Dead Ducks II: Lamy Out to Revive Doha (Really)

♠ Posted by Emmanuel in , at 9/17/2008 02:23:00 PM
The Doha Round has degenerated into a really bad horror movie, "The Return of the Doha Zombies," with endless sequels. Indian Finance Minister Kamal Nath once quipped, "while Doha is not dead...it is definitely between intensive care and the crematorium." Once again, WTO Director-General Pascal Lamy is out to resuscitate Doha against all odds. In the past, I have compared D-G Lamy to Don Quixote for his relentless optimism in the face of towering odds. Despite disagreeing with him severely on the meaning of several substantive disputes, I cannot help but admire his dogged pursuit of a deal no matter how the odds stack up against him.

Now Reuters is bringing word that Lamy is--hold your breath--attempting to get the negotiating parties together again in another attempt to get Doha done for good. This he mentioned at a still-ongoing UN Conference for Trade and Development (UNCTAD) shindig. Before you guffaw, remember that the last get-together of trade diplomats was supposed to have almost resulted in a deal. Were it not for Nath's supposed intransigence over the form of special safeguards to support subsistence farmers in India should the country be suddenly overwhelmed by agricultural imports. If a deal really is as close as some trade pundits suggest, by all means, go ahead and demonstrate that it really is. However, the US pressing for non-agricultural market access in China looks set to be a large stumbling block in possible negotiations:
The World Trade Organisation (WTO) could invite ministers to Geneva in the coming weeks to resume July's abortive talks on a new global trade pact, its head said on Tuesday. But fresh sparring between U.S. and Chinese diplomats indicated that any new meeting would not be easy.

"In the weeks to come, and depending on progress made by the negotiations at senior official level, I am ready to call ministers back to Geneva to try and close the issues which remain open," WTO Director-General Pascal Lamy told a meeting of the United Nations Conference on Trade and Development (UNCTAD).

Officials from seven trading powers met last week to explore ways of bridging the gaps, and are to meet again this week. July's ministerial talks fell apart over differences between the United States and India over special measures to help poor-country farmers cope with a surge in imports. The talks were also marked by tension between the United States and China over several issues, including one to eliminate import tariffs on certain industrial sectors.

But speakers from both rich and poor countries at the UNCTAD meeting said that July's talks did not represent a collapse of the WTO's Doha round, launched in 2001 to free up world trade and help developing countries export more. "There's no doubt it was a setback, but it was not a collapse of the round," said Australia's WTO ambassador, Bruce Gosper, who chairs the WTO's General Council.

A deal to free up world trade could boost confidence in a world economy battered by financial meltdown [see my note below]. Developing countries are particularly keen to complete the talks as they recognize trade can help them grow out of poverty. "If the shirt that we are producing to export, we don't find somebody in Europe or in the export destinations to buy it, then we don't survive," said Shree Baboo Chekitan Servansing, the WTO ambassador of Mauritius, which represents African, Caribbean and Pacific countries at the WTO. Both rich and poor countries want to build on what was achieved in July, despite the ultimate failure of those talks.

Trade experts said any resumed ministerial talks would most likely be called before the U.S. presidential election. The deputy U.S. ambassador to the WTO, David Shark, said the United States remained committed to doing a deal this year, and dismissed speculation about the impact of the forthcoming poll. "I can say on behalf of the United States that we remain willing and able to negotiate," he said.

Shark repeated Washington's long-standing view that success in a deal required a big contribution from big developing countries like China and India to open up their markets. But that prompted a swift response from China. "The problem now is that often in the negotiating rooms you find that some members are obsessed with market access rather than development, are obsessed with inventing new terms like 'key emerging countries'," said Huang Rengang, a senior diplomat at China's WTO mission.
BTW, I have expressed disbelief that Lamy ties the completion of Doha to helping countries withstand the current global financial crisis. But, he just keeps repeating this line. My point is that greater trade liberalization has enabled towering trade imbalances to mount. That is, greater integration has only meant the US consuming more and more by importing like there's no tomorrow. Accompanying this trade imbalance has been the world funding the US and its various misadventures--especially the subprime fiasco. It thus seems to me that further trade integration has played a role in making this financial crisis come true, not mitigating it. But, don't try that line on D-G Lamy...

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Dead Ducks I: Greenberg's "Pompetus of Love"

♠ Posted by Emmanuel in at 9/17/2008 02:10:00 PM
Anyone who has listened to classic rock radio should be familiar with Steve Miller's FM staple, "The Joker." A cryptic lyric from that hit song goes: Some people call me the space cowboy / Yeah! Some call me the gangster of love / Some people call me Maurice / Cause I speak of the Pompetus of Love. What the hell does this have to do with the subprime crisis? Perhaps nothing, but disgraced former AIG chairman Maurice Greenberg's attempts to salvage the House That Hank Built (AIG) did jog my memory of the song for some reason.

Quickly, let's look at two theories about Greenberg's actions. Being AIG's largest shareholder still, is he interested in preserving whatever value his equity holdings still have? Perhaps. After all, nationalizing AIG--which is what has ultimately transpired with Uncle Sam footing an $85 billion tab--has basically wiped out current shareholders. In yesterday's Financial Times, Greenberg opined that AIG only needed a "bridge loan" to temporarily tide the firm over instead of a "bailout." A bridge loan would not have resulted in the current situation of ownership being transferred to government-chosen representatives, which of course has instead transpired. So, capital preservation may have been part of Greenberg's motivations.

The second theory--the one I subscribe to more--is that having built up AIG and being unceremoniously dumped in 2005 presented Greenberg a chance to redeem his legacy. He offered to let bygones be bygones and help AIG but was rebuffed. Likely, then, it is more difficult for Greenberg to let go of past glories than anything else. In behavioural economics, there is this thing called the "endowment effect" in which those who possess certain things assign them a higher value than what others think they're worth. Ditto here. For Greenberg, think Sunset Boulevard via--you guessed it--Maurice's "Pompetus of Love." In the end, Greenberg's love for his creation would not save it: I really love your peaches, wanna shake your tree / Lovey dovey, lovey dovey, lovey dovey all the time.
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The Meaning of Halted Russian Stock Trading

♠ Posted by Emmanuel in ,, at 9/17/2008 01:31:00 PM
Some other commentators (coming from you-know-where) have expressed schadenfreude at Russia's stock markets diving. Recently, matters have gotten worse if you believe them: for a second straight day, Russia's equity bourses fell enough to trigger trading halts. In this topsy-turvy world where the rules are being rewritten almost daily, some cling to--pardon the word--neoliberal platitudes that Russia is busy shattering. You know what they are: respect property rights, honour contracts, observe transparency, etc. If it were not already abundantly evident before the Russia-Georgia conflict, those things mean very little to an assertive Russia now.

The naive response is "ha-ha, see how countries that don't play along with the West receive their comeuppance," perhaps in expectation of a 1998-style Russian collapse. It's very Thomas Friedmanesque circa 1999--the (re)imposition of "market discipline." Of course, such a collapse is not likely. As Premier Putin points out, the country's has healthy twin surpluses--budget and trade. Going forward, these will augment Russia's already massive reserves now totalling over half a trillion. Mount a speculative attack on Russia? You must be joking.

Conspiracy theories aside, the West is not out to undermine Russia as Putin suggests. Rather, rational investors are justifiably pulling out of Russia in droves given its independent (mean) streak. The important point is this: flighty FDI is not uncommon. However, increasingly dear stuff you can pull out of the ground--oil, gas, metals--is. In an era where resource scarcity plays a bigger role, demand did not suddenly disappear altogether for Russia's export wares. Instead, what's likely to happen is similar to the Seventies when oil companies were kicked out of the Middle East--key industries became nationalized. In the end, that's all there is to it--a major geopolitical event (support of Israel during the Yom Kippur War in 1973 and the Georgians in 2008) irks resource-rich foreigners (Middle Easterners then and Russians now). Foreign investment fleeing is not necessarily a "negative," but part of gaining greater national sovereignty on resource endowments. If foreign expertise is required, foreign managers can be easily hired by now-nationalized operations.

There will be dislocations in the meantime--nothing that a country with twin surpluses and half a trillion in FX reserves cannot withstand--but ultimately, the stuff buried under Russian soil is worth more than any flighty FDI. Do not forget the lessons of the past like some others have.

UPDATE: Would a country concerned about pleasing the much-vaunted "electronic herd" of foreign investors just now decide to sign friendship treaties with Abkhazia and South Ossetia? Talk about tweaking Russia's critics. Somehow, this doesn't strike me as builder of investor confidence. Further nationalization of Russia's economic interests is consistent with such moves.
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Are Foreigners Tiring of Lending to America?

♠ Posted by Emmanuel in , at 9/16/2008 04:39:00 PM
This subject matter is usually Brad Setser's, but I will pitch in given that he hasn't commented on it yet. In order to run humongous trade deficits year in and year out, foreign creditors have had to provide America with funding by investing in US bonds or stocks, whether issued by the public sector (think Treasuries) or the private sector (think corporate bonds). So far, foreign creditors have been more than willing to plunk their money in US assets--not necessarily because US investments provide better returns, but to continue a system of "vendor finance." As many export-oriented economies have trouble generating homegrown demand, they have instead lent Americans cheap and abundant credit to do the consuming for them. In turn, this cheap credit has been used Stateside for acquiring wondrous assets such as subprime mortgages and monster SUVs. Indeed, the current subprime mess would not have been possible without foreign creditors' seemingly endless willingness to lend America.

Or is this appetite really endless? There are two data points in the latest Treasury International Capital System (TICS) report which suggest otherwise. Given poor investment prospects in the US--a subprime financial system, agency bonds of dubious worth (issued by Fannie Mae and Freddie Mac), collapsing stocks, and room for further dollar decline--you would naturally expect foreigners to be wary of America. Well, it turns out that others are wising up--at least a little:

(1) Net foreign purchases of long-term US securities amounted to a measly $6.1 billion in July. Roughly speaking, such purchases need to cover America's monthly trade deficit. That is, America can only buy in excess (the US trade deficit) if foreigners are willing to provide it enough funds to do so (via net foreign purchases). In July, the US had a deficit of $62.2 billion. So, not even a tenth of July's trade deficit was covered by this yardstick.

(2) While it is true that such large shortfalls occur from time to time in the TICS data, these have been more than made up by subsequent (upward) revisions or windfall inflows. However, there appears to be a distinctly worrying trend of lower net foreign purchases in recent months. If you look at the cumulative inflows for the 12-month periods leading to July 2007 and July 2008 respectively, the story is very different. Let's make a rough comparison here: for the former period, the $971.6 billion TICS figure comfortably exceeds the 2007 US current account deficit of $736.8 billion. For the latter period, the $673.8 billion figure suggests more trouble in meeting whatever tab Uncle Sam ultimately runs up in 2008. Annualizing monthly data so far in 2008, it should come to about roughly the same as the 2007 deficit according to my calculations. Is the rest of the world finally forcing America to live within its means? It's about time, I say. It lends America good money and only gets subprimed (verb form!) for its efforts. Such a deal.

Given this lousy inflows report, you shouldn't be surprised that the dollar is strengthening for reasons beyond all logic. Pathetic foreign inflows = stronger dollar. Truly, these are "special FX." If anyone needed further proof of the irrationality of markets, here you go.

9/17 UPDATE: Right on schedule, Brad Setser has made his commentary on the latest TICS report. All I want to add is that, if you add transactions in long-term and short-term securities, the picture looks even worse. In the twelve months leading up to July 2007, the net sum comes to $878.6B. In comparison, the comparable period to July 2008 comes to $210.10B. Short-term flows tend to be "noisier" and are not usually included in determining the adequacy of capital inflows. However, including them may further suggest America's inability to sell assorted not-so-goodies. As always, caveat emptor.
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McCain, Obama Outline Their China Policies

♠ Posted by Emmanuel in ,, at 9/16/2008 08:38:00 AM
Here is an important story buried in the rubble from the subprime mess: the American Chamber of Commerce in China recently invited US presidential candidates John McCain (R-AZ) and Barack Obama (D-IL) to discuss their policy stances towards China. Indeed, were it not for China financing America in recent times, it is arguable that the global political economy wouldn't be as it is at present--for better or worse. Given the caveat that the audience for McBama here is the PRC AmCham, which you would expect to be interested in largely unfettered US-China trade, it is still surprising that many talking points of these candidates contrast where you would expect them to contrast. McCain highlights "win-win" possibilities from trade, whereas Obama highlights--you guessed it--a "level playing field."

Let us begin with McCain, more or less the standard-issue free-trader here. After reiterating the mutual benefits possible from trade, he goes into painting Obama as a protectionist / isolationist (is that redundant?)
A central challenge will be getting America’s relationship with China right. China’s double-digit growth rates have brought hundreds of millions out of poverty, energized the economies of its neighbors and produced manifold new economic opportunities. The US shares common interests with China that can form the basis of a strong partnership on issues of global concern, including climate change, trade and proliferation. But some of China’s economic practices, combined with its rapid military modernization, lack of political freedom and close relations with regimes like Sudan and Burma, tend to undermine the very international system on which its rise depends. The next American president must build on the areas of overlapping interest to forge a more durable US-China relationship.

It must be a priority of the next American president to expand America’s economic relationships in Asia. Unfortunately, in what has become an all-too-predictable pattern, some American politicians—including the Democratic candidate for president—are preying on the fears stoked by Asia’s dynamism; rather than encouraging American innovation and entrepreneurship, they instead propose throwing up protectionist walls that will leave us all worse off. The United States has never won respect or created jobs by retreating from free trade, and we cannot start doing so now.
McCain then goes into somewhat tougher rhetoric on the need for China to become a responsible stakeholder in the world economy given its growing clout. Also, McCain highlights the commercial opportunities in China for American firms:
China has obligations as well. Its commitment to open markets must include enforcement of international trade rules, protecting intellectual property, lowering manufacturing tariffs and fulfillment of its commitment to move to a market-determined currency. The next administration should be clear about where China needs to make progress, hold it to its commitments through enforcement at the World Trade Organization and enforce US trade and product safety laws. Doing so will help steer the process of China’s economic integration with the world to ensure that it is a fair, two-way street. And the US should continually expand opportunities as China develops, moving into retail ventures, environmental protection, health, education, financial and other services.
Meanwhile, Obama is more critical overall of China even if the PRC AmCham is his audience. Oddly, he starts by meandering for eight paragraphs on domestic policy and regional issues before homing in on China. In this context, some cut-and-paste bonhomies designed to please a domestic audience may not be so well-received. Obama goes:
I know that America and the world can benefit from trade with China, but only if China agrees to play by the rules and act as a positive force for balanced world growth. I want China’s economy to continue to grow, its domestic demand to expand and its vitality to contribute to regional and global prosperity. But China’s current growth is unbalanced, and in recent years domestic consumption has actually gone down as a percentage of GDP. To increase internal demand Beijing will have to improve substantially its social safety net and upgrade its financial services sector to bring its consumption in line with international norms. [Dear Obama speechwriter: what exactly are the "international norms" of consumption?]

Central to any rebalancing of our economic relationship with China must be change in its currency practices. Because it pegs its currency at an artificially low rate, China is running massive current account surpluses. This is not good for American firms and workers, not good for the world, and ultimately likely to produce inflation problems in China itself.

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

As President, I will take a vigorous, pragmatic approach to addressing these issues, utilizing our domestic trade remedy laws as well as the WTO’s dispute settlement mechanism wherever appropriate. High-level dialogue among economic leaders in both countries is also important to achieving real progress. My approach to our economic relationship is positive and forward-looking: to remove obstructions to gaining the benefits of trade and thus to enable faster, and healthier, growth in both economies.
The rebalancing bit I do appreciate, but the belligerent tone Obama adopts later on is questionable given his audience.

Do read the relatively short essays for yourselves. In addition, there is the usual bashing of China's human rights record, its suppression of personal freedoms, and its support for unsavoury regimes. However, I don't take these points seriously for (1) someone named Clinton also called China on them but proceeded to do little but push for China's further trade integration and (2) the US isn't exactly a model country in these respects. If the US couldn't get anything done when its global standing was far better, then its current subprime-infested iteration is unlikely to do any better.

UPDATE: I forgot to mention this--for what's it's worth, Obama is one of 12 senators who are part of the "Congressional China Currency Action Coalition." In the past, it has sought to apply Super 301 sanctions on China. Others are Senators Schumer, Graham, and Stabenow.
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Hey McCain: Clean Up Your Act Before Wall St.

♠ Posted by Emmanuel in , at 9/15/2008 07:54:00 PM
I get annoyed whenever Senator McCain tries his tired old line that he's a reformer out to mend the broken ways of America when the evidence suggests otherwise. Here is the latest case in point. Today, in the wake of Lehman Brothers collapsing, he is styling himself and Sarah Palin as a "team of mavericks" who will "clean up Wall Street." That sounds great and everything, but a quick trip to the campaign finance site OpenSecrets.org paints an altogether different picture. Like for George W. Bush before him, it seems that McCain hasn't been shy in accepting Wall Street campaign money at all. According to OpenSecret.org's tally, McCain's top five donors to date are, er, affiliated with Wall Street firms:

That's really "maverick," McCain: taking bucketloads of (probably subprime tainted) money in the finest Dubya style from the very same Wall Street firms you're bashing. To be non-partisan, Obama does little better despite adopting similarly tough talk. His tenth largest group of contributors is traceable to a certain Lehman Brothers. McCain and Obama as reformers? Somehow, I have my doubts. When it comes to sources of campaign finance--and a whole bunch of other things--these guys are no different from those who came before.

9/17 UPDATE: The "maverick" McCain has now outlined a thoroughly conventional (read: slow-moving and time-consuming) way of dealing with the housing bust--create something to investigate the housing mess modelled on the 9/11 Commission. Is this what a fast-imploding market needs?
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Quickly...China to Appeal WTO Auto Parts Ruling

♠ Posted by Emmanuel in ,, at 9/15/2008 05:13:00 PM
Here's a quick post just to let you know that the semi-infamous auto parts case [1, 2] ruling against China is set to be contested as the PRC will appeal the ruling. This from what is still our favourite official publication, the China Daily. Is it just me or the colloquial English used by Chinese scribes is getting somewhat wearisome?

China on Monday appealed against a World Trade Organization (WTO) ruling that found its auto parts import measures break international trade rules. The WTO expert panel ruling was circulated in July, and it largely upheld US, EU, and Canadian complaints that Chinese tax measures on imported auto parts result in unfair competition.

"China cannot fully agree with the legal explanations and verdict of the expert panel," said a statement from the Chinese WTO mission. The mission said it had appealed the case to the WTO's Appellate Body, and hoped that the body will make a fair-and-square decision [their words, not mine] on this.

Usually the Appellate Body needs 90 days to re-examine and rule on a case. It could maintain or overthrow a verdict by the expert panel. China considers auto parts as a complete vehicle if they account for 60 percent or more of the value of a final vehicle and charges a higher tariff on them. Chinese trade officials said the measure is meant to keep "lawbreakers" from exploiting the differences between tariff rates for importing entire automobiles and auto parts, and to protect consumer interests.

However, the three complainants [the US, EU, and Canada] argue that the Chinese tax measure deters auto-makers from using imported parts to build cars in the country, thus causing uneven competition.

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I've Seen the Lights Go Out on Wall Street

♠ Posted by Emmanuel in at 9/15/2008 08:11:00 AM
With apologies to Billy Joel:
I've seen the lights go out on Wall Street
I saw the stock markets laid low
And life went on beyond the Bloomberg screens
They all bought Lexuses
And left there long ago

They held a concert out in Greenwich
To watch investment bankers glow
They called our securities junk
And made our business bunk
But we went right on with the show!
There is just too much to digest right now with Lehman Brothers declaring bankruptcy (see news release), Merrill Lynch being bought by Bank of America for $50 billion, and AIG supposedly seeking funding to help stay afloat. I suppose there are bazillions of sites out there cataloguing the implications of what some are calling the demise of Wall Street. This being the IPE Zone, I will stick to the more global implications:

(1) Roubini was right (yawn): the days of independent broker-dealers are numbered as two of their ranks ceased to be such in a single day, joining Bear Stearns. What remain are Morgan Stanley and Goldman Sachs;

(2) What's wrong with old-fashioned retail banking? Now that dowdy old Bank of America has swallowed up Countrywide and Merrill Lynch, the wasteful excesses of subprime casino capitalism have been revealed;

(3) European and Asian stock markets are getting hammered hard as risk assessments readjust upward and credit will probably tighten;

(4) Interestingly, the Europeans who are supposed to take a more hands-on approach to corporate governance than their American counterparts are actually leaving matters more to the vagaries of the much-vaunted "market forces." Meanwhile, the ever-so-meddlesome Fed is now accepting stocks for cash loans [!], opening American taxpayers to pick up an open tab. French Finance Minister Christine Legarde is now lecturing the US on how its government cannot always come to the rescue given the Lehman bankruptcy. Ooh, the irony;

(5) This dollar rally nonsense is gradually waning. As far as America goes, subprime garbage in, subprime garbage out.
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Airlines: New EC Emission Regs are &*^%$@!

♠ Posted by Emmanuel in ,, at 9/14/2008 06:49:00 PM
It is an understatement to say that the airline industry isn't one of the current darlings of the environmental movement. I was flipping through the Asian edition of TIME when I encountered a full-page ad by the Pacific Asia Travel Association (PATA), a consortium of airlines plying their trade in the Orient. One of the initiatives that the European Commission (EC) is taking to help curb global warming is to include airlines in its carbon emissions trading scheme from 2012 onwards. This initiative covers airlines with flights into and out of the Eurozone countries.

Unsurprisingly, the airlines in PATA and others operating in Europe are not happy at all about this eventuality. There is even an entire industry-sponsored site detailing the airlines' case. Basically, the defence that the airlines make in the full-page ad is, ahem, Bushian in nature (or, better yet, the disregard thereof). When asked why the United States did not enter the Kyoto Protocol, Bush famously made the point that it was pointless for America to join since developing countries which were big carbon emitters were exempt from carbon caps. Hence, Kyoto wouldn't have much effect on global emissions levels anyway whether America joined in or not. This brings me to PATA's argumentation which is quite similar in nature:
The message from PATA – the Pacific Asia Travel Association – is as simple as it is obvious: if you’re going to introduce a carbon emissions scheme in a global business like aviation, it can’t be limited to one part of the world. It must be global.

The drafters of the Kyoto Protocol understood this and tasked the International Civil Aviation Organization (ICAO) to deal with international aviation and the environment. An ICAO-driven solution is the only effective way forward.
A global warming deal involving all nations--developed and developing--is a difficult feat to manage, and this is borne out by there being no real negotiations working towards a global emissions regime. Ditto with airborne emissions: saying that we're waiting for a global deal is akin to postponing matters indefinitely. PATA continues:
Let’s take an example. Imagine you need to fly from Hong Kong to London. Under the new regime, if you choose to fly directly between the two destinations, the flight would attract an emissions charge from the moment of pushback at Chek Lap Kok to touchdown at Heathrow. If, however, you choose to fly via Dubai, for example, and change planes, then you would be charged for only the second leg of the journey.

The result: confusion for customers, an administrative nightmare for regulators and, as Cathay Pacific chief Tony Tyler noted recently, a severe competitive distortion for airlines operating in a global marketplace. Moreover, what right has the EU to charge an Asia Pacific carrier for emissions over non-EU territory? Instead of cleaning up the environment, it will create an international legal mess.

The tragedy of the EU scheme is that politicians could be taking real steps to help airlines reduce their emissions. The European Commission admits that implementing the Single European Sky for air traffic management could save 16 million tonnes of CO2 each year. But they have been talking for almost 20 years with few tangible results.
PATA is reviving that old devil of red tape. And where there is red tape, there is regulatory arbitrage. For instance, it may be cheaper to fly from Hong Kong to London according to the example on Emirates (with a stopover in Dubai) than on Cathay Pacific (with no stopover) because the emissions charge for the former is lower given the shorter flight distance associated with flying into Europe. PATA then makes the usual, almost mandatory potshot at the EC for bureaucratic paralysis. Perhaps PATA would be more comfortable if a flat fee were charged for flights coming in and out of the EU as a solution. Then again, I fear that getting rid of emissions regulations altogether as a goal overrides any expressed concern for the environment. It's so cynically Bushian.

In a way, the EC is like California in the US. Just as California is usually at the forefront when it comes to emissions regulations in America, so is the EU among regional groupings worldwide. Likely, there will be no global emissions deals without there first being smaller ones such as those in the EC. Though I agree that the current format for applying carbon charges needs some ironing out as suggested by PATA, regional deals will most likely be the stepping stones for more encompassing regimes. PATA disagrees emphatically, though, citing air travels vast contributions to humanity:
PATA is committed to reducing the carbon footprint of the travel and tourism industry. In April, we gathered leaders from all sectors of the industry at the PATA CEO Challenge to share best practices to combat climate change. Airlines including Cathay Pacific, Virgin Atlantic and Qantas were vocal and active participants.

But we will not sit by as bureaucrats impose counter-productive tax schemes in the name of climate change on a sector that underpins the world’s economic health and nurtures its social and cultural well-being [I am so very moved...hand me a hankie, please.]

Airlines must continue to reduce their carbon emissions, through better technology and more efficient operations and infrastructure on the ground and in the air. A universally-applied carbon scheme, under which some of the revenues are re-invested in renewable technology processes, would speed up this process.

However, there is little to be gained, and much more to be lost, if our airlines are terminally wounded by an ill-considered move such as that being championed by the EU.
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Crunch Time: Would You Buy a $50,000 Hyundai?

♠ Posted by Emmanuel in , at 9/14/2008 03:08:00 PM
The story of Japan's trailblazing role in East Asian industrialization is well-known: Once upon a time, American manufacturers looked down upon Japanese cars coming onto their shores. They beheld the tiny cars--and had a laugh. In the space of a few years, Japanese auto manufacturers soon had the last laugh as their products became more than serious competitors to American makes. Last year, foreign cars outsold domestic ones in the US for the first time ever, no doubt owing to the pioneering moves of the Japanese.

Stories about industrial development often follow Japan's trajectory and go something like this: You begin with labour-intensive things like textiles then move on to more advanced consumer goods requiring more technical expertise such as transistor radios and motorcycles. Having hopefully established an internationally recognized brand name for such items, you can then move on to even more sophisticated offerings like video game consoles (Sony Playstation, Nintendo Wii) and luxury cars (Lexus, Infiniti). In effect, today is Hyundai's crunch time like it was for Toyota and Nissan back in 1989 when they sought to move up the price ladder to compete wih the likes of German prestige brands Mercedes-Benz, BMW, and Audi. Nearly two decades later, Lexus and Infiniti are part of the luxury establishment that Hyundai is seeking a piece of the market of with its latest and most ambitious offering, the Hyundai Genesis.

Unlike the Toyota and Nissan efforts, however, Hyundai is not establishing a separate luxury brand to go after the German bigwigs, preferring to use the Genesis alone as a spearhead. Of course, it may not be so wise to establish a second luxury brand name in this day and age of dwindling car sales Stateside. Should the Genesis not live up to expectations, then it would be easier for Hyundai to retreat than if it establishes, say, its own dealer network for a Lexus/Inifiniti rival. The big caveat in the Hyundai strategy, however, is that cars with luxury aspirations sold under regular brand names have not had the best history. I have two cases in point, and troublingly for Hyundai, both are of sedans.

First, Mazda too decided to forgo marketing upscale cars under a separate nameplate with its Millenia sedan. I don't know if you remember it, but it's probably a sign that it didn't do too well that few do remember it. Second, Volkswagen's then-CEO Ferdinand Piech had (well, he still has them actually) delusions of grandeur and sold the Phaeton as a Mercedes S-Class rival. Motor-mouthed hack Jeremy Clarkson summed the Phaeton's failing best: All the luxury you need but no pizazz. Like many others, if I want a luxury offering from the VW-Audi Group, it will have four interlocking rings, thank you very much (an Audi). While Hyundai is not aiming that high--it's targeting the midsize E-Class instead of the larger S-Class, the stakes are still pretty sizable. Will its rich feature list make up for its lack of pizazz?

Car and Driver has just performed a test drive of the Hyundai Genesis and finds that while it does give you a lot of bang for the buck in the engine power, interior space, and gizmo departments, it does not drive as well as its comparable BMW rival. Though the German car is well and truly outgunned in the horsepower department, its dynamics are still rather superior. It will be interesting to see if the Hyundai can succeed where Mazda and Volkswagen have not. For sure, it will need a hefty dose of luck. That American consumers are rather broke doesn't help things much, either.
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