Anti-Free Trade Paradise
Presidential candidates Hillary Clinton and Barack Obama, pandering to anti-trade activists, suggest that should they become president, they will restrict trade agreements. Before you buy into their promised paradise, there are a few trade questions you might consider.
Suppose you were choosing a country to live in. Which country would you prefer: a country that has the world champing at the bit to put its money into or one where the world is unwilling to invest? Let's look at the numbers.
The United States is the world's largest recipient of foreign direct investment. According the Economic Report of the President, in 2004, foreigners owned $5.5 trillion in U.S. assets and had $2.3 trillion in sales. They produced $515 billion of goods and services, accounting for 5.7 percent of total U.S. private output, and employed 5.1 million workers, or 4.7 percent of the U.S. workforce in 2004. According to the Congressional Research Service, in 2006 alone, foreign investors spent $184 billion investing in U.S. businesses and real estate, the highest amount foreign investors have spent since 2000. My question to Clinton, Obama and the anti-trade lobby is, would Americans be better off if there were no foreign investment in our country?
According to the Bureau of Labor Statistics, between 1996 and 2006, about 15 million jobs were lost and 17 million created each year. That's an annual net creation of 2 million jobs. Roughly 3 percent of the jobs lost were a result of foreign competition. Most were lost because of technology, domestic competition and changes in consumer tastes.
Some of the gain in jobs is a result of "insourcing". Foreign companies, such as Nissan, Honda, Nokia, and Novartis, set up plants, hire American workers and pay them wages higher than the national average. According to Dartmouth College professor Matthew Slaughter, "insourced" jobs paid a salary 32 percent higher than the average U.S. salary. So here's my question to anti-traders: If "outsourcing" is harmful to the U.S., it must also be harmful to European countries and Japan; would you advise them to take their jobs back home?
Wal-Mart has become the whipping boy for political demagogues, unions and anti-traders. I suggest that they have the wrong target. The correct target is revealed by answering the question: "Why does Wal-Mart exist and prosper?" Wal-Mart exists and prospers because tens of millions of Americans find Wal-Mart to be a suitable source of goods and services. Clinton, Obama, unions and anti-traders should direct their outrage and condemnation at the tens of millions of Americans who shop at Wal-Mart and keep it in business.
There's great angst over the loss of manufacturing jobs. The number of U.S. manufacturing jobs has fallen, and it's mainly a result of technological innovation, and it's a worldwide phenomenon. Daniel W. Drezner, professor of political science at the University of Chicago, in "The Outsourcing Bogeyman" (Foreign Affairs, May/June 2004), notes that U.S. manufacturing employment between 1995 and 2002 fell by 11 percent. Globally, manufacturing job loss averaged 11 percent. China lost 15 percent of its manufacturing jobs, 4.5 million manufacturing jobs compared with the loss of 3.1 million in the U.S. Job loss is the trend among the top 10 manufacturing countries who produce 75 percent of the world's manufacturing output (the U.S., Japan, Germany, China, Britain, France, Italy, Korea, Canada and Mexico).
But guess what -- globally, manufacturing output rose by 30 percent during the same period. According to research by the Federal Reserve Bank of St. Louis, U.S. manufacturing output increased by 100 percent between 1987 and today. Technological progress and innovation is the primary cause for the decrease in manufacturing jobs. Should we save manufacturing jobs by outlawing labor-saving equipment and technology?
Economist Joseph Schumpeter referred to this process witnessed in market economies as "creative destruction," where technology, innovation and trade destroy some jobs while creating others. While the process works hardships on some people, any attempt to impede the process will make all of us worse off.
Are Republican Ads That Attack Obama and Pelosi Effective?
By Stuart RothenbergHours after the results were tallied in Louisiana’s 6th district special election, both parties issued assessments about the efficacy of GOP ads linking the winner, Don Cazayoux (D), to presidential candidate Sen. Barack Obama (D-Ill.) and Speaker Nancy Pelosi (D-Calif.).
Democrats proclaimed the strategy a failure, while the National Republican Congressional Committee disagreed, asserting that its ads cut Cazayoux’s lead and made the May 3 race closer than it would have been. Republicans blamed their own nominee, Woody Jenkins, for the defeat.
Did the ads redefine Cazayoux and move voters away from him? Regardless of the results, was the strategy a reasonable one? And even if the strategy wasn’t completely effective in Louisiana, could it work down the road?
The district, which includes Baton Rouge and surrounding parishes, gave President Bush 59 percent in 2004. It is about one-third black, and it is widely regarded as Republican-leaning.
After each candidate won in the April 5 runoffs, Jenkins began the special election trailing Cazayoux.
An April 7 Club for Growth poll conducted by Basswood Research found the Democrat leading 46 percent to 38 percent. An April 16-17 NRCC poll conducted by Ayres, McHenry & Associates showed an almost identical situation, with Cazayoux leading 47 percent to 40 percent (48 percent to 41 percent when leaners were included).
The problem for the NRCC was that its survey found Cazayoux with solid 45 percent favorable and 24 percent unfavorable ratings among whites, while Jenkins’ 49 percent favorable and 37 percent unfavorable ratings among whites were much worse.
The NRCC independent expenditure effort ran three different ads in the district, all produced by OnMessage Inc., the consultants for Louisiana Gov. Bobby Jindal (R), trying to drive up Cazayoux’s negatives by using issues, and personalities, designed to polarize the race along more traditional partisan lines.
The first spot branded Cazayoux as a tax raiser (calling him Don Tax You, playing off the pronunciation of his last name), while the next two ads sought to link him in voters’ minds with Obama and Pelosi. Both ads used photographs of the two Democrats, with one ad explicit in asking voters to see the special election as a referendum on Obama and Pelosi.
A second NRCC brushfire poll was conducted April 23-24, almost a week after the “Tax You” ad began airing. It showed Cazayoux’s unfavorable rating among white voters had increased by 6 points, going from 24 percent to 30 percent. The NRCC’s message seemed to be working, and Jenkins at that point trailed Cazayoux on the ballot test by only 3 points, 44 percent to 41 percent (including leaners).
The problem for Republicans was that while Jenkins’ unfavorable rating among whites had improved, one-third of whites who said they were very likely to vote in the special election still had an unfavorable opinion of him.
That’s when, with little prospect of improving Jenkins’ reputation (especially in light of Democratic attacks on his integrity), the NRCC tried to make the special election about Obama and Pelosi. Republicans had little choice, even though Jenkins’ high negatives limited the chances of any GOP strategy working.
If the NRCC’s April 23-24 survey was accurate, and I certainly have no reason to doubt it, then there isn’t much hard evidence that the ads linking Cazayoux to Obama and Pelosi worked. After all, Cazayoux’s 3-point margin of victory was identical with the NRCC’s second survey. That’s the good news for the Democrats.
Of course, Republicans have been trying the same strategy in the Mississippi 1st district special election, and we will soon know whether they have any better results with it in that race. But even if they don’t, the danger for Democrats is that when Obama is the Democrats’ official nominee, he will be regarded as the leader of his party, defining what it means to be a Democrat.
Right now, being a Democrat still means that you aren’t responsible for Iraq or the economy. It means that you aren’t George W. Bush. It means that you represent a change in direction. But if and when Obama starts to be identified with certain policies, the Democratic Congressional Campaign Committee, as well as Democratic candidates running in largely Republican and conservative districts, could have considerable problems.
The NRCC’s April 16-17 survey found Obama’s personal ratings among white voters in Louisiana’s 6th district at a horrendous 23 percent favorable and 65 percent unfavorable. Both the Club for Growth and NRCC’s surveys found Pelosi’s unfavorable rating twice her favorable rating among all voters in the district, and the NRCC survey found her ratings among white voters at 21 percent favorable and 57 percent unfavorable.
I’ll admit that I was skeptical that many people in Louisiana’s 6th district even knew who Pelosi was. But the two sets of poll numbers can’t be ignored, and it’s now easy to understand why Republican strategists believe that she is becoming a polarizing figure and think that they will be able to use her as a punching bag in the fall and beyond.
Democratic incumbents running for reelection in 2008 (and after), won’t automatically be tossed out of Republican districts because Obama is leading his party (or the nation). Rep. Christopher Shays (R-Conn.) and former Reps. Anne Northup (R-Ky.) and Jim Leach (R-Iowa) survived Bill Clinton’s victories, and Reps. Gene Taylor (D-Miss.) and Dennis Moore (D-Kan.) have been re-elected in GOP years.
But it isn’t even debatable that Obama and Pelosi have the potential to hurt Democrats running for Congress in Republican districts in 2008, and even more so in 2010 if Obama wins the White House and Democrats turn the country in a decidedly more liberal direction.
If that happens, the GOP strategy will look prescient and incredibly astute, no matter its limited effect in Louisiana’s 6th district last week. Remember, Northup and Leach didn’t lose in 2006 because of what they did. They lost because of their party and their party’s leadership.
America must face the harsh realities over oil
President Bush was in Saudi Arabia at the weekend, trying to get his hosts to increase oil production to take some of the pressure off rising prices.
Ever willing to be seen to please their American friends, the helpful chaps at the House of Saud duly agreed to ramp up output by a few hundred thousand barrels a day. This, of course, is a drop in the tanker of Saudi, let alone global energy production, and to nobody's great surprise it had no effect whatsoever. The price of crude crept above $127 per barrel in London trading yesterday.
In economic terms, there's a not very polite term for what the President was doing which describes the futility and discomfort of performing a certain bodily function into a countervailing breeze.
But Mr Bush - an oilman after oil - knows this, too. His efforts were more of a political gesture than a meaningful policy initiative.
In political terms, inexorably rising oil prices are starting to generate something approaching panic in America. The Republicans, already battered by the weak economy and the seemingly intractable Iraq war, are ripe targets for yet more opprobrium for failing to rein-in oil companies as they heartlessly exploit the poor Americans who find themselves unable to drive their five-litre engined cars very far this summer.
The crunch from oil prices plays an important rhetorical role in Hillary Clinton's barely breathing presidential campaign. In her stump speeches to rapidly diminishing audiences, she never misses an opportunity to berate the oil companies - and their Republican friends in government.
Her economically illiterate idea for a gas tax holiday over the summer was predicated on these popular fears about rising energy costs, though one of the many problems with it was that it would probably have ended up channelling even more revenue to the oil companies because it is unlikely they would have passed on the whole tax reduction on to consumers.
Barack Obama has been marginally less demagogic, to be fair, but he can't resist sticking it to the heartless energy companies, either.
The President and most of his dwindling band of Republican brothers (though not, it should be said, the party's presidential candidate John McCain) pursue a similarly silly tack.
They'd have us believe that if only the United States would open up the Arctic to more oil exploration, prices would drop like a stone. In an election, this is all very well. But time is getting on and it is becoming ever more urgent that whoever wins in November drops the populist rhetoric and gets to grips with a couple of basic realities.
The first is that higher energy costs are here to stay. You don't have to buy Goldman Sachs's headline-grabbing forecast this month that crude will reach $200 a barrel.
But it would be foolish to try to deny that in the immediate future, anything we do now will not stop prices rising.
Oil is up by almost 30 per cent this year alone. That's not the fault of greedy energy companies, or that other current favourite, unscrupulous speculators. It is a simple fact of economic life in a world economy that is, in effect, experiencing a new industrial revolution among half its population.
Even in the event of a serious recession in much of the developed world, energy demand is not going to change much.
The second reality is that this is, in the end, at least in terms of the nexus of economics and energy policy, a Good Thing. It should force all of us in the West to redouble our efforts to diminish our dependence on oil. Fortunately, markets are quite effective at doing this. As we all know, the capitalist world - yes, even the US - is much more energy-efficient today than it was 40 years ago. For that we have the last great oil shock of the 1970s to thank.
A third reality is that, at least for the foreseeable future, these higher prices will have enormous implications for geopolitics.
It is a staple of all political debate in the US now that the American dependence on oil has led to staggeringly bad policy for decades towards the big oil producers. It has forced the US into bed with some unsavoury characters and has been the constant factor behind repeated and often baleful US interventions in the Middle East.
Now, in addition to the threats posed by an even more complicated Middle East, the US has to address the challenge of a rapidly enriching Russia, a country that shows every intention of rolling back democratic progress and using its energy wealth to create trouble for America and Western Europe wherever it can.
In the very near future, real, ingenious American leadership will be needed not to make pointless gestures towards the newly powerful energy producers but to ensure we don't turn our dependence on a scarce resource into political capitulation.
The UN and humanitarian intervention
To protect sovereignty, or to protect lives?
The new notion of global responsibility to alleviate suffering has struggled to win acceptance—and Myanmar will not be the place where it comes of age
“IT WOULD only take half an hour for the French boats and French helicopters to reach the disaster area.” Those were the wistful words uttered by Bernard Kouchner, France's foreign minister, as his country's diplomats at the United Nations vainly argued that aid might have to be “imposed” on Myanmar if the military regime refused to co-operate.
Even as he spoke, diplomats from China, Vietnam, South Africa and Russia were mocking his idea that the “responsibility to protect” (a new concept in global affairs, implying that saving human lives might in some extreme circumstances override sovereignty) could be invoked in the case of Myanmar's cyclone. China noted acidly that the idea had not been cited in 2003 when France suffered a deadly heatwave.
David Miliband, Britain's foreign secretary, reignited the debate on May 13th. Challenged by a radio interviewer to say whether the new concept (designed to deal with crimes like genocide or ethnic cleansing) could also apply to natural disasters, he replied: “It certainly could, and we have been absolutely clear...that all instruments of the UN should be available.” But nobody expects Britain, France or any other country to fight its way into Myanmar. As Mr Miliband observed, “the regime has 400,000 troops in uniform.” For ordinary people, unfamiliar with the UN's arcane workings, it looks rather depressing. Will there ever be a good moment to cite the notion of a responsibility to protect—unanimously adopted by more than 150 states at the UN World Summit in 2005—as Mr Kouchner is now suggesting?
The tortuous development of that concept is a tale close to the French minister's heart. As a young doctor, he saw the horrors of the Biafran famine triggered by Nigeria's civil war. Soon afterwards he co-founded Médecins Sans Frontières (Doctors Without Borders) and became a leading supporter of the “right of humanitarian intervention” in cases where governments fail their own people.
What Mr Kouchner was proposing sounded, in its stronger versions, like a revolution in global affairs—overturning the 1648 treaty of Westphalia, which upheld the right of sovereign states to act freely within their own borders. The UN Charter of 1945 also upholds the Westphalia principles, by stating in article 2(7), that “nothing should authorise intervention in matters essentially within the domestic jurisdiction of any state.” But Chapter VII does entitle the Security Council to take action in cases of a “threat to the peace, breach of the peace or act of aggression”.
Tension between those two principles—sovereignty versus intervention—has been palpable for decades. Some countries stress the enforcement powers laid down by Chapter VII. Others (mostly in the poor world) insist that state sovereignty always trumps, even in humanitarian emergencies.
In practice, since the end of the cold war the UN has been intervening more often in conflicts within (as opposed to between) states. Sometimes it has happened with, and sometimes without, the consent of the governments concerned.
In 1999 Tony Blair became the first world leader to assert a moral right to “get actively involved in other people's conflicts”—even without leave from the Security Council—if it was the only way to stop dire suffering. Speaking in Chicago after NATO's war over Kosovo, which the Security Council had declined to endorse, Britain's then prime minister made the case for “just war, based not on territorial ambitions, but on values”.
Four years later, an American-led coalition invaded Iraq, using somewhat similar rhetoric about the need to overthrow a dangerous tyrant for the good of everyone. Although it wasn't in any formal or legal sense a test case for responsibility to protect, many people felt that the disastrous outcome in Iraq discredited the entire idea of intervention for “altruistic” purposes.
Less of a right, more of a duty
Meanwhile, Canada had set up an International Commission on Intervention and State Sovereignty, under the chairmanship of Gareth Evans, a former Australian foreign minister, and Mohamed Sahnoun, a former Algerian diplomat. In their report, published in 2001, it was they who first suggested changing the discretionary “right to intervene” into a more muscular “responsibility to protect”, or R2P as it is known in diplomatic jargon. Under it, the “international community” (in effect the UN) would be placed under an actual obligation to take, if necessary, coercive action to protect people at risk of grave harm, in accordance with clear criteria.
Taken up by a High-Level Panel on UN reform in 2004 and adopted by Kofi Annan, then UN secretary-general, the principle survived the haggling in the run-up to the 2005 World Summit to squeeze its way into the final “Outcome Document”, though shorn of criteria. But it was never intended to cope with the aftermath of natural disasters or even “ordinary” human-rights violations. It was to be invoked only for genocide, war crimes, ethnic cleansing or crimes against humanity.
From the start, the idea was viewed by the developing world as a trick by the West to impose its values. Cuba, Egypt, Russia, Algeria and Myanmar have been vocal opponents. They have been leading a determined effort to obstruct the formal appointment of Edward Luck, a professor at Columbia University, as a special UN adviser on the issue. He still has no salary, no real title and no UN office.
Others, this time in the West, are asking whether responsibility to protect will ever be more than an empty slogan. When it came to it, who would be willing to intervene? How could such action ever get past all five of the Security Council's veto-wielding powers? Besides, as a senior UN official laments, the Iraq fiasco has “poisoned this well”. It showed that an armed intervention, even if its declared aims are benign, can set off a whole chain of terrible consequences.
“It never takes much more than a few days around the corridors and meeting rooms of the UN in New York to have your latest dose of optimism beaten out of you,” Mr Evans moaned recently. But he and other proponents of responsibility to protect have started to fight back, seeking to correct “misconceptions” over the concept. It's not meant to be a grand new doctrine or policy, they insist, rather a modest “strategy” for protecting the defenceless.
It is not only about military intervention, they add, but also prevention: spotting situations that could result in mass atrocities. Political, diplomatic, legal and economic measures should be tried before any resort to arms. Not every conflict, potential conflict, or gross abuse of rights should prompt application of the rule—only the worst cases. And even when all non-military means have failed, armed intervention may still not be the right answer. The consequences must be weighed to ensure that it will not do more harm than good to the people it seeks to protect.
Responsibility to protect is not yet dead, but it is fragile. Supporters point to the power-sharing deal that stopped Kenya's civil war in February as the concept's first success. The fact that the UN, in principle, retains the right to impose its will by force may have made it easier for the world body to broker a settlement.
Perhaps. But the idea will need some clearer successes than that if it is going to survive. And Myanmar, apparently, is not going to be one of them.
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