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China's growing regional strength Daniel

China's growing regional strength

Daniel Drezner posts on the ways that China is translating its growing economic significance into regional political power: "China's growth as a regional power, redux"

For a concrete example, look at the Australian foreign minister's recent statement distancing Australia from potential U.S. military support for Taiwan. See: "Economic basis of political power".

Light posting likely Posting may

Light posting likely

Posting may be light for several weeks, but it should pick up in late September.

GPS as a public good

GPS as a public good

Eric Helland at Marginal Revolution suggests the U.S. GPS system as an example of a a non-rival and non-excludable public good: "Candidate Public Good".

Moral hazard and the Pension

Moral hazard and the Pension Benefit Guaranty Corporation

Daniel Drezner points to a Cato study which itself points to the moral hazard issue at the core of upcoming problems with the federal Pension Benefit Guaranty Corporation: "Headlines from the future"

The study is "How to Reduce the Cost of Federal Pension Insurance" by Richard A. Ippolito.

Outsourcing and the California legislature

Outsourcing and the California legislature

Virginia Postrel reports on a study, commissioned by the California legislature, that finds outsourcing increases employment in California. Postrel reports that the legislature is sitting on the report: "Stifling Good News about Outsourcing"

Meanwhile, Postrel notes,

"...the legislature has passed the first of six anti-outsourcing bills. A bill to "prohibit the state from hiring outside service contractors, such as software companies and call centers, if they planned to use foreign workers for the jobs" is headed to the governor's desk. Only a girly-man would sign it."

If the legislature is bent on increasing taxes, or reducing the volume of services provided, they should also consider replacing the word processing equipment with manual typewriters.

Postrel is passing on things she learned from a Sacramento Bee columnist Daniel Weintraub. Weintraub's column is here: "Lawmakers sit on study praising offshoring jobs".

PS: August 25: Daniel Drezner found the paper, dated yesterday, on the web. He links to it and quotes extracts, here: "Offshoring creates jobs in California".

Doha Round politics World Trade

Doha Round politics

World Trade Organization (WTO) countries may have reached agreement a few weeks ago in Geneva on a framework for continuing trade talks, but Rosemary Righter sees problems ahead in this Timesonline analysis: "Stop the world, Jacques Chirac wants to get off"

Her argument: The capable French EU trade negotiator, Pascal Lamy, has been deliberately dropped by President Chirac in order to slow negotiating momentum. In the U.S. Kerry is distinctly wobbly on free trade issues. A Kerry victory may mean less U.S. interest in trade talks. The U.K.'s Peter Mandelson, the new EU trade representative, may be able to take up much of the slack left by Lamy's departure, but it's not clear the U.K. would be willing to push ahead if the U.S. were not interested.

The good news:

"...Brazil, India and China now actively want the Doha Round to succeed. Brazil, swelling with pride at its recent victories at the WTO against the EU�s infamous sugar regime and America�s equally indefensible cotton subsidies, displayed a convert�s zeal at Geneva...

...as farmland is concreted over, geography and industrialisation are forcing China to shift from land-intensive grain, which it will increasingly import, to labour-intensive fruit and vegetables that it can export. India, whose farmers should be able to hold their own against all-comers, still does not see that nothing would do its farmers more good than a spot of competition. But its burgeoning service industries could make agricultural protectionism expendable as part of the broader bargain.

I began with gloomy reflections about a potential loss of momentum on the Western front. But the prospects for trade liberalisation are brighter today than they have been for five years, because the conspiracy theories about globalisation are losing their allure for the rising stars of the global trade scene. Celso Amorim, Brazil�s Foreign Minister, proudly declared after Geneva that trade is now a multipolar game. The good news is that he appears to be right."

New EU Trade Chief Vic

New EU Trade Chief

Vic Keegan (at "Kick All Agricultural Subsidies") posts that Pascal Lamy has been replaced as the chief EU trade negotiator by Peter Mandelson of the UK: "Blair trade - Europe's new commissioner". The appointment came about a week ago.

Mandelson's career has had its ups and downs. Here is a BBC profile of Mandelson. Roy Hattersley writes about Mandelson in The Guardian: "The curse of Peter Mandelson".

"...Mandelson has all the attributes which would make a great commissioner - except one. He lacks discretion. But he has the ability to master his brief, argue his case and take the hard decisions which every sort of politician must face. And he has the capacity for charming the Brussels social circuit, apparently a necessary qualification for success in that city.

It is extraordinary that a man of such conspicuous intelligence does not realise that his best interests lie in concentrating on the job rather than reading about himself in the gossip columns. Paradoxically, Peter Mandelson is in urgent need of a good press adviser."

Simon Taylor reports on the appointment, Mandelson's first meeting with the other EU Commissioners in Brussels, and the emoluments of his office, in this Guardian story: "Mandelson bonds in Brussels". Ambrose Evans-Pritchard does a similar report for the Telegraph here: "I'm spurning spin to help poor, says Mandelson".

Economic basis of political power

Economic basis of political power

This week, the Australian Foreign Minister Alexander Downer told a Chinese audience that Australia was not bound by the ANZUS Treaty with the U.S. to come to U.S. aid if China tried to retake Taiwan by force. John Kerin reports in The Australian: "Downer retreats on Taiwan".

"Mr Downer told his Beijing audience that the ANZUS alliance was invoked only in the event of an attack on either country and that it was the US that was obliged by a separate agreement to defend Taiwan."

This is new:

"There has been a long-held assumption that, under the ANZUS alliance, Australia would provide military support to the US, should China invade Taiwan."

The Taiwanese are concerned: "Taiwan urges ANZUS solidarity".

"Dr Kau [Taiwanese Deputy Foreign Minister - Ben] says Taiwan would like to see more positive comments from Australia.

"To some extent, [Mr Downer's comments] may not be helpful because, as you know, China has taken a fairly militant position on the Taiwan issue," he said.

"If the world community is not committed to maintaining peace and the stability in the Taiwan Strait area, it could be sending a wrong message to Beijing.

"Australia would help the regional peace and stability by sending a more positive message to Beijing." "

Downer elaborated later in the week:

"Mr Downer yesterday retreated from his Beijing remarks, describing the prospect of a flare-up over Taiwan as "hypothetical". He stressed that Australia always maintained a position of not commenting on the position it would take.

"I have no idea in a hypothetical situation -- which would be a terrible crisis for the Asia-Pacific -- what action any country would take, including ours," Mr Downer told CNN in Hong Kong. "We've always maintained the position, in the 8 1/2 years I've been the Foreign Minister, that we make no comment about what would happen in a hypothetical circumstance." "

The Prime Minister says ("PM denies Downer damaged US ties") :

"Mr Howard concedes Australia is obliged to go to the aid of the US if it is involved in conflict but denies he is contradicting his Minister."

Kerin suggests that Downer's comments reflect changing relative power in East Asia, founded on Chinese economic growth:

"But Mr Downer's suggestion that Australia would not necessarily come to Taiwan's aid is a stunning shift in the power balance in the Pacific, which some defence analysts suggest is permanent and recognises China's growing economic importance...

But defence and foreign affairs analysts said that while they were surprised Mr Downer had publicly expressed the view Australia might not automatically support the US over Taiwan, government people had been expressing similar views in Canberra for months.

Mr Downer's comments represented not only a shift in Australian foreign policy but also a recognition of China's increasing economic importance to Australia.

"For Mr Downer to make the point publicly in Beijing suggests a significant shift in our relations with the US and a growing recognition of China's power in the Pacific," Lowy Institute senior fellow Alan Dupont said last night. "And this has come from an Australian government far closer to Washington than most."

Former Australian ambassador to China and ANU professor of economics Ross Garnaut said last night Mr Downer's first comments represented "wise foreign policy in terms of the Australia-China relationship"..."

Australian Kevin Parish at Troppo Armadillo posted on the comments: "A Useful Idiot".

"Whether Australia should intervene on either side in a China-US conflict will depend entirely on an assessment of Australia's national interest at the time, and that assessment wouldn't necessarily result in a decision to back America given China's increasing importance as a trading partner (not to mention the fact that Taiwan arguably is and always has been an integral part of China, used as a temporary refuge by the losing side in a civil war). Moreover, the fact that both nations are huge military powers with vast nuclear arsenals tends to suggest we'd be well advised to keep our heads down unless there's some overwehelming reason to get involved..."

Australian trade blogger Peter Gallagher also comments: "Strategic shadows". Gallagher points to China's growing economic strength:

"Naturally, given China's rapid economic growth and the higher profile it has adopted in foreign policy in the past two or three years, our interest tends to be in what China will become. But we also have to pay close attention to what we will become as a result of our relations with China..."

The Australians don't appear to feel threatened by China's growing political and military strength. The news stories and blogger comments suggest an intent by Downer to accommodate China over Taiwan in deference to the the growing regional significance of the Chinese economy.

I don't see any sense in the articles or posts (and obviously I've only looked at a few) of an Australian security interest in Taiwanese independence. In comments last week before going to China, Downer indicated that Australia favored a "one-China" policy, and that it was concerned about the implications of the China-Taiwan issue for regional stability: "Downer Against Taiwan's Independence".

The bloggers comment on moral dimensions to the case: China is an authoritarian state with a bad human rights record; Taiwan is a democracy; China may or may not have a historical claim to Taiwan; should Australians be concerned about the impact on Australia of growing ties to China?

See Channel News Asia for a recent story: "PM brushes off criticism of Australian FM's Taiwan war comments"

Revised 8-20-04

Kerry likes the WTO framework

Doug Palmer of Reuters reports that Kerry spokesmen have endorsed the new WTO Doha Round negotiations framework: "WTO Framework Deal 'Positive' - Kerry
Campaign".

Labor, however, wants him to make some changes:

"...Meanwhile, U.S. labor groups want Kerry to push for changes in the framework if he is elected in November.

"Our main concern with the framework is that there's absolutely no discussion on workers' right," said Elizabeth Drake, international policy analyst with the AFL-CIO, the United States' largest labor organization.

Developing countries have long resisted negotiations on labor in the WTO, fearing that could lead to costly new burdens and give rich countries an excuse to block their exports.

Former President Bill Clinton's suggestion that labor rights should be in trade agreements was one reason the December 1999 Seattle WTO meeting ended in failure."

Islamic economics Virginia Postrel abstracts

Islamic economics

Virginia Postrel abstracts insights from a recent book on Islamic economics, in this New York Times column: "Economics and Islam"

"...Islamists do offer economic and social prescriptions that can be subjected to the same analytical and empirical scrutiny as any other policies. That scrutiny is particularly important for Muslim countries where Islamists play a significant role in politics.

In a new book, "Islam and Mammon: The Economic Predicaments of Islamism" (Princeton University Press), Timur Kuran, professor of economics and law and the King Faisal professor of Islamic thought and culture at the University of Southern California, looks at the cluster of ideas known as Islamic economics.

This concept, he notes, is a 20th-century one, developed in India before independence..."