International Political Economy Zone

Malaysian Affirmative Action: Recession Victim?

♠ Posted by Emmanuel in Credit Crisis,Southeast Asia at 4/23/2009 05:22:00 PM

It is generally well-known that businessmen of Chinese descent dominate commerce in Southeast Asia. Malaysia is hardly an exception to this reality, and this has in the past inspired race riots such as the May 13 incident of 1971. Fearing reprisals from Malays who constitute a large share of the population, Malaysia has for over four decades maintained policies favoring Malays. And so various bumiputra ("son of the Earth"; presumably in contrast to lighter-skinned Chinese) policies have been instituted giving preferential treatment. In particular, the government has aimed to have 30% firm ownership in bumiputra hands--with, it must be said, mixed success. Although Malaysia's economic fortunes have waxed and waned over the years, the Asian financial crisis affected it badly, variants of the New Economic Policy (NEP) have remained in force.

Perhaps we should add "...until now." As the Asian country with the third largest share of exports to GDP. Malaysia is once again being adversely affected. In particular, its ability to attract foreign direct investment (FDI) is coming into question. That is, does the need for 30% bumiputra ownership deter foreign investors who would otherwise consider the country an attractive investment proposition? This is an interesting question as the country begins pondering the dismantling of bumiputra/NEP to cope with a changed economic environment. Effective immediately, 27 service sectors will no longer be subject to such requirements, with the stated intention of helping develop these sectors. From the Malaysia Star:

The government has removed the 30% bumiputra equity condition in 27 services sub-sectors, with immediate effect. Prime Minister Datuk Seri Najib Tun Razak said the sub-sectors, which involved health and social services, tourism services, transport services, business services and computer and related services, would have no equity conditions imposed.

He said the liberalisation was aimed at creating a conducive business environment to attract more investments, bring in more professionals and technology, encourage competitiveness and create higher value employment opportunities. “We will be progressively undertaking liberalisation of the other services sub-sectors,” he told a press conference at his office on Wednesday.

Saying that the services sector would become a new growth sector of the economy, Najib said it contributed 55% to the GDP in 2008, and accounted for 57% of total employment in Malaysia. The Government wanted to tap the sector’s full potential and raise its contribution to 60% of the GDP, he said.

American journalists being American in being hung up on race, the Wall Street Journal covers more of the racial angle:

Malaysian Prime Minister Najib Abdul Razak announced a significant relaxation of the multiracial country's longstanding affirmative-action policies in a bid to lure foreign investors and accelerate its recovery from the global economic slump. Mr. Najib told reporters in Malaysia's administrative capital Putrajaya that foreigners investing in parts of the service sector will no longer be required to take ethnic-Malay partners, who now must own 30% of any joint venture.

The newly opened sectors include health, tourism, and business and technology services, but don't include areas in which there is heavy state involvement or which are politically sensitive, such as air travel, utilities and retail, where companies such as Carrefour SA of France and Tesco PLC of Britain have pushed for more access.

The policy change indicates how a central tenet of Malaysia's race-based political system is coming under pressure as the country struggles to cope with the global economic crisis. Mr. Najib hinted that further measures may be announced next week, including changes in the country's finance sector.

HSBC economist Robert Prior-Wandesforde predicts Malaysia -- Asia's third most trade-dependent economy after Hong Kong and Singapore -- will contract 3.5% this year, leaving the country's leaders scrambling for ways to give it a short-term boost and aim for a sustained recovery when the global economic climate improves.

"This is an area where investors have been looking for a change for a long time. There might not be an immediate effect -- there's not a lot of investment anywhere -- but over time it will help," said Mr. Prior-Wandesforde. The Singapore-based economist forecasts that Malaysia's economy will rebound strongly and grow 5.5% in 2010.

The scale of any potential backlash against Wednesday's policy shift among Malaysia's Muslim Malay community could determine whether Mr. Najib will attempt to continue dismantling the country's affirmative-action program, known as the New Economic Policy.

Malays make up 60% of Malaysia's 27 million people and demonstrators have recently staged marches in defense of Malay rights. A wholesale reversal of the affirmative-action policies could be a flashpoint in a country already divided over the issue as well as dealing with a political feud between Mr. Najib and opposition leader Anwar Ibrahim.

A Tired Story: American Steel Union Bashes China

♠ Posted by Emmanuel in China,Litigation,Trade at 4/22/2009 01:06:00 PM

I guess this counts for more than just chicken feed in the arena of global trade contestation. I have been a bit tardy--not by much, mind you--on the latest protectionist squabble between the US and China. Once more, I believe the accretion of these sorts of trade squabbles have the potential to result in a bona fide trade war--not necessarily a bad thing if it means weaning the US off limitless Chinese capital it has clearly not put to good use. Now, American steelmakers have taken increased interest in laying into the PRC over the cost of steel products used in tire production.

Given the backing of organized labor for Obama, I for one believe that it has gotten a pretty raw deal from him so far such as with the automakers bailouts. It's so very Clinton-esque. Now, the United Steel Workers (USW) are going for the jugular by requesting that the US International Trade Commission (USITC) allow Section 421 investigations under the Trade Act of 1974 to proceed. Previous attempts to gain traction on this issue with the Bush administration failed, but the USW is betting that the political climate (i.e., a Democratic executive) is more favorable now. Let us first look at a description of Section 421 from the USITC site:

Under section 421 of the Trade Act of 1974, the Commission determines whether imports of a product from China are being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products. If the Commission makes an affirmative determination, it proposes a remedy. The Commission sends its report to the President and the U.S. Trade Representative. The President makes the final remedy decision.

Yes, it is a petition for import relief provided claims that domestic manufacturers' existence is being threatened by export dumping. The USW site has more details on the petition itself:

Petitioner & Subject Country: The United Steelworkers (USW) Section 421 trade case petition filed Apr. 20, 2009 with the U.S. International Trade Commission (ITC) shows how imports of consumer tires have surged in recent years, based on census data. The subject country for the investigation is China.

Product Description: Tires for consumer motor vehicles, including passenger cars,
station wagons, vans, sport utility vehicles, minivans and light trucks.

U.S. Tire Industry & USW: The USW represents about 15,000 tire workers at 13 plants
in nine states, which accounts for nearly half of the industry’s production capacity in 2008. The domestic consumer tire industry consists of ten producers with 27 plants located in 15 states. The tire producing states include: Alabama, Arkansas, Georgia, Illinois, Indiana, Kansas, Mississippi, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee and Virginia.

Volume of Trade: In 2008, China exported nearly 46 million consumer tires with a value of more than $1.7 billion to the U.S. The petition filing says, “Compared to 2004, by the end of 2008, imports from China had increased a staggering 215 percent by volume and 295 percent by value.”

Evidence of Market Disruption: During 2004-08, industry data shows a significant idling of capacity, with tire plant closings and layoffs in several states. Between 2004 and 2008, domestic production of consumer tires declined by over 25 percent. The domestic industry’s share of the U.S. tire market declined from 63 percent in 2004 to below 50 percent in 2008. Chinese producers’ share of the consumer tire market in the U.S. increased from less than five percent to more than 17 percent.

Domestic Job Losses: The U.S. consumer tire industry has lost 4,400 jobs during 2004-08. There have been announcements of two additional permanent plant shutdowns of consumer tire units in 2009 with total job losses of 2,400.

Relief Requested: The USW seeks an annual import quota of 21 million consumer passenger tires for a three-year period, which would return China imports to a 2005 level.

USW Multi-Industry Profile: The USW is the largest industrial labor union in North American, representing 1.2 million current and retired workers in industries that include primary and fabricated metals, mining, chemicals, paper, glass, rubber, transportation, utilities, container industries, pharmaceuticals, call centers, and health care.

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I honestly doubt whether Chinese tire imports are mainly behind these industry dislocations which I believe are more attributable to a slowdown in overall demand for vehicles. That is, Chinese tires are not OEM for any major brands, be they American, European, or Asian unlike several US counterparts. The WSJ opinion pages are unsurprisingly unhappy about this petition, with it being portrayed as a test of Obama's union ties. Still, this may be a litmus test for Obama's commitment to organized labor as various "progressive" voices are already expressing disappointment in his Bushian makeover.

In any event, the USW is certainly busy on the China-bashing front as it has already filed another separate petition on tubular and pipe steel. Whatever happened to ol' China Currency Coalition Obama? Once more, his friends are counting on him. If he keeps acting Bushian, I fear for his political longevity.

EU to China: Please Dump Steel On Us (Sort of)

♠ Posted by Emmanuel in China,Europe,Litigation,Trade at 4/22/2009 12:47:00 PM

While tariffs have already been given the go signal from Brussels on steel used in construction, it appears that European steelmakers are now taking a more conciliatory stance for other classes of products given that Chinese imports are dwindling as economic recession tightens its grip in Europe. Originally, the EU was set to widen its inquiry into whether various Asian steelmakers were guilty of dumping. However, the current economic climate seems to have damped such calls as the original complainant has since withdrawn its request. From the Steel Guru:

Bloomberg reported that European Union ended a threat of tariffs on stainless steel from China, Taiwan and South Korea after the recession prompted EU producers to withdraw a complaint alleging price undercutting.

The European Commission closed an inquiry into whether Chinese, Taiwanese and Korean exporters sold cold rolled flat products in the EU below cost. EU makers of this kind of steel, used in everything from cars and tanks to boilers and kitchen equipment, include Germany's ThyssenKrupp AG and Luxembourg based ArcelorMittal. [The] EC said that "Demand has recently collapsed in the EU and this has also led to a decline in imports." The closing of the case removes the threat of punitive EU duties against companies including China's Shanxi Taigang Stainless Steel Co, Taiwan's Yeun Chyang Industrial Co and Korea's Daiyang Metal Co.

European steel lobby group Eurofer withdrew its dumping complaint on March 4th 2009, the second time in four months the economic slump forced the EU industry to reverse policy. In December, Eurofer withdrew a dumping complaint covering galvanized flat steel from China, prompting the commission to close a related probe in February.

The end of the galvanized and stainless-steel cases removes two potential sources of EU China friction over steel trade. The EU is pursuing two other dumping inquiries involving wire rod and steel wires from China and has introduced provisional tariffs while examining whether to impose definitive five year levies.

It's interesting to note how worldwide economic slowdown is resulting in somewhat different responses in the EU and the US.

Eurocombat Over Cross-Border EU Banking

♠ Posted by Emmanuel in Credit Crisis,Europe at 4/22/2009 02:26:00 AM

Bundesbank President Axel Weber is an inescapably important figure in European finance given his post. At the same time, the EU has been accused of lording it over member countries to an extent that diminishes state sovereignty. The Financial Times now notes that Weber has criticized moves from the EU that aim to stabilize the banking crisis also raging there. Once more, it's a matter with collective EU versus individual member country implications.

You are probably familiar with the woes now besetting various Western European banks that have lent not-insignificant amounts via their Eastern European operations. With efforts to shore up these banks being made contingent on scaling down their Eastern European operations, Weber is becoming wary of these being classified as "foreign" rather than "domestic" in an ever-closer union sense. It's interesting stuff that certainly will have implications for the future of European economic integration:

Europe’s competition authorities risk throwing the continent’s economic integration into reverse with their response to the financial crisis, the head of Germany’s Bundesbank has warned in rare public criticism of Brussels.

In a Financial Times interview, Axel Weber said policymakers were “at a crossroads” and might harm Europe’s growth prospects if they insisted on making lenders withdraw from foreign markets and become more nationally focused. His warning comes as competition authorities decide what concessions banks will have to make in return for state aid. Commerzbank, Germany’s second largest lender, which has been offered €18.2bn of state aid, is in talks with the European Commission over remedies, which may include disposals of businesses in other EU countries.

The comments by Mr Weber – one of the most powerful figures in European banking – reflect his fears that the crisis in financial markets will set back the economic integration deemed essential for the eurozone to thrive. “Some of the demands coming out of the competition department of the Commission have been aimed at refocusing banks on their national credit and lending operations rather than fostering their pan-European endeavours,” Mr Weber said. “I find it surprising – to say the least – that European institutions view crossborder operations within the EU as foreign operations. For me, the euro area is the domestic economy.”

Neelie Kroes, competition commissioner, has insisted that if banks get state aid they must restructure to compensate for the anti-competitive distortions created. Mr Weber said these “side effects” were “more pronounced than was originally envisaged” and might deter banks from using government help. “If banks are forced to sell off profitable businesses . . . I think this creates a problem. Dealing with rescue operations in that way, the probability of a credit crunch in the euro area increases rather than decreases due to these restructuring conditions.”

Some national governments have also insisted banks become more domestically focused in return for state help. If banking did become more nationally focused “I think Europe would forgo a lot of its growth potential”, Mr Weber said.

11/11/2001: A More Important Day Than 9/11

♠ Posted by Emmanuel in China,Credit Crisis,Economic History,Trade at 4/21/2009 04:31:00 PM

For better or worse, September 11, 2001 is a date known to all. Certainly, the attacks produced dramatic footage the likes of which even Hollywood disaster scenario specialists hadn't thought of. Still. I tend to think that attention given to 9/11 is more attributable to its symbolism than its financial or personal costs. By favoring the Democrats' emphasis on the economy over the Republicans' war on terror, Americans seem to agree. In general, Americans are incurious about international affairs in the Palin-esque manner; hence, this attack was quite a wake up call for them. Those of us in the rest of the world, however, have long lived with threats of terrorism and insurgency--both domestic and international--to have thought anything particularly world-altering about 9/11. There are far worse ongoing events that have taken their toll on health, hope, and homeland.

Anyway, I have just come across a picture of an almost forgotten event two months later that has greater repercussions for international political economy other than just having many more annoying security checks at airports. This is of China signing on to the WTO on November 11, 2001. Think of it: without WTO membership, would it have so quickly become the world's second largest goods exporter after Germany? Or, would it have piled on nearly two trillion in dollar-denominated assets guaranteed to lose value in an unprecedented rip-off game it is still participating in? Certainly, the development of various securitized riffraff now plaguing international finance would not have proceeded apace had there not been a country willing to lend so much so cheaply to finance others' purchases of its exports. While looking at the picture from this momentous occasion, here's food for thought: China has been as much a perpetrator as a victim of a $4.1 trillion financial catastrophe.

China Takes US to WTO Over Poultry Exports

♠ Posted by Emmanuel in Agriculture,China,Litigation,Trade at 4/17/2009 01:49:00 PM

I haven't written anything involving the WTO for the longest time. Mostly, it's because there hasn't been much action at the international organization as other, more pressing domestic matters seem to be occupying the interests of member countries at the moment. Doha? Forget it. In December, I brought news that China would contest the US decision to impose countervailing duties on steel exports it believed were being dumped on the American market. Just last month, there were rumblings that China was showing increased displeasure over US legislation aimed at limiting chicken imports over safety concerns and that it was contemplating WTO action. The antagonist here, Rosa DeLauro (D-VT) is chairwoman of the Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies. She has upheld a dubious rule against what she describes as a Bush-era quid pro quo:

In 2006, the USDA moved to allow imports of processed poultry from China -- a regulation DeLauro described as "a gift" from former President George W. Bush to Chinese Premier Wen Jiabao to try to restore U.S. beef trade to China, which had stalled in 2003 when the U.S. found mad cow disease. DeLauro's committee blocked the rule, but she said she has told the meat industry she is open to taking another look. The block by Congress is "kind of a slap in the face to the Chinese," a U.S. poultry processor told the Reuters summit.

You can now consider Chinese displeasure official. Reuters reports that China has now requested consultations with the US. As you know, if 60 days pass without sufficient movement on the issue from the Chinese POV, then it can initiate a case at the dispute settlement mechanism--WTO court, if you will:

China requested on Friday consultations with the United States over a U.S. laws affecting Chinese poultry products, launching a formal World Trade Organisation dispute on the issue. In the written request, obtained by Reuters, Beijing said it believes that U.S. limits on poultry imports from China violate Washington's international trade commitments, a particular concern at a time when protectionist fears are rising.

"By imposing these restrictions with respect to imports from China, but not similarly prohibiting the import from other (WTO) members of like products, China is concerned that the U.S. fails to accord immediately and unconditionally to China an advantage, favour, privilege or immunity granted to other (WTO) members," the Chinese statement read...

China and the United States have previously squared off at the Geneva-based trade body over issues including car parts, software piracy, copyright rules and export subsidies. The latest case centres on U.S. rules that restrict poultry products from China, a reaction to food safety scandals that have in recent years damaged the reputation of Chinese goods.

But Beijing says its poultry production meets international standards and that it exports poultry meat to other developed markets including Japan, the European Union and Switzerland.

It ought to be noted that--in food exports at least--the US runs a trade surplus with China, sending $12.16B worth to the PRC in 2008 while importing $3.45B of such goods. Hence, quite a few American agricultural producers are sympathetic to the Chinese over the ban (like I am, of course). What should we call them...communist sympathizers?

The U.S. Poultry and Egg Export Council -- fearful that the latest dispute will prompt retaliation in China, one of the biggest markets for U.S. poultry goods with sales worth $677 million in 2008 -- has expressed support for the Chinese complaint

Uncle Sam, poultry protectionism is the height of ridiculousness. If you cannot demonstrate that Chinese chicken is unsafe compared to other poultry imports, then I suggest you...[drumroll please]...let my chickens go.

4/21 UPDATE: Forbes has more on this case. Poultry exports are hardly a key part of China's export machine. Certainly, no one will make that mistake. However, given the increasing number of US-China trade rows, think of this case as an exercise in Chinese capacity-building for international economic diplomacy. In the beginning, you try your hand with smaller cases with a reasonably high likelihood for obtaining favorable results. Such formative experiences will come in handy if and when the US tries nastier tricks like slapping unilateral tariffs over currency manipulation and the like.

Eye for an Eye: US Firms Wary of PRC Stimulus

♠ Posted by Emmanuel in China,Trade at 4/17/2009 12:48:00 PM

Many countries including China have expressed wariness over "Buy American" provisions in the US stimulus package. I guess it's time we looked at the other side of the coin. Unfortunately, many American firms are now complaining that China's own stimulus package is opaque in detailing how government contracts are awarded, possibly putting foreign firms at a disadvantage. Is this by design? Don't rule out the possibility that the PRC stimulus effort may be a lot of vaporware in the smoke and mirrors sense. From Reuters:

U.S. companies are concerned that they are not getting a fair chance at contracts linked to China's 4 trillion yuan ($585 billion) stimulus package, a leading U.S. business group said on Friday.

For its part, Beijing has strongly criticized the 'Buy American' provisions of the U.S. stimulus package finalized in February, saying it is opposed to any rise in protectionist measures in the wake of the global economic slowdown.

But Myron Brilliant, senior vice president of the U.S. Chamber of Commerce, said that China's own stimulus package lacked clarity in terms of how foreign firms can bid for contracts on infrastructure projects.

"We are very concerned that the stimulus package may have a significant local bias," Brilliant told reporters in Beijing. There is certainly a perception in the foreign business community that a lot of these contracts are going to domestic providers. And there is, I think, a legitimate concern that there isn't a fair and transparent way for the foreign business community to invest in these projects and to contribute."

I hate to say it but, tough. After Paulson's largely forgotten gestures at opening up the Chinese market in certain areas for American business, I hardly think that now is the best time to renew such efforts. Plus, you need to factor in Obama's more combative rhetoric towards China.

Viva la France: Le Strike et "Bossnapping"

♠ Posted by Emmanuel in Credit Crisis,Europe,Labor at 4/16/2009 02:12:00 PM

As anyone unfortunate enough to ride Air France on a regular basis probably knows, France and strikes go hand in hand like the USA and foreclosures. The FT has an interesting take on the dynamics of French striking, which of course is reaching a crescendo during this time of economic slowdown. It seems lots of people are striking without knowing exactly what to push for. Really, they should give this "bossnapping" shtick (soon to be laid off workers waylaying executives) a go Stateside. Given Yankee lust for firepower, results should be tabloidally interesting. Anyway, returning to today's topic, this lack of definitive French collective interest is actually playing in the government's favor.

The reason is that France's level of unionization is not significantly higher than that of other industrialized countries. It just seems that way because of widespread sympathy for strikers--particularly public sector workers. It's "we're not going to take it, but we don't know what'd be better anyway." This gives the government the chance to set the agenda with higher-profile unions by channeling their energies towards interest aggregation, which is preferable to allowing more hardcore elements set the agenda:

Government officials also know that the interests of social stability are best served by not alienating the unions. In fact, in France stability will come from even stronger unions – which is exactly what the government has tried to do with the recent reform to base collective bargaining power on election results.

The problem has been that there are too many unions chasing too few members. Individually they have been so weak that their best leverage has been through strike action – largely in the public sector. The logic is that reinforcing the biggest unions, including the hardline CGT, will help to create a higher quality social dialogue and force them to negotiate, as long as the government sets down some clear rules.

That means Mr Sarkozy may throw a few symbolic crumbs to unions after this Labour Day protest. Far better that recognised unions score a small victory and continue to channel the discontent than to leave the way open for more radical, and potentially more violent, elements to profit from the malaise.

That said, there is always the chance that a single incident could spark off a flash of anger that no one will be able to control. As one official said recently, France is an eruptive country and the game will be to prevent that first incident from taking place. But equally, he admits: “The most serious incidents are the ones you cannot predict.”

Geithner Wimps Out on PRC Currency Manipulation

♠ Posted by Emmanuel in China,Trade at 4/16/2009 06:37:00 AM

The US Treasury is mandated by Congress to make biannual reports on the currency practices of America's trading partners. Just yesterday, the Treasury released its first report under the leadership of Secretary Geithner. As you are well aware, Geithner caused a ruckus in US-China trade relations by reiterating his boss Barack Obama's opinion that China was a currency manipulator [1, 2]. As I have pointed out again and again, he was not expressing his own opinion but that of Obama. Why is this difference important? Well, let's look at the statement of Geithner accompanying the latest report as to why China hasn't been branded a currency manipulator yet again:

With respect to China, which has been highlighted in the Report in recent years, our conclusion is based on the following factors. First, China has taken steps to enhance exchange rate flexibility. Chinese officials reaffirmed in January 2009 their commitment to greater flexibility and the need to allow the exchange rate to adapt to an equilibrium level. Second, the Chinese currency appreciated by 16.6 percent in real effective terms between the end of June 2008 and the end of February 2009. As the crisis intensified, the currency appreciated slightly against the dollar when most other emerging market and other currencies fell sharply against the dollar. Third, official statistics suggest the pace of China's foreign exchange reserve accumulation slowed in the fourth quarter of last year. Fourth, China has enacted a large fiscal stimulus package – second in size to that of the United States in the G-20 – which should help spur domestic demand growth and rebalance the Chinese economy. Even so, Treasury remains of the view that the renminbi is undervalued.

Given China's large and rapid increase in its current account surplus, these steps should be just a beginning to a series of policy steps to rebalance the Chinese economy so that economic growth is more dependent on domestic demand, particularly private consumption.

I have taken pains to explain why the US engaging in a trade war with China is actually desirable as the former would set into motion a process by which the US is disciplined via losing China as effective lender of last resort [1, 2]. Again, I consider the US hitting China with punitive legislation on an undervalued currency quite frankly ridiculous in that there is virtually no chance of it coming out ahead. Nevertheless, I am chuffed to note that many others--including Obama supporters who feel abandoned--are readying legislation to "punish" China. From Bloomberg:

The conclusion clashes with Geithner’s January 22 statement to a Senate panel that President Barack Obama “believes that China is manipulating its currency.” [I wish they'd stop repeating this fallacy as they aren't one in the same person.] The shift may anger U.S. lawmakers, companies and trade unions who have sought measures to punish nations perceived to have undervalued exchange rates.

“Clearly the Treasury has made more of a political decision than an economic decision here,” Republican Senator Lindsey Graham of South Carolina said in a Bloomberg Television interview. “The truth is the Chinese manipulate their currency.” Graham was a co-sponsor of a 2007 measure that would have allowed U.S. companies to ask for steeper tariffs against goods coming from countries found to have misaligned currencies.

Democratic Senator Charles Schumer of New York, another sponsor of that bill, said he would reintroduce it. “We are relying on the administration, as market conditions clear up, to keep China’s feet to the fire on this issue,” Schumer said in a statement. “To continue the effort on this front, we intend to reintroduce our legislation.”

The U.S. Business and Industry Council, which represents domestic manufacturing companies, said the decision not to label China as a currency manipulator “breaks a major commitment candidate Obama made last year to fight Chinese exchange-rate protectionism.”

Obama's "China Currency Coalition" colleagues are now expressing understandable displeasure over his finance minister coddling these trade evildoers, having hoped for much more. Although I am generally appalled by their agenda, I think they have legitimate grievances over representation of interests. They're baying for a US-China showdown at the Trade OK Corral; well so am I. They think they can come out ahead while I certainly don't think so. I guess there's only one way to find out.

Yo Ho Ho! Maritime Piracy Then and Now

♠ Posted by Emmanuel in Africa,Underground Economy at 4/14/2009 11:14:00 AM

A recent post by our friends over at IPE@UNC jogged my memory about the International Maritime Bureau's Piracy Reporting Centre. (As you've probably figured out by now, I am a repository of useless information that sometimes becomes relevant ;-) Anyway--where was I--it maintains comprehensive mapped data about incidents relating to maritime piracy going back to 2005 all over the world. The IMB is the authority when it comes to reporting such incidents. For those interested in the dark side of trade transportation, it certainly makes for fascinating reading. Please visit and see for yourselves as you can click on each indicator for more info. For now, let me just show you the difference between two maps four years apart. First, here's one dating from the end of 2005. Red indicators map actual attacks while yellow ones indicate attempted attacks and blue ones are reports of suspicious vessels:

And here is the latest one for 2009:

A number of things are immediately striking. First, the number of incidences this year is high given that we are not even a quarter into 2009. The rescue of Captain Philips certainly hasn't deterred Somali pirates from mounting more attempts in recent days. Second, incidences in the historically piracy prone Malacca Straits have gone down significantly in recent years. This is attributable to coordinated efforts by Indonesia, Malaysia, and Singapore to patrol the area with serious intent [1, 2]. While the Gulf of Aden has been similarly prone to piracy, the ravages of civil war still ongoing in Somalia have certainly accelerated these sorts of happenings. Even if times are difficult, Indonesia, Malaysia, and Singapore are still fully functional states while the state of Somalia is, basically, a figment of the political imagination. Nevertheless, I am certain the Southeast Asians can lend help on how they've dealth with their piracy problem.

They say necessity is the mother of invention. Given the desperation of Somalia, it is no surprise that ever more daring raids are being mounted. Initially, I'd have advocated a tougher line of the pirates--shoot to thrill, shoot to kill--but then you have to remember that there are literally hundreds of sailors being held hostage unfortunate enough not to be white American sailors. What would be their fate if they started issuing such orders? It's a bleak situation all around.

4/21 UPDATE: An FT op-ed by a Chatham House researcher reiterates many points raised above.