Weekender: US-EU, US-China Trade Spats

♠ Posted by Emmanuel in ,,, at 10/09/2009 04:07:00 PM
Ah, what's the IPE Zone without reports of trade conflicts? Just as I was scheduled to go comfortably numb heading into the weekend, I was awakened by news of two brewing trade conflicts. In both, the US is exercising the initiative. Briefly, the first concerns the US asking the WTO dispute settlement mechanism to rule on the EU's ban of American poultry exports over the use of chlorine in cleaning chickens. The following is the USTR's version of events:
In 1997, the EU began prohibiting the use of PRTs [pathogen reduction treatments] to reduce microbe levels on poultry carcasses sold in the EU, stopping the shipment of virtually all U.S. poultry. Since that time, the United States has attempted to address this market access barrier without litigation.

In 2002, the United States formally requested EU approval of four PRTs: chlorine dioxide, acidified sodium chlorite, trisodium phosphate, and peroxyacids, each of which was already approved for use in poultry processing by the U.S. Food and Drug Administration and the U.S. Department of Agriculture.

Various EU agencies have now issued scientific reports relating to the processing of poultry with these four PRTs. The cumulative conclusion of these reports is that the importation and consumption of such poultry poses no risk to human health. In addition, trisodium phosphate is approved for use as a food additive in the EU. On June 2, 2008, however, a committee comprised of the chief veterinary officers of the EU member States rejected a heavily conditioned European Commission proposal to approve the four PRTs by a vote of 26-0, with the United Kingdom abstaining. On December 18, 2008, the EU Agricultural and Fisheries Council, which is comprised of the agriculture ministers of the EU member States, voted against the same proposal in an identical tally. Neither body provided a scientific basis for their respective rejections of the Commission proposal.
To which the EU replies:
"We regret that the United States has decided to ask for a panel to be established in this case. We feel that litigation is not the most appropriate way to deal with complex issues such as this one," the European Commission said in a statement reacting to the news on 8 October. "However, since the US has chosen this path, we will defend our food safety legislation, which does not discriminate against imported products," the EU executive added.

The EU poultry ban has been in place since 1997, because US poultry producers use low-concentration chlorine to wash chickens before selling them – a practice not permitted in the EU. According to EU rules on hygiene and marketing of poultry, slaughterhouses can only use water or other approved substances to rinse meat products, in order to reduce their bacterial contamination.
Alike with the genetically modified dispute, I have no sympathy for the rather prissy EU position as I don't see Americans dropping dead all over the place consuming chicken. May the WTO strike down this pointless ban with haste.

That said, let's move to the steel pipe episode. Hot on the heels of the EU slapping anti-dumping duties on Chinese steel pipe comes news that the US is investigating doing the same. On top of this, the complainants are asking for countervailing duties. Interesting stuff. From Reuters:
The U.S. Commerce Department said on Wednesday it launched an investigation that could lead to new duties of nearly 100 percent or more on imports of steel pipes from China. The department said it accepted a petition asking for the probe from the United States Steel Corp, V&M Star LP, TMK IPSCO and the United Steelworkers union.

The new investigation followed President Barack Obama's recent decision to slap a 35 percent duty on tires made in China after a U.S. trade panel said a market-disrupting import surge had occurred. The United States also imposed preliminary duties last month on $2.6 billion worth of Chinese-made steel pipe used to transport oil.

The latest case involves seamless carbon and alloy steel standard, line and pressure pipe used in industrial piping systems to convey water, steam, oil products, natural gas and other liquids and gases. Imports of the product from China increased nearly 132 percent by volume from 2006 to 2008 to an estimated $382 million, the Commerce Department said.

The petitioners have requested a 98.37 percent anti-dumping duty to offset what they allege to be unfairly low prices for Chinese-made steel pipe sold in the United States. They also want additional countervailing duties to offset suspected Chinese government subsidies.

The U.S. International Trade Commission will vote by early November on whether there is enough evidence for the case to proceed. If it gives the green light, the Commerce Department will make a decision on preliminary anti-dumping duties in December and preliminary countervailing duties in February.
This is the third straight high-profile case brought forth by the United Steelworkers--the tire episode, coated paper, and now steel pipe. Whether the last two are acted upon will certainly be interesting to observe. Note, too, that October marks Treasury Secretary Tim Geithner's second opportunity to label China a currency manipulator. In the meantime, China's official news agency is repeating its characterization of this action as "a serious act of trade protectionism" that "may increase US-China trade tensions."

What's becoming interesting to note is how EU and US actions against China are beginning to mirror each other. As always, watch this space.
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"Strong Dollar" Policy as Financial Alzheimer's

♠ Posted by Emmanuel in , at 10/09/2009 10:58:00 AM
Blame it on former US Treasury Secretary Robert Rubin. During the Clinton years, he began repeating the mantra of a "strong dollar" policy with considerable gusto when his predecessors were more circumspect in doing so while alluding to basically the same idea. Back then, of course, the US was actually reducing its budget deficits if not its external imbalances. The dollar has bounced around significantly since that time. If you recall, the euro once commanded only $0.85 in 2000, prompting coordinated intervention by the G7. In retrospect, the final days of the Clinton administration may come to be regarded as the last high water mark for dollar strength in our time prior as America plunges to Stygian depths of more borrowed money, more borrowed time.

Robert Rubin, Larry Summers, Paul O'Neill, John Snow, Henry Paulson, Tim Geithner; euro from 0.85 to 1.60 and back down again; gold from below $300 to over $1,050; it didn't matter. The song has remained the same from the sitting Treasury chief come hell or high water: Washington has a "strong dollar" policy (albeit with some curlicues attached). In recent years, the "strong dollar" policy has alternately been a source of amusement and target for derision in FX circles; a largely empty slogan without tangible policy implications. As Asian countries are once again intervening heavily to prop up the fast-falling dollar and gold is hitting record highs daily, we once again find ourselves hearing cold comfort from US authorities. Here is former Treasury honcho and current Obama chief economic adviser Larry Summers invoking that old voodoo:
The chief economic adviser to President Barack Obama on Thursday reiterated the administration’s support for a strong dollar as concerns mount about the currency’s sharp decline. Lawrence Summers, director of the National Economic Council, supported recent statements by Tim Geithner, the Treasury secretary whose office customarily voices the US stance on the dollar...

“I think he made very clear our awareness of the responsibilities we have in the US, and the special role of the dollar in the international system,” Mr Summers said of his colleague. The Treasury secretary had made clear “our commitment to a strong dollar based on strong fundamentals”, Mr Summers said.
Along the way, Summers throws in that old chestnut of countries being unable to devalue their way to prosperity. True enough, but that hasn't stopped very many from at least trying to do so to tilt the playing field in their favour. Ironically, it may be up to a source treated with some disdain in this parts who can shed light on the continuing mantra of a "strong dollar." David Malpass, formerly deputy assistant Treasury secretary during the Reagan-Bush Sr. years. Among other whoppers, Malpass has argued that declines in savings rates didn't matter since home and equity prices in America kept going up. The demise of the housing and equity bubbles has put paid to that Cheneynomic chestnut, but Malpass may still have a finger on the matter of the "strong dollar" policy's emptiness. From Bloomberg:
Timothy Geithner, the current Treasury secretary, has tolerated the greenback’s 12 percent slide from its peak this year in March as measured by the Federal Reserve’s trade- weighted Real Major Currencies Dollar Index. While he said as recently as Oct. 3 that “it is very important to the United States that we continue to have a strong dollar,” the last time the U.S. intervened in markets to support its currency was 1995.

The weaker dollar may boost America’s exports as the economy recovers from the deepest recession since the 1930s. The risk is that it may also drive away America’s largest creditors just as the Treasury relies more than ever on foreign investors to buy the bonds financing Barack Obama’s stimulus spending. The dollar’s share of global currency reserves fell in the second quarter to 62.8 percent, the lowest level in at least a decade, the International Monetary Fund in Washington said on Sept. 30.

“Since the dollar has been weak and weakening for years, Geithner was using a code phrase, a carry-over from the Bush administration,” said David Malpass, president of research firm Encima Global in New York. “It means that the U.S. approves of a constantly weakening dollar but doesn’t want a disruptive collapse,” said Malpass, the former chief economist at Bear Stearns Cos. and deputy assistant Treasury secretary from 1986 to 1989.
It is said that Alan Greenspan voiced its approval of the unvarying "strong dollar" statement in putting off those who would try to read policy shifts:
“By not varying the statement, an issue never arose about whether a comment involved a subtle change or not in the policy toward the dollar,” former Fed Chairman Alan Greenspan told his colleagues on the Federal Open Market Committee in 2001, according to a transcript of the meeting. “It was boring, it was dull, it was repetitive, it was nonintellectual, and it worked like a charm.”
Returning to Malpass, he faults the current (Democratic, naturally) administration for believing that foreign creditors have unlimited willingness to lend to America:
“The Washington theory is that dollar weakness will benefit the U.S. by inflating our way out of debt and causing more exports,” Encima’s Malpass said in a Sept. 25 note to clients. “The problem with this theory is that it assumes capital stays put while the dollar devalues.” While the dollar dropped in global currency reserves, holdings of euros rose to a record, the IMF report shows. The U.S. currency’s portion declined to 62.8 percent from 65 percent in the first quarter. The euro’s share rose to a record 27.5 percent from 25.9 percent while the pound and yen gained.
Note that the IMF Composition of Foreign Exchange Reserve (COFER) figures cited by Bloomberg are only for those countries which report the composition of their reserves. Major LDC reserve holders, particularly Middle East oilers and China, do not do so. As I write, the dollar is up a touch on Fed Chairman Ben Bernanke saying interest rates Stateside will rise once the US economy recovers. I simply don't think a sustained US recovery driven by real income growth instead of government hyper-profligacy is foreseeable in the near future. Hence, this is an empty statement that may nevertheless have the effect of temporarily buoying a sinking ship.

In any event, I think Malpass may read it right although the idea is certainly not novel: the US is glad for the dollar to drop, the US will not raise interest rates to help stem dollar weakness in particular, and the US has no intention of intervening to defend the dollar whether on its own or with G7/G20 countries. What is wants to avoid is a disorderly exit that may bring about kingdom come-style scenarios of 10% long rates, the euro at $2.00 and so on in short order. Given its current course, it cannot be ruled out that we will see one or both of those things happening.

In typically short-sighted, kick the can down the road, contemporary American fashion, the Yanks would rather have them come in a gradual, Alzheimer's-style decline of a long goodbye instead of a big bang. The "strong dollar" policy is no more than a "let her go, but gently" policy. Yippee, USA#1, etc.
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Updating Our Odds for Turkish EU Accession

♠ Posted by Emmanuel in at 10/08/2009 12:46:00 PM

I am one of those who think Turkey's EU bid has been, ah, coloured by less-than-objective factors. Would Europe embrace this predominantly Muslim country bordering Iraq, among others, into its fold? As the clip from Avenue Q above says, maybe everyone's a little bit racist--including this bastion of progressive thought. In somewhat less controversial diplomat-speak, the main impediments to Turkish EU accession concern its will to resolve the Cyprus question and its treatment of the Kurdish minority. This commentary from Azerbaijan's APA notes that the recent detente between Turkey and Armenia takes a backseat to these outstanding issues:
Indeed, the two biggest game-changers in Ankara’s membership talks are Cyprus and the ‘Kurdish question’. Cyprus is, superficially, similar to the Armenian issue – an inter-state dispute with deep roots, which currently hinges on a closed border and diplomatic recognition. Unlike the Armenian issue, Cyprus is an EU member. Consequently, the dispute with Cyprus is the biggest single stumbling block in Turkey’s EU application.

Clearly it [Cyprus] is not the only issue – there are 35 ‘chapters’ on which Ankara must satisfy Brussels, and only one (science and research) has been completed. But Cyprus’ significance is such that, when Turkey failed to apply a 2005 protocol on free movement of goods and people to the Cypriot government, the EU insisted that no ‘chapters’ could be closed, and that several would not be discussed until it had applied the protocol. The stakes are hardly as high in the Armenian thaw.

The Kurdish question is less significant than Cyprus, but more so than Armenia. The EU is reluctant to move forward on membership talks with a state which still - despite much recent progress - faces a serious ethnic insurgency. Until Ankara can, in the eyes of Brussels, get its house in order and negotiate a peaceful settlement with its Kurdish population, it will continue to be viewed as an irresponsible and unsuitable candidate for membership by some within Brussels.

It is instructive to look at the question in reverse. If, for instance, Turkey had resolved Cyprus and the Kurdish question, but had failed to make headway on opening the Armenian border, would this impede its membership process? It is unlikely.
Nevertheless, Turkish President Abdullah Gul is currently touring Europe seeking a softening of the Franco-German opposition against the "other" in Turkey:
President Abdullah Gul is touring France, hoping to persuade Paris to soften its fierce opposition to Turkey's membership in the European Union. Gul arrived in Paris on Wednesday and met with foreign policy experts at the onset of his three-day visit. The president is scheduled to talk with Premier Francois Fillon on Thursday, a day before meeting his French counterpart Nicolas Sarkozy, who is staunchly opposed to Turkey's bid.

Before leaving for France, Gul insisted his administration has been committed to implementing reforms required by the 27-nation European bloc, and said the mainly Muslim state was making good progress on the issue. Ankara launched EU membership negotiations in 2005, but has so far opened talks in only 11 of the 35 policy areas it needs to complete as an anti-expansion drive within the EU and spearheaded by Europe's big powers such as France and Germany seeks to slow, if not fully block, the process.

Eurasian Turkey, with only a small portion west of the Bosporus geographically located in Europe, holds a large population of Muslims in its Asian side and could further jostle the insecure European job market with its 76 million citizens. In June, Sarkozy flatly rejected US President Barack Obama's support for Turkish EU membership, saying Turkey should be a bridge between East and West. "It's very important for Europe to have borders. For me, Europe is a force stability in the world and I cannot allow that force for stabilization to be destroyed," he said.
Meanwhile, Turkey's chief negotiator with the EU, Egemen Bagis, rightly disavows anything less than full EU membership for Turkey--certainly not the half-baked "privileged membership" offered by France. In an interview in EurActiv, he speaks about the Cyprus matter as well as the rites of membership. Here are some of the key questions:
A number of chapters in Turkey's negotiations are blocked, mainly over the Cyprus issue, if my information is correct. Who blocked those chapters and why?

[Laughter] It's as complicated as who killed Jesus […] I think that the most important thing that we should focus is that that the most difficult part of the negotiations is behind us. And the most difficult part has been putting the Turkey train on the EU tracks. The most difficult part was starting the accession talks. Every country that has ever stated accession negotiations has at the end completed them. Turkey will not be an exception.

It took us 40 years just to get a date to start accession talks. We did not give up. We were committed, we were decided, and we were patient. And today, we are even more committed, more decided and more patient than ever.

Do you think the Union made a compromise by allowing Cyprus in the EU without its problems with Turkey being solved?

I'm not in a position to make a judgement on that. But I know some European leaders who have said publicly, including [German] Chancellor Merkel, that including Cyprus before a solution was a big mistake.

But this is not in your favour. Merkel probably means that the negotiations with Turkey should not have stated. Isn't the situation with Ms. Merkel now more complicated for you?

No. 17% of all foreign investment in Turkey is German. There are three million Turks that live in Germany. 1.2 million of them are citizens of that great country. Germany and Turkey enjoy a very strong relationship. We may sometimes differ on issues, but we are allies, we are partners, we are friends and the relationship between the two countries is very solid. In every relationship, you have good days and better days. But Turkey and Germany can easily handle differences of views.

Who is blocking Turkey's negotiating chapters?

Well, there are five chapters blocked by France, there are three by Austria and Germany, there are eight because of the Ankara Protocol, but it's a Council decision, it's not Cyprus. Cyprus is trying to prevent the opening of two chapters, education and energy. But I think these problems can be overcome.

Regarding the Turkey-EU talks, apart from the blocked chapter, your country has to deliver on the Union's requirements as any other candidate country. Do you think that your country can deliver as well as the countries from the 2004 and 2007 enlargements?

I think that Turkey is more capable than many other countries in those issues. We have already fulfilled most of the Maastricht criteria, although we didn't have to. When banks went bankrupt throughout Europe in 2008, not a single Turkish bank lost money. The only facilities of French automaker Renault that profited in 2008 were the ones in Romania and in Turkey. Turkey is a very young, dynamic nation. We have the fourth largest workforce in Europe. The medium age in Turkey is 28. Half of our nation of 70 million is below the age of 25. And we have come a long way in the last 10 years. Ten years ago we were the 27th largest economy in the world, today we are the 16th.

We have a case – we can become one of the top economies and top countries of the world, even without becoming a member of the EU. So EU membership is very important anchor, but it's not our only option.

But this is precisely the message Mr. Sarkozy will be delighted to hear. As you say membership is not the only option, he is proposing a privileged partnership…

I said the EU is not the only option. I didn't say full membership is not the only option. Turkey will only accept full membership, nothing less, nothing more. But Europe is not our only option. But if we chose plan A, we chose full membership. I checked the 100.000-page acquis, there's nothing besides membership. There is no alternative to membership. It doesn't exist. What President Sarkozy used to say, and what his colleagues promised me not to use those insulting, those horrible phrases again, does not exist. What insulting phrases? Privileged partnership.

Is it insulting?

Very insulting. Because it does not exist. There is no legal foundation for it.

But you may find Mr. Sarkozy even more reluctant after these statements.

Well, he will be hosting our president tonight (7 October) and I will be going from here to Paris today to meet with them. But I was there two weeks ago. And they realised that these phrases are insulting.
France24 has more on the ongoing Gul tour of France. Sarkozy has never been shy about excluding Turkey from EU accession consideration as a campaign plank for the UMP. I wish Gul and his accession team all the best. However, despite the ongoing strides Turkey has made in terms of rule of law, democracy, and human rights, perhaps deep down it's pointless since...[cue song above] everyone's a little bit racist. Think of right-wingers scaremongering about Turkish migrants overwhelming Western European job markets already hit by recession, etc.
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Today's UK: Jesus in Cahoots w/Money Changers

♠ Posted by Emmanuel in ,, at 10/07/2009 10:50:00 AM
'Emmanuel, let's go see the fireworks!' they always tell me during Guy Fawkes Night here in England when the burn effigies of the eponymous character. However, as a Roman Catholic, I usually demur. Guy Fawkes was a [freedom fighter or terrorist in today's lingo depending on your POV] who wanted to strike a blow for Catholics in England by allegedly hiding in Parliament during the Gunpowder Plot to blow up the House of Lords. Before he could carry out such an act, however, he was caught, tortured and executed. So Guy Fawkes may be as appalling a character as the celebration he spawned belittling Catholics for, what, 403 years now. However, Roman Catholics in Britain may still be getting the last laugh. In a previous missive during the festive season, I've discussed how Roman Catholicism has overtaken Anglicanism in Sunday church attendance. This is nothing particular to brag about since the "race" is one of declining attendance with the latter falling at a faster pace than the former in this heathen land of Western Europe. Heck, even EuroBlair has switched allegiances to Popery.

Now, the Anglican Church's lineage I've always treated with some disdain as one which was bolstered so Henry VIII could divorce Catherine of Aragon and marry Anne Boleyn. (Don't worry; I'm offending few when I characterize it as a church of convenience since mass British interest in religion approaches nil.) It was thus with some curiosity that I've followed how the Anglican Church has reacted to the credit crisis. Despite railing against financial chicanery during last year's meltdown, it was revealed that Anglican funds have lent out shares to short sellers:
The Church of England was facing charges of hypocrisy yesterday over its leaders’ attack on short selling and debt trading after hedge funds pointed out it uses some of the same practices when investing its own assets. Rowan Williams, the archbishop of Canterbury and head of the Anglican Church, said it was right to ban short selling, while John Sentamu, archbishop of York, called traders who cashed in on falling prices “bank robbers and asset strippers”.

Hedge funds pointed to the willingness of the Church commissioners to lend foreign stock from their £5.5bn ($10.2bn) of investments – an essential support for short selling – and derided the pair for not understanding shorting.

“They are trying to shoot the messenger and ... deflecting attention away from the dramatic incompetence of bank executives,” said Hugh Hendry of Eclectica Asset Management, a London hedge fund. “Short selling is the pursuit of truth.” Andreas Whittam-Smith, who as First Church Estates Commissioner oversees the Church’s assets, said the commisioners yesterday referred the practice of stock lending back to their ethical advisory group, which had previously approved it.
Not very ethical, eh? But hold on, there is worse. The Financial Times is now reporting that the Church of England is expressing concern over proposed EU directives mandating greater hedge fund accountability. (You can also see their letter.) It can certainly be said that hedge funds didn't play a major role in fomenting the crisis, but they are nonetheless overdue for better regulation, comparatively speaking:
In a letter to the House of Lord’s EU select committee, the church commissioners – the custodians of its ancient wealth – raised “serious concerns” about plans from the European Union to regulate hedge funds...“We are concerned that the directive as currently drafted will significantly restrict our ability to generate funds to pursue our charitable missions and thus reduce our impact for public good,” said the letter...

“Maximising the returns on our investment portfolios is an essential part of delivering our foundations’ missions, for the benefit of society,” said the letter. “The draft directive, while well-intentioned, threatens this goal.”

The foundations singled out three areas of concern: proposals to limit EU investors to investing in EU-domiciled funds, requirements for funds to use EU-registered depository banks, and limits on funds’ use of leverage. Instead of “imposing restrictions” which would “reduce our freedom”, said the foundations, the EU should concentrate on enforcing transparency, in order to enable investors to “make a judgment”.
Everyone's a dyspeptic Euroskeptic. So much for the bank robbers and asset strippers bit. The gist of their argument is that doing God's works requires maximizing returns on portfolio investments. It is then implied that EU-style overregulation may force the institution to invest elsewhere in a race-to-the-bottom fashion. Do I see some inconsistency here? The FT makes an interesting allusion to the story of Jesus and the money changers in the synoptic Gospels that seems to place these erstwhile people of the book in a bad light. Ah well, maybe more of them should follow the lead of EuroBlair. Heaven knows, Benedict XVI certainly displays a high level of sophistication in discussing global concerns. And some people wonder why the Anglican Church is in decline -

My house will be called a house of prayer for all nations
But you have made it a den of thieves
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Murmurs of Asian Currency Intervention

♠ Posted by Emmanuel in at 10/07/2009 10:04:00 AM
Ah yes, Asian central bank intervention. With the US dollar renewing its swoon (cue the hyperventilating headlines), the newswires are agog with rumours that the usual central bank suspects are back in the game. Dow Jones for instance says South Korea has bought somewhere between one half and a billion dollars:
The South Korean won ended a touch lower Wednesday on suspected central bank intervention, shedding its gains earlier in the session. The won was up 0.3% in early trade as major currencies like the euro remain well bid against the greenback, with the euro-zone currency trading above the $1.4700 resistance.

Traders said the Bank of Korea may have intervened again to buy dollars throughout the session to curb the won's gains. Some traders estimated the central bank likely bought between $500 million and $1 billion, in an attempt to keep the dollar above KRW1,170. "Authorities have succeeded in keeping the dollar above KRW1,170 for four straight sessions now. We will have to see how long this will last," said a foreign bank trader.
Reuters chips in by saying Singapore, Thailand, and Taiwan have been busy trying to stem gains in their currencies:
The baht fell to 33.45 per dollar from Tuesday's close of 33.33, the highest since July 2008, on suspected central bank intervention. "It looks like the Bank of Thailand has been in the market to restrain baht gains. It's a power play with the baht being caught between BoT and sustained foreign inflows into the Thai stock market," a dealer at a Thai bank said.

Central banks in South Korea, Thailand and Taiwan have intervened more aggressively than their regional peers in recent weeks to curb the rise in their currencies, traders say...

Singapore dollar SGD= eased to 1.4047/USD after hitting as high as 1.3989 late Tuesday, when it broke the 1.4 level for the first time since Aug. 8, 2008. "It was rumoured that the authority was in (the market) after U.S. dollar/Singapore dollar fell below 1.4, so the market is buying back U.S. dollars," said a Singapore-based trader, adding that a softer euro also weighed on sentiment. The Singapore dollar has gained 11 percent against the U.S. dollar since March, fanning speculation that the central bank will intervene to temper its rise.
Old habits are hard to break, I guess. So much for creating domestic demand and relying less on export markets. Most of us are still waiting for Goliath to get in the game, though. Everybody's been reading the tea leaves of when Japan will intervene as exporting industries there are currently being hammered by the mighty yen. (I'll try to post more on the conundrum facing Japanese authorities in following the path rumoured to have been taken by other East Asian economies.)

8/10 UPDATE: The Wall Street Journal has an article outlining the estimated extent of Asian economies buying up greenbacks. Toss in the Philippines and the peg-defending Hong Kong Monetary Authority into the action:
Traders in Seoul said they suspected the Bank of Korea, which has intervened heavily in recent weeks to curb won strength, bought up to US$1 billion at around 1,167 won. The U.S. currency last traded at 1,166 won, down from 1,170.50 won at the end of domestic trading Wednesday.

Bank Indonesia was suspected of buying up to $350 million around 9,370-9,380 rupiah via state banks to slow the rupiah's rise, according to traders in Jakarta. "They weren't buying yesterday but today they're not comfortable with the quick appreciation in the rupiah, and they're buying massively," said a senior dealer. Following the intervention, the dollar came off its 9,370 rupiah intraday low. It recently traded at 9,390 rupiah around, but was still down from its close Wednesday at 9,430 rupiah.

In Manila, the Philippines' central bank bought around $100 million at 46.46 pesos to 46.50 pesos, according to traders. The dollar was last at 46.40 pesos.

Taiwan's central bank was spotted buying U.S. dollars early in the session after the local currency settled at its highest level against the U.S. unit in more than a year, traders said. The U.S. dollar was recently trading at 32.133 New Taiwan dollars, lower than Wednesday's close of NT$32.180, but off its opening low of NT$32.098. Traders said if the U.S. dollar drops below NT$32.100 during the session, NT$32.000 remains a pretty strong support level in the near term.

The Hong Kong Monetary Authority said it sold 3.88 billion Hong Kong dollars in the foreign-exchange market to defend the Hong Kong dollar's peg to the U.S. dollar. Thursday's intervention, the second this week, was triggered by the U.S. currency hitting HK$7.7500, the strong side of the Hong Kong dollar's trading band. The U.S. dollar was trading at HK$7.7501. Under Hong Kong's currency board system, the Hong Kong dollar is pegged at 7.80 to the U.S. dollar, but is allowed to trade between HK$7.75 and HK$7.85.
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India to Sue EU at WTO Over Generic Drugs?

♠ Posted by Emmanuel in ,,, at 10/06/2009 12:56:00 PM
And so it may finally come to pass: India is now indicating that it will finally force the issue of the EU confiscating generic drugs while en route to Brazil. In neither India nor Brazil is the drug losartan, used for treating high blood pressure, under patent. However, it is in the EU. More specifically, tensions arose when transshipments from India to Brazil were confiscated in the Dutch port of Rotterdam at the behest of Big Pharma. Before moving on, here's a snippet from an earlier post:
On 15 January [2009] a [Dr. Reddy's Labs] shipment of the generic version of losartan was seized in transit in the Netherlands. This shipment, on its way to Brazil, was held by the customs authority at Rotterdam, which said it infringed the patent of the original drug—Cozaar. Losartan is not patented in India or Brazil. The patent for Cozaar in the Netherlands is held by DuPont, while US-based pharma multinational Merck and Co. holds the marketing rights.
The LDCs mentioned above still have until 2016 to comply fully under TRIPS (Trade-Related Aspects of Intellectual Property Rights); again, revisit the previous post. Unhappy with the EU seizures which it claims contravene WTO law, India is coming close to pursuing a Dispute Settlement Mechanism case. From the Economic Times:
India is likely to file an official case against the European Union asking the World Trade Organisation to bring EU customs regulations in line with internationally accepted norms as the government takes serious notes of two instances where drugs exported from the country to Nigeria and Brazil were seized in transit by Dutch authorities.

The consignments contained anti-HIV and anti-Malarial drugs that are off-patent in India, and were impounded early this year at Dutch ports after European companies holding patents for them moved the customs authorities alleging they were counterfeit. “It’s illegal as it not only violated the international intellectual property agreement (Trips), but was also against the GATT provisions on transit,” a[n Indian] commerce department official told ET requesting anonymity.

The official explained that GATT (now the WTO) had specific rules on goods in transit which ruled out such confiscations. Moreover, the drugs that were being exported were generic or off-patent in India and the country had every right to sell it to another country under the Trips regulations.

“India has decided to ask the WTO to set up a panel for settling this dispute. We want the EU to bring its customs regulations in line with international regulations. The panel is likely to be set up soon,” the official said. EU trade commissioner Catherine Ashton, who was in India last month, had assured commerce and industry minister Anand Sharma that the problem of confiscation would be addressed. However, she was not ready to spell out clearly how she planned to go about it and whether the customs regulations would be changed.

“We cannot work on verbal assurances. When consignments are confiscated, it brings disrepute and also leads to delays and losses. We cannot allow this to continue,” the official said.
Unless the EU spells out how it will better accommodate LDC interests, it's highly likely that we're headed for another WTO showdown. Once more, publicity will not be on the EU and Big Pharma's side as the time-tested "you're denying poor people of potentially life-saving medication" idea resonates quite strongly, even with avowed pro-globalization thinkers like Jagdish Bhagwati and Martin Wolf.
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ICANN Affirmation: US Giving Up Internet 'Control'?

♠ Posted by Emmanuel in , at 10/04/2009 07:25:00 PM
Or so says a recent Guardian headline reporting on the Internet Corporation for Assigned Names and Numbers or ICANN's new Affirmation of Commitments. This topic should be of great interest to IPE followers who view continued US discretion over the function of the Internet as evidence of US hegemony. The new document replaces the original 1998 Memorandum of Understanding between the US Department of Commerce and ICANN--a newly-established non-profit corporation--"to privatize the management of the domain name system (DNS) in a manner that increases competition and facilitates international participation in its management." Among other things, it was tasked with:
  1. Establishment of policy for and direction of the allocation of IP number blocks;
  2. Oversight of the operation of the authoritative root server system;
  3. Oversight of the policy for determining the circumstances under which new top level domains would be added to the root system;
  4. Coordination of the assignment of other Internet technical parameters as needed to maintain universal connectivity on the Internet; and
  5. Other activities necessary to coordinate the specified DNS management functions, as agreed by the Parties.
The status quo for eleven years since the beginning of ICANN and Department of Commerce involvement has become increasingly questionable given the proliferation of Internet users worldwide. That is, it was more of an American institution overseeing a global information network. Call it a cyber-democratic deficit. Accordingly, many of the complaints about the ICANN-DoC set-up pertained to the global governance of other interested parties in an institution supposedly tasked with fostering international cooperation.

In early 2008, ICANN sent a message to the Department of Commerce saying it sought independence from the US government. It justified this plea by saying most of the original objectives of the ICANN/DoC arrangement were already fulfilled and ICANN had to be changed to accommodate more international stakeholders. Fast-forward again to the end of September 2009 and this MOU has now been replaced with the aforementioned Affirmation of Commitments that should welcome more input from international stakeholders. Here's what ICANN CEO Rod Beckstrom had to say:
ICANN was created to help move the domain name system that holds all the names and all the addresses together on the internet globally. Rod Beckstrom - ICANN Chief Executive Officer And it was meant to transfer that responsibility from the U.S. government into the private sector, into a multi-stakeholder nonprofit organization. And the JPA was set up to assist that transfer and to make sure that transfer was successful.

With the conclusion of the JPA [Joint Project Agreement with the Department of Commerce], it means we've hit that target after 11 years and we're now mature enough to move on to the next phase of our global development. So it's a real exciting time for us to enter a whole new level as an organization.
Among the important bits alluding to internationalization in the text are these:
4. DOC affirms its commitment to a multi-stakeholder, private sector led, bottom-up policy development model for DNS technical coordination that acts for the benefit of global Internet users. A private coordinating process, the outcomes of which reflect the public interest, is best able to flexibly meet the changing needs of the Internet and of Internet users. ICANN and DOC recognize that there is a group of participants that engage in ICANN's processes to a greater extent than Internet users generally. To ensure that its decisions are in the public interest, and not just the interests of a particular set of stakeholders, ICANN commits to perform and publish analyses of the positive and negative effects of its decisions on the public, including any financial impact on the public, and the positive or negative impact (if any) on the systemic security, stability and resiliency of the DNS.

5. DOC recognizes the importance of global Internet users being able to use the Internet in their local languages and character sets, and endorses the rapid introduction of internationalized country code top level domain names (ccTLDs), provided related security, stability and resiliency issues are first addressed. Nothing in this document is an expression of support by DOC of any specific plan or proposal for the implementation of new generic top level domain names (gTLDs) or is an expression by DOC of a view that the potential consumer benefits of new gTLDs outweigh the potential costs...

9.1 Ensuring accountability, transparency and the interests of global Internet users: ICANN commits to maintain and improve robust mechanisms for public input, accountability, and transparency so as to ensure that the outcomes of its decision-making will reflect the public interest and be accountable to all stakeholders by: (a) continually assessing and improving ICANN Board of Directors (Board) governance which shall include an ongoing evaluation of Board performance, the Board selection process, the extent to which Board composition meets ICANN's present and future needs, and the consideration of an appeal mechanism for Board decisions; (b) assessing the role and effectiveness of the GAC and its interaction with the Board and making recommendations for improvement to ensure effective consideration by ICANN of GAC input on the public policy aspects of the technical coordination of the DNS; (c) continually assessing and improving the processes by which ICANN receives public input (including adequate explanation of decisions taken and the rationale thereof); (d) continually assessing the extent to which ICANN's decisions are embraced, supported and accepted by the public and the Internet community; and (e) assessing the policy development process to facilitate enhanced cross community deliberations, and effective and timely policy development.
So, in theory, this should mean less overt DoC involvement coupled with greater participation by foreign stakeholders. I've been online since 1994 and I am interested to see if the Internet truly evolves in a manner which increases cyber-participation among different interests--especially those which are not friendly to America but desire a significant web presence nonetheless. Could exclusively alphabetic TLDs have been a form of censorship to those unfamiliar with its associated languages, for instance? We'll see if the transition really means a proliferation of URLs and texts in different languages.
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The Road Now for EU's Lisbon Treaty

♠ Posted by Emmanuel in at 10/04/2009 11:51:00 AM
Subject the Irish to referenda until they say "yes" to the EU's Lisbon Treaty appears to be a strategy that has worked. No, this Europhile won't need to contemplate kicking Ireland out of the EU anymore. However, this does not mean that the road to implementing Lisbon is smooth sailing here on in. Ireland was the only country in the EU to subject Lisbon to a referendum. However, both Poland and the Czech Republic have not yet signed on to it. Earlier in the week, the ruling Conservative party of the Czech Republic threw a spanner in the works by challenging the constitutionality of Lisbon. Euroskeptic Czech President Vaclav Klaus has unsurprisingly indicated that he will not sign on to Lisbon until this matter is sorted out. From the Irish Times:
A group of Czech senators has lodged a new constitutional court challenge against the Lisbon Treaty, alleging that it turns the EU into a “super state”. Part of the appeal rests on a claim that the guarantees on the treaty given to Ireland by EU leaders should have been ratified by the Czech parliament. The senators hope the appeal will delay ratification until a Conservative government can win power in Britain and kill the treaty.

Senator Jiri Oberfalzer, a close ally of Eurosceptic Czech president Vaclav Klaus who helped prepare the court challenge, said that the constitutional court should state whether the EU would still be an international organisation or if Lisbon creates a new EU “super state”.

The appeal asks the court to examine whether the treaty as a whole is compatible with the Czech constitution. It also challenges the legality of the guarantees provided by EU leaders to Ireland.

“The senators claim the Irish guarantees are an international treaty which would need the consent of both chambers of the Czech parliament,” Tomas Langasek, general secretary of the court, told The Irish Times yesterday.
The wish of Czech Euroskeptics is that Lisbon fails to come into effect by the time general elections are called back here in Blighty in June 2010 at the latest, where those other Conservatives have vowed to call for a UK referendum on Lisbon. Knowing how thoroughly entrenched anti-EU discourse is in the press--think Rupert Murdoch--I am fairly certain that a protracted Czech signing process that allows the Tories to assume power will result in a dead treaty. From the FT:
For the EU's other 26 governments, the danger is that the court will spend so much time preparing its opinion that the Czech Republic will not have approved the treaty by the UK's next general election, due by June 2010...The opposition Conservative party, far ahead in British opinion polls, has given notice that, if it wins the election and Lisbon is still not in operation, it will call a referendum on the treaty with the intention of securing a No result...

Some EU officials hope that, if the Irish result is an emphatic Yes, Mr Klaus may surprise everyone with a prompt announcement that he will sign the treaty after all. There has even been talk in Brussels of a special ceremony bringing together Mr Klaus and Lech Kaczynski, the Polish president, who has also delayed signing the charter - al-though he says he will do so if Irish voters approve it.

Such a turn of events looks less likely in the light of the Czech senators' challenge. However, if it materialised it would enable -Sweden, which holds the EU's presidency, to use a summit in late October to anoint the EU's first permanent president and new head of foreign policy - two powerful jobs foreseen under Lisbon.
It is hoped that the overwhelming Irish result will compel the Czech Republic and Poland to sign shortly. Both doing so before month's end will allow current rotating EC head Sweden to ask member countries to choose the first EU president. Blair, anyone? Such talk may be premature. There are no fixed time schedules here, unfortunately.

UPDATE: EC Commission President Barroso, EU rotating head Sweden, and the other Czech parties are urging Klaus to sign the Treaty and be done with it. Former Czech PM Mirek Topolanek of America's-on-the-road-to-hell fame further argues that the US declining to establish a security blanket against Russia means it also needs to cotton up to the EU. Meanwhile, Polish President Lech "Not Related to Ted" Kaczynski indicates that he will sign on next week according to Dow Jones:
A wide spectrum of Czech and European politicians over the weekend put pressure on Czech President Vaclav Klaus to finally sign the European Union's Lisbon Treaty, approved by Irish voters in a public referendum Friday, to enable the charter to come into effect as envisaged in January.

European Commission President Jose Manuel Barroso and E.U. President and Swedish Prime Minster Fredrik Reinfeldt joined a rare, uniform alliance of right- and left-leaning Czech politicians in urging Klaus to quit grandstanding and put his signature to the Treaty...

The Treaty gives greater power to Europe's more populous countries, namely Germany [via changes in qualified majority voting], but there are more risks from not implementing the Treaty, according to ODS chairman Mirek Topolanek. I believe it'll be brought to a close," he said, adding that there are fears that not approving Lisbon would put the Czech Republic on the periphery of European politics and decision-making.

Topolanek said he has fears of Russia's geopolitical and economic intentions, the bloc's energy security, and that now with the U.S. having cancelled the planned U.S. bases in central Europe, the Czech Republic, Poland and their neighbors are more exposed than ever to becoming sidelined and falling under the geopolitical influence of Russia.
10/10 UPDATE: As expected, (Euroskeptic?) Polish President Lech Kaczynski has immediately signed on to the Lisbon Treaty, leaving Czech President Vaclav Klaus as the last leader in the EU to do so [1, 2]. All I can say is the backlash against Klaus and, by extension, the Czech Republic would be tremendous in the EU if he waylays proceedings even more.
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I'm Now at the LSE Working on ASEAN Integration

♠ Posted by Emmanuel in , at 10/02/2009 06:50:00 PM
Dear readers, you may be glad to know that I've begun a new appointment at the London School of Economics after completing my PhD from the University of Birmingham. (Hence the sporadic posting the last few days.) I foreshadowed this eventuality when I wrote about visiting London for a job interview [1, 2]. As someone who's written in some detail about Southeast Asia, you shouldn't be surprised that I will be working on matters concerning ASEAN economic integration. As the Asia watchers among you know, ASEAN is scheduled to establish a single market by 2015. Long regarded as a "talk shop," it's an exciting time for a once-dormant grouping in economic terms.

ASEAN economic integration also attracts attention for the political-economic heterogeneity of the countries involved in the process. Whereas European Community countries generally share a history of democratic institutions and Christianity, Caribbean Community (CARICOM) ones British or French colonial histories, and Gulf Cooperation Council (GCC) ones an Arabic lineage, the same cannot be said for ASEAN. You have Asia's only predominantly Catholic country (the Philippines), Islamic ones (Malaysia, Indonesia, and Brunei), and the other, mostly Buddhist countries. We have military juntas (Myanmar), Communist republics (Vietnam and Laos), fledgling democracies, and monarchies. All this mixed together with states at various stages of development--Singapore leads the pack and rivals Western countries in most indicators--and you have a very interesting project of gelling all these disparate interests.

I of course do not envision ASEAN integration being a mini-EU. That's out of the question given the political contingencies of the association's core principle of "non-intervention in the internal affairs" of other countries. Hillary Clinton suggesting that Myanmar be booted out of ASEAN is certainly viewed as a Yankee intrusion and I think it's she who's more likely to be booted out of Southeast Asia than anyone else. Moreover, a regional currency is certainly not in the cards until ASEAN+3 (including China, Japan, and South Korea) come into the mix. Certainly, there is much research fodder here in goods and services trade as well as investment. One of the things which certainly merits study is how the proliferation of bilateral trade deals in the region hasn't resulted in any substantial increase in the share of intraregional trade. Given the slowdown of traditional export markets in the West, this is no small beer.

Otherwise, I'm still adjusting to my new surroundings. The LSE itself needs no introduction from me. Wikipedia introduces it as the finest institution for studying the social sciences, and it regularly tops the league tables for these disciplines. They say that politics is showbiz for ugly people; perhaps academics is showbiz for brainy people (or those who would like to see themselves as such). Either way, there is no bigger stage than London--the world's capital IMHO despite all the subprime hullabaloo--and the LSE. I just hope that I can leverage my new appointment for greater things in the future.

Once more, I am something of the odd person out in my new post as most of the folks at LSE IDEAS are International Relations people while I am an IPE guy, obviously. At Birmingham, I was, despite my protestations, usually regarded as the token "neoliberal" guy among those into Marxist and neo-Gramscian theory who could debate endlessly about what really happened at the umpteenth Workingmans' International. Seriously, though, it's always good to be among those who do not share your worldview who can open you up to different perspectives. Oftentimes in academia, I've found that those who think most like you are not usually those must willing to help you out.

Before I end, a word of caution: I've found blogging to a be an absolute waste of time in finding a job in academia. This despite the IPE Zone getting decent attention for a blog in a disciple few are admittedly aware of. Either I've written something that's rubbed someone the wrong way--I don't follow simple categorizations--or blogging still doesn't carry much weight in academic circles. Who knows; it may be both. Nevertheless, I will continue to write at the IPE Zone to try and bring the discipline to a wider audience, my warped perspectives and all. I don't really understand my motivation sometimes as it neither earns me money or gets me work. However, the show must go on, albeit from fancier digs!

Regardless of what happens, my best to everyone and thank you for your continued patronage after all these years.
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Has Crass F1 Commercialism Turned Too Crass?

♠ Posted by Emmanuel in at 10/02/2009 05:49:00 PM
I've been an avid follower of Formula One racing ever since I was an eight-year-old thumbing through my dad's old copies of Road & Track in search of Grand Prix reports. Way back then, F1 wasn't yet the truly global sport it is today. Live TV coverage was mostly limited to Europe and Latin America. In recent years, of course, there has been a great eastward movement of race events: Abu Dhabi, Bahrain, Istanbul, Kuala Lumpur, Singapore, and Shanghai. F1 goes where governments keen on sporting showcases and fans keen on viewing the unmatched spectacle of fast cars, superyachts, private jets, and (sorry female readers) pit babes. You know, the stuff of a young man's dreams.

However, difficult times in the car industry has led to pullouts by manufacturers Honda and BMW. There are still notable names in there including the granddaddy of all participants, Ferrari. About a year ago, rumors were circulating that Ferrari wanted to get rid of their current lead driver, the furiously fast Finn Kimi Raikkonen--who won his first championship in 2007 in his first year for Ferrari after replacing the legendary Michael Schumacher. 2008 was odd for his less heralded teammate Brazilian Felip Massa was challenging for the world title up to the last race before being pipped by a point by McLaren's Lewis Hamilton. It was then that rumours started about Ferrari angling to have the Spanish world champion Fernando Alonso on board.

Now here comes the crass commercialism part. Spain's Banco Santander is the largest Eurozone bank in terms of market capitalization. In 2007 it began a prominent advertising deal with the McLaren team after Fernando Alonso moved there after his two championship-winning years at Renault. Unfortunately for Santander, Alonso moved back to Renault in 2008 after falling out with McLaren, leaving the Spanish firm advertising with an Alonso-less McLaren. Late last year, however, there were already rumblings about Santander moving its ad dollars to Ferrari, with Santander hinting heavily that they would like to be reunited with Alonso at the Scuderia:
Spanish sponsor Banco Santander will move its backing from McLaren to Ferrari after the 2009 Formula One season, the bank's boss Emilio Botin has confirmed. "Santander will be with Ferrari in 2010, yes," he is quoted as saying by the Spanish newspaper Diario AS. Botin also made clear his desire to reunite the Santander logo with the car driven by Fernando Alonso, after the former double world champion left McLaren at the end of last year.

"Alonso is the best driver in the world and we would like to work with him, but that's not something that depends only on us," he insisted. Ferrari's current race drivers Felipe Massa and Kimi Raikkonen are both contracted to the Italian team for 2009 and 2010.
Fast-forward to the past few days and we receive news that, no, Kimi Raikkonen will not be driving for Ferrari for 2010 and that Alonso will. Raikkonen isn't a particularly loqacious chap as anyone who's watched him speak knows. However, he isn't beating around the bush about the reasons why Ferrari asked him to depart a year earlier. From ITV-F1:
[Ferrari team boss] Stefano Domenicali has dismissed Kimi Raikkonen's insinuation that the Finn was dropped in favour of Fernando Alonso at the behest of major new Ferrari sponsor Santander.

Ferrari announced yesterday that Alonso's long-rumoured Ferrari move would happen in 2010 and that Raikkonen's contract had been terminated early by mutual agreement. Raikkonen implied that his on-track performances had nothing to do with his departure.

"I know more or less the reason," he said. "It’s nothing to do with my racing or anything what I do in the team. It’s just purely some other reasons." When asked if the arrival of Spanish banking giant Santander was a factor, Raikkonen replied: "You need to ask the team."
I am no authority on the skill level of F1 drivers. Still, asking a former world champion to make way for a double world champion seems to be like splitting hairs to me as either would do a fairly respectable job with a decent car. There is no age factor here as 29-year-old Raikkonen is only a year older than Alonso. Yes, it certainly looks like a big new sponsor at Ferrari has pulled the strings to make its sponsorship jibe--and a Spanish two-time champion at that.

I tend to look at the F1 sideshow as part and parcel of the attraction: outgoing FIA President Max Mosley having filmed S&M misadventures, Flavio Briatore ordering Alonso's former Renault teammate Nelson Piquet Jr. to crash his car to secure an Alonso win last year in Singapore and getting banned from the sport, etc. However, it's something else to ditch a world champion at a sponsor's behest. F1 commercialism may have indeed become too crass when sponsors, not teams, call the shots even on performance-affecting decisions.
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