The Custom-House

New CRS Report on the Recent CFIUS Legislation

Congress has passed legislation to reform the process the U.S. uses to review FDI proposals for national security concerns.  Now it's in front of the President. 

The Congressional Research Service (CRS) has updated its description of the legislation.  Exon-Florio Foreign Investment Provision: Comparison of H.R. 556 and S. 1610. (July 13, 2007) walks through each of its major elements, comparing the text of the House and the Senate bills.  The Senate version is somewhat different from the version that originated in the House, and is the version that was ultimately adopted.   Reports at the time indicated that the changes were minor.

The Attack of the Giant Alien Carp

You try to do the right thing - clean up a polluted river - but that just creates an opportunity for an invasion by giant alien carp - only the Army, with an underwater electric fence, stands a chance of stopping them: An Underwater Fence to Stop Invasive Species (Kari Lydersen, Washington Post, July 16):

"Fertility and the Real Exchange Rate"

Andrew K. Rose and Saktiandi Supaat find a connection: Fertility and the Real Exchange Rate  (NBER WP# 13263, July 2007). 

Here is the slightly reorganized abstract:

Theoretically a country experiencing a decline in its fertility rate can be expected to have higher savings, lower investment, a current account surplus, and accordingly a real depreciation.

We test and confirm this hypothesis, controlling for a host of potential determinants such as PPP deviations and the Balassa-Samuelson effect....  We use a quinquennial data set covering 87 countries between 1975 and 2005 to investigate the relationship between fertility and the real effective exchange rate.

We find a statistically significant and robust link between fertility and the exchange rate. Our point-estimate is that a decline in the fertility rate of one child per woman is associated with a depreciation of approximately .15% in the real effective exchange rate.

China: Currency Manipulator or Whiplash Victim?

Has China really been manipulating the yuan to make its exports relatively more attractive?  Jonathan Anderson, the chief Asian economist for UBS, doesn't think so (China Should Speed Up the Yuan’s Rise):

India wants to protect its sea lanes too

Earlier this week the Wall Street Journal carried a long and interesting article by Gordon Fairclough on China's efforts to develop a navy to protect its sea transport routes, and to isolate Taiwan if war comes: China's Growing Navy (Ben Muse, July 16).

India is also taking steps to protect its sea lanes.  This article Manu Pubby deals with India's Indian Ocean interests: India activates first listening post on foreign soil: radars in Madagascar. (The Indian Express, July 17):

Was the Informal 2003 U.S. Boycott of French Wines Successful?

No.

Here's the abstract of French Wine and the U.S. Boycott of 2003: Does Politics Really Affect Commerce? (Orley Ashenfelter, Stephen Ciccarella, Howard J. Shatz, NBER working paper 13258, July 2007):

China's growing navy

China increasingly feels the need for a strong navy to protect its worldwide commerial interests, and to increase its options on Taiwan: As China Grows, So Does Its Long-Neglected Navy (Gordon Fairclough, Wall Street Journal, July 16).

It wants to protect its access to the sea lanes:

Global warming is reducing the costs of mining in Greenland

Global warming is melting Greenland's ice sheet and glaciers, and reducing the costs of mining there: Greenland's Melting Glaciers Spur Mining  (Lisa Yuriko Thomas, Wall Street Journal, July 17):

The Yuan and the Dollar: The CRS Summarizes US Policy Options

The Congressional Research Service (CRS) has released an updated version of its report China’s Currency: Economic Issues and Options for U.S. Trade Policy (June 28, 2007) by Wayne Morrison and Marc Labonte.  The executive summary is below:

What's up down south?

The Economist reports on Mercosur's struggles this week: Mercosur. A Turning Point? (July 5).  Mercosur's members hope to create a customs union with free trade behind common external tariffs.  But things haven't gone well:

It has failed to implement a pledge to create a genuine customs union, with a common external tariff and free trade within the block. And it has allowed its rule book to be riddled with exceptions.

The upshot is that barriers have multiplied. For example, Argentina's government has tacitly backed the protestors who have blocked the main road bridge to Uruguay for months on end, and has recently backed banana growers who object to the import of cheaper Paraguayan fruit. Rather than use Mercosur's dispute-settlement machinery, it has filed complaints against Brazil at the World Trade Organisation. Paraguay has failed to clamp down on widespread smuggling of Chinese-made electronic goods. And Brazil's partners object to the tax breaks given by its state governments to attract investment.

The left-of-centre governments that are in charge (except in Paraguay) talk up political and energy co-operation, though recently they have achieved relatively little of either. They have also favoured widening the group, rather than its deepening into a single market. Chile and Bolivia became associate members in the 1990s, entering into free-trade agreements with Mercosur but not accepting its common external tariff. Last year Mr Chávez's Venezuela was swiftly accepted as a full member, at the urging of Argentina's president, Néstor Kirchner, and his Brazilian counterpart, Luiz Inácio Lula da Silva. Now the left-wing presidents of Bolivia and Ecuador want their countries to join too....

Mercosur has plenty of other problems. They start with the big difference in size and government policies among members. Under Mr Kirchner, Argentina's priority has been to protect inefficient but labour-intensive industries as it recovers from socio-economic collapse in 2001-02. Smaller Uruguay and Paraguay complain that the group has done little for them.

Bridges, the weekly publication of the International Centre for Trade and Sustainable Development (ICTSD) reports on the recent summit meeting of Mercosur ("Common Market of the South") member states. (Bridges subscriptions are available here).

The summit was dominated by efforts to balance the needs of its larger and smaller members, and member state concerns over Hugo Chavez's Venezeula (apparently there are some concerns about Chavez's commitments to a liberal trade regime and democracy):