Iraq
Iraq starts to fix itself
Its people are still suffering monstrously, but Iraq is doing far better than it was only a few months ago
AFTER all the blood and blunders, people are right to be sceptical when good news is announced from Iraq. Yet it is now plain that over the past several months, while Americans have been distracted by their presidential primaries, many things in Iraq have at long last started to go right.
This improvement goes beyond the fall in killing that followed General David Petraeus's “surge”. Iraq's government has gained in stature and confidence. Thanks to soaring oil prices it is flush with money. It is standing up to Iraq's assorted militias and asserting its independence from both America and Iran. The overlapping wars—Sunni against American, Sunni against Shia and Shia against Shia—that harrowed Iraq after the invasion of 2003 have abated. The country no longer looks in imminent danger of flying apart or falling into everlasting anarchy. In September 2007 this newspaper supported the surge not because we had faith in Iraq but only in the desperate hope that the surge might stop what was already a bloodbath from becoming even worse (see article). The situation now is different: Iraq is still a mess, but something approaching a normal future for its people is beginning to look achievable.
The guns begin to fall silent
As General Petraeus himself admits, and our briefing this week argues, the change is fragile, and reversible (see article). But it is real. Only a few months ago, Iraq was in the grip not only of a fierce anti-American insurgency but also of a dense tangle of sectarian wars, which America seemed powerless to stop. Those who thought it was just making matters worse by staying on could point to the bloody facts on the ground as evidence. But now it is time to look again. Each of those overlapping conflicts has lately begun to peter out.
A few Sunnis, motivated by Islam or simple resentment of foreign military occupation, continue to attack American forces. But many Sunni tribes, repelled by the atrocities committed by their former and often foreign allies in al-Qaeda, have joined the so-called Sunni awakening, the Sahwa, and crossed over to America's side. At the same time, Sunnis and Shias have stopped killing each other in the vast numbers that followed the blowing up of a Shia shrine in early 2006. General Petraeus's surge is only one reason for this. Another reason, less flattering to the Americans, is that after last year's frenzied ethnic cleansing fewer neighbourhoods are still mixed. But it is also the case that a lot of Iraqis, having waded briefly into the horror of indiscriminate sectarian slaughter, have for the present made a conscious decision to step back.
The conflict between Shias and Shias has died down too. In the past few weeks Iraq's prime minister, Nuri al-Maliki, has belied a reputation for weakness by sending the army to take control of the port city of Basra and the Baghdad slum known as Sadr City, both strongholds until then of the powerful militia run by Muqtada al-Sadr, a vehemently anti-American Shia cleric. The fact that Mr Sadr considered it wise not to resist suggests not only that the army is now strong enough to out-face private militias but also that the state has acquired far greater political legitimacy, in Shia minds at least.
Needless to say, these conflicts could resume. The Sunnis fighting on America's side today could direct their fire back towards the Americans and Shias tomorrow if not enough room is made for them in the new, Shia-dominated order. On the Shia side, it is not clear whether Mr Sadr has given up violence for good. And his is not the only political movement to have a private army. Sunnis, Shias and Kurds alike still see their respective militias as a hedge against an uncertain future.
To that extent, Iraq is still far from normality. But if the calm survives, politics will at least have a chance. Mr Maliki's next job is therefore to go ahead with the provincial elections due before the end of the year. A good showing by the Sunnis, too few of whom voted in 2005, could bring them back into the political mainstream, enabling them to wield serious power in their own provinces at least. The elections can also provide a useful alternative path to power for the Sadrists, if they really have given up violence and decide to take part.
George Bush meanwhile has a further part to play, which consists mainly of not doing things that might tempt him. He should not, for example, attack Iran. One of the impressive things about Iraq's present government is its refusal to take sides between America and its next-door neighbour. It needs good relations with both if it is to prosper. Mr Bush has also to find a way to leave to his successor the business of negotiating a new agreement on the status of American forces in Iraq. This may become a toxic issue in Iraq's elections as the existing UN mandate expires. Mr Maliki is said to want a guarantee that America will defend its borders. His opponents accuse America of seeking permanent bases in Iraq, turning it into a vassal. It would be wrong for a lame duck in Washington to tie the hands of the next administration on such matters.
It's really not about that any more
In highlighting the improved conditions in Iraq we do not mean to justify The Economist's support of the invasion of 2003 (see article). Too many lives have been shattered for that. History will still record that the invasion and occupation have been a debacle. Iraqis even now live under daily threat of violent death: hundreds are killed each month. They remain woefully short of the necessities of life, such as jobs, clean water and electricity. Iraq's government is gaining confidence faster than competence. It is still fractious, and in many places corrupt.
Nor does it follow that a turn for the better necessarily validates John McCain's insistence on America staying indefinitely. A safer Iraq might make Barack Obama's plan to pull out most American troops within 16 months more feasible, though at the moment a precipitate withdrawal looks foolish. But to guard the fragile improvements, the key for America must be flexibility. Both candidates have to keep their options open. If America's next president gets Iraq wrong because he has boxed himself in during the campaign, all the recent gains may be squandered and Iraq will slide swiftly back into misery and despair. That would be to fail twice over.
Ireland's referendum
The answer’s no
Ireland rejects the EU’s Lisbon treaty
THE European Union has been plunged into chaos after the rejection of its latest treaty by Irish voters. EU leaders must now decide if the Lisbon treaty is dead or can be salvaged in some form—even if the cost is pushing Ireland to the fringes of the European project. Though strongly pro-European, early tallies on Friday June 13th showed Irish voters rejecting the new treaty by a hefty margin. During voting on Thursday, both supporters and opponents complained that they did not understand the highly technical text—many chose to “play safe” and say no.
The Lisbon treaty is complex. It offers sweeping changes to the way the union runs—creating a new full-time “president” to represent member states, and a foreign-policy chief to speak for Europe round the world. It also sweeps away national vetoes in some important areas of policy, such as cross-border policing and justice. Many Irish no voters voiced suspicions that the treaty would, in reality, rob their small state of clout at the EU’s top tables.
Nicolas Sarkozy of France and Angela Merkel of Germany are set to issue a joint response as soon as a final result is announced on Friday, calling for leaders to debate a way forwards for Lisbon at a long-planned summit in Brussels next Thursday and Friday. France takes over the rotating presidency of the EU on July 1st for a six-month stint, and is desperate not to lose a carefully planned agenda of projects on things like climate change, immigration and beefing up EU defence co-operation. Both leaders will call for sticking to that French programme: whether that is realistic remains to be seen.
Expect some EU politicians to demand that the Irish vote a second time on the treaty (and this time get their vote “right”). That has been done before: the Irish were asked to vote again after they rejected the Nice treaty in 2001, and obliged with a yes vote the following year. Federalist types will demand to know why a small country on the far-western fringes of Europe, with less than 1% of the EU population, should be allowed to deny Lisbon to 26 other states.
Others, including Britain, will continue with their own ratification procedures for Lisbon, but will resist any attempt to “punish” Ireland.
A second Irish referendum would be harder to pull off this time. An economic slowdown after a long boom hung over this week’s referendum. Ireland’s economy will be in still worse shape in a few months’ time, when any second vote might be organised.
More important, the Lisbon treaty’s claims to democratic legitimacy are already threadbare. The Lisbon text is a reworking of an earlier attempt to create a constitution for the EU. That grandiose project was killed off by votes against it in twin referendums in 2005, in France and the Netherlands. It was no accident that Lisbon was a hard text to read: EU leaders were to be heard crowing last year that they had made it “unintelligible” in order to smuggle it past voters. The Lisbon treaty was specifically designed to be passed by the less risky route of parliamentary votes.
Unfortunately for its fans, Ireland has to hold referendums on any treaty that amends its constitution. In the end, it was the only country in the block to hold a popular vote on the text.
The yes camp amounted to the entire Irish political establishment: the only parliamentary party to oppose Lisbon was the nationalists of Sinn Fein. Disgusted yes campaigners accused Sinn Fein and a motley collection of other anti-Lisbon groups of spreading lies about the treaty, including claims that it would impose higher taxes on Ireland, force the country to legalise abortion and undermine Irish neutrality. Lies were told, but the big parties waged a terrible, half-hearted campaign. In the face of punchy anti-treaty slogans like “Lisbon: It’ll cost you”, the main messages from the yes camp included such bland generalities as: “Europe: let’s be at the heart of it”.
Ireland now faces a fight to remain at the heart of Europe, amid calls for its marginalisation. That would be outrageous hypocrisy, of course: Ireland only had to vote on the Lisbon treaty because the French and Dutch had already voted no to the constitution. But the EU has been wounded today: do not be surprised if some of its leaders lash out.
Commentary by Caroline Baum
June 13 (Bloomberg) -- One week ago, the likelihood that the Federal Reserve would raise its benchmark interest rate at the Aug. 5 meeting was zero, according to fed funds futures prices. Yesterday, the odds were better than 65 percent.
Expectations travel faster than the speed of sound nowadays. No moorings to come unhinged here, thank you very much. This boat is drifting anchorless at sea.
The rout, or rise, in short-term interest rates this week started in Europe and worked its way across the pond. The December Eurodollar futures contract, which reflects expectations for rates in the ensuing three months, slumped 65 basis points in two days -- June 9 and 10 -- alone.
The sell-off was aided and abetted by real or perceived hawkish comments from Federal Reserve Chairman Ben Bernanke.
``Inflation has remained high,'' Bernanke told the attendees at the Boston Fed's 52nd annual economic conference in Chatham, Massachusetts, on June 9 in a statement of the obvious.
So far, there's been only limited pass-through from soaring raw materials costs to consumer prices and wages, a result of soft domestic demand, he said. ``The continuation of this pattern is not guaranteed.''
To ensure that it continues, the Fed will ``strongly resist an erosion of longer-term inflation expectations.''
This followed by a week Bernanke's groundbreaking comment that the weak dollar had implications for inflation and inflation expectations.
Of course, he also told the Boston Fed conference that ``growth risks remain to the downside,'' but no one seemed to be listening.
Choppy Seas
And those risks are still there, which is why, hawkish talk notwithstanding, the Fed isn't about to rock the still shaky boat.
``They are not about to do a multistep tightening,'' said Paul Kasriel, chief economist at Northern Trust Corp. in Chicago. ``If they did, it would be aborted very quickly.''
Kasriel doesn't discount the possibility of a little cosmetic tightening. ``It's conceivable they could show their inflation-fighting credentials and bump the funds rate up 25 basis points in August,'' he said. ``But I don't think they will.''
Yesterday's retail sales for May showed surprising strength, rising 1 percent. That changes the arithmetic of second-quarter gross domestic product. It doesn't change the fundamentals driving the economy.
Housing prices are falling.
The unemployment rate is rising.
Non-residential investment is slowing.
Business confidence is slumping.
The U.S. auto industry is dead.
State and local governments are cutting back.
Bank credit has been falling since March.
The Fed's monetary base is barely growing in nominal terms.
``There's no there there'' for a second-half recovery, said Bob Barbera, chief economist at ITG Inc., a New York brokerage, who expects ``an extended period of below-trend growth.''
Against a backdrop of soaring food and energy prices, any inkling of recovery sends the bond market into a tailspin. ``There can be no acceleration in economic growth without embedding it in the inflation outlook,'' Barbera said, translating the market mindset.
Economists at Goldman Sachs Group Inc. are also resisting the rising tide of expectations of higher interest rates. The reasons, as chief economist Jan Hatzius outlines in a recent commentary, are: increased slack in the economy, with rising unemployment curbing whatever impetus there might be for higher wages; data on inflation and inflation expectations that have been ``mixed rather than downright awful''; and a dollar that has been stable on a trade-weighted basis since late February.
Anchors Away!
What's more, ``prior sell-offs at the front end of the yield curve have sometimes proven to be poor predictors of policy,'' Hatzius said.
Not to mention what the Fed says. It was only last August that policy makers viewed the risks to the economy as weighted toward higher inflation. One month later, the Fed cut the interbank rate by 50 basis points, followed by another 275 basis points in the next seven months.
So what to make of the recent rhetoric from Bernanke and other members of the policy committee?
``I think the Fed is uncomfortable with the funds rate below the inflation rate,'' Kasriel said.
As well they should be. The economic consequences of a negative real funds rate are pretty clear. With central bankers around the globe aware of the cost of restraining inflation and their own credibility once the genie is out of the bottle, you can't blame them for talking tough.
Adrift at Sea
The question is, can they or will they follow through? The Fed is independent, yes; it's not immune to political realities. After facilitating and financing the purchase of Bear Stearns Cos. by JPMorgan Chase & Co. in March, how would members of Congress react to a rate increase at a time when their constituents are struggling to buy food and gas for their families?
Bernanke is certain to be reminded of the Fed's dual mandate -- maximum sustainable employment and price stability -- when he testifies before the Senate Banking and House Financial Services committees in July.
Maybe that's why, as Kasriel's Northern Trust colleague, Asha Bangalore, points out, the Fed has never raised the federal funds rate until after the unemployment rate starts falling.
The Fed is in no position to raise interest rates. The U.S. economy is in or close to recession. Americans are losing their jobs, their homes, their wealth and their confidence.
Policy makers stress the importance of anchoring inflation expectations. They probably would be willing to tolerate a little drift when the alternative is sinking the ship.
June 13 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said that financial markets, roiled by the collapse of the subprime-mortgage market, have shown a ``pronounced turnaround'' since March.
``The worst is over in the financial crisis or will be very soon,'' the former Fed chairman said in remarks via satellite today to a conference in Mexico City. ``There is a reduced possibility of a large, intense recession.'' He added that he has a ``sense'' that tax rebates have helped retailers.
Greenspan's remarks echo the assessment of Fed Chairman Ben S. Bernanke this week, who said that the danger of a ``substantial downturn'' in the economy had receded. Economists surveyed by Bloomberg News this month indicated a smaller likelihood of a recession compared with May.
Greenspan also offered a measure for telling when the markets have returned to normal.
``We will learn that this crisis has come to an end'' once the gap between the London Interbank Offered Rate and the overnight index swap rate narrows to 50 basis points, he said. ``And more significantly when it narrows to 25 basis points, near what it was Aug. 8.''
A basis point is 0.01 percentage point.
Crisis Measure
Libor is a benchmark rate for loans between banks, while the so-called OIS rate is a measure of what traders expect for the Fed's benchmark rate. The spread between three-month Libor and the equivalent maturity OIS rate was about 69 basis points today, down from a high for the year of 90 basis points in April. It averaged about 19 basis points over the past five years.
Greenspan added that rebate checks that are intended to stimulate consumption are bringing about increased sales. ``There is a sense it is buoying the retail market,'' adding the U.S. economy has shown a ``remarkable resilience.''
A government report yesterday showed that retail sales in May rose 1 percent, twice as much as economists had forecast, as consumers spent the federal tax rebates from a fiscal stimulus plan. U.S. gross domestic product grew at a 0.9 percent annualized pace in the first quarter, capping off the weakest six months in five years.
Food Prices
At the same time, Greenspan said rising food prices have had a ``devastating'' effect on Mexico and globally. He said he believes speculation has contributed to the rise in oil and food prices, while declining to forecast oil prices.
Greenspan's comments compare to his view in February that the odds of a recession were ``50 percent or better'' and that the slump could be deeper than the previous two contractions.
Defaults on subprime mortgages in the U.S. have triggered a worldwide credit crunch, with banks and financial institutions reporting $391 billion in writedowns and losses stemming from bad debt.
The persistent slump in the housing market is putting ``major downward pressure'' on the economy, said Greenspan, who served as Fed chairman from August 1987 to January 2006.
He said housing remains a ``critical problem'' and financial markets may not recover fully until home prices stabilize, ``perhaps by the end of the year.''
The former chairman reiterated his view that there will be a test of the Fed's independence in the next few years as inflation accelerates.
Fed policy makers will have to put ``increasing pressure'' on money supply to combat inflation, and ``as a result you will see interest rates rising,'' he said.
June 13 (Bloomberg) -- The dollar posted its biggest weekly gain versus the euro since 2005 as traders speculated the Federal Reserve will increase borrowing costs this year and Irish voters rejected a treaty promoting European Union unity.
The U.S. currency rose to a one-month high against the euro on bets Group of Eight finance ministers meeting this weekend will signal they favor a stronger dollar. The yen dropped for a fifth week against the euro after the Bank of Japan left its target lending rate at 0.5 percent, the lowest among industrialized nations.
``We've seen a very sharp reversal of sentiment about the dollar,'' said Nick Bennenbroek, head of currency research at Wells Fargo & Co. in New York. ``The U.S. economy seems reasonably resilient, and the Fed is beginning to look hawkish.''
The dollar increased 0.4 percent to $1.5376 euro at 4:24 p.m. in New York, from $1.5439 yesterday. It touched $1.5303, the strongest level since May 8. The U.S. currency increased 0.2 percent to 108.21 yen, compared with 107.96, and touched 108.38, the highest since Feb. 14. The euro fell 0.2 percent to 166.35 yen, from 166.68.
The U.S. currency climbed 2.6 percent this week against the euro, the biggest increase since June 2005. The dollar rose 3.2 percent versus the yen, the most since December 2004. The yen decreased 0.5 percent versus the euro in its longest stretch of losses since October.
Irish Reject Treaty
The 15-nation euro weakened as Irish voters turned down the European Union's new governing agreement, a setback for the bloc's plans to strengthen its global voice. Results from yesterday's national ballot on the Lisbon Treaty show opponents defeated supporters by 53.4 percent to 46.6 percent.
``The rejection of the treaty undermines the EU's public legitimacy and may influence public sentiment in countries contemplating joining the euro zone,'' wrote Geoffrey Yu, a currency analyst at UBS AG, in a note to clients today. ``This change may undermine the ECB's price stability mandate in favor of a growth mandate.''
The Chinese yuan rose for a second consecutive week versus the dollar, increasing 0.3 percent to 6.9022, on speculation policy makers are seeking a stronger currency to control inflation. The U.S. wants China to keep allowing its currency to rise against the dollar and will discuss that stance in talks next week in Maryland, said Alan Holmer, the U.S. Treasury's top China negotiator, in a briefing in Washington today.
Lagarde on Dollar
French Finance Minister Christine Lagarde, before meeting with her G-8 counterparts today and tomorrow in Osaka, Japan, told reporters that the U.S. dollar's increase versus the euro is ``very satisfying.'' The group comprises the U.S., Japan, Germany, the U.K., France, Italy, Canada and Russia.
The U.S. currency strengthened versus the euro on June 9 after U.S. Treasury Secretary Henry Paulson said in an interview with CNBC that he would ``never'' rule out intervention. Fed Chairman Ben S. Bernanke said on June 3 that he's aware of the impact a falling currency can have on price expectations.
``There's a serious intent in defending the dollar,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. ``It seems the days of benign neglect are over.''
The last time the major industrialized countries intervened was on Sept. 22, 2000, when they bought the euro after it tumbled 27 percent from its 1999 debut. They last propped up the dollar in 1995, when it sank almost 20 percent in four months against the Japanese yen to a post-World War II low. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
Fed Rate Outlook
Fed funds futures on the Chicago Board of Trade show a 61 percent chance the central bank will increase the 2 percent target lending rate by at least a quarter-percentage point at its August meeting, compared with 9 percent odds a week ago. There's a 27 percent chance policy makers will lift the rate to 3 percent by December.
``People are getting ahead of themselves,'' expecting more than one rate increase this year, said David Powell, a currency strategist at Bank of America Corp. in New York. He expects the Fed to raise borrowing costs to 2.25 percent this year.
U.S. consumer prices rose 0.6 percent in May after a 0.2 percent increase the prior month, the Labor Department reported today in Washington. The median forecast of 84 economists surveyed by Bloomberg News was for a 0.5 percent advance.
Bank of Japan Governor Masaaki Shirakawa and his six colleagues left the overnight lending rate unchanged in a unanimous vote in Tokyo.
The yield advantage of a two-year Treasury note over a comparable-maturity Japanese security increased to 2 percentage points, from 1.5 percentage points on June 6, making dollar- denominated assets more attractive.
NBC's Tim Russert dies of apparent heart attack
By DAVID ESPO
AP Special Correspondent
In addition to his weekly program, Russert made periodic appearances on the network's other news shows, was moderator for numerous political debates and wrote two best-selling books.
NBC interrupted its regular programming to announce Russert's death, and in the ensuing moments, familiar faces such as Tom Brokaw, Andrea Mitchell and Brian Williams took turns mourning his loss.
Williams called him "aggressively unfancy."
Russert, of Buffalo, N.Y., took the helm of the Sunday news show in December 1991 and turned it into the nation's most widely watched program of its type. His signature trait there was an unrelenting style of questioning that made some politicians reluctant to appear, yet confident that they could claim extra credibility if they survived his grilling intact.
He was also a senior vice president at NBC, and this year, Time Magazine named him one of the 100 most influential people in the world.
Russert had Buffalo's blue collar roots, a Jesuit education, a law degree and a Democratic pedigree that came from his turn as an aide to the late Sen. Daniel Patrick Moynihan of New York.
One of his books, "Big Russ and Me," was about his relationship with his father.
He was married to Moureen Orth, a writer for Vanity Fair Magazine. The couple had one son, Luke.
Carl P. Leubsdorf, president of the Gridiron Club, an organization of journalists, said in a statement, "It was a measure of the degree to which Tim Russert was respected in the journalistic world that he was the first broadcaster elected to membership in the Gridiron Club after the rules were changed in 2004 to end our century-old restriction to print journalists."
"He was an enthusiastic member and a willing participant in our shows. His fellow Gridiron members join with all of those who knew and respected Tim in mourning his untimely death."
"Tim will be sorely missed because his years as Senate staffer and probing TV journalist gave him special insights on political and governmental issues," said Sen. Arlen Specter, R-Pa. "Had he chosen law as a career, his cross-examination would have made him a star in that field as well."
June 13 (Bloomberg) -- Barack Obama learned the pitfalls of claiming the moral high ground this week when a top adviser resigned under pressure. His next challenge is whether to forfeit a huge financial edge over Republican John McCain or renege on a promise to accept public-funding limits.
Obama pledged in March 2007 to pursue an agreement with the Republicans to participate in the public-financing system, which is designed to limit the influence of big money. That was before he began shattering private-fundraising records.
Strategists from both parties say the presumptive Democratic nominee would have an advantage of more than $100 million in the general election if he declines public money and its spending restrictions. The question is how much criticism he'd take for becoming the first presidential candidate to opt out of the system, which dates back to the Watergate era.
``The pressure once again is to prove that he's a different politician,'' said Kevin Madden, a Republican strategist who worked on Mitt Romney's primary campaign this year. Backing out would have ``all the elements of hypocrisy and expediency that could hurt this pristine brand that he tries to promote.''
The issue may have special resonance because both Obama and McCain are vying to be seen as reformers. Five aides have been forced out of McCain's campaign because of special-interest ties, and former Fannie Mae Chairman James Johnson quit Obama's vice presidential search committee on June 11 after reports that he may have received preferential mortgage terms from Countrywide Financial Corp.
Using the Issue
McCain has signaled he will use the public-financing issue against Obama.
In March 2007, McCain's campaign said the candidate would accept public money if the Democratic nominee did. Obama spokesman Bill Burton said his candidate would ``aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election.''
By February 2008, the Obama campaign said public financing was only an ``option.'' Obama has refused to be pinned down on whether he'll participate, citing concerns about the effects of outside political groups that can raise millions and aren't controlled by campaigns.
``That's Washington double-speak,'' McCain responded. ``That's not transparency, nor is it keeping one's word to the American people.''
Minimal Damage?
Some strategists say the public-opinion damage may be minimal if Obama raises his own money for the election. And the advantages will be so great, they say, that they can't see how he would accept public financing.
``He'd be crazy to do it,'' said Lynn Cutler, a former vice chairwoman at the Democratic National Committee.
Obama, 46, an Illinois senator, has raised almost three times as much as McCain, 71, an Arizona senator. The downside for Obama is that the national party coffers traditionally filled by the DNC lag behind the Republican National Committee.
That matters because the two party committees act as shadow campaigns, doing their own advertising and get-out-the-vote efforts. A shortfall in DNC fundraising would hurt Obama even as his own campaign tops McCain's. At the end of April, Obama had a cash edge of $15 million over McCain; the RNC exceeded the DNC by $36 million.
Closing the Gap
Republican and Democratic strategists said they don't expect that disparity to last. Obama is sending staffers over to the DNC and should be able to help the committee raise as much money as the RNC, while his own campaign collects and spends at least $100 million more than McCain before the nominating conventions, they said.
``A lot of Obama's contributors have no identification with the sense of being a Democrat,'' said Eddie Mahe, a former deputy RNC chairman. ``They are Obama supporters. With communication from him, `You are doing this for me,' I think he can raise all the money he needs.''
The big question for Obama centers on the two months between the nominating conventions and the Nov. 4 election. If both he and McCain take public financing, each will get about $85 million to spend in that time.
They would also continue raising money for their party committees during that period. And Obama would probably push the DNC's money total over the RNC's if he focused his fundraising efforts only on the committee.
Still, by accepting public financing, Obama might not be able to raise as much money for the DNC as he would for his own campaign and wouldn't be able to coordinate spending efforts.
$500 Million
Should he opt to raise money privately, Obama could bring in as much as $500 million in the two-month general-election campaign, predicted Democratic strategist Joe Trippi. McCain has never raised more than $22 million in a month.
While others have lower estimates for Obama's fundraising, all expect him to outmatch McCain. That's because his list of donors tops 1.5 million and he's gotten a flood of contributions on the Internet.
``It's been an extraordinarily broad-based grassroots effort,'' said Roger Altman, a former deputy Treasury secretary who was a prominent Hillary Clinton supporter. Now that Obama is the nominee, he said, his ability to ``raise enormous sums going forward is huge.''
June 13 (Bloomberg) -- After six decades of ever-expanding international commerce, the high tide of free trade is ebbing.
As tens of thousands of South Koreans protest U.S. beef imports, rising commodity prices push nations to keep more food for domestic consumption and the U.S. chooses a new president who might be less supportive of free trade than his immediate predecessors, the world may be facing the end of a cycle that began in the immediate aftermath of World War II.
The liberalization of global trade has come ``to a screeching halt,'' said Fred Bergsten, director of the Peterson Institute for International Economics in Washington. ``It'll take years to rebuild the foundations of free-trade policy.''
The cause is more political than economic. ``This is a challenging time to be in the pro-trade wing of any party in virtually any country,'' U.S. Trade Representative Susan Schwab said June 12 at the U.S. Chamber of Commerce. ``It's hard to be for open trade, whether you are in India or the European Union or in China.''
Fueling the backlash is a convergence of trade-related anxieties: national-security concerns, worries about food safety and sufficiency, the desire to protect local jobs and the environment. In addition, the benefits of trade are often widely dispersed -- think low prices at Wal-Mart -- and entail high adjustment costs, including the loss of manufacturing jobs.
Beggar-Thy-Neighbor
The modern era of trade dates to the late 1940s, when the U.S. and United Kingdom pushed for the establishment of a global organization to avoid the beggar-thy-neighbor policies often blamed for exacerbating the Great Depression.
The General Agreement on Tariffs and Trade, established in 1948, succeeded in cutting industrial duties in developed countries from an average of 40 percent to about 4 percent over six decades.
Now known as the World Trade Organization, it is stuck in negotiations that began in 2001 over U.S. and European agricultural subsidies. The Doha Round, as the talks are called, has also been held up by disagreements between rich and poor countries about how much to reduce import taxes.
``The Doha Round isn't dead yet, but it's being pushed around a nursing home,'' said Doug Goudie, director for international trade at the National Association of Manufacturers in Washington.
The EU's Concerns
European Union trade negotiators expressed concern this week about ``a re-emergence of protectionist sentiment in the U.S.'' after Congress approved a new $289 billion farm bill that extends price supports and other subsidies developing nations oppose.
The bill ``heads agriculture policies in the wrong direction at a decisive juncture'' of WTO negotiations, a group of agriculture-exporting countries led by Brazil said in a June 3 statement. ``The unfair competition brought by subsidies hinders the process of market liberalization.''
Reservations about a new WTO agreement have grown into a general aversion to free trade in many countries, including France and Italy, where cheap imports are blamed for job losses. That's causing some governments to rethink their pro- trade policies.
Most important is the U.S., the world's largest economy and biggest importer. Democrats, who took control of Congress in 2007, have postponed a decision on a trade deal with Colombia by amending so-called fast-track authority, which guards against amendments and filibusters and requires a timely vote.
Undermining the Foundation
Their action ``undermined the whole foundation of U.S. trade policy,'' Bergsten said, adding that it creates a loss of confidence in the U.S. to lead the way on trade. Luis Guillermo Plata, Colombia's trade minister, said April 11 that U.S. rejection of the accord would be tantamount to imposing ``trade sanctions'' on one of America's staunchest allies.
Meanwhile, Democratic presidential candidate Barack Obama says that if elected, he might reopen the world's largest trade deal, the North American Free Trade Agreement with Canada and Mexico. The Illinois senator, 46, says the pact should include new labor and environmental standards.
Mexican farmers want to renegotiate Nafta too: They shut down Mexico City's main boulevard in January to protest the pact, which they say hasn't done enough to protect them from cheaper U.S. imports of sugar, beans, corn and milk.
All these developments ``are portents that the politics of trade are certainly becoming more difficult,'' said Claude Barfield, a trade expert at the American Enterprise Institute in Washington.
Shaking South Korea
Nowhere is that more evident than in South Korea, where public anger related to a pact aimed at increasing trade with the U.S. by 20 percent is shaking the government of President Lee Myung Bak. Lee has seen his popularity plunge from 50 percent when he took office in February to 17.1 percent in a poll this month by Korea Research and the YTN cable news network; his cabinet this week offered to resign over the dispute.
On June 10, about 80,000 South Koreans flooded the streets of Seoul to protest a proposal to resume beef imports from the U.S. Korea must remove the five-year-old ban, which was designed to prevent the possible spread of mad-cow disease, before the U.S. Congress will consider approving the trade agreement, Senate Finance Committee Chairman Max Baucus of Montana said June 11.
Extending the ban would affect South Korean exports of products such as automobiles and semiconductors to the U.S., Lee said the same day.
New Barriers
The 60 percent increase in the price of rice, wheat, corn and other food commodities since the beginning of 2007 has led some nations to erect new barriers to exports to make sure they have adequate supplies at home.
India, the world's second-biggest producer of rice and wheat, has banned shipments of the food grains. Egypt, Vietnam and Indonesia have also banned certain food exports. And Philippines President Gloria Macapagal-Arroyo said her country wants to become self-sufficient in food production by 2010.
``For a long time, it made sense to buy food from the international market,'' Arthur Yap, the Philippines agriculture minister, said in an interview. ``The situation has changed.''
Doug Irwin, an economic historian at Dartmouth College in Hanover, New Hampshire, and author of ``Free Trade Under Fire,'' said much of the current opposition to trade may subside when commodity prices fall and the U.S. economy recovers.
``Free trade is always being attacked,'' Irwin said. ``The question is, how high is the threat level?''
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