England as a Bargain Shopping Destination? Yup

♠ Posted by Emmanuel in , at 7/31/2009 07:04:00 AM
"Don't you think the trousers are a bit too...narrow?" In retrospect, I posed the wrong question while trying on a suit to my skinny Hugo Boss salesman with a hairdo worn by Duran Duran's Nick Rhodes circa 1984 wearing a fashionable "slim fit" suit and matching two-inch-wide tie. As someone who thinks he has better things to do than read men's magazines, I was only dimly aware of the current trend for "slim fit" suits. Understandably, he shot me a skeptical look that suggested: "Whaddya want to look like, MC Hammer?" In the end, I bought the suit anyway, a nice-looking Rossellini Movie model for a bargain price of £300 that originally retailed for £500. Suit shoppers know the quality of woolen fabric is graded on the fineness of micron counts. This one was a Super 100--pretty good material for the money if not the best available. Hugo Boss is also a good brand if a bit long on marketing hype and not in the top leagues of off-the-rack names like Ermenegildo Zegna or Brioni. From the picture, I'm sure you'll agree that the style of the cut is pretty good. And, the price simply cannot be beat--especially for England of all places.

What the Yanks call "European cut" suits are more tapered in a way that's supposed to flatter the male figure, with broad shoulders and a slim waist in contrast to the standard American "sack suit" designed to hide, er, generous rolls of flab at the waist. Not having bought a suit in five years, it was an interesting shopping experience.

With the dear pound of recent years, London has not been an affordable destination, to put it mildly. Even now, the city is still the 16th dearest city in the world to live in. However, with a full-blown UK retail slump in place coupled with a currency of diminished value, I was surprised to find real deals like this one during my most recent visit.

This particular suit I bought at the Hugo Boss store at Bluewater. For those who haven't heard of the place, it's a giant shopping complex about thirty minutes away from Canary Wharf modeled after the discount outlets in America like Woodbury Commons in New York. From what I've noticed, though, Bluewater features less deals on items with imperfections or minor flaws. As I discovered, the "Anglo-Saxon" model doesn't only apply to economics but also to the fit of menswear. As expected, I had no trouble fitting into a 42 regular. However, the accompanying 36 waist pants were far too large.

Now, Americans are infamously portly people even by their own admission--probably the fattest people in the world save the Tongans. Unfortunately, the English are not far behind in the blubber department, ranking among the fattest of Europeans. (Overconsumption often pertains to food intake as well.) Hence, I could not easily redo the size 36 trousers to fit me. Helpfully, Nick Rhodes was alright with my suggestion to mix and match the trousers with a smaller size. And so I found myself swapping them with size 32 pants in the same charcoal grey. As mentioned above, I initially thought that the newer pants were too thin, but since slimmer fits are more in fashion, even this renowned curmudgeon is happy. It's "European cut" without quite being "slim fit."

Don't take my word for the "bargain" part: the best price I've found among US-based discount retailers is $500 from Suitupp.com for the same suit which goes for $800 retail. The selling price of the Rossellini Movie in the UK was £500. This model has been sold for a few years now, so it's easy to imagine it originally retailing for nearly the equivalent of $1,000 when the pound still commanded two dollars. Now, I bought it for £300 x $1.64/£1=$492. Remember that you would still have to wait while buying online and pay for shipping (another $22 bringing it up to $522). Add in that Nick Rhodes wouldn't be there to help you swap the trousers to a smaller size and I am indeed pleased with my purchase.

London as a shopping bargain destination? You better believe it, friends. Retailers across Blighty are discounting like there's no tomorrow. Plus, the selection is unparalleled: London is the world's top destination for retailers. And if you're shopping for a good deal on a suit, do visit Nick Rhodes at the Hugo Boss outlet in Bluewater. Tell him I sent you.

UPDATE: Kindred over at IPE@UNC makes this an anecdote of the perils of deflation I'm not quite sure I, ah, buy.

Singapore's SWF Temasek Loses $40B; So What

♠ Posted by Emmanuel in , at 7/30/2009 07:53:00 AM
Singapore is often regarded as a progressive Asian country in the Western sense. However, the continued dominance of its recognized founding father Lee Kuan Yew in national affairs is strongly felt, planting seeds of doubt among those following Asian politics. His son, Lee Hsien Loong, is the country's current prime minister. In turn, Lee Hsien Loong's wife, Ho Ching, manages one of the country's sovereign wealth funds, Temasek.

The political intrigue in today's story goes like this: Earlier this year, Ho Ching declared that she would step down as boss of Temasek after five years at the helm. Many attributed this decision to the SWF losing massively due to its large holdings of financial stocks and the attendant public outcry. Yankee Chip Goodyear, last the CEO of Aussie mining giant BHP Billiton, was set to replace her. For one reason or another, though, things have not panned out. News reports typically discuss the abrasive "ugly American" management style of Goodyear clashing with the public service and bureaucratic orientation of Temasek as a reason for him not assuming his intended post.

So, despite hemorrhaging billions and billions of dollars due to "investing" in Merrill Lynch and other financials, Ho Ching is now set to remain while Chip Goodyear has been told to hit the road. From Reuters:
Singapore's state investor Temasek said its portfolio slid by at least $40 billion, or more than a fifth, in the year to March but it will stick with banks and sees opportunities in food and energy. The fund saw potential in Asia and Latin America and was comfortable with financial services as its core portfolio holding, despite being hurt by the market meltdown last year after its high profile investments in Western banks, CEO Ho Ching said on Wednesday. 'At this point, we are still comfortable with the financial sector a s a sector that reflects the key economies we are interested in,' she said at a lunch talk organised by the Institute of Policy Studies think-tank.

She acknowledged, however, that the increased regulation of the financial sector may result in the rate of returns falling. 'In terms of sectors specifically, we are agnostic, we don't have a sectoral target,' she said, adding the fund would look at food and energy but without giving further details.

These were the first public comments by Ms Ho, also the wife of Prime Minister Lee Hsien Loong, after Temasek said last week that Charles 'Chip' Goodyear will not become CEO due to differences over strategy. With 40 per cent of its holdings in financials, Temasek's portfolio lost nearly a third in the eight months to November, sparking unprecedented criticism in Singapore about its strategy. Ms Ho did not give the exact portfolio level as of March 2009...

Temasek had S$185 billion in assets as of end-March 2008, which fell to S$127 billion as of November 2008. Mr Goodyear was widely expected to trim Temasek's financial holdings and move aggressively into commodities and energy and into emerging market infrastructure and consumer retail sectors, analysts and bankers have said. Ms Ho said Temasek would continue to look at internal and external candidates for her replacement. Mr Goodyear's departure came less than six months after he was named by Temasek as the sovereign wealth fund's first foreign CEO. He would have replaced Ms Ho on Oct 1.
The question I would like to ask is this: would any executive in the West have survived virtually unscathed after losing a cool $40 billion? It's true enough that Singapore is filthy rich, but for how long if it just lets these things slide? Goodyear might not have been the most amiable character, but he surely had better strategic ideas than holding trashy American financials.

UNCTAD Ponders Trade, Dev't & Migration Links

♠ Posted by Emmanuel in ,,, at 7/29/2009 12:41:00 PM
Any discussion of migration boils down to the question of what constitutes development. That is, can sending folks away really be considered as development when the common frame of understanding is Smithian in discussing the wealth of nations? To no one's real surprise, the answer for me is a firm "yes." Especially now when dependence on exporting products to the West is a nearly surefire recipe for misery creation, alternative ways of promoting the well-being of those from LDCs--which is closer to my idea of development--come into play which involve the movement of persons.

Helpfully, the UN Conference on Trade and Development (UNCTAD) has just put out a recent guide to help us understand the processes that can help maximize benefits from LDC migration. What follows is from the concluding section on "Ways Forward" though the rest of this short publication is well worth reading. I particularly like the section discussing the continuing importance of migration during the global financial crisis:

Strengthening the contributions of migrants to development by enhancing migration’s positive trade, investment and development links has become an increasingly important and timely endeavour, as the scope and depth of globalization has advanced. It remains an area of active dialogue that is already benefiting from concerted efforts involving governments, civil society groups, academia and the private sector to design more informed policies that multiply the beneficial economic and social impacts of migration. Stakeholders may wish to consider a variety of potential options to support and expand these efforts, including through further research and analysis. Some potential options falling under the different themes of this paper are presented as examples below.

Improving understanding on migration patterns, trends and potential
Consideration could be given to the following:

• Identifying and promoting ways to ensure that international migration better supports the development objectives of both sending and receiving countries by improving government capacity and structures for collecting labour migration data;
• Improving bilateral and multilateral channels for the exchange of migration and related labour market information;
• Encouraging and supporting more extensive analysis and research on labour migration issues that can be readily used by policymakers to design more informed and effective migration policies; and
• Examining how migration trends are influencing legal reforms in areas such as labour law modernization, land tenure, education, double taxation treaties and bilateral investment agreements, among others.

Strengthening the development benefits of migration
Consideration could be given to:
• Enhancing the benefits of migration by integrating and mainstreaming labour migration in national employment, labour market and development policy and coherence among these policy frameworks;
• Supporting expanded analyses of the economic and social contributions that international migrants make to sending and receiving countries;
• Enhancing consular services in receiving countries to provide information and assistance to national migrant workers; and
• Designing structures and mechanisms to empower migrants to contribute to sending and receiving country economies, including by involving all stakeholders in migration policymaking processes; simplifying administrative migration procedures for migrants and employers; recognizing migrant workers’ skills and qualifications; reducing remittance transaction costs; and opening up receiving country educational opportunities to migrant workers.

Empowering diaspora communities as an engine for development
Consideration could be given to:
• Providing incentives for enterprise creation and development, including transnational business initiatives and micro-enterprise development by diaspora communities;
• Facilitating the transfer of capital, skills and technology by migrant workers, including through innovative incentive schemes;
• Providing incentives to, and ensuring open competition within, the financial services sector in order to reduce remittance transaction costs for migrant workers;
• Providing incentives for the productive investment of remittances at both the national and community levels;
• Adopting measures to reverse or mitigate the loss of workers with critical skills, including by creating attractive terms for diaspora to return home;
• Adopting policies to encourage circular and return migration and reintegration into the country of origin, including by promoting temporary labour migration schemes, circulation-friendly visa policies, information dissemination on employment opportunities in their home countries, portability of social security rights and health insurance coverage, and related support structures;
• Enhancing capacity-building in migrant source countries to ensure that circularity can function in practice. Initiatives to build such capacities in cooperation between migrant source and destination countries are often undertaken in the form of pilot projects;
• Migrant source and destination countries can promote inter-institutional and twinning cooperation, including through linking companies or employers, to provide for controlled circularity; and
Additional surveys could be undertaken to improve understanding of the impediments to mobility encountered by private employers and recruiters.

Understanding and adjusting to the impacts of financial crises
Consideration could be given to:
Examining the current financial crisis from a migration and development perspective to reveal the full extent of the impact of such crises on migrants, their families and the economic and social progress of sending and receiving countries;
Developing policies that take into account that the economic downturn has reduced the short-term demand for temporary labour migration, but there will remain a long-term demand for additional temporary and permanent migrant labours to compensate for forecasted shortages due to demographic changes in many developed countries;
• Including migration related assistance as a component in development assistance programmes to assist sending countries adjust to decreased remittances and the economic and social impacts of sudden and unanticipated return home of their migrant workers; and
• Establishing mechanisms to assist migrant workers who have lost their jobs due to the crisis secure employment in both sending and receiving countries.

Making migration a building block for international and regional trade
Consideration could be given to:
• Promoting bilateral and regional labour and trade agreements that reduce barriers to the international flow of labour, including by addressing aspects of economic migration, such as admission procedures, mutual recognition of education and qualifications, gender issues, family reunification and integration policy;
• Providing developing countries with tangible opportunities for mode 4 services exports to developed countries through commercially meaningful multilateral commitments on mode 4 under the GATS; and
• Promoting the positive role of migration in deepening regional integration by mainstreaming migration into national trade policies.

"China Currency Coalition" Obama Sucks Up to PRC

♠ Posted by Emmanuel in ,, at 7/28/2009 04:49:00 PM
Here we go again. The Bush-era Strategic Economic Dialogue has since morphed into the Obama-era Strategic and Economic Dialogue. Whether there's any substantive difference I really can't tell, apart from more token references to climate change and human rights. The important observation from my point of view is that Campaigner Obama spewed all sorts of organized labor-friendly protectionist rhetoric. Let us recall some highlights from his remarks to the American Chamber of Commerce in China circa September 2008:
Central to any rebalancing of our economic relationship with China must be change in its currency practices. Because it pegs its currency at an artificially low rate, China is running massive current account surpluses. This is not good for American firms and workers, not good for the world, and ultimately likely to produce inflation problems in China itself.

As President, I will use all the diplomatic avenues available to seek a change in China’s currency practices. I will also undertake more sustained and serious efforts to combat intellectual property piracy in China, and to address regulations that discriminate against foreign investments in major sectors and other unfair trading practices. And I will work with the Chinese government to establish a better system for both countries to monitor products produced for export and act when dangerous products are identified.

As President, I will take a vigorous, pragmatic approach to addressing these issues, utilizing our domestic trade remedy laws as well as the WTO’s dispute settlement mechanism wherever appropriate. High-level dialogue among economic leaders in both countries is also important to achieving real progress. My approach to our economic relationship is positive and forward-looking: to remove obstructions to gaining the benefits of trade and thus to enable faster, and healthier, growth in both economies.
That sounds pretty tough, eh? The interesting thing is that the Obama administration hasn't really introduced a hardline approach, contrary to the fears of one Jagdish Bhagwati. In his remarks prior to the first Strategic and Economic Dialogue, Obama had basically nothing to say whatsoever about the renminbi. Instead, he said this:
All of these issues are rooted in the fact that no one nation can meet the challenges of the 21st century on its own, nor effectively advance its interests in isolation. It is this fundamental truth that compels us to cooperate. I have no illusion that the United States and China will agree on every issue, nor choose to see the world in the same way...This dialogue will help determine the ultimate destination of that journey. It represents a commitment to shape our young century through sustained cooperation, and not confrontation.
The Financial Times interviewing Eswar Prasad had this sea change in Obamanite rhetoric sussed out:
For years, Washington alleged that Beijing unfairly manipulated its currency, the renminbi, to support exports and demanded China allow it to appreciate to force structural changes in its economy. Humbled by the financial crisis and heavily reliant on Beijing to climb out of it, Washington has shifted gear, relegating the currency to a subset of its push for broader economic reforms in China.

"The US has for now given up on pushing China on currency issues, partly because Washington has less leverage over Beijing than at any other point in recent history," says Eswar Prasad of the Brookings Institution in Washington. "The US now has enormous financing needs for its budget deficit and current account deficit, making it more dependent on China than ever before."
Let me paraphrase Obama if he were more candid:
Look, we're basically broke. $100 trillion and counting in the hole, in fact. We have a currency we're printing like crazy that you've suggested moving away from. Don't do that as we need you to fund trillions in megaprojects that demonstrate we're "doing something." So, we'll quit this schtick about yuan undervaluation. I don't mind screwing over those unionized half-wits who voted for me expecting some prime-time China bashing. Don't take this "China Currency Coalition" stuff seriously. Even Clinton kept calling you on human rights but didn't do anything; I'm just following his example.

As long as you keep buying Treasuries--not US companies, mind you--we'll turn a blind eye to you supporting the Sudanese, jailing Australians on specious grounds, suppressing Uighurs, loading our computers for sale in China with spyware, and other human rights jibba-jabba. Same thing for the environment. F--k global warming. My car gets less than 10 miles to the gallon.

A word of warning, though. If you don't keep buying Treasuries, we reserve the right to bring trade sanctions against you on currency or environmental grounds. I need to give red meat to my constituencies if things don't come out the way we like it. I am sure you'll understand; it's nothing personal.
The US keeps talking about "human rights" violations. Isn't pleading for collaboration with the PRC leadership that has channeled some $1.4 trillion in the savings of poor Chinese to the benefit of wasteful and decadent Americans the mother of all violations? The sinking dollar and $115 billion in IOUs to be issued this week certainly don't inspire confidence. As I've often said, the world economy is becoming an even more messed up place after the spectacular implosion of the subprime-securitization-senseless overconsumption axis of financial evil. I'm sorry, but the US and China are edging closer to hell instead of moving away from it. Don't expect me to feel sorry for either.

Before I end, the speech I found less-than-encouraging on two more points. Obama's ignorance is evident in claiming that this is the first Strategic-Economic Dialogue. This is wrong because (a) Bush held these talks before and (b) it's now supposed to be the Strategic and Economic Dialogue. Next, claiming that China is alike a basketball player whose playing career is likely finished due to a career-threatening injury in Yao Ming is not encouraging. If anyone is truly hobbled here, it's the debt-addled beggar Sammy.

"China Currency Coalition" Obama is a joke. His hypocrisy on Sino-American relations is only outdone by the gullibility of organized labor that supported him. Clinton...Obama...organized labor still awaits the Great China Basher who will make all things right by building Fortress America.

UPDATE: PBoC Governor Zhou Xiaochuan reiterated Beijing's line that it will reconsider revaluing the yuan "If we are confirmed that the recovery of the U.S. economy is established and stable, if we see that the United States starts to exit its expansionary fiscal and monetary policy, then China will see what it will do at that time." He also confirmed that PRC officials cut off any talks on RMB strengthening.

Literally Dying for Privatization in China

♠ Posted by Emmanuel in at 7/26/2009 04:14:00 PM
The transition from mostly state-owned industries to private enterprises is always fraught with difficulty. Add exceptionally difficult times in China's transition to a semblance of a market economy with callous handling of the situation and you get this incident reported by the Financial Times. While the rationale for rationalizing SOEs is sharpened during these these periods, you cannot expect workers to respond too positively:
The privatisation of a state steel company has been scrapped after an executive was beaten to death by workers angry at the threat to their jobs from a takeover of their firm, according to a Hong Kong rights group. The violent riot in north-east China late last week involved up to 30,000 workers, a reminder of the ongoing sensitivity about lay-offs from state firms in industries targeted for consolidation...Tonghua Iron & Steel, a traditional state enterprise, has about 50,000 workers and has struggled to make consistent profits in recent years, making it a prime target for restructuring by its owner, Jilin province.

The privately-held Jianlong Group, one of China’s largest private steel companies, had first proposed taking over Tonghua in 2005, backed out of the deal when the economy slowed last year, but re-entered negotiations recently when industrial demand picked up...The interim general manager sent by Jianlong to run Tonghua, Chen Guojun, had infuriated the workers with his high-handed attitude, according to comments posted on internet bulletin boards in China.

He had reportedly said that he would re-establish Tonghua “under the name of Chen” and lay off nearly all the employees. “With Tonghua Steel’s retired workers each receiving only Rmb200 a month for living expenses, Chen Guojun was paid an annual salary of Rmb3m,” the rights group reported. When Mr Chen returned to the plant late last week, a large crowd of workers surrounded his office and beat him unconscious, according to a report issued by the Hong Kong Information Centre for Human Rights and Democracy.

Outside the factory, mobs of workers stopped an ambulance and police from entering the compound to rescue him. The thousands of riot police then mobilised by the authorities took several hours to bring the situation under control.
Some thoughts:
  1. It has always interested me how the Communist Party has, for a long time now, stepped into the vanguard of the privatizing bourgeoisie;
  2. While privatizing inefficient SOEs may be the correct path to take, the transition could have been handled with far more sensitivity given that social safety nets are few and far between in the PRC;
  3. Those French "bossnapers" who've held bosses hostage to persuade them to keep their jobs look pretty staid now--the difference here is that the rioters were effective in, er, killing off privatization plans;
  4. Lynching has also happened with a multinational operating in India. My guess is that the China incident will receive less press since it doesn't involve Western concerns.

Un-PC Thoughts On Stewardesses & Unionization

♠ Posted by Emmanuel in , at 7/24/2009 08:53:00 PM
"THWACK!!!" The lovely Cathay Pacific stewardess had just slapped my hand while I was reaching for a roll in the bread basket on board a flight from the Far East to London, leaving me whimpering in mock pain. As anyone who's been to the Pacific Rim knows, folks from Hong Kong are ultra paranoid about swine flu given their previous experience with bird flu. Hence, it was no surprise to me that throngs of Chinese travelers at Hong Kong's Chep Lap Kok airport had surgical masks on. Sharing their finicky disposition, the Cathay Pacific stewardess served our meals with gloves on and insisted on delivering bread rolls with tongs.

My previous years of study made it more convenient to fly KLM because that airline brought me directly into Birmingham International from Amsterdam Schipol. For reasons I'll share soon, this trip required that I travel to London. Now, European airlines have a mix of younger stewardesses and others who appear--shall we say--more veteran. Thus, European airline travel is more of a hit-and-miss for male travelers bored with being stuck on a flying metal can for hours on end. More recent travel time in Asia has just reminded me of how much I've missed traveling in the rather more unionized skies of Europe. You've probably seen advertising materials in travel magazines full of lovely flight attendants from Asian airlines plying orange juice and mineral water. Thankfully, I can attest that there is still truth in advertising. Fly the aforementioned Cathay Pacific, Singapore Airlines, Malaysia Airlines, Philippine Airlines, or Thai Airways and you're bound to notice that most stewardesses really resemble women in the advertising literature. They don't usually hire models and feature actual flight crew in ads. More often than not, they have lustrous hair, flawless complexion, and slim, shapely figures.

By now, you're probably wondering, "What does this have to do with IPE, man?" It's simple, really. The onset of commercial flight is now regarded as the golden age of air travel. Countries wanted to put their best face forward to the world by establishing national carriers, and, of course, including comely stewardesses. However, deregulation and unionization have really spelled the death knell for the romance of travel. Don't get me wrong: el cheapo discount fares have their place, but when you're traveling farther distances and paying more, you certainly feel like you're entitled to more of the things from the good old days.

As is usually the case, the Americans are the worst offenders. The not-so politically correct truth is that, to preserve their image, airlines have used age and even weight restrictions for cabin crew. Highly unionized American flight attendants, however, dealt a death blow to these sorts of practices a long, long time ago:
Many flight attendants had never cared for the airlines' long-standing no-marriage rule for stewardesses (no other airline employees were subject to it). Many were also annoyed when airlines began in the 1950s to require them to retire or transfer to a ground job when they turned 32 or 35 years old. Flight attendants' union officials complained about these policies and tried to overturn them through official grievances and collective bargaining, but airlines would not budge.

Then came Title VII. The Civil Rights Act of 1964 was mostly concerned with addressing racial discrimination, but Title VII of the Act, which concerned employment, also forbade discrimination in the workplace on the basis of sex. For flight attendants, Title VII meant new leverage in challenging airline age and marriage rules in labor relations and in the courts. Though using Title VII would prove slower and trickier than flight attendants anticipated, they eventually forced airlines to drop age and marriage restrictions entirely by the end of the 1960s. In the 1970s and beyond, they used Title VII with less success to challenge maternity restrictions and strict weight monitoring (which, like age and marriage rules, had never been applied to other airline employees).
So there you have the PC version of why American carriers feature decidedly more, er, matronly flight crew than the global norm. This holds to some extent as well in Europe depending on the particular airline, but un-PC Asian airlines are basically not blighted by commie-unionization, hence the difference. While having to remain unmarried is certainly an unwelcome intrusion, the rest is more questionable. At one point or another, major American carriers justly known worldwide for their utter crappiness have been bankrupt, subsidized by the government, or both. The reasons usually given are lousy service, high prices for aviation fuel, fear of terrorism, excessive security hassles, etc. I have always wondered if the real reason behind unprofitable airlines is that half of the passengers long for the days gone by when US flight attendants were still in the business of keeping appearances. Go figure.

When was the last time a US airline has won an international award? In some parts of the world, making money by providing travel services people actually want is not frowned upon, strange as it sounds. The Asian airlines mentioned above rack up all these accolades year in and year out while their US counterparts fill the skies with often surly flight attendants who look like they could beat me to a pulp if they wanted to. To me, crappy US airlines are another symptom of general American decline, plain and simple. If they want to improve matters, it's clear to me where they should start.

Note that I am not being sexist here. Someone thought of coming up with Hooters Air stateside but that has since closed. That is, the hick version of the romance of travel didn't play too well. There is nothing crass about having young, attractive flight crew. In other places of the world, it is an honor to be a stewardess as people will automatically think, "she must be attractive, then." It's an expected norm or at least it was during bygone days--an occupation for young'uns wishing to see the world. Moreover, I don't see anything wrong with giving female travelers hunky flight attendants to even things out who are also booted off the 747-400 when they get too portly or too old. More often than not, money losers look the part. I'll bet that you won't find stewardess dolls at Chicago O'Hare.

Finally, and I should really be returning to more conventional topics, the idea that presenting attractive flight attendants compromises flight safety is utterly absurd. Had a seasoned veteran slapped my hand instead of the lovely but no-questions-who's-in-charge Cathay Pacific flight attendant, I probably would have tried sneaking out more bread rolls surreptitiously to get back at her, swine flu or not. Thankfully, such wasn't the case here. Truth be told, I don't mind being slap...[EDIT: The IPE Zone remains a family oriented blog. The usual Emmanuel will return soon with more hard-hitting commentary on world economy once his newfound hangup with explaining the demise of the airline industry wears off.]

PS: AskMen UK has some good, some daft ideas about this topic.

Your Latest China Reserve Diversification Story

♠ Posted by Emmanuel in , at 7/21/2009 09:18:00 PM
The PRC meets a very skeptical audience when it keeps saying that it will diversify away from holding US Treasuries but doesn't appear to do so--or at least not yet. This latest round of bellyaching by Premier Wen Jiabao makes it appear as if the PRC will make strategic investments instead of fattening official holdings of increasingly dubious value. The general logic behind holding equity stakes--should they indeed come to pass (and I have my doubts)--was explained by Nouriel Roubini a long time ago in light of US protectionism over an Emerati company operating US ports and China's state-owned enterprise CNOOC attempting to acquire Unocal:
But, increasingly, foreigners are starting to realize that exchanging their goods and services for lousy low-return IOUs of the US government is a most lousy deal for them. Why to hold Treasuries that give you a mediocre 4.5% return over 30 years when you can instead buy higher return capital such as US corporation, US factories, ports, real estate and any other asset currently owned by American in this great land of ours?
In more recent times, you can count the US shooting down a legitimate bid by Chinese telecoms firm Huawei to buy parts of 3Com. Recall too that Chinese annoyance over these incidents has resulted in China returning the favor by blocking Coca-Cola's bid to buy Chinese juice maker Huiyuan in an act of juice protectionism. But hey, if CNOOC and Huawei were dissuaded over specious "national security" grounds, who's to say that OJ isn't a national security objective?

This brings me to Wen's latest statement. It may merit more attention coming from the Chinese leader himself. Also, it comes hot on the heels of a former vice-premier calling for more surveillance of countries issuing reserve currencies. What the news article below seems to neglect though is that China can prop up the dollar by buying American debt or equity to help make up for gargantuan US external imbalances. That is, China can instead buy stakes in American companies, although these would not qualify as traditional reserve assets. It would certainly cheer me up if the Chinese stopped purchasing dollar-denominated reserves in such large quantities or bought more equity in US firms instead. However, we need to consider a number of possibilities:
  1. Perhaps this is yet another shot across America's bow without real follow-through;
  2. China wants to test Treasury Secretary Geithner's assertion recently offered to Middle East states that the US will not discriminate so blatantly against foreign investors over "national security" grounds;
  3. China is sending a signal that it's more willing to let the yuan find a market-determined price by concentrating on purchasing international assets with strategic value. This of course assumes that targets outside the US won't invoke "national security" grounds against official PRC buyers.
Until proven wrong--and I so want to be proven wrong--the first answer is the default, with the second being rather unlikely and the third very unlikely. From the Financial Times:
Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday. “We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday. Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.

The “going out” strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.

Qu Hongbin, chief China economist at HSBC, said: “This is the first time we have heard an official articulation of this policy ... to directly support corporations to buy offshore assets.” China’s outbound non-financial direct investment rose to $40.7bn last year from just $143m in 2002.

Mr Wen did not elaborate on how much of the $2,132bn of reserves would be channelled to Chinese enterprises but Mr Qu said this was part of a strategy to reduce its reliance on the US dollar as a reserve currency. “This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.”

State-owned groups, particularly in the oil and natural resources sectors, have stepped up their hunt for overseas companies and assets on sale because of the global crisis. China Investment Corp, the $200bn sovereign wealth fund, has been buying stakes in overseas resources companies and has taken a 1.1 per cent stake in Diageo, the British distiller.

In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies. “Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”
Why anyone wants to buy IOUs of an entity projected to run up a tab of approximately $100 trillion once its unfunded liabilities are added up is beyond me. At the same time, it may not be very realistic to assume that these purported "bargains" elsewhere in the world will stand idly by while China, Inc. flexes its muscles.

"Death to Nokia Phones!" An Iranian Rallying Cry?

♠ Posted by Emmanuel in ,, at 7/19/2009 06:37:00 PM
The late Ayatollah Khomeini became famous for his pronouncements about the US being the "Great Satan" while his supporters chanted that now world-famous line about "Death to America!" Regardless of your opinion of him, you can't deny that the Grand Ayatollah was a great polemicist. (Nowadays, of course, we know that the Ayatollah needn't have bothered as the Yanks are bleeding themselves to death financially along with any claim to greatness, but that's another story.) In an interesting turnaround, the current protest movement fomenting over the alleged manipulation of the recent Iranian elections resulting in the re-election of Mahmoud Ahmandinejad is also tossing barbs at Western devils. However, the rallying cry these days is decidedly different.

You see, the protest movement claims that Nokia, the world's largest cellular phone maker, has provided the Iranian leadership with the requisite equipment for snooping in on mobile communications. Hence the doctored graphic above. However, Nokia refutes this claim, saying that all its national clients have equipment similar to those it has sold to the Iranian powers-that-be. In any event, the protest movement is claiming that its boycott of the Finnish firm's famous wares is killing Nokia's market share in Iran. There's even an online petition you can sign on to in case you're similarly convinced that Nokia is conniving with the misguided mullahs. From Radio Free Europe:
Ehsan doesn't personally own a Nokia, and over the past few weeks the 26-year-old Tehran resident has actively tried to ensure that friends and family -- or anyone else who will listen -- don't buy the mobile-phone giant's products either. Ehsan says that he would be proud if his efforts have harmed Nokia, which he accuses of aiding the Iranian government in its "crackdown against freedom" following the country's controversial presidential election on June 12.

According to the moderate Iranian daily "Etemad Melli," many Iranians who sympathize with the protests are boycotting Nokia for providing the Iranian government with the capability to tap mobile telephones, scramble the SMS text messages used by many protesters to communicate, and interrupt calls. The paper, which belongs to reformist presidential candidate Mehdi Karrubi, headlined its story by saying Nokia sales in Iran have been halved as a result of the boycott, although no figures were provided to support the claim. The report quoted phone sellers as saying that the price of Nokia cell phones has fallen in Iran, and that many people are exchanging their Nokia phones for other brands...

The Nokia boycott campaign was launched following reports that Nokia Siemens Networks, a Nokia subsidiary that specializes in communications services and networks, provided the Iranian government with a monitoring center. "The Wall Street Journal" reported on June 22 that the monitoring capability was provided in 2008 as part of a deal under which Nokia Siemens Networks provided Iran with mobile-phone networking technology.

Ben Roome, a spokesman for Nokia Siemens Networks, told RFE/RL that the company provides traditional circuit-switch telecoms equipment to Iran, and that all networks can potentially be monitored. "When we sell any network, anywhere in the world, we sell it knowing that whoever runs that network has the ability, potentially, to listen in to phone calls running across that network," Roome said.

In the case of Iran, the technology may have given the government the ability to listen in on individual phone conversations, and to track down opposition members and critics. The Iranian establishment is believed to have used the system during the current crackdown, and even before.

Several former detainees have told RFE/RL that during interrogation sessions they were asked about past text messages and calls. A blog titled "Boycott Nokia For Iran Crackdown" has changed Nokia's motto from "connecting people" to "jailing people." It states that Nokia has a responsibility to ensure that its technology is used in an ethical manner. On Facebook, an image is circulating showing a Nokia cell phone with ears, above text that reads: "Nobody is alone."
They have a Facebook page, too. Now here's a CSR problem for a major Western multinational in the digital age if there ever was one. The WSJ also has a feature on Iran's ability to perform "deep packet inspection." Whether "Death to Nokia Phones!" has the same sort of ring to it I leave up to you.

Euroskepticism v. Reality: Iceland Approaches EU

♠ Posted by Emmanuel in ,, at 7/18/2009 01:03:00 PM
I like to think of Euroskeptics as modern-day descendants of Captain Caveman but minus the Teen Angels due to their generally surly attitude towards European integration. That Euroskeptics are often race-baiters only reinforces my belief. These econo-Luddites think going it alone is preferable to attaining membership in an organization that, despite its flaws, offers several tangible advantages. First and foremost in our day and age is the right to use euro currency. Financially incontinent PIGS--Portugal, Ireland, Greece, and Spain--have so far managed to keep afloat by anchoring to the Bundesbank's ultimate self-sacrifice: Germany gave up the deutsche mark so that another currency could serve as a similar bulwark for price stability and continuing value not only for Deutschland but throughout the region.

EU monetary policies have always remained conservative in contrast to the "anything goes" dollar debasement strategies playing out Stateside. Yes, the EU and US are having a rough time, but it's the EU that recognizes throwing everything against the wall to see if something sticks in Cheneynomic fashion is not a viable strategy. In the US case, nothing is working unless the goal is piling on yet more IOUs on the backs of future generations to ensure debt peonage. Financial responsibility is distinctly un-American.

Now, the travails of Iceland's famously overextended banking sector racking up claims well in excess of the country's GDP are well-known. Suffice to say that, in this instance, the flinty claims of Euroskeptic backwardism came up against the rock-solid euro with the former yielding, as one would expect. It's a matter of priorities: how much does one value the convenience of debasing one's currency to become more "competitive" in typical Yankee fashion? Sooner or later, one tires of such cheap fixes and recognizes the value of using one of the last few examplars of real and not play money. From the Wall Street Journal:
After six days of grueling debate, Iceland's parliament voted narrowly Thursday to apply to join the European Union -- an institution from which the country long stood proudly apart. But a binge of overseas expansion by Iceland's buccaneering banks led to a towering stack of bills that couldn't be paid when the credit crunch cut off funding last fall, leaving Iceland with few options. Alone, with a currency that no one wanted to buy, Iceland's banking system went under. The measure passed 33-28, with two abstentions, and followed vigorous discussion on farms, fish and finance that reflects Icelanders' lingering misgivings about the regulations that come with EU membership.

The country's new prime minister, Jóhanna Sigurdardóttir, elected after the financial crisis, made joining the EU -- and, eventually, the stable euro currency -- a priority. With Thursday's vote, she wrangled her own center-left party into line and cajoled support from parts of her usually euro-skeptic left-wing coalition partner and a handful of smaller parties. The right-wing Independence Party, which held power in Iceland for decades and long decried the EU for excessive regulatory zeal, wasn't able to muster enough opposition.

The prime minister's spokesman said Ms. Sigurdardóttir was "extremely happy about the outcome" and was on track to submit a formal application to the EU by the end of the month. "This is a historic day for Iceland," said foreign minister Össur Skarphédinsson, also a member of Ms. Sigurdardóttir's Social Democratic Party.

Iceland, which declared independence from Denmark in 1944, had until last year enjoyed a generation of prosperity and stability. But the financial crisis caused chaos in the country of 320,000. The collapse of the currency, the krona, cascaded into disaster for businesses and households who took foreign-currency loans, and for Icelanders accustomed to buying imported cars, food and building materials with kronur.

Iceland is likely to have an easier time with EU accession than other aspirants, such as Albania, which wrestles with poverty and corruption, and Turkey, whose large population of Muslims has caused consternation in France and Germany. Thursday, the EU commissioner in charge of enlargement praised Iceland's "deep democratic traditions."

But hurdles remain, among them an expected popular referendum on the matter and substantial concerns over the economic hit to the fishing industry from adopting EU quota and catch rules. Fish and seafood accounted for 37% of Iceland's exports in 2008. Even if all goes smoothly, accession is at least 18 months away, and likely more. After joining, Iceland would still need to meet stringent economic and currency-stability criteria [ERM II] -- which it is far from reaching -- before adopting the euro.
The euro is the trump card that wipes out any and all objections to EU membership. It is also what sets the EU apart from any other project aiming for regional economic integration. In a world of immanence, the euro remains a point of fixity. Hence, it has always befuddled me why some European countries delay membership when the rest of the world looks up to the EU example with admiration. Like Captain Caveman, I guess they've been trapped in ice too--frozen by outmoded ideas from a bygone era.

Russia's Tragicomic WTO Bid Turns Solo Again

♠ Posted by Emmanuel in ,, at 7/16/2009 10:34:00 AM
Ho-hum, here we go again. The usual tagline while discussing Russia joining the WTO is that it is the largest economy still outside the organization's membership. I have made several posts on this topic, the last being on EU asking for Russia to join the organization prior to pursuing more detailed bilateral discussions. A few weeks ago, the Russian authorities threw a spanner in the works by saying that it would apply for membership together with Belarus and Kazakhstan as a customs union. This bid was so wacky that I failed to report on it. For starters, (1) there isn't even an existing customs union / league of dictators to speak of, and (2) Russian relations with Belarus and Kazakhstan aren't entirely hunky-dory.

Mercifully, I saved myself a few keyboard strokes (thanks a lot, procrastination) since the purported customs union application appears increasingly unlikely. While a customs union bid for WTO membership is possible in principle, it hasn't been done before. Moreover, this motley crew would not have been the ideal proponents of it for any number of reasons, not the least because of trade-related disputes Russia has with Georgia and Ukraine hindering applications by Belarus and Kazakhstan. That is, Russia's woes which they aren't party to would've been dumped on them, too. Our friends at the ICTSD have discussed the twists in turns in some detail and I believe it's best to refer to them. Let me paraphrase what has transpired:
  1. "£$%^ the WTO giving us trouble over South Ossetia, Abkhazia, and Ukraine; it doesn't really matter. The WTO can ^&*%ing go to hell for all we care."
  2. "Then again, perhaps the WTO has some value despite its Western bias."
  3. "Given that the WTO has given us so much trouble in joining--we've been discussing this thing for 16 years now--it's time we made a joint customs union bid with our pals Belarus and Kazakhstan."
  4. "Erm, maybe the original solo bid wasn't so bad after all..."
This soap opera continues--and continues to amuse if not necessarily enlighten. Maybe they can hire comedian Yakov Smirnoff as their lead negotiatior. Heaven knows, they aren't likely to do much worse than they're doing now.

US Barges In on China Holding Oz Mining Execs

♠ Posted by Emmanuel in ,, at 7/16/2009 07:41:00 AM
I am of two minds about this. The United States has long enjoyed playing the role of globocop in world affairs. Despite its fast-shrinking economy and concomitant decline in global influence as a model to be emulated, the US largely thinks it can play the role it did before. A few days ago, I mentioned the case of Rio Tinto mining executives being detained by Chinese officials on suspicious "national security" grounds. It is of course more illuminating that negotiations of Chinese state-owned steel mills with Australian providers of iron ore have come to naught despite protracted negotiations.

Into this picture enters Uncle Sam. Fearful of China jailing its own executives (and Chinese executives working for them), the US Commerce Secretary Gary Locke is set to discuss this matter with his Chinese counterparts. Remember, too, that Gary Locke became America's first Chinese-American governor in Washington state not so long ago. Then again, Aussie PM Kevin Rudd is a fluent Mandarin speaker--for all the good that's done for Sino-Australian relations:
The U.S. commerce secretary plans to bring up "fair treatment" for employees of foreign companies in meetings with Chinese officials on Thursday, in a sign of international concern over the detention of four Rio Tinto executives. Stern Hu, an Australian citizen, and three Chinese colleagues were detained this month for stealing state secrets to aid Rio in price negotiations for iron ore, which is used in steelmaking. At least one Chinese steel executive is also detained and the probe has reached many of the largest mills.

The murkiness of state secret laws puts foreign investors potentially at risk when dealing with state-owned entities and potentially sensitive economic information. "These are of course of great concern with respect to U.S. investors and multinational companies from around the world that have projects here," Gary Locke said in an interview with CNN. "We need to have transparency, we need to have assurances and confidence that people working for these multinational companies ... will be treated fairly.

Rio Tinto evacuated some expatriate staff in China involved in researching the iron ore and steel industry after the detentions, sources in the mining industry told Reuters. Rio Tinto did not immediately comment on the decision, which was also reported by the Australian Financial Review on Thursday...

At the official press conference later that morning to release the second-quarter data, National Bureau of Statistics spokesman Li Xiaochao said the leak would be investigated but stopped short of saying it constituted a "state secret..." The detentions have complicated annual negotiations to set the price at which mills import contracted iron ore.

Reuters reported on Wednesday that in the absence of a formal settlement between the Chinese steel industry and iron ore suppliers Rio Tinto and BHP Billiton, major Chinese mills had agreed to pay 33 percent less than the 2008 prices, in line with settlements reached by Japanese and Korean mills.
Meanwhile, Reuters further notes that Chinese secrecy laws are fairly wide-ranging, allowing them to send all sorts off to the gulag without much trouble over Western jibba-jabba concerning human rights:
The options for Australian miner Rio Tinto, or indeed anyone, to help four employees detained in a Chinese state secrets investigation are limited, lawyers say, as laws leave great latitude to investigators and prosecutors. Under China's sweeping laws, the health and even the birthdays of the current leadership are considered state secrets.

Almost anything else can be classed as secret, especially economic data, as China moves from a system where everything once belonged to the state to the current free-for-all where everyone scrambles for any advantage they can get...

Chinese diplomatic protocol prevents Australian consular official from asking Hu about anything other than his physical welfare. After their first visit last Friday, Beijing is not required to allow another visit for one month. During investigations, neither the defendant nor the lawyer have access to documents on which a case in based, and lawyers cannot challenge the "secret" designation,...Lawyers are often not allowed to see their clients until the state security apparatus has concluded the investigation and formally handed the suspect over for prosecution. That can take months, or even more than a year.

Defense lawyers in such cases themselves have a legal "obligation to guard secrets," said lawyer Guan Anping, who took on state secrets cases in the past. Trials involving state secrets are held behind closed doors, and family members of defendants are barred.

The diplomatic fuss could benefit Hu in areas where Chinese authorities exercise discretion, for instance in allowing earlier access for his lawyer or increased privacy in consultations...His three Chinese subordinates, and any Chinese executives caught up in the investigation, have far less protection. Rio could hire a lawyer for its Chinese employees, but not much else.

Article 111 of the Chinese code, which refers to illegally providing state secrets or intelligence to organizations or people outside the country, leaves a lot of room for interpretation. Sentences can vary from six months to death, and some foreigners have been expelled after conviction in the past. "Intelligence" could include information that may be public in China, but considered embarrassing if aired abroad...

The Chinese business culture is additionally confusing because of the hybrid form of many state-owned companies, which are listed entities but also integral to a state-directed economic model that China adopted from the Soviet Union. One legacy of the system is that a "state secret" can be in the hands of a commercial enterprise, and the cost of a raw material -- such as iron ore -- can become of national interest.

Will Idiotic US Laws Make Asia Poker's Epicenter?

♠ Posted by Emmanuel in ,, at 7/13/2009 06:15:00 AM
The United States, that erstwhile promoter of free trade, has long been criticized by the international community for its senseless and unwarranted clampdown on Internet gaming on specious "moral" grounds. In its Jerry Falwell-esque crusade to protect the public interest, it has applied significant hurt to small trading partners hosting Internet gambling sites like Antigua and Barbuda (for a brief history of this quarrel, see a previous post). To make a long story short, the Unlawful Internet Gaming Enforcement Act (UIGEA) has not been found to pass muster in WTO ruling after WTO ruling. This leaves the US vulnerable to countries seeking financial redress for these legislative monstrosities.

Current US House Financial Services chairperson Barney Frank has long championed a repeal of UIGEA. Indeed, it is reported that he uttered the famous line "Shuffle up and deal" at a recent World Series of Poker (WSOP) event prior to discussing with industry figures his plans for getting rid of UIGEA. Still, anti-UIGEA legislation has been delayed by congressmen dealing with the more immediate problem of a full-blown economic downturn. Chances remain good that UIGEA will have a well-deserved demise.

In the meantime, TIME writes that poker's major sponsors are not sitting idly by waiting for if and when UIGEA is repealed. With recession already hitting gaming revenues, especially in Las Vegas, they are setting their sights on promoting the game of poker in Asia. At the moment, baccarat rules the roost among player's favorite games in Asia--go ask PRC officials. However, a big marketing push should see to it that poker becomes more of a fixture in the region. Who knows--in time, poker revenues in Asia may outstrip those in the US, especially if online gaming starts to catch on. Remember too that legendary Asian players who have made a name Stateside like Men "The Master" Nguyen and the "Orient Express" Johnny Chan can serve as ambassadors of the game:
Baccarat, a 15th century Italian table game, contributed 86% of Macau's $14.1 billion in gambling revenue last year...Despite baccarat's dominance, a 2006 ban on Internet gambling in the U.S. is prompting poker promoters to take their card game across the Pacific in hopes of setting down roots in Asia's Las Vegas. Since the Macau government approved Texas Hold'em cash games and tournaments in January 2008, three casinos have opened designated poker rooms. In its first year in Macau, Texas Hold'em brought in less than $7 million, but that number is set to rise: in the first quarter of 2009 alone, the game took in more than $4 million. "Poker has exploded in Macau," says Celina Lin, 26, an Australian poker player who competes in Macau. "The skill level of the players here has increased dramatically just in the last year..."

Still, there are challenges to cultivating a poker following in this part of the world. The WSOP is taking place right now, but most Asians won't have a chance to watch it. Unlike in the U.S., where the WSOP and celebrity poker tournaments have developed a sports following enabled by ESPN and Bravo coverage, poker is frowned upon — along with other forms of gambling — in some parts of Asia, and many markets ban televised tournaments and any mention of gambling in traditional advertising. In 2007, mainland Chinese censors banned a television commercial for the Altira Macau hotel and casino (formerly known as the Crown Macau) that featured Hong Kong actor Chow Yun-Fat flipping hotel key cards and ice cubes in an allusion to gambling.

To get around these marketing challenges, promoters across Asia are sponsoring rising talents and relying on word of mouth to popularize the game. In South Korea, gaming company AsianLogic is hoping poker will take off among the legions of video gamers in that country. "We're converting Korean [World of ] WarCraft players into poker players," says Tom Hall, AsianLogic's CEO. "If we dangle $5,000 in front of them, they'll blog about it."

Asia might be new to the game, but some of the most famous American poker players are of Asian descent. That includes five of the top 20 World Series of Poker players: Men (The Master) Nguyen, Scotty Nguyen, John Juanda, David Chiu and Johnny (Orient Express) Chan, who holds two WSOP main event titles. Still, without media exposure, these names remain unknown in Macau, leaving organizers to develop local heroes who can inspire the masses to take up the game.
And remember, IPE followers: If you can't tell who globalization's sucker is, then it's probably you ;-)

Belgian Misadventures of the British National Party

♠ Posted by Emmanuel in at 7/12/2009 08:34:00 AM
You can argue that British politics is most accurately arranged on a dimension of xenophobia given its increasing lack of distinguishing features. There is only one party, the pro-Europe and pro-migration Liberal Democrats, who do not resort to the cheap but oftentimes useful "everything was fine here until you foreigners and colored people showed up" political strategy. At the extreme end is the British National Party (BNP), an ultra-right wing outfit similar to others elsewhere in Europe. Somewhat less militant but nonetheless sharing the BNP's euroskeptic and xenophobic outlook is the UK Independence Party. Meanwhile, the two largest political parties are hardly immune to these sorts of appeals. Conservative leader David Cameron continues the Tories' anti-immigration tradition by proposing caps on migration. Meanwhile, current Labour PM Gordon Brown has repeated the BNP mantra of "British jobs for British workers" and, in the process, appalled less opportunistic party members.

Us non-Europeans may find it odd as to why right-wing, anti-Europe parties run for office as Ministers of European Parliament (MEPs). Why would race-baiting isolationists want to represent their country in an Enlightenment project aiming for European integration? The answer is simple: voter interest in placing officials in Brussels is usually low. With negligible turnout, these right-wing parties perceive that their chances may be better at elections for European parliament than at local elections. A big stir occured last month with the selection of unrepentant BNP candidates as MEPs due to this sort of opportunism paying off.

In an amusing if not entirely encouraging turn of events, the arrival of BNP leader Nick Griffin and the similarly victorious Andrew Brons has not resulted in their being greeted warmly by the British contingent at Brussels. From Channel 4 news:
The British National Party's first two MEPs are struggling to win friends and influence people in Europe. BNP leader Nick Griffin and Andrew Brons both won seats in the euro-elections - and so far they have chalked up three notable rebuffs.

First, they were unable to muster enough allies to form an official political grouping in the European Parliament, which begins work next week. Second, they were asked to leave one of the main drinking haunts of European Parliament staff and MEPs in Brussels. And now they find they are not on the Government's guest list for a formal drinks party for British MEPs in Strasbourg next week.

The pair are still trying to form workable political alliances with other right-wing MEPs, but they seem unlikely to muster the necessary minimum of 25 MEPs from at least seven member states which would trigger substantial funding for staff, as well as improve prospects of influential committee seats and speaking time in the European Parliament chamber.

After one recent visit to the European Parliament's Brussels headquarters, Mr Griffin, MEP for the North West region, visited nearby O'Farrell's bar, where he sat at a table outside to be served. Soon afterwards he was asked to leave. According to another drinker on the premises at the time: "He was sitting quietly outside, and then he was recognised and he was told he wasn't welcome."

The same bar is one of the regular watering holes of UK Independence Party leader (Ukip) and MEP Nigel Farage, who is trying to put as much political distance between his party and the BNP as possible. Mr Bons (Yorkshire and Humber) was not far off when he predicted after the election that his victory would not be "universally popular".
It's funny how UKIP folks who've had a longer record of success at European elections are trying to place daylight between themselves and the BNP when their basic appeals are identical. Moreover, the Guardian also notes that more mainstream politicos can conduct relations with UKIP in a way they cannot with the BNP:
The government is to single out Nick Griffin and Andrew Brons, the British National party's two newly elected representatives in the European parliament, for special treatment, denying them some of the access and information afforded to all the other 70 UK MEPs.

Under new guidelines drafted in Whitehall and in the Foreign Office following the June elections to the European parliament, the two BNP leaders will be kept at arm's length from the kind of routine contacts and socialising that take place between British civil servants and MEPs in Brussels and Strasbourg.

When the new parliament convenes next week in Strasbourg, Glenys Kinnock, the new Europe minister, is to host a reception for all British MEPs. Only Griffin and Brons have not been invited. "Officials will not engage in any other contact with elected representatives of any nationality who represent extremist or racist views, unless specific permission has been granted to do so on a particular occasion from the FCO permanent under-secretary and the minister for Europe," a government spokesperson said.

The official said that the BNP duo would be subject to the "same general principles governing official impartiality" and they would receive "standard written briefings as appropriate from time to time". But British diplomats made plain that they would not be "proactive" in dealing with the BNP MEPs and that any requests for policy briefings from Griffin or Brons would be treated differently and on a discretionary basis.

A Brussels-based civil servant said it was acceptable for him to meet MEPs across the party spectrum for a drink, but that any such meetings with Griffin or Brons would be frowned upon. The MEPs of the anti-EU UK Independence Party have been invited to next week's government reception...

Chris Davies, the Liberal Democrat MEP, said that the BNP represented a special case and that the government was entitled to differentiate in its dealings with elected representatives. "A line has been crossed [with the BNP]. It's a difference of degree. It's not surprising that the government has to draw up guidelines to deal with a different situation."

Following the European elections, the civil service and government officials considered a range of options for dealing with the BNP, from an inclusive non-discriminatory approach to total quarantine, effectively ostracising them. David Miliband, the foreign secretary, is said to have signed off a decision that would bar the BNP people from government and embassy events in Brussels, while providing the extremists with some policy information.

"I don't think the policy of isolating them, of a cordon sanitaire, will work at all," Farage said. "It's a mistake. They're elected representatives, whether we like it or not."

The isolation has been compounded by Griffin's failure over the past week to cobble together an alliance of extremists in the parliament in order to qualify for official caucus status and thus benefit from better funding, speaking time, and committee positions. To qualify, a parliamentary fraction needs to muster 25 MEPs from at least seven EU countries. Griffin's signature failure was not persuading Italy's anti-immigration party, Liga Nord, to join him. Instead the Italians linked up with Farage's Ukip.
Expect fringe politics to become more active as times becomes worse across Europe. Are we really living in a politically correct world? Blaming foreigners with little political power is oh-so-convenient even if it doesn't really do anything constructive or identify real causes of economic malaise. As for the difference between the BNP and UKIP, it beats me, pal.

PRC v. Oz: China Detains Rio Tinto Mining Execs

♠ Posted by Emmanuel in ,, at 7/10/2009 11:05:00 AM
Think of Australia and China as star-crossed lovers. The former needs to find developing market customers as demand for its commodity exports fall in the developing world. Meanwhile, the latter needs coal, steel, and other minerals to power its mighty manufacturing-for-export machine. As in many things IPE, frictions arise. Australians are wary of those dratted foreigners acquiring controlling stakes in major Aussie mining concerns. For instance, see China's efforts to head off a proposed Rio Tinto-BHP Billiton deal that would have combined Australia's largest mining concerns in fear of the resulting combination exercising undue monopoly power. (See the table to the left taken from the Wall Street Journal on the China-Rio Tinto soap opera.)

Now we have word from the WSJ that China is taking a more aggressive stance towards Australian miners by detaining Rio Tinto executives over alleged security intrusions. Being no slouch in being accused of industrial espionage itself, this is pretty rich for the Chinese authorities. Moreover, I doubt whether the Chinese have any trade secrets that would hold interest for the likes of Rio Tinto. At any rate, this episode marks a low point in PRC-Australia relations. If you will recall, Oz PM Kevin Rudd is a fluent Mandarin speaker, and this was supposed to portend better relations:
China said a detained Australian mining executive and three colleagues "stole Chinese state secrets for a foreign country," escalating Beijing's business dispute with a major supplier and straining the economic relationship between two nations that depend on each other for growth.

The actions of the four Shanghai-based employees of mining giant Rio Tinto PLC "hurt China's economic interests and economic security," said foreign ministry spokesman Qin Gang, breaking Beijing's official silence on their detention since Sunday. Mr. Qin didn't say what secrets are alleged to have been stolen. The allegations relate to the employees' actions in relation to negotiations between Rio Tinto and Chinese steelmakers on the price of iron ore, according to reports in the Chinese press that an official at the State Security Bureau in Shanghai said were accurate.

On Friday, Australian Foreign Minister Stephen Smith noted that official Chinese comments posted Thursday stated Mr. Hu stole state secrets by illegal means, including bribery of Chinese steel company officials. Rio Tinto declined to comment on the situation.

China's state-secrets law has a broad reach that could cover the commercial information of state firms. Australian Prime Minister Kevin Rudd said Friday that his government will take whatever action is appropriate in the case and "proceed carefully."

Three of the detained employees are Chinese citizens; the fourth, Stern Hu, general manager in China of Rio Tinto's iron-ore division, is Australian. Australia's foreign ministry said consular officials will be able to visit Mr. Hu on Friday, and that China has given assurances that he is being treated well.

The detentions stunned the Australian mining industry and sparked a fierce reaction from opposition politicians. In Australia, anti-China sentiment has been simmering as some worry about a surge in Chinese firms buying into Australian resource companies. Last month, Rio Tinto walked away from a $19.5 billion deal to expand an alliance with Aluminum Corp. of China in favor of a tie-up with fellow Anglo-Australian miner BHP Billiton Ltd.

China, scouring the world to secure energy and materials to feed its fast-growing economy, has spent the past several years trying to improve relations with resource-rich nations in Africa and Latin America. It has offered aid and investment to developing countries and a sympathetic ear to governments not well received in the West. But China's business dealings haven't always been welcome in other countries, and the Communist Party has often failed to sway foreign public opinion...

The interests of China and Australia are interlocked, with Australia's iron-ore miners and China's steel industry depending heavily on each other. Australia is the world's biggest exporter of iron ore, expected to account for 40% of global seaborne iron ore produced in 2009, while China is by far the biggest importer, set to account for 62% of imports of seaborne ore this year, according to Goldman Sachs JBWere. China was Australia's second-largest trading partner last year, narrowly outstripped by Japan. China has built up the world's largest steel industry to supply its demand for the metal as it expands its cities and adds roads, bridges and other infrastructure.

Scholars say economic interdependence will likely push the two governments to find a solution. "Even if the charges are found to be unfounded, it won't make a really serious dent in the nature of the relationship which at this stage is economic and strategic," said Michael McKinley, an expert in global politics at Australian National University...

Mr. Rudd's government has been wrestling with how best to handle a surge of investment by Chinese state enterprises in the mining sector. This year, more than $6 billion of such investments have been announced, more than double all of last year. The detentions could complicate the situation for Chinese firms going to Australia's Foreign Investment Review Board, analysts say...

Mr. Rudd Friday played down any threats to relations between Australia and China. "I am confident we can get through this," he told 3AW radio. "This is a relationship which is very broad, but we take the interests of any single Australian national very seriously." He said he isn't ruling out intervening on the matter but described the process as a "complex, consular" case that requires a step-by-step approach.

The strains with a key trading partner aren't unprecedented in Australia. In the 1970s, Japanese companies were investing in Australian resources for the same reasons China is now. At the time, Japan's involvement raised the ire of some Australians -- but has since been broadly recognized as providing much-needed funds for development. "The current situation is largely the same," said Hou Minyue of the Australian Studies Center at East China Normal University. "There is a process the two countries need to go through to understand each other."
The Japanese also aroused the ire of many while cottoning up to Oz in previous times to garner a steady supply of raw materials. What will be interesting to watch is how Canberra treats Chinese firms trying to gain clearance for investment in Aussie miners after this episode. As always, stay tuned for further developments.

UPDATE: In its latest salvo, Oz officials warn that foreign investment may be discouraged by China's actions.

Jeepers, is the WTO Really This Irrelevant?

♠ Posted by Emmanuel in , at 7/10/2009 09:05:00 AM
I was surprised to find that no one in the blogosphere has linked to this 6 July Pascal Lamy op-ed in the Wall Street Journal--surely no obscure publication--concerning aid for trade. Recently, the WTO held another gathering concerning this ongoing program of trade facilitation: aid in the form of giving LDCs help with how to trade. Here's a quote from Lamy that describes aid for trade's essence:
One key component of this is the creation of adequate physical infrastructure -- roads, ports, telecommunications, electricity supply, storage facilities -- to ensure the consistent and reliable flow of goods, services and information that underpin global trade. Another is to ensure that producers are trained in meeting global product quality and safety standards [sanitary and phytosanitary measures to you trade enthusiasts] demanded by the world's consumers. Improving physical and human capacity will further assist countries in diversifying their production and reaching new markets.
There's a large 4.5MB PDF file you can download from the WTO site concerning aid for trade entitled Maintaining Momentum. However, in addition to Pascal Lamy's speech barely registering a blip on the media radar, neither has the accompanying report. Indeed, all I've managed to find is this commentary from the Warsaw Business Journal by Zambian Richard Mbewe repeating standard bash-the-WTO rhetoric:
This week, the World Trade Organization held a Global Review on Aid for Trade meeting in Geneva. Participants of this meeting included representatives of major financial institutions and regional development banks. The objective of the meeting was to effectively monitor Aid for Trade flows, improve the assessment of trade development needs for developing countries and to strengthen regional trade in the Aid for Trade framework. In short, the intention was to improve the capabilities of developing countries to fully participate in international trade. The Director-General of the WTO, Mr. Pascal Lamy's wrote a commentary entitled “Developing Countries Need Trade” that appeared in The Wall Street Journal on July 6, that fully illustrates the shortcomings of this policy.

Whilst Mr. Lamy states the obvious, he fails to explain how developed countries can help developing countries. His text contains phrases like “pledged,” “commitments,” “supply side constraints,” etc. – phrases that have no practical meaning for developing countries. Apart from that, these phrases have so much ambiguity in their meaning that they can be interpreted at any time to mean anything except allowing developing countries to enter the developed countries' markets!

Mr. Lamy fails to address the key issue – access to the markets of developed countries by producers and labor from developing countries. This must involve products and labor in areas where developing countries can effectively compete with developed countries. These are in agriculture and labor-intensive industries. But it is these very markets that are closed to developing countries. Of course, the major culprits are the European Union and the US.

Therefore, when Mr. Lamy boasted that the meeting would be centered on the theme “Aid for Trade,” I find it hard to understand his optimism, especially since research has shown that aid does NOT help developing countries. Instead, it destroys them. Secondly, former US President Bill Clinton coined the slogan “Trade and Not Aid,” but slogans were all that came of it. So what is so unique about Aid for Trade that makes Mr. Lamy optimistic?

Thirdly, this new initiative will be negotiated in the framework and structure of the WTO. One of the major shortcomings of WTO negotiations is the failure by real developing countries (not the BRICs) to be fully represented by seasoned, highly-qualified negotiators. Thus, the role of developing countries during such meetings is reduced to selling their votes to the highest bidder (usually the EU or UK), who does not necessarily have the same interests as the developing countries.

Fourthly, developing countries are poorly represented at these meetings, because just a handful of these countries have got an ambassador or representative fully dedicated to the WTO.

The failure of the Doha Development Round should have opened the eyes of the likes of Mr. Lamy to fully address the shortcomings of the WTO's negotiating process and decision-making procedure to make fully representative by all countries involved. But this has not happened.
There are valid and invalid points here:
  1. Lamy's language is technical and opaque to avoid entanglement over the extent of others' commitments. In his defense, he doesn't speak on behalf of the EU or US but as WTO Director-General;
  2. Aid for trade is not primarily official development aid (ODA) but technical assistance. Nobody is claiming that technical assistance will result in economic development, but instead will help spur trade which can help the process along;
  3. Lack of trade experts among LDCs--especially trade lawyers who can pursue cases at the Dispute Settlement Mechanism (DSM)--is something that aid for trade aims to alleviate by familiarizing more LDCs with WTO processes. That wealthier developing countries like Brazil and India as well as--to a growing extent--China are already seasoned trade negotiators is a valid point. Moreover, their faster rate of progress increasingly means that they will have diverging interests from those of less advanced LDCs;
  4. Ditto.

Tyson: US Needs More Stimulus; Current One Tiny

♠ Posted by Emmanuel in , at 7/07/2009 01:42:00 PM
I was watching Bloomberg TV--financial news for sane people--when the normally sane and competent Laura Tyson (at least during the Clinton years) started spouting Obamanite "deficits still don't matter"-style rhetoric:
The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an adviser to President Barack Obama.

The current plan “will have a positive effect, but the real economy is a sicker patient,” Tyson said in a speech in Singapore today. The package will have a more pronounced impact in the third and fourth quarters, she added, stressing that she was speaking for herself and not the administration.

Tyson’s comments contrast with remarks made two days ago by Vice President Joe Biden and fellow Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect. The government is facing criticism that the first package was rolled out too slowly and failed to stop unemployment from soaring to the highest in almost 26 years.

Obama said last month that a second package isn’t needed yet, though he expects the jobless rate will exceed 10 percent this year. When Obama signed the first stimulus bill in February, his chief economic advisers forecast it would help hold the rate below 8 percent. Unemployment increased to 9.5 percent in June, the highest since August 1983. The world’s largest economy has lost about 6.5 million jobs since December 2007.
And then we come to the fun part about the US foisting its debts on the rest of the world:
Tyson, 62, later told reporters that the U.S. can afford to pay for a second package, even as the fiscal deficit soars. She said the budget shortfall is “likely to be worse” than the equivalent of 12 percent of gross domestic product that the administration forecast for 2009 and the 8 percent to 9 percent it projected for next year. [But hey, deficits still don't matter, right? I guess this is why there's a CBO.]

The professor at the University of California’s Walter A. Haas School of Business downplayed worries from China and other countries with dollar reserves that the U.S. will let inflation soar as the deficit expands. “The concern is that the U.S. will have to inflate away its debt. I do not think that is a valid concern,” she said. “The Federal Reserve is not going to let the U.S. government inflate away its debt.”
However, we get to the crux of her plan of action fast:
Tyson said the U.S. should shift away from its dependence on consumption to grow, and promote expansion through investment and exports. The dollar will need to weaken in the longer term to promote export-led growth, she said.
Isn't dollar debasement normally associated with, well, inflation? My opinion, which should be evident to anyone who has visited these pages, is that the US is mightily screwed anyway regardless of what is does. Throwing good money after bad through ineffective measures isn't likely to do anything other than add to America's endless obligations...and dig a deeper hole in the process. The US should just lay back and receive what it has long had coming to it. Call it political-economic justice: if you act like a bozo, nobody feels sorry for you when you have to pay the price for doing so despite endless, repeated warnings.

As an aside, it puzzles me how the Chinese refuse to show the US who wears the pants in the global economy when it does not hesitate to use force at home to quell dissent and promote a "harmonious society." Tyson's dream scenario is of the Chinese still acting like wusses and buying American junk paper. All I can say is, the Chinese acting foolishly will have consequences for them as well. Think of the fun riots that will happen when all those reserves go "poof" via Tyson's dollar debasement strategy

In the meantime, bring on the $7.87 trillion stimulus package or whatever foolishness these people are up to. And, most important of all, charge it to the burghers of Beijing. In many ways, the world is even more messed up than it was prior to the credit crisis.