Iran warned Monday that it could easily close a critical Persian Gulf waterway to oil shipments and said that it had a new long-range naval weapon that could sink enemy ships nearly 200 miles away. The warning, by the head of Iran’s Revolutionary Guards, followed the weekend expiration of an informal deadline for Iran to respond to an offer of incentives from six world powers to stop enriching uranium.
The United States, which has warships deployed in the Persian Gulf, has said new sanctions should be imposed on Iran for failing to respond to the deadline. On Monday, a State Department official said the six powers — the United States, Russia, China, France, Britain and Germany — had agreed to pursue new sanctions, but it remained unclear what they might be or which nations would take part. In comments carried by the semiofficial Iranian news agency, Fars, Gen. Mohammad Ali Jafari, the head of the Revolutionary Guards, said Iran was capable of imposing “unlimited controls” at the Strait of Hormuz in the Persian Gulf, an important oil route. “Closing the Strait of Hormuz for an unlimited period of time would be very easy,” he was quoted as saying. “The Guards have recently tested a naval weapon which I can say with certainty that the enemy’s ships would not be safe within the range of 300 kilometers,” General Jafari was quoted as saying. “Without any doubt we will send them to the depths of the sea.” General Jafari gave no details about the type of weapon tested, but he said it was Iranian-built and “unique in the world.”Sounds pretty scary, right? In fact, this kind of threat is much more oil-specific than the generic "come and get us" rhetoric that Iranians have been using for a while. Oil markets must have trembled, right? Not so much:
Crude oil fell to $118 a barrel on speculation Tropical Storm Edouard will leave U.S. oil rigs and refineries undamaged and as commodities prices tumble because of the slowing U.S. economy.Iran is not mentioned anywhere in the article. This is a good news/bad news kind of story. The good news, as David Victor points out in Newsweek, is that there are hard limits on what oil-producing countries can do to influence energy prices. The bad news is that the reason oil prices have been falling as of late has to do with declining demand. Part of this is a substiution effect -- consumers choosing to spend/save money on different things rather than energy. Part of it is clearly an income effect -- in an economic downturn, people can't afford the energy.
At this week’s World Trade Organisation ministerial meeting, the teargas and riots of past ministerial meetings like the disastrous Seattle conference of 1999 have been a distant memory. Not all attendees think this a good thing. As one business representative notes darkly: “At least people were paying attention back then.” The twists and turns in this week’s meeting have played to a small audience. The days have long gone when any WTO meeting was attended by a travelling caravan of lobbyists, protesters and journalists. Protracted stasis in the talks has driven away all but the most hardcore. Not one demonstrator is keeping vigil outside the gates. Seminars held by think-tanks draw a handful of attendees. Oxfam, who have doggedly stuck with campaigning on the Doha round, are present and staging one of their trademark photo-stunts – on this occasion four campaigners, dressed up as the main players, “gambling with the future of the poor” at a poker table set up nearby in a park.... After the talks were reduced first to a few dozen selected countries and then to an inner core of just seven to try to make progress, many of the surplus ministers present find themselves unoccupied and somewhat embarrassed. “Frankly, a lot of ministers are sitting around with no idea what they should be doing,” one lobbyist says. “The smarter ones have gone shopping.”Of course, the absence of media and civil society interest could make it easier to reach an agreement. Has that happened? According to the WTO:
Director-General Pascal Lamy reported to an informal meeting of the Trade Negotiations Committee on 26 July 2008 that after a week of hard work by Ministers, there was now “a basis for possible convergence”. He welcomed the “package of elements” from his consultations as “an important contribution” to progress towards establishment of modalities in agriculture and non-agricultural market access, adding that intensive consultations would continue on the outstanding issues.Um... not to be too pessimistic, but there's been a "basis for possible convergence" for a few years now. There just hasn't been any actual convergence. This Wall Street Journal story by John W. Miller suggests that no one should be holding their breath too long for actual convergence anytime soon:
A final resolution remains far from certain. China, India, South Africa, Argentina and many others remain opposed to the compromise proposal, drawn up by WTO chief Pascal Lamy Friday in a last-ditch attempt to save the talks. And there are still dozens of unresolved issues on the table....
Brazil's foreign minister, Celso Amorim, sounded a note of optimism on leaving the meeting of delegates from some 30 countries. "There is now a 65% chance of doing a deal, where before there was a 50% chance," he said.
When the protestors reappear, then I'll start paying attention.
During nearly four weeks of voting, more than 500,000 people came to ForeignPolicy.com to cast ballots. Such an outpouring reveals something unique about the power of the men and women we chose to rank. They were included on our initial list of 100 in large part because of the influence of their ideas. But part of being a “public intellectual” is also having a talent for communicating with a wide and diverse public. This skill is certainly an asset for some who find themselves in the list’s top ranks. For example, a number of intellectuals—including Aitzaz Ahsan, Noam Chomsky, Michael Ignatieff, and Amr Khaled—mounted voting drives by promoting the list on their Web sites.Reading this automatically triggered my "old school" nerve -- could anyone imagine Irving Howe or Friedrich von Hayek mounting such a voting drive? Admittedly, Norman Podhoretz is a different story.... The results themselves are predictable, as anyone who remembers how Internet voting on Time's man of the (20th) century turned out:
No one spread the word as effectively as the man who tops the list. In early May, the Top 100 list was mentioned on the front page of Zaman, a Turkish daily newspaper closely aligned with Islamic scholar Fethullah Gülen. Within hours, votes in his favor began to pour in. His supporters—typically educated, upwardly mobile Muslims—were eager to cast ballots not only for their champion but for other Muslims in the Top 100. Thanks to this groundswell, the top 10 public intellectuals in this year’s reader poll are all Muslim. The ideas for which they are known, particularly concerning Islam, differ significantly. It’s clear that, in this case, identity politics carried the day.
The search for a new international order at a time of profound global change: Is the global system established in the wake of WWII still working? Do organizations such as the UN, the World Bank and the IMF need to be reformed ... or replaced?You can access the video by clicking here. Other participants include Janice Gross Stein, Richard Rosecrance, Alan Alexandroff, Patricia Goff, and David Rothkopf. As an added treat, if you watch the whole thing, you'll catch the conversation about me and my eye-rolling.
A) It makes some people who dislike Friedman very happy; B) It makes people who agree with Friedman like him even more; C) It makes people who have ambiguous (or no) feelings towards Friedman feel much more sympathetic towards him.Matt also suggests checking out his book Heads in the Sand as "a more intellectually rigorous Friedman takedown." That's great, but damning with faint praise. I'm pretty sure my seven-year old could muster a more intellectually rigorous takedown as well. Admittedly, I think he's an exceptionally smart seven year old, but still.... UPDATE: Jonathan Chait agrees with me on this:
I don't think I'm particularly sensitive, but I find the notion of physically humiliating somebody who's trying to explain their ideas in a civic forum to be absolutely horrifying.For a more virtuous -- and more amusing -- example of pie-throwing, click here.
It's generally assumed that a chief source of this opacity is that the governments chruning out SWFs are largely authoritarian and this impervious to domestic scrutiny. I tend to agree with this assessment. But I did find this Wall Street Journal op-ed by Heidi Crebo-Rediker and Douglas Rediker to be counterintuitively interesting on this point -- transparency on SWFs would have domestic effects within these countries as well:
When even the most secretive sovereign wealth fund makes an investment, it must comply with the disclosure obligations of the countries in which it is investing. So, when the newly formed China Investment Corporation bought into Blackstone last summer, it was compelled to disclose the terms of the deal and other material information as part of Blackstone's regulatory filings in the U.S. That turned out to have some very real consequences back home. Soon after CIC invested in Blackstone, the holding lost nearly $1 billion in less than a month. Chinese citizens immediately let their political leaders know how they felt about their country's savings being squandered by flooding the Internet and other media outlets with angry criticism. When it emerged that China Development Bank, having already lost another cool billion in its investment in Britain's Barclays Bank, was considering pouring $2 billion into Citigroup as part of the American lender's January rescue package, Chinese politicians quietly killed the deal. While no official explanation was given, China experts believe that the State Council's rejection of the CDB-Citi investment was driven by fear of taking another highly visible loss and the desire to avoid the resulting political backlash at home. It is not just the public grumbling that was noteworthy, but that Chinese political leaders heard it and apparently reacted. And it is not just China. Following the flurry of sovereign investment in Western banks over the last several months, people world-wide expressed real concerns, alarmed about foreign government shareholdings in the fragile international banking system.... As was the case with China, Singapore and Kuwait, investing globally in our markets has already piqued the interest of those who stand to benefit from those investment decisions. It is likely that increased disclosure of a sovereign wealth fund's attempt to invest for the "wrong" reasons would engender criticism not just from the West, but from those with the most to lose. This could begin to break down the distinctions between "the state" and "the people." The idea that undemocratic governments might consider the voices of their own citizens regarding how their money will be invested may be one of the most underappreciated benefits of sovereign funds' disclosure. It may also be one of the most effective.Read the whole thing.
The number of mobile phone users will overtake the number of nonusers this year for the first time, according to the U.N. telecoms agency. Ownership rates in developing countries are rising fastest, with Brazil, Russia, India and China alone accounting for 1 billion subscribers last year, the International Telecommunication Union said. In 2000, only 12 percent of the global population had a mobile phone. "At current growth rates, global mobile penetration is expected to reach 50 percent by early 2008," according to ITU's January newsletter. This would amount to more than 3.3 billion subscriptions worldwide.I would be more impressed, however, if this piece of information appeared anywhere on the International Telecommunications Union main web page.
Last Thursday morning, five law-enforcement agents marched into Zhai Minglei's Shanghai apartment, seized his computer hard disk and copies of the small magazine he used to publish, and ordered him to report for questioning the next day. It was the latest blow in what one leader of a nongovernmental organization here calls a "systematic crackdown on the voices of civil society" in China, as the government manufactures the unruffled image it hopes to project to the world during the 2008 Olympic Games. Civil society groups formed by activists in fields such as environment, social welfare, health, and education "have really suffered setbacks and tougher controls since earlier this year," adds Wen Bo, China program director for the US NGO Pacific Environment. Mr. Zhai published an open letter online late last month revealing that his magazine, Minjian, an apparently innocuous publication chronicling NGOs' development projects, had been forcibly closed by the authorities in July. His quiet efforts to win a reprieve had failed, he says.... Other groups have also been closed, while organizers of some have been placed under house arrest. Police surveillance has been stepped up, a number of activists report. "Visits by the police are quite normal," says one environmentalist who asked not to be identified. "It is a difficult period. It has affected all the organizations we work with and anyone else they work with," says one representative of a foreign agency that is funding Chinese NGOs. Such moves appear to run counter to President Hu Jintao's pledge at the recent 17th Communist Party Congress to "step up education about citizenship" and the hope he expressed that "social organizations [will] help expand participation by the public" in "self-governance." They also cast doubt on International Olympic Committee president Jacques Rogge's claim after Beijing was awarded the 2008 Olympics that "the Olympic Games will improve the human rights record in China." Many NGO activists attribute the current crackdown specifically to government preparations for the games.... The government ensures control over the sector by a restrictive registration process. An NGO needs an official sponsor agency that will take legal responsibility for it. Such agencies are hard to find, most NGOs discover. At the same time, the government allows only one NGO to work in a particular sector in each region. Independent groups often find a GONGO [government-owned NGO--DD] has registered before them..... NGOs, which as conduits for people's participation in civic affairs often act as the building blocks of civil society, have proved most effective elsewhere when they have created networks among themselves. That is a lesson Chinese officials appear to have learned: China Development Brief, Minjian, and Gandan Xiangzhao all acted as hubs, encouraging the exchange of information and the creation of networks. "They initiated activity, made citizens more active," says Professor Jia. "I suppose the government may think it is better for citizens to be quieter." The imminence of the Olympics, and the world attention they will focus on China, is one reason, say some activists. "Ordinary people's voices disturb the unilateral pursuit of a stable and united political environment and a happy and peaceful atmosphere before the Olympics," says Lu Jun, head of Gandan Xiangzhao. At the same time, Chinese national-security officials appear afraid that NGOs could develop into a political threat, having seen how NGO leaders played prominent roles in the "color revolutions" that swept former Soviet republics. "For them, NGOs are new, color revolutions are new; they know NGOs through color revolutions and they fear what might happen next," says Jia.It should be noted that this reaction to the color revolutions is not unique to China -- it mirrors what governments in Russia, Iran, and Central Asia have done as well.
The effort, though noble, is largely irrelevant to the urgent task of cutting greenhouse-gas emissions. The countries that care the most about successful U.N. talks are a small and shrinking part of the problem. Those that matter most?notably China, which in 2007 became the world's largest emitter of warming gases?have exempted themselves from any regulation of their effluent. The Bali agenda offers no route around this impasse and will probably make it harder to solve in the future.
The depth of anti-globalisation feeling in the FT/Harris poll, which surveyed more than 1,000 people online in each of the six countries, will dismay policy-makers and corporate executives. Their view that opening economies to freer trade is beneficial to poor and rich countries alike is not shared by the citizens of rich countries, regardless of how liberal their economic traditions.Indeed, as the poll shows, there's either majority or plurality enthusiasm for "setting pay caps for the heads of companies." The breadth of support surprises Mark Thoma. For a pro-globalization type like me, there's not a lot that's funny about this kind of public sentiment. There is something ironic, however, about the extent to which publics believe that this kind of measure will reduce income inequality. On this point, I click over to Marginal Revolution and find the following:
We consider how much of the top end of the income distribution can be attributed to four sectors -- top executives of non-financial firms (Main Street); financial service sector employees from investment banks, hedge funds, private equity funds, and mutual funds (Wall Street); corporate lawyers; and professional athletes and celebrities. Non-financial public company CEOs and top executives do not represent more than 6.5% of any of the top AGI brackets (the top 0.1%, 0.01%, 0.001%, and 0.0001%).... ...we do not find that the top brackets are dominated by CEOs and top executives who arguably have the greatest influence over their own pay. In fact, on an ex ante basis, we find that the representation of CEOs and top executives in the top brackets has remained constant since 1994. Our evidence, therefore, suggests that poor corporate governance or managerial power over shareholders cannot be more than a small part of the picture of increasing income inequality, even at the very upper end of the distribution. We also discuss the claim that CEOs and top executives are not paid for performance relative to other groups. Contrary to this claim, we find that realized CEO pay is highly related to firm industry-adjusted stock performance. Our evidence also is hard to reconcile with the arguments in Piketty and Saez (2006a) and Levy and Temin (2007) that the increase in pay at the top is driven by the recent removal of social norms regarding pay inequality. Levy and Temin (2007) emphasize the importance of Federal government policies towards unions, income taxation and the minimum wage. While top executive pay has increased, so has the pay of other groups, particularly Wall Street groups, who are and have been less subject to disclosure and social norms over a long period of time. In addition, the compensation arrangements at hedge funds, VC funds, and PE funds have not changed much, if at all, in the last twenty-five or thirty years (see Sahlman (1990) and Metrick and Yasuda (2007)). Furthermore, it is not clear how greater unionization would have suppressed the pay of those on Wall Street. In other words, there is no evidence of a change in social norms on Wall Street. What has changed is the amount of money managed and the concomitant amount of pay.Oh, and there's no apparent correlation between higher pay and the openness of a sector to international trade. To be fair, I suspect publics would support capping the income of Wall Street groups if they were asked. CEOs might simply be a proxy for "evil capitalist pg-dogs." That said, CEOs do tend to be the first target whenever this kind of sentiment is translated into political action. I can't dispute the rising resentment about rising inequality -- but that doesn't mean that the resentment has acquired the correct target (I don't think there is a clear target, but that's a topic for another day). There is support, clearly, for some really stupid policies.
Answers to these questions after the jump....
Thanks to many decades worth of trade agreements, trade is pretty darn free already. So while trade agreements may not be huge sources of job loss, signing additional trade agreements to get that last 10% of free trade isn't a likely source of huge economic gains either, is it? It seems as though both sides may be making mountains out of molehills here. How come free traders always yell and scream about, say, labor clauses or environmental requirements being inserted into trade agreements, but don't seem able to muster up the same passion when it comes to special treatment for favored industries? Seems to me that if it's a choice between forcing a trade partner to institute some kind of minimal child labor protection and forcing a trade partner to accept oppressive IP regulations favored by the U.S. content industry, the labor regulations are actually more justified and produce less economic distortion. Dan? If Dems should be concerned about stagnant wages but shouldn't be demagoging it with trade, what should they be doing? That is, what should they be doing that conservatives wouldn't assault like mad dogs until the last breath was torn kicking and screaming from their bodies? Stronger unions? Higher minimum wage? Expanded EITC? More progressive taxation? Vastly increased assistance to help people displaced by trade agreements? Throw me a bone here. Anything?
China said on Wednesday that nearly a fifth of the food and consumer products that it checked in a nationwide survey this year were found to be substandard or tainted, underscoring the risk faced by its own consumers even as the country?s exports come under greater scrutiny overseas. Regulators said the broad survey of foods, agricultural tools, clothing, women and children?s products and other types of goods turned up sizable quality and safety failure rates for products that are sold domestically. The government said, for instance, that canned and preserved fruit and dried fish contained excessive bacteria; that 20 percent of the fruit and vegetable juice surveyed was deemed substandard, and that some children?s products were defective or laced with harmful chemicals. The announcement came in the midst of a growing scandal over the quality and safety of Chinese-made exports and follows a series of international recalls involving everything from contaminated pet food ingredients and counterfeit toothpaste to toxic toys, defective tires and contaminated seafood. The General Administration of Quality Supervision, Inspection and Quarantine said the survey, conducted in the first half of this year, showed quality and safety improvements compared with conditions in the period a year earlier. But the announcement also suggested that Chinese consumers are at serious risk of being harmed by purchasing tainted foods, substandard goods and suspect or defective equipment. Regulators said, in effect, that goods sold in China were far more hazardous than the exports that were driving the country?s economic growth and now partly the subject of safety and quality debates.This is going to be a huge, long-term headache for Beijing. Brand images are not easy to change, and China has been beset by a perfect storm of health and safety scares over the past six weeks. Furthermore, as Barboza points out, improving the brand is not merely a function of the central government "getting it" (and cases like this one suggest that they do not "get it" across the board):
Experts say aggressive and opportunistic entrepreneurs continue to take advantage of the country?s chronically weak enforcement of regulations, choosing to blend fake ingredients into products; to sign contracts agreeing to sell one product only to later switch the raw materials for something cheaper; and to doctor, adulterate or even color foods to make them look fresher or more appetizing, when in fact they might be old and stale.strong enforcement of regulations will require a widespread change in both the government and business cultures, and addressing head-on issues of corruption. In other words, this problem won't be going away anytime soon.
A fatal auto accident in Pennsylvania has stirred concerns about another potentially hazardous Chinese product in wide use in the U.S.: tires. About 450,000 Chinese-made tires sold in the U.S. -- and possibly many more -- may lack an important safety feature, according to federal regulators and the U.S. distributor that helped design them. But the task of identifying who bought the defective tires and getting them off the road has been complicated by litigation and holes in the nation's product-recall system. The tire defect comes in the wake of several other high-profile safety problems involving Chinese products, including the discovery of lead paint on children's toys and hazardous materials in Chinese-made toothpaste and in wheat gluten used in pet food. "As imports grow -- and China is the largest exporter to the U.S. -- it's essential" that all manufacturers comply with U.S. safety regulations, said Daniel Zielinski, a spokesman for the Rubber Manufacturers Association, the tire industry's main trade group.... The fatal wreck occurred last August, when the tread allegedly separated on a steel-belted radial on a cargo van carrying four passengers. The driver lost control and crashed, killing two passengers and injuring the other two -- one severely. The driver was also hurt. Tread separations are particularly hazardous when they involve vans and SUVs, which have a higher center of gravity and are more prone to tip over than passenger cars. Tread-separation problems sparked a massive nationwide recall of Firestone tires in 2000. An official at NHTSA said the agency is aware of the defect and that the U.S. distributor is ultimately responsible for a recall. The agency generally doesn't test tires independently, unless a manufacturer or distributor fights NHTSA's conclusion that its tires are defective.... In its lawsuit, filed after FTS itself was sued in the wake of the fatal accident, the company accuses the tire maker of removing the safety feature -- a 0.6-millimeter layer of rubber, known as a "gum strip," which is added between the steel belts to give the tires added durability -- without notifying the distributor. Shi Xinbo, an official at Hangzhou Zhongce, said, "We are confident in our quality. Our products certainly meet the safety standards of foreign countries. This is just a commercial dispute. We are not aware of any official investigation by the U.S. government." He declined to comment on the gum-strip issue.As a country develops and moves up the consumer supply chain, they generally acquire a reputation for making high-quality goods (think Japan and South Korea). What's interesting is that China seems to be moving in the opposite direction. I have no doubt that U.S. industry associations will hype consumer health and safety fears to serve their own interests. This doesn't mean they're wrong, however.
India and China, countries where the Food and Drug Administration rarely conducts quality-control inspections, have become major suppliers of low-cost drugs and drug ingredients to American consumers. Analysts say their products are becoming pervasive in the generic and over-the-counter marketplace. Over the past seven years, amid explosive growth in imports from India and China, the FDA conducted only about 200 inspections of plants in those countries, and a few were the kind that U.S. firms face regularly to ensure that the drugs they make are of high quality. The agency, which is responsible for ensuring the safety of drugs for Americans wherever they are manufactured, made 1,222 of these quality-assurance inspections in the United States last year. In India, which has more plants making drugs and drug ingredients for American consumers than any other foreign nation, it conducted a handful. Companies based in India were bit players in the American drug market 10 years ago, selling just eight generic drugs here. Today, almost 350 varieties and strengths of antidepressants, heart medicines, antibiotics and other drugs purchased by American consumers are made by Indian manufacturers. Five years ago, Chinese drugmakers exported about $300 million worth of products to the United States. Eager to meet Americans' demand for lower-cost medicines, they, too, have expanded rapidly. Last year, they sold more than $675 million in pharmaceutical ingredients and products in the U.S. market. After the pet food scandal that triggered fears over the safety of human and animal foods imported from China, experts say medicines from that country and from India pose a similar risk of being contaminated, counterfeit or simply understrength and ineffective. "As the manufacturing goes to China and India, the risk to human health is growing exponentially," said Brant Zell, past chairman of the Bulk Pharmaceuticals Task Force. The group represents American drug-ingredient makers that filed a citizen's petition with the FDA last year asking the agency to oversee foreign firms more aggressively. "The low level there" of follow-up inspections, "combined with the huge amount of importing, greatly increases the potential that consumers will get products that have impurities or ineffective ingredients," he said. FDA officials say that they are not aware of any health problems caused by drugs imported from India or China and that the American companies that import them usually do their own quality and safety testing. But the agency acknowledges that it is virtually impossible for it to know whether poor-quality or contaminated drugs from lightly regulated Asian plants have caused patients to get sicker or remain ill, especially because patients and doctors are unlikely to suspect poorly manufactured drugs as a problem.Meanwhile, in USA Today, Jayne O'Donnell reports about another brewing regulatory problem -- lead levels in childrens' jewelry:
The Chinese government opposes a proposed U.S. standard limiting the amount of lead allowed in bracelets, necklaces and other jewelry sold for children. All but three of more than 30 Consumer Product Safety Commission recalls for lead in children's jewelry since 2003 were for China-made items. The others were made in India. The Chinese government said in comments to the CPSC that it's not necessary to limit the lead content to the proposed 0.06% by weight because much of the lead wouldn't seep out of jewelry so would "do little harm for children." China's comments are the only ones opposing the CPSC proposal. A final regulation is likely by early 2008. CPSC says 20,000 children were treated in emergency rooms from 2000 to 2005 after swallowing jewelry. The number doesn't include choking incidents. A 4-year-old boy died last year after swallowing a charm that was 99% lead. CPSC is concerned that children can ingest unsafe levels of lead after putting necklaces and other jewelry in their mouths, even briefly. If they are also exposed to lead in their homes or drinking water, there can be a cumulative risk. Lead poisoning can lower the IQ, cause learning disabilities and lead to kidney or liver disease. Along with being the target of nearly all of the lead jewelry recalls, China-made products have made up half of CPSC's overall recalls for at least two years, says acting Chairman Nancy Nord. Recalls of China-made products have been steadily increasing since 2003. "It is absolutely imperative that all manufacturers understand that if they are going to sell products in the U.S., consumer protection has to be one of their main concerns," she says. In the comments, Guo LiSheng, a deputy director general in China's Administration of Quality Supervision, Inspection and Quarantine, said the agency agrees with the U.S. that children's health and safety need to be protected but believes putting warning labels on the jewelry "may be more efficient than setting the limit of lead content."If you read both articles, these two cases are not identical. There appears to be a strong justification for ratcheting up the lead regulations, while problems with pharmaceutical imports remain more hypothetical than real. Going forward, it will be interesting to see whether affected domestic industries will be lobbying for regulatory barriers rather than more overt forms of protectionism. The thing about regulatory barriers is that they are not always protectionist in motivation. And that's precisely what makes them more attractive for import-competitive sectors. Developing.... UPDATE: Thanks to Nicholas Weaver for sending me this New York Times story by Walt Bogdanich on Chinese resistance to regulatory investigations. Definitely worth a read.
Twenty years ago, American perceptions of Asian food could be summed up in one word: ?Chinese.? Since then, we have developed appetites for Korean, Japanese, Thai and Vietnamese fare. Yet while the quality of the restaurants that serve these cuisines, particularly Japanese, has soared in America, Chinese restaurants have stalled. For American diners, the Chinese restaurant experience is the same tired routine ? unimaginative dishes served amid dated, pseudo-imperial d?cor ? that we?ve known for years.... There is a historic explanation for the abysmal state of Chinese cuisine in the United States. Without access to key ingredients from their homeland, Chinese immigrants working on the Central Pacific Railroad in the 1860s improvised dishes like chow mein and chop suey that nobody back in their native land would have recognized. To please the na?ve palates of 19th-century Americans, immigrant chefs used sweet, rich sauces to coat the food ? a radical departure from the spicy, chili-based dishes served back home. But today, getting ingredients is no longer an issue. Instead, the principal obstacle to improving Chinese fare here is the difficulty of getting visas for skilled workers since 9/11. Michael Tong, head of the Shun Lee restaurant group in New York, has said that opening a major Chinese restaurant in America is next to impossible because it can take years to get a team of chefs from China. Chinese restaurateur Alan Yau planned to open his first New York City restaurant last year but was derailed because he was unable to get visas for his chefs. If Henry Kissinger could practice ?Ping-Pong diplomacy,? perhaps Condoleezza Rice could try her hand at ?dumpling diplomacy?? China and the United States should work together on a culinary visa program that makes it easier for Chinese chefs to come here.Hmm.... reducing barriers to exchange, increasing globalization of cuisine... I should be on this proposal like white on rice. Except that the Zagats' policy solution does not explain their policy conundrum. Immigration barriers should have a roughly equal effect on all Pacific Rim cuisines, not just China's. Why would it be the case that Chinese cuisine in the U.S. is particularly disadvantaged by vsa restrictions? Three possibilities:
1) Because China has a larger internal market, there is more innovation and competition at home, leading to more frequent innovations. Without a reliable transmission mechanism (i.e., migrating chefs), Chinese cuisine in China will improve at a faster rate than in the U.S.A. 2) Law of averages. There are 41,000 Chinese restaurants in the U.S., but only 9,000 Japanese restaurants. If quality is a function of quantity, then the average Chinese restaurant will simply be of poorer quality than other cuisines. 3) Innovation in a different direction. As this Washington Post story from last year suggests, American restaurants tend to innovate by using new cooking styles to present more traditional foods. Indeed, as the Zagats observe, this tendency is strongest in cuisines that have been here for a while -- like Chinese. This roils devotees of "pure" national cuisine, but deights everyone else.I'm willing to endorse more culinary trade as a matter of principle, but I'd still like a good explanation for this conundrum. Take it away, Tyler Cowen!
Russian president Vladimir Putin called on Sunday for a radical overhaul of the world?s financial and trade institutions to reflect the growing economic power of emerging market countries ? including Russia. Mr Putin said the world needed to create a new international financial architecture to replace an existing model that had become ?archaic, undemocratic and unwieldy?.... His speech on financial institutions suggested that, along with an aggressive recent campaign against US ?unilateralism? in foreign policy, he was also seeking to challenge western dominance of the world economic order. Mr Putin said 50 years ago, 60 per cent of world gross domestic product came from the Group of Seven industrial nations. Today, 60 per cent of world GDP came from outside the G7. ?The interests of stable economic development would be best served by a new architecture of international economic relations based on trust and mutually beneficial integration,? Mr Putin said. The Russian president said there was increasing evidence that existing organisations were ?not doing a good job regulating global economic relations?. ?Institutions created with a focus on a small number of active players sometimes look archaic, undemocratic and unwieldy. They are a far cry from recognising the existing balance of power,? he said.What's interesting about this speech is that Putin is correct in describing the state of the world, but not necessarily correct in his belief that "a new architecture of international economic relations" is going to serve Russia's interests. Consider that Russia is already a member of one powerful club -- the G-8. Any realistic reform of global economic governance is going to give China and India more power than Russia relative to the status quo, because Russia still has the great power trappings it inherited from the Cold War. Indeed, unless we're talking about energy or nuclear weapons, Russia would be a less powerful actor after any reform effort. Putin probably does not believe this, given sustained interest in the Russian economy and the comfort of high oil prices. Russia, however, should be very wary of what it wishes for -- it might just get it. UPDATE: Brad Setser offers up a different new new world order:
This new international order is just dominated by big national institutions -- SAFE and the PBoC, the Bank of Russia, the Saudi Arabian Monetary Agency, the Abu Dhabi Investment Authority and the like -- not big international institutions. The international financial institutions of the old international economic order -- the IMF for example -- are still around. But they don't have as much influence as they once did.
China will overtake the United States as the world?s biggest emitter of heat-trapping carbon dioxide (CO2) either this year or next, the International Energy Agency said on Wednesday. The estimate is much firmer than the IEA?s previous forecast, last November, that on current trends China would overtake the United States before 2010. ?Either this year or next year,? IEA Chief Economist Fatih Birol told Reuters, in answer to the question of when China would overtake the United States.... China is set to become the world?s top carbon emitter just as serious talks start to extend the U.N.-sponsored Kyoto Protocol on global warming beyond 2012, potentially heaping pressure on Beijing to take more action on climate change. A copy of a so-far unpublished Chinese government global warming report, seen by Reuters, rejects binding caps on carbon emissions until the country?s modernisation, by the middle of this century, opting instead to brake emissions growth. The United States, which pulled out of Kyoto in 2001, would not join a new climate change regime unless it also applied to China and India, the U.S. ambassador to the European Union said on Wednesday. ?There will be no comprehensive global warming legislation coming out of the United States... that does not include limits or a programme for China, India and the rest of the developing world,? Ambassador C. Boyden Gray told Reuters in an interview ahead of an April 30 U.S.-EU summit. Few Western climate negotiators expect China to accept caps from 2013 but do want to see a timeline for that.... Latest data shows China is building a coal-fired power plant every four days, British foreign ministry official John Ashton said on Monday. Growth in the emerging Asian giant?s emissions puts in perspective Western efforts to fight climate change, Birol said. ?What we do in Europe may be with good intentions, may be very ethical... but if you put it in terms of numbers its meaning is very limited.?Read the whole thing. One could argue -- as China will -- that the U.S. produces far more pollutants per person -- not to mention the fact that the OECD countries are responsible for much of pre-existing pollution in the atmosphere. However, if this IPCC report is correct, then global warming will have disproportionate effects on the poorer countries of the world. From a bargaining perspective, it will be interesting to see whether this effect will put greater pressure on China than the United States.
The Internet Corporation for Assigned Names and Numbers has rejected a controversial proposal to create a new .xxx domain suffix for adult Web sites. ICANN on Friday voted 9-5 to deny an application from ICM Registry, which for the past several years has sought to be the registry for adult-content Web sites. ICANN, which oversees domain names and Internet addresses, decided that ICM's proposal raised too many public-policy concerns and ultimately could change the role of the nonprofit organization. "ICM's response does not address (the ICANN Government Advisory Committee's) concern for offensive content and similarly avoids the GAC's concern for the protection of vulnerable members of the community," ICANN stated in the meeting. "The board does not believe these public-policy concerns can be credibly resolved with the mechanisms proposed by the applicant."In the New York Times, Thomas Crampton explains the interesting coalition of interest groups that opposed the .xxx registry:
ICM had argued that creation of the domain would enhance safety for young users by clearly defining .xxx sites as a no-go zone. Described last week by Paul Twomey, Icann?s chief executive, as ?clearly controversial, clearly polarizing,? the issue had been discussed among Internet enthusiasts and on blogs. Some who objected to the proposal included companies in the sex-related entertainment industry as well as religious groups. The entertainment executives raised fears that use of the domain, although voluntary, could open the way for governments to isolate sex-oriented Web sites into a single part of the Internet. Religious groups expressed concern that creation of the .xxx domain would serve only to encourage creation of more sex-related content. Others warned that the move would create a bonanza for ICM Registry, since companies with existing Web sites would be compelled to buy .xxx domain names to prevent someone else from creating sites using their company names.Political scientists talk about "baptist-bootlegger coalitions" to explain occasions when groups on opposite sides of an issue support the same policy for very different reasons (baptists: naive expression of preferences; Bootleggers: rent-seeking). In this case, however, the baptists refused to side with the powerful bootlegger.
We are all familiar with the clich?s about American insularity: the number of Congressmen who don?t have a passport, the number of Americans who have never left the US ? and so on. But, as I come to the end of a week in Washington, my overwhelming impression is how incredibly outward-looking intellectual life is in this city compared with London ? despite the fact that London flatters itself that it is now the world?s most international city. On Monday I went to a speaker-meeting at the New American Foundation ? one of the plethora of DC-based think tanks, dealing with world affairs. The subject was the future of Pakistan and the speaker was a prominent Pakistani journalist. The room was packed. By contrast, I remember going to a speaker-meeting in London about a year ago with a much more obviously star-studded cast ? Bill Kristol, a key neoconservative thinker; Tariq Ramadan, a central figure in the debate about Europe and Islam; and Phil Gordon, one of the leading experts on US foreign policy at the Brookings Institution. The meeting attracted maybe 30 people. You could get more people than that to turn up and listen to the deputy head of the OSCE, in Washington. Nor is this American interest in the outside world an entirely Washington-based phenomenon. There is a Chicago Council on Foreign Relations and a Los Angeles World Affairs Council; I haven?t noticed their equivalents in Birmingham or Edinburgh. Or take book sales: Edward Luce, the FT?s Washington bureau chief, recently published a much-acclaimed book on India. You might expect it to do best in Britain - given that Luce is a Brit and given the historical connections between India and the UK. Not at all ? ?In Spite of the Gods? has sold about 5,000 copies in Britain and almost 30,000 in the US.... Perhaps this is because Britain used to be an imperial power -- while America is still enjoying its imperial moment.Much as I like the back-slapping of America, a few obvious points of caution are warranted. The most obvious is this one: the United States has roughly five times the population of Great Britain. It shouldn't be that surprising, therefore, if a book sells better five times here or a foreign policy event attracts a much larger crowd. Second, cosmopolitan implies more than just a keen sense of foreign policy interest -- there are cultural dimensions as well. The U.S. might stack up well in that department as well, but it's not a part of Rachman's post. Now, that said, assuming that Rachman's point is still correct, is this because "America is still enjoying its imperial moment." Well, right now I would use neither the word "imperial" nor "enjoying." That said, what the U.S. does have in place is a foreign policy infrastructure that's second to none at this point. Beyond the official organs of the federal government, there are a host of quasi-governmental organizations, think tanks, NGOs, foundations, and yes, God forbid, universities with a vested interest in thinking about the world and America's place in it. Sixty years of superpower status will have that effect. The interesting question to ponder is how long it will be before another country -- or supranational institution -- matches American investments in this area. There is a lag between the acquisition of power and the development of domestic and international institutions to convert that power into authority.
The Zimbabwe government will not sit back and watch the opposition perpetrating "terrorist attacks" on innocent citizens while authorities are also geared to stamp out domestic violence, which accounted for 60 percent of Zimbabwe's murder cases, President Robert Mugabe has said. Speaking at a ceremony to commemorate the International Women's Day in Harare on Saturday, Mugabe said authorities would not tolerate lawlessness and violence must stop, The Sunday Mail reported. Mugabe was quoted by the newspaper as saying: "We have given too much room to mischief makers and shameless stooges of the West. Let them and their masters know that we shall brook none of their lawless behavior." Mugabe made the remarks in the wake of acts of violence, which the opposition MDC unleashed, in different centers across the country last week.I can only hope that the honorable people's government in Zimbabwe crushes the treacherous curs of the MDC to promote peace, order and social justice for all [Snap out of it!!--ed. C'mon, I don't get to use "treacherous curs" in daily parlance all that often.]
[T]he survey for the Discover America partnership ? a group of big businesses that seeks to promote tourism ? also suggested that 39 per cent of regular travellers rate the US ?worst? for immigration and entry procedures; the Middle East came second on 16 per cent. Discover America complains of a ?climate of fear? and a ?travel crisis?. It cites a ?near 20 per cent drop in the United States share of overseas travellers since 2000? and claims that this has cost 200,000 jobs and $93bn in revenue. There is always a slightly spurious precision about figures like these. But it is not just the tourism industry that is complaining. A McKinsey report into America?s financial services industry, also published in January, warned that New York risks losing its status as the ?financial capital of the world? within 10 years. The first two problems it cited were over-regulation and fear of litigation. But problem three was ?US immigration restrictions which are shutting out highly skilled workers?. Getting foreign businessmen into the US for one-off meetings can be a problem. Long-term work visas are an even bigger issue. One financial service executive is quoted as complaining: ?It is much easier to hire talented people in the UK ? I couldn?t hire the team I need in the US and I wouldn?t bother trying.? The McKinsey report says Wall Street is still the best place to find talent. But the City of London is catching up, as it benefits from free movement of workers within the European Union and the fact that Britain does not have a quota-limit on work visas, even for non-Europeans. Testifying before Congress last week, Bill Gates of Microsoft argued that US computing companies are also suffering from a severe skills shortage and that: ?America?s immigration policies are driving away the best and brightest, precisely when we need them most.? Mr Gates sees an interlocking set of problems. A smaller proportion of international students are now studying at American universities, partly because it is made so hard for foreign graduates to then get a job in the US. In 2001, the US issued 200,000 H-1B visas for highly skilled workers. That figure has now shrunk to about 65,000 a year. A big increase is promised, if and when a new immigration act is finally passed. But in the meantime Mr Gates complains that American companies are shifting research and development work overseas. Presenting an unwelcoming face to the world has political as well as economic implications. Surveys regularly show that foreigners who have actually visited the US have a much more favourable impression of the country. The same report that uncovered widespread fear of American immigration procedures reported that 72 per cent of visitors had a ?great? experience inside the US. The good news for the US is that so far the damage is at the margins. American universities, investment banks and computing companies are still clearly the world leaders. The American government has shown that it is keen to improve immigration procedures. The annual number of student visas issued for the US, after falling for some years, rose in 2006. The number of business visas issued for the US also rose. The waiting time to get a visa interview in India, which used to be notorious, has been cut back to a few days. Tourist numbers are also going up again. A lot more needs to be done. But at least there is an awareness of the problem.You'll have to read his whole post to understand the title of this post.
In truth, the world is not nearly as connected as these writers would have us believe. Despite talk of a new, wired world where information, ideas, money, and people can move around the planet faster than ever before, just a fraction of what we consider globalization actually exists. The portrait that emerges from a hard look at the way companies, people, and states interact is a world that?s only beginning to realize the potential of true global integration. And what these trend?s backers won?t tell you is that globalization?s future is more fragile than you know.... One favorite mantra from globalization champions is how ?investment knows no boundaries.? But how much of all the capital being invested around the world is conducted by companies outside of their home countries? The fact is, the total amount of the world?s capital formation that is generated from foreign direct investment (FDI) has been less than 10 percent for the last three years for which data are available (2003?05). In other words, more than 90 percent of the fixed investment around the world is still domestic. And though merger waves can push the ratio higher, it has never reached 20 percent. In a thoroughly globalized environment, one would expect this number to be much higher?about 90 percent, by my calculation. And FDI isn?t an odd or unrepresentative example.... [T]he levels of internationalization associated with cross-border migration, telephone calls, management research and education, private charitable giving, patenting, stock investment, and trade, as a fraction of gross domestic product (GDP), all stand much closer to 10 percent than 100 percent. The biggest exception in absolute terms?the trade-to-GDP ratio shown at the bottom of the chart?recedes most of the way back down toward 20 percent if you adjust for certain kinds of double-counting. So if someone asked me to guess the internationalization level of some activity about which I had no particular information, I would guess it to be much closer to 10 percent?the average for the nine categories of data in the chart?than to 100 percent. I call this the ?10 Percent Presumption.? More broadly, these and other data on cross-border integration suggest a semiglobalized world, in which neither the bridges nor the barriers between countries can be ignored. From this perspective, the most astonishing aspect of various writings on globalization is the extent of exaggeration involved. In short, the levels of internationalization in the world today are roughly an order of magnitude lower than those implied by globalization proponents.Read the whole thing. This paragraph helps explain to me why my editor at Princeton made me remove the world "globalization" from the title of All Politics Is Global:
According to the U.S. Library of Congress?s catalog, in the 1990s, about 500 books were published on globalization. Between 2000 and 2004, there were more than 4,000. In fact, between the mid-1990s and 2003, the rate of increase in globalization-related titles more than doubled every 18 months.
Brussels wants the rest of the world to adopt the European Union?s regulations, the European Commission will say this week. A Commission policy paper that examines the future of the Union?s single market says European single market rules have inspired global standard-setting in areas such as product safety, the environment, securities and corporate governance. ?Increasingly the world is looking to Europe and adopts the standards that are set here,? the paper, seen by the Financial Times, says. The paper calls on the EU to encourage other jurisdictions to follow suit ? for example by ?promoting European standards internationally through international organisation and bilateral agreements?. This strategy, it claims, will help European businesses beat their rivals abroad since it ?works to the advantage of those already geared up to meet these standards?. The EU?s drive to establish itself as the pacesetter for worldwide business regulation could well lead the bloc into conflict with the US and other trading partners. US officials have often voiced concern about the Union?s growing clout as a global standard-setter, and the two sides have clashed over issues such as rules for the chemicals industry and the EU?s stance on genetically modified foods.... The two sides have very different regulatory philosophies, with the EU placing a heavy emphasis on consumer protection and environmental legislation while the US tends to promote a more market-based approach. Some critics of the European approach argue that the Union?s stance on issues such as GM foods may also reflect a desire to protect the region?s commercial interests. However, as the Commission paper points out, the sheer size and wealth of the Union?s single market mean that few corporations can afford to ignore it. By harmonising the rules for a market boasting 500m consumers, the Union has set standards ?which partners then have to meet if they are to benefit from the single market?, it says. ?[The single market] gives the EU the potential to shape global norms and to ensure that fair rules are applied to worldwide trade and investment. The single market of the future should be the launch pad of an ambitious global agenda.?The EU deciding to throw around its market weight? This sounds very, very familiar.
"I know you don't know that you don't know." Those insulting words, thrown out by a Chinese man to a Westerner, are the punchline of an Internet commercial that ends with a beautiful Chinese bride jilting her confused Western fiance for the Chinese hero. The wildly popular video was created by Baidu, a Chinese search engine, to poke fun at its U.S. competitor, Google. It is but one of the growing signs that China is rethinking its stance on foreign companies and investment within its borders."Gee," I thought, "That's an odd example. There's no government action there -- it's a marketing campaign." To Cha and her editors' credit, they do make this very point at the end of the story:
Richard Ji of Morgan Stanley Hong Kong said some companies have used China's new rules as an excuse for their own marketing or strategic shortcomings. He said that in the cases of Google and eBay, the companies' challenges have had more to do with failure to tailor the content of their Web sites to Chinese tastes and needs. In the Baidu commercial about Google, the Western man begins by saying "I know" repeatedly as he stands, smirking confidently, next to his bride-to-be. But after the Chinese man bursts on the scene and the two get into a war of words, the Westerner becomes confused. By mistake, he says, "I know I don't know that I don't know" -- at which point the disgusted bride runs away. So the commercial is "not about nationalism and protectionism," Ji said. "It says that it's localization that gives success. If you localize services, it means you understand the people you are selling to."Read the whole thing. In between this vignette, there's some decent evidence that China is officially wigging out about certain forms of FDI. UPDATE: Thanks to Mitchell Young for pointing to the Baidu commercial on YouTube: The ad is a good example of the difference between economic nationalism and economic protectionism. The ad is clearly nationalist, and designed to foster a "Buy China" mindset, in part through rational arguments that Baidu is better than Google, and in part through cultural tropes designed to make the Western character in the ad look uncool. However, it's not an example of protectionism -- it's not calling for government intervention or relief, it's just trying to beat Google.
I went to two international conferences last week. The Herzliya security conference took place on the Israeli coast and the World Economic Forum was held in the Swiss mountains. It felt as if they were taking place on different planets.... By the end of the week I was left wondering whether these two worlds ? Davos and Herzliya ? can continue running in parallel. Are they fated to collide? If so, which will prove the more powerful ? conflict or capitalism? Davos man does not seem to be particularly worried by the business implications of chaos in the Middle East. There were 17 sessions at the forum devoted to climate change ? and just one to global political risk. A debate on ?globalisation at the crossroads? considered three main threats to the world economy ? failed trade talks, financial regulation and global economic imbalances. Nobody mentioned the war. Perhaps Davos man is right not to worry. Even in Israel, war and globalisation have managed to coexist. The Israeli economy grew at 4.8 per cent last year, in spite of the country?s involvement in a war in Lebanon during the summer. Israel is very much part of the global high-tech economy. There are almost 100 Israeli technology companies listed on New York stock exchanges. But the Israelis are also acutely aware that conflict threatens their prosperity. At the most basic level, many are genuinely frightened that if Iran develops nuclear weapons, it might actually use them on Israel. But there is also a subtler version of the ?existential threat? that the development of an Iranian bomb is said to pose to Israel. The Israelis know that their most talented technology workers could get jobs anywhere in the world. They worry that if 20,000 decided to emigrate, rather than live under the shadow of an Iranian bomb, the damage to Israel?s economy would be irreparable. At that point, security really would have trumped globalisation.... It may be a long time before capitalism can ride to the rescue of the most troubled parts of the Middle East. In the meantime, the capitalists will just have to hope that conflict in the Middle East continues to leave them largely unmolested.Read the whole thing. And then, for fun, check out Rachman's description of his "brainstorm" nightmare at Davos on his blog.
An overwhelming majority of citizens in the big eurozone countries believe the euro has damaged their national economies, highlighting the popular scepticism that still surrounds Europe?s eight-year-old monetary union. More than two-thirds of the French, Italians and Spanish ? and more than half of Germans ? believe the single currency has had a ?negative impact?, according to an FT-Harris poll. In France, just 5 per cent said the euro has had a positive effect on the French economy.... [M]ore than half of citizens in countries using the euro say they prefer their former national currency, according to the poll of 5,314 adults in Germany, the UK, France, Spain and Italy, which was conducted between January 10 and January 22. Almost two-thirds of Germans say they preferred their former currency, the D-Mark.UPDATE: Henry Farrell provides an explanation for the oddity.
[What] about a Starbucks inside Buckingham Palace[?]. For all I know there may be one, years since I was there, but certainly there should be one. It wouldn't make much money inside the private quarters, I doubt the Queen does many skinny lattes, but in the Royal Gallery, which is the visitable part of the palace, a Starbucks would be an excellent fit.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.