Trade-war not likely

Precisely

"Taking a legal case over exchange rate misalignments to the WTO would probably fail, and take years in any case. The only real route left is to unilaterally slap tariffs on Chinese imports to compensate for alleged currency undervaluation. That would be a nuclear option that really could spark the destruction of the postwar world trading system, and it doesn’t look like the US is quite desperate enough for that yet." Extract from Alan Beattie in the FT - Skirmishes are not all-out trade war

Your thoughts?…

Simple deductions about climate change

The UK Met Office (which has been unable to predict British weather recently) now claims to be certain about climate.

"The fingerprint of human influence has been detected in many different aspects of observed climate changes,” said Peter Stott, head of climate monitoring at the Met Office Hadley Centre for Climate Research. “Natural variability, from the sun, volcanic eruptions or natural cycles, cannot explain recent warming" Extract from FT.com (emphasis added)

This sort of mad assertion—reminscent of the IPCC's origninal claims that there could be no explanation other than man-made CO₂ emissions—makes a claim so broad that it would not be feasible to establish its truth. Some climate scientists may like to pretend that they can detect a cause by simple forensics ('fingerprints'), but if that is so, let them show us the success of their predictions.

Climate is a complex, chaotic system, whose course has not been modelled successfully despited decades of attempts by well-funded institutions such as NOAA, the Met Office and the CSIRO. Not even one model has successfully accounted for the path of warming since 2000 nor do any of the IPCC models succeed even in backcasting the path of warming before 1990.

In the face of the evident failure of current models to produce confirmed projections, god-like pronouncements such as these beggar credulity.

Your thoughts?…

Apple’s patent protectionism

In an action before the U.S. Federal courts and the International Trade Commission, Apple Inc. is attacking a Taiwanese manufacturer of Google's Android Phone for alleged abuse of 20 software patents. It seems the suits are aimed at slowing the growth of competition for the iPhone and, possibly, aimed at Google's proposed web operating system.

The prosecution of software patents, especially those for 'user interface innovations', is a dubious action at best that is sometimes (often? usually?) an abuse of market-competition principles. Worse, in this case, Apple has chosen to pursue it's competitors under the notorious, protectionist, S.337 of the US Trade Act of 1930 which does not provide damages for infringement of patent rights but prohibits imports of goods likely to infringe a U.S. patent.

Section 337 of the US Trade Act (1930) was the subject of a well-known GATT complaint brought by the European Communities against the USA in 1998. The Panel Report, adopted by the GATT Contracting Parties, concluded:

…that Section 337 of the United States Tariff Act of 1930 is inconsistent with Article III:4 [of GATT], in that it accords to imported products challenged as infringing United States patents treatment less favourable than the treatment accorded to products of United States origin similarly challenged, and that these inconsistencies cannot be justified in all respects under Article XX(d).

The GATT Panel recommended that Member governments ask the USA to amend it's legislation to bring it back into conformity with the GATT. But this was the middle of the Uruguay Round of negotiations, focussing on the TRIPS negotiations on intellectual property. The USA took no action as recommended by the Panel. Finally, in 2000 the EC again requested consultations with the USA over S.337, now citing its concerns about incompatibility with the TRIPS Agreement…but, again, there has been no action by the USA.

The Apple commentariat, is unhappy about the idea of protecting software patents to consolidate what is, already, a dominant postion for Apple in the phone market. Here are two pretty big guns from that world, blasting Apple with both barrels.

" Whatever benefit in the market Apple hopes to achieve by this suit to me seems likely to be worth far less than the loss of good will and prestige Apple will suffer if they vigorously pursue this case (let alone if they initiate more such suits)." Extract from John Gruber: This Apple-HTC Patent Thing

"But when you sue someone for doing something you do yourself, you become one of the bad guys. Can you name a company you admire that spends its time enforcing patents, instead of innovating? Remember the pirate flag you flew over Apple's headquarters when you were building the Mac? Is Apple part of the Navy now?" Extract from Will Shipley: An Open Letter to Steve Jobs Concerning the HTC Lawsuits.

Your thoughts?…

Tea leaves

A hiccup? Or a sign that imported deflation—via low-priced Chinese imports—will now start to slow?

"‘Labour availability is tight right now in Guangdong compared to other regions,’ said Paul Hussey, chief executive of Strix. The Isle of Man company, which dominates the global market for thermostatic controls on electric kettles, maintains most of its manufacturing operations in the provincial capital, Guangzhou." Extract from FT.com - Labour shortage hits China export recovery

According to the FT, China's economic stimulus program has increased investment and employment opportunities in the hinterland provinces, reducing the availability of labor in the coastal manufacturing hubs.

If this is not merely a temporary effect of the stimulus but the start of a long-term shift of industrial production away from China's coast it would not be a surprise to find that it was oriented more strongly toward supplying domestic demand than export markets. Transport and handling costs, for example, would make domestic markets a prior target.

Your thoughts?…

Discounting the Intergenerational Report

"[H]ow often does the IGR [Intergenerational Report], in five pages vaunting public investment in infrastructure, use the term 'cost benefit analysis'? Not once. Clearly, suggesting that public investment only be undertaken when the benefits exceed the costs is no longer politically correct." Extract from Henry Ergas in The Australian

What can we make, for example, of an IGR whose chapter on 'Climate' fails even to mention the impacts of migration policy or population growth when evaluating the efficacy and economic impacts of a proposed emissions cap/objective/trading scheme?

Why do we need an IGR that merely regurgitates what the Government has already claimed about its own policies? An inter-generational report must be an independent and rigorous review of the evidence about policy outcomes to be of any use in the necessary debates about growing our wealth or maximising our opportunities. The current edition is a poor effort from such a talented group (Treasury).

Your thoughts?…

EU ramps up farm subsidies

Yow!

"The latest official notification to the WTO shows that total EU support levels have returned to levels not seen since the previous decade, with €90.7 billion of support being reported to the global trade body for 2006/2007 - up from €75.6 billion in 2002, when support was at its lowest in the last fifteen years." Extract from ICTSD

Your thoughts?…

Shorting common sense

I've previously noted that the policy of banning short-selling looked just like the sort of hunch driven regulation that hurts both the economy and common sense. Its prohibition of speculation on price falls was Canute-like.

Now here's some strong evidence that bans such as ASIC's had adverse impacts on precisely factor most needed in a crisis of market confidence: liquidity.

"The evidence suggests that the knee-jerk reaction of most stock exchange regulators around the globe to the financial crisis – imposing bans or regulatory constraints on short-selling – was at best neutral in its effects on stock prices. The impact on market liquidity was clearly detrimental, especially for small-cap and high-risk stocks. Moreover, it slowed down price discovery" Extract from Short-selling bans in the crisis: Alessandro Beber and Marco Pagano

Your thoughts?…

Chinese savings rate & the gender balance

Fascinating. A strong, explanatory correlation appears between very high household savings rates and the male-gender imbalance.

"…[E]conomists and policymakers have looked with concern to the large Chinese current account surplus and large US current account deficit, or global imbalances, much of their discussion has focused on changing exchange rate policy. None of the discussion about global imbalances has brought family-planning policy or women’s rights to the table, because many do not see these issues as related to economic policy. Our research suggests that this is a serious omission." Extract from The mystery of Chinese savings: Shang-Jin Wei

Your thoughts?…

Monckton Lecture, Melbourne Feb 1, 2010

A number of people have asked for these details:

Monday, 1 February 2010, 5:30 pm
Ballroom, Sofitel Hotel (25 Collins St Melbourne)

Entry by $20 'donation' at the door (no reservations).

Christopher, Viscount Monckton is a serious analyst and good fun: he has mastered the art of keeping it simple and exaggerating (a little bit). So I expect a big crowd, a great atmosphere and some clever, convincing, talk.

Your thoughts?…

Are the BRICS ready to lead?

Reflecting on the greater influence of the BRICS, recently, in global forums, the always-interesting Alan Beattie asks:

"Is this a pivot point such as the second world war, where the confident, innovative US muscled aside the weakened, debt-laden economies of Europe and remade the global financial architecture? " Extract from FT.com

His guess? "No, not yet". He points out the BRICS are dominated by one country, China, that is still dependent on foreign demand for its economic strength rather than on its domestic resources.

"A decade of rapid growth is not enough for the Brics to seize the baton of global economic leadership from the US and western Europe. The grouping, or some of them, may have astonished the world with their progress over the past 10 years. But it will require a qualitative improvement as well as more growth to consolidate that shift of power."

In an accompanying article he argues:

"…Aside from the long-running debate about giving developing countries more votes in the IMF, it has proved hard to hammer out a substantive set of subjects on which the disparate Bric countries have the same interests." Extract from FT.com

Beattie points out that for all their capacity jointly to wield influence in global forums, the BRICS do not have much in common in their domestic policy approaches and few common external interests. This has been evident in the Doha negotiations where India and Brazil, especially, have opposing interests in matters such as agricultural trade liberalization, and at Copenhagen where China's interests were not apparently those of many developing countries; effectivelly sui generis. Beattie concludes that:

"In diplomacy, as in economics, the power wielded by the Bric countries may end up being distinctly weighted towards the wishes of Beijing."

I think all this is pretty sound. But…in my view we are witnessing, nonetheless, a secular change in global governance, to be marked by confusion, delay and irrelevance for global institutions such as WTO that cling to a mode of "explicit consensus" (as the Doha Declaration puts it) in decision-making. Such presumptive unanimity or compliance is no longer likely except where the decisions concerned are inescapable—like those on the global 'stimulus' (or otherwise trivial in a policy sense, such as humanitarian aid). The future seems, for now, to belong rather to plurilateral decision-making and institutions in different forms.

Your thoughts?…

U.S. looks for a ‘critical mass’ climate deal

There is absolutely nothing new in U.S. exasperation with the United Nations and its overblown processes. This statement from the deputy U.S. climate envoy recalls the responses of thousands of technocrats exposed for the first time to the diplomatic morass; for decades, we've heard something similar from every new Administration.

"Pershing said the flaws in the UN process, which demands consensus among the international community, were exposed at Copenhagen. 'The meeting itself was at best chaotic,' he said, in a talk at the Centre for Strategic and International Studies in Washington. 'We met mostly overnight. It seemed like we didn't sleep for two weeks. It seemed a funny way to do things, and it showed.'" Extract from UN should be sidelined in future climate talks, says Obama official | The Guardian

What is new is that the so-called BASIC countries—giant, rapidly growing but poor economies—have become the necessary interlocutors of the USA and, perforce, for Europe, Japan and the rest of the twenty-something countries that have committed to sign the 'pledge' on emissions cuts by 31 January this year.

Pershing goes on to say that he's looking for a 'critical mass' alternative:

"[He] indicated the focus would be narrower in scope than the UN's all-inclusive approach. "We expect there will be significant actions recorded by major countries," he said. "We are not really worried what Chad does. We are not really worried about what Haiti says it is going to do about greenhouse gas emissions. "

Your thoughts?…

Elaborating the Ag. travesty

It is difficult to believe that the complex, weak, confusing, rent-preserving, ponderous white-elephant being proposed for an agreement on agriculture in the WTO Doha negotiations could be more bloated or further compromised…but that's exactly what seems to be happening.

According to a report^* from ITCSD, developing countries and the EU want to further slow the pace of change where opening markets for products such as sugar, cut flowers, vegetable oils, fruits and juices might threaten some highly profitable deals between of a small group of EU importers and developing country exporters. So much for the poor old consumer!

"Trade sources told Bridges that this provision [to preserve tariff preferences] is meant to refer specifically to sugar; however, the language leaves open the possibility that other products, such as beef, could qualify as well. Specifically, if members use a complex methodology called ‘partial designation’ to select very specific products, then it is possible that those goods, which would not otherwise receive preference erosion treatment, might also qualify." Extract from ICTSD Preference Erosion List Marks ‘New Era’ in WTO Farm Talks

It's time to kill this ugly beast of an agreement and to start again with a simpler deal among countries that want open, competitive markets. If the current Doha text ever gets off the table it will serve only to anchor the development and expansion of international food trade in the morbid swamps of its infamously protectionist past.

^* There's no sign of the EU-ACP proposal yet on the WTO website.

Your thoughts?…

Lamy’s assessment of Copenhagen

It's called whistling in the wind.

"The outcome of the conference in Copenhagen represents a step forward. The Kyoto Protocol addresses about 30% of global carbon emissions. In contrast, the framework accord hammered out in Copenhagen last week may encompass the majority of world emissions. " Extract from WTO | 2009 News items - Lamy praises Copenhagen efforts, calls for more to be done

The Director-General of WTO goes on to claim that "…in the end, it is only through a multilateral process that we can achieve results which are legitimate and credible." But this is an argument seems to stand only when propped-up by jargon. Processes? What are they? Agreements to a coherent single-framework for action? Only a weak one at best, and likely compromised by exceptions, concessions and deals (qv Copenhagen, Doha). Or are 'processes' just talk?

Your thoughts?…

Rahmstorf rebuffed

The Potsdam Institute physicist whose 2007 paper Ross Garnaut relied on for his assertion that "on the balance of probabilities" CO₂-driven warming was accelerating dangerously, has been exposed as a scientific gadfly.

At the time of the publication of Garnaut's interim report, several well-qualified sceptics disputed Rahmstorf's projetions, including David Stockwell, Lucia Liljegren and Steve McIntyre with strong support from former Australian statistician Ian Castles. Ian also kindly supported my request to the Statistical Society of Australia to evaluate the Rahmstorf methodology in the interests of better informed public debate on Garnaut's recommendations (they eventually declined).

Now, A UK Met Office researcher and oceanographers have harshly criticised Stefan Rahmstorf for his extravagant prediction that warming would lead to sea-level rises of 1.88 meters by the end of the century.

"Critic Simon Holgate, a sea-level expert at the Proudman Oceanographic Laboratory, Merseyside, has written to Science magazine, attacking Professor Rahmstorf's work as 'simplistic'.

'Rahmstorf's real skill seems to be in publishing extreme papers just before big conferences like Copenhagen, when they are guaranteed attention,' Dr Holgate said." Extract from Sea-level theory cuts no ice | The Australian

Interesting to note Rahmstorf's weasly response to the criticism, reported at the end of The Australian's story.

Your thoughts?…

Multilateralism not a ‘single undertaking’

More commentary—this time from the President of the U.S. Council on Foreign Relations—on the significance of the Copenhagen meeting as one of the first signs of whatever-it-turns-out-to-be that follows the pax atlantica

"Multilateralism in the 21st century is, like the century itself, likely to be more fluid and, at times, messy than what we are used to." Extract from Richard Haass in the Financial Times

Haass provides three possible new conformations of multilateralism for the 21^st century that seem plausible to me: 'regionalism' as in regional trade agreements; 'functional' multilateralism—by which he means 'coalitions of the willing' or the 'critical mass' agreements that have been at the core of my recent work on agricultural trade agreements—and; 'informal' multilateralism comprising executive agreements on collaboration that fall some way short of treaties.

What these forms have in common, that distinguishes them from the form of multilateralism embodied in WTO, is that they are not 'single undertaking' agreements of the kind that has so crippled progress in the Doha Round of negotiations. It's past time that the WTO member governments got that idea.

Your thoughts?…

Cheering for ‘democracy’

Rachman—who's normally pretty astute—assesses the emblematic events in Copenhagen as a blow to the U.S. program of 'spreading democracy'.

"As emerging global powers and developing nations, Brazil, India, South Africa and Turkey may often feel they have more in common with a rising China than with the democratic US." Extract from Gideon Rachman in the Financial Times

Although I share his sense that the Copenhagen events illustrated a watershed, I'm surprised by this pedestrian analysis from Rachman.

Even if 'spreading democracy' were still at the core of U.S. foreign policies under Obama (I doubt it), the idea that these emerging nations are somehow picking sides on the issue of 'democracy' is at best condescending. What, after all, does any of these countries need to learn from the USA about managing democracy? Not much, I'd say. Their democratic credentials have survived some of the most extreme challenges in the past half-century. What they have in common with China is something simpler and deeper than political philosophy: the desire for wealth.

Your thoughts?…

How the deal was done

Official Chinese account of the negotiation of the accord at Copenhagen, emphasising, of course, their own role:

The Copenhagen conference has put China on a higher and broader world stage. China has reason to be proud and China will work even harder! Verdant mountains cannot stop water flowing; eastward the water keeps on going.

The report provides a detailed account of Premier Wen's movements and consultations over three days in Cophenhagen. No mention, however, of any talks with 'Friend of the Chair' and 'true friend' of China, Kevin Rudd.

Your thoughts?…

Global governance in the aughties

First, bodice-ripping as political theory

"We live in an era in which unprecedented globalization and economic interdependence, liberal-democratic hegemony, nanotechnology, robotic warfare, the 'infosphere,' nuclear proliferation and geoengineering solutions to climate change coexist with the return of powerful autocratic-capitalist states, of a new Great Game in Central Asia, of imperialism in the Middle East, of piracy on the high seas, of rivalry in the Indian Ocean, of a 1929-like market crash, of 1914-style hypernationalism and ethnic conflict in the Balkans, of warlords and failed states, of genocides in Bosnia, Rwanda and Darfur, and of a new holy war waged by radical Islamists complete with caliphates and beheadings reminiscent of medieval times." Extract from The National Interest

(Nanotechnology?)

Here's a more sober, more plausible, assessment of the likely route for the global governance framework (at least) from the U.S. National Intelligence Council:

The existing international organizations—such as the UN, WTO, IMF, and World Bank—may prove sufficiently responsive and adaptive to accommodate the views of emerging powers, but whether the emerging powers will be given—or will want—additional power and responsibilities is a separate question. Indeed some or all of the rising powers may be content to take advantage of the institutions without assuming leadership burdens commensurate with their status. At the same time, their membership does not necessarily have to involve heavy responsibilities or burden-sharing, allowing them to pursue their goals of economic development.

That veiw from mid-2008 is holding up pretty well, so far…except that 'accommodating views' does not mean doing anything. Which explains much about why WTO is stymied and why the Copenhagen conference of the UN Climate Convention was a farce (there are other reasons, too, in each case).

Your thoughts?…

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