Thailand Still Dreams About an 'OPEC of Rice'

I guess there are few truly novel ideas in international political economy. Since the formation of OPEC, developing nations have envied its perceived success in buoying oil prices. As such, there have been any number of cartels for other commodities which have been mooted or even made. Bauxite, anyone? However, it should immediately be apparent that the prospects of a successful cartel depend on a number of things such as (a) the centrality of a commodity to modern life, (b) the price elasticity of demand for the commodity, (c) the global market share of the countries within a cartel and (d) the willingness of cartel members to stick to production quotas.

In 2008, the literally cooking Thai Prime Minister Samak Sundaravej proposed that Thailand group together with four other Southeast Asian nations--Vietnam, Myanmar, Cambodia and Laos--to form a rice cartel. Rice being a staple food in Asia, it definitely meets the criterion of being an important commodity in everyday life in our part of the world. The global rice industry is somewhat unique though in that most production is consumed domestically. Given that situation, countries that do export have a greater say in global rice prices which may belie their comparatively lesser output compared to the likes of, say, China and India. The world's top two rice exporters, #1 Thailand and #2 Vietnam, would have been included in the mooted cartel

As it so happens, the Thais have once again been clamouring for the creation of this cartel, demonstrating the durability of the idea through various leadership changes there. However, there appears to be a fly in the rice as India has become more oriented toward exporting rice as well and is purportedly poised to overtake Thailand as the world's #1 rice exporter this year. Just as Russia is the spoiler to OPEC by being a major energy exporter that is not within the organization, so too does India pose a rice "threat":

An alliance of Thailand, Vietnam, Cambodia, Laos and Myanmar will aim to share information and cooperate in production and marketing, with the goal of increasing rice export prices, Yanyong Phuangrach, Thailand's permanent secretary for commerce said in Bangkok Wednesday. The aim is to form the alliance by the end of the year, he added.

Thailand and Vietnam usually control close to half of the global rice trade. But the London-based International Grains Council estimates their combined share will fall to 38% this year, as India has become the world's biggest exporter. This week's move to create a cartel is seen as a response to India's increased market share, which came after it lifted a 3½-year ban on exports of "ordinary" rice last September.

For obvious reasons, getting Vietnamese cooperation is crucial to Thailand's effort. Vietnamese officials are also wary of the sensitivities involved in raising food prices worldwide at a time when high food prices causing hunger in LDCs is causing concern:

If this new effort is to succeed, it will need to keep Vietnam on board, said Chiaki Furui, chief executive of Agrow Enterprise, a Bangkok-based commodities brokerage. Indeed, Vietnam responded to India's lifting of the export ban last year by cutting its own export prices, despite Thailand's lobbying of other exporters to keep prices high, and some are skeptical that the latest push for an alliance can work.

"A cartel on rice trade won't succeed. Vietnam already has a minimum rice export price, but traders continue to sell at lower prices to be competitive in the global market," said Tejinder Narang, an executive with New Delhi-based trading company Emmsons International. An official with state-run Vietnam Southern Food Corp., the country's largest rice exporter, warned that efforts to boost prices could trigger world-wide protests, given that many people around the globe are starving.

Further, it is very important to keep in mind that Thailand's proposed cartel is not an ASEAN effort. Alike in other regional groupings, there usually are importers and exporters of certain commodities. Hence, while the proposed membership is entirely composed of ASEAN members, higher rice prices in international markets are most likely to harm other ASEAN members that import much rice to meet domestic demand alike Indonesia and the Philippines (which are more populous than any of the mooted cartel countries):

But the push for higher rice prices could put Thailand at odds in this case with Indonesia, a major rice importer. Indonesia's response to possible higher global prices will be to expand local buying and stockpiling by raising the domestic purchase price, said Mohammad Ismet, a former consultant to Indonesia's state-run buyer, Bulog. "There is no reasonable basis to form such an alliance. Clearly, traditional importers such as Indonesia and the Philippines feel threatened by the unreliability of the world's rice market," Mr. Ismet said.

In the interest of third world solidarity, I do not favour this cartel since rice-consuming nations are predominantly developing ones. Fellow Southeast Asians, you won't be "sticking it to the (white) man" but rather ourselves.

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Non-Alignment Reborn? Morsi, UN's Ban, etc in Iran

The Non-Aligned Movement (NAM) came into existence at a time when developing countries could, yes, align themselves with either the United States and its allies or the Soviet Union and its allies. Even the United States--which dissuaded many countries from attending the 1955 Bandung Conference in Indonesia launching the NAM--has since acknowledged it as a "milestone" for developing countries. Ever-so-suspicious of others' motives, American leaders of the time thought it was some sort of communist shindig, headlined as it was by the attendance of probably the most skilled Asian diplomat of his generation, Chou En-Lai.

The developing countries' stated principles about political self-determination, mutual respect for sovereignty, non-aggression, non-interference in internal affairs, and equality were notable, especially in a world fraught with Cold War tensions. While it is true that developing countries have made countless political-economic mistakes since 1955, some have done spectacularly well, too. At any rate, that they deemed it important to find out on their own what sort of governance would permeate their societies certainly remains an attraction.

To certain white American commentators, the end of the Cold War "ended" the rationale for non-alignment since LDCs no longer had to choose between communism and market democracy. To paraphrase Thomas Friedman, the erasure of the Iron Curtain meant there was no longer an alternative to the "golden straitjacket" of market democracy, and he chides others for their...current deviations.

But, something which surprises most casual observers is that the NAM still lives on in the post-Cold War era. It's not about LDCs being caught in the middle of two would-be oppressors, but still very much the desirable objectives of political self-determination, mutual respect for sovereignty, non-aggression, non-interference in internal affairs, and equality. While one blowhard may have met its end several years ago, another still remains that usually exaggerates the good it's done the rest of the world.

While the Western media largely ignored the recent handover of NAM leadership from Egypt to Iran in Tehran--look around and see how much attention was devoted to the Republican National Convention--the NAM handover matters. Veteran Asia watchers should be familiar with Philip Bowring, former editor of the late, lamented Far Eastern Economic Review (FEER). While he does acknowledge that NAM has itself become marginalized as of late, there is an opportunity to revive the movement and the causes it champions insofar as its aspirations remain those of countries as diverse in NAM membership as Singapore and, say, Fiji:

The Non-Aligned Movement is a shadow of its former self. In a multi-polar world of many criss-crossing alignments it may have no place at all, leaving the 115 member organization, founded in the wake of the 1955 Bandung Conference of independent Asian and African states, as a meaningless relic of the Cold War.

However, the fact that Iran is hosting the Movement’s 16th summit, which began yesterday, is an acute embarrassment to the US and other western countries who have been demonizing Iran...[t]he US even attempted to lean on UN Secretary General Ban Ki-moon not to attend...

Ban is doubtless aware of the hypocrisy of sanctions against a country which is itself surrounded either by nuclear states, or by countries recently invaded by the US. NAM delegates, includ[e] India’s Prime Minister Manmohan Singh and Indonesia’s President Susilo Bambang Yudhoyono...

That India and Indonesia's leaders--generally held up as Western-friendly, democratically progressive sorts--went to Tehran anyway does indicate their respective countries still see value in the aims of non-alignment. Despite the sideshow of Secretary-General Ban's appearance and an Egyptian head of state visiting Iran for the first time in small eternities, Bowring sees the potential of reviving NAM by returning to its founding principles:

Members such as India and Indonesia would like to use the non-aligned movement as a vehicle for pushing their own aspirations to regional and international influence. But it is unclear how this can be achieved given the diversity of nations involved and their varying degrees of ties with the US, China and Russia.

However, for all its lack of identity and common goals the NAM remains a symbol of lingering Afro-Asian (and Cuban) resentment over western colonialism and imperialism and continued western and particularly US assumptions that they can continue to dictate to a wider world whether on politics, social mores or economics. They need only look to the Afghan and Iraq wars and the continued occupation of Palestinian territory for reminders.

Westerners are certainly not infallible and tend to revert to their preachy habits sooner or later. For that reason, it is still a good idea for the developing world to have a gathering where they can point this out and chart their own destinies in the process. Contrary to Friedman, the NAM is not another despot's club, but one that reflects the diverse choices LDCs have made over the years. For better or worse, the choices they've made remain theirs.

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Developing an 'Autocracy Index' (World Policy Inst)

You are doubtlessly familiar with the "world's worst dictators" feature from Parade. Apparently, this concept of comparing authoritarian rule remains popular as our colleagues over at the World Policy Institute have come up with their own compilation.

In their composite measure, they take a look at years in power, percentage of GDP dedicated to military spending, prison population per 100000 people, press freedom and a subjective "expert score" to rank these rather nefarious characters. While I see the logic in using national-level indicators for the most part, they have their limits. This consideration is especially true for those countries which have relatively newer leaders.

A case in point is Kim Jong-un. The WPI folks do a shortcut by adding +3 years for tenure for those who inherited their leadership from a family member. While little may change in North Korea, there is certainly the possibility of reform on the margins--or even more extensive changes. For instance, see Parade's 2011 rating in which Myanmar's Thein Sein ranked fifth largely on the strength (weakness?) of his predecessors' actions. It took some time to get going perhaps, but he was intent on reform. We'll see: let's not give up on Kim Jong-un just yet. Sins of the father and all that...

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Hillary, More White Man's Burdenish Than Kissinger

Say what you will about Henry Kissinger and the practice of realpolitik, but it is interesting to note the degeneration in US foreign policy attitudes over four decades. From Kissinger-era live and let live, Missus Clinton has largely returned to the "America knows best" attitude familiar to American exceptionalists. What is of course interesting is that the present secretary of state is even more assured in her smug self-superiority at a time when the US is in clear and obvious political-economic decline. At any rate, here's what Kissinger told South Korean leaders during the Park Chung-Hee era when certain American lawmakers were raising a big stink about human rights in that country. From the account of Kim Chung-Yum

[Kissinger] also added that a country had to adopt a political system that served its environment, as the history, culture, and politics of every country was different...Secretary Kissinger remarked in a press conference that: "We cannot change all the governments and political systems in the world based on our American values." [p. 535-6]

Speaking of Asia and cultural imperialism, contrast those statements with those delivered by Missus Clinton prior to the APEC summit  late last year. Essentially, its the familiar theme of "you coloured peoples of Asia would be better off following us enlightened white people in the US and Europe." Yes, precisely--the White Man's Burden of civilizing the unwashed masses in Asia (and elsewhere):

We have a model for what we and our partners in the region are working to achieve. It is what the United States and our partners in Europe achieved together in the past 50 years. The 20^th century saw the creation of a comprehensive transatlantic network of institutions and relationships. Its goals were to strengthen democracy, increase prosperity, and defend our collective security. And it has paid remarkable dividends, in Europe itself, in our thriving two-way trade and our investment, and in places like Libya and Afghanistan. It has also proven to be absolutely critical in dealing with countries like Iran. The transatlantic system is and always will be a central pillar of America’s engagement with the world.

OK, so let me get this straight: First, Afghanistan is a great place. And second, she mentions that the transatlantic system (composed mainly of white nations with colonial imperialist histories) will remain a central pillar of American engagement in the context of supposedly currying favour with Asian nations. Aside from having a tin ear for politics--the ugly American in excelsis--Hillary speaks loudly and carries a teeny-weeny stick, while Henry believed more in having it the other way around.

With Park Chung Hee's daughter being the front-runner to be South Korea's next leader, I guess that nation which is far more progressive than the US at the current time isn't exactly down with Hillary's whitebread "freedom 'n' growth" schtick. As ever, the best way to get the white people to quit telling the rest of the world how great they are is to do them one better--which is not exactly difficult nowadays given the wretched state of their downwardly mobile nation.

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Pragmatist Islamists? Those IMF-Loving* Egyptians

In case you haven't been following the news, IMF Managing Director Christine Lagarde recently visited Egypt, where she was promptly serenaded by a plea from their Muslim Brotherhood-linked President Mohamed "Islam is the Solution" Morsi to increase the prospective bailout amount to $4.8 billion from $3.2 billion. Undoubtedly, Egypt is in dire economic straits with borrowing costs north of 16% for long-term bond issuances and a massive budget shortfall--which even enhanced IMF beggary will fail to plug by most accounts.

That said, there may be an ever-so-slightly improved prospect for a loan coming through (or some hope). Although the previous Freedom and Justice Party (FJP)-dominated legislature made quite frankly unrealistic pleas for conditionality-free loans, its subsequent dismissal and the election of Morsi has supposedly changed matters. Insofar as the caretaker military government of Kamal Ganzouri was treated with understandable contempt by the FJP legislature, his succession by Morsi has, according to some, changed the overall FJP tune on IMF loans. In other words, the twin evils of a military leader and the IMF were probably too much for the Muslim Brotherhood to stomach, but an FJP leader plus the reviled IMF may be something Egypt can digest--at least for a while.

Ahram Online has a fascinating article on the alleged volte-face of the Islamist party on IMF lending in the grandiosely entitled "From hell to heaven: Egypt Islamists change tack on IMF loan" [!--even I cannot make this stuff up]:

On Monday, the former head of the budget and planning committee in the now-dissolved parliament Saad El-Husseini said he completely supports the IMF loan, even if it entails what is considered usury. El-Husseini added that in Sharia law "necessities allow the forbidden," according to a report on Ahram's Arabic-language news-site.

In addition, Adel-Hafez El-Sawi, the FJP's Economic Commission Chairman told Ahram Online on Monday that "we never rejected the idea of borrowing." El-Sawi explained that what the party previously opposed were the economic reforms suggested by Ganzouri's government to attain IMF funding. The plans were not transparent and ignored key issues regarding public debt, wage structures, taxes and governmental spending, he said.

The FJP also issued a statement on Sunday night saying it did not take a "negative" stance towards an International Monetary Fund (IMF) loan to Egypt. "Our decision not to reject borrowing is based on Egypt's supreme economic interest," the statement read. 

More interestingly, Morsi is implied to have bought off the Nour Party for whom an Islamic identity is even stronger than the FJP by virtue of giving its leader a place on his advisory team:

For its part, the [even more Islamist] Nour Party said on Sunday that it had never objected to overseas loans and denied that it had ever claimed an IMF loan was tantamount to usury. Emad Abdel-Ghafour, head of the party and a recently-appointed member of Morsi's presidential team, told Ahram Online that the party will not approve any loan until it knows the conditions. “Economists told us that this loan and its interest rates need not be regarded as usury," he said. Abdel-Ghafour said that any previous statement from a Nour Party member rejecting such loans was not representative of party opinion and was purely a personal view. 

Under sharia law, of course, charging interest is regarded as usury and is thus prohibited. While Islamic borrowers (especially from the IMF) rationalize borrowing somewhere along the lines of "we had no choice" or the excuse of "the IMF lends at concessional rates and therefore it's not usurious," I am actually in agreement with the Nour Party head in believing that forthcoming conditionalities applied by the IMF on Egypt will make or break this deal as they likely would have before.

The prospect of IMF conditionalities may now be more palatable to Islamists because they believe that popular discontent over the implementation of reform measures alike reducing massive energy subsidies is outweighed by the prospect of being thrown out of power by failing to deliver on the economic front. Prospects going forward depend on the ability of the Islamists to tamp down the IMF conditionalities and keep popular discontent at a manageable level, while at the same time managing to normalize the dire economic situation in Egypt. It's a tall order for the Islamists in a high-stakes bid to keep their grip on power, but an advantage Egypt has over many other countries is the geopolitical importance of Egypt. Would the IMF have been so eager and willing to dispatch Lagarde to, say, Yemen?

Remember, though, that Egypt is an IMF repeat customer--hardly something to be proud of. It has gone to the poorhouse four times since the Eighties. Doing so did not solve Egypt's problems conclusively then as evidenced by repeatedly having to visit the Washington-based emergency funder, and most hardly expect it to do so now when Egypt's shortfall is far more than $4.8 billion. Needless to say, it is generally unpopular there, too.

Good luck, Egypt. You're going to need lots of it.

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25 Years Later, World Bank Returns to Myanmar

For developing countries, the process of normalizing relations with the rest of the world involves again availing of certain things: Coca-Cola. Pepsi. Aside from re-engaging in trade in (rather unhealthy and fattening) consumer goods, however, you also have development technocrats flogging their services in your country. I am of course talking about World Bank folks coming to your country plying development advice and rather more sought-after loans. From the Inter-Press Service:

At the beginning of August, the World Bank, along with the Asian Development Bank, reopened offices in Yangon , following more than a year of widely watched though still disputed political and social reforms in the country. This marks the first formal engagement between the World Bank and Myanmar, also known as Burma, in 25 years, as well as the first ever entry of the International Finance Corporation (IFC), the World Bank Group's private-sector arm.  

Already the bank has pledged an US$85 million loan, also expected for approval in October, alongside a plan to restructure Myanmar's debt [to the World bank, worth some $400 million.

That said, activists are wary of their lack of inclusion and the emphasis on dealing so far mostly with the regime. Given the fractious and contentious nature of Burmese politics on one hand and the supposedly more inclusive and participatory nature of World Bank lending nowadays, these are not minor issues:

To date, local organizations and communities have felt the World Bank's approach is non-inclusive, sparse on details, lacks transparency and, most worrisome, does not solicit input from the organizations and communities most affected by conflict and development to inform their decision-making process, Jennifer Quigley, with the Washington-based US Campaign for Burma, told IPS.

Just prior to the ISN release, four dozen Myanmarese NGOs sent a letter to the World Bank's headquarters, expressing their anxiety that "the Bank's re-engagement activities in our country ... have been rushed, secretive and top-down."

So there's reason to be wary. At any rate, the draft Interim Strategy Note (ISN) mentioned in the article which should be replaced with something more permanent by year end is viewable on the World Bank site. At any rate, after a quarter of a century, the World Bank is back in Burma.

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Cold War Still Rages...In US Trade Policy on Russia

Remember the time before China joined the WTO when it was annually subjected to congressional dog-and-pony shows concerning whether a country that did not respect human rights deserved most-favoured nation (MFN) trade status with the US? Just as Americans from various walks of life still have a hankering for the good ol' days when Reagan was in office, so do there remain representatives who cannot let go of the Iron Curtain glory days.

While Russia already acceded to the WTO late last year, the United States still requires its lawmakers to sign off annually on Russia not disallowing emigration of its Jewish citizens--the obscure and quite frankly antiquated reason why Jackson-Vanik was established to stick it to the Soviets in 1974. In American trade lingo, Russia still does not have permanent normal trade relation status (PNTR)--what we know as MFN--alike China, and so most-favoured nation status must be re-approved annually ostensibly based on the appraisal of Russia's human rights practices. The main source of trouble for the United States now is that WTO members are in principle obligated to grant each other MFN status, which is clearly violated by Jackson-Vanik requiring annual re-approvals.

To be sure, the Obama administration has already told congress that Jackson-Vanik must be lifted so that the United States may meet its obligations to its fellow WTO member. That said, there again remain certain holdouts among American lawmakers (dreaming of Pershing missiles and Star Wars missile defence shields, no doubt).

Indeed, there even are legislative proposals to further play up links between human rights and trade with Russia than under Jackson-Vanik. In a Bloomberg editorial:

Some U.S. lawmakers want to combine the repeal of Jackson- Vanik with a punitive measure aimed at pressuring Russia for human-rights violations. The Sergei Magnitsky Rule of Law Accountability Act [text here], which was approved June 26 by the Senate Foreign Relations Committee, would name and sanction Russian officials thought to be responsible for the 2009 death in a Moscow prison of Sergei Magnitsky, a lawyer who disclosed evidence that government officials had embezzled $230 million. The scope of the act has been broadened from its initial focus on Russia and now requires the U.S. to seize the assets of and deny visas to any official deemed to be involved in any human- rights violations. 

(There is more on the politicking behind efforts to pass the Magnitsky Rule, which Russia has said it would retaliate against if passed.) This being Bloomberg--a business news organization--the emphasis is less on continuing human rights violations and more on how not giving Russia its due in the trade realm as a WTO member makes it less likely to follow global regimes and disadvantages American firms wishing to do business there in the process:

The Magnitsky case is just one of many reasons for grave concern over the Russian government’s repeated repression of democratic freedoms and human-rights violations. Yet combining the two pieces of legislation would do more harm than good. WTO membership will further bind Russia and President Vladimir Putin to a global regime of rules and laws and also open opportunities for U.S. companies. Those are important goals in their own right. Failure to repeal Jackson-Vanik would just give Russia free rein to punish U.S. companies. 

The latter point is similar to that made by the US Chamber of Commerce which has been lobbying for granting Russia MFN (PNTR). If Russia does not receive it from the US, then it has the right to suspend granting US firms PNTR--and disadvantages American firms in the process vis-a-vis those of other WTO member countries:

Under WTO rules, every WTO member must grant all other members unconditional Permanent Normal Trade Relations (also known as Most-Favored Nation status). This WTO rule mandates that any advantage granted to one WTO member by another member must be accorded unconditionally to all other members. The United States will be in clear violation of this rule if Congress fails to graduate Russia from Jackson-Vanik. Russia would thus be fully within its rights to withhold the benefits of its accession-related reforms from U.S. companies.

A newer Agence France-Presse article also cites the economic losses which may accrue if Jackson-Vanik is not dealt away with immediately:

The US Chamber of Commerce, the world's largest business organization, warned that Russia could retaliate if Congress fails to normalize trade relations. "Until Congress approves PNTR with Russia, Moscow will be free to deny the United States the full benefits of its reforms," Chamber president and chief executive Thomas Donohue said.

Under Russia's accession to the WTO, Moscow agreed to apply a final tariff ceiling of 7.8 percent for goods, compared with a 2011 average of 10 percent. "The United States gives up nothing -- not a single tariff -- in approving" normal trade relations, Donohue said. "It's a true jobs bill, and won't cost taxpayers one penny. Because of our inaction on PNTR, European and Asian companies have won a head start in the Russian market."

Russia, which became the 156th WTO member Wednesday after 18 years of negotiation, was the United States's 14th largest supplier of goods imports in 2011, led by oil imports.US goods exports to Russia have climbed steadily in recent years, and jumped almost 40 percent from 2010 to $8.3 billion last year.

How does the saying go? Give peace a chance. Last I checked, Russians could freely emigrate starting in 1991--a long time ago in a political economy far, far away from today's WTO member state--even if certain holdout Cold Warriors dream otherwise. 

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