Of Currency Wars and Capital Controls

♠ Posted by Emmanuel in , at 7/13/2011 12:01:00 AM
As a student of South-South cooperation--no matter how its ambitious goals are often negligible or even contradictory in practice--international bodies promoting such cooperation are of interest to me. One of these happens to be the South Centre, which sends me newsletters every so often either because I subscribed sometime ago or they discovered my research interests in third world issues. It describes itself as an "intergovernmental policy think tank of developing countries" and its HQ is in, er, Geneva. I'd like to think of the location as a manifestation of many important international organizations being based there such as various UN bodies and the WTO. My home country being one of the many LDCs funding this think tank (including China and the DPRK), I have naturally made use of its output once in a while, though it's not always that I agree with its stances.

However, Yilmaz Akyuz recently had a contribution that caught my eye on the quasi-eternal topic of international capital flows. There are, of course, two versions of this story. The first is the one we often hear from the likes of Martin Wolf and other apologists for subprime globalization that goes like something like this:
  • LDCs should welcome capital flows since they are more attractive investment destinations with more future growth opportunities than developed ones;
  • However, LDCs keen on maintaining export competitiveness are wary of local currency appreciation that such inflows bring;
  • Hence, capital controls imposed by developing countries to limit inflows unnaturally distort the global economy and promote economic imbalances
On the other hand, you have the Guido Mantega [1, 2] "international currency war" version:
  • Excessively loose fiscal and monetary policies in developed countries have caused hardships for developing ones by in effect exporting inflation as manifested by heightened prices for food, energy and commodities in the Global South;
  • Meanwhile, exchange rate policies of benign neglect encourage beggar-thy-neighbour competitive devaluations against LDCs;
  • By using capital controls, therefore, LDCs are merely trying to protect themselves from destabilizing policies emanating from developed countries
This coming from the South Centre, you should not be surprised that the second version is what's being promoted here. The major thesis is that large capital inflows tend to precede economic crises felt in the developing world such as the Latin American debt crisis and the Asian contagion. We are said to be on the verge of another lest LDC policymakers introduce capital controls:
Like these past episodes, the current surge in capital inflows is creating fragility in DCs. Deficit countries including Brazil, India, South Africa and Turkey are experiencing currency appreciations faster than surplus economies and relying on capital flows to meet growing external shortfalls. Many of those that have been successful in maintaining strong payments positions are facing credit and asset bubbles. Both categories are now exposed to the risk of instability to a greater extent than during the subprime debacle, though in different ways.

It is almost impossible to predict the timing of capital reversals or their trigger, even when the conditions driving the boom are clearly unsustainable. Still, it is safe to assume that the historically low interest rates in AEs cannot be maintained indefinitely and the current boom can be expected to end as interest rates start to edge up.
And what worse baddie is there other than the USA?
The US is now under deflation-like conditions and the Fed is aiming at creating inflation in goods and asset markets. But its policies are adding more to the commodity boom and credit expansion and asset price rises in DCs.

If commodity prices are kept up by strong growth in China, the continued policy of easy money in the US, along with speculation and political unrest in Arab countries, the Fed may end up facing inflation, but not the kind it wants. In such a case, capital and commodity booms may end in much the same way as the first post-war boom ended in the early 1980s — that is, by a rapid monetary tightening in the US even before the economy fully recovers from the subprime crisis.

The boom may also be ended by a sharp slowdown in China. As a result of a massive stimulus programme financed by cheap credits, large capital inflows and rising commodity prices, the Chinese economy is overheating. Monetary breaks now applied to control inflation could reduce growth considerably, particularly if it pricks the property bubble. The consequent fall in commodity prices could be aggravated by the exit of large sums from commodity futures, creating payments difficulties in commodity-rich economies and leading to extreme risk aversion and flight to safety.

Regardless of how the current surge in capital flows may end, it is likely to coincide with a reversal of commodity prices. The most vulnerable countries are those which have been enjoying the dual benefits of global liquidity expansion. Most of these are in Latin America and Africa and some are running growing deficits despite the commodity bonanza.

When policies falter in managing capital flows, there is no limit to the damage that international finance can inflict on an economy. Multilateral arrangements lack effective mechanisms that restrict beggar-my-neighbour policies by reserve issuers or enforce control on outflows at the source.

The task falls on recipient countries. But many developing countries still adopt a hands-off approach to capital inflows while others have been making half-hearted attempts to control them through taxes that are too low to match large arbitrage profits promised by interest rate differentials and currency appreciations. In either case taking capital controls much more seriously is now the order of the day.
It begs the question of who beggars which neighbours. It kind of beggars belief that we are still in roughly the same place as were when the G20 processes started in being rather more interested in apportioning blame than in devising mutually acceptable solutions. While I am obviously more attuned to the second version of events, I believe that such solutions do exist, but more on those later. Meanwhile, I remain relaxed about imposing such controls.
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Become Filthy Steenkin' Rich...in the Falklands

♠ Posted by Emmanuel in , at 7/12/2011 12:01:00 AM
To say British tabloids have output of variable quality is an understatement--witness Rupert Murdoch's fine mess--but the Daily Mail recently ran an interesting feature on the British Falklands. Ever since the 1982 Falklands War between the UK and Argentina put this remaining piece of Empire in the world's consciousness, I've kept tabs on developments there.

Aside from its jingoistic/quasi-strategic value, the Falklands are not quite as barren as certain pop entertainers make it out to be. Indeed, as the article notes, the Falklands are doing quite well, thank you--arguably better than Britain itself. While oil finds may see the Baa-rain [get it?] name become apropos, granting fishing rights has proven to be a money spinner for the Falklands for years and years. Hence--pardon their other pun, not mine--the squidionaires. With farming becoming pretty lucrative in recent years on top of everything, well, it's not such a bad way of living down South:
The once-barren rock, defended at the cost of 255 lives during the 1982 war, is undergoing an economic revolution. In the past, the name ‘Falklands’ summed up images of a windswept archipelago covered in thousands of sheep and penguins, and populated by a rugged rural people rather cruelly dubbed ‘Bennys’ by British soldiers after the simple soul in Crossroads.

But in the nearly 30 years since the war, the place has undergone an astonishing transformation. The population now enjoys a higher average income than the UK, the education and health system is second to none and a booming fishing trade has created at least seven ‘squidionaires’.

In recent days the Falklands, 8,000 miles from London but just 300 from Argentina, have again been in the headlines. Argentine President Cristina Kirchner accused Britain of being ‘a crude colonial power in decline’ as she called for ‘Las Islas Malvinas’ to be returned to Argentine rule. But her sabre-waving is more than just nationalistic pride. For today’s Falkland Islands are a prize indeed.

The prospect of potentially 60 billion barrels of oil less than 150 miles offshore has led to an influx of hundreds of oil workers who have dubbed the remote sheep-filled islands ‘Baa-rain’ after the oil-rich Arab state.
The turning point, as one would suspect, is the post-Falklands War era. "How do you make it safe from the Argentines?" was probably a goal for British leaders seeking to consolidate their dominion over these islands. As you'd suspect, making the place not only economically sustainable to populate but even bountiful in certain respects does help:
The islands’ economy was transformed after the war. Before 1982, the annual GDP was just £3.9 million. The economy was based on the production of wool – there are 250 sheep for every resident – but plummeting prices in the Eighties caused mass emigration. Farms were owned by absentee landlords. There was no international airport, few proper roads and nightlife was non-existent.

After the war, the British Government backed a 200-mile exclusive fishing zone around the Falklands (which locals had been demanding for years) that enabled the islanders to start selling lucrative squid and fishing rights to Japan, Spain, Russia and Korea.

Today, the islands have an annual GDP of £90 million. There is no national debt and the Falklands government has £103 million in savings which generate a further £5.1 million in interest each year. Booming fishing and tourism industries earn £42 million and £7.6 million a year respectively and high wool and meat prices means agriculture brings in a further £6.4 million a year.
You have to give credit where credit is due. They even have a tourist authority that brings the punters in. One of the top draws, evidently, are wartime tours. Generally, the Falklands present an interesting cultural counterpoint to the rest of South America for travellers in that part of the world. As the Brits would say, it's bloody impressive for a bunch of islands with less than 5000 persons for a population.
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Harry Potter and Hollywood Gone AWOL in Indonesia

♠ Posted by Emmanuel in ,, at 7/10/2011 10:01:00 AM
This being on my purported beat of Southeast Asia, here's some interesting news. One of the more practical applications for those studying political science / international relations is the area of "political risk analysis." In particular, there is concern by foreign investors of how shifting political winds affect the climate for their businesses, the ultimate Bad Thing being uncompensated expropriation. But there are many other irritants that may yet cause foreign firms to throw their hands up in frustration. Frustrating enough to keep the final instalment of Harry Potter from the world's fourth most populous country.

For your consideration, today we have Harry Potter and Hollywood Gone AWOL in Indonesia. No, JK Rowling has not quite reneged on having written the last novel about Harry Potter. Besides, I doubt whether she would have penned something with such a mouthful title for Year 8. Rather, this story is Based on Real Life and is occurring right now in Indonesia.

There are two opposing versions here. Both concern the largest motion picture chain in Indonesia, the Cineplex 21 Group, and regulations supposedly introduced at the start of the year on taxes and royalties due to the government from those showing Hollywood blockbusters. The Motion Picture Association (MPA) representing the largest US firms have worked with Cineplex 21 for the longest time, and it is the latter which has come under fire the most from Indonesian government officials. While Cineplex 21 claims it was not aware of the new regulations coming into effect (which obviously require larger payments being made to the government), the authorities point out that Cineplex 21 has been recalcitrant in paying up.

So, with the largest Indonesian movie chain not being able to show first-run Hollywood movies over alleged arrears--the very same one which has an exclusive deal to show such movies in the country--they've been screening nearly everything else to the annoyance of local filim buffs. As with other American commercial interests facing fettered access, this has become a full-blown trade issue:
Debates over the absence of Hollywood movies at local cinemas have gone bilateral, with Indonesia asking the US to find other importers to end the five-month Hollywood movie drought amid the summer blockbuster season. Local importers, which have the exclusive rights to import Hollywood blockbusters, have suspended import activities since January as they settle tax cases in court involving Rp 300 billion (US$35.09 million) in royalty fees and penalties in arrears. The importers said they were never aware of such obligations.

Ever since, Indonesians enjoying the luxury of movie theaters in 65 cities across the country have been screening lower-quality flicks such as Beastly and What Women Want, while much-awaited blockbuster films such as Black Swan and Kung Fu Panda 2 are nowhere to be seen. “In the [bilateral] meeting, which was also attended by the US ambassador, we said there were many importers willing to work with them,” Finance Minister Agus Martowardojo said over the weekend.

Indonesia’s cinema industry has long been dominated by the Cineplex 21 Group, which acts as both importer and distributor and also owns the largest theater chain. Of 600 total theaters in the country, about 500 are owned by the 21 Cineplex Group, 50 by Blitz Megaplex and the remaining by various other businesses. Ananda Siregar, CEO of the second-largest theater chain, Blitz Megaplex, has tried to contact the Motion Picture Association (MPA) to take over import activities, but failed as Hollywood distributors have agreements with the Cineplex 21 Group. MPA represents major Hollywood studios such as Twentieth Centry Fox, Paramount, Sony Pictures Entertainment, Walt Disney Studios and Warner Bros.

Finance Ministry Director General of Taxation Agung Kuswandono said last week that there have been importation requests from new firms to ship foreign movies. “But I don’t know if they are [affiliated] with the existing players or not.” If they are affiliated with existing players, Agung added, they might not be allowed to import. “We are not only banning the company, but also the directors. So, we need to look at it first, to see if these [new importers] are only an effort to shift position from being banned to being allowed [to import].”

In the meeting conducted on Tuesday, both the Indonesian and the United States governments have also called the “Hollywood boycott” bogus, Agus said. “The American representatives clearly understood that Indonesia has no problem with American film exporters, producers or government. but there is a problem that needs to be solved by [local] importers that have been acting as American film importers for the MPA.”

From the fiscal front, the government has pushed efforts to ease importation of foreign movies by simplifying import procedures for foreign movie importers. The Finance Ministry stopped the royalty fee requirement, but instead imposed a new duties system that requires importers to pay import duties of Rp 21,000 to Rp 22,000 per minute for each copy of a film they brought into the country.
There was an earlier hope that instead of being taxed a fixed proportion of gate receipts which MPA rejected as being too prohibitive, a tax on film length in minutes would solve the impasse. However, as the article above suggests, the Indonesian government appears keener on ending the "Hollywood boycott" not by making terms more favourable to 21 Cineplex but by giving the franchise of distributing Hollywood films to other importers. Like many things in Southeast Asia, I suspect these rule changes have more to do with certain interests wanting something done with 21 Cineplex as opposed to regulatory opaqueness.
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The Political Comeuppance of Rupert Murdoch

♠ Posted by Emmanuel in ,, at 7/07/2011 03:49:00 PM
I used to rule the world
Seas would rise when I gave the word
Now in the morning I sleep alone
Sweep the streets I used to own

[With apologies due to Coldplay.] For a long time now, I've grudgingly admired Rupert Murdoch's business acumen if not necessarily the fruits of his media empire [1, 2, 3, 4, 5, 6, 7]. Starting from Australia, he has literally made the world his oyster. Such is his influence that the rise of New Labour is said to not have been possible without him backing away from Tory support. Murdoch's UK titles are well-known: the Times of London, the Sunday Times, the Sun, and until a few hours ago, the News of the World. The latter two tabloids set the template for other lowbrow publications around the world owned by Murdoch alike the New York Post.

However, time moves on and the big money to be had in media has long since gone to more interactive forms such as cable services. Not that Murdoch has always struck gold; witness the ill-fated News Corporation purchase and subsequent fire sale of MySpace. Still, these occasional lapses have been more than offset by successes such as the Fox Channel and Fox News stateside. The success of the latter alongside other right-leaning publications and programmes has always made Murdoch an arch-conservative in the eyes of some, but a keener understanding is that he shifts with the political winds when it suits. Instead, more conservative governments have traditionally allowed him more leeway to operate his media empire when antitrust questions came up. Witness Fox News' much-parodied broadcasting style.

I used to roll the dice
Feel the fear in my enemy's eyes
Listen as the crowd would sing
"Now the old king is dead! Long live the king!"

It is certainly an open question if Murdoch is a kingmaker insofar as his media outlet's outsize influence is concerned. Forbes ranks him as the 13th most powerful person in the world ahead of several dozens of world leaders. Not only did Tony Blair fear offending Murdoch at all costs, but the current Tory-led coalition also values good relations with the media titan. Aping Blair's tactic of hiring Alastair Campbell--a former tabloid journalist from the Daily Mirror--as his director of communications, Cameron infamously appointed Andy Coulson from the News of the World to the same post when he became PM. Coulson subsequently being sacked over phone hacking allegations is well-known.

Yet having made strong inroads into Britain's political-economic elite over the decades, Murdoch is now in imminent danger of overplaying his hand. It's been a slow-burning story over the years of how the News of the World has been associated with phone hacking. (See a summary and timeline here.) Whereas previous controversies have surrounded the usual suspects of the rich and famous of typical tabloid fare--actors, celebrities, sports stars, politicians, and other public figures--in recent days things have become far more dramatic and constitute a tabloid story onto itself. In its hunger for the sensational story, it appears the News of the World phone hacking also targeted families of servicemen, crime victims, and those affected by the 7/7 attacks.

To be certain, not all right-leaning voices back Murdoch. Still, for a long time, it could count on those who mattered overall. Aside from Coulson, David Cameron is also chummy with Rebekah Brooks, CEO on News International--publisher of Murdoch's various UK publications. However, the recent news of phone hacking extending to regular folks who find themselves in difficult situations made News Corporation universally vilified in Westminster's halls even among Cameron's people as such odiousness is difficult to dispel.

One minute I held the key
Next the walls were closed on me
And I discovered that my castles stand
Upon pillars of salt and pillars of sand

Today, the seemingly unthinkable has happened: Rupert's son James Murdoch announced the closure of the News of the World, with its last edition to be published this Sunday--without advertising--after 168 years in operation. Prior to this announcement, it was the widest circulation newspaper (tabloid) in the UK.

In no small, part, this action is due to several previously loyal sponsors abandoning ship: Boots, O2, Halifax, Virgin Holidays, The Co-op, Butlins, Ford and Vauxhall all ditched it for fear of offending common decency. With many others potentially following suit, the writing on the wall became clear: NoW was no longer a commercially viable title for as long as these accusations were being contested in legal proceedings.

Revolutionaries wait
For my head on a silver plate
Just a puppet on a lonely string
Oh who would ever want to be king?

Aside from putting News Corporation stock under heavy pressure, the NoW endgame is also calling into question its other activities. As mentioned above, the rapid demise of print publications has shifted the battleground for this firm and many others. For many months, it was expected that News Corporation would acquire the remaining 61% stake in British Sky Broadcasting, the largest cable service in the UK with 10 million subscribers. It was once assumed that the Murdoch-friendly Tories would let this deal pass, but things have changed. Telecommunications regulator Ofcom has put out a statement on media concerns having to be "fit and proper" to broadcast with the target being rather obvious:
In the light of the current public debate about phone hacking and other allegations, Ofcom confirms that it has a duty to be satisfied on an ongoing basis that the holder of a broadcasting licence is ‘fit and proper’.

It is clearly not for Ofcom to investigate matters which properly lie in the hands of the police and the courts, however we are closely monitoring the situation and in particular the investigations by the relevant authorities into the alleged unlawful activities.
The general consensus is that NoW had become, due to the various phone hacking controversies, a sacrificial lamb. The possibility of creating a Sunday Sun or similar weekend tabloid removed of such blemishes exists. More importantly, while print media may be influential--especially in shaping politicians' perceptions of News Corporation--the real money at stake is with the pending bid for British Sky Broadcasting. Chris Hughes over at Reuters has more to say on what's really at stake:
But News Corp’s total UK newspaper operations contribute only about 4 percent of group sales and barely break even. London-based Enders Analysis puts the annual pre-tax profit contribution of the News of the World and its weekday sister paper The Sun at just 86 million pounds. News Corp could clearly cope with a loss of readers and ad revenue. The group will also have to swallow the expense of settling with victims of alleged phone hacking. The actress Sienna Miller was recently awarded 100,000 pounds ($160,000). Two hundred more settlements at the same rate would cost 20 million pounds.

But bigger potential costs come with News Corp’s ambitions to take full ownership of BSkyB. The price may now rise if the hacking row stiffens the resolve of the satellite broadcaster’s independent directors. A deal was previously expected at 900 pence to 950 pence a share. If Murdoch now has to pay 10 pounds a share, the extra cost would be 795 million pounds over the midpoint of the lower range.

Then there is a small risk that the UK regulator revokes BSkyB’s broadcasting license. It could if the outcome of the investigations now underway makes it believe that News Corp isn’t a “fit and proper” owner or part-owner. That in turn would lead to forced divestiture of BSkyB. But this looks unlikely given the regulator’s criteria are designed to exclude certain categories of owner — for example political groups — and focus on existing breaches of UK broadcasting law rather than criminality per se.
Slumping stock price aside, also consider the controversy discount on the value of News Corporation stock which may grow even larger if the NoW-killing gambit fails:
That leaves the costs of poor governance. News Corp stock already labours with a “Murdoch discount” of about 30 percent compared to peers on an enterprise value to EBITDA basis. This is a $10 billion burden which, in theory at least, reflects concern that Murdoch isn’t shareholder-friendly.

In cash terms the UK newspapers — which also include The Times and The Sunday Times — are little more than a rounding error for News Corp. Greater economic value may have come because they gave Murdoch power and influence in Britain, and that may have helped him establish his broadcasting operations. But if Murdoch overpays for BSkyB or loses the deal because he addresses the problems in UK print with weakness or sentimentality, the discount deserves to widen.
Lastly, I am particularly critical of the lousy tabloid NoW gating its content, as if its flotsam and jetsam were worth paying a premium price for. It isn't the WSJ or even the Times of London--two other Murdoch titles. Good riddance, you gated monstrosity. Now, if only something similar could bring down Fox News--perhaps the second most repugnant Murdoch property. It was not so long ago that Murdoch was regarded as invincible here in the UK, so things may change in Australia and the States as well . As matters unfold, it seems the mightiest of old school media barons is not as invincible as he thought to simple outrage.

UPDATE 1: As expected, Andy Coulson has just been arrested in connection with the latest phone hacking allegations.

UPDATE 2: The notion that print media was a political battering ram for News Corporation's more profitable interests is echoed by the FT:
For years, shareholders have indulged Mr Murdoch’s love of print “because the political clout was worth the marginal loss”, says someone close to the family. That could change “if these playthings cost us our reputation and our commercial relationships”.
UPDATE 3 (11/7): Instead of rubber-stamping the deal as expected prior to this debacle, News Corporation's bid for the remaining stake in BSkyB has now been sent by the government to the competition regulator.
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Novak Djokovic Smoothes Serbia's EU Accession

♠ Posted by Emmanuel in ,, at 7/07/2011 12:01:00 AM
Before beginning, I must tell you of perhaps the worst marketing gambit of modern times. In November 2009, Adidas decided to make Andy Murray its top tennis endorsee when it already had Novak Djokovic under contract. While it's understandable that getting the Great Hope of British tennis on board was a coup of sorts given that it's one of the largest markets for sporting goods and has been starved for a Wimbledon champion for ages, let's just say Murray has not delivered the goods since then. Djokovic soon left Adidas and endorsed Sergio Tacchini. Owning precisely zero spotswear from the latter and loads from the former, it behoves me how Djokovic has become next to unbeatable this year while picking up the Australian Open and Wimbledon titles. Meanwhile, Murray has won no grand slams.

Anyway, to the story. Serbia has produced world-class athletes over the years. Think of Red Star Belgrade winning the European Cup (Champions League) in 1991. Or, how Ana Ivanovic became the world's top-ranked tennis player a few years ago. To be sure, the events in the former Yugoslavia after the Cold War's demise are still prominent in the world's consciousness to this day since they happened not so long ago. Since then Serbian leadership has been keen on repairing its international image. Among its more important medium-term objectives has been joining the European Union alike its neighbours. As I've long documented [1, 2, 3], this process of integration was contingent on handing over the big three war criminals to the UN tribunal. With Slobodan Milosevic. Radovan Karazdic and Ratko Mladic being handed over to meet their fates, this chapter is rapidly closing and is helping Serbia's process of accession, one hopes.

However, while IR junkies may know who these not-so-fine folks are and what's become of them, the wider public may not. How does one improve Serbia's public image, then, to the wider European and world publics? The answer is the world's No. 1 tennis player, Novak Djokovic. After thoroughly dismantling Rafael Nadal in the Wimbledon final--what more Adidas boy Andy Murray?--Serbia has in part sought to capitalize on his sporting achievements. There was Serbian President Boris Tadic cheering "Nole" in London SW19. Celebrations pictured above in Belgrade are indicative of his popularity. But, in reality, how does Djokovic's achievements fit with convincing bureaucrats of Serbia's EU worthiness? The FT's beyondbrics serves up this take:
The former Yugoslav republic has struggled to overcome image problems since the wars of the 1990s – in which neighbours and much of the world saw Serbia as the aggressor. “Novak really did a great thing for our country”, said Boris Tadic, the country’s pro-western president, joking that he could hand over his duties to Djokovic without much worry. Blic, a Belgrade newspaper, proclaimed that politicians should follow Djokovic’s example of diligence and dedication, particularly as Serbia embarks on the long, hard road of EU accession.

The arrest in May of Ratko Mladic, a fugitive Bosnian Serb former army commander (and a big part of Serbia’s international image problem), has made EU candidacy probable by the end of this year, and accession talks with Brussels likely to open not long after.

But the EU monitoring apparatus – the thousands of bureaucrats overseeing Croatia’s reform progress for the last six years – will now focus most of its attention on Serbia. With that in mind, the state should work harder on promotion, rather than rely on a successful individual like Djokovic, said Milka Forcan, a marketing specialist and former executive at Delta Holding, the country’s largest private sector company.

“Novak with his results has already influenced a better image of Serbia, and his position as world Number One and winning the Wimbledon championship is going to underline that,” Forcan said. “The state [also] has to work in an organised and planned way on constant promotion of the country.”

Djokovic has done more to improve his country’s image than “all of our diplomacy”, a former ambassador to France said. The Serbian ambassador to the UN said the tennis win prompted friendly comments among diplomats, but this made no difference with regard to other countries’ political stances toward Serbia.
Take note, Adidas--domestic concerns are keen on the commercial opportunities offered by the charismatic, grass-eating tennis player:
The Serbian Chamber of Commerce last December recognised the tennis star’s PR potential, naming him, as an individual, the “Best Serbian Brand”. Djokovic has appeared in television advertising for Telekom Srbija, the state-run phone company, and Idea supermarkets, a Croatian-owned chain. A Croatian public relations executive commented after the Wimbledon final: “This is finally one positive global story about Serbia, instead of Ratko Mladic.
Moreover, Serbia has to deliver more in European fora than in tennis courts according to diplomats working on the front line of Serbia's accession process:
Fantastic success by Novak Djokovic might help Serbian foreign policy but only if it continues fulfilling all undertaken obligations and working diligently on change of laws at least as much as the famous tennis player has been working to make his dream come true. This is actually the message by politicians from the EU and world media editors who yesterday spoke for ‘Blic’.

‘We support and are happy about Djokovic’s success. For a country it is very good to have so successful people and we believe this shall improve the image of Serbia. However, it is not to be expected that the individual success of a tennis player is going to have any influence on the process of association because it depends on Serbia and obligations it has to fulfill’, ‘Blic’ was told at the cabinet of Stefan Fuehle, the EU Enlargement Commissioner...

Jelko Kacin, the rapporteur for Serbia at the European Parliament has the similar opinion. ‘The victory is huge and I congratulate Djokovic. The most important message of that victory is directed to Serbia: only diligent work can bring progress and success. Serbia and its politicians have to understand that only Serbia can take itself into the EU’, Kacin says.
It almost makes me want to buy Sergio Tacchini's gear instead of Adi Dassler's (even if the former not having a website in AD 2011 complicates matters). At any rate, Serbia has a new hero who not only provides the country with a highly positive image but also wipes the slate clean for a new generation of Serbs. And nearly no one would doubt that Serbia is indeed *in* Europe.
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PRC Rare Earth Metal Hoarding: Fake Trade Issue?

♠ Posted by Emmanuel in ,,,,, at 7/06/2011 12:03:00 AM
Given several new developments, today's a mighty fine time to update our coverage [1, 2] of worldwide rare earth metal availability provided its importance to modern industrial production. Beginning a year and a half ago, the US, EU and Mexico filed related WTO cases [DS 394, 395 and 398 respectively] challenging the PRC's use of quotas, export duties and licence requirements to limit exports of rare earth metals required in many high-technology products. With 95-97% of these metals emanating from the PRC at the present time, it is not a trivial problem for various manufacturing concerns abroad that rely on their supply. Although the PRC has claimed that environmental protection and conservation were the grounds for limiting exports, such claims have been undermined by largely unfettered access by local firms to these rare earth metals. The NY Times cheat sheet above graphically illustrates China's dominant position in sourcing these valuable materials.

To make a long story short, China has just been found in violation of trade rules via a ruling from the WTO's dispute settlement mechanism. Bloomberg offers a summary. The naturally pleased US Trade Representative claims victory while offering this version of what has just transpired:
U.S. Trade Representative Ron Kirk announced today that a World Trade Organization (WTO) dispute settlement panel has agreed with the United States, finding that export restraints imposed by China on several important industrial raw materials are inconsistent with China’s WTO obligations. China’s actions were not justified as conservation measures, environmental protection measures, or short supply measures. The raw materials at issue include various forms of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus, and zinc, and are used in a multitude of downstream applications in the steel, aluminum and chemicals industries...

The export restraints challenged in this dispute include export quotas and export duties, as well as related minimum export price, export licensing, and export quota administration requirements. These types of export restraints can skew the playing field against the United States and other countries in the production and export of numerous processed steel, aluminum and chemical products and a wide range of further processed products. The export restraints can artificially increase world prices for these raw material inputs while artificially lowering prices for Chinese producers. This enables China’s domestic downstream producers to produce lower-priced products from the raw materials and thereby creates significant advantages for China’s producers when competing against U.S. and other producers both in China’s market and other countries’ markets. The export restraints can also create substantial pressure on foreign downstream producers to move their operations and, as a result, their technologies to China.
The USTR's claims on "market distortion" grounds are straightforward: the Chinese are responsible for rare earth metal shortages worldwide that disadvantage foreign firms by limiting their availability while raising their prices. However, local producers do not face similar limitations. What's more, perhaps consistent with China's wish to be on the technological leading edge via knowledge transfer, such limitations encourage foreign manufacturers to bypass such restrictions by locating in the Middle Kingdom.

But is that all there is to this story? While the US, EU and Mexico chose the route of litigation to free up more supplies from China, Japan appears to have found a (potentially) superior solution: get these materials from non-PRC sources. And so we have another tale hot off the presses touting Japan's newfound sources that both cut out China and make these metals appear less rare than at first glance. Instead of being in Inner Mongolia, these finds are under the sea:
Vast deposits of rare earth minerals, crucial in making high-tech electronics products, have been found on the floor of the Pacific Ocean and can be readily extracted, Japanese scientists said on Monday. "The deposits have a heavy concentration of rare earths. Just one square kilometer (0.4 square mile) of deposits will be able to provide one-fifth of the current global annual consumption," said Yasuhiro Kato, an associate professor of earth science at the University of Tokyo.

The discovery was made by a team led by Kato and including researchers from the Japan Agency for Marine-Earth Science and Technology. They found the minerals in sea mud extracted from depths of 3,500 to 6,000 meters (11,500-20,000 ft) below the ocean surface at 78 locations. One-third of the sites yielded rich contents of rare earths and the metal yttrium, Kato said in a telephone interview.

The deposits are in international waters in an area stretching east and west of Hawaii, as well as east of Tahiti in French Polynesia, he said. [Kato] estimated rare earths contained in the deposits amounted to 80 to 100 billion tonnes, compared to global reserves currently confirmed by the U.S. Geological Survey of just 110 million tonnes that have been found mainly in China, Russia and other former Soviet countries, and the United States.
We then return to the geopolitics of it all:
A chronic shortage of rare earths, vital for making a range of high-technology electronics, magnets and batteries, has encouraged mining projects for them in recent years. China, which accounts for 97 percent of global rare earth supplies, has been tightening trade in the strategic metals, sparking an explosion in prices. Japan, which accounts for a third of global demand, has been stung badly, and has been looking to diversify its supply sources, particularly of heavy rare earths such as dysprosium used in magnets.

Kato said the sea mud was especially rich in heavier rare earths such as gadolinium, lutetium, terbium and dysprosium. "These are used to manufacture flat-screen TVs, LED (light-emitting diode) valves, and hybrid cars," he said.
As you would expect, there are qualifiers. First, Japan is not free and clear to mine them unlike if they were in its exclusive economic zone, i.e. its territorial waters. If it wishes to abide by international law which I presume it does, then it will have to consult with UNCLOS authorities--and likely with other countries which have manufacturing interests such as the litigants mentioned above. The Economist offers this take on potential complications:
Seafloor mining beyond countries’ territorial waters is regulated by the International Seabed Authority, set up under the United Nations Convention on the Law of the Sea. So far it has issued only eight licences, all for exploration, not production, all for nodules, not massive-sulphide deposits, and all to governmental or quasi-governmental agencies (of China, France, Germany, India, Japan, Russia, South Korea and an east European consortium). No wonder. Commercial miners want both a clear title to their holding and exclusive rights to exploit it. They also have to answer to shareholders.
Second, there are likely more technical obstacles to deep sea mining and, third, its environmental sustainability than the Japanese let on. From Nature News:
Current on-land mines, and sites picked out for future mines, have rare-earth concentrations of about 3–10%, he points out [whereas those found by the Japan researchers are in the 0.1-0.2% range]. The much lower concentrations at the Chinese clay mine mentioned by Kato and his colleagues are only economically viable because the material is much easier to access than it would be in hard rock. That's not true for mud located below 4 or 5 kilometres of water, which would require expensive ship time and equipment to pull up. "There are better options," he says.

Craig Smith, an oceanographer at the University of Hawaii at Manoa, notes that companies are exploring the idea of mining manganese nodules from the sea floor to exploit their commercially-valuable contents, including copper and nickel as well as rare earths. Commercial mining of nodules is "probably a decade away", says Smith. Ocean mud could prove another possible source of the increasingly valuable elements.

Smith and others have raised concerns about the environmental consequences of deep-sea mining, particularly around hydrothermal vents, which host unique worms, clams and other life. Kato points out that gathering the metals from mud won't involve disturbing the vents; he found the highest concentrations of rare-earth elements thousands of kilometres away from vents. Closer than that, the rare earths were diluted by other deposits. But Smith notes that sea-floor life away from vents could also be fragile. Ecosystems on the cold ocean floor regenerate very slowly, he says, so any damage done by mining could take decades or centuries to heal.
Qualifiers and all, it's a potentially significant discovery. Whether Japan itself stands to benefit from this find is a matter of interpretation concerning the law of the sea and the state of deep sea mining technology. (If you're further interested, io9 has a map depicting where these deposits lie as per the Nature Geoscience article.)

Returning to the main story, China also has the opportunity to appeal the WTO ruling, though I firmly believe that the PRC's claims are covers for protectionism plain and simple. Perhaps other countries ramping up the capacity to mine rare earth metals on land will be more viable than either the route of litigation or deep sea mining. That said, China being alone in continuing large-scale mining of such resources remains a testament to its foresight and long-term planning. In a way, it's being punished for being resourceful, dubious PRC claims at the WTO notwithstanding.
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Fukushima, TEPCO & Kamikaze Shareholder Activism

♠ Posted by Emmanuel in , at 7/05/2011 12:02:00 AM
It is no surprise that with stock prices not rising with any alacrity in the developed world for years and years, shareholder activism has become a high art of sorts. The most common complaint is of firms holding too much cash on hand. Who's brave enough to invest in such an uncertain world? A long time ago, consumer activist Ralph Nader was the scourge of big business, famously calling the Chevrolet Corvair Unsafe at Any Speed before going on to many more targets. With products being built to a generally higher standard nowadays, Nader has mellowed with age and become that most pedestrian of whiners, the shareholder activist. He is complaining that Cisco Systems holds far too much cash that should be distributed to shareholders alike himself. Not so wild and crazy anymore, eh, Ralph?

However, not all shareholder activists are created equally reticent. The Japanese are famous worldwide for their surface calm and general orderliness. Witness that country's noted fastidiousness about cleanliness, timeleness, and other hallmarks of conscientiousness. However, when excited, these most calm peoples of the earth can and do go banzai. Witness kamikaze attacks during World War II or group suicide as an online recreational activity in contemporary Japan.

In case you missed it, we had a very interesting phenomenon happen with the Tokyo Electric Power Company (TEPCO), parent firm of the now-infamous Fukushima nuclear power plant whose emissions have been the largest since Chernobyl and whose fate gripped the world in fear for a number of weeks after the devastating Tohoku earthquake. As the nation's largest utility, you can bet much anger was vented during its recent shareholder's meeting. Combine the apologetic tendencies of Japanese who've felt they've let the side down [hari-kiri, anyone?] with outraged shareholders who are just coming to grips with the magnitude of TEPCO's contingent safety liabilities and you had a most interesting gathering. "Go jump into a reactor and die!" yelled a crazed fogey evidently displeased with this turn of events. From the New York Times:
The operator of the stricken Fukushima Daiichi nuclear plant met with angry shareholders on Tuesday, offering profuse apologies as hecklers shouted abuse from a rowdy floor. But a motion that would have forced the company to abandon its nuclear program was defeated. “I apologize from the bottom of my heart for the trouble and fear that we have brought to our shareholders, and to society,” the chairman, Tsunehisa Katsumata, said at the shareholders’ meeting at a tightly guarded Tokyo hotel. “We will do our utmost to bring the accident to a resolution and to work toward our mission of providing a stable source of electricity,” he said.

Some investors refused to be placated. “Go jump into a reactor and die!” one elderly man shouted at the row of executives, before being escorted out by attendants. At one point, when Mr. Katsumata tried to wrap up a question-and-answer session, angry shareholders rushed toward the stage. The session continued. With her voice shaking, a woman told board members that they were unfit to lead the company. She said the company had ignored warnings about the dangers of nuclear power. “Shame on you!” she cried. “You should all be sacked.”

Tokyo Electric has been fighting for its survival since the March 11 quake and tsunami ravaged the Fukushima Daiichi nuclear power plant, about 140 miles north of Tokyo, leading to hydrogen explosions and releases of radioactive material in the worst nuclear accident since the Chernobyl disaster in Ukraine in 1986.
Total up the amount of compensation due to those whose lives have been disrupted and it could make BP in the Gulf of Mexico look distinctly Little League, like say Bush-era deficits compared to Obama-era cataclysmic debt orgies. Despite having a public debt already 200% of GDP, the Japanese government may yet have to keep the troubled parent company afloat. Someone needs to keep the lights on, right? It's not pretty:
At least 80,000 people in northeastern Japan have fled their homes, and farmers and fishermen in the area have had to abandon their livelihoods. Factories within a 20-kilometer evacuation zone have had to move or close. Tokyo Electric could face as much as 11 trillion yen, or $136 billion, in compensation claims, analysts have estimated. The cost of dismantling the Fukushima Daiichi plant could reach an additional 20 trillion yen, according to the Japan Center for Economic Research.

The dismal forecasts have cast a dark cloud on the financial health of Japan’s largest utility, a company with strong links to government that has dominated the country’s power industry for decades. Last week, Moody’s cut Tokyo Electric’s credit rating to junk status, after a similar move by Standard & Poor’s last month. Tokyo Electric shares have plunged more than 80 percent since the earthquake.

Prime Minister Naoto Kan has said that the government should provide a safety net for Tokyo Electric, to keep the company afloat while it pays damage claims. Japan is considering setting aside about 230 billion yen from a planned 2 trillion yen supplementary budget to help Tokyo Electric, according to Bloomberg News. Mr. Kan has been eager to hold Tokyo Electric accountable and to avoid having to dip into public money. But he also wants the company to avoid bankruptcy, which would bring chaos to the stock and credit markets.

The company had about 933,000 shareholders at the end of March. At that time, financial institutions held about 30 percent of Tokyo Electric shares, while other corporations had 5 percent. Individual investors held about 44 percent, while overseas investors held 17 percent.
We then come to the crux of the energy issue. The Germans have done themselves no favours economically or environmentally by announcing that their nuclear plants will be wound down in due course. What more Japan, a country even more hard up in terms of local energy sources?
Still, the shareholders’ demands mirror a growing antinuclear sentiment among the Japanese public. On June 11, tens of thousands marched across the country, calling for an end to nuclear power in Japan. In a poll published by the Nikkei business newspaper on Monday, 47 percent of respondents said they wanted fewer nuclear power plants in Japan, an increase of 5 percent from a month earlier.

Most experts agree that it would be difficult for Japan to permanently close all of its 54 plants without substantial fuel costs, as well as a large increase in carbon emissions. Before the Fukushima crisis, nuclear power provided 30 percent of the electricity needs of Japan, a resource-poor country with few domestic sources of energy to draw on.

Still, 35 of Japan’s 54 reactors are already closed for maintenance or safety checks, and others are scheduled to follow, which could leave the country without any nuclear power by next April. To make up for the shortfall, power companies around Japan have increased their purchases of natural gas.
Alike the kamikaze pilots of yore, shareholder activists with a penchant for self-immolation--let's all jump in the reactor and die!--should ponder whether their proposed cure is worse than the illness that plagues a nation in troubled times. Increasing the safety margin of nuclear plants I understand--these are problems dealing with corporate governance where there is indeed room for improvement. Doing away with them altogether in Japan's case? To paraphrase Ralph Nader, modern shareholder activist, I am not fully convinced nuclear power is Unsafe at Any Location.
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Avast Ye Furriners! Arab Spring and 'Saudization'

♠ Posted by Emmanuel in ,, at 7/04/2011 12:02:00 AM
One of the more interesting angles that migration researchers have focused on in recent years has been that of South-South migration. While the common perception we have of economic migration is of those from developing countries travelling to developed countries, about half of all migration occurs between developing countries themselves. That is, there are gradations of economic development and opportunity between, say, Ukraine and Russia or Bangladesh and India.

It is well-known that workers with various skill levels ranging from Sri Lankan construction workers at one end to British bankers at the other have travelled to the Middle East in droves over several decades. Aside from providing manpower that relatively small countries there lack, they provide technical expertise not necessarily found among Mideast elites. Right? Well, maybe not for so much longer. As the Arab Spring seems to be demonstrating, there is a lack of employment opportunities for Arab youth in many of the MENA countries, often resulting in outpourings of negative sentiment against monarchical classes. But, it also poses the question of how much citizens of these countries would tolerate '3D'-type jobs: difficult, dangerous or dirty.

As a student of regional integration schemes, one of the common refrains you get from the Gulf Cooperation Council is to hire less foreign workers and employ more locals. Like in other regions, skilled migration that aims to keep talent within the Middle East is a common objective. Here is a typical example:
Implementing the Supreme Council’s resolution in the previous session with regard to employment of the national work force, and in order to facilitate their mobility from one Member State to another; and with a view to increasing the job opportunities for the GCC citizens and to nationalize jobs in the various sectors, and to achieve coordination among the Member States in this field, the Supreme Council approved the views of the Consultative Commission in this regard. The Council decided to assign the Consultative Commission with the task of undertaking an evaluation of the process of joint action in the field of economy, asking it to present its views in the 21st session of the Supreme Council.
Again, it seems the Arab Spring has spurred efforts to employ more locals. Take Saudi Arabia, for instance. For years and years, Saudi Arabia has been among the top destinations for Filipino migrants. While they have a fairly vast range of skill levels, Philippine employment authorities are keeping a close eye on lower-skilled migration in particular as a programme of 'Saudization' takes place. Various news outlets have bandied about massive figures on how much Saudi powers-that-be are spending to buy off dissent and discontent; some say this amounts to up to $130 billion. But, aside from that massive sum, how do you create a more sustainable way of dealing with pent-up demand for domestic employment? Answer: you finally deliver on promises to hire fewer foreigners and more nationals. From the Philippine Star:
The implementation of the new hiring policy in Saudi Arabia, also known as the “Saudization” program, may displace 90,000 low-skilled workers, the Department of Labor and Employment said yesterday. Labor Secretary Rosalinda Baldoz said the Philippine government is assessing the impact of the new policy on Filipino workers employed by small establishments.

The Saudi Labor Ministry is classifying 300,000 local companies into four categories: excellent and green (complying companies), and yellow and red (non-complying companies). Local firms will be required to hire a minimum number of Saudi citizens. The categorization is expected to be completed on Aug. 30.

Baldoz assured Filipinos employed in Saudi that the government is prepared to act on the challenge of the new policy. She said the Philippine labor offices in the kingdom are educating Filipino workers on the impact of the program.
So they're even going to colour-code firms based on certain hiring criteria of Saudis--the exact formula is not exactly known. (There's also the assertion of Philippine central bankers that many of those heading to Saudi Arabia are now more highly-skilled to contend with.) However, one thing I will readily concede is that there is likely a sizeable number of young unemployed locals. Arab News offers this take on 'Saudization':
Saudi Arabia announced Sunday new plans to intensify the Saudization of jobs in private companies as part of efforts to reduce the unemployment rate. According to official statistics, there are more than 448,000 Saudi jobseekers, including women, in a country with eight million expatriate workers.

Labor Minister Adel Fakieh said private companies would be classified into green, yellow and red categories considering their performance in the Saudization of jobs. “We have set out new standards to assess the employment of Saudis in private firms. We have differentiated between companies that have achieved high Saudization rates and those refusing to employ Saudis,” he said.

He said companies in the red category would be prevented from renewing work visas of their expatriate workers while companies in the green category would be allowed to select foreign workers in the other two categories and transfer their sponsorship without the approval of theirs employers.

Fakieh said the new Saudization plan has been designed to keep most private companies in the green category and considering the reality of the labor market. He said details of additional incentives given to Saudization-friendly green companies would be announced on June 11 on the ministry’s website.
It's not as if Saudization hasn't been tried before. Yet the aforementioned payments and wage hikes aside, the events currently engulfing the Gulf seems to have forced the Saudi authorities' hand in a more pronounced fashion:
The new measures came after Custodian of the Two Holy Mosques King Abdullah set up a high-level ministerial committee to find a quick way to employ the growing number of graduates in public and private sectors. The king increased the minimum salary of Saudis to SR3,000 and ordered payment of a SR2,000 monthly allowance for the jobless.

Fakieh acknowledged that the real number of the unemployed could be higher than 448,000, because of the increasing number of Saudi university graduates. He also pointed out that about six million of the country’s eight million expatriates work in the private sector. “These expatriate workers cost the Kingdom SR98 billion annually in terms of transfer of salaries to accounts in their respective countries,” the minister said. “They also put additional pressure on the country’s infrastructure and service sectors.”

Fakieh said there was a five-percent annual rise in the number of expatriate workers, which is double the size of annual Saudi population increase. “This increase of expatriates is causing imbalance in the job market and preventing Saudis to get jobs in private companies. Most companies prefer to employ expatriates as they are ready to accept low salaries,” he pointed out.

He said the new measures were taken as previous Saudization plans were not successful due to various reasons. Saudis working in private companies do not exceed more than 10 percent of the total workforce. He also pointed out that 84 percent of expatriate workers carry only secondary school certificates, adding that these unskilled expatriates could be replaced by Saudis gradually.

Fakieh said companies who had poor Saudization record would be given a time limit to change the situation before preventing them from enjoying the new facilities and incentives. “Saudization has become a national necessity rather than a choice,” the minister said, adding that it would boost the economy.
My question is simple and hearkens back to what I stated earlier: given that many of the jobs on offer will be to of the '3D' difficult, dangerous or dirty variety, what guarantee is there that Saudi nationals will readily fill these posts when foreigners will no longer be allowed to occupy them? For instance, the burgeoning number of university graduates is mentioned, but wouldn't they be seeking white-collar employment more than low-skilled work?

As they say, it's very much a work in progress.
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Fondly Recalling Thatcher's Handbag of IPE Doom

♠ Posted by Emmanuel in ,,, at 7/01/2011 12:03:00 AM
It is one of the most notable incidences in European integration history: Although the exact wording is still being debated to this day, former British Prime Minister Margaret Thatcher famously went before her European Community colleagues in 1984 demanding that the UK not pay so much into the infamous Common Agricultural Policy (CAP) of agricultural subsidies since Britain believed it paid far more than it received in this scheme.

Demanding a rebate, she slammed her handbag into the conference table and exclaimed something to the effect of "I want my money back!" While the CAP's share in the EU budget has gone down from being over three-quarters at its height to less than half today, it remains a big sticking point in WTO negotiations over agricultural market access of LDCs to developed countries, but that's another story for a different post. Here is a brief backgrounder on the UK rebate which exists to this day:
The UK won the rebate in 1984, after the then prime minister Margaret Thatcher threatened to halt payments to the EU budget. "We are not asking the Community or anyone else for money," she said at a summit in Fontainebleau. "We are simply asking to have our own money back".

The UK was then the third poorest member of the Community but was on course to become the biggest net contributor to the EU budget. This was mainly because the UK had relatively few farms, so it got a relatively small share of farm subsidies, which at the time made up 70% of Community expenditure.

The formula for determining how much a country paid into the Community budget was also unfavourable to the UK. It was in effect penalised for raising more revenue from VAT than most other member states and importing more goods from countries outside the Community.
So we now have this splendid story of a charity auction of some famous people's possessions. A finals match ball from England captain Lawrence Dellaglio's 2003 Rugby World Cup winning side went for £13,500. One of "Slowhand" Eric Clapton's Fender Telecasters commanded £16,000. And, apropos for today's story, Mrs Thatcher's now-famous handbag--swung around for emphatic effect in various national and international political arenas in her heyday--highlighted the auction and sold for £25,000:
A handbag belonging to Margaret Thatcher fetched £25,000 when it went under the hammer on Monday, auctioned by Lord Archer. The black glossy leather bag, owned by the former prime minister for more than 30 years, was pictured in a photograph taken as she walked alongside then US president Ronald Reagan during her visit to the United States in 1985.

The lot donated by Lady Thatcher was among a number of highly prized items sold by amateur auctioneer and author Lord Archer for charitable causes. It was bought by an unnamed Cypriot who is understood to have been a student in Britain during Lady Thatcher's tenure as prime minister. The Cypriot, a private buyer, is said to be a "great admirer" of the former Conservative leader.
It literally carries considerable British history, and surpassing prissy stuff like mace, pepper spray and stun guns, made "handbagging" a true weapon worthy of IPE Mortal Kombat:
As the auction at Christie's headquarters in central London concluded, Lord Archer said: "The handbag makes you automatically think of Margaret Thatcher. Someone has captured this and will have, frankly, a historic document for the rest of their lives."

Lady Thatcher's daughter Carol, who joined bidders in the packed sale room, said her mother was "longing to know" how much the bag had raised for her "carefully chosen" charities. "I hope that the highest bidder knows that if he's into handbagging, he's got a weapon with quite a track record. After all, my mother invented the verb 'to handbag'," she said.
Talk about girl power before that hackneyed term was developed:
Edwina Currie, a former minister in Baroness Thatcher's government, said: "It wasn't a shield, it was a weapon. "It said, 'I am Margaret Thatcher, I'm the boss, I'm in charge. I have all this power and I have control'. "That was why the handbag was always so neat and tidy and black and shiny and dominant. It would go on the Cabinet table.
Make no mistake: the Iron Lady had bigger balls than nearly everyone else while maintaining a distinctly feminine touch. WHOMP! Former US Secretary of State George Schultz is said to have enrolled her into the Grand Order of the Handbag:
In 1988 Mrs Thatcher received a handbag as a gift from George Shultz, Ronald Reagan’s secretary of state. He told her it was ‘to mark your ability to produce from within the right form of words to end a tedious discussion. You are the first and only recipient of the Grand Order of the Handbag’.
Those were some days.
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If EMU is Muddled, What More EU Migration Policy?

♠ Posted by Emmanuel in , at 7/01/2011 12:01:00 AM
If you think discord in economic coordination and monitoring are rife in the EU--Greece, Ireland and Portugal are really forcing these issues--what more migration? A side effect of the various uprisings in the Middle East is a steady stream of migrants heading northward to find better lives. This in addition to folks from newly integrated EU states and those from farther afield seeking opportunities in wealthier countries (like myself, for instance) and you have similar issues of discord among EU nations. Those on the Mediterranean are obviously sensitive as literally first ports of call. Wealthier countries relay their wariness about welcoming "different" folks. Newer members are perhaps not as vigilant about patrolling EU borders since migrants just transit through them. And so on and so forth.

The end result of many different countries having uncoordinated migration policies and a lot of punting on the issue at the European Union itself is as you'd imagine. IP Global, the German Council of Foreign Relations, offers a fairly downbeat assessment:
There are enormous challenges to be addressed before the EU has a coherent and legitimate migration policy. First, the approach to the legislation is still too piecemeal. Measures are needed on all aspects of labor migration, not just the highly skilled. The Commission proposed a general labor migration direction in 2001, but it was rejected by member states and withdrawn. Various other measures have been suggested and even passed, such as a measure on migrant workers’ rights and another on seasonal workers—but overreaching structures are lacking. Second, the legislation that has been adopted tends to have far too many coercive elements such as integration conditions as a mechanism to restrict family reunification or long periods of detention permissible for the purpose of expelling a person. Detention conditions vary among member states. In one case that went to court in Luxembourg, a man was held in a high security prison for more than 18 months while the authorities sought to expel him. Third, the measures adopted in the asylum field have not resulted in the convergence of protection for individuals in similar situations in different member states, and are already under sharp criticism by the European Court of Human Rights for their failure to protect people from destitution and provide them with legal remedies. In short, the system is neither coherent nor effective, and it is not fully in compliance with human rights standards.

One may well ask why this situation has occurred after more than 12 years of developing the system. One possible answer is that there has been too much influence on the process by a small group of member state officials from interior ministries with a specifically exclusionary vision of the movement of people across borders. Away from the tempering influence of other ministries at the national level, specifically foreign affairs and social affairs ministries, these officials at the EU level have succeeded in promoting coercive measures which perhaps would not have succeeded at the national level.
Given European demographic trends, even more strenuous debate over the "fourth freedom" of migration after those for the movement of goods, services and investment is inevitable.
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