Gotcha! US Faulted by WTO on Susidizing Boeing

♠ Posted by Emmanuel in ,, at 3/31/2011 05:18:00 PM
Today, the WTO finally released its panel report on the EU's complaint against the United States regarding American subsidies for Boeing (case # DS353). This, of course, is the countersuit launched by the EU in the wake of the US launching a case against Airbus on launch subsidies (DS316). I have always thought both parties, EU-Airbus and US-Boeing, culpable of subsidizing aircraft development and that it would ultimately prove to be a wash. And so it has come to pass: it seems Boeing too is not scot-free alike its European consortium counterpart.

The key part of the panel report faulting the US on aid to Boeing is here:
The Panel upheld the European Communities' claims that: (a) some of the measures maintained by the States of Washington, Kansas, Illinois and municipalities therein, the NASA aeronautics R&D measures, some of the DOD aeronautics R&D measures, and the FSC/ETI and successor act subsidies, constituted specific subsidies. The Panel estimated the total amount of these subsidies between 1989 and 2006 to have been at least $5.3 billion; (b) the FSC/ETI and successor act subsidies constituted prohibited export subsidies; (c) some of the specific subsidies (i.e. the NASA and DOD aeronautics R&D subsidies, the FSC/ETI and successor act subsidies and the Washington State and municipal B&O tax subsidies) caused adverse effects to the European Communities' interests in the form of serious prejudice, finding that the effect of these subsidies was displacement and impedance (or threat thereof) of Airbus large civil aircraft from third country markets, significant price suppression and significant lost sales.
For the sake of clarity, FSC/ETI refers to "[t]ax break exemptions under legislation relating to Foreign Sales Corporations (“FSC”) and the Extraterritorial Income Exclusion Act (“ETI”) and successor acts. Both function as effective subsidies when marketing Boeing civil aircraft abroad.

Transatlantic bickering has already begun, with EU Trade Commissioner Karel de Gucht (obviously) claiming a victory:
"This WTO Panel report clearly shows that Boeing has received huge subsidies in the past and continues to receive significant subsidies today. The US began this dispute in 2004 and now finds itself with a crystal clear ruling that exposes its long-running multi-billion dollar subsidisation of Boeing through Federal and State programmes as illegal.", said EU Trade Commissioner Karel De Gucht. "These subsidies have resulted in substantial harm to EU interests, causing Airbus to lose sales, depress its aircraft prices and unfairly lose market share to Boeing. The detrimental costs to EU industry from this lengthy and onerous subsidisation run into billions of euro. We therefore welcome the WTO Panel's report and call on the US Government to take the appropriate steps that may assist to achieve a mutually agreed solution to this dispute.", Commissioner De Gucht added.
Meanwhile, the Yankees point out that this ruling pales in comparison to launch aid violations previously found against the EU. (And of course the USTR was similarly chuffed when the findings came out against the EU last year.)
Compared with the ruling over Airbus aid, today’s panel report “reveals a market distorted by Airbus’ practices, with illegal launch aid being the key discriminator,” J. Michael Luttig, Boeing executive vice president and general counsel, said in a statement. Boeing wants its bigger rival to reimburse the illegal portion of so-called launch aid until repayments reach what they would have been had the loans been made at market rates.
Both sides can appeal their respective rulings, with the Europeans already having done so. Still, you have to wonder about how much time and effort is being put into something that will likely be deemed a wash at the end of a long process of litigation.

Who benefits in the end? As in many such proceedings, the (trade) lawyers, of course.

Japan Says Don't Overreact to 'Nuked' Foodstuffs

♠ Posted by Emmanuel in , at 3/31/2011 12:01:00 AM
With alarming news reports coming out of Japan on a nearly daily basis about how various foodstuffs are exhibiting raised radioactivity levels--whether the bulk of them are true or not I cannot ascertain for obvious reasons--its trading partners are becoming understandably wary of importing Japanese food products. In fact, a number of them have already begun slapping bans on imports from Japan. A few days ago, there were indications that Japan would voice its concerns at the WTO over this sort of overreaction:
Japan will ask World Trade Organisation (WTO) members not to 'overreact' to the crisis surrounding the stricken nuclear plant in Fukushima Prefecture, which has prompted import restrictions on some Japanese food products over fears of radioactive contamination, trade and diplomatic sources said.

The Japanese government delegates will make the request at an informal meeting of the WTO's Trade Negotiation Committee which convenes Tuesday, the first since the March 11 catastrophic earthquake and ensuing tsunami crippled the Fukushima Daiichi nuclear plant in northeastern Japan.

Concerns over safety of Japanese farm and dairy products are spreading globally as radioactivity levels higher than the legal limit set by the Japanese government under the food sanitation law were detected in several kinds of vegetables and milk produced in Fukushima and its vicinity in the aftermath of the nuclear accident.

Countries including Australia, Singapore, Hong Kong, the Philippines, Canada and Russia have placed restrictions on the imports of Japanese food products after the United States slapped an import ban on such dairy products and vegetables produced on farms contaminated by the crippled nuclear power complex, while some others said they would step up inspection of such products.

Japan is expected to ask the member countries and regions to abide by the WTO agreement which bans trade restriction not based on scientific grounds, telling them that Japan is taking strict measures such as shipment bans on agricultural and dairy products with radioactive levels above the limits so as to meet international requirements, the sources said.

Yoichi Otabe, ambassador extraordinary and plenipotentiary to the Permanent Delegation of Japan to International Organisations in Geneva, will explain to the meeting the stance of the Japanese government in order to prevent Japanese agriculture from being hit by harmful rumors, the sources added.
The report in fact previewed matters correctly since, just today, Japanese officials in Geneva raised this very issue at a gathering concerning Sanitary and Phytosanitary (SPS) matters. That's 'food safety' to non-trade junkies:
Japanese officials asked the country’s trading partners on Wednesday not to overreact on its food exports in response to the radiation leak at the Fukushima Daiichi nuclear power plant. A WTO official told journalists that Japan had briefed other countries on the state of food safety following the leak during a meeting of the WTO’s Sanitary and Phytosanitary Measures (SPS) Committee. Japan “urged WTO members not to overreact by implementing ‘unjustifiable’ import restriction,” the WTO official explained. He spoke on condition of anonymity.

Japanese officials said their government has already restricted the distribution of agricultural products which might be contaminated by the leak. “Japan said it has provisional regulations under its Food Sanitation Act for preventing food exceeding residual radioactive contamination levels from being supplied for public consumption. The provisional levels are based on the Japanese government's Nuclear Safety Commission's index, in line with recommendations of the International Commission on Radiological Protection (ICRP),” the WTO official continued.

The Japanese officials told the WTO meeting that their government is carefully monitoring radioactive contamination of food products. They explained that the government is trying to keep trading partners abreast of latest developments through the WTO, Food and Agriculture Organization and World Health Organization.
Japan's highly protected agricultural industry relies on export markets as an outlet for certain types of food products, and they're certainly not those it would like to lose at this point in time. All the same, these products only make up 1% of its total exports. Yet the concerted lobbying at the WTO and elsewhere abroad indicates this is no small matter for them.

Inevitable Reform Candidate for FIFA President?

♠ Posted by Emmanuel in , at 3/30/2011 12:01:00 AM
Governance of sport should be of considerable interest to its followers given how much attention and money fans devote to sporting events. At the same time, let's just say that global governance of sport often fails the smell test on justifiable grounds. If there ever were institutions that could use standard prescriptions of transparency and fair dealing, the backroom world of sports politics is long overdue for attention.

Now, the words "FIFA" and "corruption" go together in popular discourse alike "America" and "bankrupt." Despite my tendency to favour new locations all over the world to host World Cups--especially in regions where they haven't been held before--you certainly have to wonder about how poorly some obvious bidders did. While us Londoners have major gripes about the cost and quality of public transportation here, London will host the 2012 Summer Olympics. So the UK sent Becks (David Beckham), Wills (Prince William), and PM Cameron (Cams?) to Zurich to secure the 2018 event--with nothing to show for as its bid was dismissed early. Also, despite hosting the 1994 World Cup well--the lack of on-field action isn't America's fault, obviously--the United States lost out to the rather daft choice of Qatar in 2022. Having been in the American and MENA deserts at the height of summer, I can only imagine what athletes will have to contend with--oddball promises of cloud climate control notwithstanding. ("But it's a dry heat.")

In the meantime, the political circus that is FIFA rolls on. Incumbent President Sepp Blatter is keen on securing a third term as FIFA president despite the controversy which continues to surround his tenure. His former ally, Qatari Mohamad Bin Hammam--president of the Asia Football confederation--is keen on unseating Blatter. However, I tend to believe that Hammam's bid would do little to dispel allegations of corruption at FIFA since, er, he promises larger giveaway packages to national member associations if elected:
Mohamed Bin Hammam, who is challenging the Swiss national [Blatter] in the June 1 vote, has said he’d double the $250,000 that each of FIFA’s 208 national member associations get each year. Blatter said only FIFA’s governing panel can change funding as he dismissed the offer from the 61-year-old Qatari, who runs Asia’s soccer federation. Blatter, 75, has run FIFA since 1998. “We’ve already made the budget” for 2011-15, Blatter said. “If you give only money and you don’t control where the money is going, this is not a good gift.”
As a champion of lost causes--I supported rally legend Ari Vatanen's bid to succeed Mas Mosely as FIA president over that of Jean Todt (formerly Ferrari team boss)--I must therefore support someone who isn't Blatter or Hammam. Potentially, step forward the great Chilean central defender Elias Figueroa:
Former South American player of the year Elias Figueroa may challenge Sepp Blatter for the presidency of FIFA, the Chilean said on Friday. The 64-year-old ex-central defender said he was the choice of a group called FIFA Change who are seeking a new leader of world soccer's ruling body at the June 1 election in Zurich.

"This arose through a group in England and other parts of Europe who wanted to present someone as a candidate for FIFA and they called me to join a committee which later decided I was the most suitable person as a candidate," Figueroa told Reuters. "I really didn't want this to be known (yet) but the news came out. I'll only be replying on Monday or Tuesday and if I accept I'll reveal who my backers are."

Blatter, who succeeded Brazilian Joao Havelange in 1998, has said he will seek re-election for one more four-year term before retiring in 2015. The Swiss is already certain to be up against Qatar's Mohamed Bin Hammam, leader of the Asian Football Confederation, in the June 1 presidential election.

Figueroa, who shone for Penarol of Uruguay and Internacional of Brazil and played for Chile at three World Cups, said the support group had gained backing from a FIFA national federation. "If I accept I know I'll face a rather difficult scenario but nothing is impossible ... I know very good things have been done in football but we also have some proposals," said South America's triple player of the year from 1974-76.
A long shot, yes, but hey--we've seen upsets before in world sport. Certainly, FIFA's reputation has nowhere to go but up as a result of a long-overdue change.

The PR Art of Selling Authoritarian Regimes?

♠ Posted by Emmanuel in ,, at 3/29/2011 12:03:00 AM
Here we go again with the alleged dark arts of the marketing trade. Flipping through the London dailies, there's apparently a new cause celebre here in Britain. And no, I'm not talking about fish pedicures--that's so 2010, dahling. As a business major from days long gone, I think of marketing concepts as general-purpose tools of persuasion whose principles can be applied in many realms--selling products, services, candidates, or even countries. (Remember the notion of "nation branding.") As you will read, it turns out that among the most avid users of advertising and public relations services here in Blighty are authoritarian regimes from the Middle East and elsewhere. For the benefit of IPE Zone's international readers, the graphic to the right is supposedly illustrative of these activities--Persil is a major brand of detergent sold by Unilever here in the UK.

On one hand, you can say that it's a perfectly legitimate enterprise. For instance, any number of them are keen on branding themselves as financial services and tourist destinations in that part of the world. Bahrain has (had?) seats to fill for its F1 race, for instance, On the other hand, you have articles like what follows that attribute more sinister motives to these activities in attempting to conceal blood on their hands while suppressing dissent. Reputation laundering, they call it. Which way you see it is up to you. From the Evening Standard:
London's public relations industry has got a PR problem. Top firms such as Bell Pottinger, Brown Lloyd James, Portland and Grayling are coming under intense scrutiny because of their work for foreign governments or in regimes of dubious repute. The catalyst has been the Arab uprisings in Libya, Egypt, Bahrain and Tunisia, which have raised questions about the ethics of these PR firms. Critics claim that London has turned into the global capital of reputation laundering.

Bell Pottinger, run by Margaret Thatcher's former image adviser Lord Bell, has already faced protests outside its High Holborn office because of its work for Bahrain. But it is not just spin doctors working in the Middle East that are being accused of "propping up" unplesasant regimes. Tonight, opponents of the authoritarian regime in Belarus are demonstrating outside the Victoria HQ of Grayling because the PR firm has opened an office in the former Soviet republic. Actor Jude Law and playwright Sir Tom Stoppard are backing the protesters, who are then marching to the House of Commons to hear the two theatre stars speak at a rally, organised by Index on Censorship and the Free Theatre of Belarus.

Tory donor Lord Chadlington, boss of Grayling's parent company Huntsworth, is adamant that his firm is not an "apologist" for Belarus and does not work for any foreign government. Grayling's office in Minsk is just to help international clients keen to invest and explore privatisation opportunities. But Mike Harris, public affairs manager of Index on Censorship, says: "We are targeting Grayling because it is currently working in getting inward investment in Europe's last dictatorship and it is the only major PR firm in Belarus."

For Index on Censorship and other critics, there is a wider point about PR firms in dubious regimes. "They are not just the messenger," says Harris. "They try to normalise these regimes with nice pieces in the papers about holidays in these places and business features on investment. They are instrumental in keeping the economy of these regimes going."

If there is one London firm synonymous with this international spin it is Bell Pottinger - even though, as Britain's biggest PR agency, it also represents many uncontroversial UK household brands. Recent clients have included the Egyptian Ministry of Information, the Economic Development Board of Bahrain and the governments of Belarus and Sri Lanka, and it has also worked in Yemen.
I am of two minds about these practices. Positively, you can say that helping authoritarian regimes solicit business is welcome insofar as their citizens can benefit from the arrival of commercial opportunities. Negatively, you can say that these firms are indirectly contributing to inflows which help solidify these regimes' financial stature.

Unless you have a Bushian-Manichaean world view--or an intractable aversion to all things Libyan, for that matter--there are no easy answers.

Anna Chapman: Political Economy of Lousy Spying

♠ Posted by Emmanuel in , at 3/29/2011 12:02:00 AM
Oh, I just had to make a post on this bit of kookiness out of respect for my boss. What do Andrei Arshavin, Roman Pavlyuchenko, and Anna Chapman have in common? They are all boosters of the pro-Putin United Front. I have mentioned the now-infamous Miss Chapman previously in connection with the notion of "erotic capital." As it turns out, I may have underestimated her hypermarketing in Mother Russia. All this because of being a rank incompetent at what she was supposed to do--spying. I am beginning to think of her as another Russian Anna who was not really a top-rank tennis player but was a looker nonetheless--Anna Kournikova. Men are suckers for this sort of this non sequitur titillation; trust me. In any event, Vladimir Putin is oddly singling her out as a shining example of modern Russia (after being deported from the United States from not doing her job right, obviously). She is also being feted by the Putin Youth, better known as Nashi. The Guardian sheds light on the Russian government's efforts to create a cult of personality around Chapman; she is even being advanced as a political candidate:
A month after their deportation, Putin joined up with the failed spies for a karaoke-type evening, where they crooned together the Soviet-era song – and unofficial Russian intelligence service anthem – "From Where the Motherland Begins". After that cosy night out, things moved fast for Chapman. She was awarded a top state honour by President Dmitry Medvedev, posed for erotic – and lucrative – photos for men's magazines, and was handed her own primetime TV show. She did, however, turn down a role in a porn film, despite being offered a "substantial" fee by the Vivid Entertainment adult-film company. may not be attracting the right crowd when the triple-X crowd is knocking on your door. Then again, you might as well make some hay when the notoriety shines on you, I say. Fancy public office?
Chapman has also been made the face of the ruling United Russia party's youth movement and has been tipped to win a seat in parliament in upcoming elections. On top of all this, she has registered her surname as a trademark; has brought out a poker app and a slew of Chapman-own products, including perfume, watches and vodka, is expected to hit the shops soon. The 29-year-old provincial Russian also has a Max Clifford-type agent to handle "commercial projects", which include highly paid interviews and photo shoots.
And then, of course, there's the naked truth that all these commercial and political opportunities stem from Keystone Kops-quality "espionage":
The irony is, of course, that Anna Chapman is being rewarded for doing her job badly. Not only was she duped by the FBI into blowing her cover, but she apparently failed to turn up any useful information for Moscow. Espionage charges were not brought against a single member of the spy ring, as there was no indication that any classified information had been accessed. Prosecutors instead had to settle for charges of "failure to declare foreign agent status" and money laundering. Chapman and the other nine agents were exchanged for just four American spies. As US vice president Joe Biden put it: "We got back four really good ones. And the 10, they've been here a long time, but they hadn't done much."
Meanwhile, let's say the Russian blogosphere is not as taken by this dumbing down of public discourse as yours truly. I suppose that Putin's attempts to become the Eastern Silvio Berlusconi isn't going down too well with the intelligentsia:
But despite her ubiquity, it's arguable whether Chapman is popular among ordinary Russians. As ever in this country, it's the internet where people's true feelings find a voice. And Russia's assorted bloggers and message-board users seem to be unequivocal in their disdain.

"Citizen of the world Anna Chapman is undoubtedly the major hero of our vast country," writes one user on Live Journal – Russia's most popular blogging platform. "We all also dream of dropping our knickers abroad and stealing enemy secrets." "A true symbol of our time!" offers another. "How we need such people! Those ready to join whatever they are told to! To sleep with whomever they are told to!" Other comments are more explicit, involving combinations of the words "Putin" and "whore".
UPDATE: Don't miss her video interview, too.

The UN Should Be Anywhere But New York

♠ Posted by Emmanuel in ,,, at 3/28/2011 12:03:00 AM
Where, after all, do universal human rights begin? In small places, close to home - so close and so small that they cannot be seen on any maps of the world. Yet they are the world of the individual person; the neighborhood he lives in; the school or college he attends; the factory, farm, or office where he works. Such are the places where every man, woman, and child seeks equal justice, equal opportunity, equal dignity without discrimination. Unless these rights have meaning there, they have little meaning anywhere. Without concerted citizen action to uphold them close to home, we shall look in vain for progress in the larger world - Eleanor Roosevelt

There is no such thing as the United Nations. There is only the international community, which can only be led by the only remaining superpower, which is the United States...The Secretariat Building in New York has 38 stories. If you lost ten stories today, it wouldn't make a bit of difference - John Bolton, former US ambassador to the United Nations

Given that his campaigning self promised a more internationalist outlook, it is striking how Barack Obama hews more closely to the John Bolton School of International Relations (now there's a thought for you) than that of Eleanor Roosevelt. In addition to keeping that shining example of American justice Guantanamo Bay alive and strong, the Obama administration has done little in terms of Roosevelt's "concerted citizen action" at home. As Eleanor Roosevelt suggested, a likely reason why we often "look in vain for progress in the larger world" is because of unyielding negativity about the UN from the country it is headquartered in. Home ain't where the heart is.

As I will enumerate, the US routinely flouts conventions people from other parts in the world consider valuable--especially in terms of advancing rights. Given the plenitude of such examples, it is best to consider the US a delinquent parent of the organization. Unfortunately, John Bolton's flippant suggestion that nothing much would be lost if ten floors of the UN were blown off is not far from actual US policy. Indeed, the Obama administration is next to no improvement seen in this light -

"The United States is concerned about children's rights and welfare."

Americans blather on and on about human rights. Call it the white man's harangue. So much so that you'd expect it to have ratified the well-meaning UN Convention on the Rights of the Child (CRC), right? If you read my lengthy post on why the shameless publicity seeker Amy Chua is more American than Chinese, then you would know that it isn't. How embarrassing is this? Well, aside from a failed state (Somalia), the US is the only other country that hasn't ratified it. Alike Guantanamo, it appears Obama has not been more talk than action in behaving in an internationally acceptable manner.

For all its human rights happy talk, the truth, dear readers, is this: the United States is a miserable place to be a kid. But don't take my word for it. The OECD recently compared the well-being of children across developed countries and found that the US ranked second worst next to the UK--and by quite some margin. Perhaps you and I should be concerned about this American failing that is only reinforced by its failure to ratify this convention. Child misery, thy name is America:

"The United States wishes that women have equal rights to men."

While the US does somewhat better on measures of gender equality such as the pay gap, it has yet to achieve several milestones others have alike having a female head of state. Most plausibly, America's chauvinistic tendencies are behind it not inking the UN Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). In another shameful display, the US is noted by commentators to be the only developed nation not to ratify CEDAW. A shining beacon of gender equality for the world to follow? I think not.

"The United States condemns crimes against humanity."

The Bush administration was famously hostile to pursuing the ratification of US membership in the International Criminal Court (ICC) based in the Hague. While the Obama administration has stopped its predecessor's outright hostility to the body, it still remains aloof to the idea of ratifying participation. Then again, given the United States' continuing penchant for extrajudicial imprisonment, I guess membership in the ICC is not on the game plan for the immediate future despite more internationalist voices calling for it.

"The United States cares about the welfare of migrants."

It is well-known that virtually all signatories to the UN Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families are migrant-sending nations. Despite calling itself the land of opportunity, a melting pot, and so forth, the truth is that the US is just as reluctant as other developed nations to sign on to something which concerns guaranteeing the welfare of migrants. In trade terms, it is unsurprising a country that has so far been unwilling to implement WTO provisions concerning temporary migration is also unwilling to extend them substantive international rights.

"The United States does not want to deploy land mines indiscriminately."

Activists have, for a long time, been championing the reduction in the use of land mines for the simple reason that they tend to kill and maim civilians--often long after conflicts that resulted in them being deployed have ended. However, the US has once again not ratified the Anti-Personnel Landmines Convention. For a country that is already malodorous in so many parts of the world due to its militaristic excursions, this shameful omission only reinforces America's negative image.

"The United States cares about the environment."

Kyoto Protocol. Nuff said.

"The United States has a national interest in respecting international maritime law."

Of all the conventions left unsigned by the US at the UN, the Convention on the Law of the Sea (UNCLOS) is perhaps the most interesting one in terms of geopolitical implications. In fact, Hillary Clinton alluded to it last year during the non-controversy over the South China Sea the US fomented at the ASEAN Regional Forum. As I have explained, the utterly hypocritical point is that the US has not ratified UNCLOS but claims that its stipulations should be followed when it comes to resolving others' disputes. Hypocrisy aside, meddling in others' disputes without a discernible legal basis to do so takes a lot of nerve.

All in all, here is the bottom line when it comes to the US and the UN: If you don't bother with much of anything people of the world devote their valuable time and effort to, then you might as well not host the United Nations. Let's face it: Americans tend to be very parochial in outlook. This negative kind of American exceptionalism poisons international relations through thinking that what goes on in the UN is not in US interests in so many instances. Alike with the IMF which really ought to be in Beijing, the time has come to move the UN elsewhere. The world has moved on. I won't even get into the US offering the sole veto over discouraging continued Israeli settlement of the occupied territories.

There's a saying that you shouldn't stick around where you're not wanted. I guess now is as good as time as any for the UN to move from a country of the past that doesn't care much for it (by brushing off any number of conventions) to a country of the future that at least embraces its core belief in the value of multilateralism. There is no point remaining in a location which undermines it at almost every turn like the United States does. A reason why the UN is often ineffective is because of America's delinquent parenting as its host nation. Think of a child continuously being belittled, insulted and threatened by its parents and modern US treatment of the UN comes to mind. (Not that actual American parenting is much better--see above.) That it even functions at all is a wonder.

When the United States is such an all-around bad example for core UN principles alike human rights, justice, opportunity, and non-discrimination, it's best to skip town. That's something John Bolton and I can probably agree on. Does modern America do Eleanor Roosevelt proud? As I said, the UN should be anywhere but New York.

India Shining: Rupee Symbol Now in MS Windows

♠ Posted by Emmanuel in , at 3/25/2011 07:22:00 PM
Always one to play the foil, let me say that contrary to conventional wisdom among the self-styled digerati, I see no reason to chuck Windows 7 for OS X. Not only is the range of programmes for the former vast, but a smidgen of diligence means you can avoid catching viruses and malware. Yes, you can run software that allows you to run Windows software on a Mac, but it makes little sense to pay extra to run stuff more slowly on a Mac. What is more, ever since Apple switched to Intel from Motorola (PowerPC) processors, the hardware used by both contending operating systems is virtually identical--but Apple charges you significantly more in most instances. Colour me sceptical, and give me Windows 7 over OS X any day. Heck, I run Vista on my four-year-old machine and have had no substantive complaints.

This introduction brings me to further proof that India has arrived on the world stage. Typically, developing markets are not prime Microsoft targets. Among the typical reasons you'll hear are...
  • the market is too small;
  • where there are Windows users, they typically use pirated software;
  • this is because intellectual property laws are not strongly enforced
At one point or another, I am sure software vendors have used these reasons in describing the Indian market. But now it's a different picture altogether. You see, aside from offering software in Hindi, the latest iteration of Windows 7 contains the brand spanking new symbol for the Indian rupee. Currency watchers should be aware of a contest Indian authorities introduced two years ago to create a symbol for India's currency. Finalized just last year, Microsoft is now so confident of India's growing stature that the new character set for Windows worldwide will incorporate it. From Softpedia (!--for the first time ever):
Microsoft has released an update to all supported versions of Windows designed to introduce support for the new currency symbol that will be used from now on for the Indian Rupee. Customers can download variants of KB 2496898 and install the refresh in accordance with the operating system they’re running.

According to the software giant, following the installation of the update, the new currency symbol for the Indian Rupee (which can be seen in the image accompanying this article) will be available in Windows 7 SP1 and RTM, Windows Server 2008 R2 SP1 and RTM, as well as Windows Vista and Windows Server 2008...

Of course, the refresh is not limited at introducing the new symbol for the Rupee. The Redmond company revealed that “this update includes font support, locale changes, and keyboard support.” Before the new symbol was adopted by India for its currency, the Rupee was abbreviated as either Rs or Re, although Indian language alternatives also existed.

The Indian government announced a contest for a new currency symbol back in the first half of 2009, and over a year later the winning design was selected. The official Rupee symbol was created by Udaya Kumar Dharmalingam, who based the design on the Devanagari letter र, to which he added an extra horizontal line.

The new Rupee symbol is already a part of Unicode version 6.0, and it only makes sense for Microsoft to also integrate it into copies of the Windows operating system. Take a good long look at the Rupee symbol above, as it will be used to represent India’s currency just as the case for the US Dollar ($), the Japanese Yen (¥), or the Euro (€).
If the Redmond giant takes the Indian market seriously enough to issue a separate update, then I guess we should all take heed of its prospects. You may think it a minor development, but think of the wider ramifications of Microsoft's eagerness to please this particular market. Indian shining, indeed!

The Slow Road to Southeast Asian Integration

♠ Posted by Emmanuel in at 3/24/2011 12:08:00 AM
Here is an update on something I follow quite closely from my home region: Southeast Asian economic integration. Unlike the European Union (liberal democracies) or the Gulf Cooperation Council (Islamic monarchies), Southeast Asia possesses countries with a range of political and economic systems. You also observe sizeable economic disparities between countries that span from Myanmar to the virtually first world Singapore.

What's more, differences in institutional capacity mean that economic integration will be bound to occur in fits and starts since the respective starting points and learning curves of these countries are vastly different. As we approach 2015, the stated target date for completing processes of economic integration in the region save for a currency union, let's just say much work remains to be done.

Notably, speakers at a recent Euromoney conference voiced more optimism that the newer CLMV (Cambodia, Laos, Myanmar & Vietnam) member states were better poised to achieve integration target dates more readily, probably since they have not become as accustomed to shielding certain products via sensitive lists that allow for the retention of intraregional tariffs for designated goods. There too remains confusion among exporting firms about the benefits of integration. On this point Christopher Dent notes that the paperwork involved in availing of tariff-free trade often exceeds the cost of just paying the duties--not a good sign--as is the still-low percentage of tariff-exempt trade. Still, it's early days and better cross-border facilitation can go a long way towards making the ASEAN Economic Community something which offers benefits to member countries come 2015. From Xinhua:
ASEAN economic integration will expand trade and investment opportunities among the regional grouping's members, but a full-fledged integration is not seen in the next few years, speakers at a regional conference said on Monday. The grouping is seen most likely to achieve import tariffs cut by its own version of integration while more complicated issues such as customs procedures or investment will be more difficult to be integrated due to the diversity among its members, the speakers said.

The so-called ASEAN Economic Community (AEC) is set to be launched in 2015, integrating a market of over 600 million population in Southeast Asia, or the same size of all European nations, and a combined gross domestic product of over $1.77 trillion.

"2015 is probably a very aggressive target," said Sopon Asawanuchit, executive vice president for corporate finance at Siam Commercial Bank, at a Euromoney conference. Sopon said cooperation in trade was easier to achieve while unifying the members' financial system would need to create a major organizational structure comparable to that of the European Union.

Pornsil Patcharintanakul, deputy secretary general of the Thai Chamber of Commerce, said tariff cut could be expected though the rate would not go down to zero percent for all items as many members keep their "sensitive" products out of the target list.

Others believed Myanmar, Laos and Cambodia, the lesser developed among the grouping's 10 members, could be seen to better integrate into the ASEAN, or the Association of South East Asian Nations, in the next few years. "Our problem is our diversity," said Kobsak Pootrakul, executive vice president for international banking at Bangkok Bank, at the conference titled "The 5th Annual Euromoney Thailand Investment Forum: Continued Growth in Uncertain Times." Kobsak did not foresee the possibility of launching a single currency system in the ASEAN in the near future.

But he and others agreed that members in the ASEAN needed to integrate their economies to make them more competitive globally as each member alone is a small economy. Speakers also saw the need of ASEAN members to learn more about each other in the grouping's integration attempt. Kobsak said 70 percent of Thai companies still did not understand the AEC and how they would benefit from the scheme. He said the integration would provide opportunity for Thai businesses to invest overseas at a time when the country was facing labor shortage and the local currency's value was rising.

Sopon agreed that as currently many Thai businesses needed to employ people from Myanmar due to lack of Thai labor, they should move their operation to the country to enjoy the cheaper wage and the abundance of resources there. He believed that Myanmar would provide a great opportunity for foreign companies to invest for manufacturing there and, then, export products to other ASEAN members.

Opiate of the Masses? Predicting Religion's Death

♠ Posted by Emmanuel in at 3/23/2011 12:01:00 AM
Let us begin today's missive on the contemporary fate of religion with Karl Marx's famous "opiate of the masses" passage:
Religion is the sigh of the oppressed creature, the heart of a heartless world, and the soul of soulless conditions. It is the opium of the people. The abolition of religion as the illusory happiness of the people is the demand for their real happiness. To call on them to give up their illusions about their condition is to call on them to give up a condition that requires illusions. The criticism of religion is, therefore, in embryo, the criticism of that vale of tears of which religion is the halo.
I am not so sure if Karl Marx would welcome current global conditions which see religious participation on the wane. While folks are becoming less observant of religious strictures--witness the literal bastardization of Western societies--a counterargument can be made that his notion of "commodity fetishism" has replaced it in an era of increasingly commercialized intermediation of social ties.

No matter; I will not go into arguments about "Western moral decay" here. There will be other opportunities for delving into that. Rather, I wish to point out an interesting study mentioned by the BBC that suggests religious extinction is well underway in any number of societies. (Unsurprisingly, this study by Daniel Abrams, Haley Yaple, Richard Wiener appears in a physics and not a social science outlet.) Although the underlying mathematical specification of "perturbation theory" is complex, the gist of its argument in this particular context goes like this: Persons choose to participate socially in such things as religion insofar as the utility from doing so exceeds that from not. Among others, you can think of conformity (being "part of society") and networking opportunities as part of the benefits which have traditionally gone with religious participation.

But what if people no longer believe that these benefits obtain? Then you begin to observe social network effects of eroded participation. Hence, a simplified description of the model is as follows:
According to the model, a single parameter quantifying the perceived utility of adhering to a religion determines whether the unaffiliated group will grow in a society. The model predicts that for societies in which the perceived utility of not adhering is greater than the utility of adhering, religion will be driven toward extinction.
The conclusion this study comes up with is, as you may have guessed, rather deterministic in nature. That is, if current trends continue, further erosion of the perceived utility from religious participation will eventually lead to its extinction in any number of societies. What's more, they claim that their model's predictions fit well with census data from the societies under study. Note that they do not distinguish between religions but use two encompassing categories of "religious affiliation" (whichever it is) and "religious non-affiliation" for modelling purposes:
We have developed a general framework for modeling competition between social groups and analyzed the behavior of the model under modest assumptions. We found that a particular case of the solution fits census data on competition between religious and irreligious segments of modern secular societies in 85 regions around the world. The model indicates that in these societies the perceived utility of religious non-affiliation is greater than that of adhering to a religion, and therefore predicts continued growth of non-affiliation, tending toward the disappearance of religion [my emphasis].
Whether Marx would approve is an open question, but one thing is for sure at the moment: fortune favours the irreligious.

Would You Stay in Libya as a Nurse for More Pay?

♠ Posted by Emmanuel in ,,, at 3/22/2011 12:03:00 AM
The Philippines is widely recognized as one of the world's top labour exporters. Although its Department of Foreign Affairs began evacuations from Libya shortly after the troubles began like many other countries, it appears that one of its main exports have chosen to stay. Among others, Filipino medical professionals--doctors, dentists, and nurses--have been in great demand abroad as evidenced by their sheer numerical strength.

The situation is no different in the Middle East. With their ability to adapt to local cultures, Filipino nurses--particularly those of Muslim faith--have been practising in these countries. Loath to let them go, it turns out the Libyan government has promised increased pay in exchange for Filipino nurses not leaving the country immediately. While the risk-reward ratio of such an action is debatable, these nurses are hedging on medical facilities not being targets for the pro-Gadhafi forces, the rebels, or the Western no-fly zone enforcers. Risky? Yes, but I hope their safety is indeed what they believe it is. From the Philippines' Daily Tribune:
At least 2,300 Filipino nurses have refused to be evacuated even after the United Nations approved military strikes against Libya. Acting Foreign Affairs Secretary Albert del Rosario said the nurses, 2,000 of whom are based in capital Tripoli and 383 in the rebel stronghold of Benghazi, opted to stay following request from the Libyan government, which promised to increase their pay significantly if they remain.

“We have not received any request to come and provide transport so they can leave Tripoli,” Del Rosario said. “They feel safe being in a hospital and there’s nothing safer than being in a hospital.” But if the situation worsens, he said the government can arrange another ship to pick them up. The government has ended its evacuation in Libya and has moved to safety some 13,000 Filipinos.

Foreign Affairs spokesman Eduardo Malaya said the Filipino nurses chose to stay “in order to fulfill their professional obligation and attend to the needs of the sick and wounded...The safest places for them are the hospitals were they work. Hospitals are considered protected areas under international humanitarian law,” he added.
Matters are complicated by Manila throwing its backing to UN Resolution 1973:
Manila has expressed support to the UN resolution in Libya. Malaya said the Philippines “abides by the decision of the UN security council in imposing a no-fly zone over Libyan airspace as a member of the UN and a signatory of the UN charter. “This UN action is a humanitarian measure which is meant to safeguard the civilian population in Benghazi and other contested areas of said country,” he said.

Recent developments, he added, “will not likely adversely affect Filipinos, as the bulk of our nationals already exited Libya.” The Philippine Embassy in Tripoli will remain open to serve the needs and oversee the safety of the remaining Filipinos there, he said. “Ambassador Alejandrino Vicente and the embassy staff in Tripoli will remain to take care of the country’s interests and ensure the safety of Filipinos who chose to remain for personal reasons,” Malaya said.
And speaking of which, the Philippine government is on the hook for its citizens in several other Middle East destinations where ongoing protests may yet put them in harm's way. Take Syria and Bahrain:
In Syria, Philippine officials there are ready to activate the country’s contingency measures once the political strife worsens. A stock estimate from the Commission on Filipinos Overseas showed 19,423 Filipino workers in Syria. Syrians also took the same path as their neighbors by staging similar loud protests against their authoritarian government, hoping it would result in having their political freedom restored.

“The Philippine Embassy in Syria is closely monitoring developments in certain parts of the country,” Malaya said, adding that the 1,050-strong Filipino peacekeepers stationed in Golan Heights who were deployed to the country as part of a UN peacekeeping contingent can be mobilized to evacuate the thousands of Filipinos if needed.

Meanwhile, Bahrain Prime Minister Shaikh Khalifa Bin Salman Al Khalifa has assured the Philippine government that all Filipinos will be provided protection amid the growing unrest in the Middle East state. Khalifa on Saturday personally relayed this message to Del Rosario, who is currently on five-day Middle East swing to check on the condition of Filipino workers trapped in the spreading conflict across the region.
I suppose this is one of the unspoken responsibilities of mass migration in the 21st century. For, we have an international system where (economic) migrants are ultimately no one's responsibility except for the home country.Given that the Philippines does promote such migration, it's only fair. Then again, there will always be those who are more adventurous--alike the Filipino nurses in Libya.

Moammar, Italy & BRICs: The Battle for Libyan Oil

♠ Posted by Emmanuel in ,,, at 3/21/2011 12:03:00 AM
A few days ago, we had former UNDP head Mark Malloch Brown talk impressively about global events, especially goings-on at the UN in relation to the Middle East/North Africa. One of the things he pointed out was that perhaps an even worse humanitarian disaster is occurring in Cote d'Ivoire. While this is sadly and undoubtedly true, I'll take the crude Marxist route of economic determinism and suggest the difference boils down to energy. Possessed of the finest grades of petroleum reserves--light, sweet crude that is easy to refine--Libya will remain a prize far greater than the Ivory Coast. Tis the way of the world: I am afraid and ashamed of in equal measure.

Arguably, two of the countries that have pressed hardest for a no-fly zone over Libya are those with the most commercial interests there. Perhaps it's a matter of saving face. Remember that prior to leading the current international effort to penalize the Gadhafi regime, Nicolas Sarkozy was telling everyone not too long ago that it was OK to sell arms to Libya. Given its imperial history, Italy has invested in Libya and has in turn attracted investment by Libyan powers-that-be. However, the head of Italy's largest petroleum company ENI (formerly Agip), has been thinking ahead about the future implications of sanctions should Gadhafi remain in control--or at least of the key oil-producing regions. From the WSJ:
The head of Italian oil giant Eni SpA called for Europe to drop sanctions against Libya, saying it was "shooting itself in the foot" and endangering its energy security by punishing the Gadhafi regime.

Eni Chief Executive Paolo Scaroni's comments come against a background of threats and warnings by Col. Moammar Gadhafi against foreign oil companies, especially those from countries that have backed the opposition rebels and called for a no-fly zone above Libya...Foreign companies such as Eni, which suspended production and evacuated staff when the violence erupted, are keen to resume operations in a country that holds the largest oil reserves in Africa and has long been considered one of the great unexplored frontiers of the global energy industry.

But they face a dilemma. Libya is likely to face an era of deep international isolation, with a new round of sanctions that could affect foreign oil companies. Those from states that called for Col. Gadhafi's ouster, like France and Italy, may be singled out for punishment by the leader and his inner circle.

And those that try to rekindle their relationship with a reviled regime face grave risk to their reputations in Western markets. "Companies that go grovelling back to Gadhafi are not going to look great in the eyes of Western public opinion," said Samuel Ciszuk, a North Africa energy expert at IHS Global Insight. "It's going to be a very uncertain environment for them."
Indeed, it's by no means certain that the West will not eventually forgive and forget as it has done in the past. ENI thinking is simple: if the West offends Gadhafi sufficiently but he is not dislodged from power, then there are others who would certainly welcome the opportunity to take its place:
In interviews published this week, Col. Gadhafi indicated that contracts with Western oil companies could come under review. He told the Italian daily Il Giornale he felt "betrayed" by Italian Prime Minister Silvio Berlusconi, who had previously courted the Libyan leader but called for him to step down after the uprising broke out...Italy has suspended its 2008 "friendship treaty" with Libya and frozen Libyan investments in the Italian economy, including large stakes in defense contractor Finmeccanica SpA and lender UniCredit SpA.

Asked whether Libya might reconsider its contracts with Eni, the Libyan strongman said he "believes and hopes" that the "Libyan people" would reconsider their economic, financial and security ties with the West. Speaking to Russia Today, the pro-Kremlin channel, Col. Gadhafi said Libya can "no longer trust the West...That is why we would like to invite companies from Russia, China and India to invest in our oil production and construction industries," he added.

Other officials in Libya have said they are eager to have Western companies back. Shokri Ghanem, head of Libya's National Oil Corp., or NOC, and the country's de facto oil minister, said last week that Libya would respect all contracts and wanted its current partners to return to work as soon as possible.

Speaking on the sidelines of a parliamentary hearing on Italy's energy ties to Libya, Mr. Scaroni said imposing sanctions was "shooting ourselves in the foot," because not taking Libyan gas would undermine Italy's energy security. Eni has been in Libya since 1955 and is the largest single foreign investor there; in 2007 it signed a $28 billion deal to extend its Libyan oil contracts to 2042. But sanctions have forced Eni to suspend shipments of the oil it produces there, which account for about a quarter of Italy's oil supply. It also shut down the Greenstream pipeline which supplies 10% of Italy's natural gas.

With Libya's political future still uncertain, Mr. Scaroni appeared to hedge on where Eni's allegiances lie. "Whatever political system there is in the future, it will have its own NOC, which will have contracts and relations with us," he said. "I don't see any reason that these ties should be compromised."
Now for more on the BRICS--all of which declined to cast their vote. Permanent security members China and Russia unsurprisingly did not vote on the resolution implementing the no-fly zone. While Russia being attracted to Libya's energy supplies is indeed like bringing coals to Newcastle as the saying goes, the Chinese would certainly welcome the opportunity to expand its access to such supplies. Are they currying favour just in case? In addition to abstaining, both countries now express "regret" over military action.

Meanwhile, non-permanent security council members Brazil and India did the same. (Remember, there are five permanent security council members and ten rotating ones--which Brazil and India happened to be at the time of the vote.) Brazil does not lack for energy resources, but India could certainly stand to gain in the aftermath if Gadhafi manages to cling to power. Gadhafi has already suggested as much.

Although I suspect these major emerging economies are more concerned with keeping the principle of non-interference intact, you cannot rule out the possibility of some--particularly China and India--hedging their energy bets. Energy realpolitik--if the Italians can't do without it, imagine how countries many time its size keep it in mind.

Ultimately, it hinges on whether Moammar Gadhafi remains in power or nor. Insofar as Western enforcers of the no-fly zone are reluctant to launch a ground effort lest another protracted counterinsurgency-type challenge appear (as Gadhafi warns), there are any number countries and companies jockeying for position in anticipation of ever after.

Stephen Roach on Japan Quake Consequences

♠ Posted by Emmanuel in at 3/21/2011 12:01:00 AM
There's been something of a proliferation by the commentariat on the economic effects of Japan's crisis. Martin Wolf was among those first out of the chute with a paean to its historical resilience to such events which it both prepares for quite thoroughly and has experienced in the past. Moreover, he argues that Japan's private sector runs a surplus more than sufficient to cover government deficits. In the (virtual) pages of al-Jazeera, though, Morgan Stanley's Stephen Roach offers an altogether more pessimistic take--especially on the knock-on effects of this very unfortunate tragedy.

Though the entire op-ed is worth reading, I'll excerpt what he think it means for subrime crisis-hit countries that have already run out of ammo in terms of using accommodative policies:
Alas, there is an added complication that makes today's shocks all the more vexing; governments and central banks have exhausted the traditional ammunition upon which they have long relied during times of economic duress. That is true of both monetary and fiscal policy – the two mainstays of modern countercyclical stabilization. Interest rates are close to zero in the major economies of the developed world, and outsize budget deficits are the norm. As a result, unconventional – and untested – policies such as "quantitative easing" have become all the rage among central bankers.

Previously, such unconventional policies were viewed as a temporary fix. The hope was that policy settings soon would return to pre-crisis norms. But, with one shock following another, the "exit strategy" keeps being deferred. Just as it is next to impossible to take a critically ill patient off life-support treatment, it is equally difficult to wean post-bubble economies from their now steady dose of liquidity injections and deficit spending. In an era of extraordinarily high unemployment, political pressures only compound the problem.

This raises perhaps the most troublesome concern of all - with a post-crisis world getting hit by one shock after another, and with central banks having no latitude to cut interest rates, it is not hard to envision a scenario of open-ended monetary expansion that ends in tears. The dreaded inflationary endgame suddenly looms as a very real possibility.
While Roach concurs that Japan will eventually go back to normal, what passes for normal nowadays will not likely generate enough momentum to bring itself out of the slumber it has been in since the bubble burst in 1990:
None of this detracts from the resilience factor. Yes, Japan will rebuild, which will undoubtedly spur some type of recovery in its disaster-battered economy. That happened in the aftermath of the Hanshin (Kobe) earthquake in 1995, and it will happen this time as well.

But, just as the post-Kobe rebuilding did little to end the first of Japan's lost decades, a similar outcome can be expected this time. The upside of rebuilding – beyond the urgent restoration of normal life for thousands of people – is only a temporary palliative for an impaired economy.

That is only one of the lessons that Japan offers the rest of us. The Japanese economy has, in fact, been on the leading edge of many of the more serious problems that have afflicted the global economy in recent years. From asset bubbles and a dysfunctional financial system to currency suppression and monetary-policy blunders, Japan has been in many respects the laboratory of our future.

Unfortunately, the world has failed to learn the lessons of Japan. And now it risks missing another important clue. The significance of the earthquake and tsunami of 2011 is not the relatively low magnitude of Japan’s direct impact on the broader global economy. The more meaningful message is how these shocks box the rest of us into an even tighter corner.

Of Repatriation and Concerted G7 Yen Intervention

♠ Posted by Emmanuel in , at 3/18/2011 01:16:00 AM
My goodness, things are happening so fast that my head is spinning. If the UN establishing a no-fly zone above Libyan airspace wasn't enough, we're now headed for a G7 currency no-speculation zone (of sorts) with regard to the Japanese yen. It certainly isn't everyday when the story on the Yahoo! front page is of G7-coordinated currency intervention. I'm comfortable suggesting that in no other circumstance would market intervention make the headlines were it not for post-disaster Japan being the beneficiary nation in question. You see, the currency of that calamity-stricken country recently hit all-time highs against the US dollar in nominal terms in the wake of the earthquake and tsunami. This, of course, on top of the Japanese government stepping back into FX markets last year after a six-year hiatus.

Longtime FX followers will know that yen movements around this time of the year are attributed to repatriation flows as firms wrap up their fiscal year at the end of March. That is, they need to reconvert their foreign exchange holdings back to yen for the purposes of financial reporting as they close the books. However, well-known commentator Kathy Lien cautions there is no evident pattern in USD/JPY during March:
It is commonly believed that March tends to be a positive month for the Japanese Yen because of the fiscal year end in Japan. Tax incentives and the desire to window dress their balance sheets usually encourage repatriation by Japanese corporations...Contrary to popular belief, there has been no seasonal trading pattern in USD/JPY during the month of March over the past 10 years.
I bring this up for a reason: Nowadays, many attribute the super-strong yen to expectations that widespread yen repatriation will soon follow in efforts to rebuild Japan, Inc. after the disaster. In theory, it would lend yen strength alike in the end-of-fiscal-year story. But speaking of which, doesn't the old story of financial reporting considerations fit into expectations of repatriation as well? For, pressures to window-dress financial statements would be even greater given that a calamity that probably affected any number of businesses occurred so close to the end of the reporting season. It is March, you know.

It's certainly up for debate; perhaps a definitive answer will never emerge as they often don't in mysterious "special FX" land. While the speculators have been cowed for now as the G7 cavalry have mounted a coordinated effort to weaken the yen, let's just say this rolling battle is not over yet. Not by a long shot. From the ever-reliable Reuters:
Japanese shares jumped nearly 3 percent and the yen tumbled on Friday after the G7 group of rich nations agreed on joint intervention to curb the Japanese currency's rise, showing its support as the country struggles with a nuclear crisis. The G7 move comes a day after the yen soared to a record 76.25 in chaotic trading, and a week after Japan was struck by a 9.0 magnitude earthquake and devastating tsunami that crippled the Fukushima nuclear power plant.

"This is the first coordinated intervention we have seen since 2000, so it's going to have a very huge resonating effect on the market," said Kathy Lien [hello again, Kathy], director of currency research at GFT in New York.

The dollar spiked nearly 3 percent to a high of 81.49 after the announcement of joint intervention, which came just as Tokyo stock markets opened. The dollar was last trading around 81.15 yen . Traders said the Bank of Japan had been spotted buying dollars.

Market players saw the move as putting a floor under the dollar around 80 yen for now, but some doubted how much impact it would have in the longer term. "It looks like we'll see a nervous battle between the BOJ and the speculators," Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "Hedge funds have expanded their asset-holdings to unprecedented levels, so even if it's a coordinated intervention, effectively it may be similar to one-country intervention, so looking mid- long-term, I'm not sure if they'll be able to curb it."

The Nikkei share average was up 2.7 percent, to stand down around 10 percent on the week and headed for its biggest weekly slide since the 2008 financial crisis. JGB futures fell.
Once more, FX battle is joined. While I doubt Japanese authorities will begin making "death to speculators" Mahathir-style pronouncements, now is probably as good a time as any for speculators to lie low.

USTR Ron Kirk on Moving Doha Forward

♠ Posted by Emmanuel in at 3/18/2011 12:40:00 AM
I guess the points put forward here will not surprise many since the US trade representative is tasked with promoting trade liberalization first and foremost. For what they're worth, here is Ron Kirk on the US position regarding the aforementioned topic, all the while emphasizing the reasonableness of American demands vis-a-vis its trade partners--especially major emerging economies. From the USTR site:
Right now in Geneva, Switzerland, a test is underway. It is a test of the willingness of World Trade Organization (WTO) members to move the decade-long Doha Development Round negotiations into the “end game” – as President Obama and other G20 Leaders have directed negotiators to do this year. The window of opportunity for the talks to avoid decline into futility is a narrow one. The United States will leave no stone unturned in its quest for an ambitious and balanced outcome. But key negotiating partners must share this motivation.

The world has changed since the Doha negotiations began in 2001. To succeed today, WTO trade talks must address the world as it is and as it will be in the coming decades. The remarkable growth of emerging economies like China, India, and Brazil must be reflected in a final Doha outcome.

The United States has been frank about the importance of increased access to these emerging markets for U.S. exporters. But such access is also vital for the poorest countries that have been a particular focus of the Doha negotiations –especially since these countries already have largely open access to major developed economies like the United States. In a negotiation in which the United States is being asked to significantly cut 100 percent of import duties on both industrial and agricultural goods, we are asking emerging economies to accept responsibility commensurate with their expanded roles in the global economy.

No country is more important to a successful Doha outcome than China. By any estimate, China will be an enormous winner from a Doha agreement. China’s exports have boomed since joining the WTO, but it continues to maintain high tariffs, many of which still would not be cut under the current parameters of the Doha Round.

Despite its position as an economic and trade powerhouse, today’s WTO rules allow China to have open access to major markets without giving appropriately reciprocal access. In Doha, we are asking China to commit to a significant opening of its market in industrial sectors – like chemicals, electronics, and industrial machinery – where China’s global competitiveness is unquestioned. That’s reasonable.

Similarly, Brazil is one of the world’s ten largest economies and a growing export power. Yet Brazil’s market remains restricted in the technology sector, among others. Since 1996, 73 countries comprising over 97 percent of the global trade in information technology products have opened their markets to competition in this sector by signing the WTO Information Technology Agreement (ITA). Signatories include developing countries such as Egypt, El Salvador, Costa Rica, and Vietnam. In Doha, one of our “asks” of Brazil is to join the ITA. That’s reasonable.

Under the Doha package currently on the table, India would make cuts on only 3 percent of the tariffs it applies on industrial goods – a result that can hardly make sense in a 21st century economy in which India plays a major role. As with China and Brazil, we look to India to offer significant liberalization in sectors – such as pharmaceuticals and industrial machinery – where India is doing extremely well as an exporter. That’s reasonable.

These three big players are also major competitors in global trade in services, where we also have considerable work to do to create new market access. China’s telecommunication operators are now the world’s largest; Brazil is the world’s 7th largest Internet user; and India is a world leader in information and communications technology (ICT) services. And yet the current services package would yield little progress in opening markets in sectors that drive global economic growth and development, from communications to financial services, environmental to supply chain services. Any final Doha package simply must do better.

We also have critical unfinished business on agriculture. While the current negotiating texts are abundantly clear on what is expected of the United States, it is still unclear what our farmers will see in return, especially from the key emerging markets.

The United States is encouraged that a new sense of urgency appears to be present in Geneva. But in order to put Doha firmly and finally on the path of success, that urgency must now translate – very quickly – into real negotiations. The United States will shoulder its share of the burden. We will expect and insist, however, that other key players help to lift the load. That’s reasonable.
By the same token, we should ask Ron Kirk why his country isn't so keen on implementing WTO clauses regarding the temporary movement of labour when potential gains from the liberalization of migration vastly exceed those from further trade liberalization. That's reasonable.

UPDATE: IPE@UNC misreads what I mean at the top. While representing US business interests may be its primary task in practice, its formal, stated mission is as follows:
American trade policy works toward opening markets throughout the world to create new opportunities and higher living standards for families, farmers, manufacturers, workers, consumers, and businesses. The United States is party to numerous trade agreements with other countries, and is participating in negotiations for new trade agreements with a number of countries and regions of the world.
You have to wake up pretty early in the morning to put one over ol' Emmanuel--and he certainly isn't at fault here.

Why I Still [Heart] Trade War, US Federal Shutdown

♠ Posted by Emmanuel in at 3/16/2011 11:49:00 PM
I've just come from an engaging talk by Martin Wolf at the LSE. In his take on one of Aesop's fables, China and other industries have been, in recent years, industrious "ants" busy saving up through thrift and industry. Meanwhile, the likes of the US and the UK have been loafing around, singing a happy tune. Making his own elaboration, he adds "locusts" or financial intermediaries we've come to know more than we would probably like in the aftermath of the subprime crisis who perform the task of intermediating between the "ant" and the "grasshoppers."

Depressingly, Martin Wolf lays out a global picture which is remarkably unchanged despite the aforementioned crisis (the podcast should be uploaded to the LSE Events site in the next few days for you to listen to). Various LDCs have now accumulated an unbelievable $9 trillion in reserves by his estimate after slowing down their rate of accumulation in the immediate wake of the US-manufactured debacle. Speaking of whom, the Americans have been acting like themselves in acting out the ol' "deficits don't matter tune"--lip service aside, no one has the political will in that dissipated land to do anything about it.

This brings me to something I wanted to ask of Wolf but ran out of time: We've been talking about global economic imbalances since 2003 or 2004 and how increasing savings in places alike the US (making them more "ant"-like) and increasing consumption in the surplus countries alike China (making them more "grasshopper"-like) should help mitigate these imbalances. Well, it hasn't happened. Despite the novel analogy, the facts remain largely unchanged.

It seems to me that we need to shake both parties out of their complacency. How can that happen? Again, I can think of two ways that global economic imbalances can be mitigated in one fell swoop:

First, a nice US-China trade war should solve the problem of capital flowing uphill from where there are more investment opportunities (the PRC) to where there are less (the US), hence investment in non-productive activities alike residential fixed investment. No capital flows, no imbalances, period. I've been quite keen on this confrontational approach of the US and China just cutting the crap and putting their money here their mouth is at for quite some time now.

Second, a newer idea is inspired by the current congressional budget impasse in Washington. While bickering over $61 billion worth of cuts is quite pointless insofar as the US will most likely run a deficit well over $1 trillion next year, look on the bright side: Republicans are threatening to stop drip-drip-drip feeding Washington and let the federal government shut down. In reality, of course, only a few government agencies will stop, leaving the diplomatic service and other apparatus of American influence running. Still, you can imagine a prolonged "starve-the-beast" episode where intractable differences drag on, causing massive hits to confidence in America's ability to run day-to-day.

Two attractive scenarios obtain here in the interest of solving global imbalances: (a) the US becomes unable to service its gargantuan debts and hence defaults on "AAA" Treasuries, causing massive investor panic among those dumb enough to hold such dollar-denominated detritus; or (b) investor fears over hampered debt service ability owing to significantly diminished revenue collection makes folks shun US sovereign debt in droves. Voila! Cutting off funding to the world's largest issuer of such instruments solves the problem of reserve overaccumulation overnight.

Wouldn't it be nice? Martin Wolf has been talking about the resolution of global economic imbalances for a very long time now, but to no avail. So, our American friends, write to your senators and congresspersons about how much a blanket tariff on all Chinese imports is necessary, or how a federal government shutdown is required to show the world conservatives mean business. Maybe the Tea Party won't be so bad if something along these lines pushes through.

Besides, ain't it about time we figured out who's got the biggest balls in today's global economy?

Japan's Lean Mfg Becomes the World's Problem

♠ Posted by Emmanuel in , at 3/16/2011 12:01:00 AM
It's not always that you feel sorry for Japanese automotive behemoth Toyota, but I'm sure we should all wish it well at the moment. For several years now, the Japanese have been the world's "lean manufacturing" innovators as exemplified by the likes of the Toyota Production System. During conventional times--therein lies the rub, but more on that later--they have sought to minimize muda or waste, which comes in seven forms: (1) overproduction, (2) overprocessing, (3) unnecessary transportation, (4) excess inventory, (5) excess motion of workers and equipment, (6) product defects, and (7) downtime. Certainly, we can all do without excess pollution, busywork, and material use. These are goals we can applaud.

However, these are obviously not conventional times in Japan as many supply disruptions occur: lack of electricity, water, transportation, and what else have you. Add in the human element of fear given what has occurred on top of the possibility of harmful radiation spreading. Given the highly interconnected production chains in Factory Asia (to use cheaper labour where available, inter alia), it may thus be detrimental that Japanese manufacturing has become too lean. Given that several Japanese wares are at the top of the production value-added pyramid, a lot of processing and other less knowledge-intensive activities elsewhere will have to wait while our Japanese friends get back to speed at doing what they do best. In the meantime, however, disruptions are noticeable. Be prepared for shortages of all sorts of manufactured goods in the near future, then. From Reuters:
Automakers, shipbuilders and technology companies worldwide scrambled for supplies after the disaster in Japan shut down factories there and disrupted the global manufacturing chain. Technology companies were particularly hit since Japan accounts for one-fifth of the world's semiconductor production, including about 40 percent of flash memory chips used in everything from smartphones, tablets to computers.

Multinationals that buy parts from Japan or have plants located there were grappling with power blackouts, factory closures and transportation problems after roads, railways and ports in north east Japan were destroyed by Friday's devastating earthquake and tsunami.

Toyota Corp was hard hit as many of its plants were near the epicenter of the 8.9 earthquake, and Sony Corp has suspended production. Texas Instruments warned its two suspended plants would take until July to return to full production, though it had managed to re-direct 60 percent of their output to other sites. Of the two, its Miho facility churns out about 10 percent of its analog chips by revenue.

Intel Corp was managing better. It buys wafers from Japan but relies on flights to transport goods. "Right now the main issue is trying to sort through the issues associated with moving materials within Japan," Intel spokesman Chuck Mulloy told Reuters. ON Semiconductor said unreliable power supplies kept one its six factories off line.

These disruptions pushed shares down worldwide in the industry. The Thomson Reuters G7 Semiconductor & Semiconductor Equipment Industry Group Domestic Float Price Return Index was off 1.1 percent late on Monday. Rolling power blackouts are set to hit Tokyo and surrounding areas over coming weeks, adding to the challenge of inspecting and repairing northern Japan manufacturing plants. Aftershocks and radiation leaks from damaged nuclear power plants also threaten production in the region.

Companies and analysts said it was too early to gauge how long the problems would last. Power supply is critical, as is transport. Ports handling as much as 7 percent of Japan's industrial output sustained major damage from the quake, with most seen out of operation for months.

Toyota plans to halt production at all its 12 Japanese plants in Japan through Wednesday to support relief efforts, slashing output by 40,000 vehicles. "Not only is the struck region one of our production bases, those directly hit and vastly affected include our dealers, suppliers and numerous other partners," Toyota President Akio Toyoda said in a statement on Monday.

Honda Motor Co said it would suspend production at its Japanese plants at least until March 20, and it was closely monitoring the supply of parts to its southern England plant in Swindon..."I'm looking at it as mostly a temporary issue for the industry," Standard & Poor's Efraim Levy said. "The question that no one can answer is what the duration will ultimately be...It seems to be the automakers' plants themselves are in OK condition, but some suppliers have issues that stop production of a whole vehicle line of a certain car or a certain truck."

Others warned the long-term impact may be more severe than anticipated. Dave Andrea, economist with the Original Equipment Suppliers Association, said the earthquake could have the largest impact on the global auto industry since World War II. Unlike now, past disasters had not hit as many segments of the infrastructure -- rails and roads to plants and electricity -- of a country with major auto manufacturing. "This is going to have an impact on every vehicle manufacturer and every supplier," he said.
As an illustration of a clear supply chain jam, many Korean firms have been left in the lurch:
South Korean companies, which depend heavily on Japan for LCD glass, chip equipment, silicon wafers and other materials to make semiconductors, are likely some of the worst hit. Hynix Semiconductor, the world's No.2 memory chipmaker and a rival of Japan's quake-affected Toshiba Corp and Elpida Memory, said it was concerned the quake may weaken consumer demand and disrupt supplies.

"It could give a boost to battered chip prices but that's a short-term impact from disrupted supplies," said Hynix CFO Kim Min-chul. "We are more concerned about the quake reducing overall consumer demand and disrupting supplies of chip components and equipment, which could interrupt our production as well."

Toshiba, which supplies more than a third of the NAND memory used worldwide in devices such as Apple's iPad, was restarting a chip factory in Iwate, northern Japan. The disaster also led to a rise in spot prices in China for DRAM chips, mostly used in personal computers, said chip price tracker DRAMeXchange. Nokia, said it was investigating supplies. About 12 percent of its components are sourced in yen, but Japanese components are likely to represent a larger share due to a recent renegotiation of supply contracts.

Japanese steelmakers halted production at some plants, a possible problem for South Korean shipbuilders since Japan exports 40 percent of its steel. South Korea has the world's top three shipbuilders -- Hyundai Heavy Industries, Daewoo Shipbuilding and Marine and Samsung Heavy Industries
While I understand the win-win of higher profitability and lower waste of just-in-time manufacturing, the flip side occurs in times like these. Given that there is so little margin for error in supplying critical materials and components abroad, a major event in a key nation like Japan jams many of those lying downstream.

If you're a follower of organization science, Factory Asia with lean manufacturing Japan at its head is a tightly coupled system where slight changes have widespread systemic consequences. There is often very little slack or room to accommodate, sorry for the term, slippages in the process. While redundancies can indeed be muda or waste, they may also serve as buffers to shocks administered during extraordinary situations. A system that relies so much on the right things being at the right place at the right time for the right folks to work on them is not resilient when the work flow is upset. Why did the stocks of several global manufacturers drop in recent days? Either their supply chains rely significantly on Made in Japan stuff--or at least certain folks think they are.

BTW: An incident which I recall had fairly marked knock-on effects was the 1999 Taiwan earthquake. Prices of computer memory (DRAM) of which it was a major manufacturer went up quite drastically in a matter of days after it occurred.