Ben Muse

One Way Innovations Get Delayed In a Bureaucracy

Edward Luttwak explains why weapons systems are so expensive : Breaking the Bank. Why Weapons are so Expensive  (The American Interest, Sep/Oct 2007).

One problem is that defense contractors have a limited ability to exploit economies of scale.  The "astounding persistence of traditional weapon configurations" is another: 

The North American Potato Cartel

Matt Jenkins has a nifty article on the North American potato cartel in a recent High Country News: The Sultans of Spuds (August 20):

The Germans Want Their Own CFIUS

Germany is developing its own version of the U.S. process that vets foreign direct investment for national security concerns: Germany plans for own Cfius deal watchdog (Bertrand Benoit, Tony Barber, and George Parker , Financial Times, Sept 27).  But the Germans want to skip some of the bells and whistles:

CFIUS and Antitrust

Neal R. Stoll and Shepard Goldfein discuss the importance of coordination between the antitrust and CFIUS teams - particularly in light of the recent reform of the CFIUS process (the process the U.S. uses to vet foreign direct investment for national security implications) in this year's Foreign Investment and National Security Act (FINSA):  Post-FINSA Coordination of Antitrust, CFIUS Practitioners  (New York Law Journal, September 19, 2007):

Antitrust practitioners involved in international mergers and acquisitions might want to take note of this development. FINSA increases the likelihood of CFIUS scrutiny of transactions with national security implications. Thus, antitrust attorneys should be aware of the logistical implications of a CFIUS review or investigation, such as the effect on timing, "best efforts" and other provisions in the merger agreement. More generally, however, a transaction's antitrust team may wish to coordinate its efforts with the CFIUS team on an ongoing basis. Indeed, the argument that a transaction has minimal impact on national security is often bolstered by the proposition that the parties lack market power. Thus, a joint effort by the antitrust and CFIUS teams in exploring market-related issues makes sense for reasons of both efficiency and tactics.

Here's a longer extract:

Why the weak business leadership on free trade?

Business leadership has been missing on free trade issues. 

Aaditya Mattoo and Arvind Subramanian thought this helped explain the slow progress in the Doha negotiations: "Why Prospects for Trade Talks are Not Bright" (March 2005 issue of the IMF magazine, Finance & Development; Why is it so hard to reduce trade barriers?, Ben Muse, May 11, 2005). 

Francesco Guerrera and Chrystia Freeland learn that Neville Isdell, Coca-Cola's CEO, has also noticed the relatively weak business effort, and has an additional explanation: Coke chief attacks protectionism (Financial Times, Sept. 14)

Isdell

has criticised corporate leaders for not speaking out against protectionism, warning that the failure of big business  to convince politicians and public opinion of the benefits of free trade will harm global growth and companies’ profits.

In a video interview with the Financial Times... Mr Isdell said recent regulatory scandals had prompted chief executives to steer clear of controversial topics such as free trade.

Asked whether business leaders were doing enough to make a public case against rising protectionist sentiment in the US, Mr Isdell said: “No, I don’t think so. I think that, [after] what happened around Enron and the like, a lot of us put our heads below the parapet.

“I think we’re now learning to bring our heads up above the parapet again but I think, certainly on free trade, we need to be more outspoken

Don't believe everything you read in the scientific journals

Bad science may be very common.  Robert Lee Holtz reports that one person who's looked at the problem finds that in medical science, most - published - findings may be wrong: Most Science Studies Appear to Be Tainted By Sloppy Analysis (Wall Street Journal, September 14, 2007):

Steps the Government Can Take to Address Food Import Safety

The Progressive Policy Institute has just published a 10 page note by Jessica Milano about guaranteeing the food safety, with special reference to the safety of food imports: Spoiled: Keeping Tainted Food off American Tables (September 2007):

New Import Safety Report

The Administration's Interagency Working Group on Import Safety delivered its report to the President yesterday: Protecting American Consumers Every Step of the Way.

The report is only 28 pages, and is written at a high level of abstraction.  It's meant to provide an overall strategy.  The Working Group is now looking for input from the public on how to implement the strategy.  They plan a "follow up action plan" for mid-November.

The report doesn't really talk about funding constraints on the existing system.  There are references to resources, but usually to "leverging," "targeting," "focusing," or "wise use" of resources.  There's only one reference to "additional resources," indicating that requests for these have not necessarily been ruled out, I assume in the action plan.

The Chair, Health and Human Services Secretary Mike Leavitt briefed the press yesterday: Press Briefing on Import Safety by Heath and Human Services Secretary Mike Leavitt and National Economic Director Al Hubbard .

Jane Zhang reported for the Wall Street Journal today: Risk-Based System Urged for Import Safety.

ITC Report on the Panama-U.S. FTA

The U.S. International Trade Commission (ITC) has released the analysis of the agreement that it is required to prepare under the Trade Act of 2002: U.S.-Panama Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects.

Here's the abstract:

"TradeAgreements.gov"

Here's a new Web site on U.S. free trade agreements (FTAs), sponsored by five Federal government departments (Agriculture, Commerce, State, Treasury, and USTR). 

The site provides background on existing FTAs.  The main purpose appears to be to provide information about, and to advocate for, the four upcoming free trade agreements (FTAs) with Peru, Panama, Columbia, and Korea: TradeAgreements.gov.

Most adults can't stomach milk

Most people in the world are lactose intolerant - their bodies (after infancy) aren't configured to deal with milk .  John Reader explains how we figured this out, in Africa. A Biography of the Continent.  The story is interesting because of the interaction of human cultural and physiological evolution, and because of the way the problem originally presented itself:

"Alaska polar bears called doomed "

Tom Kizzia reports on new US Geological Survey research concluding that global warming and sea ice retreat are dooming Alaska's polar bear populations: Alaska polar bears called doomed (Anchorage Daily News, September 8):

Cuban issues facing Congress

Here's a new Congressional Research Service (CRS) report by Mark Sullivan: Cuba: Issues for the 110th Congress (July 5, 2007).  Here's the executive summary (after division into shorter paragraphs):

Scary campfire tales for economic policy analysts

Joseph Francois, The Random Economist and a trade expert, has spent a lot of time in government and academics. 

He may be the coauthor of "the only economic model that has been banned in proposed legislation...": Illegal models (The Random Economist, Dec 16, 2006):

I have been been banned by the US Congress! Well, not quite, but one can always hope. I am coauthor of what I believe is the only economic model that has been banned in proposed legislation -- COMPAS. Many professional incarnations ago, I coauthored a set of rather simple calibrated trade models meant to help in the assessment of economic factors relevant in fair trade litigation and safeguard cases. The goal, naively, was to make the process more transparent vis-à-vis the winners and losers. Economic guidelines and indicators have been used for decades in antitrust litigation, and our intention was to introduce the same dose of scientific reason to trade litigation. Of course, this was before the surge in research on politics of trade policy, and before I had read Michael Finger's delightful JPE piece "Policy Research." Since trade litigation has less to do with scientific rationality and national interest than it does with lobbying by competing special interests (including efforts to obfuscate the impact on losers), the effort was not appreciated. Recently, it keeps surfacing in legislation. One example of the draft legislation is linked here (the proposed law) -- see pages 71 & 72. The current tone of proposed legislation is not really targeted at our simple models. Rather is it prohibit the Executive Branch from using economic analysis when formualting economic policy. Does this make sense? Of course it does. Just read Finger's article.

Here's a piece of the text from the draft legislation:

The following factors may not be used as the basis of a recommendation by the Trade Representative to recommend denying relief under this section... Any results of the econometric model known as the Commercial Policy Analysis System (COMPAS) or equivalent model.

The COMPAS model is a widely used partial equilibrium model originating in the U.S. International Trade Commission.  Here's an Excel version: COMPAS.  Here's a recent article about a modifed Canadian version: Adapting the COMPAS model for Foreign Affairs and International Trade Canada

The Finger piece is worthwhile and won't take you long.

Lay the groundwork for your CFIUS filing carefully!

Edward Rubinoff and Henry Terhune of Akin Gump Strauss Hauer & Feld LLP, weigh in on the impacts of the new CFIUS legislation: New CFIUS Reform Act Presents Challenges To Foreign Investment In The United States (The Metropolitan Corporate Counsel, Sept 2007). 

CFIUS, of course, stands for the Committee on Foreign Investment in the United States.  This is the process by which foreign direct investment (FDI) is vetted for security concerns.

This note has a very short and frank explanation of the ways firms can exploit CFIUS to avoid unwanted competition - highlighted in the excerpt below.  These authors fully expect that the new law will expand the opportunities for people interested in issues other than national security to exploit the CFIUS process to derail FDI they don't like:

Trade in Congress this fall

Ian Swanson surveys the trade scene in Congress as the August recess ends: Free-trade deals face rocky path (The Hill, Sep 4).

The Panamanian National Assembly's selection of a leader the U.S. believes was involved in the murder of a U.S. serviceman is probably not going to help the Panamanian FTA in Congress: Panama elects wanted man (Financial Times, Sep 4).

Panama’s pending free-trade agreement with the US could be endangered by the election as head of the country’s National Assembly of a man who Washington believes is responsible for the murder of a US soldier in Panama in 1992, according to one of the country’s leading opposition politicians.

In an interview with the Financial Times, Mireya Moscoso, the former Panamanian president who started the free-trade initiative between the two countries when she was in office, said she feared that the election of Pedro Miguel González, a member of the ruling PRD party, could bring grave economic consequences for the Central American nation.

“The mistake they made is going to be very expensive for the country,” she said, referring to PRD legislators’ decision to appoint Mr González. “The free trade agreement is going to be in danger when senators in Washington find out that the person presiding [over] an organism of the state...is the person [wanted] in the US for murder.”...

How is the U.S. doing in WTO litigation?

The U.S. has been doing pretty well in the WTO's dispute resolution system (measuring success by simple win-loss counts). 

The U.S. Trade Representative maintains a more or less up-to-date scorecard: Snapshot of WTO Cases Involving the United States (update July 31, 2007). 

Here's a pie-chart summarizing the USTR's score-keeping.  The chart shows cases in which decisions have been reached, or the parties have come to an agreement that short-circuited the ongoing settlement process (resolved).  There are many cases still in the pipeline.  Blue cases were resolved through negotiation, green cases were won by the U.S. on USTR-identified core issues, and red cases are those the U.S. lost.

   

On balance, the U.S. seems to be doing fairly well.  In the overwhelming number of cases in which we are complaining we have won on the core issues, or have obtained a resolution through negotiation.  We're not doing so well when we're the defendent.  We've lost about half on the core issues, and won or negotiated solutions to about half.  This is a crude measure of success and failure; it doesn't address the relative importance of the different cases, or the nature of the negotiated solutions. 

On the other hand, Brandon Wu, at Public Citizen's "Eyes on Trade," thinks the U.S. is a big loser in WTO dispute settlement outcomes: We are the "world's biggest loser" (August 27):