The Agenda with Steve Paikin is TV Ontario's equivalent of Charlie Rose...at least, that's what they tell me.

Anyway, I participated in their show on "The International Order" earlier this week:

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?

As an added treat, if you watch the whole thing, you'll catch the conversation about me and my eye-rolling.

Is summarized in https://blogs.princeton.edu/globalforum/2008/05/panel-6-the-global-economy.htmlthis blog post.

And I might have been the most upbeat person on the panel!

Look, I like ripping into Thomas Friedman as much as the next blogger -- but I can't agree with Matt Yglesias that the following video is "funny":

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.

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.

A common lament about sovereign wealth funds is their lack of transparency -- no one knows their investment strategy. The chart below -- cribbed from a Standard Chartered report summarized by the FT's Martin Wolf -- makes this visually clear:

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.

The AP reports some pretty stunning news:

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've blogged a few times about whether China's hosting of the 2008 Summer Olympics has increased the government's vulnerability to domestic and external political pressure.

The Christian Science Monitor's Peter Ford reports that in advance of the Games, China's government is devising new ways to handcuff indigenous NGOs:

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.

When it comes to enegy and the environment, anything David Victor writes is worth reading.

In Newsweek, Victor suggests that the upcoming Bali summit won't achieve much of anything:

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.

What you see above you is the result of a Financial Times/Harris poll among various OECD countries about globalization (note, by the way, that the FT wierdly flip-flops the categories halfway through the graph). The associated story sums it up as follows:

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.

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.

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.

In response to my last post on the rise of economic populism among Democrats (admittedly, one of a long series), Kevin Drum poses the following questions to yours truly:

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?

1) The trouble with populism is (mostly) not about the remaining 10% of barriers to trade (though see below), it's about efforts to f$%& up the 90% of barriers that have been dismantled. The Baucus-Grassley-Schumer-Graham bill, for example, isn't about halting new trade openings -- it's about finding new ways to clamp down on existing openness.

Furthermore, this is never going to go away. Protectionism is a great way to reward concentrated interests with diffuse costs, so members of Congress will always have an incentive to act in this way. The current populist mood makes it easier to do it out in the open, but as Daniel Kono has shown, it will also be done behind closed doors as well.

This is why I'm so adamant about trade liberalization -- the status quo never stays the status quo, but creeps back ever so slowly towards economic closure.

2) I'm pretty agnostic on "trade plus" kinds of agreements involving either IP or labor standards, and I challenge Kevin to find me a free trader who's been really gung-ho about intellectual property rights enforcement. I do understand, however, why U.S. trade negotiators care more about the former and not the latter. A general disregard for intellectual property protections across the developing world does blunt the incentive to innovate in the United States. The abuse of child labor, in contrast, plays a pissant role at best in the global economy, and has no direct effect on the United States.

3) Policy proposals "that conservatives wouldn't assault like mad dogs until the last breath was torn kicking and screaming from their bodies"? Hmm.... let me offer four suggestions:

a) Health care portability. Every poll I've seen suggests that workers are more scared of losing their health coverage than anything else... including their job. If the Democrats can propose something that's in the same ballpark as what Mitt Romney implemented in Massachusetts, it would go a long way towards alleviating public anxiety about globalization.

b) Tax reform. In the current issue of Foreign Affairs, Kenneth Scheve and Matthew Slaughter propose a "New Deal for globalization" that includes making the payroll tax much less regressive:

A New Deal for globalization would combine further trade and investment liberalization with eliminating the full payroll tax for all workers earning below the national median. In 2005, the median total money earnings of all workers was $32,140, and there were about 67 million workers at or below this level. Assuming a mean labor income for this group of about $25,000, these 67 million workers would receive a tax cut of about $3,800 each. Because the economic burden of this tax falls largely on workers, this tax cut would be a direct gain in after-tax real income for them. With a total price tag of about $256 billion, the proposal could be paid for by raising the cap of $94,200, raising payroll tax rates (for progressivity, rates could escalate as they do with the income tax), or some combination of the two. This is, of course, only an outline of the needed policy reform, and there would be many implementation details to address. For example, rather than a single on-off point for this tax cut, a phase-in of it (like with the earned-income tax credit) would avoid incentive-distorting jumps in effective tax rates.

This may sound like a radical proposal. But keep in mind the figure of $500 billion: the annual U.S. income gain from trade and investment liberalization to date and the additional U.S. gain a successful Doha Round could deliver. Redistribution on this scale may be required to overcome the labor-market concerns driving the protectionist drift. Determining the right scale and structure of redistribution requires a thoughtful national discussion among all stakeholders. Policymakers must also consider how exactly to link such redistribution to further liberalization. But this should not obscure the essential idea: to be politically viable, efforts for further trade and investment liberalization will need to be explicitly linked to fundamental fiscal reform aimed at distributing globalization's aggregate gains more broadly.

Slaughter was a Bush appointee to the Council of Economic Advisors, by the way.

3) Eliminate all tariffs on food products, footwear and apparel. Because they are concentrated in food and clothing, the remaining U.S. tariffs hurt the poor much more than the rich as a fraction of income. Don't take my word for it, this is the argument made by the Progressive Policy Institute: "tariffs appear at least on average to be the only major tax in which effective rates rise as incomes fall." [UPDATE: Kudos to Congressmen Joseph Crowley (D-NY) and Kevin Brady (R-TX) for proposing legislation that addresses this issue.]

4) Finally, if you really, really need to go after China, go read this.

David Barboza reports in the New York Times on another nail in the coffin that is China's reputation for product quality:

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.

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.

In other words, this problem won't be going away anytime soon.

The growth of health and safety concerns about Chinese imports is not fading away into the night.

The Wall Street Journal's Timothy Aeppel reports that tires are the latest product to raise concerns:

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.

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.

In the past two days there have been two stories in the press suggesting that the U.S. will be butting heads with China and India over a variety of regulations.

On Sunday, the Washington Post's Marc Kaufman writes that the growth of pharmaceutical imports is triggering health and safety concerns:

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.

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."

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.

The Cato Unbound debate about All Politics Is Global continues with response essays:

1) Ann Florini, "Globalization Is Transformative."

2) Jeremy A. Rabkin, "While Great States Sleep."

3) Kal Raustiala, "Globalization and Global Governance."

Nina and Tim Zagat have an op-ed in today's New York Tmes about why Chinese food in the United States is substandard. I should sympathize with their argument:

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 décor — 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 naďve 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.

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.

Take it away, Tyler Cowen!

Hey, remember that Foreign Affairs essay I wrote called "The New New World Order?" If you don't, that's OK -- but it appears that Vladimir Putin has been reading it. From the Financial Times' Neil Buckley and Catherine Belton:

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.

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.

Why, hey, what do you know, the topic of June's Cato Unbound will be All Politics Is Global: Explaining International Regulatory Regimes!!!

My lead essay, "The Persistent Power of the State in the Global Economy," is now up. Response essays will be written by Jeremy Rabkin, Ann Florini, and Kal Raustiala.

Go check it out.

Reuters reports the latest trends in CO2 emissons:

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.”

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.

CNET's Dawn Kawamoto reports that the .xxx registry will not be happening anytime soon:

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."

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.

In this case, however, the baptists refused to side with the powerful bootlegger.

On his Financial Times blog, Gideon Rachman suggests that Americans are more cosmopolitan than Brits:

We are all familiar with the clichés 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.

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.

There's been a spot of trouble in Zimbabwe's autocracy as of late. I wonder how media outlets in non-democratic regimes are covering this trouble?

From the People's Daily Online:

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.

Over at his FT blog, Rachman points out that excessive regulation for admitting both foreigners and foreign capital is posing some problems for the United States:

[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.

That's the conclusion of Pankaj Ghemawat in this Foreign Policy essay. He makes a convincing case:

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.

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.

Tobias Buck reports in the Financial Times that the European Commission has decided it wants the rest of the world to look more like Brusels:

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.”

That's the topic of Ariana Eunjung Cha's story in today's Washington Post. It starts out with an odd example, however:

"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.

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."

UPDATE: Thanks to Mitchell Young for pointing to the Baidu commercial on YouTube:

Gideon Rachman attended two conferences last week, and writes about the resulting conceptual whiplash:

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.

There's something a bit odd about the contrast between a) economists debating the prospect of the euro supplanting the dollar as the world's reserve currency, and b) the fact that Europeans don't like the euro all that much. The Financial Times' Ralph Atkins explains:

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.

The Economist's Free Exchange manages to jam all of these topics -- plus Davos!! -- into one post. Go check it out.

Favorite quote that will cause rioting in London:

[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.

I have an essay in today's Los Angeles Times about the World Economic Forum -- otherwise known as the Davos forum. In the essay,I ask whether Davos is really significant, or whether it has jumped the shark:

Since Swiss business professor Klaus Schwab launched the forum in 1971, it has become the ne plus ultra of elite meetings, eclipsing such challengers as Renaissance Weekend, the British-American Project and the Trilateral Commission.

At least, that's what the rhetoric surrounding Davos suggests. According to the World Economic Forum's website, Davos is "an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas." Political scientist Samuel P. Huntington asserted that "Davos people control virtually all international institutions, many of the world's governments and the bulk of the world's economic and military capabilities."

Its critics hold a similar view. Anti-globalization protests have targeted the conference, causing its security budget to grow at an alarming rate. To many of them, Davos is the epitome of how globalization is managed by the elite to impoverish the many. One of the few scholarly studies of the Davos experience characterizes the meeting as "a polymorph platform of intermediations on the new frontiers of capitalism." I'm not entirely sure what that means, but it does not sound good....

There are signs that Davos may have jumped the shark. Activists used to demand a voice at the forum. In recent years, however, they have abandoned it altogether. Instead, they attend the rival World Social Forum, which is held at about the same time as Davos.

Even more disconcertingly, Davos sponsored a Gallup poll that found, across the globe, growing distrust of political and business leaders — the very people who attend Davos....

[T]he polling data could be a harbinger of Davos' irrelevance. This leads to an interesting existential question: What if they threw an elite meeting and no one cared?

The byline reads -- online at least -- as "Daniel W. Drezner is associate professor of international politics at Tufts University's Fletcher School and the author of "All Politics Is Global." He maintains a blog at danieldrezner.com/blog/."

Which is great, but the byline I submitted to them was, "Daniel W. Drezner is associate professor of international politics at Tufts University's Fletcher School and the author of "All Politics Is Global." He has never been invited to Davos, but is not bitter about that fact in the slightest."

I think I'd be less upset if I didn't fear that the deleted sentence was the best line in the piece.

Want to read more about Davos? You can check out the David Rothkopf's diary from last year's conference here. A precis of the polling results discussed in the piece can be found in this story. And here's a link to the official web site.

Finally, given that I was gently mocking it in the piece, I feel I owe a link to the one scholarly piece I found on Davos: Jean-Christophe Graz, "How Powerful are Transnational Elite Clubs? The Social Myth of the World Economic Forum." New Political Economy, Vol. 8, No. 3, November 2003. If you can get past the sections when Graz gets trapped in his own jargon, he makes an interesting argument about the inherent limits of these kind of fora.

Skimming through the Obama-thon coverage from New Hampshire, this quote from a Newsweek story about Hillary vs. Obama by Jonathan Alter caught my eye:

"After seven years of the 'we kick a--, go it alone' foreign-policy response to 9/11, the American voter will be ready to try a leader who projects better on the world stage," says Jeh Johnson, a corporate attorney and former general counsel of the Air Force under Clinton. "Barack's multicultural heritage will represent that change."

Here's an uncomfortable question to readers -- are there any regions, countries, or classes of the globe where Obama's African heritage might not be considered in a favorable light?

Just to be clear -- these kind of responses do not constitute a knock on Obama. But Johnson's quote got me thinking, and it's worth pondering all of the effects of Obama's media coronation candidacy.

Ah, the Democratically-controlled Congress -- is there any step towards economic liberalization that they won't block?

Don Phillips, "U.S. Withdraws Plan on Foreign Investment in Airlines, Disrupting Open-Skies Treaty," New York Times, December 6, 2006:

The Bush administration withdrew a plan on Tuesday to give European airlines more freedom to invest in American airlines and to participate in management decisions, bowing to opposition expected to deepen in a Democratic-controlled Congress.

The decision deals a blow to greater cooperation between United States and European airlines. Europe had made the investor rule a condition for putting in place the so-called open skies treaty with the United States, which is needed to allow airlines based in Europe or the United States to fly with little or no restrictions to each other’s territories. Such flights are now often subject to government-to-government negotiations.

The open skies treaty, which has been agreed to by the United States and the European Union, is far more important on both sides of the Atlantic than the separate foreign ownership rule. Europe could easily allow the open skies treaty to take effect at any time, but it has made such an issue of tying the two together that it now faces embarrassment if it appears to give in.

Yet Tuesday’s development is probably not the end of the negotiations that govern international air accords, said Mary Peters, the transportation secretary, whose agency issued the ruling....

The European transport commissioner, Jacques Barrot, told the Associated Press that the European Union was disappointed with the decision, saying that scrapping the foreign ownership rule had been an essential element in concluding a deal on the separate open skies issue.

Nonetheless, Mr. Barrot said negotiators planned to meet again shortly.

The foreign ownership rules would have changed a series of administrative decisions that have been interpreted to strictly limit the ability of any European airline investor to participate in the management of an American airline. European airlines said the rules were so strict that a United States citizen with a single share of stock would have a greater say in airline management than the European airline investor.

The rules have led European airlines to sell their interests in American carriers. Even if the Bush administration had approved the proposed rules, foreigners would still have been limited to 25 percent of voting equity in United States airlines.

Aviation specialists say Europe will probably approve the open skies accord in 2007, even if there is no action on the foreign ownership rules, because Europe stands to gain even more than the United States.

The foreign ownership proposal had been strongly opposed by influential members of Congress, unions and several major airlines led by Continental. British Airways was also cool to the idea because it would have allowed the open skies rules to go into effect, giving other airlines greater access to Heathrow Airport, which it dominates.

Representative James Oberstar, a Democrat from Minnesota who is expected to become chairman of the House Transportation and Infrastructure Committee, commended Ms. Peters for her decision. Mr. Oberstar said Ms. Peters chose to do the right thing in the face of strong pressure from the administration and from the European Union.

You see some of the union arguments by clicking here and here. As near as I can determine, the primary reason for opposition is based on simple protectionism akin to the Dubai Ports World episode-- they simply do not want to see foreign ownership and control of U.S. carriers.

As for the benefits of an Open Skies arrangement? One union head argued that since the benefits are likely to be realized in the medium to long-term, there's no real cost to scuttling the arrangement.

Gonna be a long two years.....

UPDATE: This FT story by Doug Cameron and Andrew Bounds provides some more context for the Open Skies agreement:

The grounded open-skies deal was only half the prize sought by both sides. Ending most market-access restrictions would have triggered a second round of talks aimed at creating an Open Aviation Area (OAA), with more alignment of safety, security and competition policy and, perhaps, investment and ownership rules....

Governments and airlines have sought for two decades to find a way to replace the 1944 Chicago Convention which governs the industry. This requires new routes to be negotiated on a bilateral government-to-government basis for airlines that are “nationally” owned and controlled.

That was the opportunity presented by the OAA between the US and EU, and one closely-watched by regulators in other trade regions. Mary Peters, the US transportation secretary, admitted this week that the thorniest issue of all – foreign ownership and control of US airlines – remains politically unpalatable.

Congress rejected a move to raise the 25 per cent ceiling on voting rights by foreign investors in 2003, and the incoming Democratic majority appears in no mood to move on the issue.

Ms Peters is also unwilling to sacrifice progress in other areas – such as solving the broader congestion in the US transportation system – by alienating Congress.

A "homeland security risk"? All the DOT's proposal would have allowed is non-citizens to hold executive positions in airlines that oversee purely economic decisions (think fares, routes and aircraft purchases). The proposal explicitly -- I repeat, explicitly -- walled off non-citizen managers from having any say in an airline's security. In fact, the DOT proposal would have left the 25% foreign ownership cap completely intact; it even had the blessing of the Department of Defense....

But the anti-foreign ownership and Open Skies troupe in Congress isn't appealing to our economic sensibilities. If they did, doubtless they'd lose (imagine running for re-election on "I voted to increase ticket prices on transatlantic flights!"). Instead, their arguments have a xenophobic tinge, relying on our assuming that non-citizens are somehow less trustworthy than Uncle Sam's own kids to run an airline. Economics aside, that's the biggest problem with Oberstar and the protectionist crowd.

Kos is right -- if this Wall Street Journal editorial is any indication, James Webb is no conservative:

The most important--and unfortunately the least debated--issue in politics today is our society's steady drift toward a class-based system, the likes of which we have not seen since the 19th century. America's top tier has grown infinitely richer and more removed over the past 25 years. It is not unfair to say that they are literally living in a different country. Few among them send their children to public schools; fewer still send their loved ones to fight our wars. They own most of our stocks, making the stock market an unreliable indicator of the economic health of working people. The top 1% now takes in an astounding 16% of national income, up from 8% in 1980. The tax codes protect them, just as they protect corporate America, through a vast system of loopholes....

In the age of globalization and outsourcing, and with a vast underground labor pool from illegal immigration, the average American worker is seeing a different life and a troubling future. Trickle-down economics didn't happen. Despite the vaunted all-time highs of the stock market, wages and salaries are at all-time lows as a percentage of the national wealth. At the same time, medical costs have risen 73% in the last six years alone. Half of that increase comes from wage-earners' pockets rather than from insurance, and 47 million Americans have no medical insurance at all.

Manufacturing jobs are disappearing. Many earned pension programs have collapsed in the wake of corporate "reorganization." And workers' ability to negotiate their futures has been eviscerated by the twin threats of modern corporate America: If they complain too loudly, their jobs might either be outsourced overseas or given to illegal immigrants....

America's elites need to understand this reality in terms of their own self-interest. A recent survey in the Economist warned that globalization was affecting the U.S. differently than other "First World" nations, and that white-collar jobs were in as much danger as the blue-collar positions which have thus far been ravaged by outsourcing and illegal immigration. That survey then warned that "unless a solution is found to sluggish real wages and rising inequality, there is a serious risk of a protectionist backlash" in America that would take us away from what they view to be the "biggest economic stimulus in world history."

More troubling is this: If it remains unchecked, this bifurcation of opportunities and advantages along class lines has the potential to bring a period of political unrest. Up to now, most American workers have simply been worried about their job prospects. Once they understand that there are (and were) clear alternatives to the policies that have dislocated careers and altered futures, they will demand more accountability from the leaders who have failed to protect their interests. The "Wal-Marting" of cheap consumer products brought in from places like China, and the easy money from low-interest home mortgage refinancing, have softened the blows in recent years. But the balance point is tipping in both cases, away from the consumer and away from our national interest.

With this new Congress, and heading into an important presidential election in 2008, American workers have a chance to be heard in ways that have eluded them for more than a decade. Nothing is more important for the health of our society than to grant them the validity of their concerns. And our government leaders have no greater duty than to confront the growing unfairness in this age of globalization.

This country is splitting into three pieces. As a result of the internationalization of the economy, the people at the top have never had it so good. The middle class is continuing to get squeezed by stagnant wages and rising cost of living. And we are in danger of creating a permanent underclass. We must reexamine our tax and trade policies and reinstitute notions of fairness, and also enforce our existing trade laws so that free trade becomes fair trade.

a) Have little effect on the income of the richest Americans -- though their capital gains will fall dramatically;

b) Benefit some middle-class Americans in the form of preserving their import-competing jobs, while hurting other middle-class Americans by destroying their import-reliant jobs;

c) Have a mixed effect on the poorest Americans -- even if their wages rise from halting illegal immigration, their costs of living will rise even higher from the higher price of goods in the stores.

UPDATE: Arnold Kling and Greg Mankiw have more. Mankiw makes a good point here:

[L]et's suppose for a moment that a free-market economist were hired by the Dems to offer policy advice. If the boss's goal is to reduce income inequality, what is the best way to do that?

The standard Democratic fare would be quickly rejected. Erecting barriers to trade, raising the minimum wage, encouraging the cartelization of labor via unions, and bashing Wal-Mart are inefficient and poorly targeted ways to redistribute income.

The tax system is probably the best vehicle to accomplish the Dems' goal. One possibility would be to reduce the payroll tax rate and to make up the lost revenue by increasing, or perhaps even eliminating, the cap on taxable payroll. That would benefit, approximately, the bottom 90 percent of the income distribution.

This policy change would, of course, have an efficiency cost. By raising taxes on taxpayers who already face the highest tax rates, the deadweight losses of the tax system would surely rise. But almost any attempt to achieve a more equal distribution of income would entail efficiency costs. The Dems' goal should be to minimize the efficiency cost for any given amount of redistribution. And that is most likely accomplished through the tax system rather than by more heavy-handed market interventions.

The Democratic victories have generated a lot of pessimism in the business press about there being any chance for a revival of world trade talks. I'm certainly not optimistic about a revival in trade talks.

That said, let me offer two counters to this -- one positive and one negative.

The negative is that there wasn't exactly a lot of momentum on trade liberalization before the election. The most symblolic evidence of this fact come from this Reuters story from November 2nd:

Comatose world trade talks showed a possible sign of brain activity on Thursday as World Trade Organization Director General Pascal Lamy arrived in Washington to meet with U.S. officials.

Experts said Lamy could be gathering material for a possible draft plan to try to get the talks started again, although the visit was billed as a low-key opportunity for Lamy to meet with top Bush administration officials on the heels of meetings and speeches in New York and Boston this week....

Lamy will return to New York to run in that city's marathon on Sunday. (emphasis added)

[So what should Lamy have done with his time?--ed. Oh, the impasse is not his fault -- the WTO director has practically no power. His ability to train for the marathon is a symptom of the stalemate among the key countries -- not a cause.]

Second, even if Doha goes down, and even if enthusiasm for free trade slows in the Congress, progress towards liberalization can still be made. Consider that in the past week, Vietnam was admitted into the WTO, and the US approved Russia's entry into the organization as well. There are a few other economies on the outside looking in -- Ukraine and Kazakhstan, not to mention a third of the Middle East-- and if the US can facilitate their entry, then the WTO can live up to its name.

In the interest of posting some good news about the Middle East, I found this AP story about the diamond trade between Israel and Dubai to be pretty interesting:

As Israelis and Arabs emerge from the war in Lebanon, a booming diamond exchange in Dubai, United Arab Emirates (UAE,) 1,300 miles away, is hard proof that some Arab-Israeli ties have survived despite the region's tensions.

The two-year-old Dubai Diamond Exchange has put the Gulf emirate squarely inside a global business dominated by Jewish traders. And that, inevitably, means trade ties with Israel, another world diamond hub.

"There has been no visible platform for Arab-Jewish cooperation since the 1960s," said Chantal Abboud, Beirut-based representative of Antwerp's diamond industry in the Middle East. "Now, Dubai has created it."

Israeli Diamond Exchange president Avi Paz says diamonds and hospitality flow freely between Israel and Dubai.

"We came there, they came here. There is no problem at all," Paz said in Tel Aviv. "I wish that wherever I go, they'll host me like they hosted me in Dubai."....

The 34-day summer war in Lebanon, between Hezbollah and Israel, dulled sales in Dubai's diamond markets but only temporarily, industry officials say.

"People don't mix conflict with business. The war will not affect the diamond trade in any lasting way," said Abboud.

The relationship was highlighted in March, when controversy arose over Dubai Ports World assuming the management of ports in the United States. At the time the chairman of Israel's merchant fleet told U.S. senators that his ships called often at DP World-owned ports in Dubai and worldwide, and faced no problems.

The Dubai Diamond Exchange, the Arab world's first diamond bourse, seeks to serve the largely untapped but diamond-hungry Gulf market, the world's third largest for diamond jewelry, traders say.

So far, the exchange's tax-free transactions have coaxed more than 250 diamond dealers to become members, including Jewish-Americans, Belgians, Indians -- even Israelis with dual nationality, said Noora Jamsheer, the exchange's chief executive.

"Dubai is quickly growing to become a very important center for diamonds," Ernest Blom, president of the World Federation of Diamond Bourses, said by phone from Jerusalem.

The good Arab-Jewish vibes extend across the Atlantic. In June, The largely Jewish New York Diamond Dealers Club on Manhattan's 47th Street feted Ahmed bin Sulayem, deputy chairman of the Dubai Diamond Exchange, for his contribution to the industry....

Traders say Dubai has less red tape and is closer to the expanding Chinese, Arab and Russian markets.

It also competes directly with Antwerp, serving as a gateway for India's burgeoning diamond output. For example, Rosy Blue diamonds, a leading Antwerp-based business, is considering moving its headquarters to Dubai, said Pearl Chandrawansa, who heads the company's Dubai operations. (emphasis added)

[I thought this was a good news post!!--ed. Sorry,I failed to stay the course.]

I'm shocked, shocked at this Associated Press report that some industrialized nations might not be living up to their Kyoto Protocol obligations:

With few exceptions, the world’s big industrialized nations are struggling to meet the greenhouse gas reductions they committed to in the embattled Kyoto pact on climate change. Europe is veering off course, Japan is still far from its target and Canada has given up.

he latest figures of heattrapping gases spewing out of chimneys and tail pipes are grim news for the agreement’s supporters and welcome ammunition for the told-you-so camp in such non-Kyoto nations as the United States and Australia....

Pro-Kyoto activists dismiss such conclusions, saying the targets are within reach if nations just try a bit harder....

The United States, the world’s biggest greenhouse generator, dropped out of the Kyoto accord, complaining it would hurt the U.S. economy, and that such big-polluter developing nations as China and India were not included.

Other nations decided to forge ahead regardless, and the latest U.N. figures show that as a group the 36 countries committed to the pact can meet the 5 percent target. That progress came mainly from a one-time boost in the 1990s, however, when excommunist states of Eastern Europe slashed greenhouse emissions by shutting down or modernizing heavy-polluting Soviet-era industries.

Elsewhere, the situation is more dire. Yvo De Boer, head of the U.N.’s climate change secretariat, said industrialized countries needed to ‘‘take a lot of action at home’’ to meet their targets.

‘‘But fortunately they do still have a number of years to meet those targets because in a number of cases it’s not going to be easy,’’ he said.

Among the worst off is Canada, the current president of U.N. climate change talks, which this year became the first country to announce it would not meet its Kyoto target of a 6 percent emissions cut on average over the years 2008-2012. Canada’s emissions have ballooned by 29 percent instead.

With oil production growing in the tar sands of Alberta, the Conservative government saw no other option than to jump the Kyoto ship. Environment Minister Rona Ambrose has stated interest in a rival, U.S.-led pact, the Asia-Pacific Partnership, which has no targets, and said the government was working on a ‘‘made-in-Canada’’ solution.

Japan, too, has a long way to go to meet its reduction.

The report does observe that the EU as a whole could achieve its target -- provided that they "make full use of carbon credits for investing in clean technology projects in developing countries." However, another AP report by Charles Hanley points out the pitfalls of trading scheme as implemented:

As the world grows warmer, poorer nations are helping the rich by reining in heat-trapping gases in a multibillion-dollar "carbon trade" that is outrunning its U.N. overseers and founding principles, and spawning conflicts of interest and possible abuse....

The U.N. body [Kyoto's Clean Development Mechanism] relies on private accounting and inspection firms to validate that projects will cut emissions and enhance economic development and the environment, and to verify later that gases are being reduced - all the while being paid by project participants. Specialist firms can act as developers for some projects and validators or verifiers for others. Critics see conflicts of interest.

"You're creating all kinds of incentives for corruption," said Daphne Wysham, a CDM expert at Washington's Institute for Policy Studies.

Earlier this week Clay Risen wrote an alarming story for TNR Online about Hugo Chavez's threat to the liberal world order:

Far from being a pariah, Venezuela is increasingly in step with the world. Thanks to deep wells of anti-Americanism and Chávez's dogged diplomacy among the developing world, he's managed to build a large, loose coalition of states aligned not just against the United States, but against the liberal world order that is the real bedrock of American hegemony. Chávez's goal is not to destroy the American economy--cutting off our supply of oil from Venezuela would do more harm to Caracas than to us--so much as to replace the structures by which we hold sway over the world economic community. And while it makes headlines to talk about Chávez's military (and paramilitary) aspirations, his real successes--and his real threats--exist in the economic, rather than the military, realm....

too many parts of the world are seeing uneven internal growth (benefiting the elite but not the general public) or no growth at all, even as they make painful budget reforms and market concessions. This breakdown has given rise to a powerful challenge to the liberal economic order--at the center of which sits Hugo Chávez.

The most significant challenge, arising from the slow collapse of the WTO's Doha Round of trade negotiations, is Venezuela's plan to replace the international trade structure with a series of trading blocs. Many of its efforts have been the banal sort of bilateral deals that would go unnoticed--if they weren't with an eyebrow-raising set of partners: Vietnam, Nicaragua, Russia, Libya, and other countries at the edges of the liberal economic order. Just days before his U.N. appearance, Chávez signed some 20 trade accords with Iran, totaling more than $200 million. Iranian tractors are already under production in Venezuela, and the Iranian national oil company has spoken of investing up to $4 billion there. Chávez has promised a $500 million oil refinery in Uruguay, a country the United States has been courting for its own trade deal. And he has pursued countless oil-related deals with China--with the expressed goal of disengaging his country's oil sector from the United States.

Alongside his bilateral efforts, Chávez has pursued a set of multilateral trade agreements with the intention of displacing American economic hegemony in the western hemisphere. In 2005 Cuba and Venezuela created the Bolivarian Alternative for the Americas (ALBA), also known as the People's Trade Agreement, which sets up zero-tariff trade among members. The ALBA has since expanded to Bolivia, and Nicaraguan presidential candidate Daniel Ortega has promised to join if he wins in November. Chávez has also signed onto Mercosur, the pact among several South American countries designed to challenge NAFTA and the EU. Mercosur is, for now, a fairly innocuous group, but Chávez has spoken frequently of transforming it into an anti-U.S. regional bloc. Trading blocs such as these, especially in light of the Doha collapse, not only undermine the structure and spirit of the liberal trading regime, but they also push the world back to the era in which politics, rather than growth-oriented national interest, determined trade policy, with all the economic and political instability that went with it.

The key facts about Chavez's policy initiatives are as follows: 1) Sure, Chavez has signed a lot of trade deals -- but most of them are of the pissant variety. $200 million? Big whoop.

2) Sure, Chavez wants to diversify his imports and exports away from the United States -- but he's not going to succeed.

3) Sure, Chavez wants Mercosur to do his bidding -- but he can't, since Brazil is the key veto player in that trading bloc. Lula might not be America's biggest fan, but he's not really anti-American either.

4) For all of Chavez's wheelings and dealings, his foreign and economic policies alienate more politicians that they attract.

Hugo Chavez is an irritant, but it's silly to paint him as the big bad wolf of the global political economy.

The Center for Global Development's Lawrence MacDonald blogs about Joe Stiglitz's new idea to scupper the WTO make trade "fairer":

Nobel laureate Joseph Stiglitz urged at a CGD event that U.S. trade partners ask the WTO for authority to impose countervailing duties on exports of U.S. steel and other energy-intensive products that benefit unfairly from Washington’s refusal to join the Kyoto Protocol limiting carbon and other greenhouse gasses....

"One of the main purposes of the WTO is to create a level playing field; subsidies distort the playing field, which is why countries are allowed to offset subsidies through countervailing duties," Stiglitz explains in Making Globalization Work, the new book he was promoting at the CGD event. "This should be the case for hidden subsidies—not forcing firms to pay for the environmental damage they inflict—as well as for open subsidies."

The book contains a detailed explanation of the proposal--and an interesting discussion of the response his idea has received so far from senior officials:

I have discussed this idea with senior officials in many of the advanced industrial countries that are committed to doing something about global warming. And while, almost to a person, they agree with the analysis, almost to a person they also show a certain timidity: the proposal is viewed by some as the equivalent, in the trade arena, of declaring nuclear war. It is not. It would, of course, have large effects on the United States, but global warming will have even larger effects on the entire globe. It is just asking each country to pay for the full social costs of its production activities. Following standard practice, the pressure of trade sanctions could gradually be increased; and almost surely, as America recognizes the consequences, its policies would be altered--as they have been in other instances where the United States has been found in violation of WTO rules.

Stiglitz's proposal probably would improve the global warming situation -- but not the way he thinks. Assuming the WTO Appellate Body was willing to destroy itself, here is the chain of events that would improve the environment:

1) The WTO rules against the U.S.A.;

2) The U.S. refuses to comply, thereby weakening respect for the WTO's Dispute Settlement System;

3) As the Trade Diversion blog suggests, "once the litigation gates open, "hidden subsidy" will be a phrase that lawyers and protectionists love. Is the absence of labor standards in developing countries a "hidden subsidy" to exporters of labor-intensive manufactures?.... Costs are subjective; social costs doubly so." So, expect Canadian, American, Japanese, and European trade officials to file suit in the WTO over every "hidden subsidy" under the sun. Expect the target of a lot of these suits to be China?

4) The WTO, burdened by the collapse of the Doha talks and persistent noncompliance of dispute rulings, collapses.

5) The absence of multilateral trade rules encourages the emergence of economic blocs, as governments start applying "social tariffs" against countries that don't share their regulatory aims.

6) The ensuing, protracted slowdown in the global economy leads to significant reductions in CO2 emissions.

This, by the way, is one of the basic problem I find with the parts of Making Globalization Work that I've read. There is a decent diagnosis of some of the ills caused by globalization -- but for a man who spent the past decade and a half in policymaking circles, he seems oddly oblivious to the massive political externalities many of his proposals would create.

UPDATE: My colleague Joel Trachtman explains why Stiglitz's plan is a legal non-starter.

ANOTHER UPDATE: Greg Mankiw critiques another of Stiglitz's policy prescriptions.

This week the Economist has an excellent survey by Pam Woodall of the global economy, and the increasingly powerful effects that the developing world are exerting on prices, wages, and interest rates:

Last year the combined output of emerging economies reached an important milestone: it accounted for more than half of total world GDP (measured at purchasing-power parity). This means that the rich countries no longer dominate the global economy. The developing countries also have a far greater influence on the performance of the rich economies than is generally realised. Emerging economies are driving global growth and having a big impact on developed countries' inflation, interest rates, wages and profits. As these newcomers become more integrated into the global economy and their incomes catch up with the rich countries, they will provide the biggest boost to the world economy since the industrial revolution....

In particular, the new ascendancy of the emerging economies has changed the relative returns to labour and capital. Because these economies' global integration has made labour more abundant, workers in developed countries have lost some of their bargaining power, which has put downward pressure on real wages. Workers' share of national income in those countries has fallen to its lowest level for decades, whereas the share of profits has surged. It seems that Western workers are not getting their full share of the fruits of globalisation. This is true not just for the lowest-skilled ones but increasingly also for more highly qualified ones in, say, accountancy and computer programming.

If wages continue to disappoint, there could be a backlash from workers and demands for protection from low-cost competition. But countries that try to protect jobs and wages through import barriers or restrictions on offshoring will only hasten their relative decline. The challenge for governments in advanced economies is to find ways to spread the benefits of globalisation more fairly without reducing the size of those gains.

One obvious implication to draw from the survey is that the relative (though not absolute) economic power of the US and EU will decline over time.

How will Washington and Brussels respond? The Financial Times' Bertrand Benoit offers one intriguing answer:

Spurred by concern about China’s growing economic might, Germany is considering a plan for a free-trade zone between Europe and the US.

A senior aide to Angela Merkel said the chancellor was “interested” in promoting the idea as long as such a zone did not create “a fortress” but rather “a tool” to encourage free trade globally, “which she is persuaded is a condition of Germany’s future prosperity”....

News that the free trade zone, last pursued by Sir Leon Brittan, when European trade commissioner in 1998, is being debated in the German chancellery testifies to the rapprochement between Washington and Berlin since Ms Merkel’s election last November.

This convergence of views was underlined this week when Wen Jiabao, Chinese premier, was politely chided by Ms Merkel for China’s poor human rights record and recent restrictions on foreign news agencies, during an official visit to Berlin....

Ms Merkel’s aide said it was “far too early” to tell whether the project of a transatlantic free-trade zone would be part of Germany’s priorities when it assumes the six-month presidency of the European Union and chairs the G8 group of leading industrial nations from January.

Two of Ms Merkel’s most senior advisers, Jens Weidmann on economic policy and Christoph Heusgen on foreign policy, have warned her the initiative could be construed as protectionism.

Yet the notion has struck a chord with Ms Merkel, who has often called for “a global framework of rules” – minimum social, environmental and ethical standards – to prevent competition from sophisticated yet authoritarian low-wage economies eroding western achievements in these domains.

“The west needs to pull together,” Gabor Steingart, Berlin bureau chief for the Spiegel weekly, told the FT yesterday. His book, World-War for Prosperity, a warning about the dangers of globalisation published this week, is credited with influencing the debate in the chancellery.

“What Nato did for the west under the cold war, Tafta (Transatlantic free-trade area) can do in the current battle.”

There are many reasons to believe that TAFTA will never get off the ground. What Europe thinks should go into a free trade agreement is a bit more modest than what the U.S. thinks should go into one. I simply can't see agriculture included into any TAFTA. I can't imagine that France would ever let it go forward. Anti-Americanism on the continent could be enough to scotch it.

And yet, the idea is very intriguing. Even if it takes ten years to negotiate, the combined weight of a TAFTA in terms of both market size and rule-setting behavior would be formidable.

Developing....

The BBC reports that some Muslims are none too keen on what the Pope said yesterday... or rather, who the Pope quoted yesterday:

A statement from the Vatican has failed to quell criticism of Pope Benedict XVI from Muslim leaders, after he made a speech about the concept of holy war.
Speaking in Germany, the Pope quoted a 14th Century Christian emperor who said the Prophet Muhammad had brought the world only "evil and inhuman" things.

Pakistan's parliament passed a resolution on Friday criticising the Pope for making "derogatory" comments.

The Vatican said the Pope had not intended to offend Muslims....

The head of the Muslim Brotherhood said the Pope's remarks "aroused the anger of the whole Islamic world"....

In his speech at Regensburg University, the German-born Pope explored the historical and philosophical differences between Islam and Christianity, and the relationship between violence and faith.

Stressing that they were not his own words, he quoted Emperor Manuel II Paleologos of the Byzantine Empire, the Orthodox Christian empire which had its capital in what is now the Turkish city of Istanbul.

The emperor's words were, he said: "Show me just what Muhammad brought that was new and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached."

Benedict said "I quote" twice to stress the words were not his and added that violence was "incompatible with the nature of God and the nature of the soul".

"The intention here is not one of retrenchment or negative criticism, but of broadening our concept of reason and its application," he added in the concluding part of his speech.

"Only thus do we become capable of that genuine dialogue of cultures and religions so urgently needed today."

Question to readers -- will this be the sequel to the Muhammed cartoon controversy, something not quite as serious, or something even more serious?

UPDATE: OK, less than 24 hours for the burning of the Pope in effigy. If the Feiler Faster Thesis ever gets applied to world politics, I expect to see effigy-burning take place within an hour of whatever triggers the controversy.

Meanwhile, Juan Cole has little sympathy for the Pope, "The Pope was wrong on the facts. He should apologize to the Muslims and get better advisers on Christian-Muslim relations."

I've been known to question the value-added of think tanks from time to time, so I looked with interest at Michael Barbaro and Stephanie Strom's New York Times story on how Wal-Mart is potentially buying ideological support through it's support of consevative think tanks:

As Wal-Mart Stores struggles to rebut criticism from unions and Democratic leaders, the company has discovered a reliable ally: prominent conservative research groups like the American Enterprise Institute, the Heritage Foundation and the Manhattan Institute.

Top policy analysts at these groups have written newspaper opinion pieces around the country supporting Wal-Mart, defended the company in interviews with reporters and testified on its behalf before government committees in Washington.

But the groups — and their employees — have consistently failed to disclose a tie to the giant discount retailer: financing from the Walton Family Foundation, which is run by the Wal-Mart founder Sam Walton’s three children, who have a controlling stake in the company.

At least five research and advocacy groups that have received Walton Family Foundation donations are vocal advocates of the company.

The American Enterprise Institute for Public Policy Research, for example, has received more than $100,000 from the foundation in the last three years, a fraction of the more than $24 million it raised in 2004 alone.

....the Walton Family Foundation gave Pacific Research [Institute] $175,000 from 1999 to 2004....

....the $20,000 Heritage has received from the Walton Family Foundation since 2000 amounts to less than 1 percent of its $40 million budget....

Conservative groups are not the only ones weighing in on the Wal-Mart debate. Ms. Williams of Wal-Mart noted labor unions have financed organizations that have been critical of Wal-Mart, like the Economic Policy Institute, which received $2.5 million from unions in 2005.

Besides the fact that the story reveals no link between the donations and think tank outputs, besides the fact that these groups would be ideologically predisposed to support Wal-Mart anyway (just as EPI would support the union position), it's worth stressing that in the think tank world, these are nothing amounts. These sums of money buy a B.A.-level RA and some cocktail shrimp at a reception. After reading the article, I'm not amazed that Wal-Mart is giving money to these think tanks -- I'm amazed they'e giving so little.

This leads to a fundamental question -- what on earth motivated the New York Times to put this article on the front page of its Business section? Properly headlined, an article that blares, "Little Money Flowing Between Wal-Mart and Washington Think Tanks" wouldn't even have run, much less on the front page. Instead, we get,"Wal-Mart Finds an Ally in Conservatives."

In Congress, there's a threshhold below which legislators are not required to report gifts because they are so minor. The sums we're talking about here are below the threshhold to motivate a NYT story.

UPDATE: For the record, I have received no money or gifts from Wal-Mart at any time.

And frankly, I'm a little hurt.

ANOTHER UPDATE: Over at Volokh, David Bernstein also has some fun with the article.

YET ANOTHER UPDATE: Here's an example of a Heritage analyst -- the very same one who's cited as pro-Wal-Mart in the story -- adopting an anti-Wal-Mart position. Thanks to Heritage's Khristine Brookes for the pointer. [You remembered to ask her for cash, right?--ed. D'oh!!]

The Australian's Matthew Warren reveals that the Intergovernmental Panel on Climate Change is about to revise its global warming projections in a way that will be inconvenient for Al Gore:

The world's top climate scientists have cut their worst-case forecast for global warming over the next 100 years.

A draft report by the Intergovernmental Panel on Climate Change, obtained exclusively by The Weekend Australian, offers a more certain projection of climate change than the body's forecasts five years ago.

For the first time, scientists are confident enough to project a 3C rise on the average global daily temperature by the end of this century if no action is taken to cut greenhouse gas emissions.

The Draft Fourth Assessment Report says the temperature increase could be contained to 2C by 2100 if greenhouse gas emissions are held at current levels.

In 2001, the scientists predicted temperature rises of between 1.4C and 5.8C on current levels by 2100, but better science has led them to adjust this to a narrower band of between 2C and 4.5C.

The new projections put paid to some of the more alarmist scenarios raised by previous modelling, which have suggested that sea levels could rise by almost 1m over the same period.

The report projects a rise in sea levels by century's end of between 14cm and 43cm, with further rises expected in following centuries caused by melting polar ice.

Global warming is still a real phenomenon, and it will bring costs associated with it -- but any day when the worst-case scenario looks more than 50% better than it did yesterday is a very good day.

UPDATE: OK, having read Tim Lambert and Gavin Schmidt, I'm withdrawing my endorsement of the Warren article. He appears to have "confused climate sensitivity (how much warming will eventually occur if we double CO2) with projected 21st century warming," according to Lambert. Which means the reduction of the worst-case scenario outcome is nonexistent.

Apologies to one and all.

Federal Reserve Chairman Ben Bernanke gave an interesting speech entitled, "Global Economic Integration: What's New and What's Not?" that's worth a gander. Here's his answer to what's new:

Each observer will have his or her own perspective, but, to me, four differences between the current wave of global economic integration and past episodes seem most important. First, the scale and pace of the current episode is unprecedented. For example, in recent years, global merchandise exports have been above 20 percent of world gross domestic product, compared with about 8 percent in 1913 and less than 15 percent as recently as 1990; and international financial flows have expanded even more quickly. But these data understate the magnitude of the change that we are now experiencing. The emergence of China, India, and the former communist-bloc countries implies that the greater part of the earth's population is now engaged, at least potentially, in the global economy. There are no historical antecedents for this development. Columbus's voyage to the New World ultimately led to enormous economic change, of course, but the full integration of the New and the Old Worlds took centuries. In contrast, the economic opening of China, which began in earnest less than three decades ago, is proceeding rapidly and, if anything, seems to be accelerating.

Second, the traditional distinction between the core and the periphery is becoming increasingly less relevant, as the mature industrial economies and the emerging-market economies become more integrated and interdependent. Notably, the nineteenth-century pattern, in which the core exported manufactures to the periphery in exchange for commodities, no longer holds, as an increasing share of world manufacturing capacity is now found in emerging markets. An even more striking aspect of the breakdown of the core-periphery paradigm is the direction of capital flows: In the nineteenth century, the country at the center of the world's economy, Great Britain, ran current account surpluses and exported financial capital to the periphery. Today, the world's largest economy, that of the United States, runs a current-account deficit, financed to a substantial extent by capital exports from emerging-market nations.

Third, production processes are becoming geographically fragmented to an unprecedented degree.4 Rather than producing goods in a single process in a single location, firms are increasingly breaking the production process into discrete steps and performing each step in whatever location allows them to minimize costs. For example, the U.S. chip producer AMD locates most of its research and development in California; produces in Texas, Germany, and Japan; does final processing and testing in Thailand, Singapore, Malaysia, and China; and then sells to markets around the globe. To be sure, international production chains are not entirely new: In 1911, Henry Ford opened his company's first overseas factory in Manchester, England, to be closer to a growing source of demand. The factory produced bodies for the Model A automobile, but imported the chassis and mechanical parts from the United States for assembly in Manchester. Although examples like this one illustrate the historical continuity of the process of economic integration, today the geographical extension of production processes is far more advanced and pervasive than ever before. As an aside, some interesting economic questions are raised by the fact that in some cases international production chains are managed almost entirely within a single multinational corporation (roughly 40 percent of U.S. merchandise trade is classified as intra-firm) and in others they are built through arm's-length transactions among unrelated firms. But the empirical evidence in both cases suggests that substantial productivity gains can often be achieved through the development of global supply chains.

The final item on my list of what is new about the current episode is that international capital markets have become substantially more mature. Although the net capital flows of a century ago, measured relative to global output, are comparable to those of the present, gross flows today are much larger. Moreover, capital flows now take many more forms than in the past: In the nineteenth century, international portfolio investments were concentrated in the finance of infrastructure projects (such as the American railroads) and in the purchase of government debt. Today, international investors hold an array of debt instruments, equities, and derivatives, including claims on a broad range of sectors. Flows of foreign direct investment are also much larger relative to output than they were fifty or a hundred years ago. As I noted earlier, the increase in capital flows owes much to capital-market liberalization and factors such as the greater standardization of accounting practices as well as to technological advances.

Mary Jordan has a front-pager in the Washington Post detailing how social movements use text messaging to surmount attempts to contain dissent:

Cellphones and text messaging are changing the way political mobilizations are conducted around the world. From Manila to Riyadh, Saudi Arabia, andKathmandu, Nepal, protests once publicized on coffeehouse bulletin boards are now organized entirely through text-messaging networks that can reach vast numbers of people in a matter of minutes.

The technology is also changing the organization and dynamics of protests, allowing leaders to control, virtually minute-by-minute, the movements of demonstrators, like military generals in the field. Using texts that communicate orders instantly, organizers can call for advances or retreats of waves of protesters.

This tool has changed the balance of political power in places where governments have a history of outmuscling dissent. In April, Nepal's King Gyanendra ordered authorities to cut cellphone service after protesters against his absolute rule used text messages to help assemble street protests by tens of thousands of democracy advocates.

The Philippines, widely called the text-messaging center of the world, has led the way. When President Joseph Estrada was forced from office in 2001, he bitterly complained that the popular uprising against him was a "coup de text."

At 1:30 p.m. on a recent day, Palatino and three students lingered near the doughnut case in the 7-Eleven on a congested corner of Morayta Street. They stood in the air-conditioned cool, cellphones in hand, waiting for a text....

They knew police had been ordered to disperse unauthorized crowds near the presidential palace and would not hesitate to use wooden batons and water cannons to do it. So organizers wanted to make sure that everyone converged at the same time to make the rally harder to break up.

Soon Palatino's phone was alive with a flurry of texts from coordinators and marchers anxious to start.

One asked: "Are the media here?"

About a dozen TV cameramen and newspaper photographers gathered outside. They, too, had been summoned by text.

At 1:45, Palatino's phone pinged again, this time with the message: "ASSEMBLE RIGHT NOW!"

A smile crossed his face. With a few more taps of his thumbs, he forwarded the command down the text brigade ranks. He sent it to those on his phone list, and each who received it did the same. In seconds, about 1,000 students were in the street, stopping traffic and sending cars and bicycle taxis scattering.

Two students quickly hooked up a public address system to the battery of a vehicle. One by one, leaders climbed on top of it to fire up the crowd. Palatino demanded that President Arroyo do more to end the [unsolved] killings and allocate more money for universities.

"Books, not bullets!" he shouted.

The all-at-once strategy worked: The police were caught off guard. Only a few officers were on the scene, and they quickly pulled out their own cellphones to make urgent voice calls.

I'm a big fan of Jared Diamond's Guns, Germs and Steel, and still need to read his sequel, Collapse. However, Terry L. Hunt has an essay in the latest issue of The American Scientist that calls into question Diamond's central case study in Collapse -- the decline and fall of the Rapa Nui on Easter Island:

In the prevailing account of the island's past, the native inhabitants—who refer to themselves as the Rapanui and to the island as Rapa Nui—once had a large and thriving society, but they doomed themselves by degrading their environment. According to this version of events, a small group of Polynesian settlers arrived around 800 to 900 A.D., and the island's population grew slowly at first. Around 1200 A.D., their growing numbers and an obsession with building moai led to increased pressure on the environment. By the end of the 17th century, the Rapanui had deforested the island, triggering war, famine and cultural collapse.

Jared Diamond, a geographer and physiologist at the University of California, Los Angeles, has used Rapa Nui as a parable of the dangers of environmental destruction. "In just a few centuries," he wrote in a 1995 article for Discover magazine, "the people of Easter Island wiped out their forest, drove their plants and animals to extinction, and saw their complex society spiral into chaos and cannibalism. Are we about to follow their lead?" In his 2005 book Collapse, Diamond described Rapa Nui as "the clearest example of a society that destroyed itself by overexploiting its own resources."

Two key elements of Diamond's account are the large number of Polynesians living on the island and their propensity for felling trees. He reviews estimates of the island's native population and says that he would not be surprised if it exceeded 15,000 at its peak. Once the large stands of palm trees were all cut down, the result was "starvation, a population crash, and a descent into cannibalism." When Europeans arrived in the 18th century, they found only a small remnant of this civilization....

When I first went to Rapa Nui to conduct archaeological research, I expected to help confirm this story. Instead, I found evidence that just didn't fit the underlying timeline. As I looked more closely at data from earlier archaeological excavations and at some similar work on other Pacific islands, I realized that much of what was claimed about Rapa Nui's prehistory was speculation. I am now convinced that self-induced environmental collapse simply does not explain the fall of the Rapanui.

Radiocarbon dates from work I conducted with a colleague and a number of students over the past several years and related paleoenvironmental data point to a different explanation for what happened on this small isle. The story is more complex than usually depicted.

The first colonists may not have arrived until centuries later than has been thought, and they did not travel alone. They brought along chickens and rats, both of which served as sources of food. More important, however, was what the rats ate. These prolific rodents may have been the primary cause of the island's environmental degradation. Using Rapa Nui as an example of "ecocide," as Diamond has called it, makes for a compelling narrative, but the reality of the island's tragic history is no less meaningful....

There is no reliable evidence that the island's population ever grew as large as 15,000 or more, and the actual downfall of the Rapanui resulted not from internal strife but from contact with Europeans. When Roggeveen landed on Rapa Nui's shores in 1722, a few days after Easter (hence the island's name), he took more than 100 of his men with him, and all were armed with muskets, pistols and cutlasses. Before he had advanced very far, Roggeveen heard shots from the rear of the party. He turned to find 10 or 12 islanders dead and a number of others wounded. His sailors claimed that some of the Rapanui had made threatening gestures. Whatever the provocation, the result did not bode well for the island's inhabitants.

Newly introduced diseases, conflict with European invaders and enslavement followed over the next century and a half, and these were the chief causes of the collapse....

I believe that the world faces today an unprecedented global environmental crisis, and I see the usefulness of historical examples of the pitfalls of environmental destruction. So it was with some unease that I concluded that Rapa Nui does not provide such a model. But as a scientist I cannot ignore the problems with the accepted narrative of the island's prehistory. Mistakes or exaggerations in arguments for protecting the environment only lead to oversimplified answers and hurt the cause of environmentalism. We will end up wondering why our simple answers were not enough to make a difference in confronting today's problems.

Ecosystems are complex, and there is an urgent need to understand them better. Certainly the role of rats on Rapa Nui shows the potentially devastating, and often unexpected, impact of invasive species. I hope that we will continue to explore what happened on Rapa Nui, and to learn whatever other lessons this remote outpost has to teach us.

If the International Whaling Commission is my favorite international governmental organization, then my favorite international non-governmental organization would have to be the TransAtlantic Business Dialogue. Why? Because despite the impressive membership roster, this group does not appear to accomplish all that much. On issues like data privacy or genetically modified foods, the TABD has repeatedly issued stern proclamations with no effect on the outcome.

Which is why I am unmoved by this Financial Times story by Stephanie Kirchgaessner

Citigroup chairman Charles Prince has urged President George W. Bush to reinvigorate multilateral trade discussions and “identify a way forward” on the Doha round of trade talks.

In a letter also signed by British Airways chairman Martin Broughton on behalf of the TransAtlantic Business Dialogue, the executives said it was “unacceptable” that transatlantic differences over agriculture, representing less than 3 per cent of transatlantic gross domestic product, were dictating progress on increased market access for goods and services that comprise the majority of global trade.

The corporate chiefs said several factors should prompt the administration to revitalise the talks, including the rise of protectionist tendencies, the increase in bilateral agreements between stronger trading nations, and the expiration next June of the president’s trade promotion authority to negotiate trade agreements.

UPDATE: Henry Farrell disagrees:

I think Dan is wrong here. The main reason that the TABD isn’t very influential in the grand scheme of things is that it doesn’t need to be. Business leaders on both sides of the Atlantic have plenty of access to policy makers without any need to go through the formalities of the TABD....

There is still an interesting question here, which is why businesses with an interest in increased transatlantic and international trade don’t have more impact than they do. But this doesn’t say anything about the structural power of business more generally. Indeed, I suspect that you could tell a reasonably convincing Marxist or marxisant story about how this demonstrates the relative strength of agribusiness as opposed to the internationalist types who make up the membership of TABD.

The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connexions everywhere.

The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations.

One of the low-level globalization stories that occasionally bubbles to the surface is the apparent difficulty of combating piracy in the sea lanes.

Which makes this Financial Times story by John Burton so interesting:

One of the world’s busiest and most hazardous shipping routes was yesterday declared to be winning its fight against piracy when Lloyd’s, the shipping insurer, dropped its war risk designation for the Malacca Strait.

Lloyd’s surprise decision, which will cut insurance costs for shipping lines using one of the world’s busiest sea lanes, came a year after the insurer incensed the shipping industry and regional governments by imposing the rating.

The Malacca Strait came to be regarded as among the world’s most dangerous sea lanes after a surge in piracy attacks after 1998, as the Indonesian economy deteriorated and Aceh rebels stepped up their military campaign.

However, the International Maritime Bureau, which tracks global piracy, said recently that attacks in the area had fallen to their lowest level since 1999. Lloyd’s said there had been a “significant improvement” in security along the 900km strait as Singapore and Malaysia increased naval and air patrols.

In the Chronicle of Higher Education, Mathew H. Gendle engages in one of the more useless acts of self-flagellation about globalization I've seen in quite a while:

Like many liberal-arts institutions, the university where I teach [Elon] places a heavy emphasis on the freshman year, and all new students are required to take a class called "The Global Experience," taught by faculty members drawn from departments across the campus. One of the central objectives of the course is to break students out of their bubble by forcing them to think about the interconnectedness of our world.

In my class, we spend considerable time talking about the negative aspects of globalization: depressed wages, slave/child labor, the exploitation of the poor, and homogenization of cultures. I emphasize the underbelly of modern economies not to condemn them in a "holier than thou" manner, but with the intention of getting students to understand (in some small way) that their everyday consumer choices can have far-reaching social and economic effects around the globe.

I make a point of discussing how we are all implicated in some of those adverse outcomes, and suggest that the only way to prevent them is to work together for change. Despite my best efforts, I find myself feeling like a complete fraud with such idealistic talk. Indeed, I have pointed out to previous classes that on the very same day that we are discussing such issues, I am also wearing clothes that were probably manufactured with child labor and have consumed chocolate that was, in all likelihood, produced by slaves.

But I had no idea just how much of a hypocrite I was until I started to pay attention to my retirement account....

[A]s ignorant as this sounds, I was quite unhappy to discover that the equities funds in which I have invested own millions of shares of General Electric, Unocal/Chevron, Altria Group, Halliburton, Nestlé, and other corporations whose behaviors I have used in class as specific examples of poor global corporate citizenship....

You might say, "Well, that's capitalism," but that response seems hollow and unsatisfactory. Unfortunately, the simple reality is that as long as you are operating within a capitalist market, there will always be winners and losers, and I am essentially trying to position myself to be one of the winners.

The same could be said of my clothing purchases. Sure, theoretically I could buy only clothing that was union-made, or the product of workers earning a living wage. But the reality is that such articles are pricey and surprisingly hard to find. With a mortgage and child-care expenses, I find myself gravitating toward the inexpensive and mass-produced clothing offered by large corporate retailers.

With those choices, I am again essentially saying that the welfare of my family is more important than the welfare of others, which is truly the last sentiment that I want my students to identify with.

I find myself confounded and in one of the most uncomfortable positions I have been in as a college professor.

When I teach "The Global Experience" this coming fall, it is my intention to share the nasty details of my investments with my students. But will that really matter? Can I honestly expect my students to change their consumer behaviors when I refuse to change my own? (emphasis added)

If Gendle really wants his students at Elon to learn, he might want to inform them of the following:

1) Eric V. Edmonds and Nina Pavcnik, "Child Labor in the Global Economy," Journal of Economic Perspectives 19 (Winter 2005): 199–220,. Their punchline:

Fortunately, abhorrent images of children chained in factories or forced into prostitution stand out for their relative rarity. Most working children are at home, helping their family by assisting in the family business or farm and with domestic work....

While some children do work in circumstances so hideous as to command immediate attention, development is the best overall cure for child labor.

In all likelihood, the clothes you wear are not manufactured with child labor -- but if you choose to refrain from buying clothes made in countries like Bangladesh, you actually increase the likelihood of exploitative child labor.

2) As for cocoa and slave labor, I can understand the confusion -- there's been a lot of media reportage of the alleged abuse of children to cultivate cocoa in West Africa. In 2000, Save the Children-Canada estimated that “15,000 Malian children have been forced to work in virtual slavery on plantations in the Ivory Coast” to harvest cocoa for multinational corporations such as Nestlé or Hershey. This figure was cited in many press accounts of the problem of child labor in West African cocoa plantations. A November 2001 cover story in the New York Times Magazine painted a harrowing picture of one child’s ordeal as a plantation worker.

However, this meme has turned out have little basis in fact. Three months after it originally appeared, the New York Times Magazine cover story was revealed to be a fabrication; the author’s titular character was in fact a composite, and events in the story were based on “extrapolation”. The New York Times later reported that the 15,000 figure is also a myth.

The ILO and USDA financed study by the International Institute of Tropical Agriculture, "Child Labor in the Cocoa Sector of West Africa." The ITTA study does an excellent job of chronicling labor abuses, but the big-picture point is on page 12:

The quantitative surveys revealed that the recruitment and employment of both children and adults from outside the family [to work on cocoa plantations] as permanent salaried workers was relatively uncommon. In RCI [Ivory Coast], an estimated 0.94% of farmers indicated that they employed children as permanent full-time workers, while in Ondo State, Nigeria, an estimated 1.1% of farmers reported doing so. In Ghana and Cameroon, none of the farmers questioned reported employing children as salaried workers. An estimated 5120 children were employed as full-time permanent workers in the RCI (versus 61 600 adults), while in Ondo State, Nigeria, 1220 children (versus 11 800 adults) were full-time permanent workers. In the RCI, an estimated 4630 farmers were employing salaried child workers.

3) On Wal-Mart, I'll just refer to Jason Furman's analysis of the welfare effects of big-box retailers.

UPDATE: The flagellation continues in the Chronicle's discussion board:

I'm in an area that focuses on social justice and responsibility along environmental, gender, political, and economic lines. Know what I'm doing this afternoon? Going to the WalMart to buy a product I haven't been able to find anywhere else. After I finish my tropical fruit and non-organic, non-fair trade coffee and take a 20-minute shower, of course.

It is really difficult to have ideals and still live in the world.

World trade talks have collapsed. The Financial Times' Alan Beattie and Frances Williams explain:

A last-ditch meeting in Geneva of the six core “Doha round” negotiators – India, Brazil, the US, EU Japan and Australia – broke up amid recriminations over irreconcilable differences about farm liberalisation. The US continued to argue for big cuts in farm import tariffs to open up markets for its farmers, a demand fiercely rejected by the European Union, Japan and India, who said America had first to go further in offering to cut agricultural subsidies.

The Doha round, which began in November 2001, will now enter indefinite suspension unless and until a consensus within the World Trade Organisation’s 149 member countries can be found to revive it.

Last year, the World Bank estimated that global gains from trade liberalisation would equal roughly $287 billion, of which $86 billion would accrue to developing nations, lifting at least 66m people out of poverty. Activist groups including Greenpeace and Oxfam were quick to condemn both Washington and Brussels for intransigence over agricultural subsidies, saying that rich-world self interest is leaving the poor to suffer.

Without further progress at the WTO, those keen on liberalising trade will focus on regional and bilateral agreements. These are already proliferating... just about every one of the WTO's 149 members is a party to a regional trade agreement of some sort.

But these smaller agreements are a poor substitute for global progress. While they improve flows within the deal, they distort markets by favouring certain countries over others, even if their goods offer less economic value. The proliferation of special regulations, which companies must spend time and money to understand, does nothing to free up trade generally.

Historical experience provides a little hope but not firm ground for optimism. The previous “Uruguay round” of trade talks was in essence suspended in 1990 after similar disagreements between countries. Arthur Dunkel, then director-general of the WTO’s predecessor organisation, continued to take soundings among member countries and produced his own “Dunkel draft” suggestion for a final deal a year later, leading eventually to a final agreement in 1994.

But the current situation differs from 1990 in two respects: Pascal Lamy, the WTO’s director, has already been deeply involved in trying to get countries to agree, and because the White House is likely to lose the “fast-track authority” granted by Congress when it comes up for renewal next year.

WTO members can continue negotiating, but if the world’s largest economy cannot pass trade deals through its legislature, it seems unlikely the talks will have any urgency.

UPDATE: Simon Lester has a good roundup of who is blaming who for the collapse of the talks.

There's not a lot of good news out there today, so let's engage in a little counter-programming before we get to it.

From the Guardian's science correspondent Ian Sample:

A British drug company is seeking permission to conduct the first human trials of an experimental vaccine against the avian flu virus.

The vaccine will target the lethal H5N1 strain of avian flu, which has spread rapidly throughout bird populations in Asia and has been brought to Europe by flocks of migrating waterfowl. The World Health Organisation has reported 97 human cases of avian flu since December 2003, with at least 53 deaths....

A vaccine against avian flu could significantly bolster efforts to limit the infection's spread if a pandemic strain emerges, by adding to government stockpiles of the anti-viral drugs Tamiflu and Relenza.

Unlike conventional vaccines, which use weakened strains or fragments of the harmful virus, the test vaccine uses strands of DNA that can be made quickly and cheaply.

In the trial, volunteers will be vaccinated using an alternative to a needle. Instead, a handheld device will blast harmless, microscopic gold particles coated in the vaccine into the upper arm at supersonic speeds.

Tests of a DNA vaccine designed to give protection against seasonal flu were published earlier this year and showed that it offered 100% protection, based on the immune response of volunteers.

So far, the DNA vaccine against avian flu has only been tested in animals, where it has also proved successful.

"Our tests have shown that it stops the infection entirely, to the point that we can't even measure the virus in the animals afterwards," said John Beadle, chief medical officer of the Oxford-based company PowderMed.

The company's research suggests humans would need two doses of the vaccine, a prime and a boost. Calculations suggest that less than half a kilogram of DNA would be enough to offer two doses of the vaccine to everyone in Britain.

Senator Richard Lugar has an op-ed in the International Herald-Tribune that sounds a theme familiar to readers of danieldrezner.com -- high energy prices hurt the developing world a hell of a lot more than the developed world:

As we in the West contend with spiraling world crude prices, we must remember that they can be devastating to developing countries, blunting the effectiveness of foreign aid and the push for democracy. This is more than a humanitarian issue - it is also a global security concern that demands our urgent attention.

By stunting development and increasing poverty, high world oil prices contribute to instability that can lead to internal civil strife and regional conflict. More ominously, they help build the resentments and frustrations that breed terrorism. That's why the United States' quest for energy security must encompass global energy security too. Lessening America's petroleum use will not have its maximum potential geopolitical impact if others simply consume the oil we save, keeping markets tight and prices high, with the producers in control and the poor- country importers impoverished.

Rob Long has a very amusing piece at ForeignPolicy.com on how celebrities can maximize their star poweer to pursue foreign policy agendas:

Welcome to the fascinating world of foreign policy! It’s wonderful that Hollywood has taken such an interest in world affairs—the hotel lobbies and corridors of Davos have never been so glittering, and hotspots in Africa and the Middle East are sprinkled with stardust. Boffo kudos, as we say in the business.

The world, though, is a complicated and treacherous place. It’s impossible, really, to convey the pitfalls and booby traps waiting out there as you venture far outside the 310 area code. Playing to the lefty Academy Awards crowd is fine, but that instinct may get you into trouble in, say, Caracas or Pyongyang. If you say something that delights a Fidel Castro or a Mahmoud Ahmadinejad, chances are it’s going to go over badly back home—and for good reason.

Still, your success in navigating the ferociously competitive world of Hollywood is the ideal training for global activism. Think about it: The entertainment industry is characterized almost entirely by shrieking egomaniacs, psychotic dictators, money-losing operations, clueless bureaucrats, corrosive nepotism, enormous travel allowances, and fraudulent accounting practices—not unlike most large nongovernmental organizations, the World Economic Forum, and the continent of Africa. You are well prepared to succeed on the world stage.

Honestly, Davos is a no-win situation for you. You won’t be the most famous person there; that honor will inevitably go to Bill Clinton. You won’t be the richest; that honor will go to Bill Gates. You won’t really get the respect or the attention that you deserve. It’s sort of like going to the Oscars when you’re not nominated. No matter how famous you are, people will wonder what, exactly, you’re doing there. You’ll be photographed in a swank hotel lobby with a lot of short men in dark suits. Someone will try to hire you to appear in a commercial in Bahrain. The scientists and techies will ignore you. The Economist will print something snarky about you. Davos is a terrible costar.

Venezuelan President Hugo Chavez wants OPEC to join his anti-American bandwagon. The Financial Times' Carola Hoyos reports that he hasn't been all that successful:

Ministers of the Organisation of the Petroleum Exporting Countries, the oil cartel, on Thursday united against Venezuela to reject its call to cut the group’s production.

The vast majority of the 11 delegates meeting in Caracas on Thursday said they were set to agree to keep pumping at nearly maximum capacity. Opec produces 30m barrels a day of oil, about 40 per cent of the world’s total.

Saudi Arabia, the world’s biggest oil producer, led the cartel’s efforts to counter Venezuela and Iran’s attempts to use Opec as a tool against the US.

Oil prices are at near record highs and a reduction in Opec’s production would have led to a further rally, analysts said. They warned that this could have undermined world economic growth and pushed up inflation.

Hugo Chávez, Venezuela’s populist president, has tried to use Opec to spread his anti-Washington message and to push energy nationalism.

One way he has done this is to back Bolivia to join Opec as an observer and Ecuador, which was a member of the group from 1973-1992, to rejoin as a full member. Both countries have recently moved to wrest more control of their energy assets from international companies. Bolivia in March sent its military to take over its gas fields.

Mr Chávez, in addressing Opec ministers, said: “We are third world countries, countries that for years and years have suffered colonialism, countries that are condemned by much more powerful states.”

He added: “The life of our organisation has not been easy. We are under an unfair way of exploitation. Oil is the reason of the permanent aggression of the US empire. Oil did not benefit the Venezuelan people while the US empire was drinking our oil,” Mr Chávez said.

Like a tenor reaching the climax of his aria, Mr Chavez grew more and more animated: “Opec is a liberator of countries in Asia, Africa, Latin America and the Middle East,” he concluded.

The faces of other Opec ministers revealed their unease with such inflammatory rhetoric. Saudi Arabia, especially, has tried to stop Venezeula from hijacking the meeting to push its nationalist cause and its spread its criticism of the US, Opec’s biggest customer. Many Opec countries do not consider themselves third world nations. (emphasis added)

For now, however, let's focus on Chavez's bolded statement, because it's pretty much the opposite of the truth. If one posits that the cartel's reason for existence is to keep the price of oil at artificially high levels, then OPEC does little for the third world except to impoverish countries in Asia, Africa, Latin America and the Middle East that are not members of OPEC.

How is Africa fairing with past year's rise in oil prices? Let's check with the African Development Bank:

According to the African Development Bank (ADB), current oil prices will certainly translate into a higher average inflation of 2.6 percentage point for oil-importing African countries in 2006. High oil prices will exert a heavy toll on the finances of many oil-importing African countries. Increasing oil prices spell real economic danger for these countries as many companies faced with higher energy bills may attempt to cut down on cost and one way of achieving this is to lay off some workers. In the event of such a situation, governments of affected countries will see their tax bases eroded. Lay-offs in one sector of the economy could have huge and devastating effects on the entire economy and many African countries already caught up in the throes of an economic crisis, may have to deal with more complex economic and political situations.

Lower employment prospects and higher inflation rates will obviously lower the purchasing power of the poor and this will have a ripple effect on the entire economy. Clearly, higher petroleum cost will increase commuting cost, and in the case of agricultural economies, – which many African economies are – the cost of getting the harvest to the markets will rise, pushing therefore the cost of food up and making it well beyond the means of the underprivileged who, prior to the escalating oil prices, were already living in very straightened financial circumstances.

Similarly, another danger that escalating oil prices pose to many African economies stems from the fact that even development banks such as the ADB, which finances many projects on the continent, will be affected. Firstly, many ongoing thermal power production projects which are being implemented on the basis that oil, the main input in those power plants, will be affordable. Secondly, higher energy prices will certainly affect a number of other key inputs which affect both the rate of return of existing projects and the choice of future ones. Infrastructure programs will cost more because construction materials are energy-intensive and this will reduce the Bank’s ability to handle many development projects on the continent. This situation is certainly bad news for many struggling African economies which have benefited from projects financed by ADB. The financial injections that ADB-financed projects bring to their economies may reduce or even dry up if world oil prices remain a huge challenge to the global economy.

The region of developing Asia and the Pacific is potentially vulnerable to high oil prices. It is a large net importer of oil (in this section oil is taken to include petroleum energy products excluding natural gas) and much of its rapidly expanding energy needs are met by oil. Developing Asia produces about 11% of the world's crude oil, but consumes more than 20% of it, and this gap is widening. Economies in developing Asia are nearly as oil intensive in energy consumption and much less energy efficient than most industrial countries. For each unit of gross domestic product (GDP), measured at market exchange rates, developing Asia consumes nearly five times as much energy as Japan and nearly three times as much as the United States (US).

Despite its dependency on oil and a threefold increase in nominal oil prices since 2003, the region has performed well economically. But past resilience does not mean that developing Asia is immune to high oil prices. Signs of stress are indeed starting to surface: inflation is creeping up; fuel subsidies are beginning to cast a large shadow over fiscal prospects in some places; and high oil prices may become a prominent factor that will further prolong the region's generally anemic investment demand--outside the People's Republic of China (PRC)--that has prevailed since the Asian crisis.

In fact, let's just excerpt this 2004 International Energy Agency report to see the effect of high oil prices on the non-OPC members of the developing world as a whole:

The adverse economic impact of higher oil prices on oil-importing developing countries is generally even more severe than for OECD countries. This is because their economies are more dependent on imported oil and more energy-intensive, and because energy is used less efficiently. On average, oil-importing developing countries use more than twice as much oil to produce a unit of economic output as do OECD countries. Developing countries are also less able to weather the financial turmoil wrought by higher oil-import costs. India spent $15 billion, equivalent to 3% of its GDP, on oil imports in 2003. This is 16% higher than its 2001 oil-import bill. It is estimated that the loss of GDP averages 0.8% in Asia and 1.6% in very poor highly indebted countries in the year following a $10 oil-price increase. The loss of GDP in the Sub-Saharan African countries would be more than 3%.

Hugo Chavez has zero interest in helping the countries of the developing world. And it's a good thing for the developing world that the rest of OPEC chooses to ignore him.

In the Financial Times, George Parker and Tobias Buck make an argument about EU regulation that sounds very, very familiar:

Seen from some European capitals, the accession of Bulgaria and Romania in 2007 or 2008 is a worrying sign of overstretch, fuelling fears that the EU is becoming too cumbersome and too diverse to have real clout in the globalised world.

In Washington there is another view. Senior officials see the latest step in the creation of a behemoth that will use its economic weight to impose European values on the rest of the world, often through excessive regulation.

According to Rockwell Schnabel, the former US ambassador to Brussels, Europe is "increasingly seeking to act as the world's economic regulator".

Little surprise then that Mr Schnabel's successor, Boyden Gray, is not a career diplomat but a top regulatory lawyer, whose mission is to minimise transatlantic friction between the world's two biggest trading partners.

On Thursday Mr Gray set out plans to improve regulatory co-operation between Europe and the US but added: "We're not interested in convergence if it would mean raising the regulatory burden in the domestic US market.

"From a US perspective, the main problem is less that our regulations differ than a general sense that Europe is overregulated and that this overregulation is stifling growth," he told the European Policy Centre think-tank...

"It is a huge advantage if you are the one setting the standards, because it is always better to make the policies rather than to follow them. That is also hugely important for our industry," says the spokesman for Günter Verheugen, the EU industry commissioner.

The New York Times' Donald McNeil Jr reports on an encouraging trend in the place where avian flu started:

Even as it crops up in the far corners of Europe and Africa, the virulent bird flu that raised fears of a human pandemic has been largely snuffed out in the parts of Southeast Asia where it claimed its first and most numerous victims.

Health officials are pleased and excited. "In Thailand and Vietnam, we've had the most fabulous success stories," said Dr. David Nabarro, chief pandemic flu coordinator for the United Nations.

Vietnam, which has had almost half of the human cases of A(H5N1) flu in the world, has not seen a single case in humans or a single outbreak in poultry this year. Thailand, the second-hardest-hit nation until Indonesia recently passed it, has not had a human case in nearly a year or one in poultry in six months.

Encouraging signs have also come from China, though they are harder to interpret.

These are the second positive signals that officials have seen recently in their struggle to prevent avian flu from igniting a human pandemic. Confounding expectations, birds making the spring migration north from Africa have not carried the virus into Europe.

Dr. Nabarro and other officials warn that it would be highly premature to declare any sort of victory. The virus has moved rapidly across continents and is still rampaging in Myanmar, Indonesia and other countries nearby. It could still hitchhike back in the illegal trade in chicks, fighting cocks or tropical pets, or in migrating birds.

But this sudden success in the former epicenter of the epidemic is proof that aggressive measures like killing infected chickens, inoculating healthy ones, protecting domestic flocks and educating farmers can work, even in very poor countries.

The Financial Times has a few stories on the ups and downs of global economic negotiations. Negotiations about trade barriers appear to be going in one direction, while negotiations about global imbalances seem to be going forward.

Frances Williams reports on the backtacking on Doha:

Pascal Lamy, director-general of the World Trade Organisation, will on Monday ask WTO members to work for a crucial deal on farm and industrial goods by early summer, after key trading powers acknowledged their self-imposed April 30 deadline was out of reach.

The meeting on Friday, attended by about 25 rich and poor WTO members agreed to call off plans for ministerial talks this week.

The US and European Union blamed each other for the setback. Peter Mandelson, EU trade commissioner, accused the US of lacking realism on agriculture, while the US trade representative’s office said it wished the EU would put the same energy into the negotiations as it did in finger-pointing.

In Geneva, diplomats said failure to agree detailed guidelines for cutting farm subsidies and agricultural and industrial tariffs was disappointing but not “the end of the world”.

Leading countries secured a breakthrough in the governance of the global economy at the weekend, transforming the role of the International Monetary Fund and putting it at the centre of a more co-operative effort to resolve trade imbalances.

The IMF was given a mandate to start immediate negotiations between the countries with the largest trade imbalances. Its goal will be to secure agreements to reform economic and exchange rate policies to close trade gaps and prevent a global financial crisis. If successful, it could lead to big changes in economic policies, including an appreciation of China’s renminbi.

Causes of global imbalances will come under the spotlight in the first IMF “multilateral consultation”, including low levels of US savings, the inflexibility of the Chinese exchange rate and surpluses in Japan, Germany and among oil producers. Participating nations will use the IMF as a forum to seek solutions to these problems.

Rodrigo Rato, IMF managing director, said the IMF’s analysis would be published, putting additional pressure on countries to agree, since it would not have any tools to force policy changes.

All IMF members, including China, supported the new procedures. IMF members also agreed that some emerging countries should be given greater ownership and voting rights.

Mr Rato said the changes to the fund’s purpose in addressing global imbalances was “a very important step in the role of the fund in tackling global imbalances but also in producing an encouraging, co-operative response to global issues”.

The US, in particular, is pleased at the growing recognition that its record trade deficit is the product of global forces, not just its own government deficit, and has to be resolved in a way that sustains global growth.

A senior US official said: “I think that surplus countries are beginning to understand that there will be no adjustment unless they are a part of it.”

Even senior G7 officials sceptical about the chances of progress were delighted.

I need to look into the nature of the agreement a bit longer, but to indicate the daunting nature of what's involved here, consider this paragraph from the IMF communiqué:

Following the discussion at the Global Imbalances Conference held at the IMF on April 21, the Committee confirms that the agreed policy strategy to address imbalances remains valid. Key elements include raising national saving in the United States—with measures to reduce the budget deficit and spur private saving; implementing structural reforms to sustain growth potential and boost domestic demand in the euro area and several other countries; further structural reforms, including fiscal consolidation, in Japan; allowing greater exchange rate flexibility in a number of surplus countries in emerging Asia; and promoting efficient absorption of higher oil revenues in oil-exporting countries with strong macroeconomic policies. Given economic interlinkages, all countries and regions will have a role to play by increasing the flexibility of their economies and adapting to changing global demand patterns.

When it's not as bad as a national catastrophe. Tyler Cowen links to a Washington Post story by Craig Timberg on how AIDS infection rates in most of Africa have been wildly overestimated:

Researchers said nearly two decades ago that this tiny country was part of an AIDS Belt stretching across the midsection of Africa, a place so infected with a new, incurable disease that, in the hardest-hit places, one in three working-age adults were already doomed to die of it.

But AIDS deaths on the predicted scale never arrived here, government health officials say. A new national study illustrates why: The rate of HIV infection among Rwandans ages 15 to 49 is 3 percent, according to the study, enough to qualify as a major health problem but not nearly the national catastrophe once predicted.

The new data suggest the rate never reached the 30 percent estimated by some early researchers, nor the nearly 13 percent given by the United Nations in 1998.

The study and similar ones in 15 other countries have shed new light on the disease across Africa. Relying on the latest measurement tools, they portray an epidemic that is more female and more urban than previously believed, one that has begun to ebb in much of East Africa and has failed to take off as predicted in most of West Africa....

Most of the studies were conducted by ORC Macro, a research corporation based in Calverton, Md., and were funded by the U.S. Agency for International Development, other international donors and various national governments in the countries where the studies took place.

Taken together, they raise questions about monitoring by the U.N. AIDS agency, which for years overestimated the extent of HIV/AIDS in East and West Africa and, by a smaller margin, in southern Africa, according to independent researchers and U.N. officials.

"What we had before, we cannot trust it," said Agnes Binagwaho, a senior Rwandan health official.

Years of HIV overestimates, researchers say, flowed from the long-held assumption that the extent of infection among pregnant women who attended prenatal clinics provided a rough proxy for the rate among all working-age adults in a country. Working age was usually defined as 15 to 49. These rates also were among the only nationwide data available for many years, especially in Africa, where health tracking was generally rudimentary.

The new studies show, however, that these earlier estimates were skewed in favor of young, sexually active women in the urban areas that had prenatal clinics. Researchers now know that the HIV rate among these women tends to be higher than among the general population.

The new studies rely on random testing conducted across entire countries, rather than just among pregnant women, and they generally require two forms of blood testing to guard against the numerous false positive results that inflated early estimates of the disease. These studies also are far more effective at measuring the often dramatic variations in infection rates between rural and urban people and between men and women.

That said, this is still unambiguously good news.

In a speech last month, WTO Director-General Pascal Lamy said that the Doha round was approaching a "moment of truth"

Christopher Swann and Edward Alden report in the Financial Times about what House Ways and Means Chair Bill Thomas told the truth to an audience at AEI about the future of U.S. trade policy:

Bill Thomas, President George W. Bush’s most important congressional ally on trade liberalisation, is urging the administration to focus its energy on concluding bilateral trade deals, warning on Monday that the Doha multilateral round of talks was heading for failure because of conflicts between the US and the European Union.

“The US and the EU have irreconcilable differences on trade, and when you have irreconcilable differences the best thing you can do is call it off,” said Mr Thomas, Republican chairman of the influential House ways and means committee, who will retire from Congress this year.

He also warned about the growing influence of protectionism in the US, saying the “anti-free trade forces” were poised to capture control of Congress in this year’s election.

The pessimistic conclusions from Mr Thomas, who has repeatedly come to the rescue of the Bush administration in pushing controversial trade deals through Congress, will not be reassuring to the administration’s efforts to conclude the Doha round negotiations.

I've beeen jamming on a paper I need to finish within the week, which means I haven't been able to cover the whole immigration debate as thoroughly as Mickey Kaus.

[So what's your position?--ed. I think guest worker programs make little economic or political sense. I'd rather vastly expand the legal flows of immigrants who want U.S. citizenship, while simultaneously investing more in border security schemes -- though I'm pessimistic about the latter working terrbly well.]

That said, I can link to this interesting Financial Times story by Richard Lapper on the extent to which Latin America relies on worker remittances as a source of capital inflows:

Migrant workers from Latin America and the Caribbean sent home $53.6bn to their families last year, an increase of 17 per cent on 2004.

The rise – documented in a survey to be announced on Thursday by the Inter-American Development Bank – confirms Latin America’s position as the biggest market in the world for remittances.

For the third consecutive year, remittances to the region exceeded the combined flows of direct foreign investment and overseas economic aid....

An estimated 25m-27m Latin Americans are living and working abroad, 22m of them in the developed markets of North America, Eur-ope and Japan. Mr Terry said migrant workers from the region now made up more than 20 per cent of the labour force in Madrid, Spain’s capital. In the US, Latin American and Caribbean workers constitute an average of 12 per cent of the labour force. “Family by family, worker by worker, migrants are redrawing the map of global labour markets,” Mr Terry said.

Improvements in techniques used to monitor the flows of remittances in part accounted for the sharp rise last year. Many migrants continue to use informal channels, and the total could be more than $59bn.

Countries nearest the US have seen the biggest flows, with Mexico drawing some $20bn of foreign exchange earnings from remittances. The five countries of Central America and the Dominican Republic received $11bn.

Brazil got $6bn, Colombia $4bn and the four other Andean economies a total of $9bn.

Scientific American's David Biello reports on a important finding: why, so far, the H5N1 avian flu virus has not passed from human to human yet:

A virus's ability to spread is the key to its ability to create a pandemic. New research shows that this bird flu currently lacks the protein key to unlock certain cells in the human upper respiratory tract, preventing it from spreading via a sneeze or a cough.

Virologist Yoshihiro Kawaoka of the University of Wisconsin and University of Tokyo and his colleagues tested strains of H5N1 isolated from respiratory tissue in the noses, throats and lungs of infected humans. Although regular human flu viruses bound easily with the receptors found in the nose and throat cells, H5N1 strains attached only to those receptors on cells found in the deepest regions of the lungs.

"Deep in the respiratory system, receptors for avian viruses, including avian H5N1 viruses, are present," Kawaoka explains. "But these receptors are rare in the upper portion of the respiratory system. For the viruses to be transmitted efficiently, they have to multiply in the upper portion of the respiratory system so that they can be transmitted by coughing and sneezing."

....the findings suggest one way in which H5N1 must mutate if it is to become a highly contagious virus, the researchers argue in their paper in today's Nature. It also reveals a way to monitor for the emergence of such a strain. "Identification of the H5N1 viruses with the ability to recognize human receptors would bring us one step closer to a pandemic strain," Kawaoka says. "Recognition of human receptors can serve as molecular markers for the pandemic potential of the [isolated strains]."

John Thornhill reports in the Financial Times that China doesn't like the way people are bitching about globalization:

Long Yongtu, the diplomat who negotiated China’s entry into the World Trade Organisation, has urged western governments to stop politicising trade and start telling their voters the truth about globalisation.

He said that some politicians in Europe and North America had been blaming China for problems in their own economies that they had failed to tackle themselves.

“There are many misconceptions about globalisation in Europe and North America,” he said. “Governments should not deliberately politicise trade and economic matters.”

China and other developing nations in Asia did not like to be a scapegoat, he said on Saturday at the World Deauville Conference in France, which is designed to strengthen relations between Asia and Europe. “We have to have more public education to understand that globalisation is unavoidable.”

[You're saying that these things are a big deal?--ed. I'm much less troubled than most of my readers on China's state interventions -- it's their inefficient policies, not ours. However, to ask Western governments to keep politics and economics separate when the Chinese state can't seem to do the same thing is a bit rich.]

UPDATE: Based on other FT stories, I'd have to conclude that this exhortation has had exactly zero impact on either the United States or the European Union.

The first rule of watching Fight Club -- try not to think about the plot holes in Fight Club.

Naturally, I violated this rule the first and only time I watched it. The thing that kept running through my head was, "Gee, all of the people who supposedly hold these degrading jobs seem to be Anglos. I'm pretty sure in the real world a large fraction of these jobs would be taken by immigrants."

I raise this because of the front page of the Chicago Tribune this morning:

In a show of strength that surprised even organizers, tens of thousand of immigrants poured into the Loop Friday, bringing their calls for immigration reform to the heart of the city's economic and political power.

What started as a word-of-mouth campaign, then spread through the foreign language media, grabbed the attention of the entire city by midday, as a throng 2 miles long marched from Union Park on the Near West Side to Federal Plaza.

Police estimated the crowd as large as 100,000, making it one of the biggest pro-immigrant rallies in U.S. history, according to national advocates.

Observers said the turnout could galvanize both sides in the immigration debate, launching a grass-roots pro-immigrant movement while provoking a backlash among those who want stricter controls.

The trigger for the rally was a controversial federal bill that would crack down on those who employ or help illegal immigrants. But the broader message--carried mostly by Mexicans, but also by a smattering of Poles, Irish and Chinese--was that immigrants are too integral and large a part of Chicago to be ignored.

As they transformed the Loop with their presence, immigrants made a powerful statement elsewhere by their absence.

Without his immigrant employees, a Northwest Side body shop owner gave up and closed for the day. An Italian restaurant in Downers Grove relied on temps to cook and managers to bus tables. High school students walked out en masse....

Whole shifts of workers left their jobs to underscore the importance of immigrant workers. One server from an Italian restaurant came in his work tie and apron, draped with a U.S. flag. Construction workers, still wearing hardhats, came straight from their job sites. Clerks from the El Guero market in Aurora piled into the store's delivery van, riding on produce boxes.

Alex Garcia and about 10 co-workers from a Joliet commercial sign company rode a Metra train to Chicago's Union Station, walked out to Union Park, and then retraced their steps as they marched back to the Loop.

"Most people don't realize how much work we do, but it's part of their daily lives," he said. "We are putting up all the buildings and cooking all the food. Today, they'll understand."

David Ignatius' column in today's Washington Post echoes some recent speculation about why globalization hasn't led to the kind of moderate, secular modernization predicted by the likes of Tom Friedman and other Davos men:

So why does the world feel so chaotic? Why is there a growing sense that, as Francis Fukuyama put it in a provocative essay in last Sunday's New York Times Magazine, "More democracy will mean more alienation, radicalization and -- yes, unfortunately -- terrorism"?....

A second explanation of the connectedness paradox comes from Charles M. McLean, who runs a trend-analysis company called Denver Research Group Inc. (I wrote a 2004 column called "Google With Judgment" that explained how his company samples thousands of online sources to assess where global opinion is heading.) I asked McLean last week if he could explain the latest explosion of rage in our connected world -- namely the violent Islamic reaction to Danish cartoon images of the prophet Muhammad.

McLean argues that the Internet is a "rage enabler." By providing instant, persistent, real-time stimuli, the new technology takes anger to a higher level. "Rage needs to be fed or stimulated continually to build or maintain it," he explains. The Internet provides that instantaneous, persistent poke in the eye. What's more, it provides an environment in which enraged people can gather at cause-centered Web sites and make themselves even angrier. The technology, McLean notes, "eliminates the opportunity for filtering or rage-dissipating communications to intrude." I think McLean is right. And you don't have to travel to Cairo to see how the Internet fuels rage and poisons reasoned debate. Just take a tour of the American blogosphere.

What the f@#$ does Ignatius know about blogs???!!! He's just a card-carrying member of the ELITE MAINSTREAM MEDIA!! ATTICA!!! ATTICA!!!!!

OK, got that out of my system.

I see the point that Ignatius and Fukuyama are trying to make -- that democratization creates real short-term problems by allowing radicals to take over governments. However, as I've said repeatedly, unless radical or revolutionary groups succeed at making the trains run on time, these groups (and blogs) become discredited and illegitimate over time. More generally:

[I]lliberal democracies are [not] necessarily better for world politics than slowly reforming authoritarian states are. But they are not necessarily worse, either. It's more a question of timing -- illiberal states that become democratic are more likely to have problems sooner rather than later, while authoritarian states that are slowly democratizing are likely to have problems later rather than sooner.

Readers may have noticed that I haven't posted on the whole cartoon business. To be honest, I didn't think it was that big a deal. Clearly, some Muslims disagree.

So, comment away. Click here or here for useful timelines.

A lot of blogs have posted deep, deep thoughts about the state of Islam and the perceptions of Muslims in the world. I'm afraid I can't muster anything beyond two quick, cryptic observations: a) there's a difference between a democracy and a liberal democracy, and it's clear that the Muslims exercised by this cartoon do not distinguish between the two at all, and b) this is neither the first or the last time we're going to see protests of this nature.

UPDATE: This Andrew Sullivan post seems pretty powerful to me.

Lurking among the many fears of anti-immigration advocates -- and Sam Huntington -- is the fear that the large influx of Mexican immigrants into this country will have divided loyalties -- or worse, develop no sense of American identity. Another fear is that this is a conscious policy of the Mexican government in order to wield influence in the United States.

This brings me to a story by Oscar Avila and Hugh Dellios in the Chicago Tribune about Mexican government efforts to get expats to vote in Mexican elections. Apparently it's not going so well:

At a registration drive in Pilsen, radio host Javier Salas tried to energize his countrymen about their historic opportunity to vote in Chicago for their homeland's next president. "Let's hear it!" he shouted into his microphone Thursday. "Viva Mexico!"

But Salas later acknowledged that few are tuning in to that message: Three days before the registration deadline, it appears that the widely heralded debut of Mexican expatriate voting has fizzled.

Since registration started in October, only about 15,500 Mexicans in the U.S. have registered to vote by mail in the July presidential election, of an estimated 4 million eligible voters.

When the Mexican Congress approved the plan last year, organizers predicted a turnout of about 300,000 voters....

It's possible that many would-be voters are waiting until the last minute, election officials say, or that the final publicity push will create momentum.

But for now, an experiment billed as a celebration of Mexican democracy has devolved into fingerpointing on both sides of the border, while casting doubts on the commitment of expatriates to their homeland.

No one seems happy with the process, which required immigrants to register by paid certified mail and travel to Mexico to get electoral cards, effectively shutting out undocumented immigrants, who cannot easily go home.

"This has all been a failure," grumbled activist Oscar Tellez of the Chicago-based United Network for Immigrant and Refugee Rights. "It is better to have no vote than this turnout."

The hand-wringing has spread to Mexico, where lawmakers and pundits have questioned whether it is worth the government's expense to organize expatriate voting when so few signed up. Mexico's Federal Electoral Institute has spent $10 million on organizing the effort.

There have been a series of avian flu cases reported in Turkey over the past week, and oddly enough there's been some good news from this development.

First, World Health Organization officials are convnced that this isn't a sign of human-to-human transmission:

World Health Organisation (WHO) officials said that the 14 cases of avian flu recently discovered in Turkey were contracted through contact with infected animals and that there is absolutely no evidence that human-to-human transmission is occurring.

The officials said there are different locations where the outbreaks have been confirmed, showing that it is poultry that is infected and that the deadly disease continued to be spread by infected birds and not through contamination between humans.

Second, Elizabeth Rosenthal of the International Herald-Tribune reports on a very interesting development among some of the avian flu diagnoses -- they're not getting sick:

Two young brothers, aged 4 and 5, are being closely watched at the gleaming new Kecioren Hospital here, a police car at the entrance guarding a potential scientific treasure. Though both boys have tested positive for the H5N1 virus after contact with sick birds, neither has any symptoms of the frequently deadly disease.

Doctors are unsure if - for the first time - they are seeing human bird flu in its earliest stages, or if they are discovering that infection with the H5N1 virus does not necessarily lead to illness.

In any case, the unusual cluster of five cases detected in this capital city over the last three days is challenging some doctors' assumptions about bird flu and giving them new insights into how the virus spreads and causes disease.

These cases have raised the possibility that human bird flu is not as deadly as has been thought, and that there may be many mild cases that have gone unreported....

A study released Tuesday in the Archives of Internal Medicine suggested that the H5N1 virus might cause a wide spectrum of disease, but that doctors in Asia might only detect the severest cases, the ones that went to the hospital. The four children in Ankara bolster that theory

Developing....

Concerns about a looming avian flu pandemic have prompted a lot of commentary and blog chatter over the past few months (including from yours truly) about whether governments are adequately pepared to combat an outbreak of avian influenza. However, panicked calls for governments to "do something" without contemplating the costs and risks that come with each strategy generally leads to bad policy.

Consider, for example, that many developed-country governments have been scrambling to load up on the drug Tamiflu as a way to treat the H5N1 variant of the bird flu. In the Financial Times, however, Andrew Jack explains why this might be a problem:

Fresh doubts were cast on the efficacy of Tamiflu as a treatment for bird flu on Wednesday night when one of the world’s most prestigious medical journals published new reports of resistance to the drug and deaths in patients in Vietnam.

Menno de Jong and colleagues from the hospital for tropical diseases in Ho Chi Minh City recorded in the New England Journal of Medicine that four out of eight patients suffering from the H5N1 flu strain and treated with Tamiflu had died, including two who developed resistance.

The reports increase suggested levels of resistance to nearly 10 per cent, or three out of the 31 known human cases of H5N1 treated with Tamiflu, which is marketed by Roche of Switzerland.

The study raises new questions about the drug, which more than 50 governments have ordered in significant quantities in recent months to stockpile as a potential prophylactic and treatment in the case of a flu pandemic.

An accompanying article in the journal reinforced calls for alternative approaches to treatment for a pandemic, including the stockpiling of the rival drug zanamivir, or Relenza.

It is therefore worrisome that personal stockpiling of oseltamivir [Tamiflu] is likely to lead to the use of insufficient doses or inadequate courses of therapy. Shortages during a pandemic would inspire sharing of personal supplies, resulting in inadequate treatment. Such undertreatment is of particular concern in children — the main source for the dissemination of influenza within the community, since they usually have higher viral loads than adults and excrete infectious virus for longer periods. The habit of stopping treatment prematurely when symptoms resolve (a well-established tendency with antibiotic therapy) could also lead to suboptimal treatment of influenza and promote the development of drug resistance....

Like any successful infectious agent, influenza virus will most likely evolve to evade any single drug. By targeting several points in the viral life cycle simultaneously with different drugs, we are more likely to discourage the emergence of viruses that can resist all drugs at once. But we currently rely solely on the neuraminidase inhibitors — and solely on oseltamivir in many situations, such as in patients who cannot use inhaled medication or in patients infected with H5N1 virus, in whom systemic drug levels may be important. We must not abrogate the usefulness of these drugs by exposing circulating influenza to them in such a way as to facilitate the selection of resistant viruses. The study by de Jong et al. confirms that oseltamivir-resistant H5N1 virus is now a reality. The need to learn more about how and when resistance to the neuraminidase inhibitors develops, while we focus on the development of new antiviral drugs, is pressing. This frightening report should inspire us to devise pandemic strategies that do not favor the development of oseltamivir-resistant strains. Improper use of personal stockpiles of oseltamivir may promote resistance, thereby lessening the usefulness of our frontline defense against influenza, and should be strongly discouraged. (emphasis added)

After a long night, the Associated Press is prematurely reporting that a trade deal has been reached:

Negotiators at the World Trade Organization have agreed on a sweeping trade deal dismantling barriers to trade in agriculture, manufacturing and services, India's trade minister said Sunday....

Delegates met overnight into Sunday and managed to overcome differences on a draft text. A final agreement on an exact date was expected later in the day, Indian Trade Minister Kamal Nath said.

"We'll have a definite date," he said. "We have a deal."

Nath said that ending agricultural export subsidies by 2013 would be acceptable to India, one of the leading developing nations and a key player in the rules-setting WTO.

Just one issue remained unresolved as World Trade Organization negotiators worked to reach a series of agreements to end agricultural, manufacturing and service trade barriers, according to a WTO official Sunday.

The issue yet to be settled is the date for ending export subsidies, WTO press officer Emmanuelle Ganne told CNN.

My hunch is that Humpty Dumpty has a decent chance of being put together again -- I think the EU is trying to tell the Brazilians and others it's either 2013 or no deal, and I suspect the Brazilians will take what they can get. One possible explanation for Nath's statement is that the Indians are trying to publicly signal to the Brazilians to accept the deal on the table. That said, the EU folks are exceedingly grumpy right now, so I wouldn't place a great deal of faith in that hunch.

The hard deck for the Ministerial will be 5 AM Hong Kong time on Monday (4 PM Sunday EDT). That's when the Convention Center here has to prep for its next booking.

A side note: one of the amusing features of being in the press room is seeing the pack mentalityof journalism in action. If a sufficient number of journalists are congregating around person A, then that group starts acting like a powerful magnet attracting the individual iron fillings of other journalists. Sometimes this makes a great deal of sense -- as when the EU tspokesman contradicts the India statement. Sometimes it makes no sense -- as when a great throng materialized to get their hands on... a schedule of the Ministerial's closing ceremonies. No one gives a flying fig about that.

UPDATE: Both the AP and Reuters are reporting that there's a deal. The AP story has more details:

WTO negotiators reached a breakthrough on the most contentious issue of their six-day talks, agreeing that wealthy countries would eliminate farm export subsidies by 2013, according to a final draft of the accord. The deal paves the way for a broader agreement to cut trade barriers across various sectors.

The breakthrough, coming after all-night negotiations, appeared to save the World Trade Organization meeting from an embarrassing collapse provided the final draft is approved by all 149 member nations and territories who are meeting later Sunday.

The 2013 date was a key demand of the European Union, which held out against intense pressure from Brazil and other developing nations to phase out a significant proportion of its farm export subsidies by 2010. Developing nations say the government farm payments to promote exports undercuts the competitive advantage of poor farmers.

The revised text also sets April 30, 2006, as a new deadline to work out formulas for cutting farm and industrial tariffs and subsidies - a key step toward forging a sweeping global free trade treaty by the end of next year....

The final draft also calls on wealthy nations to allow duty-free and quota-free privileges to at least 97 percent of products exported by the so-called least developed countries by 2008.

In addition, the draft retained an earlier proposal that rich countries to eliminate all export subsidies on cotton in 2006.

Despite the fact that the WTO negotiations are, at best, making marginal progress, the Korean Peasants Association appears bound and determined to wreak havoc in Wan Chai (the neighborhood where the Ministerial is being held).

The result is that Hong Kong's Secretary for Security made an announcement for the public to leave Wan Chai. Which is great, except for those of us staying in hotels in Wan Chai.

The result is that I've spent this evening looking at policemen sheathed in protest gear -- gas masks, body-length Plexiglass shielding, truncheons, etc. -- while drinking and dining at the hotel buffet along with a healthy number of WTO delegates. It's more than a bit surreal.

The truly bizarre thing is that, having ventured out earlier in the evening, I'm quite certain that the number of curious onlookers outnumbers the actual protestors, the press contingent outnumbers the protestors, and the police most definitely outnumber the protestors. The Korean protestors are certainly causing inconveniences beyond their numbers, but this is a much smaller contingent of activists than were present at either Seattle in 1999 or Cancun in 2003. And any press report suggesting otherwise is full of it.

Do check out Simon's World for a link-rich post on the Ministerial.

A former U.S. trade negotiator during the Uruguay round sent me an e-mail that contained the following:

I haven't keep current, thank goodness, on ag trade policy issues for more than 10 years. However, I suspect the lay of the land hasn't changed much: - Agricultural trade, as usual, is the biggest block to freer trade for agricultural products... but also non-agricultural products since the agricultural stalemate is holding up progress in non-agricultural talks:

- The EU is the biggest block to freer trade in ag products.

- France is the biggest block to the EU accepting freer trade in ag products (and therefore non-ag products).

- French agricultural organizations (especially FNSEA) are the biggest block to the government of France accepting freer ag trade.

- French grain and meat producers are the biggest anti-free trade forces in the FNSEA.

First, small countries have figured out that they can use the need for consensus to threaten walkouts if they don't get something. For example, The Independent's Philip Thornton reports that the west African country of Benin is now a major player:

The mood soured [at the WTO meetings] further when Benin indicated it was prepared to walk out of the talks over the failure of the US to meets its demand to end cotton subsidies.

The last meeting two years ago in Cancun, Mexico, collapsed after a handful of countries walked out over cotton, depriving the WTO of the 100 per cent mandate it needs to strike a deal.

Samuel Amehou, Benin's ambassador to the WTO, said African cotton producers have to compete against vast subsidies paid to US farmers. He said African states would "not accept any consensus that did not take the legitimate interests of the African farmers into account".

He added: "The conference in Hong Kong is the place to hold people to their commitments."

Ibrahim Malloum, the head of the African Cotton Producers Association, said he did not want a repeat of Cancun but added: "We came here to get concrete results, not to hear more proposals that will never be respected."

Kamal Nath, India’s commerce minister, said there would be no deal at the WTO talks in Hong Kong unless developed nations stop demanding concessions from poor countries in exchange for reducing agricultural and other protectionism that should not be there in the first place.

In an interview with the Financial Times, Mr Nath said: “What really upsets me is that developed countries are asking: ‘If we stop doing what we shouldn’t be doing, what are you willing to pay us for it?’”

“That approach is not one which is going to fly.”

He added: “We can’t have our economy shaken by subsidised exports of food, of grains, and at the same time we can’t have our economy shaken just as we are nurturing our manufacturing sector.”

Take sugar, for example: Sugar is highly protected in virtually all major developed and developing countries. It is subject to the following MFN rates, for example: 72 percent in South Africa, 60 percent in India and Japan, 56 percent in high-income developing Asia, 43 percent in the United States, 23 percent in Central America and the EU (and 74 percent in other European countries), 18 percent in China, and 17 percent in Argentina and Brazil. Thus, reforming tariffs on sugar will require virtually all WTO members to liberalize. The EU and the United States are major offenders, but others -- including developing countries -- are not without blame....

[T]he EU also needs compensation for its [agricultural] concessions. Recall that at Cancún it dropped investment, competition policy, and government procurement from the Doha agenda. And because the EU does not have a comparative advantage in agriculture, it is naturally seeking cross-sector reciprocity in the form of liberalization in industrial products and services. The next step in breaking the U.S.-EU impasse is to put offers on industrial products and services on the table quickly. This would be a step forward: the elimination of tariff peaks in developed countries and liberalization by developing countries in trade in the industrial sector promise gains commensurate with agricultural liberalization.

But for tariff reductions to really be beneficial, action will be required of both developed and developing countries. The gains to developing countries from lowering border barriers will be minuscule if reform is limited to developed countries.

Paul Blustein frets in the Washington Post that many developing countries are heading for another financial bubble:

International money managers are pouring funds at a record pace into the emerging markets of Latin America, Asia, Eastern Europe and Africa. Cash is gushing into mutual funds that specialize in emerging markets, and billions of dollars more are flowing into such countries from giant insurance companies and pension funds.

Turkey's stock market is up more than 50 percent this year; Mexico's is up more than 30 percent; Egyptian stocks have more than doubled. And investors are snapping up bonds issued by emerging-market governments with remarkable gusto.

Therein lie the makings of future disasters, in the view of many economists, market veterans and policymakers. Having pumped large sums into emerging markets at a time of low interest rates and high prices for the commodities that many developing countries produce, investors may well bolt when conditions deteriorate, with the sudden outflow of cash devastating economies and plunging governments into default.

"I worry that there's this perfect storm coming for emerging markets," said Kristin J. Forbes, a Massachusetts Institute of Technology economics professor who served until early this year on President Bush's Council of Economic Advisers.

To hear professional investors tell it, their current bullishness is based on the vastly more prudent economic policies that emerging-market nations have adopted. They cite the higher ratings bestowed by credit agencies such as Moody's and Standard & Poor's on countries that only a few years ago were plagued by defaults and currency devaluations. For example, government bonds issued by Mexico, Russia and Poland now qualify as "investment grade."

"Those ratings have come from fundamental improvements in monetary and fiscal policy," said Dario Pedrajo, senior portfolio manager at Biscayne Americas Advisors. "Deficit spending has declined considerably in emerging-market countries."

But skeptics contend that the main reason for the boom is the paltry level of interest rates in the United States, Europe and Japan, which prompts money managers flush with cash to scour the globe for investments providing at least slightly better returns. "There's just a huge amount of money sloshing around looking for a place to go," said Desmond Lachman, an economist at the American Enterprise Institute who, as a Wall Street research analyst, was one of the first to predict doom for Argentina well before its 2001 default.

The problem, Lachman and others said, is that the influx of cash makes the financial strength of many countries look better than it really is -- and deludes government officials into believing that their policies must be near-perfect. "Even Turkeys Fly When the Winds Are Strong" is how Lachman put it in the title of an article he published recently in the magazine International Economy.

What is also surprising is how little attention Latin American investors seem to be paying to the gathering storm clouds over the global economy. How long do they think that global economic growth can be sustained at its recent pace with international oil prices likely to remain at their currently heady levels? Or how long do they think that international commodity prices will remain well bid in a world in which the Chinese economy slows under the weight of its deep macro-economic imbalances and in which Europe stagnates at a time of internal dissension and policy paralysis?

The decline in home bias is reflected in savers increasingly reaching across national borders to invest in foreign assets. The rise in U.S. productivity growth attracted much of those savings toward investments in the United States. The greater rates of productivity growth in the United States, compared with still-subdued rates abroad, have apparently engendered corresponding differences in risk-adjusted expected rates of return and hence in the demand for U.S.-based assets....

[S]tarting in the 1990s, home bias began to decline discernibly, the consequence of a dismantling of restrictions on capital flows and the advance of information and communication technologies that has effectively shrunk the time and distance that separate markets around the world. The vast improvements in these technologies have broadened investors' vision to the point that foreign investment appears less risky than it did in earlier times.

Accordingly, the weighted correlation between national saving rates and domestic investment rates for countries representing four-fifths of world gross domestic product (GDP) declined from a coefficient of around 0.97 in 1992, where it had hovered since 1970, to an estimated low of 0.68 last year.

Does this make any sense? Most people would instinctively say no, and Blustein's implication in his article is that this crazy. My hunch is that it makes a fair amount of sense, because U.S. capital markets and financial institutions possess both a comparative and absolute advantage in coping with risk. This allows them to place large bets in developing country equity markets and earn a higher rate of return than those investing in the U.S.

Then again, I don't have large sums of money invested in the Turkish stock market. Large, wealthy investors are heartily encouraged to post comments on how sanguine they feel about global equity markets.

UNAIDS released a good news/bad news kind of report yesterday about the state of the AIDS epidemic. These paragraphs from their press release capture the nature of the problem:

Despite decreases in the rate of infection in certain countries, the overall number of people living with HIV has continued to increase in all regions of the world except the Caribbean. There were an additional five million new infections in 2005. The number of people living with HIV globally has reached its highest level with an estimated 40.3 million people, up from an estimated 37.5 million in 2003. More than three million people died of AIDS-related illnesses in 2005; of these, more than 500000 were children.

According to the report, the steepest increases in HIV infections have occurred in Eastern Europe and Central Asia (25% increase to 1.6 million) and East Asia. But sub-Saharan Africa continues to be the most affected globally with 64% of new infections occurring here (over three million people).

"We are encouraged by the gains that have been made in some countries and by the fact that sustained HIV prevention programmes have played a key part in bringing down infections. But the reality is that the AIDS epidemic continues to outstrip global and national efforts to contain it," said UNAIDS Executive Director Dr Peter Piot. "It is clear that a rapid increase in the scale and scope of HIV prevention programmes is urgently needed. We must move from small projects with short-term horizons to long-term, comprehensive strategies," he added.

The report recognizes that access to HIV treatment has improved markedly over the past two years. More than one million people in low-and middle-income countries are now living longer and better lives because they are on antiretroviral treatment and an estimated 250 000 to 350 000 deaths were averted this year because of expanded access to HIV treatment....

Levels of knowledge of safe sex and HIV remain low in many countries - even in countries with high and growing prevalence. In 24 sub-Saharan countries (including Cameroon, Côte d'Ivoire, Kenya, Nigeria, Senegal and Uganda), two-thirds or more of young women (aged 15-24 years) lacked comprehensive knowledge of HIV transmission. According to a major survey carried out in the Philippines in 2003, more than 90% of respondents still believed that HIV could be transmitted by sharing a meal with an HIV-positive person.

For five years now, Abbott has worked with Tanzania's government to alleviate the impact of AIDS. The experience has taught the company that the biggest obstacles are less obvious, and less readily overcome, than getting drugs to the villages.

Hospital laboratories are archaic. Treatment wards are overrun with patients. There is little capacity to treat AIDS-related illnesses such as tuberculosis and malaria.

Tanzania cannot adequately care for the orphans of AIDS victims. A social stigma against AIDS victims persists, which deters people from getting tested and treated for the disease.

"People who simplify this into just drop-shipping gobs of drugs into remote areas of Africa, they're nuts," said Miles White, Abbott's chief executive, during a trip to Tanzania last month to review the progress of Abbott's work. "It's a lot more complicated than that."....

Dealing effectively in Africa also means avoiding pitfalls that have hit other donors.

The United Nations-supported Global Fund to Fight AIDS, Tuberculosis and Malaria early this year cut off support for five programs in Uganda, citing widespread mismanagement. In Kenya, skepticism over the government's ability to deliver drugs has led church-backed organizations to form a private distribution company.

Merck & Co. teamed with the Bill & Melinda Gates Foundation five years ago to launch a groundbreaking $100 million program to aid Botswana, where 37 percent of the adult male population has AIDS. But the donors have found it difficult to distribute money, in part because of bottlenecks and logistical difficulties.

Jo Johnson reports in the Financial Times that the Indian government is about to make some major changes in its rules about foreign direct investment:

India's Communist-backed government will on Thursday afternoon consider a sweeping liberalisation of foreign direct investment rules that would kick start a long-stalled programme of economic reforms.

Kamal Nath, India's minister for commerce and industry, has proposed allowing 100 per cent foreign direct investment in a range of sectors, including airport construction, oil & gas infrastructure and cash & carry wholesale trading.

The cabinet will also debate whether to allow FDI in the exploration and mining of coal, lignite and diamonds, and in the cultivation of important plantation crops such as coffee, tea and rubber....

India attracted $5.5bn in FDI in 2004-5, an increase of 18 per cent, but less than a tenth of the inflows into China. The government estimates that $150bn needs to be invested in upgrading the country's infrastructure over the next 10 years.

If the new rules are approved, they will also allow foreign investment to come in by the so-called "automatic route", circumventing a cumbersome approvals process overseen by the Ministry of Finance's Foreign Investment Promotion Board....

The measures will disappoint the US and UK government, however, who have been lobbying aggressively for foreign direct investment thresholds to be allowed in the Indian retail sector and for the ownership ceiling to be raised in insurance. Mr Nath, in an interview on Tuesday, said he would be in a position to put a proposal to the cabinet permitting FDI in retail, allowing companies such as Wal-Mart and Tesco to enter into the $205bn Indian retail market, within three months.

Yesterday Michael Martinez wrote a front-pager for the Chicago Tribune about the influx of Latinos into New Orleans looking for post-Katrina reconstruction work. Today, Leslie Eaton has a similar story in the New York Times.

Some highlights from Eaton's piece:

[A trailer park] is a temporary home for hundreds of LVI's workers, some of whom said they were in the United States illegally. They are commuting into New Orleans, swabbing the mold off walls, ripping the guts out of buildings, removing mountains of soggy debris.

And they are stirring up resentment. Louisianians, from high-level public officials to low-wage workers, have begun to complain about the influx of outsiders they perceive as having come to profit off their pain....

Workers from all over have been pouring into Louisiana, some bused in by contracting companies, others simply turning up on their own in search of jobs. While nobody seems to know how many are here, there is plenty of work; the federal government estimates it will spend more than $450 million just to clean up hurricane debris.

And as that work continues, Louisianians are casting unhappy eyes on everyone from the giant construction companies that won federal contracts to the small-town builders driving big pickup trucks with out-of-state license plates.

Much of the overt hostility is focused on the army of Latino workers who appear to be doing much of the dirtiest cleanup work, often in the employ of those big companies, and often for less money that local workers might insist on....

Employers point out that they are not required to investigate the authenticity of employees' documents. And as for bringing in workers, some say they have no choice.

"People in the area of impact are disjointed, disoriented," said Burton T. Fried, president of LVI Services.

But in places where LVI will be working for a while, it tries to make a transition to local workers, Mr. Fried said. "The purpose is, forgetting morality, that we don't have to pay per diems, food service, transportation," he said....

Hard and unpleasant as cleanup work is, there are Louisianians willing to do it, said Barry Kaufman, the business manager of Construction and General Laborers' Local 689 in New Orleans. Mr. Kaufman has said he has at least 2,000 people willing to take cleanup jobs, although many of them - and the local's hiring hall - are now displaced in Baton Rouge, more than an hour's drive from New Orleans.

"The local guys are trying, but there's nowhere for them to stay," Mr. Kaufman said, adding that one of the camps "looks like Little Mexico."

The situation is new to Louisiana, which has little tradition of attracting large numbers of transient workers, unlike Florida and other booming areas, said Mark Zandi, chief economist for Economy.com. The stagnant economy here has not provided many job opportunities since 2001.

The complaints also reflect the widespread frustration over the continuing lack of housing in the area. Tens of thousands of houses were destroyed by Hurricanes Katrina and Rita, leaving their former residents adrift. Businesses of all sorts are frantically advertising for workers, even as the jobless rate for Louisianians jumped to 11.5 percent in September, from 5.8 percent in August.

This is interesting stuff, but for my money, the Martinez piece in the Tribune is of greater interest because of two points not mentioned by Eaton. I've highlighted them below:

The swelling numbers of Hispanic migrant laborers, legal or not, have raised political tensions. A Tulane University historian speaks of a possible "population swap" between the city's evacuated black population and its new Latino workforce, and the backlash was fueled by New Orleans' African-American mayor, C. Ray Nagin, who recently uttered remarks deemed offensive by some.

"How do I make sure New Orleans is not overrun with Mexican workers?" Nagin asked at an October forum with business people as he discussed the city's future....

As more Latinos move into the region, a September survey found that most New Orleans evacuees in Houston, a large percentage of them black, didn't plan to return.

Officials don't have a count of the Hispanic workers in the Gulf Coast region, but their presence--made more visible because they are working in evacuated areas--has drawn attention to the demographic, economic and legal impacts of such a large, cheap labor force--a good portion of it composed of illegal immigrants. (emphasis added)

This story raises all sorts of uncomfortable questions about immigration, race, and the economy.

For me, the big question remains -- if New Orleans was such a stagnant economy that those displaced to Houston don't want to return, just how much money should be committed to reconstruction efforts?

Over at The Plank, Jason Zengerle castigates the Times and other national outlets for not reporting on Nagin's remarks. Props to Martinez and the Tribune for catching it.

One of the central tenets of the global war on terror and the National Security Strategy is that the primary source of ant-American terror comes from the Arab Middle East. Some, like Peter Bergen, challenge this assumption, arguing that the bigger threat comes disaffected Muslims living in Western societies.

Bill Powell has a long, disturbing essay in Time for Europe that makes Bergen's point for him. The nut paragraphs:

While the precise number of European jihadis is impossible to pinpoint, counterterrorism officials across the Continent believe the pool of radicals is growing. A 2004 estimate by the French police found that around 150 of the country's 1,600 mosques and prayer halls were under the control of extremist elements; in a study of 1,160 recent French converts to Islam, 23% identified themselves as Salafists, members of a sect that has been associated with violent extremism. In the Netherlands, home to 1 million Muslims, a spokesman for the Dutch intelligence service says it is believed as many as 20 different hard-line Islamic groups may be operating. Some are simply prayer groups adhering to radical interpretations of the Koran, while others may be organizing and recruiting for violence. In Britain, authorities say that as many as 3,000 veterans of al-Qaeda training camps over the years were born or based within its borders.

What explains the proliferation of Europe's homegrown radicals? Interviews by Time correspondents with dozens of Muslims across Western Europe reveal consistent answers as to why so many are responding to the call of extremism. Some lack a sense of belonging in European societies that have long struggled to assimilate new immigrants from the Islamic world. Many, in particular younger Muslims, suffer disproportionately from Europe's high-unemployment, slow-growth economies. Others are outraged over the bloodshed in Iraq and the persistent notion that the West is waging an assault on Islam itself. "There's a spreading atmosphere of indignation among normal Muslims that is echoing among the younger generation," says a French investigator with a decade of antiterror experience.

It's echoing loudly, in part because the anger is amplified by 21st century technology. In the past, the alienated would simmer in relative isolation, unable to connect or communicate with those who shared their anger. The Internet has changed that. Critical to the rise of generation jihad has been the ease with which its members can communicate with each other and peruse controversial websites like Tajdeed.net, run by Saudi dissident and London resident Mohammed al-Massari. While his other English site hosts what he calls "philosophical discussions," the Arabic site shows gruesome videos of U.S. and British troops being blown up by Iraqi insurgents, and beheadings of kidnap victims. Al-Massari says he cannot control what is posted there. These days, the very existence of such sites alarms the British government. Prime Minister Tony Blair, in the wake of the summer bombings, vowed to crack down on "specific extremist websites."

Combine alienation, unemployment, political anger and the power of the Internet, and the result is toxic.

The most disturbing aspect of Powell's story is that the turn to radicalism appears to be inculcated among second-generation Muslims:

What's striking about the rhetoric of second-generation radicals... is how much it differs from the experience of many newer arrivals to Europe. Moroccan Farid Itaiben, 30, who has lived outside Madrid for 10 years, came to Europe to find a job and a more comfortable life. "If we had work at home, believe me, we'd get out of Europe," he says. "We're not here to spread the Word, we're here simply to make a living." Itaiben has no patience for jihadis who come to Europe to fight holy war; his brother, Mohammed, was among those killed by the train blasts in Madrid on March 11, 2004. "Those people," he says, "weren't Muslims who did this thing. How can they call themselves Muslims?"

It's a critical question: how do second- generation European Muslims define themselves? Many say they feel a part neither of the country of their birth, nor of their parents' heritage. That some often live on the dole, unable to find work, only enhances their sense of estrangement. The attitude of Riad, a 32-year-old French citizen who has been unemployed since 2002, is all too common. Sitting in a café in the Lyons suburb of Vénissieux, he says, "They say we are French, and we would like to believe that as well. But do we look like normal French people to you?" His friend Karim, 27, insists they are discriminated against because of their long beards. "Who will give us a job when we look like this? We have to fend for ourselves and find a way out."

Celia Dugger has an annoying New York Times story entitled, "Study Finds Flight of Educated Workers Affects Poor Nations." Here's how it opens:

Poor countries across Africa, Central America and the Caribbean are losing sometimes staggering portions of their college-educated workers to wealthy democracies, according to a World Bank study released yesterday.

The study's findings document a troubling pattern of "brain drain," the flight of skilled middle-class workers who could help lift their countries out of poverty, some analysts say. And while the exact effects are still little understood, there is a growing sense among economists that such migration plays a crucial role in a country's development.

The findings are based on an extensive survey of census and other data from the 30 countries in the Organization for Economic Cooperation and Development, which includes most of the world's richest nations.

The study found that from a quarter to almost half of the college educated citizens of poor countries like Ghana, Mozambique, Kenya, Uganda and El Salvador lived abroad in an O.E.C.D. country - a fraction that rises to more than 80 percent for Haiti and Jamaica.

In contrast, less than 5 percent of the skilled citizens of the powerhouses of the developing world, like India, China, Indonesia and Brazil, live abroad in an O.E.C.D. country.

These patterns suggest that an extensive flight of educated people is damaging many small to medium-size poor countries, while the largest developing countries are better able to weather relatively smaller losses of talent, and even benefit from them when their skilled workers return or invest in their native lands, said Frédéric Docquier, a lead researcher for the bank and an economist at the University of Leuven in Belgium.

A few thoughts:

1) Er... has Indonesia been a "powerhouse of the developing world" since 1998?

2) How much of the cause behind brain drains is simple geography? India, China, Brazil, and Indonesia are all quite distant from an OECD country -- especially for inland populations. Haiti and Jamaica are quite close. That's not the only factor (see Mozambique) but it might have been worth a mention.

3) The lead paragraphs make it sound like the brain drain is causing these countries to stay in poverty. This precludes the possibility that there are extant causes -- government corruption, weak property rights, segmented capital markets, inadequate investments in primary education -- that encouage brain drains and keep countries poor at the same time. Brain drains might be an intervening variable, but I'm unconvinced it's an underlying cause.

Here's a link to the actual World Bank report. Go check it out.

Alan Beattie and Victor Mallet report in the Financial Times that the EU's previous trade commissioner -- and current Director-General of the World Trade Organization -- is trying to pressure the current trade commissoner to get the EU's act together on the Doha round:

The European Union is under pressure to improve its offer on farm tariff cuts within 10 days, or risk the cancellation of December's Hong Kong trade summit, according to trade officials.

Officials in Europe say that Pascal Lamy, WTO director-general, has warned them there is no point going ahead with the meeting in December without a more ambitious proposal.

The other leading partners in the negotiations - the US and the Group of 20 developing countries - have also identified the EU's position as the main sticking point. "A clear and rising degree of concern has been expressed to us," said one European Commission official.

The official confirmed that Mr Lamy had suggested that the next week to 10 days was the make-or-break point for the Doha round of talks. The WTO declined to comment.

Cancelling a ministerial meeting, which take place every other year, would require the consent of all 148 members of the WTO and would be an admission that the round had come to a halt.

The EU, which initially offered what the US says is a 24.5 per cent cut in farm tariffs, is working on a second and final offer which it hopes to present later this week, proposing cuts likely to average around 40 per cent.

But such a plan would fall short of what the US says is the minimum acceptable offer - to match the G20's plan for an average 54 per cent cut....

Mr Mandelson wants an offer to at least match the cuts agreed in the previous "Uruguay round" of trade talks, which reduced farm tariffs by an average of 36 per cent. "If there is another bid, it will be a final and non-negotiable one, and will be dependent on progress in the goods and services parts of the talks," the Commission official said. John Tsang, the Hong Kong commerce secretary due to host December's ministerial, told the Financial Times that the process was "at crisis point".

"This agriculture deadlock could really derail the whole project," Mr Tsang said, adding that the EU call for liberalisation in goods and services at the same time was pointless. "We all know agriculture is the key, the EU holds the key, and now is the time to turn the key."

The situation is clearly causing Peter Mandelson to get hot under the collar.

Why exactly is the EU acting so obdurate on this issue? Well, it's mostly the French, and according to Thomas Fuller of the International Herald Tribune, it's the power of terroir (link via Virginia Postrel)

Last week WTO Director-General Pascal Lamy said that, "the engines [of WTO negotiations] are buzzing" -- mostly because of a U.S. proposal to reform its domestic price supports for agricultural goods.

Lamy has an ambitious timetable in the run-up to the December Hong Kong Ministerial conference:

I believe we should stand by our target of circulating a comprehensive draft text in mid-November, which is essential for governments to prepare themselves properly. That is about 30 days from now, counting every day as a working day. The amount of ground to be covered in this very short time is very large. But I am convinced it is not impossible. It can be done, and I believe that a number of issues are ripe for rapid movement once other sectors unblock.

Well.... the problem is that the U.S. isn't the only country that needs to make concessions.

There's the European Union, for example. Deutsche Welle is not optimistic:

First came the proposal to reduce agricultural subsidies; then came the backlash.

Peter Mandelson, the EU trade commissioner, called for reducing subsidies under the bloc's common agricultural policy by 70 percent and farm import duties by 60 percent after 2013.

Then France, along with a dozen other members, called an emergency meeting Tuesday to tie his hands. They accused him of exceeding his mandate, offering too many concessions in negotiations, and want him restricted before he goes to Hong Kong in December.

And then there's the rest of the world -- particularly the developing countries. In the Financial Times, Alan Beattie is not optimistic:

India would like to see rich countries' subsidies cut but wants to keep the tariffs that protect its millions of small, low-productivity farmers.

Moreover, other countries that are even more defensive of their farmers than India and the EU complain that their views are squeezed out of a Doha round focused on liberalising agriculture.

The Group of 33 poor countries, for example, of which India is a member, recently complained that “it is unfortunate that the G33 are not invited in representative proportion to uphold their interests in the negotiations”.

Japan has repeatedly complained its interests in agriculture it maintains some of the highest farm tariffs in the rich world are ignored....

The influential Group of 20 developing countries, for example, to which both Brazil and India belong, has proposed heavy cuts in subsidies for rich nations' farmers but modest tariff reductions for poorer countries, a combination the US says it cannot accept.

Some observers close to the talks suspect the G20 tariff offer is already close to a red line for India....

The G20 at some point must decide whether it wants a deal, says William Cline, senior fellow at the Center for Global Development in Washington. “If there is an insistence on keeping self-injuriously high tariffs as an option, then the thing is not going to fly."

Lamy is correct -- his timetable for negotiations is not impossible.

But with this constellation of interests, it's pretty damned improbable.

As the Bush administration continues to develop its pandemic plan, I'm beginning to wonder if any country is really prepared for a pandemic. The Financial Times reports that the EU isn't prepared for an avian flu pandemic. What's interesting is why:

Europe is not properly prepared for a flu pandemic and has inadequate supplies of vaccines and antiviral drugs, says an internal European Commission document obtained by the Financial Times.

With avian flu on its borders, the human vaccine situation in the EU is “far from satisfactory”, according to a note presented last Wednesday by Markos Kyprianou, health and consumer protection commissioner, to his colleagues ahead of a meeting of EU health ministers on October 20.

Some member states have reserved all available antiviral drug supplies for years to come, leaving countries that may be first hit by the disease without any access to drugs, it adds....

The report said: “There are complaints from member states (and third countries) that orders from some countries have reserved all manufacturing capacity for several years to come, leaving no possibilities for others who may be hit first.”

It also said the situation was “far from satisfactory”, for pandemic vaccines. “Some member states have concluded advanced purchase agreements for the H5N1 virus vaccine”.

The EU warnings of capacity shortfalls will increase pressure on Roche, sole distributor of Tamiflu the principal flu antiviral drug as Cipla, an Indian drugs company, has said it is beginning to make a generic version in defiance of patent laws.

There are going to be some nasty intra-EU squabbles if a pandemic breaks out anytime soon (which, it should be stressed, is far from certain. Experts are predicting an outbreak by 2020. So, with luck, this will turn out to be like the Y2K problem rather than the 1918 influenza outbreak).

UPDATE: Tyler Cowen makes the case for not violating Roche's patent on Tamiflu.

That's the assessment of one expert in Gina Kolata's New York Times front-pager on new research about the 1918 influenza virus:

The 1918 influenza virus, the cause of one of history's most deadly epidemics, has been reconstructed and found to be a bird flu that jumped directly to humans, two teams of federal and university scientists announced yesterday....

"This is huge, huge, huge," said John Oxford, a professor of virology at St. Bartholomew's and the Royal London Hospital who was not part of the research team. "It's a huge breakthrough to be able to put a searchlight on a virus that killed 50 million people. I can't think of anything bigger that's happened in virology for many years."

The scientists painstakingly traced the genetic sequence, synthesized the virus using tools of molecular biology, and infected mice and human lung cells with it in a secure laboratory at the Centers for Disease Control and Prevention in Atlanta. The research is being published in the journals Nature and Science.

The findings, the scientists say, reveal a small number of genetic changes that may explain why this virus was so lethal. It is significantly different from flu viruses that caused the more recent pandemics of 1957 and 1968. Those viruses were not bird flu viruses but instead were human flu viruses that picked up a few genetic elements of bird flu.

The research also confirms the legitimacy of worries about the bird flu viruses, called H5N1, that are emerging in Asia. Since 1997, bird flocks in 11 countries have been decimated by flu outbreaks. So far nearly all the people infected - more than 100, including more than 60 who died - contracted the sickness directly from birds. However, there has been little transmission between people.

A companion piece by Gardiner Harris suggests that Democrats have officially freaked out about the avian flu problem:

Health officials have warned for years that a virulent bird flu could kill millions of people, but few in Washington have seemed alarmed. After a closed-door briefing last week, however, fear of an outbreak swept official Washington, which was still reeling from the poor response to Hurricane Katrina.

The day after the briefing, led by Michael O. Leavitt, the secretary of Health and Human Services, and other senior government health officials, the Senate squeezed $3.9 billion for flu preparations into a Pentagon appropriations bill.

On Wednesday, Senate Democrats plan to introduce another bill calling for the creation of a flu pandemic coordinator within the White House and a federal buy-back program for unused flu vaccines, among other measures, according to a draft of the bill. Its authors include the Senate minority leader, Harry Reid of Nevada; Senator Barack Obama of Illinois; and Senator Edward M. Kennedy of Massachusetts.

Thirty-two Democratic senators sent a letter to President Bush on Tuesday expressing "grave concern that the nation is dangerously unprepared for the serious threat of avian influenza."....

Mr. Leavitt warned in the briefing last week that an outbreak could cause 100,000 to 2 million deaths and as many as 10 million hospitalizations in the United States, one person who was present said. Those numbers have been presented publicly many times before. But hearing them in closed session gave them urgency, some who were at the meeting said.

The briefing "scared the hell out of me," Senator Reid said recently.

So the Times, it appears, passes the Hotline Blog's test of media relevance (link via Glenn Reynolds).

Even though I've been Bush-bashing as of late, it's worth pointing out that Democrats are late to this party. Kolata says in her story that, "Bush administration officials have been talking about pandemic flu preparedness for years, and they say they will soon release a pandemic flu plan, in the works for more than a year." Harris says that, "The Senate majority leader, Bill Frist of Tennessee, said he had been delivering speeches about improving the nation's preparedness for a flu pandemic since December."

Of course, let's see how the plans pan out.

The Independent's Jeremy Laurance reports that the World Health Organization is trying to calm people down about avian flu:

The World Health Organisation has moved to play down a cataclysmic warning by one of its own officials that a pandemic caused by the bird flu virus ravaging poultry flocks in the Far East could kill as many as 150 million people.

The prediction came from David Nabarro, a senior WHO expert on infectious diseases, who was appointed on Thursday as UN co-ordinator for avian and human influenza. He said the next pandemic could claim from five million up to 150 million lives....

While he did not say the 150 million prediction was wrong, or even implausible, he said it was impossible to estimate how many could die. But he reiterated the WHO calculation that countries should prepare for 7.4 million deaths globally, arguing that was "the most reasoned position". (emphasis added)

Well, I feel much better now.

Even more calming is this Time.com report from Christine Gorman:

If, like public health authorities in the U.S. and many other countries, you're counting on the anti-viral drug Tamiflu (generic name oseltamivir) to save you should bird flu become pandemic, you may have to think again. A Hong Kong expert told Reuters on Friday that a strain of the H5N1 virus isolated in northern Vietnam this year is resistant to Tamiflu. More common human flu viruses have also recently been shown to be developing a resistance to another set of antivirals called adamantine drugs.

If the Vietnam report proves true, the implications will be particularly worrisome for public health programs to combat bird flu: Many governments have made stockpiling Tamiflu the centerpiece of their planning for a possible pandemic. U.S. Health and Human Services Secretary Michael Leavitt wants to create a big enough stockpile to treat 20 million Americans, and about $3 billion of the $4 billion the U.S. Senate last week proposed allocating to the Centers for Disease Control and Prevention to prepare for bird flu is to be used to buy Tamiflu. Never mind the fact that Tamiflu is produced in only one facility in the world, which is unlikely to produce enough to fill everyone's stockpile for several more years.

What this tells you is that the medical, private and public sectors had better have more than one big idea on how to deal with a potential pandemic of bird flu among humans. Debating — as a number of health experts have done recently — over whether a pandemic would kill 2 million or 150 million people is kind of beside the point.

Mickey Kaus is still worried about immigration even after reading and partially debunking a L.A. Daily News story by Rachel Uranga:

[I]t's worth worrying about a) the possible collapse of a common language and b) the possible Quebec-like Mexification of Southern California.

I've never really bought into either meme. And today, Nina Bernstein has a New York Times story that pours more cold water on this hypothesis:

For years it seemed that immigration to the United States could only rise. Now a new study, based on a year-by-year analysis of government data, shows a startlingly different pattern: Migration to the United States peaked in 2000 and has declined substantially since then....

In terms of immigrant destinations, the study confirms a long-recognized trend away from the "big six" traditionally immigrant states - California, Florida, Illinois, New Jersey, New York and Texas - which still receive 57 percent of immigrants, toward so-called new growth states like Iowa and North Carolina. The foreign-born pioneers to such states in the 1990's now serve as a magnet for friends and relatives from abroad, especially when jobs are plentiful

Bernstein's story is a riff on the Pew Hispanic Center's latest report, "Rise, Peak and Decline: Trends in U.S. Immigration 1992 – 2004." The executive summary also observes that:

The shift of immigrant flows away from states with large foreign-born populations such as California and New York towards new settlement states such as North Carolina and Iowa accelerated during both the peak and the decline that followed.

Indeed, the report makes it clear that the shift in immigration flows to new states is a permanent and not temporary shift.

Beyond allaying fears of Mexifornia, the study has two take home points.

First, immigration flows follow the economy:

Rather than undergoing a continuous increase in immigrant levels as is commonly perceived, the United States experienced a sharp spike in immigration flows over the past decade that had a distinct beginning, middle and end. From the early 1990s through the middle of the decade, slightly more than 1.1 million migrants came to the United States every year on average. In the peak years of 1999 and 2000, the annual inflow was about 35% higher, topping 1.5 million. By 2002 and 2003, the number coming to the country was back around the 1.1 million mark. This basic pattern of increase, peak and decline is evident for the foreign-born from every region of the world and for both legal and unauthorized migrants.

In 2004, migration bounced back to exceed 1.2 million. Whether or not this move portends further increases is impossible to predict. But even with this recent increase in migration, the most recent data show that immigration flows are at levels comparable with those of the mid-1990s and still significantly below the peak levels of 1999–2000.

Both the run-up to the peak and the drop-off in immigration coincide with a variety of conditions known to influence such flows, most notably the performance of the U.S. economy. Immigration grew sharply during the rapid economic and job expansion of the 1990s and then declined as the economy went into a downturn after 2001. Measures of the change in the Mexican labor force—the largest single source of U.S. immigrants by far—follow trends closely related to the pattern of changes in U.S. immigration.

This finding probably won't surprise many economists, but it is politically significant -- because it counters the belief that immigration is some unyielding, unstoppable force.

That said, the second, more disturbing take-home point is that the composition of immigration flows is changing -- and not for the better:

From 1992 to 2004, the unauthorized share of immigration inflows increased and the share that was legal decreased. By the end of the period, more unauthorized migrants than authorized migrants were entering the United States.

Declines in legal immigration accounted for the largest part of the drop from the peak flows at the turn of the 21st century. From the peak in 1999–2000 to the trough in 2003, over 60% of the decrease in flow is attributable to lower levels of inflows of legal permanent residents and legal temporary immigrants counted as part of the population.

This kind of study may give greater impetus to a grand bargain on immigration reform -- in which legal immigration flows are expanded at the same time there is a crackdown on illegal immigration. [I thought the grand bargain involved a guest worker program--ed. Yeah, but my grand bargain would ditch that part -- guest worker programs don't have a great track record, and the dispersal of immigrants to non-border states would probably reduce its allure anyway.]

Go check out the whole report.

Tamar Jacoby thinks the answer is yes. She explains why in the Weekly Standard:

[E]ven with politicians as diverse as President Bush, House Speaker Dennis Hastert, and Senators Kyl, Cornyn, McCain, and Edward Kennedy weighing in--there is much more consensus on immigration than is generally recognized.

We're not quite at the point yet where, as is said about the Israeli-Palestinian problem, "everyone knows what the solution is--the only difficulty is getting there." But there is increasing agreement about the contours of the problem and even about critical elements of the solution.

The emerging consensus starts with a shared grasp not just that the system is broken, but also why its breakdown is unacceptable to Americans: because of what it means for the rule of law and for our national security.

Gone are the days when one side in the debate was concerned about immigrants and the other about angry native-born voters--when one side wanted expansive annual quotas and the other wanted tighter control over the system. Today, reformers as different as Kyl and Kennedy (cosponsor of the McCain legislation) recognize that robust immigration is a boon to the U.S. economy, but that we must construct a system--a more regulated, orderly system--that permits foreign workers to enter the country in a lawful manner. Both sides recognize that we need immigrants and the rule of law--that we need foreign workers, but also control. The war on terrorism demands this better control, and so, increasingly, does the public. From the Minutemen volunteers on the Arizona border to angry suburbanites in Herndon, Virginia, and on Long Island, voters are expressing frustration, and lawmakers in both parties know they must respond.

Second, and even more encouraging, politicians as far apart as the president and Senator Kennedy grasp the paradoxical nature of the remedy: namely, that the best way to deliver control is not, as many reflexively think, to crack down harder, but rather to expand the channels through which immigrant workers can enter the country legally. This consensus is reflected in the competing bills in the Senate, and it is at the heart of the White House's position (a position reiterated in recent weeks in a series of private meetings with legislators). All of the current reform proposals rest on two central pillars: a guest worker program and much tougher enforcement. (emphasis added)

There might be a consensus at the elite level, but I'm very skeptical that this consensus extends down to the populace. Click here for why I'm skeptical.

The interesting question is if Jacoby is correct, whether public hostility would derail any proposed reform.

I've expressed concern in recent months about the possibility of a pandemic of avian flu emerging from the birds of East Asia. So it's only fair to point out when there is good news on this front. Lawrence K. Altman provides some on the front page of the New York Times:

Government scientists say they have successfully tested in people a vaccine that they believe can protect against the strain of avian influenza that is spreading in birds through Asia and Russia.

Health officials have been racing to develop a vaccine because they worry that if that strain mutated and combined with a human influenza virus to create a new virus, it could spread rapidly through the world. (The vaccine cannot lead to such a situation because it is made from killed virus.)

Tens of millions of birds have died from infection with the virus and culling to prevent the spread of the virus. About 100 people have been infected, and about 50 have died from this strain of the avian influenza virus, called A(H5N1). So far there has been no sustained human-to-human transmission, but that is what health officials fear, because it could cause a pandemic. And that fear has driven the intense research to develop a vaccine.

The director of the National Institute of Allergy and Infectious Diseases, Dr. Anthony S. Fauci, said that although the vaccine that had undergone preliminary tests could be used on an emergency basis if a pandemic developed, it would still be several months before that vaccine was tested further and, if licensed, offered to the public.

"It's good news," Dr. Fauci said. "We have a vaccine."

That's the message Jagdish Bhawgati delivered in a Wall Street Journal op-ed on Friday, responding to Thomas "The World is Flat" Friedman.

[I]t is wrong to infer from this that the world has gone "flat," and that there is no comparative advantage left. The notion of a flat world is as wrong metaphorically now as it was when Copernicus showed it to be literally wrong. To be more precise than his metaphor, Mr. Friedman has on his mind not the world but a large fraction of it -- India and China. He believes that the gradient which the citizens of these countries had to climb to get to our shores and out-compete us has now disappeared, giving way to a level playing field that we ignore at our peril.

But he takes too literally his friends in Bangalore. They flex their muscles on IT the way Popeye does on spinach, and tell him that some Indians can now do anything that the Americans can do. But it is a leap to translate this into the proposition that several Indians will now do everything that the Americans do. Then again, we have Intel Chairman Craig Barrett talking about 300 million Indians and Chinese professionals who will hurtle down the flat road. And Clyde Prestowitz, in his latest book, carries the argument to its logical conclusion with the American nightmare that there will be three billion Indians and Chinese capitalists soon down that road.

In truth, the flat road is not flat at all. Take the supply of educated manpower in India. Of the numbers in the age cohort for college education, only about 6% make it to college. Of these, only two-thirds graduate, and just a small fraction can read English. Of these, a further fraction can speak it; and of these, a smaller fraction still can speak it in a way which you and I can understand. The truth of the matter, therefore, is that even for the call-answer and back-office services, the numbers who will compete are only a very small fraction of the numbers being thrown about. India's huge size and the dazzle of the few Institutes of Technology are totally misleading. The road is not flat; the gradient becomes steep as wages rise for those who can manage while others cannot qualify.

Again, just think back on why China has not managed to break into IT the way it has on a range of manufactures, while India has. Surely, that has to do with the fact that India is democratic and hence IT can flourish. By contrast, the CP (the Communist Party) is not compatible with the PC: Authoritarian regimes are fearful of IT -- a gigantic pothole in the road!

Such fears of a flat road were rampant when many thought that Japan would be a fearsome Godzilla, trampling over our activities all around. But then it turned out that the Japanese were real klutzes in the financial sector. They still are. And remember that while the Chinese and Indians have lower wages, we have better infrastructure, stronger venture capital markets, an ability to attract talent from around the world, and a culture of inventiveness. Comparative advantage persists; the road is simply not flat.

The best rebuttal to Bhagwati's argument, by the way, is not Thomas Friedman, but labor economist Richard Freeman. So go check both of them out.

A follow-up post to June's discussion of the threat of an avian flu pandemic. There's some good news and some bad news.

The good news is that, according to the Financial Times' Clive Cookson, containing the spread of a pandemic is quite feasible:

A human outbreak of avian flu could be “nipped in the bud” preventing the deaths of millions of people in a pandemic if local public health measures are implemented quickly enough, two international research teams reported on Wednesday.

The scientists, based at Imperial College London and Emory University in Atlanta, said their computer modelling revealed two key conditions that must be met to stop an outbreak at source.

First, medical experts would need to identify the new viral strain a mutation of avian flu that spreads easily between humans when fewer than 40 people had been infected.

Second, preventative capsules of the antiviral drug Tamiflu would have to be given to thousands of people who might have come into contact with those infected. This would require the World Health Organisation to build an emergency stockpile of 3m courses of Tamiflu to be deployed anywhere at short notice, said Neil Ferguson, head of the Imperial College team.

At present the WHO holds just 120,000 courses of Tamiflu the only antiviral medicine that works well against all flu strains and can be taken by mouth but it is negotiating with Roche, the drug's Swiss manufacturer, to expand the stockpile to 1m doses or more. The company is expected to donate some or all of the Tamiflu to the WHO.

The bad news is that the computer simulations were based on "an outbreak in rural Thailand of flu caused by the H5N1 avian strain." I'm not sure how they would cope with where the strain has actually migrated. Douglas M. Birch explains in the Baltimore Sun:

A strain of avian influenza virus that can be lethal to humans has spread from Southeast Asia to poultry flocks in Russia and Kazakhstan, a scientific journal reported yesterday, leading a British researcher to warn that the virus may be approaching Europe.

"If we are seeing an expansion in range, that is something we should be concerned about," Ian Brown, head of avian virology at the United Kingdom Veterinary Laboratories Agency, told the journal Nature in an article published yesterday on its Web site.

A Kazakh man who works on a chicken farm recently fell ill with the symptoms of bird flu, Nature reported. The man lives in a village in the Pavlodar region of northeast Kazakhstan, near the Russian border....

Dr. Michael Osterholm, director of the University of Minnesota's Center for Infectious Disease Research and Policy, said it was too early to conclude whether the events reported in Nature represent a widening of the outbreak that has struck Southeast Asia.

If a pandemic were to spread this year, it is far from clear whether the United States or the rest of the world would be able to cope.

Developing....

Peter Gumbel has a fascinating story in Time on the growth of U.S. based private equity firms engaging in leveraged buyouts of European firms.

Germans in particular have taken pride in their "humane" form of capitalism, characterized by relatively short working hours and high pay, in contrast to what they see as a more cutthroat, competitive American way. But as global competition grows, European firms are under pressure to trim costs. Private-equity transactions--in which investors buy up a company using substantial amounts of debt, overhaul operations, then sell out after a few years--have been common for years in the U.S. and Britain. They used to be the rare exception in continental Europe, where financial leverage has long been frowned on and relationships with investors were based on tradition. No longer.

Starting in the late 1990s, all the big U.S. players, including Blackstone, Kohlberg Kravis Roberts (KKR), Carlyle Group and Texas Pacific Group, set up small-scale European operations. They're now bustling, growing rapidly and accounting for ever more of the U.S. groups' business. In four years, Blackstone's investments in Europe have jumped from about 10% to 30% to 40% of its total business, and the firm has opened offices in London, Hamburg and Paris. "It has become quite a significant part of our business," says Stephen Schwarzman, Blackstone's CEO and one of its co-founders. "It's a moment of structural change in Europe." The American moneymen last year were involved in about one-third of all European buyouts, doing deals worth more than $25 billion. That's triple the amount in 2001 (see chart). And there's no end in sight: several of the groups, including Blackstone and KKR, are in the process of setting up new investment funds aimed in part or entirely at Europe.

As the American money pours in, the deals are larger, more frequent and more highly leveraged. Five years ago, the largest European buyout transactions had a value of about $1 billion. Today's biggest deals are three times as large, and several private-equity groups are poring over at least one transaction involving a telecommunications firm in Spain that is worth more than $12 billion. One reason Europe is attractive: such huge firms as electronics giant Siemens, automakers DaimlerChrysler and Fiat and the French media company Vivendi Universal have shed operations they deem no longer core to their fundamental business. Also, investors have been buying medium-size companies whose family owners are looking to sell. Once the Americans take over, they move fast, prodding the firms to make their operations leaner and frequently reshuffling management. The worse off an operation is, the more money the investors stand to make from selling after turning it around. "We like the complexity of Europe," says Jim Coulter, a San Francisco--based founding partner of Texas Pacific. "It often means there is more inefficiency."

Read the whole thing. The restructurings are causing a bit of a ruckus. That fact that these groups are headquarted in the U.S. probably doesn't help matters right now. More importantly, European unions allege that the private equity groups come with mass layoffs. I have no doubt that's true in some cases, though the funny thing is that if you read the entire article, you will fail to find a single example of a U.S. firm actually recommending mass layoffs.

In The Lexus and the Olive Tree, Thomas Friedman argued that globalization forced states into the Golden Straitjacket, choosing between "free market vanilla and North Korea." This is one of those classic Friedmanisms that is simultaneously overexaggerated and yet tugs at some gut sense that there's a truth embedded in somewhere in that statement.

Anyway, I bring this up because apparently North Korea has called and apparently wants vanilla. Anna Fifield explains for the Financial Times:

North Korea, the world’s most reclusive state and one that prides itself on its communist ideals, plans to apply to the World Trade Organisation for observer status, according to a European Parliament delegation that visited Pyongyang this week.

News of the plan, the first step down the long road to joining the free trade body, is likely to be met by the outside world with bewilderment, optimism and opposition in equal measure....

“North Korea says it has been in contact with the WTO secretariat about observer status,” Glyn Ford, a British member of the European Parliament, said after the delegation for relations with the Korean peninsula met high-level North Korean officials. “Iraq also applied so if one horse can get through the door, maybe two can.”

Observer countries are allowed to participate in meetings but not be involved in the decision making process.

Post-Saddam Iraq was granted the right to attend meetings and hold talks with WTO member countries in February last year. The US had vigorously opposed attempts by Iran, which it also accuses of secretly developing nuclear weapons, to gain observer status but in May agreed to allow Iran to start the membership process.

The WTO on Friday said it had not received any application from North Korea.

I really do not know how much credence to put into this report. But if there's any truth to it, I'd love to be a fly on the wall when the accession negotiations start.

Richard McGregor reports in the Financial Times about a potential breakthrough in the agricultural negotiations for the Doha round of world trade talks.

Sounds great, until you get to the nitty-gritty of the proposal:

The G20 proposal centres on a new five-tier tariff system for developed countries, setting uniform tariff cuts in each band, and also capping the maximum tax on imports at 100 per cent.

The plan offers greater leeway for developing countries, with a four-tiered system and a maximum tariff of 150 per cent. Mariann Fischer Boel, EU agriculture commissioner, said: “We welcome the G20 proposal on market access.”

Rob Portman, US trade representative, also backed the G20 plan as a potential basis for negotiations, saying: “The US is prepared to move, and move to the middle.”

The differences between the world's two largest trading blocs remain substantial, with the EU proposing a variation on the G20 plan to give it greater flexibility to resist sharp tariff cuts.

The EU is also demanding that the US put on the table a plan to reduce its domestic farm subsidies as part of any negotiating package, something that Mr Portman rejected yesterday as “not realistic”.

With only about two weeks to go before a framework is needed to allow time for the detailed and difficult negotiations ahead of Hong Kong, not everybody was optimistic about a genuine resolution to the impasse.

“I am pessimistic but I want to be proved wrong,” said Supachai Panitchpakdi,the WTO director-general.

“We have days. We don't have weeks.”

The G20 plan potentially faces stiff resistance from countries such as Japan, Taiwan and South Korea, which have tariffs on farm goods far higher than the caps set by the G20 proposal.

The scary thing is that what's proposed represents liberalization of a sort -- agriculture is so heavily protected and subsidized that it will take decades for complete liberalization.... if it ever happens.

Supachai is more pessimistic about the overall progress of the Doha round. Click here for his statement from last week. Key paragraphs:

It is true that some progress has been made in certain areas of the negotiations. But let us be clear: this progress is nowhere near sufficient in terms of our critical path to Hong Kong, and it is not being seen in the key issues which would help unblock progress across the board. Overall, there seems to be a renewed sense of blockage and frustration. We are also seeing a resurgence of sterile debate about process, rather than negotiations on substance.

I am afraid we have to face the facts. These negotiations are in trouble. Very little of the political support which has been shown at successive Ministerial meetings has been turned into concrete progress in the negotiating groups. Everyone has a generalized commitment to progress, but when it comes to the specifics, the familiar defensive positions take over.

Christian Noyer, governor of the Bank of France, recently gave an interview to the Financial Times in which he said some very un-French things:

The Scandinavian economic model, combining market flexibility with a high degree of social protection, “is full of lessons for countries such as France, Germany and Italy”, Christian Noyer, governor of the Bank of France, has argued.

The willingness of France's central bank governor to admit in an interview with the Financial Times that other countries might have found a better answer to the forces of globalisation highlights how the political debate in Paris has shifted since the country rejected the European Union constitution in May.

Asked about last month’s appeal by Tony Blair, UK prime minister, for Europe to rethink its social model, Mr Noyer said: “I tend to agree with that.”

Sweden, Finland and Denmark have seen some of the fastest growth and lowest inflation rates among the main continental European economies. Sweden, which plunged into financial crises in the early 1990s, has re-invented its famed social model in the past decade.

“One of the key elements in the way these countries work is that they have mixed a greater level of flexibility in labour and product markets – a bit like the UK economy – with a high degree of social protection, which is traditional in continental Europe,” he said.

Social protection, he added, did not mean “a job for life even if your company is sinking. Protection means you have a social safety net to help you during a transitional period, and a whole system of education, training and retraining that obliges people to find a new job”.

Read more of the interview here -- in which he gives faint praise to new French PM Dominique de Villepin while dismissing Villepin's suggestion for closer political consultations with the European Central Bank.

Louis Uchitelle has a nice case study of how one U.S. multinational deals with global sourcing questions in the New York Times:

Globalization is often viewed as a rootless process of constantly moving jobs to low-wage countries. But the issue is more complex, as illustrated by Whirlpool's worldwide operations. What attracts Mr. Fettig and other chief executives is a relatively new form of globalization that emphasizes first-rate centers of production and design in various countries - including the United States.

Whirlpool's global network, a work in progress, includes microwave ovens engineered in Sweden and made in China for American consumers; stoves designed in America and made in Tulsa, Okla., for American consumers; refrigerators assembled in Brazil and exported to Europe; and top-loading washers made at a sprawling factory in Clyde, Ohio, for American consumers, although some are sold in Mexico.

Read the whole thing. One interesting result is that despite the fact that globalization supposedly flattens the world, geography (in the form of shipping costs) and history (in the form of past investments) still matter a great deal.

The announcement by General Motors that it planned to 25,000 or more assembly-line jobs over the next few years would seem to advance the hypothesis that the United States suffers from expanding international trade.

Gregg Easterbrook does a nice job of pointing out why that's not true in the New York Times today:

The announcement last week that General Motors would cut 25,000 jobs and close several factories is yet another blow to the Goliath of automakers and its workers. But only if you work for G.M. is the company's decline a worry. For consumers, the decline can be seen as a symbol of healthy competition....

In the 1950's, General Motors had 46 percent of the American auto market, Ford and Chrysler 44 percent, and everyone else combined just 10 percent. Today, G.M. sells 27 percent of the cars bought in America, Ford and DaimlerChrysler combined sell 32 percent, and other automakers add up to 41 percent.

This means that the international competition, once trivial compared with General Motors, is now bigger than General Motors. Intense competition within the auto industry has resulted in steady improvements in the workmanship, performance, safety and design of cars, while holding down prices. That's the ideal outcome for consumers but not for General Motors, which, as the largest automaker, had the most to lose....

General Motors also declined because of poor quality. But in this spring's influential J. D. Power & Associates automotive workmanship rankings, General Motors rose to No. 2, trailing only Toyota for overall quality. The Buick and Cadillac divisions ranked ahead of Mercedes.

Yet even if a new generation is drawn to G.M.'s products, recovery of its former position seems unlikely. Other brands have improved, too: J. D. Power estimates that for the auto industry overall, manufacturing defects declined 32 percent since 1998 alone.

There is also great pressure to hold prices down, which is bad for companies like G.M. with vast amounts of overhead. According to the consumer price index, new cars and light trucks today cost less in real-dollar terms than in 1982, despite having air bags, antilock brakes, CD players, power windows and other features either unavailable or considered luxury options back then.

This means that during the very period that General Motors has declined, American car buyers have become better off. Competition can have the effect of "creative destruction," in the economist Joseph Schumpeter's famous term, harming workers in some places, while everyone else comes out ahead.

[Yeah, but life is still bad for workers in the auto indistry, right?--ed.] Well, that depends on where you live. Easterbrook points out some other employment trends in the automobile sector beyond General Motors:

[T]he same week that G.M.'s cut made the front pages, DaimlerChrysler announced it would invest $40 billion in North American operations over the next five years, including building a new assembly plant in Illinois and expanding factories in Ohio and Michigan.

According to a study by the Association of International Automobile Manufacturers, non-Detroit automakers have in the last two years created 55,000 new factory jobs in the United States. Today just under 50 percent of the "foreign" cars sold in America are made here, with BMW, Honda, Nissan, Toyota and others operating large factories in Alabama, California, Indiana, Kentucky, Mississippi, Ohio and Tennessee. About 800,000 passenger vehicles are expected to be manufactured this year in Alabama, all for global brands; cars have become to the state's economy what cotton once was.

AIAM's press release about that report also mentions, "When the number of jobs created by the new American automakers is combined with related new vehicle dealership employment, this sector of the industry has generated 1.8 million jobs in the U.S. economy."

Psst... hey, buddy -- want to make some more money?

Chris Giles writes in the Financial Times on the Organization for Economic Cooperation and Development's latest working paper:

Workers in advanced economies could gain the equivalent of a full year's income over their working lives if countries increased competition in their domestic economies and reduced trade barriers, the Organisation for Economic Co-operation and Development said on Tuesday.

The international body charged with improving the economic performance of its 30 member countries came down firmly on the side of market liberals after examining the effects of restricting competition.

“At a time when Europe may be losing momentum in its drive to open product and services markets, the study shows that the economic rationale for such liberalisation remains very strong,” said Jean-Phillippe Cotis, the organisation's chief economist.

You can access the OECD's summary here, and the full report here. By barriers, the authors are referring to tariffs, limits on foreign direct investment, and product market regulation. The bulk of the gains come from regulatory reforms.

How big are the benefits? This is from the report's cover letter:

The benefits to be expected from such a liberalisation exercise are... substantial:

In the United States, GDP per capita would increase by 1% to 2.5%;

In Europe, GDP per capita would be boosted by between 2 to 3%, which is equivalent to two years of growth. Compared with the United States, gains would be stronger in Europe, reflecting its tighter initial stance of regulation.

Spill-overs outside the European Union and the United States may be large: 2% for Canada and Mexico, 1.5% for Turkey, Japan and Central Europe....

An important lesson of this work is that product market deregulation rather than tariff lowering would provide the main source of economic gains. This finding should not come as a surprise, however, knowing that tariff and non-tariff barriers are now rather small while domestic product market regulations remain often substantial, especially so in the services sector.

The magnitude of estimated output gains look very significant to us but they may seem too modest to some observers. A first answer would be that our estimation of the gains of liberalisation are indeed very prudent. In this exercise, we have only assessed the “one-shot”or “static gains”, coming from greater international trade specialisation and better allocation of resources. But many would argue that liberalisation produces “dynamic gains”, that is more open product markets stimulate research, innovation and technical progress on a sustained basis. Empirical research indeed suggests that these gains could be quite large although their estimated magnitude is still surrounded by substantial margins of uncertainty.

Read the whole thing.

UPDATE: Robert Tagorda at Outside the Beltway has some more thoughts on the OECD report.

Meanwhile, Gary Hufbauer and Paul Grieco's op-ed in the Washington Post yesterday makes a similar point about the past benefits of economic openness:

Using four different methods, we estimate that the combination of shrinking distances--thanks to container ships, telecommunications and other new technologies--and lower political barriers to international trade and investment have generated an increase in U.S. income of roughly $1 trillion a year (measured in 2003 dollars), or about 10 percent of gross domestic product. This translates to a gain in annual income of about $10,000 per household.

Unfortunately for the cause of continued liberalization, Americans do not receive this money as a check marked “payoff from globalization.” Instead, the payoff is hidden within familiar channels: fatter paychecks, lower prices and better product choices (compare the telephones available now with the standard black model of 1980).

Nevertheless, each of our four methods uncovers a large payoff. First, we parse international data that correlate the expansion of international trade with economic growth. This shows that the increase in U.S. income sparked by more intense trade equates to 13.2 percent of GDP. In the second method, we calculate how lower tariffs stimulate U.S. productivity through competitive forces and bring greater product choices to U.S. producers and consumers. The estimate for these benefits comes to 8.6 percent of GDP. Third, we draw on a computable general equilibrium model to suggest how today's economy would react to the restrictive Smoot-Hawley trading environment of the 1930s. That exercise indicates an estimate of 7.3 percent more in GDP from liberal trade. Finally, we calculate the productivity benefits arising from use of imported components and find a benefit of 9.6 percent of GDP. While none of the four estimates is perfect, the broad result is clear: The benefits of trade and investment liberalization are positive and large.

Given the large gains from past liberalization, and today's low tariffs and modest investment barriers, skeptical commentators might say, "Been there, done that." But our estimates of future policy liberalization alone (excluding likely benefits from better communications and transportation) indicate that a move from today's commercial environment to global free trade and investment could produce an additional $500 billion in U.S. income annually, or roughly $5,000 per household each year. Much of the benefit would come from sectors of the economy that were effectively ignored during earlier rounds of liberalization: services, agriculture, transportation and trade with developing countries.

[But the costs... what about the costs!!--ed. Ah, yes, they measure that too:

Surveying several estimates, we arrive at a middle-of-the-road figure of roughly 225,000 trade-related job losses per year. Most dislocated workers find new jobs in six months, many far sooner; but some are unemployed for an extended period. Even workers who are re-employed may face significant pay cuts. Taking these features into account, we estimate that the lifetime costs of a year's worth of trade-related job losses is roughly $54 billion, about $240,000 per affected worker. This is a huge loss on a personal level, but only about 5 percent of the annual national gains from liberalization. (emphasis added)

Click here to read more.

In Foreign Policy, Moises Naim makes an interesting point about Arab Americans:

People of Arab descent living in the United States are doing far better than the average American. That is the surprising conclusion drawn from data collected by the U.S. Census Bureau in 2000 and released last March. The census found that U.S. residents who report having Arab ancestors are better educated and wealthier than average Americans.

Whereas 24 percent of Americans hold college degrees, 41 percent of Arab Americans are college graduates. The median income for an Arab family living in the United States is $52,300—4.6 percent higher than other American families—and more than half of all Arab Americans own their home. Forty-two percent of people of Arab descent in the United States work as managers or professionals, while the same is true for only 34 percent of the general U.S. population. For many, this success has come on quickly: Although about 50 percent of Arab Americans were born in the United States, nearly half of those born abroad did not arrive until the 1990s.

For Naim, this success presents an interesting puzzle:

Of course, many will explain the success of Arab Americans by pointing out that people who emigrate tend to be younger, more motivated, ambitious, and entrepreneurial. The Arab immigrants who are doing so well in the United States, according to this view, would have made it anywhere.

Sadly, that isn’t true, either. Otherwise, how does one explain why Arab immigrants in Europe are worse off than those in the United States? Why are leaders of Arab communities in France warning that social and racial tensions are in danger of creating a “social and political atom bomb”? Sure, France may be an extreme case, but the situation of Arabs in the rest of Europe is hardly better. In general, Muslims living in Europe—of which Arabs constitute a significant proportion—are poorer, less educated, and in worse health than the rest of the population. In the Netherlands, the unemployment rate for ethnic Moroccans is 22 percent, roughly four times the rate for the country as a whole. In Britain, the Muslim population has the highest unemployment rate of all religious groups. The failure of Arabs in Europe is particularly worrisome given that 10 of the states or entities along Europe’s eastern and southern borders are home to nearly 250 million Muslims—most of them Arabs—with a birthrate more than double that of Europeans.

This census data should prompt soul-searching in many quarters. Cultural determinists may want to revise their theories of Arab backwardness. Arab leaders should be ashamed when they see their emigrants prospering in the United States while their own people are miserable. And Europe should wake up to the possibility that it may have less of an “Arab problem” than a “European problem.” Then again, maybe the cultural determinists have an explanation for why Europeans are so predisposed against Arab success.

Read the whole thing. And thanks to Colin Grabow for the link.

UPDATE: Hmmm.... Naim may have spoken too soon. Many thanks all of the commenters -- especially Andrés Vernon -- for pointing out the differences in the attributes of Arabs emigrating to the U.S. versus Arabs emigrating to Europe. Vernon provided a link to this Arab American Institute web page on Arab demographic. Two graphs worth reprinting:

BREAKDOWN OF ARAB AMERICANS BY COUNTRY OF ORIGIN

BREAKDOWN OF ARAB AMERICANS BY RELIGION

The second graph is particularly telling. I seriously doubt that only 24% of Europe's Arab influx is Muslim -- which means that the Arab immigrant stream into Europe is demonstrably different than those Arabs who empigrate to America. For more on the European side of the equation, see Claude Salhani analysis for UPI from last December.

And thanks to all the commenters for picking up the flaw in Naim's data.

LAST UPDATE: See Reihan Salam for more on this.

Well, the meeting of the G-7 finance ministers happened. Did the U.S. and the G-7 ratchet up the pressure on China, as was previously suggested?

This appears to depend on who you ask. In the Washington Post, Paul Blustein says "no":

In its communique, the G-7 pledged "vigorous action" to deal with "global imbalances" -- a reference to the massive U.S. trade deficit and corresponding trade surpluses of other nations, especially the export-driven economies of Asia. But the statement mostly reiterated past calls for countries to take measures that should help shrink the trade gap, including a reduction of the U.S. budget deficit and "structural reforms" in Europe and Japan to help speed growth.

The G-7 conspicuously refrained from commenting directly on one politically charged issue related to the trade deficit -- China's decade-old practice of keeping its currency, the yuan, pegged to the U.S. dollar at a rate of about 8.3 yuan per dollar. That policy has been widely attacked in recent months, especially by members of Congress and U.S. manufacturers, as an artificially low rate that gives Chinese goods an unfair edge in world markets.

Bush administration officials had raised expectations that the G-7 would turn up the heat on China, because they had ratcheted up pressure themselves in recent days by urging that the yuan be allowed to rise now. Previously, they had refrained from putting the Chinese on the spot about timing.

But the G-7 communique included only the language that has been contained in every such statement for the past year. "More flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility," the statement said.

Andrew Balls and Scheherazade Daneshkhu say "yes" in the Financial Times:

The Group of Seven leading industrialised countries this weekend put China on notice that it must shift to a more flexible currency regime, with finance ministers demanding it take action immediately.

The G7's communique repeated its call for "more flexibility in exchange rates" where it was lacking, to help promote more balanced global growth, and added a demand that "vigorous action is needed to address global imbalances".

Officials said there was no discussion of singling out China because in the statement the language was already clearly aimed at Beijing - and because of the difficulty of getting Japan to agree a formal declaration.

But ministers from all the countries apart from Japan backed a US demand that China should act immediately. (emphasis added)

In this case, both the FT and WaPo are correct. It's clear that the latest G-7 statement doesn't differ much from previous ones, and I have no doubt Japan acted as the brake on any change in the language. However, U.S. Treasury Secretary John Snow also delivered a statement after the communique that was reasonably clear in its intent:

I want to comment specifically on China in this context. China's strong economic growth has made a tremendous contribution to the global economy. China has taken numerous steps over the last few years, including preparing for greater flexibility in their exchange rate, introducing foreign exchange market financial products and strengthening banks and bank supervision. With this groundwork in place, China is ready now to adopt a more flexible exchange rate.

Of course, the U.S. can insist that China is ready all it wants -- whether Beijing will hop to is another question. Until and unless Japan changes its tune, it would appear that China doesn't face a huge incentive to change the status quo.

On the other hand, this Bloomberg report by Tim Kelly suggests that Japan recognizes the political lay of the land:

The U.S. government is under pressure at home to get China to fulfill a pledge to loosen its currency's decade-long peg to the dollar, a Japanese Ministry of Finance official said.

The U.S. administration is under more pressure than governments in Europe or Japan over the yuan, according to the official, who spoke on condition he wouldn't be identified. The official was speaking at a briefing in Washington after a meeting of finance ministers from the Group of Seven.

Developing....

Martin Wolf has a concise summary of globalization's variable effects on the human condition for the past few decades in his Whitman Lecture to the Institute for International Economics last week:

If we turn to human welfare, what is our assessment?

• Globalization has brought large economic gains to many parts of the world, above all to Asia, which has successfully exploited the ladder of development created by labor-intensive manufactures.

• Globalization has brought about huge reductions in the number of people in extreme poverty. According to the latest World Bank data, the proportion of the east Asian population living on less than a dollar a day at purchasing power parity fell from 56 percent in 1981 to 16 percent in 2001. This is the biggest and fastest reduction in extreme poverty in world history.

• The relatively rapid growth of Asian developing countries has almost certainly reduced global inequality among households for the first time since the 1820s.

• Globalization has brought big gains to the developed countries as well. Recent work by the Institute for International Economics suggests that the gains to the United States alone amount to $1,000 billion—almost 10 percent of GDP. For the United Kingdom, the gains must be far greater.

• Globalization has not worked well for Africa or much of Latin America. For this there are three reasons: the resource curse, persistent protectionism in agriculture, and the weak supply conditions in these countries. In addition, for these countries, the entry of China into the world economy is a massive shock, both positive and, in some cases, negative.

About the only thing I would add is that with regard to economic development, one could say, "________ has not worked well for Africa and much of Latin America" and you'd likely be correct no matter what filled in the blank. And I don't mean that scornfully, but rather tragically.

Andrew Balls reports in the Financial Times that the World Bank ain't too comfortable with the developing countries' accumulation of dollar-denominated assets:

Developing countries that have amassed large US dollar reserves face a growing threat of big losses from a sudden decline in the dollar, the World Bank warned yesterday.

In its 2005 Global Development Finance Report, the bank identified the "gravest risk" for emerging markets as a deep and disorderly dollar decline. This could create volatility, including a dollar collapse below what the bank's economists see as its long-term equilibrium level.

The result, it said, could be "a costly restructuring of world industry that would have to be undone in following years as the dollar returned to its equilibrium level".

But even in the event of a continued steady decline in the dollar the bank warned that countries with big dollar reserves faced capital losses, continuing the pattern of the past 2½ years.

Foreign reserves held in developing countries rose from $292bn (€227bn) in 2003 to $378bn last year, the bank said in the report. Asia, and particularly China, accounted for much of this, but 101 of 132 developing countries increased their reserves last year.

The report's warning was echoed by the International Monetary Fund, the bank's sister organisation, yesterday. Rodrigo Rato, IMF head, said: "A sharp increase in US interest rates would adversely affect the expansion and lead to a significant deterioration in emerging market financing conditions."

The World Bank press release contains more direct warnings shots than those quoted in the FT:

[Uri] Dadush [Director of the Bank’s Development Prospects Group] says the US current account deficit is likely to hit six percent of GDP in 2005.

“This is an unsustainable current account deficit level. The phasing out of that deficit will take forms that are very difficult to evaluate in advance. It will require some adjustment in interest rates. It will require some adjustment in exchange rates,” he says.

Overall, Dadush says it could lead to a “significantly more turbulent financial environment for developing countries.”

... But [François] Bourguignon, [the Bank’s senior vice president for Development Economics and Chief Economist], too sounds a warning about the risks facing developing countries.

“We should also keep in mind that current global financial imbalances pose risks—of disorderly exchange rate movements, or of interest rate increases—that could threaten these gains. Developing countries need to prepare themselves for adjustments, some of which could be sudden,” he says.

Dadush says it’s vital for developing countries to be ready to act.

“History shows again and again that policy makers have been surprised by financial crises when they arise,” he says.

“There is a tendency for financial markets and policymakers to miss the warning signs and overshoot, making the necessary adjustment larger when it does occur.”

Click here for the Bank's full report, Global Development Finance 2005: Mobilizing Finance and Managing Vulnerability.

Brad Setser has further thoughts on this topic as well:

The Bretton Woods 2 system of Asian reserve financing of the US continues, no doubt. But I also think it is fair to say that many -- both in Asia and in the World Bank -- are beginning to reassess the cost/ benefit ratio of this system.

Developing....

UPDATE: Last month Stefan Karlsson provided a nice backgrounder on the trade deficit for those who need a refresher. An the Economist has a nice backgrounder as well.

The Economist has a good backgrounder on the delicate politics of proffering aid and debt moratoriums as a means of assisting countries experiencing natural disasters. It opens as follows:

Between them, the 19 member states of the Paris Club, an informal coterie of major lenders, pledged $3.64 billion in aid to the countries afflicted by the Indian Ocean tsunami. But these 19 countries, meeting in the French capital on Wednesday January 12th, had also been due to receive about $5 billion in debt repayments this year from these same disaster-hit nations. Indonesia, the country that suffered the most casualties in the disaster, also carries the bulk of the region’s debt. It was due to pay $3.15 billion in principal and $1.36 billion in interest in 2005. But at its meeting, the Paris Club decided to offer all tsunami-hit countries a freeze on debt repayments, starting immediately, until the World Bank and International Monetary Fund have completed an assessment of their needs. In the face of such suffering, the rich world has agreed to be generous, not usurious.

But not all of Indonesia’s fellow sufferers are crying out for their burden to be lifted. Thailand, for one, is cautious about creditors’ magnanimity. To delay its repayments may send the wrong signal to the capital markets, it fears, suggesting that Thailand is a mendicant country unable to carry its debts. This might deter new creditors and investors. Thailand therefore may thus decide to show that it can pay its debts in full and on time, even though it is not now obliged to do so.

Some of the lenders have also had reservations about offering debt relief, although it is impolitic to air them too loudly. Such relief frees up resources, which a government can then devote to aid and reconstruction—or divert to anything else. Heavily indebted governments tend to be bad governments, sceptics argue. If they cannot borrow money prudently, why should we trust them to spend it well?

Read the whole thing.

UPDATE: CNN provides another complication when disaster relief is deployed:

Concerns continue to grow over Indonesian efforts to exert more control over aid operations in Aceh province, which was devastated by the December 26 tsunamis.

Jakarta is telling aid workers and reporters to keep the military informed about their locations and travel plans in the region, especially if venturing outside Banda Aceh or Meulobah.

The government has warned of possible violence by separatist rebels in Aceh, although both the rebels and Jakarta declared a cease-fire after the tsunami.

Indonesian vice president Yusuf Kalla also suggested all foreign troops providing aid in Aceh should plan to be out of the area by March 31.

It's dangerous to ascribe a common set of preferences to the heterogeneous collection of NGOs, social movements, activist networks, charities, churches, and even some individual philanthropists that comprise "global civil society." But most people who study these entities would acknowledge a rough consensus among these groups that a) genetically-modified organisms (GMOs) should be regulated to within an inch of their existence; and b) land mines are evil and should be banned.

So I wonder which side of the fence these groups will fall on when they read about this tidbit blogged by Warren Ginn:

A Danish company, Aresa Biodetection, has developed genetically-modified flowers that change color when their roots come in contact with nitrogen dioxide in the soil. Explosives used in mines produce NO2 as the chemicals gradually decay. The company plans to sow fields of NO2-sniffing Arabidopsis thaliana (Thale or mouse cress) in areas riddled with long-forgotten ordinance from Angola to Cambodia.

Link via Virginia Postrel.

Aresa's web site has this to say on how these GM products would accelerate land mine removal:

There is only one method with global validity for the removal of landmines. This method (prodding) consists of putting a stick into the ground, locate the mine, remove it and detonate it. It is highly time consuming and risky....

By adding our process to the current prodding or other processes, we expect to represent the most cost efficient method ever invented, and increase speed for projects by a factor of 10 times. At the same time the risk will be reduced significantly, as mines will be located before prodding and removal takes place.

Pretty cool.

Remember that G-7 dinner that Chinese Finance Ministry officials were asked to attend? It took place over the weekend. Chris Giles and Andrew Balls report on the outcome in the Financial Times. First, the dinner:

China resisted pressure by industrialised countries to liberalise its currency regime at this weekend's meetings of the International Monetary Fund and World Bank.

Jin Renquin, China's finance minister, and Zhou Xiaochuan, the central bank governor, attended a working dinner of the Group of Seven industrialised nations on Friday, but maintained China's previous stance that it needed more time before it could consider introducing greater flexibility into its exchange rate.

The dinner was the first time that China, now the world's seventh-largest economy, had attended a G7 meeting.

G7 countries praised the quality of debate and the openness of the Chinese officials, but little progress was made.

More interesting was the assessment at the end of the article on why there might not be any change in global macroeconomic imbalances anytime soon -- although they may be unstatainable in the long run, the status quo ante brings short-run economic benefits and minimal political costs for the U.S., China, and the European Union:

Unlike in many previous meetings, the US did not blame low growth in Japan and Europe for its current account deficit and European delegates refrained from criticising irresponsible US economic policy.

The rapid growth of the global economy in 2004 explains the improved mood in part. But it also reflects a growing understanding that global economic imbalances are the inevitable outcome of the combination of US efforts to boost domestic demand, Asian countries' desires to boost currency reserves and persistently low domestic demand in the eurozone.

"Policies to support an orderly resolution of global imbalances are a shared responsibility", the International Monetary and Financial Committee concluded.

What was left unsaid was that the current economic imbalances are boosting economic performance of most large economies and there is little appetite for the measures that could reduce them, such as tighter fiscal or monetary policy to reduce demand in the US or an appreciation of Asian currencies against the US dollar.

The consequence is likely to be that the US current account deficit will grow even larger as will foreign holdings of US dollar assets.

Few economists think these trends are sustainable in the longer term. They warn that the management of the global economy with ever larger imbalances and a large proportion of the global economy fixed to the dollar is likely to create a much less benign outlook for future IMF and World Bank meetings.

This post from a few weeks ago is also worth checking out -- both on the global imbalances and China's exchange rate policies.

UPDATE: The Economist has more on the G-7 meeting. Money paragraph:

The G7 once held great sway over exchange rates. When it met, in a previous incarnation, in New York in September 1985, it engineered a near-30% decline in the dollar. When it reconvened a year and a half later in Paris, it promptly halted that decline. By breaking bread with the Chinese on Friday, the current G7 is tacitly admitting that it can no longer achieve very much without them.

Paul Blustein reports in the Washington Post about a very important invitation:

China will participate in a special meeting with the Group of Seven industrialized countries on Oct. 1, the U.S. Treasury said yesterday, an announcement that could herald Beijing's eventual membership in the elite economic club.

John B. Taylor, the undersecretary of the Treasury for international affairs, said one major purpose of the meeting will be "high-level engagement" with the Chinese on their currency policy, which has become a politically charged issue in the United States.

Beijing's longtime policy of fixing its exchange rate at 8.3 yuan per dollar is viewed by many economists, manufacturers and labor groups as giving Chinese products an unfair price advantage in world markets, and the Bush administration has come under criticism for failing to press the matter more aggressively.

Calling the meeting "a historic first engagement," Taylor said it will be held over dinner in Washington after a regular session of top G-7 policymakers on global economic issues. Jin Renqing, the Chinese finance minister, and Zhou Xiaochuan, governor of the People's Bank of China, will join counterparts including Treasury Secretary John W. Snow and Federal Reserve Board Chairman Alan Greenspan.

Asked whether the Chinese will be invited to future meetings or given full membership in the group, Taylor declined to rule either possibility in or out.

"The next steps will depend on how this meeting goes," he said. But he strongly indicated that more such meetings are likely, saying that they "are useful in making progress on economic reform" and that the currency issue "is a very natural one for the G-7 to discuss with China" given its implications for global trade and finance....

Following the end of the Cold War, Russia was also invited to join the group's annual leaders' summit, which was re-christened the G-8. Russian officials also attend some of the meetings of finance ministers and central bank governors, though they do not participate in the sessions dealing with matters such as exchange rates. Russian officials will not attend the meeting with the Chinese, Taylor said.

I suspect it will be quite some time -- if ever -- before China becomes a full-blown G-7 member. Having participated in the G-7 process while at Treasury, it involves an intense and ongoing consultation among officials up and down the chain of command. This kind of close working relationship doesn't always produce consensus, but there is a shared trust in the value of the consultation process. When the states in question are on the same page -- or at least pretty close to each other -- it's a powerful coordination tool.

The trillion-dollar questions are whether a) Chinese preferences are even close to the advanced industrialized states on global economic matters; b) Whether the G7 finance ministries are willing to trust their Chinese counterparts. You'd think I would have firm answers to those questions -- but I don't.

Still, the outcome of this meeting will be very interesting to observe.

Jon Bonné reports in MSNBC that the Hooters restaurant chain is not only expanding to the skies and casinos -- it is also busting out beyond American borders:

With all those reports of call centers heading off to India, one U.S. brand intends to tap into the subcontinent's growing prosperity. Hooters is exporting its controversial brand of home-grown sex appeal.

The Atlanta-based restaurant chain, known more for its scantily-clad female servers than its rib-sticking menu, this week announced it signed a deal to open several Indian franchise locations, though it has not said where....

"I am looking forward to the 'recreation' of this dining atmosphere," Sunil Bedi, Managing Director of franchisee H.O.I. Pvt. Ltd., said in a statement....

Hooters' expansion is the latest sign that U.S. businesses have awoken to the potential of the Indian middle class and its growing disposable income, said Jagdip Ahluwalia, executive director of the Indo-American Chamber of Commerce of Greater Houston.

"We've got Domino's there, we've got McDonald's there, we've got all these brands out there," Ahluwalia said. "There is a window of opportunity that’s open. And if we don’t grab that opportunity, Europe will."

Hooters already has a strong global presence with some 370 restaurants, including 26 overseas locations in such places as Austria, Guatemala, Singapore and Taiwan. This is its first location in South Asia, where more modest sensibilities often prevail. But it has aggressive plans for further expansion -- including its first restaurant in China, due this fall, three restaurants in Thailand and elsewhere.

"We're going to continue to fill out Latin America," said [vice president of marketing for Hooters of America Mike] McNeil.

I can already visualize the impending Naomi Klein column, heaving with brand outrage -- of course, Klein has had her own problems as of late.

Richard Waddington has a Reuters story suggesting that the Doha round of trade talks has overcome the agriculture obstacle:

Five core members of the World Trade Organisation have ended hours of hard bargaining with an accord that could open the way to a deal on a trade pact by the full membership, a leading negotiator says.

"It brings the possibility of an agreement (of the full membership) nearer," the negotiator, who had been involved in the talks, told Reuters on Thursday.

The five are the United States, the European Union, Australia, India and Brazil, who are considered to represent a wide range of trade interests within the 147-state body.

The WTO has set itself until midnight on Friday to seal outline deals in four key areas - farm and industrial goods, services and a new customs' code - in a bid to put its troubled Doha Round of free trade negotiations back on track.

However, a number of other members, including Switzerland, suspicious at the leading role assumed by the five, have warned that they will not be railroaded into a deal just because the big trading powers back it.

The negotiator, who declined to be named or to go into detail, said that the ideas accepted by the five covered all points of the hotly disputed text on agricultural reform, which is widely seen as crucial to an overall pact....

Although there were still problems in the other issues, diplomats said that there was a good chance that they could quickly be overcome once the all-important question of agriculture had been decided.

"The feeling is that they are all doable," said one diplomat, who asked not to be named.

It's worth noting that 15 years ago, when the Uruguay round was being negtiated, the "core members" of the world trade body were called the "Quad" -- the U.S., European Union, Japan, and Canada. The fact that India and Brazil need to be consulted at this level is a testament to how the balance of power has shifted within the WTO.

That's the question asked by the German Marshall Fund of the United States, which helped commission a four-country public opinion survey on the subject entitled Reconciling Trade and Poverty Reduction.

The fund concludes that "support for free trade remains robust." After reading the report, I'm more pessimistic. This is from the accompanying press release:

[W]hile free trade is popular, the instruments through which it is delivered – the EU internal market and NAFTA – are not. Forty-three percent of American respondents support the “free flow of people, goods, and services” between the US, Canada, and Mexico, but only 4% support NAFTA....

More than half (56%) of respondents feel that multinational corporations benefit most from trade. The numbers are particularly high in France (65%), Germany (62%) and the US (53%). Slightly less than half of the British respondents (43%) see multinationals as the prime beneficiaries. (emphasis added)

The report goes onto suggest ways to pitch free trade policies in politically friendly ways. Consider this proposed phrasing:

International trade contributes to prosperity and should therefore be welcomed, but not at all cost. The United States and European Union must stand up for labor and human rights standards and protect our jobs, the environment, and our children. Otherwise we'll get a race to the bottom, with jobs being moved to sweatshops in China, workers in developing countries living under abominable conditions, and the loss of our ability to protect against tainted foods. That would be a race without winners, perhaps with the exception of a small group of big business.

That's just a God-awful way to sell free trade, because it admits a falsity. Smart people like Stephen Roach are dredging up the race-to-the-bottom argument to explain the current job market, but it's just wrong. The statement that "workers in developing countries living under abominable conditions" with more globalization is particularly egregious.

On the other hand, this message works for me:

International trade has both positive and negative effects. International trade brings a lot of benefits -- lower consumer prices, more choice -- but also causes a lot of disruption in millions of workers' households with people losing their jobs. With the world becoming a smaller and smaller place, we need to make trade work for everyone. For us here in the United States and Europe, that means we need to invest more in skills and technology so that our economy becomes more flexible and innovative -- that is where our best opportunities lie for the future.

This phrasing has the twin virtues of greater acccuracy and greater optimism.

One final interesting finding:

Americans are less favorable toward further international trade deals than Europeans. A high proportion of Europeans – 82% of French and 83% of British – want more international trade agreements, compared to just 54% in the US.

Go check it out.

In my mailbox today I found David Victor's Climate Change: Debating America's Policy Options, which was sponsored by the Council on Foreign Relations. David is a disgustingly prolific and competent writer with a cv longer than my arm, so it's worth paying attention to what he writes.

The book maps out three possible policy options for the coping with climate change. Flipping through, I came across this assessment of the myriad predictions about the extent of global warming by the year 2100 (p. 11):

The most recent full assessment of the science was completed in 2001 by the Intergovernmental Panel on Climate Change (IPCC) an international assessment process involving thousands of scientists from around the world, including most of the best climate scientists from the United States. The IPCC examined uncertainties in the full chain from emissions of greenhouse gases to changes in climate and concluded that by 2100 the global climate will probably warm from between 1.4oC to 5.8oC. That range is actually wider than that predicted by the previous IPCC study just five years earlier, mainly because the most recent scenarios for emissions of greenhouse gases account for a much greater variety of possible futures and also because new climate models assume a wider range of possible climate sensitivities. In 2001 President Bush asked the NAS to convene a panel of distinguished scientists to review several key questions related to climate change, including the main findings of the IPCC report; the NAS panel reached essentially the same conclusions as the IPCC....

We find it striking that more than two decades of intense research, reflecting a total investment of perhaps as much as $30 billion worldwide, has actually expanded the estimated change in temperature. That investment has not narrowed any key estimates of other changes in climate, such as the frequency and intensity of storms or the risks of drought. As scientists have learned more about the climate system, they have uncovered a vast field of unturned stones. (emphasis added)

For a very long pdf version of the report, click here.

Peter Dougherty, the senior economics editor for Princeton University Press, tries to summarize and categorize the globalization literature in an interesting Chronicle of Higher Education essay (subscription may be required).* As this is a topic with which your trusty blogger has more than a passing interest, I checked it out. Some of the good parts:

I once read that at an international conference of economists in 1959, the only thing the attendees had in common was that they had all read a single book, Paul Samuelson's 1948 landmark text, Economics (McGraw-Hill). What intrigued me was that even as recently as the cusp of the 1960s, modern economics, a language now so familiar to the ear of participants in the globalization debate, was so novel. Without that working language, and other such scholarly vernaculars, today's globalization discourse would be hard to imagine.

The story reminds us that globalization, much as it is the result of big business, power politics, and protean innovations, also remains the product of ideas -- ideas that have helped shape the industrialized world and that harbor hopeful implications for the developing world. Those benchmark ideas, which can be traced through scholarly books in the economics and social-science tradition in which I work, set the mark we should aspire to in our current lists.

Samuelson, of course, worked in a grand tradition too, one that could be traced some two centuries back to Adam Smith's An Inquiry Into the Nature and Causes of Wealth of Nations. One of Samuelson's grand antecedents and still the masterwork of globalization literature, Smith's then-revolutionary 1776 tome made the case for the demolition of international trade barriers as a means of enhancing nations' prosperity. But what we tend to miss in the glare of the word wealth is that Smith's objective in pressing that argument was not commercial, but moral. He wanted to improve the world not for monarchs and merchants, whom he held in deep suspicion, but for the majority of people. That end remains close to the hearts of today's globalization critics and supporters alike, contentious and opposed as their rhetoric may be....

If you were a social scientist advising the leadership of a developing nation and you wanted to help that country grow, you would probably have the following two items high on your agenda: Increase citizens' employability, and align your country's resources with its population, so that more people could eat, live free of disease, become educated, and emerge from poverty. One means of accomplishing both objectives is as straightforward as it is profound: Educate women.

From a purely self-interested perspective, this is the part I found most gratifying:

[S]ome may dismiss my riff on the study of globalization as too narrowly focused on technical scholarship to come under the normal definition of "literature." After all, works by analytical economists, electrical engineers, theoretical mathematicians, and empirical agronomists seldom penetrate the pages of The New York Review of Books, The New York Times Book Review, or other literary publications in which the high polemics of globalization are usually discussed. Yet rapidly accelerating technical ideas are driving the engine of globalization relentlessly forward, for good or bad. Those ideas come not only from economics, but from all walks of investigation: epidemiology, operations research, earth science, and so on. Scholarly publishers have a vital role to play in helping to contextualize the exploding technical literature for general readers, and for helping our scientifically inclined authors to frame their books in the larger social-scientific and humanistic discourse....

[T]he globalization literature suggests that books still matter. Even the most mathematically hidebound economist cannot rely on articles, but must write books to engage the larger conversation of globalization. The result is a more substantive broad discussion, and a more thoughtful, open-minded, yet grounded technical one. It is in books that we find the most realistic hope for a successful resolution to many of the problems associated with globalization.

*[Possible conflict of interest alert: I have an advance contract for my globalization book with Princeton University Press. However, I've never met or interacted with Dougherty.]

Voice of America reports on recent research on a generic three-in-one drug to fight AIDS:

A team of French medical researchers say a single dose of an inexpensive AIDS medicine is just as effective as three doses of expensive drugs.

The French national agency for AIDS research published its findings in the British medical journal Lancet.

The generic medicine is manufactured by an Indian pharmaceutical firm.

Doctors gave a single pill containing generic versions of three separate drugs to 60 AIDS patients in the West African nation of Cameroon. The patients took the pill twice a day. Six months later, 80 percent of the patients showed no sign of the virus.

The researchers say the cheap drugs can help the United Nations reach its goal of treating three million HIV-infected people in developing countries by the end of 2005.

Here's a link to the aforementioned Lancet article -- and here's a link to Sally Satel's more pessimistic take on the quality of generics in a Los Angeles Times op-ed.

Meanwhile, the same issue of Lancet has an epidemiological study of HIV trends in sub-Saharan Africa that also offers a modest dollop of good news:

Recent trends in HIV prevalence in women attending antenatal clinics suggest that the epidemic has levelled off since the late 1990s in all countries in Sub-saharan Africa. In eastern Africa, there is an indication of a gradual and modest decline. In western and central Africa there is no consistent evidence of changes in HIV prevalence in recent years and in southern Africa most countries report either a stabilisation or at worst a small increase in HIV prevalence.

Marcus Noland and Howard Pack have written a must-read policy brief for the Institute for International Economics on why the Middle East appears to be suffering from relative economic stagnation. They lay out the challenge in stark terms:

[T]he region as a whole will experience labor force growth of more than 3 percent for the next 15 years or so. On current trends, according to an Arab League report, unemployment in the region could rise from 15 million to 50 million over this period. Under plausible assumptions about the rate of productivity growth and required investment levels, the economies of the region will have to maintain investment rates on the order of 30 percent of GDP and income growth of 5 to 6 percent a year to absorb all this labor. This is a very tall order. And recent history is not reassuring....

Yet the implications of not achieving rapid growth to absorb the rising number of entrants to the labor force could be dire. In the Zogby (2002) poll of Arab attitudes, Saudi males stand out as uniquely dissatisfied and pessimistic about their children’s future. Presumably these feelings are rooted in the reality of dwindling employment prospects, the 40 percent decline in per capita income from its peak in 1982, and the lack of political voice. Dissatisfaction and pessimism about the future are mildly correlated with age, education attainment, and internet access. The youngest, most advantaged sections of society have the bleakest appraisal of the future. It goes without saying that 15 of the 19 September 11 hijackers were Saudi males.

The authors dismiss the simple argument that Islam retards receptivity to capitalism. Rather, Noland and Pack's key finding is that "public attitudes toward foreigners and globalization" more generally is the greatest barrier to foreign investment. Their operationalization of this kind of attitude is most intriguing:

Three of the many questions posed in the Pew [Global Attitudes] poll have particularly high correlations with measures of risk in economic exchange, especially FDI that involves a local physical presence. The regional pattern of responses to three issues—the necessity of closing large, inefficient factories; the need to protect their way of life against foreign influence; and the desirability of societal acceptance of homosexuality—are displayed in figures 2 through 4. Relative to most respondents in the rest of the world, the Arabs were less willing to close inefficient factories, more committed to protecting the local way of life, and less tolerant of homosexuality. The picture that emerges from the pattern of responses to the full set of Pew survey questions is of local populations that are relatively averse to change, instead favoring the maintenance of existing economic and social arrangements—especially if the forces of change are regarded as emanating from foreign or nontraditional sources.

Controlling for economic fundamentals such as the level of per capita income, macroeconomic stability,and corporate taxes across a broad sample of countries, these responses have some explanatory power with respect to measures of interest such as the level of inward FDI, sovereign debt ratings, and local entrepreneurship. Although the precise channels of causality are ill defined, it is plausible that the attitudes manifested in the survey responses
are underpinning behaviors and practices that may impede successful globalization. The question about closing of factories could be interpreted as a straightforward question about the priority placed on efficiency. The questions about protecting against foreign influence and accepting homosexuality could be interpreted as capturing the extent of entry barriers to human capital from nontraditional sources. (emphasis added)

From this finding, the authors return somewhat gloomily to the role of Islam and conclude:

Islam may matter—not in the simple sense that belief in Allah dooms one to a low personal saving rate or that Islamic banking systems handicap financial efficiency—but rather in a more subtle way. Today there are Muslim communities in the Middle East that are relatively discomfited by aspects of ongoing social change. To the extent that adherence to Islam is a significant component of personal and communal identity, Islamic teachings will be one prism through which these developments are evaluated. This pattern of apprehension may be reinforced if Islam itself is regarded as being part of this contested terrain.

Read the whole brief.

The Chicago Tribune's front-pager yesterday was a James P. Miller story about the effect of Chinese air pollution -- the "Asian brown cloud" -- on U.S. weather. Some of the tidbits:

Add one more item to the long list of things Asia exports to the United States: air pollution.

The contaminated air that rides the jet stream to Trinidad is laced with the sulfates and soot from Asia's industrial smokestacks, and nitrogen oxides that emerge from tailpipes of Asia's rapidly growing fleet of automobiles. It contains particles from fires set to clear jungles for farming, and from the millions of households that burn coal, wood or animal dung for heating and cooking.

Scientists identified the phenomenon five years ago. The Asian brown cloud, researchers now know, routinely climbs high enough into the atmosphere to hitch a ride on the fast-moving jet stream heading east to North America. In April and May, when seasonal winds are strongest, the high-altitude pollution can cross the Pacific in as little as four days....

So far, the increase in ground-level pollution that the Asian brown cloud causes in the United States is "not catastrophic, or even critical," said David Parrish, a research chemist with the National Oceanic and Atmospheric Administration's Aeronomy Lab in Boulder, Colorado....

A cloud heavy with particles of dust or pollution is whiter than a non-polluted cloud, because water droplets condense around the particles, explained [scientist V.] Ramanathan.

"Double the aerosols, double the droplets," he said. That means polluted clouds reflect sunlight more efficiently than a clean cloud. And that, in turn, affects the weather.

When clouds scatter sunlight, ground-level temperature declines. Such unnaturally high reflectivity also can suppress rainfall, or it can hold rain back so long that when it finally does fall to earth, it comes in the form of a damaging downpour, said Ramanathan.

Some researchers, in fact, think the extra-white clouds caused by dirty air are helping to offset the global warming effect. That would offer an explanation for the unsettling fact that "the planet hasn't warmed as much as the models suggest it should," given the amount of greenhouse gas that humans have released into the atmosphere, the researcher said.

The Asian cloud is only the first and largest of a number of high-atmosphere brown clouds scientists have discovered. This summer, National Oceanic and Atmospheric Administration is funding a major study of a similar blotch found hovering a mile or more above the eastern U.S. (and which sends a plume of dirty air trailing toward Europe.)

It's not clear if there are any policy implications from this -- but I hadn't seen the phenomenon reported previously.

Great Washington Post story on the current mood of pro-globalization thinkers. The money grafs:

Globalization's staunch defenders point to evidence indicating that countries are well advised to open their markets. Studies by two World Bank researchers, David Dollar and Art Kraay, show that the developing world's "globalizers" -- defined as countries that have increased trade the most relative to their national income -- have enjoyed much faster growth in recent years than non-globalizers.

But many economists find this argument unpersuasive, because it relies on including two giant, fast-growing countries -- China and India -- in the ranks of the globalizers, even though both the Chinese and Indian governments keep
their economies closed in many important respects, and India's growth spurt
began several years before it started opening up. "The irony is, China and
India are hardly paradigmatic open-market economies," said Nancy Birdsall,
president of the Center for Global Development and a former official at the World Bank and the Inter-American Development Bank.