "is culture" and the stimulation provided by music, painting, literature, and history. Consumers must be educated to make wiser choices.

Scitovsky's book was written in 1976, but his indictment of a consumer-driven economy built upon the edifice of sloth is as relevant now as it was then. The combination of cheap credit provided by foreigners with a desire for creature comfort has culminated in the subprime mess whose fallout will have far-ranging consequences on the American political economy. It is indeed ironic that this illusory quest for comfort has culminated in more pain as the value of these acquisitions declines further due to changes wrought by excess consumerism. Some may chafe at Dr. Roubini's flourishes on a theme by Scitovsky, but he is merely making the tragedy of it all realistic: You bought all this stuff and they only brought you misery in the end. In his own way, Dr. Roubini tries to redress the balance noted by Scitovsky with rich cultural references that only reinforce my belief that he is the heir to Scitovsky.

One of the critiques of the so-called "Anglo-Saxon" model of governance is putting consumer credit and consumption on a pedestal. It is of no mere coincidence that Anglophone countries such as the UK, Australia, and New Zealand which have modeled themselves on the US are similarly afflicted by such problems: gaping external imbalances, housing bubbles, and rising consumer indebtedness. Many other countries chafe when Americans try to lecture them about how to run their economies in an "Anglo-Saxon" way--why exactly would they want to be like America with the attendant problems noted above? Take heed: the path to ruin may be comfortable, but it leads to ruin nonetheless. If not necessarily providing the answers as to why Americans continue to act as if money can buy happiness, Scitovsky and his heir, Dr. Roubini, are at least asking the important questions about our existence in consumer-driven societies.

It's Official: PRC Loses to US in Auto Parts Case

♠ Posted by Emmanuel in ,, at 7/19/2008 01:04:00 AM
It's now official: the WTO Dispute Settlement Body (DSB) has ruled in favour of the United States in its case against China regarding auto parts (DS 340). In February, I noted that a preliminary ruling was made in favour of the US along with the EU and Canada on discrimination against auto parts originating from the countries mentioned. The ball is back in China's court. It can abide by the decision or challenge the ruling at the DSB. However, if it chooses the latter option, then it will be subject to retaliatory tariffs against its exports should the ruling be upheld.

While news stories like those of Bloomberg and the Financial Times [HT: Trade Diversion] are correct in pointing out that this is the first defeat for China at the DSB, China backed down earlier on a more recent case filed by the US against it before further proceeding. The case in question concerns auto parts exports by the US, EU, and Canada to China for which Chinese authorities levied tariffs equivalent to those for complete automobiles if vehicles manufactured in China were deemed to have more than 60% of their parts coming from abroad. As the tariff rate that is supposed to be applied to auto parts is significantly lower than that for complete vehicles, the complaining countries were not chuffed by this misclassification and the ensuing discrimination. Detroit News hopes that US auto parts makers that have been hurt by the slowdown in US auto production can now find more business in China, the world's fastest growing auto market. Nuff said; here's the USTR's victory blurb, and I will try to get the Chinese response to this ruling if it comes along shortly:
U.S. Trade Representative Susan C. Schwab announced today that the first World Trade Organization (WTO) dispute settlement panel to address a dispute against China has issued a report finding that China’s treatment of U.S. and other imported auto parts is inconsistent with China’s WTO obligations.

“I am extremely pleased with the issuance of a very strong report by the WTO panel,” Ambassador Schwab said. “Enforcing trade agreements so that problems are solved – whether through dialogue or, if need be, litigation – is a critical part of the U.S. trade agenda. The panel report leaves no doubt that China’s discriminatory treatment of U.S. auto parts has no place in the WTO system.

“The auto industry is an important part of the U.S. economy, and we will continue our efforts to ensure that U.S. manufacturers and workers in this and other industries enjoy the benefits of open markets and a level playing field,” Schwab said. “Our pursuit of this case makes clear that we will not stand idly by when China or any other country adopts regulations or industrial policies that tilt the playing field against American goods or services.”

The United States was joined by the European Union and Canada, which also pursued dispute settlement proceedings with China on the same matter.


Increasing access to China’s auto market was a key issue in China’s accession to the WTO. China imposes an additional charge on imported auto parts whenever the imported parts are incorporated into a final assembled vehicle that fails to meet certain local content requirements. The WTO panel agreed with the United States that these higher charges unfairly discriminate against the use of imported parts in the assembly process and discourage automobile manufacturers in China from using imported auto parts in the assembly of vehicles. They also put pressure on foreign auto parts producers to relocate manufacturing facilities to China.

In particular, all vehicle manufacturers in China that use imported parts must register with China’s Customs Administration and provide specific information about each vehicle they assemble, including a list of the imported and domestic parts to be used, and the value and supplier of each part. If the number or value of imported parts in the assembled vehicle exceeds specified thresholds, the Chinese authorities assess a 25 percent tax on each of the imported parts.

The United States argued, and the WTO panel agreed, that these regulations impose an internal charge on U.S. auto parts resulting in discrimination against U.S. auto parts, in violation of WTO rules. The panel found that China is acting inconsistently with several WTO provisions, including Articles III:2 and III:4 of the General Agreement on Tariffs and Trade 1994 and specific commitments made by China in its WTO accession agreement.

The United States requested formal WTO consultations with China on March 30, 2006. The WTO established the dispute settlement panel on October 26, 2006, the first such panel against China. China has the opportunity to appeal today’s report.