Wednesday, November 30, 2005

India needs to develop retail marketing policy
Jo Johnson
Financial Times

According to this article, India's retail marketing policy is in shambles. Some suggest that the confusion surrounding the ‘retail policy’ is actually a method to delay the advent of the foreign retailers. "Mom and Pop" stores are ubiquitous in India and employ as many as 40 million people. This is increasingly becoming a political battle - while India's Prime Minister and Commerce Minister have expressed a desire to liberalize India's retail sector, political parties such as the Communist Party of India have expressed serious reservations about such a policy. With the large number of people likely to lose their jobs if foreign retailers enter the Indian market, liberalization of India's retail sector is unlikely to occur anytime soon.

Tuesday, November 29, 2005

Barcelona Process Stumbles?

"Muslim Nations Skip Meeting With Europe"
New York Times
November 27, 2005

This week, representatives of the European Union and several Mediterranean countries gathered for a two-day summit to discuss immigration, trade, and terrorism. The meetings were part of a ten-year initiative between the two regions, sometimes called the Barcelona Process, to build political and economic ties. The E.U. hoped further meetings would demonstrate their commitment to Muslim nations in the southern Mediterranean and neighboring regions.

However, several leaders from North African and Middle Eastern countries, who had previously indicated that they would attend this week's conference, failed to show. The Presidents of Egypt and Algeria and the King of Morocco were among the missing. "Their absence weakens European claims that their approach to the Muslim world - based on economic development, dialogue, strengthening the rule of law, and other forms of soft power - has greater credibility with the region's leaders than what they see as the Bush administration's more aggressive approach."

Exactly what these meetings accomplished remains unclear. Additionally, the absent leaders offered numerous reasons for their inability to attend, including poor health and domestic crisis. Their lack of participation may be no more than bad timing or, as the article speculates, an indication that the Barcelona Process has little to offer.

For more information on the Barcelona Process, visit

Saturday, November 19, 2005

Bill and Melinda Gates Foundation Provide Funds for Medical Care in African Nations

The World Health Organization (W.H.O.), a 192 member organization and the public health arm of the United Nations, aims for “the attainment by all peoples of the highest possible level of health.” The annual budget of the W.H.O. is $1.65 billion. However, since 2000, the Bill and Melinda Gates foundation has spent over $6 billion to address Third World health issues.

Much of this money has been allocated to alleviate the damage done by rampant HIV infection and malaria. Malaria alone kills as many a three million people each year. Almost all of the victims are under five, desperately poor, and African. Twelve billion dollars, nearly 40% of public health spending, is spent in Africa each year.

In October, the foundation committed more than $258 million to the advancement of a malaria vaccine that helped protect children in Mozambique. A large portion of the funds, $107 million, of the funds will go to develop an experimental malaria vaccine and will cover the completion of testing in Africa and the licensing process, should the vaccine prove viable. A study in Mozambique has found the vaccine cut the risk of severe malaria among young children by 58 percent.

In July, President Bush announced a $1.7 billion aid package for Africa devoted primarily to combating malaria. As skeptics noted, the President has announced such initiatives before, and then failed to fulfill them. In addition, others claim that the aid package was created in part by repackaging previous pledges. As the headline of one article proclaimed, “The health of the world depends more on Bill Gates than on the World Health Organization.” Few could disagree with this statement.

Baker, Peter. “Bush Pledges $1.2 Billion For Africa to Fight Malaria,” Washington Post, Friday, July 1, 2005.
Specter, Michael. “What Money Can Buy,” The New Yorker, October, 24, 2005.

Friday, November 18, 2005

Disappearing Middle Class

Pain in the Middle , By David Rothkopf, Newsweek International, November 21, 2005 issue

In his article, Rothkopf criticizes the international financial institutions for not using formulas that would build the middle class in poor nations. He notes that only four nations in the past four decades- South Korea, Singapore, Hong Kong, and Taiwan - have been able to move to the level the World Bank classifies as "high income nations", with per capita gross national incomes (GNI) of more than $10,066. He cites World Bank economist Branko Milanovic's book, "World's Apart" to illustrate how generally the poorest nations have gotten poorer, while the richest nations have remained rich. Political instability and civil conflict have resulted in declining incomes in the Caribbean, Latin American, Eastern Europe, Central Asia, and Africa, by placing severe constraints in planning and development. Rothkopf suggests that development institutions shift their lending from governments to the people of poor nations to "allow the ranks of the most economically vulnerable to grow."

[W]e among the privileged of the world need to recognize that even if, as Deng
Xiaoping once said, "to be rich is glorious," giving others the chance to simply
be comfortable and offer a better future for their children is the bedrock upon
which our collective futures must be built.

Wednesday, November 16, 2005

The Changing Face of Japan

Meet the new salaryman
The Economist

According to this article, Japan will require the young, women and the elderly to enter the labor force given current Japanese demographics. This could dramatically change the way companies, and even cities look.

Copper prices might hit China hard

China's copper crisis
Nov 16th 2005From The Economist Global Agenda

The article suggests that China might be hard pressed to meet its contracts because of the rising price of copper, which, ironically is a result of its own economic success.

Basel II

The Institute for International Finance (IIF), which represents the world's largest banks, has warned that any delays in the implementation of the Basel II capital accord in the US, and inconsistent adoption in other areas, could undermine the benefits of the framework and prevent a level playing field.

The warning comes in a report released by the IIF, which represents over 320 banks worldwide.

The Basel II framework was supposed to be implemented globally by the beginning of 2008, but US regulators said in October that they would delay implementation of the rules by a year.

Daniel Bouton, chairman and chief executive of Société Générale, and chairman of the IIF steering committee on regulatory capital who wrote the report, says there is substantial concern about the different implementation schedules set for various jurisdictions.

Says Bouton: "We believe that adoption of inconsistent versions of the Accord could ultimately disrupt the successful implementation of Basel II, undermine its basic fabric and create serious level playing field issues."

Bouton also says there has not been clear guidance as to how the practical implications of staggered implementation will be addressed: "Given the current state of the Basel II implementation plans of internationally active banks, it is important that international regulators coordinate their efforts in order to provide clarity in these areas swiftly."

Last month the American Bankers Association (ABA) also expressed concern over the decision to delay implementation of the Accord, saying that US institutions will be at a disadvantage to banks that have met the agreed timeframes.

"Banks warn over Basel delay",ft_acl=,s01=2.html
"SG chief warns of dangers in delaying Basel II"

Monday, November 14, 2005

UN Votes Against Cuban Economic Embargo

“Cuban Trade Embargo Going Out of Fashion” By Fang Zhou China Daily 11/14/2005
“U.N. Urges U.S. to Lift Cuba Embargo” By Evelyn Leopold Reuters 11/08/2005
“Bush Tightens Cuba Embargo” By Jim Lobe Inter Press Service English News Wire 05/07/2004

On November 8, 2005 the United States once again refused the United Nation’s General Assembly’s resolution to call for an end of its embargo against Cuba. This is the 14th consecutive year that the U.S. has refused a U.N. resolution to lift its four-decade old economic embargo.

Cuba has been under a U.S. embargo since 1961. The embargo, aimed at overthrowing President Fidel Castro’s socialist regime, has been steadily tightened in recent years.
For the past few years, the U.S. has taken measures designed to reduce the flow of money and visitors, including Cuban-Americans, from the United States to Cuba.

In May 2004, the Bush Administration also committed up to $59 million for public diplomacy, overcoming the jamming of U.S. government radio and television broadcasts to Cuba, and providing support for "democracy-building activities," including helping pro-democracy activists with training and support.

Cubans in the U.S. can only go to visit immediate family members once every three years (as opposed to previous policy that allowed the visitation to extended family once a year). Cuban-Americans or other US visitors can pay only $50 per day for food and lodging while in Cuba – down from 164 dollars a day. Cash remittances remained limited to $300 per family every three months, and the administration also further restricted the travel by students to Cuba through educational programs.

The U.N. emphasized that the U.S. trade, financial, and travel embargo, particularly its provisions that penalize foreign companies that deal with Cuba, has adversely affected the Cuban people. Cuban authorities allege that the Cuban economy has suffered $82 billion from the embargo. The U.S. is not legally obligated to follow the U.N. resolution. The U.N. margin of approval – with 182 in favor, four against, and one abstention – was the highest it has ever been. The four nations voting “no” were the United States, Israel, Palau, and the Marshall Islands. Micronesia abstained.

Critics of the embargo say that it has failed to bring change to Cuba and allows Castro to blame the country’s economic failures on the United States. Others criticize the United States for ignoring international opinion and once again isolating itself from the rest of the world.

The U.S. envoy at the U.N. General Session stated that “[i]f the people of Cuba are jobless, hungry or lack medical care, as Castro admits, it is because of his economic mismanagement, not the embargo.”

Are we living in a financial fantasyland?

The dollar is appreciating, despite the fact that the U.S. notched up a record trade deficit of $66.1bn last week (equivalent to roughly 6% of its gross domestic product). The US is financing that trade deficit by flooding the global markets with dollar-denominated assets that are snapped up by its creditors.

When you get down to it, there are only two reasons for an appreciating dollar. One is that it is going up because it is going up; the herd mentality of markets means that you do what everybody else is doing even if you think they are wrong. The second is that the markets have deluded themselves into thinking that a country that is spending one dollar and six cents for every dollar that it is earning doesn't have a problem.

The fact that the Chinese, the Japanese and the other big exporting nations of Asia are colluding in this financial fantasy should come as no surprise. A strong dollar is wonderful for these countries since it helps them to build up their industrial - and, in China's case, political -power even as American manufacturing is hollowed out.

It would be misguided of the US to believe that all sides gain equally from this arrangement; the Asians are getting by far the better of the deal, owning enough US dollar assets to buy a controlling interest in every company listed on the Dow Jones Index. As a new book by Bill Bonner and Addison Wiggin (Empire of Debt: The Rise of an Epic Financial Crisis; published by John Wiley) notes: "They [the Asians] have enough Treasury bonds to destroy the US economy on a whim."

Bonner and Wiggins argue that Americans believe they can go on spending more than they make indefinitely. "They go deeper and deeper in debt, believing they will never have to settle up. They buy houses and then mortgage them out, room by room, until they have almost nothing left. They invade foreign countries in the belief that they are spreading freedom and democracy, and depend on lending from communist China to pay for it. The imperial people choose to spend rather than to save, and to hallucinate, rather than think hard. They demand bread and circuses at home; let the Asians sweat abroad."

At some point, as Bonner and Wiggin note, the shopkeeper who keeps extending credit to a customer having problems paying the bills in the hope that he will eventually straighten himself out can end up sharing the pain. Until the crunch comes, however, it's easy to keep believing the fantasy.

Larry Elliott, The Guardian, Monday November 14, 2005
Bill Bonner and Addison Wiggin, Empire of Debt: The Rise of an Epic Financial Crisis; published by John Wiley

China Opens Up Its Insurance Market to Lloyd's of London

During his visit to England this past couple of days, President Hu Jintao of China signed multiple commercial contracts with English businesses, one of which was the first reinsurance contract with Lloyd's of London.

It is believed to be the first time a Western reinsurer has gained entry to China's rapidly expanding market.

Other commercial contracts worth £1.3bn (£783m) were also signed during Mr Hu's state visit.
They included orders for Rolls-Royce and Airbus, and a contract for Arup to develop plans for new cities in China.

Under the deal with China, Lloyd's will be able to reinsure local currency business, which currently comprises nearly 90% of the total Chinese market. It will also provide Chinese insurers with full access to the Lloyd's market.

Reinsurance is the insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and therefore its capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don't pay policyholder claims. Instead, they reimburse insurers for claims paid.

It has not been easy for Lloyd's to establish its presence in China, especially because Lloyd's is viewed as a market rather than a company. This has resulted in negotiations that went on for years. Solution? Have Lloyd's set up a subsidiary company in China.

"An on-shore presence will allow Lloyd's to play a broader role in China, helping to transfer major risks from the balance sheets of local insurers and providing full access, in local currency, to the capacity, knowledge and technical expertise of the Lloyd's market," said Lord Levene.

It is said that China has the potential to become as valuable as the US where Lloyd's conducts $9bn-worth of business a year, although, for now, it is doubtful that Lloyd's will make significant money in China in the next four or five years.

The reinsurance business is facing the challenges of globalization, although many of the brokerage deals are done locally. Insurance companies are under pressure from all sides, such as investors wanting a fair return for their risk, policyholders concerned about exclusions and willingness to pay, regulators demanding compliance disclosure and contract certainty. These issues are local in nature, but increasingly, new risks exposures, whether catastrophic or legal, like tsunami and terrorism, are constantly being identified. In the case of local catastrophes, global reinsurance companies have had to make enormous payment on their policies. Brits Insurance Holding estimated that claims from the hurricanes to be 37.5m pounds.

One of the major issues with reinsurance companies is to manage global capital markets with accute understanding of the local issues involved with the insurance companies that they insure. It seems like China, with its current state of legal infrastructure and market economy, will present quite a challenge to Lloyd's.

From China's perspective, Lloyd's entrance to the Chinese market will be a valuable balance to the once-monopoly of the Chinese reinsurance market by China Re. Also, Lloyd's subsidiary will provide Chinese insurance to Chinese insurance companies in Chinese currency, which will be a significant advantage for future business.

APMC Insurance Services
FT Chinese
Global Reinsurance

Open Source Software in the Developing World

Open Source Software (OSS) is a free alternative to expensive Microsoft products. The Linux (pronounced "lie-neks") operating system is the most popular OSS alternative to Microsoft Windows. OpenOffice is a free alternative to Microsoft Office.

In the developing world, cost is paramount. In this 2004 article, License fees and GDP per capita: The case for open Source in developing countries, the author computes that the cost of Microsoft Windows XP with Office is

over 2.5 months of GDP/capita in South Africa and over 16 months of GDP/capita in Vietnam. This is the equivalent of charging a single–user licence fee in the U.S. of US$7,541 and US$48,011 respectively, which is clearly unaffordable. Moreover, no likely discount would significantly reduce this cost, and in any case the simple fact that a single vendor controls any single proprietary software application means that there can never be a guarantee that any discount offered is intended to be sustained for the long term, rather than as a temporary measure used to tempt consumers into a lock–in situation at which point in time the discount can be reduced.

As a result, countries such as South Africa, India, Brazil, and China are adopting Open Source Software in their schools and government offices. (In addition to piracy). This 2005 article, Open source: Developing markets and anti-Americanism, discusses how Linux is being adapted to many different languages for these uses.

Microsoft has gone so far as to threaten legal action against nations using OSS. This article makes it clear that such threats are not appreciated abroad. Microsoft has reportedly funded a company called SCO in its ongoing lawsuits against Linux.

Friday, November 11, 2005

World Bank and Climate Change

World Bank Participates in New Climate Change Meetings
Announced November 1, 2005

This week, the World Bank's Vice President for Sustainable Development, Ian Johnson, announced that he would be attending meetings in the U.K. to discuss the interplay between climate change, energy sources, and sustainable development. Mr. Johnson suggested that a new comprehensive plan, including innovative technology, insurance schemes, and strategic partnerships, could "climate proof" high population areas.

This approach seems to recognize the link between environmental quality, large-scale natural disasters, and slow-approaching climate changes. The agenda items address preventive measures, like investigating new energy sources and making building requirements more stringent to withstand changing environmental conditions, and emergency planning to make areas more resilient following climate-related disasters.

Do you think this a step in the right direction? Or just another talk? In light of this year's hurricanes, tropical storms, and the tsunami, do these agenda items have a greater chance of becoming active programs?

Wednesday, November 09, 2005

South Africa foreign exchange controls should be lifted

By Gordon Bell
Reuters South Africa
November 9, 2005

South Africa’s central bank governor, Tito Mboweni, urged the country’s Treasury to abolish what he calls “purposeless” foreign exchange controls during a recent address to a conference in Cape Town. He added, “[t]he cost of exchange control administration and the inconvenience that goes with managing (them) might not be worth the exercise."

In response to Mboweni’s comments, the rand weakened by nearly 3 cents to 6.76 against the dollar. In the country's mid-term budget unveiled two weeks ago, Finance Minister Trevor Manuel announced a further easing of investment limits for the country's banks and fund managers, but many controls remain, including for individuals.

Analysts and traders speculated that the governor's comments implied further relaxation of foreign exchange controls in South Africa's 2006 budget and that the long-term result for the currency should be positive, despite the immediate weakening of the rand.

As far as interest rates go, Mboweni also said he was against the idea of "artificially low" rates and an inflation target which was too flexible, although these steps have been urged by some to boost growth and reduce high unemployment in the continent's biggest economy. The country's targeted inflation rate has remained inside its three to six percent target for 25 consecutive months, although higher oil prices have pushed it up to 4.7 percent from a record low of 3.1 percent early this year.

South Africa's rand regained its poise on Wednesday after wobbling in response to calls from central bank governor Tito Mboweni to abolish exchange controls, taking heart from a modest recovery in the euro.

For the full speech, see

Mboweni has cautioned that the long period of lower interest rates may come to an end, and an interest rate hike may be coming for December. South Africa’s Reserve Bank must continue to closely monitor events and take necessary action to achieve the inflation target mandate, and adjusting interest rates mitigates inflationary pressures. Is it better to raise interest rates preemptively than to hike rates more steeply later on?

Tuesday, November 08, 2005

Effect of Immigration on US Wages

“Yes, Immigration May Lift Wages,” Virginia Postrel, NYT, November 3, 2005
"Rethinking the Gains From Immigration: Theory and Evidence From the U.S.," Gianmarco I. P. Ottaviano of the University of Bologna and Giovanni Peri of the University of California, Davis (The paper is available at

From 1990 to 2000, the number of people working in the United States grew by more than 9 million, or around 8%, from immigration alone. What effect did all those new foreign-born workers have on the wages of native-born Americans?

In a new working paper for the National Bureau of Economic Research, two economists estimate that immigration in the 1990's increased the average wage of American-born workers by 2.7%.

Although it still relies on a highly stylized model of the economy, their paper adds two complexities that bring it closer to reality.

First, the two economists assume that businesses can make additional capital investments to take advantage of the expanded supply of workers. Companies may open new restaurants or stores, add new factory lines or build more houses.

In their model, as in the real world, "investment adjusts not to keep fixed the amount of capital but to keep fixed the return to capital," Professor Peri said. As long as businesses can profitably add new production, they hire more workers, and wages do not necessarily go down. Instead, he said, "more workers means more business."

As businesses expand, hiring foreign-born workers to do one job may also require hiring more native-born workers with complementary skills. Immigrant engineers, for instance, may create demand for native-born patent lawyers and marketing executives.

That is the paper's second refinement. It assumes that immigrants do not always compete for the same jobs as American-born workers. The two groups are not "perfect substitutes," even when they have similar education and the same occupation.

Immigrants often bring different skills to the American labor force, and concentrate on different occupations from natives. Among high school dropouts, the paper notes, the "foreign-born are highly overrepresented in professions like tailors (54 % were foreign-born in 2000) and plaster-stucco masons (44% were foreign-born in 2000)." By contrast, American-born workers make up more than 99% of all crane operators and sewer-pipe cleaners.

Sunday, November 06, 2005

FTAA & Bush in South America

“Hemisphere Meeting Ends Without Trade Consensus”
By Larry Rohter and Elisabeth Bumiller, New York Times, Published November 6, 2005

“Brazil, US Look Ahead to World Trade Talks”
By Reuters, New York Times, Published November 6, 2005
“Violence flares at Anti-Bush Protests in Argentina”
By Mary Milliken and Kevin Gray, November 5, 2005

On November 4-5, 2005, President Bush attended the Summit of the Americas in Argentina, which failed to make any progress toward setting up the Free Trade Area of the Americas, or FTAA. The Free Trade of the Americas would be larger than the European Union. As the dominant economic power in the hemisphere, the United States would benefit greatly from the absence of tariffs and other barriers on American good and services.

One reason the group reached a deadlock was because the United States and some Latin American countries are awaiting the outcome of the Doha Round of the World Trade Organization. The outcome of the Doha Round would place restrictions on regional trade agreements such as the FTAA.

Opposition to the FTAA is led by Venezuelan president, Hugo Chávez. President Chávez opposes the FTAA because he believes that it will “stifle or destroy local industry, roll back social safety nets and labor protections and permanently extend American political domination of the region to the economic realm.” Chávez is in favor of free trade among the Caribbean and Latin America.

The Mercosur (Brazil, Argentina, Paraguay, and Uruguay), the world’s third largest trading bloc, is not opposed to free trade, only the current FTAA proposal. Mercosur wants the United States to discontinue the billions it currently subsidizes to American agriculture, in exchange for Latin American concession on intellectual property rights, financial regulation, and market access.

After the summit reached a deadlock and during a 15 minute break, President Bush left early for his flight to Brazil. White House officials said the President had to leave for his Sunday meeting with Brazilian president, Luiz Inácio Lula da Silva. After the President left, other leaders, including President da Silva, departed as well.

On Sunday, President da Silva and President Bush agreed to put their differences aside in favor of global trade. Brazil and the United States are the two largest countries in the Western Hemisphere. President da Silva was elected in 2003.

Bush’s visits to Argentina and Brazil were marked with protests and rioting. Several thousand protestors in Argentina who oppose the FTAA and the U.S.-Iraq War gathered in a stadium to hear Venezuelan president Chávez speak. Chávez was joined by Argentine soccer legend Diego Maradona, who waved the Cuban flag and wore a T-shirt of President Bush under the words, "War Criminal." Also present was Bolivian leader and presidential hopeful Evo Morales. Rioters burned buildings, looted stores, and battled riot police.

In Brazil, Bush was greeted with the burning of the American flag and chants of “Invader! Tyrant! Exploiter of the poor!'' Protestors also burned a small effigy of Bush while chanting ''Bush fascist, you are a terrorist” and ''Fora Bush'' -- which means ''Get out Bush.''

Who's telling the truth? - Chávez or Bush?

The Shanghai Cooperation Organization

The Shanghai Cooperation Organization (SCO) is a nascent political alliance of Russia, China, Uzbekistan, Tajikistan, Kazakhstan, and Kyrgyzstan created in June 2001. When first established, the SCO had the original goal of fostering security ties across China and Eurasia. Now, the organization also visits trade and development issues in the region.

Given the goal of forming a pan-security-economic-political bloc, SCO holds meetings periodically to discuss issues of regional concern. On October 26, the Moscow summit was held, where all member states participated, and attendants from Mongolia, Pakistan, India and Iran observed. The Inter-bank SCO Council was created to fund future joint projects, and it is believed that the SCO would prioritize joint energy projects, including the expanding oil and gas sector, exploration of new hydrocarbon reserves, and joint use of water resources. More specifically, talks of economic development center around the construction of oil and gas pipelines, oil prospecting, development of production technologies to the use of water resources.

China has invested heavily in Central Asia to enhance its energy security. It is constructing a 1,000-kilometer pipeline from Kazakhstan's central Karaganda region to its own northwestern Xinjiang region. Expected to be ready by the end of 2005, the Karaganda pipeline will be a vital link in a 3,000-kilometer project that will link China to the Kenqiyaq oil field farther west and to the Caspian Sea.

China is also working with Uzbekistan to develop its oil fields in the Ferghana Valley and has invested in hydroelectric projects in Tajikistan and Kyrgyzstan. China also is interested in Central Asian markets. An unstable Central Asia could result in a spillover of conflicts into its already restive Xinjiang province. It has sought to secure its borders through firming up its relations with Central Asian governments. It has poured more resources into maintaining the SCO than any other member state. The American presence in Central Asia is seen in Beijing as posing a challenge to its energy security and stability.

With regard to trade, China's program of export loans to SCO states is estimated at $900 million currently.

Some observers have noted that the SCO is the new counterbalance to U.S. hegemony in Eurasia, with China and Russia being the future leaders in Central Asia. One can easily imagine that, as the SCO strengthens on the economic front, United States influence in Central Asia will have to move beyond the few military bases already established in Kyrgyzstan, and its continual presence in Afghanistan.

The Harvard Asia Quarterly
Shanghai Cooperation Organization Eyes Economic, Security Cooperation
The People's Daily
Asia Times Online

Friday, November 04, 2005

New Global Fund to Target Poverty

USAID and Private Investors Team Up to Create a New Fund, Targeting Poverty With Market-Based Solutions
November 3, 2005

The newly announced Global Commercial Microfinance Consortium seeks to provide financing, banking services, and business expertise to small businesses and entrepreneurs in struggling economies. The fund totals $75 million, with $30 million already committed to projects in over half a dozen countries.

Amartya Sen argues, in Development as Freedom, that "[t]he far-reaching powers of the market mechanism have to be supplemented by the creation of basic social opportunities for social equity and justice" (p. 143). While this new partnership of private and public players to combat poverty demonstrates laudable international cooperation, is it enough? Does the mere combination of money and expertise provide the holistic development approach advocated by Sen?

Wednesday, November 02, 2005

Starbucks Fights Russian Trademark Squatter

A Chicago Tribune article reports on the lack of enforcement of intellectual property laws in Russia.   A Russian trademark squatter named Zuykov is demanding $600,000 from Starbucks to release the Starbucks logo.   Starbucks refuses to pay, and is fighting back.   Starbucks has won recent victories in Rospatent, the Russian trademark office.   But Zuykov threatens to open his own "Starbucks" cafe in Moscow, and he isn't too concerned with maintaining Starbucks' reputation.

"Coffee is coffee," Zuykov said. "If they don't like it, they'll leave and won't come again."

DR-CAFTA Falls Short on Workers’ Rights

By Carol Pier
Human Rights Watch.

At a port that supplies U.S. consumers with clothes and other imports from El Salvador, a group of forty-one dockworkers signed up in December to form a union. When the employer found out, it fired thirty-four of them. Unlike in the United States, these workers have no right to their jobs back under Salvadoran law for anti-union firings.
Under a regional trade pact known as DR-CAFTA, which passed the U.S. Senate and is likely facing a vote in the House of Representatives by the end of July, the weak labor laws that allow such human rights abuses to flourish could remain intact in U.S. trading partners like El Salvador. Yet the Bush administration is attempting to sell this agreement with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua as pro-worker. Congress should not be fooled. The accord falls short on workers’ rights, and Congress should reject it in its current form.
Under existing laws that DR-CAFTA would replace, the United States can withdraw trade benefits from Central American and Caribbean countries if they do not enforce their labor laws and if those laws do not protect workers’ rights. But DR-CAFTA only has one enforceable labor rights requirement: that countries apply their own labor laws—even if they are grossly inadequate. If governments change their laws to eliminate rights, that’s okay, too, just so long as the new laws are enforced.
Equally troubling, DR-CAFTA affords women and other groups that have historically faced abuse in the workplace no protection from discrimination. Women workers predominate in Central American and Dominican free trade zones. This year, the State Department identified sexual harassment and pregnancy-based discrimination as serious problems in the region.
The Bush administration’s spin is that DR-CAFTA’s enforce-your-own-laws standard is sufficient because the labor laws in the region are fine. It claims that International Labor Organization (ILO) studies confirmed its analysis. In fact, these studies found no such thing. Instead, they identified at least twenty-seven areas in which labor laws in the region fall short of international standards, for example, by severely restricting workers’ right to strike.
El Salvador’s labor laws exemplify the weakness of workers’ rights protections in the region. Several months ago, Congressman Kevin Brady (R.-Texas), a DR-CAFTA supporter, cited a Salvadoran law allowing workers to register a union with thirty-five supporters as an example of the region’s allegedly strong labor protections. But an ILO decision says this minimum number, along with El Salvador’s other union registration requirements, are so onerous that they “seriously infringe the principles of freedom of association.”
The Bush administration claims that the real obstacle to greater respect for workers’ rights in the region is weak labor law enforcement. It cites DR-CAFTA’s Labor Cooperation and Capacity Building Mechanism, designed to help governments better protect workers’ rights, as a panacea for this problem. But DR-CAFTA does not require funding for this mechanism.
Recently, the U.S. Trade Representative, Rob Portman, promised to support $40 million a year for labor and environmental capacity building in Central America and the Dominican Republic. But this is a nonbinding pledge and only tells half the story. The other half of the story is the Bush administration’s proposal to cut by 87 percent—from $93.2 million to $12 million—the 2006 budget for the U.S. Department of Labor’s Bureau of International Labor Affairs (ILAB). ILAB is the principal U.S. agency charged with providing international workers’ rights assistance and houses the Office of Trade Agreement Implementation, the national contact point for administering the labor chapters of all free trade agreements to which the United States is party.
Other governments in the region are also withholding resources for labor rights enforcement. According to the Central American and Dominican governments’ white paper, in 2005, only half the countries in the region apparently increased Labor Ministry budgets more than the inflation rate.
Opponents of DR-CAFTA have been called many names, “protectionists” among the most common. But it is not protectionist to join a chorus of opposition from labor and women’s movements, human rights activists and ombudsmen, and Catholic bishops throughout Central America and the Dominican Republic who understand that the region’s workers will be the big losers under DR-CAFTA.
Such losers include the thirty union members fired from a baked goods factory in El Salvador in 2002. With no right to their jobs back under Salvadoran law, they accepted the severance pay due for illegal, anti-union dismissals, knowing that a successful court fight would still leave them out of work.
Rather than playing a game of smoke and mirrors, the Bush administration should renegotiate DR-CAFTA to strengthen workers’ rights protections and provide the funds to make them a reality. For Congress to oppose DR-CAFTA until it does so isn’t protectionist or anti-trade, it’s pro-human rights.

South Africa Lawmakers Pass Diamond Law Changes

By Gordon Bell
Reuters South Africa
November 1. 2005

On November 1, South Africa's national assembly approved highly controversial changes to diamond laws. The new laws allow for a state diamond trader to help lock-in wealth in the world's fourth largest diamond producing nation. The goal of the new laws is to stimulate more jewelry manufacturing by black South Africans.

De Beers, the leading world diamond producer, claims that the law will harm the industry, leading to mine closures and job losses, although it remains hopeful it can work with the government. In fact, De Beers’ largest shareholder states that the proposed law may lead to the demise of the company’s powerful marketing arm.

Under the new law, miners must first offer their diamonds to a state trader, who in turn will make the stones available to local cutters and polishers. Producers will be compelled to route their exports through a state-controlled export centre, although the minister can issue an exemption from this.

Minerals and Energy Minister Lindiwe Hendricks dismissed warnings of massive job losses because of the law, and noted that several major companies had expressed interest in investing in South Africa's processing sector once the law was passed. He further rejected the criticisms by stating, "Some of the concerns raised were valid whilst others were nothing but myths that were created by people who do not want to see the status quo changed."

The bill will now be referred to parliament's lower house and will be implemented once the finance law is approved, likely early next year. Lawmakers also approved the Precious Metals Bill, which also aims to encourage local processing and requires companies to apply for refining and processing licenses.

South Africa is the world's fourth largest diamond producing country. Currently, most of South Africa’s diamond production is exported in raw form to be cut and polished. Is this a smart move by the government to create more jobs, or is it “interventionist,” placing the entire industry under the control of the current government?

China facing a scarcity of labor?

"China's high-tech success is not patently obvious",dwp_uuid=2aaa1c16-afc8-11d9-ab98-00000e2511c8.html
Financial Times
November 2, 2005

The author argues that China might actually be facing a scarcity of manpower, rather than a glut of it. According to the author, "China has yet to show it can turn R&D into internationally successful products. [Further, the links] between state research centres and industry are often weak. "

Democracy and economic growth

"Democracy's drawbacks"
The Economist
October 27, 2005

The authors argue that India's growth is in spite of its political climate instead of because of it. As an example, the authors point to the "mountain of subsidies" and the presence of a behemoth bureaucracy.
This raises the seemingly troubling question - is democracy, despite all of its positives, really the best facilitator of sustainable economic growth and development?