Gadgets Make the World Go Round: 15 Yrs of ITA

During these dark days of Doha Round deadlock, good news from the WTO is hard to come by. But, even your ever-pessimistic correspondent has managed to fetch--wait for it--reasonably good news involving the WTO. Although many people do not know of it, the Information Technology Agreement (ITA) signed under the auspices of the WTO way back in 1996 was a seminal event in the formation of global value chains in  the electronics industry. By gradually encompassing more and more countries in tariff-free arrangements in the production of electronic goods, disparate nations have benefited. To use commercial lingo, ITA enabled both Super Mario and Samsung to each have their own (export) Galaxy.

Just to show you how I am in such a generous mood, I will even let Mr. Doha Round Failure himself, WTO Director-General Pascal Lamy, fill you in on ITA's importance:

The 21st century is the era of information and communication technology, and the ITA has played a vital role in promoting affordable access to those technologies. This sector is crucial for the world economy – not only due to its considerable size, but also because it is an important driver of productivity, innovation and, ultimately, economic growth. Over the past 15 years, world exports of IT products have almost tripled in value since 1996, and reached an estimated US $1.4 trillion in 2010, accounting for 9.5 percent of world merchandise trade. Together, ITA participants account for 96 percent of world trade in IT products. And because they provide duty-free treatment to imports on a most-favoured-nation basis, they have created opportunities for exporters in all WTO members, including those in least-developed countries.

With the most recent participation of Colombia, the ITA has now grown to include 74 WTO members, and the majority of them are developing participants. Developing countries have consistently increased their participation in world trade of IT products since 1996, accounting for approximately 64 percent of exports and 51 percent of imports in 2010. While a growing share of the investment in both the production and use of these products is made by developed country IT industries, IT spending is increasing considerably in some emerging economies, such as China, India and countries of the Association of Southeast Asian Nations (ASEAN). These investments have been the catalyst that has allowed countries as diverse as China, Costa Rica, and some ASEAN countries to develop their capacity for manufacturing IT products and become important players in global production networks. In addition, other developing nations used these IT products and technologies as tools to become key players in other areas. For example, access to affordable IT equipment was instrumental in enabling India to become a powerhouse in consulting services, software development and other services. 

Good stuff, and there's much more information on the ITA's history, mechanics and future in the publication I excerpted Lamy from. As ever there's far too much interesting stuff to read if you're interested at all in international political economy. Rest assured that, sometimes at least, the WTO works.

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Sooper Franc KO's Calvinist Global HQ in Geneva

John Calvin before the Geneva Council, 1549

On the Sabbath day, I guess it's time for another weekend feature. For, after a long while, we have another instalment of religious political economy ("RPE"). John Calvin should be exceedingly well-known to students of social science as Max Weber's Exhibit A in the transition to a Protestant Work Ethic from Catholicism (and what we can only presume to call, ah, the Catholic Sloth Ethic by way of comparison). That is, material success was taken by Calvinists as suggestive that their destination lay beyond the Pearly Gates and not the Gates of Hell.

Now, the Swiss have traditionally been more tolerant of differences in opinion and dissenters throghout their history, so it was perhaps inevitable that Calvinism with its zero-fun, hair shirt outlook would be welcomed in Geneva--a town that has since been associated with sybaritic accoutrements alike the world's finest chocolates and wristwatches. In time, Geneva as the "Protestant Rome" even became a target for the separation of church and state. Yet, it bears remembering that the arrival of Calvin in Geneva in the mid-sixteenth century was much-lauded by those partial to him as an epochal event not only for the faith but also for the city:

On the very day of his arrival Calvin presented himself to the Council. During this session the general programme of his duties was determined; he returned home with a well-developed plan of activity; his desire was to establish in Geneva a State of which God Himself would be Head and the citizens of which would have to strive to lead a life in the closest possible conformity with the precepts of the Gospel. This idea has been called theocracy. It is indispensable, in any attempt to understand Calvin and his writings, to remember that he remained true to this principle all his life, and that any of the mistakes for which he may be reproached today are based on this system...

The founding of the College and the Academy marked an important date in the history of Geneva. The poor, modest city became, so to speak, the Protestant Rome. The running of its schools became a model for a large number of other academies. Thenceforth the young students of Europe flocked to Calvin's Academy.

So, where's the RPE here? A few months ago I talked about how the Swiss franc was becoming incredibly strong as a result of the Eurozone crisis. Safe haven capital flows and all that jazz. Swiss authorities have thus been compelled to intervene on behalf of its export industries alike the aforementioned food producers and watchmakers, but it's not only them who have been hurt. Geneva was already one of the most expensive cities in the world to begin with, and this dubious distinction has only been exacerbated by the mighty Swiss franc. Somewhat unsurprisingly, the Calvinist umbrella group the World Communion of Reformed Churches recently decided to pull the plug on its Geneva headquarters because foreign donations did not stretch very far in (converted) CHF. From the press blurb:

The Executive Committee of the World Communion of Reformed Churches (WCRC) has voted to relocate its offices from Geneva, Switzerland to Hanover, Germany. The results of the vote taken via email were announced today by WCRC President Jerry Pillay...

The move comes in response to concerns about the cost of running an organization in Switzerland. These include staff salaries and the high value of the Swiss franc. Most WCRC membership fees and donations are made in Euros or American dollars that have dropped in value in the past several years against the strong Swiss franc. The move to Hanover is scheduled for the end of December 2013. The new offices will be located at the Calvin Centre owned by the Evangelical Reformed Church of Germany where the Reformed Alliance has its offices. WCRC has a seven-member staff. 

And so here ends 463 years of close association between the Calvinist Church and the city of Geneva. A financial crisis on Europe's periphery that has resulted in a remarkably strong Swiss franc has done what centuries of bloody conflicts in continental Europe have failed to do. Then again, the euro isn't exactly a wimpy currency either, so it does make me wonder if they could have chosen a lower-cost location than Hanover, Germany in line with their ascetic philosophies. Hungary, anyone?

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M Carey, J Bieber & Barack the Enviro-Fraud

I was shopping at a discount store when I caught sight of an LED TV playing what I thought was a  music video of Mariah Carey's 1994 seasonal hit "All I Want for Christmas is You." I smiled as I recalled fond memories of a more innocent age. To my eyes at least, the young Mariah Carey was up there in the running for the most beautiful woman I ever saw'd. Imagine my surprise, then, when Justin Frickin' Bieber appeared in the video. As it turns out, this clip was Beiber's remake featuring the aforementioned Mariah Carey...made in 2011. What threw me off was the image of her all slinky alike in her youth. But alas, contrasting her mannequin-like image standing up with her true-to-life figure circa 2011 evident in the shots where she sits on the couch and frolics with the teen nuisance reveals the lie in the video. Nowadays she is rather...big. It was all just computer-generated trickery to make us think we were seeing the young Mariah Carey. How sad.

Like computer-generated imagery (CGI), American policy involves a lot of of fraud and fakery. Easily impressionable conservatives--among the world's b--chiest people--cast Obama as some sort of enviro-nut keen on destroying American free enterprise to save the world from (supposedly non-existent) climate change [1, 2, 3]. Nothing could be further from the truth as US environmental policy is not significantly improved from the unenlightened years of Bush the Younger.

I'd like these folks to explain this: say what you will about the pathetic US airline industry--and I've had much to say [1, 2, 3] about it from government bailouts to bouncer-sized cabin crew--but its ability to gain rents from the government is unprecedented. Never has so much been lost by so few who continue to inflict so much inconvenience and expense on the American people. A few months ago, I talked about how non-European carriers were infuriated by an EU law which was supposed to come into effect at the start of 2012 mandating that airlines pay a carbon tax based on the distance travelled by a jetliner landing at an EU airport. For instance, a flight from Atlanta to Frankfurt would be taxed over the entire distance of the trip and not just that over EU airspace. As it so happens, outrage by other nations was so great that the EU has punted on the issue, leaving implementation for a later date.Yet, Barack Obama, the so-called environmentally aware president, has (surprise!) safeguarded US airline interests ahead of schedule anyway:

The carbon fee bill was the first piece of legislation debated on the House floor after Congress returned from recess on November 13, and had been cleared by the Senate in September in a rare unanimous vote. President Barack Obama signed a bill on Tuesday shielding U.S. airlines from paying for each ton of carbon their planes emit flying into and out of Europe, despite a recent move by Europe to suspend its proposed measure for one year.

It directs the U.S. transportation secretary to shield U.S. airlines from Europe's carbon emissions trading scheme (ETS) if he or she deems it necessary. Lawyers have said the bill is unusual because it would prevent U.S. companies from complying with the laws of another country.

The argument that the United States and the airlines in question would prefer a global emissions scheme is a red herring. First, a global regime would be much harder to come by when you throw in traditional opponents of multilateral environmental schemes into the mix alike China. In other words, adding more veto players makes it more likely that no carbon scheme will come into effect. Second, even the United States' experience shows that it takes a leading state to raise national environmental standards. I am of course taking about California. It has traditionally had the highest standards in America concerning automobile emissions and mileage. Rather than sell California-only models, most automakers have instead made all cars sold in the USA conform to CA emissions regulations--improving nationwide standards in the process.

Or so the logic of EU flight taxes would go. It would have put pressure on manufacturers to lessen the emissions of jets. And, given that Europe is still a very major global market, there would have been pressure for other regions to adapt. But alas, it appears even the EU is conflicted on the matter. However, this much is clear: Barack the purported Enviro-Hero is nothing more than an Enviro-Fraud in the same way that Mariah Carey tries to pass herself off as her considerably slimmer former self. How sad.

Those Americans sure do like fraud and fakery. In fact, it's an industry called "Hollywood" that just so happens to love Obama partly for his dubious environmental poses.

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Tim Geithner, I Dub Thee 'Pantywaist of Globalization'

I've been meaning to make this post for four long, steenkin' years--and here it finally is. Perhaps Timmy thought he got away with stepping down soon as Treasury Secretary, but alas, I've pulled the trigger at the last moment. Anyway, this award is for continually being cowed in the China-bashing exchanges he finds himself in the middle of. In the past, I confess to poking fun at his responses to being made to perform admittedly unenviable tasks [1, 2]. How does piling on $1T in debt annually sound, for starters? My favourite, of course, being his repeated avocations of "strong dollar" policy despite continually asking China to revalue its currency. After all, wouldn't calling for the latter be a "strong yuan" policy that conversely implies a weak dollar is actually in effect?

At this point I guess we'll never know. Since moving from a strict peg to a managed float, the yuan has gained 25%. This doesn't mean that criticism has ceased, though. His soon-to-be former boss certainly kept harping on the currency issue throughout the recent US election. As it so happens, the US Senate requires the Treasury to report on the currency practices of America's trading partners. Eight opportunities have come to "do something" about China. Eight opportunities have gone to "do something" about China. As is usual during election years, Treasury delayed the release of the report scheduled for October for after the elections. And we got exactly the same thing:

The deadlines for the currency report to be issued are April 15 and Oct. 15 each year. But the Obama administration announced in October [this year] that it would delay the fall report until after meetings of finance ministers in early November. That decision also delayed the report until after the November election...

But Sen. Charles Schumer, a longtime Democratic Party critic of China's trade policies, criticized it. "This report all but admits China's currency is being manipulated but stops short of saying so explicitly," Schumer said in a statement. "It's time for the Obama administration to rip off the Band-aid and force China to play by the same rules as all other nations."

Not that the US will ever give up this issue:

Still, Treasury said the yuan remains significantly undervalued. It vowed to keep pressing Beijing to let the currency rise further to "level the playing field for American workers and businesses and support a strong, sustainable and balanced global economy."

The U.S. trade deficit with China reached $29.1 billion in September. It is running 6.8 percent ahead of last year's record pace. It has long been the largest U.S. trade gap with any one country.

Just as Susan Rice is the archetypal Ugly American, Tim Geithner is the archetypal Damp Squib in British-speak.Tim Geithner, for what will probably be the last IPE Zone post on you in your current capacity, I dub thee pantywaist of globalization.

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God Save the Empire: UK's Canadian BoE Guv'nor

 To be sure, outgoing Bank of England Governor Sir Mervyn King has a number of things going for him in my book. He was a longtime LSE professor before giving up his teaching position for a higher calling. He is also a long-suffering Aston Villa fan as our team battles to save itself from the ignominy of relegation. (Since the Premier League started, Aston Villa has never been demoted to the second division, but this year it's well and truly in the relegation zone.) That said, let's just say that during his time at the venerable BoE, many did not cotton up to his uppity ways. Philip Stephens of the FT had this to say about Merv's tenure:

Firstly, modernise. Sir Mervyn King has run the BoE as an 18th century monarch – a former Labour chancellor dubbed him the “Sun King”...It is time to say goodbye to the hordes of Threadneedle Street flunkeys in pink tailcoats and top hats, to open up the rarefied corridors of the governor’s office to the rest of the Bank, and to listen occasionally to colleagues. And no, you should not insist, as does Sir Mervyn, on being addressed as Mr Governor. 

To make a sporting analogy of the sort Merv would probably approve, I understand that Aston Villa has its faults despite having a storied history including winning a European championship way back in 1982. Still, you cannot live off days of wine and roses long past. Why should a team with such a large payroll be fighting for survival? In that way Mervyn King and his country are a lot like his team: trading on past glories and failing to keep up with the times alike the political currents that ebb and surge. In other words, the UK was due for a change.

And what a change it is! Mark Carney is the outgoing Bank of Canada governor--and a highly lauded one he is, being named one of the world's top central bankers in 2012. From his perspective, where else can you go having won the top accolade of your profession? Well I suppose he's done a Jose Mourinho and traded up to what I consider the third biggest show of them all after being Fed or ECB chairman: BoE governor...or guv'nor in British slang meaning "the boss."

It's all hand on deck now as Her Majesty has recognized the direness of Britain's economic situation. Will Britain suffer a downgrade from AAA alike the US and France? Heaven forbid. Searching all of her dominions (upon which the sun never set in days gone by), the selection committee chose...a Canadian. But wait, he does have a British wife and wishes to be naturalized besides:

Born in Canada, the 47-year-old intends to bring his British wife and four children to the UK and apply for citizenship. But he rejected the Treasury's stipulation that the new governor serve for a single eight-year term in favour of a contract that runs for only five years...

City analysts said that while they were surprised by the appointment, Canada's ability to survive the financial crash had boosted the status of its central bank boss. His promotion last year to head the G20 financial stability board, which is charged with forcing the world's major banks to agree and implement global standards, also elevated him to the top rank of financial regulators.

Carney said he had strong ties to the UK, not only through his wife's family, but also from working here for a decade and making contacts with UK businesses and financial institutions over recent years. He said: "I think I can play a constructive role in relaunching the institution in its new role in promoting financial stability and the regulation of financial services."

Actually, there is precedent for nationality-hopping among elite central bank governors. Carney's cohort in the 2012 best bankers in the world list is Stanley Fisher of Israel. Formerly, Fisher was first deputy managing director at the IMF--the #2 job at the IMF customarily taken by an American since the #1 was of course European. In 2005, however, he renounced his American citizenship (a really good idea) for an Israeli one (but the jury is still out on this move). 

At any rate,  it's the moment of truth for crown and country as the UK struggles to keep its place at the head of the sovereign credit ratings table and as its moribund economy continues to baulk. Kudos though to the selection committee--they could not have chosen a better person for the job. Godspeed, Mark Carney, and remember:

There will always be a Bank of England.

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12.9% Inflation? Bah! Serbia's Soccer Club Bailouts

Ladies and gentlemen, today I bring you the best act of "sticking it to the EU and the IMF" for 2012. So those Greeks may have caved in to the IMF-ECB-EU troika for the umpteenth time, but it appears those only aspiring to join the EU are keen on Sticking It To The Man. Having told the IMF to take the idea of central bank independence and shove it despite badly needing funds, the Serbian government has come up with yet another brilliantly over-the-top ploy sure to guarantee emergency lenders loathe it even more (if not to actually get it any money).

Let me first give you the IMF's 20 November depiction of Serbia as discussions continue for an "IMF-supported program":

The Serbian economy faces numerous challenges. The fiscal deficit has widened sharply in 2012 relative to the original budget and to last year’s level, and is unsustainably large. Public debt has also increased significantly. In addition, the external debt burden is high, inflation is volatile, and unemployment is elevated. Economic activity has significantly weakened amid a difficult global environment. GDP is expected to contract by about 2 percent this year, with a modest recovery expected next year. Inflation has risen sharply into double digits.

In other words, Serbia is broke. Awhile ago, I discussed how Serbian football coaches were its finest exports. Rest assured that Serbia is a proud footballing nation. Remember, Red Star Belgrade were European champions in the not-so-distant past. What the heck do these have to do with each other? Well, the Serbian government is apparently keen on addressing its widening fiscal deficit by--get this--bailing out its money-losing football teams [!] Aside from Red Star Belgrade, Partizan is also to receive a bailout:

The Serbian government will help refinance debt-ridden soccer giants Red Star and Partizan Belgrade and have appointed managers to temporarily run Red Star, the Balkan country's deputy Prime Minister Aleksandar Vucic said. Vucic had called a press conference in the early hours of Wednesday to announce the refinancing after Red Star chairman Vladan Lukic resigned on Tuesday saying he was exhausted from struggling with managing the club's debt of about 60 million euros ($76.27 million) and from a poor run of results...

"I spoke to the club's legends and leadership on the behalf of Serbia's government and we have agreed to (refinance) Red Star's and Partizan's debts because the state cannot allow these two clubs to go under," Vucic said. "The situation is so dire it's beyond comment and we will do what we can to help out Red Star and Partizan."

To me, this is beyond belief on any number of levels. If the situation is so dire for the Serbian government itself, why must it be compelled to bail out even less financially fit entities alike elite football clubs? And second, having annoyed the IMF already by curbing central bank independence, what does it say about being fiscally responsible when the state's chief priority is apparently the bailout of football clubs...and to appoint managers for the clubs besides?

This will be pretty hard to top in the offensive and frivolous waste of money department short of erecting gold-plated statues of Serbian war criminals, but you never know what will happen if I give them ideas...

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Can the White People Have Mubarak Back Now?

Sometime ago now, some wet-behind-the-ears white kid criticized me for suggesting that US policy in the Middle East could use improvement since it was contradictory and incoherent--especially when it came to using ICT as a diplomatic tool. Unsurprisingly, greenhorns like him took the events of Arab Spring as confirmation that we were in a whole new world of digitally revolutionized international relations--a dazzling place fogeys like myself never knew.

Hosni, Hosni - prolly better than Morsi, Morsi

However, unfolding events have demonstrated that there is no such thing. First they held runoff elections contested by those representing the old, old guard of Egyptian politics--a military man and a Muslim Brotherhood acolyte. The latter won, and has now gone about dismantling the judiciary after the lower house was done away with earlier. The end result? A potentially even more powerful executive than Mubarak ever was. The honest truth is that Arab Spring mobs were and remain a ragtag bunch, allowing those far better organized alike the Muslim Brotherhood to take full advantage. This outcome was utterly predictable if you've spent any time studying the ultimate beneficiaries from revolutions, and no amount of tweeting could have changed this turn of events. What a stunning blow for democracy.

And so it is that political turmoil once again engulfs Egypt as Morsi's power grabbing habits become apparent--especially to the West which has sought to curry favour with the Islamist by bankrolling his bankrupt government and more besides. For, not only is Egypt in social upheaval yet again, but it's well and truly broke. The realist in me asks that you consider what Egypt's Western benefactors have lost in the meantime:

1. The US still provides military aid to Egypt to the tune of $1.3B annually. The big difference, of course, is that the Egyptian military is now at odds with the Islamist government, so the US of A essentially funding those who stand to benefit from destabilizing the government or getting rid of it altogether (Mubarak-style);
2. Egypt pre-Arab Spring was in better economic condition than it is now. While not in the best of shape, it wasn't haemorrhaging foreign exchange reserves at a stunning pace due to capital flight, investment loss, and tourist non-arrivals either;
3. So Mubarak was authoritarian, but Morsi is authoritarian and Islamic fundamentalist to boot--generally intolerant of other religions and prone to consolidating power amongst his own ranks. Moreover, what Mubarak was intolerant of was precisely the sort of fundamentalist intolerance Egypt has today;
4. The trump card, of course, is that Mubarak wasn't chummy with Muslim Brotherhood offshoots Hamas--classified by most Western nations as a terrorist group--either.

I should be much less amused by all of this nonsense because it's ultimately the Egyptian people who are bearing the brunt of it, but let's get to the now-endangered IMF loan. The characteristically high-faluting announcement said that gaining buy-in from all sectors of society was a precondition for the loan:

Broad-based domestic and international support will be crucial for the successful implementation of the planned policies. The authorities intend to disseminate the contents of their economic program to a wide range of domestic stakeholders, which is welcome. The IMF, for its part, is stepping up to the challenge of supporting Egypt and its people by providing financial resources and technical assistance in the fiscal, financial, and statistical areas

Broad-based support now? You must be joking. Plus, Ahram Online now quotes the ever-familiar IMF sources to contradict the government's glib statement that Morsi's latest stunt will go unpunished:

A senior IMF official, who requested anonymity, told Ahram Online on Sunday that the development could bring into question the stability of state institutions and raise doubts that could delay the loan...

“I do not think the IMF will rescind its agreement, but if the situation in Egypt deteriorates it could suspend the loan,” Samir Radwan, former Egyptian finance minister, told Ahram Online. Radwan said the IMF executive board would be closely monitoring events in Egypt, including mass protests on Tuesday by those opposed to and in favour of President Morsi's recent move.

Morsi is a highly partisan sort who plays his redistributive game at the expense of the general welfare of the Egyptian people. "Internet Freedom" acolytes may even believe that since that's what their gospel truth--the tweets--say.  Meanwhile, the stock market has plunged nearly 10% in a single day. I guess there's no freedom here--or economic progress for that matter.

Though they would of course probably not admit this, it makes the white people wish Mubarak were still there, eh?

UPDATE 1: CFR bloggers have more on the news that Morsi is backtracking a bit on being able to override judicial decisions, but still, much remains up in the air. 

UPDATE 2: AP has a sobering analysis of the realpolitik the US must now play. To some extent, it is condoning Morsi's power grab.

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