All Entries in the "Foreign Policy" Category

Help Stop the Disastrous Korean-U.S. Free Trade Agreement (KORUS) From Ruining America

President Obama will soon present the South Korean Free Trade Agreement (KORUS) to Congress, and we need your help to tell your representatives to stop this horrendous treaty!

There are a multitude of issues with this disastrous agreement that will only increase unemployment and make America even more dependent on foreign nations. This is according to a study done by a government agency, the U.S. International Trade Commission, as well as non-partisan think tanks such as the Economic Policy Institute.

In the first seven years of the agreement, KORUS could cost as many as 159,000 American jobs and increase our trade deficit by $16.7 billion. Obama has promised that this deal would create 70,000 low-paying insourced jobs (Americans working for foreign employers). That would not even be half of the high paying jobs we would lose. As more foreign products enter our country, our trade deficit will continue to rise out of control.

Full Story Here: Help Stop the Disastrous Korean-U.S. Free Trade Agreement (KORUS) From Ruining America | Economy In Crisis.

What’s Really Going On in Libya?

It looks as though eastern Libya will slide into the Mediterranean under the sheer weight of western journalists assembled in Benghazi and Misrata. A tsunami of breathless reports suggests that Misrata is enduring travails not far short of the siege of Leningrad in World War 2. The reports have been seized on by Obama, Cameron and Sarkozy to raise the ante on Mission Odyssey Dawn. In their joint newspaper column published both sides of the Atlantic they now say that to leave Gaddafi in power would be an “unconscionable betrayal” and speak of Misrata as enduring “a medieval siege.” Not yet, surely. A medieval siege was something that usually lasted at least a year, in which the city’s inhabitants were reduced to eating rats, then each other, and the besiegers all succumbed to plague.

Maybe it will turn out that way, with reporters eying each other from a gastronomic perspective and wiring Ferran Adria, seeking recipes for preparing Haunch of Hack sous vide. “So long as Gaddafi is in power, Nato and its coalition partners must maintain their operations so that civilians remain protected and the pressure on the regime builds,” write the three leaders. This is not Mission Creep but, once again, Mission Leap, way beyond the UN mandate.

On closer inspection, the reports suggest something less than a medieval siege or Leningrad. Reuter’s man in Misrata could only come up with this: “A local doctor told Al Jazeera at least eight people died and seven others were wounded in the second day of intense bombardment of Misrata, a lone rebel bastion in western Libya.” The UK Independent’s Kim Sengupta did better: “The attacks started early in the morning as the residents of this besieged and battered city were starting their hours of queuing for bread…. Even by the grim standards of Misrata, the most violent battleground of this savage civil war, what happened yesterday was a cause of deep shock….At least 16 people died, and 29 were injured, almost all of them civilians – including a mother and her two young daughters.”

Full Story Here: Alexander Cockburn: What’s Really Going On in Libya?.

Theory of Comparative Advantage

The Famous (and Almost Never Understood)

Ian Fletcher

You can read about the free trade controversy for months and never hear about it.  But in the minds of real economists, it’s there all the time, and it’s big. I’m talking about the so-called theory of comparative advantage, the theoretical lynchpin—in the view of free traders and protectionists alike—of the case for free trade.   It has an unfortunate reputation for being too technically tricky for non-economists to understand, but I think this is a shame, because this myth tends to shut ordinary concerned citizens out of the debate. Therefore, I’d like to take a shot at explaining this theory.

The theory is ultimately wrong, for reasons I spent half a book discussing.  And in a future article, I’ll explain why. But for now, let’s just get clear on what it says.  That’s the price of admission for engaging in serious debate on the issue.

To understand comparative advantage, it is best to start with its simpler cousin: absolute advantage. The concept of absolute advantage simply says that if some foreign nation is a more efficient producer of some product than we are, then free trade will cause us to import that product from them, to the benefit of both nations. It benefits us because we get the product for less than it would have cost us to make it ourselves. It benefits the foreign nation because it gets a market for its goods. And it benefits the world economy as a whole because it causes production to come from the most efficient producer, maximizing world output.

Sounds good.  Indeed, absolute advantage is a set of fairly obvious ideas. It is, in fact, the theory of international trade most people instinctively hold, without recourse to formal economics, and thus it explains a large part of public opinion on the subject. It sounds like a reassuringly direct application of basic capitalist principles. It is the theory of trade the great Adam Smith himself, founder of modern economics, believed in.

It is also false. Under free trade, America observably imports products of which we are the most efficient producer—which makes no sense by the standard of absolute advantage. This causes complaints like conservative commentator Patrick Buchanan’s below:

Ricardo’s theory…demands that more efficient producers in advanced countries give up industries to less efficient producers in less advanced nations…Are Chinese factories more efficient than U.S. factories? Of course not. (The Great Betrayal, p. 67.)

Buchanan is correct: this is precisely what Ricardo’s theory demands. It not only predicts that less efficient producers will sometimes win (observably true) but argues that this is good for us (the controversy). This is why we must analyze trade in terms of not absolute but comparative advantage. If we don’t, we will never obtain a theory that accurately describes what does happen in international trade, which is a prerequisite for our arguing about what should happen—or how to make it happen.

At bottom, the theory of comparative advantage simply says this:

Nations trade for the same reasons people do.

And the whole theory can be cracked open with one simple question:

Why don’t pro football players mow their own lawns?

Why should this even be a question? Because the average footballer can almost certainly mow his lawn more efficiently than the average professional lawn mower. The average footballer is, after all, presumably stronger and more agile than the presumably mediocre workforce attracted to a badly paid job like mowing lawns. (If we wanted to quantify his efficiency, we could measure it in acres per hour.)

Efficiency (also known as productivity) is always a matter of how much output we get from a given quantity of inputs, be these inputs hours of labor, pounds of flour, kilowatts of electricity, or whatever.  Because our footballer is more efficient, in economic language he has absolute advantage at mowing lawns. Yet nobody finds it strange that he would “import” lawn-mowing services from a less efficient “producer.” Why? Obviously, because he has better things to do with his time.

This is the key to the whole thing. The theory of comparative advantage says that it is advantageous for America to import some goods simply in order to free up our workforce to produce more-valuable goods instead. We, as a nation, have “better things to do with our time” than produce these less valuable goods. And, just as with the football player and the lawn mower, it doesn’t matter whether we are more efficient at producing them, or the country we import them from is.  As a result, it is sometimes advantageous for us to import goods from less efficient nations.

This logic doesn’t only apply to our time, that is our man-hours of labor, either. It also applies to our land, capital, technology, and every other resource used to produce goods. So the theory of comparative advantage says that if we could produce something more valuable with the resources we currently use to produce some product, then we should import that product, free up those resources, and produce that more valuable thing instead.

Economists call the resources we use to produce products “factors of production.”  They call whatever we give up producing, in order to produce something else, our “opportunity cost.” The opposite of opportunity cost is “direct” cost, so while the direct cost of mowing a lawn is the hours of labor it takes, plus the gasoline, wear-and-tear on the machine, et cetera, the opportunity cost is the value of whatever else these things could have been producing instead.

Direct cost is a simple matter of efficiency, and is the same regardless of whatever else is going on in the world. Opportunity cost is a lot more complicated, because it depends on what other opportunities exist for using factors of production.

Other things being equal, direct cost and opportunity cost go up and down together, because if the time required to mow a lawn doubles, then twice as much time cannot then be spent doing something else. As a result, high efficiency tends to generate both low direct cost and low opportunity cost. If someone is such a skilled mower that they can mow the whole lawn in 15 minutes, then their opportunity cost of doing so will be low because there’s not much else they can do in 15 minutes.

The opportunity cost of producing something is always the next most valuable thing we could have produced instead. If either bread or rolls can be made from dough, and we choose to make bread, then rolls are our opportunity cost. If we choose to make rolls, then bread is. And if rolls are worth more than bread, then we incur a larger opportunity cost by making bread. It follows that the smaller the opportunity cost we incur, the less opportunity we are wasting, so the better we are exploiting the opportunities we have.

Therefore our best move is always to minimize our opportunity cost. This is where trade comes in.

Trade enables us to “import” bread (buy it in a store) so we can stop baking our own and bake rolls instead. In fact, trade enables us to do this for all the things we would otherwise have to make for ourselves. So if we have complete freedom to trade, we can systematically shrug off all our least valuable tasks and reallocate our time to our most valuable ones

Similarly, nations can systematically shrink their least valuable industries and expand their most valuable ones. This benefits these nations and under global free trade, with every nation doing this, it benefits the entire world. The world economy, and every nation in it, become as productive as they can possibly be.

Or so goes the theory…

Here’s a real-world example: if America devoted hundreds of thousands of workers to making cheap plastic toys (we don’t; China does) then these workers could not produce anything else. In America, we (hopefully) have more-productive jobs for them to do, even if American industry could hypothetically grind out more plastic toys per man-hour of labor and ton of plastic than the Chinese. So we’re better off leaving this work to China and having our own workers do that more-productive work instead.

This all implies that under free trade, production of every product will automatically migrate to the nation that can produce it at the lowest opportunity cost—the nation that wastes the least opportunity by being in that line of business.

The theory of comparative advantage thus sees international trade as a vast interlocking system of tradeoffs, in which nations use the ability to import and export to shed opportunity costs and reshuffle their factors of production to their most valuable uses.

This all (supposedly!) happens automatically, because if the owners of some factor of production find a more valuable use for it, they will find it profitable to move it to that use. The natural drive for profit will steer all factors of production to their most valuable uses, and opportunities will never be wasted.

It follows that any policy other than free trade (supposedly!) just traps economies producing less-valuable output than they could have produced. It saddles them with higher opportunity costs—more opportunities thrown away—than they would otherwise incur.

In fact, when imports drive a nation out of an industry, this must (supposedly!) be good for that nation, as it means the nation must be allocating its factors of production to producing something more valuable instead. If it weren’t doing this, the logic of profit would never have driven its factors out of their former uses. In the language of the theory, the nation’s “revealed comparative advantage” must lie elsewhere, and it will now be better off producing according to its newly revealed comparative advantage.

Or so goes the theory, and it’s easy to see where it leads.  Next time, I’ll tell you why it isn’t true.

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank, and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

Why Public Support for Free Trade Will Collapse Soon

Ian Fletcher

For once, some good news: public support for free trade will almost certainly collapse over the next few years.  On this issue, the public is way ahead of the political class in the quality of its thinking., and the average hardware store owner in Nebraska understands the real economics involved better than the average U.S. Senator.

Public opinion certainly continues to turn against free trade: an NBC-Wall Street Journal poll in September 2010 found 53% of Americans believing free trade agreements hurt the U.S., with only 17% believing them beneficial.  (The split had been 30%  vs. 39% in the dot-com boom year of 1999.)  86%  named outsourcing to low-wage nations the key cause of America’s failure to emerge fully from recession and create jobs, significantly outranking choices like the federal deficit. The turn against free trade was sharpest among the affluent and cut across boundaries of class, region, and political affiliation.

As of early 2011, there are four missing prerequisites for free trade to explode as an issue and collapse as a policy:

1.    Everyone is still preoccupied with the financial crisis, its aftermath, and recovery from recession, especially job recovery.

2.    There remains a residual sense in the minds of the public and the lawmakers that somehow free trade, despite all its problems, is still sound economics, and that perhaps we should just keep on eating our spinach because it will be good for us in the end.

3.    There is no obvious alternative policy on the table. There is instead a grab bag of issues, ranging from Chinese currency manipulation to the proposed Korea, Colombia, and Panama free trade agreements. This paucity of credible alternatives feeds the defeatist attitude that nothing fundamental can be done, which feeds apathy.

4.    A specific crisis has not happened to force the system out of its old way of doing things as the debacle in subprime mortgages upended our financial system in 2008 and made continuation of prior policy impossible whether anyone wanted it or not.

For the first prerequisite above to be supplied, all it will take is time, as recessions, even double-dip recessions (?), always eventually end, and the financial crisis of 2008 was successfully patched (albeit at astronomical cost and without fixing its underlying causes, risking a repeat)

For the second prerequisite to be supplied, all it will take is sufficient public debate, between persons perceived as credible, for free trade to become established in the public mind as an issue with two legitimate sides to it. As the reader has hopefully gathered from my column by now, once one seriously scrutinizes the underlying economics of free trade, even if one is not disabused of the policy outright it becomes hard to deny that it is a legitimately controversial issue. The pure “100 percent free trade with 100 percent of the world 100 percent of the time” position is simply not intellectually serious. (Free traders will, of course, respond that none of them actually believe in literal 100% free trade. The reader may judge whether the various kinds of 99% free trade they believe in are significantly different.)

So when public debate finally cracks open, free trade will lose its innocence very fast.

Once protectionism is perceived as a legitimate choice, it will become the actual choice of large numbers of people whose protectionist instincts have been held back by the belief that it is somehow an ignorant position to take. They will not need to master the details of why it is legitimate; they will only need to know that it is legitimate.

Sen. Sherrod Brown (D-OH), one of the leading opponents of free trade in the Senate, reports that ever since he came to Congress in 1993, every free trade vote has been accompanied by predictions by the White House of economic disaster if it was not passed. Trade wars, stock market decline, and recession were predicted every time. The power of this rhetoric to intimidate is going to end. “Protectionist” will cease to be a canard and become just another policy option.

The third prerequisite above (no obvious alternative) can emerge overnight if some major political figure launches a tariff proposal that captures the public’s imagination. Or the myriad individual issues that currently comprise the opposition to free trade could force the soldering together of an omnibus proposal on the floor of Congress.

The fourth prerequisite (a sudden crisis) is difficult to predict as to time, but we can rely securely upon the fact that unsustainable trends are always, in the end, not sustained. At some point, America’s giant overdraft against the rest of the world must come to an end. Although our government is trying to postpone the day of reckoning as long as possible, this day will come. Secretary of State Hillary Clinton flying to China to beg its government to keep buying our bonds (as she did in February 2009) won’t make much difference in the end.

Once protectionism is conceded to be a valid political position, it will eventually win the public debate, if free trade’s unpopularity continues to mount at the pace it has been mounting over the last 10 years. And this pace is, if anything, likely to accelerate.

When this happens, the status quo will be sustained only by the tacit bargain of the American political duopoly, in which the two parties agree not to make trade a serious issue, whatever tactical feints they may deploy. This corrupt bargain will hold as long as the benefits of keeping it, which mainly consist in keeping the corporate backers of both parties happy, exceed the benefits of defecting from it, which consist in winning votes.

Once one party defects, protectionism will, if rationally designed and competently implemented, almost certainly be sufficiently successful in practice (and therefore popular) that the other party will have no choice but to follow. The alternative, if one party insists on handicapping itself by clinging to an unpopular position on such a major issue, is an era of one-party political dominance like 1860-1932 or 1932-80.

Make no mistake: we are heading for a big economic paradigm shift here.

[Minor note: the 2011 edition of my book just came out.]

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank, and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

US Embassy in Baghdad to double staff

The US Embassy in Baghdad, already the largest in the world, is expected to double its staff after American forces pull out of the country later this year.

Full Story Here: US Embassy in Baghdad to double staff – Telegraph.

OPS:  So…we’re leaving, when?

Disastrous Panama Free Trade Agreement is Likely

The Panamanian legislature is likely to approve a tax treaty with the U.S. by the end of next month, paving the way for a finalization of a bilateral trade agreement between the two countries, a member of the U.S. Trade Representative’s office said yesterday during a congressional hearing.

“I have every reason to believe they will do it before they recess,” Deputy U.S. Trade Representative Miriam Sapiro told the House Ways and Means Committee, according to Bloomberg News. “We are working very hard, and so is Panama. The ball is really in their court right now.”

The tax information sharing agreement will supposedly aid the U.S. in combating tax evasion, which Panama is notorious for. The tax agreement is necessary to corral enough votes in Congress to pass the bilateral trade pact that has been stalled since 2006.

Full Story Here: Disastrous Panama Free Trade Agreement is Likely | Economy In Crisis.

Democrats Call for More Trade Enforcement

In a letter to the White House, Democratic members of the committee praised the president’s handling of trade issues thus far into his first term, but made no bones about the fact that more could be done to protect American jobs and industries from unfair trade practices.

Democrats on the House Ways and Means Committee are urging administration officials to take a tougher stand when it come to trade enforcement, according to The Hill.

In a letter to the White House, Democratic members of the committee praised the president’s handling of trade issues thus far into his first term, but made no bones about the fact that more could be done to protect American jobs and industries from unfair trade practices.

“It is now clear that trade barriers do not simply work themselves out over time, as proponents of that outdated approach have suggested,” they wrote. “Rather, it is imperative that the U.S. government act vigorously and aggressively to address the trade barriers and defend U.S. trade rights and interests.”

Full Story Here: Democrats Call for More Trade Enforcement | Economy In Crisis.

The Collapse of Globalization

Chris Hedges

The uprisings in the Middle East, the unrest that is tearing apart nations such as the Ivory Coast, the bubbling discontent in Greece, Ireland and Britain and the labor disputes in states such as Wisconsin and Ohio presage the collapse of globalization. They presage a world where vital resources, including food and water, jobs and security, are becoming scarcer and harder to obtain. They presage growing misery for hundreds of millions of people who find themselves trapped in failed states, suffering escalating violence and crippling poverty. They presage increasingly draconian controls and force—take a look at what is being done to Pfc. Bradley Manning—used to protect the corporate elite who are orchestrating our demise.

We must embrace, and embrace rapidly, a radical new ethic of simplicity and rigorous protection of our ecosystem—especially the climate—or we will all be holding on to life by our fingertips. We must rebuild radical socialist movements that demand that the resources of the state and the nation provide for the welfare of all citizens and the heavy hand of state power be employed to prohibit the plunder by the corporate power elite. We must view the corporate capitalists who have seized control of our money, our food, our energy, our education, our press, our health care system and our governance as mortal enemies to be vanquished.

Full Story Here: Chris Hedges: The Collapse of Globalization – Chris Hedges’ Columns – Truthdig.

One Free Trader Replaces Another

As if Larry Summers wasn’t bad enough. The Obama administration has chosen his replacement to head the National Economic Council and, like Summers, the choice is a former Clinton administration official perhaps best known for being at the forefront of America’s worst policy blunders over the past two decades.

Gene Sperling, will take over as director of the National Economic Council, a position he held over the course of the last four years of the Clinton administration.

Sperling, like incoming Chief of Staff William Daley, has a long and not so storied history when it comes to America’s failed trade policies.

Full Story Here: One Free Trader Replaces Another | Economy In Crisis.

Conversations with Great Minds with Ian Fletcher

Thom Hartmann: Video

Friday on The Big Picture it was “Conversations with Great Minds.” Thom Hartmann welcomed Ian Fletcher, Senior Economist at the Coalition for a Prosperous America. They discussed the major problems with free trade in America. And are you ready to rumble about the biggest stories of the week? Wisconsin Governor Scott Walker signed his union busting bill without any Democrats present. Will legal action follow? Also will mainstream corporate media ever talk about the problems of corporate control in America? Plus, did Peter King’s witch hunt hearings accomplish anything? Thom hosted a panel discussion with Jamie Weinstein, Deputy Editor at the The Daily Caller, Jimmy LaSalvia, Executive Director of GOProud and Bill Press, Host of The “Bill Press Show”.

Time to Quit Pining for a “Level Playing Field” in International Trade

Ian Fletcher: :

One of the most common plaints from those who are upset about America’s current trade mess is “just give us a level playing field.”  In particular, this is what one tends to hear from American businesses (at least those which have resisted the siren song of offshoring) that are hard pressed by “unfair” foreign competition.  It’s hard not to be sympathetic, and on an individual basis, my heart goes out to them.

Unfortunately, the whole idea of a level playing field in international trade is basically a mirage as an aspiration, and we’ll all be better off if we stop pining for one right now.

As I pointed out in a previous article, the concept of “fair” trade, while of some finite usefulness in the context of things like fair trade coffee, is basically a non-starter as a serious solution for economic problems, either here or abroad.  And unfortunately, the cry of  “all we want is a level playing field” is just another way of asking for fair trade.

The fundamental problem is this: a true level playing field would require not just equal rules for international trade, but also that nations have the same domestic economic policies, as these can also confer an export advantage.

First, consider international trade rules. Foreign protectionism doesn’t only mean obvious policies like tariffs and quotas; it also includes local content laws, import licensing requirements, and subtler measures (some of them covert, hard to detect, or infinitely disputable) such as deliberately quirky national technical standards and discriminatory tax practices.

That’s not even mentioning outright skullduggery such as deliberate port delays, inflated customs valuations, selective enforcement of safety standards, and systematic demands for bribes. One study by the Congressional Research Service identified 751 different types of barriers to American exports worldwide.

Now consider purely domestic ways in which foreign governments put their thumbs on the scale in trade.  There are literally thousands of places in an economy where export subsidies can be hidden, from the depreciation schedules of the tax code to state ownership of supplier industries, land use planning, credit card laws, non-performing loans, cheap infrastructure, and tax rebates.

Thanks to all these practices, a true level playing field would require America to supervise the domestic policies of foreign nations, which is obviously not feasible. Even if we reached agreements on paper to end these subsidies, we would still have to enforce these agreements on the ground, as the other side would have a multi-billion dollar incentive to cheat.

Foreign governments often face strong domestic political pressures to keep these subsidies in place even when they want to strike a deal with the U.S. to eliminate them. China, for example, is full of effectively bankrupt state-owned companies that can’t be allowed to collapse for fear of unleashing a tidal wave of unemployment.

In other nations, subsidies are products of the day-to-day political bargaining that goes on in every country as governments buy political support and buy off opposition, so eliminating subsidies just to keep America happy would risk unraveling the balance of power.  Our own difficulties abolishing unjustified agricultural subsidies illustrate just how hard it is to repeal entrenched subsidies.

Level playing fields tilt the other way, too: Americans tend not to realize how many subsidies our own economy contains. But judging by the same standards the Commerce Department applies to foreign nations, they are legion.

Agricultural subsidies are just the beginning, and already a flashpoint of international trade disputes. (They basically scuttled the Doha round of WTO talks in 2008.) But there are thousands of others, ranging from the Import-Export Bank (cheap loans for exporters) to the Hoover dam (cheap electricity).

This is just on the federal level; states and localities constantly bid subsidies against each other to attract businesses. Every tax credit, from R&D and worker training on down, subsidizes something, and if that something is exported, then it constitutes an export subsidy.

So unless we are prepared to have foreign bureaucrats pass judgment on all these policies, subsidies both here and abroad are unavoidable and a true level playing field is impossible. And if a level playing field is impossible, then no free-market (or to be realistic, “free” market) solution will ever balance trade, and balanced trade will have to be some kind of managed trade.

Managed trade doesn’t have to be a scary word.  It doesn’t imply a bunch of Soviet commissars determining who buys what.  We basically had a system of managed trade under the 1945-71 Bretton Woods system of fixed exchange rates and capital controls. During that period, we had more economic growth, and much lower trade deficits, than we have today.  There’s a lesson in that.

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank, and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

Mike Mullen: U.S. Mission In Libya ‘Limited’, But No End In Sight

Joint Chiefs of Staff Chairman Adm. Michael Mullen made the rounds of the morning talk shows on Sunday, and one of the main messages that emerged on Libya is that, right now, there just aren’t many answers: how long the U.S. will stay involved, how long a no-fly zone will stay in place, and how much capacity the U.S. military has to sustain another conflict.

On “Fox News Sunday,” host Chris Wallace pointed out to Mullen that with the U.S. at war in Iraq and Afghanistan, there were already concerns that America’s armed forces were stretched too thin. “How can you take on a third operation?” asked Wallace. “Is something going to have to give?”

Mullen stressed that, at this point, the mission in Libya remains very “limited,” and therefore, the U.S. military has been able to carry it out effectively.

Full Story Here: Mike Mullen: U.S. Mission In Libya ‘Limited’, But No End In Sight.

OPS: Another bottomless pit of blood and treasure.  “We’re broke’ but we always have enough money for war over oil.

Carlos Pascual Resigns: U.S. Ambassador To Mexico Out, Says Clinton

The U.S. ambassador to Mexico resigned Saturday amid furor over a leaked diplomatic cable in which he complained about inefficiency and infighting among Mexican security forces in the campaign against drug cartels.

U.S. Secretary of State Hillary Rodham Clinton, in Paris to meet with U.S. allies on Libya, said Carlos Pascual’s decision to step down was “based upon his personal desire to ensure the strong relationship between our two countries and to avert issues” raised by President Felipe Calderon.

Clinton didn’t say specifically what she was referring to, but a furious Calderon has publicly criticized Pascual’s cable, which was divulged by the WikiLeaks website.

Full Story Here: Carlos Pascual Resigns: U.S. Ambassador To Mexico Out, Says Clinton.

The South Korean FTA – The Final Nail in Our Economy’s Coffin

Who wants the South Korean FTA and Why?

Senate Republicans are willing to pass three leftover trade agreements from the Bush era by any means necessary, even if that means figuratively holding the president’s nominee to head the U.S. Commerce Department hostage to extract what they want.

With former Commerce Secretary Gary Locke headed to China to become U.S. Ambassador to the Asian powerhouse, the position is currently empty, and any replacement must be confirmed by two-thirds of the Senate.

“So important are these deals to our economy and our relations with these key allies in Latin America that, until the president submits both agreements to Congress for approval and commits to signing implementing legislation into law, we will use all the tools at our disposal to force action, including withholding support for any nominee for commerce secretary and any trade-related nominees,” the letter, signed by McConnell and 43 other GOP senators, states.

Full Story Here: The South Korean FTA – The Final Nail in Our Economy’s Coffin | Economy In Crisis.

WTO Sides With Chinese State Capitalism Against the U.S.

Ian Fletcher: :

The World Trade Organization has a long history of anti-American actions.  They’ve just handed us another one, and in the process handed a big freebie to Chinese state capitalism.

Unbeknownst to most Americans, huge sections of our nation’s trade policy aren’t set in this country anymore.  They are set by panels of WTO judges in Switzerland, to whom we have signed over the right to rule on the legitimacy of our policies.

At issue in a WTO ruling handed down last Friday is how much scope the U.S. is entitled to in trying to level the playing field for American companies competing against companies subsidized under China’s system of state capitalism.

The specific products at issue in the ruling are steel tubing, off-road tires, and woven sacks.  However, as in domestic legal rulings, the implications go far beyond the immediate subject matter.

Since July 2008, the U.S. has imposed tariffs on $200 million worth of steel pipe imports from China, South Korea, and Mexico.

Why?  The American position is that we are entitled to apply what are called “countervailing duties” against products that are subsidized by foreign governments. And on top of that, we are also entitled to apply duties designed to counteract the practice of dumping, or selling a product below cost in order to destroy foreign competitors.

Both these responses on our part have long histories of being accepted as legitimate, both under international trade law and in economics.  (This is why the WTO had originally accepted our position; the new ruling is actually the result of an appeal by China.)

In terms of international law, one can trace the legitimacy of our policies at least as far back as the founding of the General Agreement on Tariffs and Trade, the WTO’s predecessor, in 1947.

In terms of economics, their justifying logic is very simple.

In the case of subsidies, free trade only makes sense if it really is free, which means that a thumb on the scale at one end of the transaction justifies a tariff, or counter-subsidy, at the other end.

In the case of dumping, free trade is not justified if one side sells below cost in order to wipe out the other and thus eventually grab the market (or most of it) for itself.  Even if the attempt fails, the damage done to our industries will be real, and by then it will be too late.

There’s no serious question about whether China engages in subsidies and dumping.  That’s why, in this case, we imposed duties of up to 200 percent to offset their subsidies, plus up to 265 percent to counteract their dumping.

Enter state capitalism. The flashpoint of the current dispute centers on the vexed question of what price constitutes dumping in a non-free-market economy.

In a free-market economy like our own, dumping is considered to occur when a product is sold abroad for either less than its production cost, or less than what it is sold for domestically.  Unfortunately, in an economy like China’s, which is so tightly controlled by the government that many prices are essentially whatever the government says they are, this logic doesn’t work.  There are no normal prices to observe in order to figure out how big the subsidy is.  So the U.S. Government has been using various statistical techniques to calculate the relevant prices.

The WTO has ruled that our techniques are not legit.  Bottom line? We’re supposed to overlook the vast panoply of subsidies—ranging from free land to cheap loans and a million different tax credits—because state capitalism makes them tricky to calculate.

Free traders are celebrating this ruling.  Unfortunately, “free” is the last thing trade with subsidized state capitalism is. It’s controlled.  Just not in our interests.

As with many of America’s trade problems, it’s not like we didn’t see this coming.  As Leo Gerard, president of the United Steelworkers, has rightly pointed out in protest against this ruling,

When China joined the WTO in 2001, it agreed to be treated as a non-market economy in dumping cases and to be subject to countervailing duty laws, but today the Appellate Body appears to have created special carve outs for China that neither the U.S. nor anyone else agreed to ten years ago.

When will we ever learn?  China views trade as economic warfare by other means, and we keep expecting the WTO to somehow make them play fair.  We will keep losing jobs and industries until we wise up.

 

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

Free Trade and the Tea Party: Puppets or Rebels?

Ian Fletcher

My job deprives me of the luxury of partisanship, as I have to reach out to both sides on the issue of free trade–a disastrous policy one can give impeccably liberal or conservative reasons to be against. So I can’t offer any opinion of the Tea Party movement per se. But I can tell you that the way they’re handling the issue of free trade reveals a lot about them.

Over the last year, I’ve interacted with the Tea Party about the issue at both the local level and with some of their leadership. And I’ve observed a few things.

The main thing is just how utterly conflicted they are, in two very different ways.

The first way is simply that the base of the Tea Party has views of free trade very different from its Washington leadership, and very different from the Republicans they’ve elected to Congress. (In this respect, the Tea Party’s base is not all that different from a lot of disappointed liberals who voted for Obama.)

Polls show that 61% of the grass roots of the Tea Party think free trade agreements have been bad for the country. (This is not a perfect proxy for free trade per se, but it’s close enough to make the point, especially when these agreements are the flashpoints of the issue.) But there’s no sign of such skepticism in their leadership, which seems to think that it’s leading the Ayn Rand Party, not the Tea Party. The leadership is utterly gung-ho for new free trade agreements with Korea and now Panama and Colombia.

More importantly, the Tea Party’s grass roots are themselves conflicted–between what they believe, and what they want.

What they believe about economics, if you ask them, is similar to what they say they believe about many other issues: America should return to this country’s founding principles, get the overweening government out of the way, etc. It’s the familiar classical liberal vision of society.

But if you ask them what they want in economics, i.e. what outcomes they want to see happen, you get a very different story: they want good jobs with good wages, an industrial base strong enough for us not to be beholden to foreign nations, no more endless accumulation of foreign debt, etc.

It’s 1776 vs. 1956.

The problem here is that A doesn’t follow from B. The reality, in both this country and abroad, both today and a hundred years ago, is that prosperous economies do not come from a pure less-government strategy. While government must respect its limits, every nation that has became a developed nation–and every nation that has stayed that way–has done so thanks to a long list of proactive government policies designed to make this happen. Laissez faire is simply false economic history.

This isn’t just a liberal or Democratic insight, though obviously FDR and the New Deal would be obvious examples of effective government interventions. It’s also a Republican insight, thanks to the interventionist policies of great Republican presidents like Lincoln (“give us a protective tariff and we will have the greatest country on earth”) and Teddy “the trustbuster” Roosevelt.

Now here’s where the Tea Party actually has a fighting chance to sort out its own conundrum, because, for all its intellectual limitations , it does at least claim to take history seriously. (By the way, the free trade issue will help reveal if this is, in fact, true.)

So if Tea Partiers ask, for example, what the Founding Fathers really thought about free trade, they will find out very fast that they were explicitly against it, thanks to Alexander Hamilton, America’s first Treasury Secretary and the one serious economist among the Founders.

And if Tea Partiers want to get back to the original intent of the Constitution, Article I, Section 8 of the Constitution says plain as day that Congress has the power “to regulate commerce with foreign nations.”

Clearly, a lot of the Tea Party grass roots already gets this. So–can this eventually put an end to the paradox that they have mostly elected Republicans who support free trade once in office? Obviously, that’s a tough nut to crack, because conservatives in this country have a long history of being used as electoral cannon fodder by a corporate-centered Republican establishment that despises them and sniggers at their beliefs behind their backs.

But the Republican establishment doesn’t have a magical grip on the Republican party. It has a grip that depends on certain finite kinds of institutional and financial power, and it has been challenged before. The most famous example, of course, is the revolt against liberal “Rockefeller” Republicanism that nominated Barry Goldwater and eventually put Ronald Reagan in the White House.

The Republican establishment has already lost a few battles in Republican primaries against the Tea Party. So it could quite possibly lose control of the party.

America’s economic situation probably has to get quite a bit worse before trade will boil hot enough as an issue for this to happen, but this may, of course, be in the cards. And obviously there are huge risks involved whenever a populist insurgency takes over a party, as insurgents generally lack a lot of the political skill and prudential judgment that establishments, for all their flaws, bring to the table.

But yes, there is hope, and–to answer some of my liberal friends–no, the Tea Party is not entirely a puppet show orchestrated by selfish billionaires. Neither, as shown by its surprising willingness to countenance cuts in defense spending, is it a pack of mindless right-wing drones incapable of new thinking.

Somebody is going to have to save this country’s economy from free trade, and honestly, I don’t really care which end of the spectrum does it. If it turns out to be a right-wing-populist insurgency, liberals will have only themselves to blame for not having gotten the job done first.

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

The Social Snobbery of Free Trade

Ian Fletcher

Skepticism about free trade is often stigmatized with ad hominem attacks. These mostly come down to variations on the following:

“Protectionists are dummies, losers, incompetents, hippies, rednecks, dinosaurs, closet socialists, or crypto-fascists.”

Thomas Friedman’s version in The World is Flat (the Das Kapital of Globalism) runs thus:

Let’s face it: Republican cultural conservatives have much more in common with the steelworkers of Youngstown, Ohio, the farmers of rural China, and the mullahs of central Saudi Arabia, who would also like more walls, than they do with investment bankers on Wall Street or service workers linked to the global economy in Palo Alto, who have been enriched by the flattening of the world.

And here’s free trader Barack Obama’s version, delivered to an audience of campaign donors in the exclusive Pacific Heights neighborhood of San Francisco, a few blocks from where this book was written, while seeking the Democratic nomination in April 2008:

You go into these small towns in Pennsylvania and, like a lot of small towns in the Midwest, the jobs have been gone now for 25 years and nothing’s replaced them. And it’s not surprising, then, they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations. (Emphasis added.)

God forbid the unemployed of an old-line industrial state should think trade has anything to do with their problems! How silly of them.

The media are saturated with these patronizing attitudes. Thus magazine articles on trade problems focus on the unemployed, implying that only life’s losers oppose free trade (and that their unemployment is probably their own fault, anyway). The careers of people whose jobs are being lost to offshoring? Mere “drudgery.” Their lives are obviously nothing worth worrying about. They’re not like us here in Pacific Heights.

Ultimately, economic logic isn’t even really the issue here, as these arguments are really aimed at people who don’t even try to understand economics, but do care immensely about their social status.  Free trade is chic, global, modern, classy.

Free traders have been playing this game for a very long time. The  protectionist author Giles Stebbins complained in 1883:

It is the fashion in many of our colleges to assume that free trade is the ideal of the noblest persons and the best minds in the Old World, while protection is a vulgar and selfish matter advocated by those of lesser note and narrower culture.

Luckily for America, in 1883 such ridiculous arguments were not taken seriously, at least on the trade issue, and the country was protectionist—even under the rule of such genuine American aristocrats as Teddy Roosevelt.

A lot of this is just a tasteful gloss on raw class bias. Despite the doc­u­mented center-left preferences of most journalists on social and cultural issues, on economic issues, including trade, they lean right. A late-1990s survey by the watchdog group Fairness and Accuracy in Reporting found, for example, that only on environment-related economic issues were they to the left of the public. But on trade, they were well to the right. (“Right” defined as per usual in contemporary American politics; 100 years ago, protectionism was the rightist position.) For example, 71 percent of editors and reporters supported Fast Track negotiating authority for the North American Free Trade Agreement, while 56 percent of the public opposed it. As 95 percent of these editors and reporters had incomes over $50,000, and more than half over $100,000, this comes as no surprise.

But there is no good reason for the rest of us to be intellectually intimidated by these people, no matter how complete their mastery of social posturing and media innuendo.  It is high time people stopped forming their opinions about free trade based on what they think people will think of them at cocktail parties.  If they will make even a moderate stab at inquiring into its underlying economics, they will find out very quickly that it is an exceedingly dubious policy.

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

Exports Won’t Solve America’s Many Trade Woes

Even if America did experience an export boom, it would do little to cut into the nation’s massive trade deficit.

Proponents of unfettered free trade have long claimed that lowering trade barriers will allow America to export more and more goods, eventually leading to trade surpluses and economic prosperity.

That, however, has not come to fruition, and it never will, trade expert Ian Fletcher writes at Huffington Post.

Even if America did experience an export boom, it would do little to cut into the nation’s massive trade deficit.

“Our deficit is now so large that our exports would have to outgrow our imports by two percent a year for over a decade just to eliminate the deficit — let alone run the surplus we need to start digging ourselves out from under our now-massive foreign debt,” Fletcher writes. “This doesn’t sound like much, but it is, in fact, a very strong export performance for a developed country, and unlikely in the present international economic environment, where every other nation is also trying to expand its exports.”

Full Story Here: Exports Won’t Solve America’s Many Trade Woes | Economy In Crisis.

The Consequences of Defeat in an Economic War

We would never apologize for protectionism militarily, yet we do for choices that would save our economy – which is being destroyed.

If the U.S. was attacked in a military war, we would do everything imaginable to defend ourselves, as losing a war could ultimately end in the enslavement of ourselves and future generations. History has shown us what happens to losers in a military conflict – the losers work for the benefit of the conquerors under their new ruler’s conditions.

When the British militarily controlled America, many patriots emerged. Most famously Patrick Henry is remembered for shouting, “Give me liberty, or give me death!”

In recent years, the U.S. has been in an economic war imposed on us by countries like China, Japan and Mexico – our constant balance of trade deficit will attest to this. Thanks to the very damaging agreements our leaders signed like the North American Free Trade Agreement (NAFTA) and our treaty with the World Trade Organization (WTO), we are unable to protect ourselves in this economic war.

Full Story Here: The Consequences of Defeat in an Economic War | Economy In Crisis.

Which Countries Hold The Most U.S. Government Debt?

New Treasury figures have revealed that some surprising countries own U.S. debt.

By the end last year, foreign governments held around $4.4 trillion in U.S debt in the form of Treasury bonds, according to government figures released last week.

Despite reducing the amount of U.S. debt it holds, China is still is high on the list, as are financial centers — like the U.K., and some Caribbean islands — where people from around the world make trades.

But there are some unexpected countries on the Treasury Department list, and the U.S. owes one major creditor 30 percent more than analysts previously estimated.

There are growing concerns that foreign countries holding U.S. debt could try to exert influence. Last month, confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong obtained by WikiLeaks, showed China’s growing influence on one of America’s creditors, with a top Chinese money manager asking U.S. Treasury Secretary Timothy Geithner for a favor.

Full Story Here: Which Countries Hold The Most U.S. Government Debt? (PHOTOS).

New World Trade Center To Be Built With German Steel

Not only will One World Trade Center be built using Chinese-made glass, but German-made steel will be used on the outer façade of the building being erected to replace those knocked down in the September 11 attack.

German steelmaker ThyssenKrupp will provide the product, which it says the company is uniquely positioned to make.

“The quality of our product helped us to win the contract for this out-of-the-ordinary project. Ultimately we regard it as an accolade to be a part of this globally known project in the heart of New York which means so much to so many Americans,” the company said in a statement.

Others, however, may not see it that way. Some expressed outrage and disillusionment when it was announced last year that a Chinese company had beat out a Pittsburgh-based company for the right to provide much of the glass for the building.

Full Story Here: New World Trade Center To Be Built With German Steel | Economy In Crisis.

Trade Solutions That Won’t Work

Ian Fletcher: :

Americans in recent decades have not, of course, been entirely unaware that America has a trade problem. This has drawn into public debate a long list of proposed solutions. Unfortunately, many will not work, some are based on analytical confusions, and a few are outright nonsense. If we are to understand the true scope of our problem and frame solutions that will work, these false hopes must be debunked forthwith.

For example, since the early 1990s it has been repeatedly suggested that the U.S. is on the verge of an export boom that will erase our trade deficit and produce a surge of high-paying jobs. Bill Clinton was fond of this idea, and Barack Obama proposed in 2010 that America double its exports in five years.

The possibility looks tantalizing when we observe that America’s exports have indeed been growing rapidly—just not as rapidly as our imports. (Between 1992 and 2008, our exports more than doubled, from $806 billion to $1,827 billion.) This seems to imply that we are not uncompetitive in world markets after all, and that if only our export growth would climb just a few points higher, the whole problem would go away.

Unfortunately, our deficit is now so large that our exports would have to outgrow our imports by two percent a year for over a decade just to eliminate the deficit—let alone run the surplus we need to start digging ourselves out from under our now-massive foreign debt. This doesn’t sound like much, but it is, in fact, a very strong export performance for a developed country, and unlikely in the present international economic environment, where every other nation is also trying to expand its exports.

Much of our recent export growth has been hollow anyway, consisting largely in raw materials and intermediate goods destined to be manufactured into articles imported back into the U.S. For example, our gross (i.e., not net of imports) exports to Mexico have been booming, to feed the maquiladora plants of American companies along the border. But this is obviously a losing race, as the value of a product’s inputs can never exceed the value of a finished product sold at a profit.

Not only is America’s trade deficit the world’s largest, but our ratio between imports and exports (1.28 to 1 in 2010) is one of the world’s most unbalanced. Given that our imports are now 17 percent of GDP and our entire manufacturing sector only 11.5 percent, we could quite literally export our entire manufacturing output and still not balance our trade. Import-driven deindustrialization has so badly warped the structure of our economy that we no longer have the productive capacity to balance our trade by exporting more goods, even if foreign nations wanted and allowed this (which they don’t, anyway). Therefore, the solution will have to come from import contraction one way or another.

Exporting services won’t balance our trade either, as our surplus in services isn’t remotely big enough, compared to our deficit in goods (in 2010, $148 billion vs. $652 billion).

Neither will agricultural exports balance our trade (a prima facie bizarre idea for a developed nation). Our 2010 surplus in agriculture was only $28 billion—about one eighteenth the size of our overall deficit. 2010 was also an exceptionally good year for agricultural exports; our average annual agricultural surplus from 2000 to 2010 was a mere $15 billion.

It is sometimes suggested that to solve our trade mess, America merely needs to regain export competitiveness through productivity growth. Comforting statistics, showing our productivity still comfortably above the nations we compete with, are often paraded in support of this idea. Unfortunately, those figures on the productivity of Chinese, Mexican, and Indian workers concern average productivity in these nations. They do not concern productivity in their export industries, the only industries which compete with our own. These nations are held to low overall productivity by the fact that hundreds of millions of their workers are still peasant farmers. But American electronics workers compete with Chinese electronics workers, not Chinese peasants.

It is narrowly true that if foreign productivity is as low as foreign wages—an easy claim to make with aggressively free-market theory and cherry-picked statistics—then low foreign wages won’t threaten American workers. But a problem emerges when low foreign wages are not balanced by low productivity. It is the combination of Third World wages with First World productivity, thanks largely to the ability of multinational corporations to spread their technology around, that has considerably weakened the traditional correlation of low wages with low productivity. For ex-ample, it takes an average of 3.3 man-hours to produce a ton of steel in the U.S. and 11.8 man-hours in China—a ratio of nearly four to one. But the wage gap between the U.S. and China is considerably more than that.

In any case, productivity is not in itself a guarantee of high wages. U.S. manufacturing productivity actually doubled in the two decades from 1987 to 2008, but inflation-adjusted manufacturing wages rose only 11 percent. From roughly 1947 to 1973, productivity and wage growth were fairly closely coupled in the U.S., but since then, American workers have been running ever faster simply to stay in place. Wage-productivity decoupling has been even starker in some foreign countries: in Mexico, for example, productivity rose 40 percent from 1980 to 1994, but following the peso devaluation of 1994, real wages were down 40 percent.

As I’ve been saying for a while now, a tariff is the real solution.

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

The Anti-NAFTA Party Launches in Michigan

The political party, the idea of mechanic James Bogely Jr., will focus on stopping the trade pact thrust upon the American people in 1994.

Fed up with America’s failed trade policies that he believes are destroying the middle class, a Michigan resident is in the process of forming an anti-NAFTA party, according to the Macomb Daily.

The political party, the idea of mechanic James Bogely Jr., will focus on stopping the trade pact thrust upon the American people in 1994.

“NAFTA is one of many vehicles used, knowingly and unknowingly, to damage the middle class in Michigan,” he told the Macomb Daily.

The group will hold its first meeting Sunday, Feb. 27 at 4 p.m. in the basement of Tracy’s Corner Café in Warren, Mich.

He also plans to launch a website, antinaftaparty.org, on the same day as the inaugural meeting.

Full Story Here: The Anti-NAFTA Party Launches in Michigan | Economy In Crisis.

Yes We Can! (Fix Our Trade Mess)

Ian Fletcher: :

The fashionable despair of America fixing its trade mess is a mistake.

For example, the standard objection to taking a stick to America’s trade imbalance by levying a tariff is that our trading partners would just shrug it off by increasing subsidies to their exporters. (They do something similar to this already: China, for example, is constantly adjusting its export subsidies to protect its positions in foreign markets.) This would, supposedly, force us into an endless game of matching these moves on a country-by-country, industry-by-industry, and even product-by-product basis.

However, retaliatory subsidies by our trading partners would be restrained by the fact that they would be very expensive in the face of an American tariff. Right now, these subsidies are relatively affordable only because they don’t have to climb an American tariff wall. But if they did, their cost would increase dramatically. Escalation is a game two can play, and no, this wouldn’t lead to a trade war.

Currency manipulation is probably the only subsidy that is affordable over prolonged periods of time (and even then problematic in the end), as it involves buying foreign assets and debt, thus accumulating wealth rather than just expenditures. But other subsidies amount to a giveaway from the exporting to the importing nation.

While this doesn’t prevent them absolutely, it does tend to set a limit. This is all we need, especially as we have no hope of eliminating or countervailing all foreign subsidies no matter what we do, tariff or no tariff.

The same goes for the objection that our trading partners would just devalue their currencies. We can end foreign currency manipulation at any time simply by restricting or taxing foreigners’ ability to lend us debt and buy our assets. We would need to raise our own savings rate if we did this (or face rising interest rates), but we need to do this anyway.

So it’s an utter mistake to think America is this big helpless giant with respect to its trade problems. The solutions are out there if we would but avail ourselves of them.

 

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

WTO Destroying American Sovereignty

The bylaws of the WTO supersede our own Constitution, which is a contradiction to the stated premise of the Constitution to be the “supreme law of the land.”

The World Trade Organization (WTO) came into existence in 1995 to “deal with the global rules of trade between nations.” The WTO is supposed to provide a forum for governments to negotiate trade agreements and settle trade disputes with one another.

The bylaws of the WTO supersede our own Constitution, which is a contradiction to the stated premise of the Constitution to be the “supreme law of the land.” Member nations must adhere to WTO policies without any legislative process in their own countries. Local policies aimed at rewarding companies who hire local residents, use domestic materials, or adopt environmentally sound practices are essentially illegal under the WTO.

Full Story Here: WTO Destroying American Sovereignty | Economy In Crisis.

Outsourcing Is the Problem, Protectionism Is the Solution

Solving America’s economic problems lies not in finding the proper level of government spending, which in a best case scenario is only bailing water out of a boat with a hole in the bottom, but plugging the hole and ending trade policy that encourages businesses to leave this country.

‘Free’ trade policy has been the bane of this country for decades now. Thanks to government policy, it is no longer profitable for businesses to employ Americans, so they do not. Removing tariffs while letting other nations subsidize or otherwise undercut domestic products has created a massive trade deficit, and left us with fewer people employed today than in the year 2000.

Long-term economic strength depends on a resurgence of our manufacturing base. Based on figures from the Bureau of Labor Statistics, over three million manufacturing jobs have been lost over the last ten years. The loss of manufacturing jobs started in the late 1970s, continued in the 1980s, accelerated in the 1990s after the signing of NAFTA, and accelerated further when China was given most favored nation trading status in 2003. This has not only increased unemployment in the U.S., but has transformed the country into a service economy that offers relatively low-paying jobs.

Full Story Here: Outsourcing Is the Problem, Protectionism Is the Solution | Economy In Crisis.

Imperial Sunset: Wave of Awakening Hits American Satrapy

Muammar Gaddafi is not the only Arab tyrant using deadly violence against his people when they speak out against the destitution, repression and corruption that plague their country. In Iraq, the sectarian thugs put into power by American invaders are gunning down citizens in the streets.

The BBC reports that at least five people have shot and killed by security forces so far today, as the corrupt elite tries to keep the Arab Awakening from spilling into the war-ravaged land. But protests against the atrocious living conditions inflicted on most Iraqis by the client lords of the American occupation have broken out across the country.

Maliki, just like Gaddafi, has ordered troops into the streets to shut down the nation’s capital city and stifle popular discontent against his rule. And just like Gaddafi, he has blamed “al Qaeda” for organizing protests against his benevolent rule — without offering any proof at all for his wild assertions. He has, so far, refrained from actually bombing the populace like his Libyan counterpart, but the situation presents a curious contrast in reactions from the poobahs on the Potomac.

Full Story Here: Imperial Sunset: Wave of Awakening Hits American Satrapy.

Why Have Nations at All? The Case for Economic Borders

Ian Fletcher

Why have nations at all, economically speaking?

This question is provoked by the fact that every few months, without fail, somebody writes to me and asks why, if the protectionism I advocate between the U.S. and the rest of the world is rational, why isn’t it rational to have tariffs between the various states of the U.S.? And since it clearly doesn’t make any sense to have tariffs on trade between, say, California and Oregon, it follows that nations shouldn’t practice economic protectionism either.

Sounds good. In fact, some people proffer this argument as if it, on its own, settled all questions in the complex field of trade economics.

The first thing to understand is that valuing nations as economic units doesn’t entail the idea that every nation is necessarily an appropriate economic unit. We are lucky enough, here in the United States, to live in one that is, but many are not. This is why many of the great protectionist thinkers of the past were also advocates of policies that created larger economic units than were then existing. For example, the great German protectionist economist Friedrich List, whose ideas still influence policy from Berlin to Beijing today, was also an advocate of the German Zollverein or customs union. This helped solder the German principalities of his day (Prussia, etc.) into a single German economy. And Alexander Hamilton, the intellectual father of American capitalism (and protectionism) was also a strong advocate of national union upheld by a strong (if small) central government.

So far, so good. But sometimes, the above argument is presented more radically. People argue that it’s irrational (or even evil) to care about national economic well-being at all, because globalization has rendered nations economically irrelevant (or outdated constructs that do nothing useful and just start wars).

The odd thing about this idea is that it tends to come from two otherwise-opposite ideological quarters: from the libertarian far right, for whom individuals are the only thing that matters, and from the universalist far left, for whom Humanity as a whole is the only thing that matters. For purely ideological reasons, neither of these groups have much use for nations, so they assume that the modern economy hasn’t, either.

Therefore, it’s well-worth reviewing why it’s a normal and reasonable thing for nations to exist as economic units, and for us to care about their well-being. We should neither expect nor want them to go away. And this is a matter of economics, not politics–let alone nationalist ideology, though you can believe in that (or not) if you want to.

The recent debt crisis in Europe illuminated in stark fashion some of the key facts that make national economies still relevant and economic borders still valuable.

In case the reader isn’t familiar with the story, what basically happened was that, when the euro currency was created in 1999, this gave all the governments of Europe roughly the same ability to borrow money. Granted, there were still some minor differences, but nothing like the differences (measured by the different interest rates on the bonds issued by different nations) that prevailed before. Previously, when the government of Greece, for example, wanted to borrow money, it either had to borrow in drachmas (and was thus limited by its own national savings rate) or borrow in a foreign currency like dollars or deutschemarks and take the risk that exchange rates would move against it. So borrowing was constrained (imperfectly) along the lines of ability to repay.

Then came the euro, which erased all those squiggly lines that used to divide up the European currency map and gave American tourists such a fascinating variety of pictures of dead politicians to bring home at the end of their vacations. And what happened? The result was a borrowing binge in the less-creditworthy nations, which had suddenly been granted access to money on (close to) the same terms as financially-prudent export powerhouses like Germany.

Uh oh.

In some countries, like Greece, this resulted in excessive government borrowing. In others, like Spain, it resulted in a real-estate bubble as cheap mortgage credit (whose price was calibrated off of the rate the government can borrow at) flooded the country.

Then, of course, there was a bust in all these countries. Like our own 2008 financial crisis, it generated a lot of secondary turbulence (and considerably more street riots) and exposed a lot of the previous decade’s apparent prosperity for a sham built on a house of cards called debt.

The lesson? Europe would probably have been better off keeping a lot of its old national currencies. These don’t stop international flows of money, of course, but they do impose a cost, in the form of exchange rates, when you move wealth from one country to another. They are a meaningful but not prohibitive barrier.

The lesson here is that treating all national economies like they are the same–by dropping the currency barrier–doesn’t work when they are not the same. An absence of economic barriers presumes economic similarity on both sides of the barrier. The barrier doesn’t have to (indeed shouldn’t) be absolute–you can exchange one currency for another at a bank–but it is still a meaningful constraint. It makes things you shouldn’t do expensive.

The currencies of different nations should have different values, to reflect the fact that the economies whose output makes these currencies worth something are meaningfully different. Different economies have different productivity levels, different levels of accumulated wealth, different propensities to save rather than consume, different labor laws and thus personal behavior, and so on. Treating these different national economies like they are the same just invites economically irrational behavior–like borrowing money you can’t afford to repay.

Removing the currency barrier between disparate national economies also deprives them of the ability to fix certain problems by adjusting their currency value so that it accurately reflects their economic condition. Having different currencies functions something like a universal joint in engineering: it transmits torque, but it’s also flexible. As economist Paul Krugman recently explained it,

Imagine that you’re a country that, like Spain today, recently saw wages and prices driven up by a housing boom, which then went bust. Now you need to get those costs back down. But getting wages and prices to fall is tough: nobody wants to be the first to take a pay cut, especially without some assurance that prices will come down, too. Two years of intense suffering have brought Irish wages down to some extent, although Spain and Greece have barely begun the process. It’s a nasty affair, and as we’ll see later, cutting wages when you’re awash in debt creates new problems. If you still have your own currency, however, you wouldn’t have to go through the protracted pain of cutting wages: you could just devalue your currency — reduce its value in terms of other currencies — and you would effect a de facto wage cut… In the current crisis, it took Ireland two years of severe unemployment to achieve about a 5 percent reduction in average wages. But in 1993 a devaluation of the Irish punt brought an instant 10 percent reduction in Irish wages measured in German currency.

But you need the currency barrier between nations for it all to work. At bottom, this means accepting the fact that national economies are different, and function best when this differentness is recognized, not denied.

The creation of the euro was predicated on the idea that having a common currency would of itself cause these nations’ economies to become similar. On paper, this is, of course, perfectly logical, in the sense that if the European economies had converged to similarity, these problems would not have occurred. But they didn’t. National economies are not paper abstractions that can be manipulated at will. The fact that Germany, for example, has the economy it has, and Greece the economy it has, is rooted in decades (if not centuries) of economic history, different political systems, different cultures, and other things that just don’t go away at the stroke of a pen. Even if you leave out all the political and cultural factors, national economies are still very different simply qua economies: they have different skills, tend to specialize and excel in different industries, have billions of dollars committed to different industries, have their particular drawbacks and flaws, etc. For example, as Michael Porter of Harvard Business School explains it,

Competitive advantage is created and sustained through a highly localized process. Differences in national economic structures, values, cultures, institutions, and histories contribute profoundly to competitive success. The role of the home nation seems to be as strong as or stronger than ever. While globalization of competition might appear to make the nation less important, instead it seems to make it more so.

So contrary to the endlessly-repeated myth of a world converging on one big economic sameness, economic diversity (a concept that is poorly understood compared to, say, ethnic or cultural diversity) is a fact of life — and almost certain to remain so. Economic policies that assume a homogeneous world, whether they take the shape of a pan-European currency or global free trade, are an attempt to defy this basic fact. And the cost of failure runs into the trillions.

What’s the connection to trade? It is that free trade is like having a shared currency: it makes it impossible to draw the distinctions that sometimes need to be drawn between different economies. This isn’t a matter of cutting off all trade, any more than having separate currencies means you can’t exchange one currency for another. But it does mean there should be trade barriers that reflect the real (and quite legitimate) differences between national economies.

Let’s start with an example that’s easy to understand, one quite familiar from complaints by the unions and the environmental movement: what if environmental or worker-safety standards are higher in one nation than in another? Then having free trade is obviously an open temptation to just move production from the former to the latter. It may not literally be a race to the bottom, i.e. fast and reaching the absolute worst standard, but it sure produces pressure in that direction.

And this is just the tip of the iceberg when it comes to economic differences. What if nations differ not in their environmental standards, but in, say, their propensity to save vs. consume their income? For example, the fact that the U.S. currently practices free trade means that, because we have a high preference for immediate consumption as opposed to savings, we are gradually selling off our country and going into debt, thanks to the trade deficit. This is the well-nigh inevitable result of having free trade between a country with a very low savings rate and one with a very high one (like China). If we were just trading with ourselves, we’d be going into debt to ourselves, so our overall net worth wouldn’t change. But because foreign debt is involved, our national net worth can be reduced this way.

It’s important to understand that the above problems are not defects in the functioning of the free market. They represent the free market doing exactly what it’s supposed to do. But this doesn’t mean these problems are not problems.

What are the implications?

In the first case above (the environment), the implication is to tax imports from nations with lower environmental standards.

In the second case (consumption vs. saving), the implication is to tax U.S. imports sufficiently to bring our trade into balance.

In technical economic terms, the way to say all this is that the whole world is not an optimal free-trade area. Optimal free-trade areas haven’t had a lot of attention lately from economists (most of whom believe in free trade simpliciter as the best option), but optimal currency areas are a reasonably well-developed concept, the key thinker here being Robert Mundell of Columbia University. What economists need to take more seriously is the similarities in the underlying reasoning between the two.

The ideal free-trade area may be quite large. And the ideal tariff between many nations may not be that high. But the ideal free-trade area isn’t the entire world, and the ideal tariff isn’t always zero.

There are plenty of other reasons to maintain national economic borders. One of them, which is increasing in importance in our increasingly high-tech world, is that there is an unavoidable publicly-financed component to innovation. Despite the Silicon Valley myth of rugged individualism (which I hear all the time here in San Francisco), the reality is that government inputs to major high-tech industries from semiconductors to aircraft have been huge. And it’s hard to justify spending money on supporting, say, basic scientific research if that research is just going to be commercialized abroad. Worse, without capturing its value here, we won’t have the tax base to pay for the next round of research.

All of the above is very complex and, of course, endlessly debatable. But what drives me up the wall is when people try to smuggle “one world” economic assumptions into the debate while pretending they’re doing nothing at all. Economics should never be used to “prove” the inappropriateness of caring about national economic well-being–something it does not do. People who reject the national economy (or the national economic interest) should do so openly, not hide behind theoretical constructs that do this on the sly. (By the way, these theoretical constructs are the same “efficient market” thinking that conned us into the policies that led to the 2008 financial crisis, if that helps the reader evaluate them.)

Globally, for good or ill, the nation-state is still where the buck of political legitimacy stops. Higher and lower political entities, from Kansas to the United Nations, enjoy legitimacy only because nation-states have given it to them. So even if other instruments for controlling the world economy can be developed over time, the nation-state will be the bottleneck for developing them. A blanket rejection of even the mildest economic nationalism simply hands a blank check to multinational corporations, foreign powers, and (distorted) market forces to do as they please. It doesn’t result in the world all holding hands and creating some free-market utopia.

Economist Herman Daly of the University of Maryland, best known for his work on ecological economics, once pointed out that with regard to all these problems,

Free trade makes it very hard to deal with the root causes at a national level, which is the only level at which effective social controls over the economy exist.

Because we have a national government, because Americans care about what happens to their economy, and because it is the national debate on the question that will bring changes or fail to, our trade problems will be fixed in Washington–or not at all.

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

America’s Trade Policy Is Insanity

Insanity is said to be defined as repeating the same actions and expecting different results. Now that NAFTA is a proven failure, the decision-making by the Obama administration to push the South Korean Free Trade Agreement can only be defined as insane.

This trade deal is rife with provisions that will harm the American economy. Non-tariff barriers, such as the value-added tax and the promise of a government audit for any Korean citizen who buys an American vehicle are not addressed by this agreement. This agreement will do little to help America sell more cars to Korea, which currently sells us 615,000 each year compared to the paltry 7,000 we export to that nation.

Ian Fletcher, author of the book ‘Free Trade Doesn’t Work: What Should Replace It and Why’, wrote in a recent article, “The Obama administration doesn’t seem to grasp this. Apparently, it’s just fine for America to sell Korea beef and they can sell us cars. Like a well-behaved colony, it’s our job to be a captive market and supplier of raw materials.”

Full Story Here: America’s Trade Policy Is Insanity | Economy In Crisis.

The Obama Administration’s Clueless Trade Diplomacy

Ian Fletcher

Obama clearly doesn’t get it yet on trade agreements.

Despite the fact that every major American trade agreement since NAFTA has worsened America’s trade balance, he actually seems to think he can improve America’s export performance by going for more, starting with a free-trade agreement with South Korea.

So it’s worth taking a hard look at why America’s trade diplomacy is so chronically dysfunctional. I mean, if the trade agreements our government signs are so disadvantageous to the U.S., why does it sign them in the first place?

The obvious answer is, of course, special interest pressures. Realpolitik in the name of the national interest is a joke; what we have is multinational corporations headquartered in the U.S. passing themselves off as American and calling the shots.

Even worse, many of the largest American companies are now so dependent on their overseas operations, and thus so vulnerable to pressures by foreign governments, that they have become outright Trojan horses with respect to American trade policy. As former congressman Duncan Hunter (R-CA), for years one of the outstanding critics of trade giveaways in Congress, has put it,

For practical purposes, many of the multinational corporations have become Chinese corporations.

At some point, the nationalists and the capitalists in the Republican party will necessarily come to blows over this. Tea Party, are you listening?

The more profound answer, however, is that our government signs these treaties simply because it does not take their dangers seriously. Why? Because of its underlying economic assumptions about the universal benevolence of free trade. This is the deeper kind of special-interest corruption: when special interests are so entrenched in a society that the society has lost the power to distinguish their interests from those of society at large. The universities where America’s diplomats, economists, politicians, and journalists are trained are, of course, funded (and their boards of trustees filled with) the same corporate interests which also lobby directly for “free” trade. So what do you expect?

This corruption is often quite subtle, as befits a rich developed nation. It is not Soviet-style indoctrination. For example, the naïve assumptions about economics that our trade diplomats have rarely consist in outright intellectual fanaticism about the economics of free trade. That is easy enough to find in academia and the strange wonderland of the editorial pages, but quite rare in our trade negotiators and diplomatic service generally. Instead, there is usually a hazy, almost undergraduate, sense that “economics says free trade is best” which renders our trade negotiators helpless in the face of corporate pressures for more trade agreements.

This helplessness is worsened by inexperience and a lack of institutional memory about past negotiations. And when our trade negotiators work to open foreign markets, they usually do so willy-nilly, with no sense that some industries are more strategic than others. This assumption is profoundly wrong, as it ultimately comes down to the idea that all industries are alike in their value for our economic future. This was epitomized by an infamous (and subsequently denied) comment by Michael J. Boskin, George H.W. Bush’s chairman of the Council of Economic Advisers:

It doesn’t matter whether America exports computer chips, potato chips, or poker chips! They’re all just chips!

This is, of course, nonsense, as has been pointed out even by mainstream establishmentarian economists like Laura D’Andrea Tyson, chairwoman of Bill Clinton’s Council of Economic Advisors, who observed that:

The composition of our production and trade does influence our economic well-being. Technology-intensive industries, in particular, make special contributions to the long-term health of the American economy. A dollar’s worth of shoes may have the same effect on the trade balance as a dollar’s worth of computers. But…the two do not have the same effect on employment, wages, labor skills, productivity, and research–all major determinants of our economic health.

The Obama administration doesn’t seem to grasp this. Apparently, it’s just fine for America to sell Korea beef and they can sell us cars. Like a well-behaved colony, it’s our job to be a captive market and supplier of raw materials.

More generally in our trade diplomacy, superficial attempts at hard bargaining occasionally reflect some well-organized industry that has managed to flag the attention of Congress, but are mainly just posturing. America’s trade bureaucrats have little sense of loyalty to American industry or understanding that their efforts must ultimately be judged by quantifiable success in America’s trade balances.

Supremely confident in its own brilliant trade performance, the U.S. government spends billions trying to help other nations improve theirs. In 2008, the United States spent $2.3 billion on its various Aid for Trade programs, and it remains official U.S. policy to be “the largest single-country provider of trade-related assistance, including development of trade-related physical infrastructure.” The 9/11 attacks intensified this effort; apparently what Osama really wants is to export.

American efforts to negotiate reasonable trade agreements are often handicapped by the fact that some American politicians have an unrealistic idea of international law. International law is not like ordinary civil or criminal law because there exists no sovereign to compel the obedience of nations. Instead, it is analogous to the rules of a game of stickball being played by children on a vacant lot: its rules only mean anything insofar as they are enforced by the players upon themselves. Obviously, as in the case of stickball, the players will enforce certain rules, because that is the only way they can have a game. So international law is not a completely vacuous concept, as some cynics suggest. But the players also won’t enforce any rule grossly to the disadvantage of any particularly powerful player.

This means that the Anglo-American legal framework Americans tend to take for granted simply does not exist internationally, and therefore that a trading model based upon neutral and consistent enforcement of legal obligations is not feasible. There is no way to take power politics out of trade, which means that there is no way to leave everything in the hands of a neutral and rational free market once we but construct the right international legal machinery–otherwise known as the WTO.

On some level, I have to assume that many of the big power players are well aware of this. But since this puppet show aggrandizes both the relentlessly power-accreting bureaucrats of the WTO and the multinationals, neither has any reason to let the cat out of the bag in public. So the game goes on, with a quasi-fictional legal order implementing fantasy economics.

And at the middle of it all, the president, who, despite being a serious scholar of such subjects as, say, constitutional law, appears to have no economic ideas of his own, seems blissfully unaware of all this. He just does what his Clinton-retread advisors tell him to do.

How appropriate that in the America of 2011, even our economic policy has been outsourced.

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.

Obama Administration Entered Direct, Secret Talks With Taliban Leaders

: The New Yorker:

On August 22, 1998, Mullah Omar, the emir of Taliban-ruled Afghanistan, made a cold call to the State Department. The United States had just lobbed cruise missiles at Al Qaeda camps in his nation. Omar got a mid-level diplomat on the line and spoke calmly. He suggested that Congress force President Bill Clinton to resign. He said that American military strikes “would be counter-productive,” and would “spark more, not less, terrorist attacks,” according to a declassified record of the call. “Omar emphasized that this was his best advice,” the record adds.

That was the first and last time that Omar spoke to an American government official, as far as is known. Before September 11th, some of his deputies had occasionally spoken with U.S. diplomats, but afterward the United States rejected direct talks with Taliban leaders, on the ground that they were as much to blame for terrorism as Al Qaeda was. Last year, however, as the U.S.-led

Full Story Here: The Obama Administration and the Taliban : The New Yorker.

Free Trade Erodes Civil Society

Free trade not only results in the loss of jobs, the crumbling of the industrial base and an explosion in the trade deficit, but it also undermines civil society. Civil society takes a backseat to corporate profits, which is not the blueprint on which America became the world’s foremost power.

Free trade not only results in the loss of jobs, the crumbling of the industrial base and an explosion in the trade deficit, but it also undermines civil society, according to Stan Sorscher, a labor representative for the Society for Professional Engineering Employees in Aerospace.

Writing in the Huffington Post, Sorscher says that America’s failed trade policies put the interests of multinational corporations ahead of the interests of society.

“Civil society worries about environmental rights, labor and human rights, public health and long-term prosperity,” he writes. “Free trade agreements sweep those interests aside, and create a global economy where investors have no obligation to any country or any public interest.”

Instead, the only interests that matter when it comes to free trade are those of big business. Oftentimes, their only concern is increased profits, no matter the societal costs.

Full Story Here: Free Trade Erodes Civil Society | Economy In Crisis.

Interactive Map: Foreign Aid Analysis Made Easy

U.S. foreign aid is in the headlines now as almost never before, with massive political upheaval in Egypt, calls by House Republicans to dramatically slash funding for development programs, and a major overhaul of our aid programs announced by the Obama administration last year. The new interactive tool below is designed to accompany our latest report on foreign aid, “U.S. Foreign Aid Reform Meets the Tea Party,” by John Norris, the Executive Director of the Sustainable Security Program here at CAP. It lets you better explore where U.S. foreign aid dollars are spent and how these countries rank in terms of basic indicators such as political rights and civil liberties, corruption, and overall development.

Both Congress and the Obama administration should support a more selective approach to delivering aid that produces lasting economic growth and is designed with the direct input of the people of the developing world themselves. Foreign aid can work wonders in those countries willing to make hard choices, combat corruption, and support reform—and is often starkly ineffective when those conditions do not exist.

Full Story Here: Interactive Map: Foreign Aid Analysis Made Easy.

Free Trade Isn’t the Solution, It’s the Problem

Detroit is evidence of the failure of our trade policies, crafted by armchair opinion makers who don’t have to worry about losing their jobs as ‘free trade’ ruins our industries and economy.

Detroit is evidence of the failure of our trade policies, crafted by armchair opinion makers who don’t have to worry about losing their jobs as ‘free trade’ ruins our industries and economy.

The relative success of the Big Three in Detroit has been partially due to embracing instead of fighting the race to the bottom. Ford recently opened production facilities in Mexico to lower labor costs. General Motors produced and sold more cars in China last year than in America and 25 percent of Chrysler is owned by the Italian company Fiat.

While executives in Detroit prosper, former workers are forced into unemployment lines, and in extreme cases, homelessness. There has been a total disconnect between gains for the elite and middle class, as multinational corporations can now play countries against each other, in a battle where one side gets no jobs and the other gets bad jobs. The skyrocketing stock market (which has nearly doubled in value since 2008) compared to the stagnant unemployment rate is the clearest example.

Full Story Here: Free Trade Isn’t the Solution, It’s the Problem | Economy In Crisis.

America Full Speed Ahead Inexorably Headed into Colonial Status

Why are we killing ourselves? China, Japan and Germany sell very few companies to their competitor nations. When they do sell their businesses, they sell to their own countrymen.

China now has $2.6 trillion worth of convertible currency reserves, it accumulated this wealth through its balance of trade surplus with the United states – Japan has $1 trillion.

These convertible currency reserves are economic bullets poised to strike – the reserves are used to buy out our companies on our open stock market.

We have sold 16,613 of our country’s best companies to our competitors – foreign countries – in the past 30 years. These companies once produced wealth for this nation, now they generate profits for other nations.

Today, we can no longer produce enough for ourselves. We are living on ever increasing imports and debt.

Full Story Here: America Full Speed Ahead Inexorably Headed into Colonial Status | Economy In Crisis.

Trade Deficit Jumps 33 Percent in 2010

Overall, America’s trade deficit grew by 33 percent in 2010, to $497.8 billion, according to the data.

The U.S. trade deficit with the rest of the world had its largest annual increase percentage-wise in the past decade, according to information released Friday by the U.S. Commerce Department.

Overall, America’s trade deficit grew by 33 percent in 2010, to $497.8 billion, according to the data.

On the year, imports grew at a rate of 19.7 percent, to $2.33 trillion. Exports grew as well, but not at the same pace.

Exports jumped to $1.83 trillion on the year, an increase of 16.6 percent. That is a good start toward President Barack Obama’s goal of doubling exports by 2015. However, it is all for naught if the pass of imports is growing faster.

Full Story Here: Trade Deficit Jumps 33 Percent in 2010 | Economy In Crisis.

U.S. files two new trade cases against China with WTO

The Obama administration said Friday that it had launched two new appeals against China to the World Trade Organization as new data showed the trade gap between the two countries rose to a record level last year.

The new appeals to the WTO are part of an evolving administration strategy to press China for better market access while playing down the high-profile dispute over how Chinese authorities manage the value of the country’s currency.

The latest cases attack import duties imposed on certain types of U.S. steel and challenge the virtual monopoly over electronic payment processing granted to a state-owned Chinese company. They come on top of other trade actions filed by the administration, including the tariffs on imported Chinese tires and a high-profile challenge of the subsidies and other support that the country provides to its alternative-energy industries.

Full Story Here: U.S. files two new trade cases against China with WTO.

Wallflowers at the Revolution

Frank Rich: :

A month ago most Americans could not have picked Hosni Mubarak out of a police lineup. American foreign policy, even in Afghanistan, was all but invisible throughout the 2010 election season. Foreign aid is the only federal budget line that a clear-cut majority of Americans says should be cut. And so now — as the world’s most unstable neighborhood explodes before our eyes — does anyone seriously believe that most Americans are up to speed? Our government may be scrambling, but that’s nothing compared to its constituents. After a near-decade of fighting wars in the Arab world, we can still barely distinguish Sunni from Shia.

The live feed from Egypt is riveting. We can’t get enough of revolution video — even if, some nights, Middle West blizzards take precedence over Middle East battles on the networks’ evening news. But more often than not we have little or no context for what we’re watching. That’s the legacy of years of self-censored, superficial, provincial and at times Islamophobic coverage of the Arab world in a large swath of American news media. Even now we’re more likely to hear speculation about how many cents per gallon the day’s events might cost at the pump than to get an intimate look at the demonstrators’ lives.

Perhaps the most revealing window into America’s media-fed isolation from this crisis — small an example as it may seem — is the default assumption that the Egyptian uprising, like every other paroxysm in the region since the Green Revolution in Iran 18 months ago, must be powered by the twin American-born phenomena of Twitter and Facebook. Television news — at once threatened by the power of the Internet and fearful of appearing unhip — can’t get enough of this cliché.

Full Story Here: Wallflowers at the Revolution – NYTimes.com.

Illegal Immigration and NAFTA

An influx of highly subsidized corn flooding the Mexican market has displaced millions of rural farmers, according to McClatchy Newspapers. Prior to the implementation of NAFTA, Mexican officials claimed that factory jobs would fill the void left by disappearing work on family farms.

One of the largely overlooked aspects of the North American Free Trade Agreement is the fact that the failed trade pact has been the catalyst for the massive increase in illegal immigration over the past two decades or so.

An influx of highly subsidized corn flooding the Mexican market has displaced millions of rural farmers, according to McClatchy Newspapers. Prior to the implementation of NAFTA, Mexican officials claimed that factory jobs would fill the void left by disappearing work on family farms.

Mexican officials had promised that NAFTA would result in the “export of goods, not people.” That, however, has turned out to be far from reality.

Full Story Here: Illegal Immigration and NAFTA | Economy In Crisis.

US-Russia nuclear arms treaty takes effect

A U.S.-Russia nuclear arms treaty that limits the number of atomic warheads the former Cold War foes can possess and allows them to inspect each other’s arsenals — securing a key foreign policy goal of President Barack Obama — went into effect Saturday.

The New START treaty was approved by the U.S. Senate in December after Obama pressed strongly for its passage. Russia ratified the deal last month.

The 10-year treaty, which can be extended by another five years, went into effect when U.S. Secretary of State Hillary Rodham Clinton exchanged the ratification papers with Russian Foreign Minister Sergey Lavrov on the sidelines of an international security conference in Munich.

Full Story Here: US-Russia nuclear arms treaty takes effect – Yahoo! News.

US plan: Replace Mubarak with torture-linked ‘CIA point man’

A US plan to see Egyptian President Hosni Mubarak leave office immediately is reportedly in the works and would see a transitional government formed by Mubarak’s vice-president, a former head of Egypt’s spy agency and an alleged “CIA point man” who facilitated the “extraordinary rendition” of terrorism suspects.

US officials are discussing a plan with Egyptian officials that would see Mubarak quit immediately and hand over power to a transitional government run by Vice President Omar Suleiman, the New York Times reported Thursday.

Even though Mr. Mubarak has balked, so far, at leaving now, officials from both governments are continuing talks about a plan in which, Mr. Suleiman, backed by Sami Enan, chief of the Egyptian armed forces, and Field Marshal Mohamed Tantawi, the Defense Minister, would immediately begin a process of constitutional reform.

Full Story Here: US plan: Replace Mubarak with torture-linked ‘CIA point man’ | Raw Story.

Egypt’s Democratic Uprising Exposes the U.S. Corporate Welfare Scheme of Military ‘Foreign Aid’

Revolution threatens Egypt’s authoritarian regime, U.S. Empire…

“The problems the protesters are trying to address are extremely deep-seated…Egypt and other countries of the region have just been through a neoliberal period which have led to…high concentrations of extreme wealth and privilege, tremendous impoverishment and dismay for most of the population.” Noam Chomsky, 2/2/11

As more than a million protesters are said to have “flooded into central Cairo” this week, demanding an end to Hosni Mubarak’s authoritarian rule, William Hartung, the director of the Arms and Security Initiative at the New America Foundation and author of Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex, explained a little understood fact about the “tens of billions of dollars” in US military aid used to prop up the authoritarian Mubarak regime.

Full Story Here: The BRAD BLOG : Egypt’s Democratic Uprising Exposes the U.S. Corporate Welfare Scheme of Military ‘Foreign Aid’.

“Free Trade Doesn’t Work: What Should Replace It and Why”

Book Review by Thom Hartmann:

Some book reviews write themselves, because the book is so clear and articulate and easily read, and the information in it so straightforward that all the reviewer needs to do is lay it out.

Ian Fletcher writes: “Over the last 20 years, Americans have bought over $6 trillion more from the world than we have sold back to it. That’s over $20,000 per American. Ironically, if the US were a developing country, our deficits would reach the 5% level that the international monetary fund takes as a benchmark of financial crisis.”

This is not the budget deficit that everybody is so hysterical about in the press, and which would go to zero over the next six years if the Obama administration simply let the Bush tax cuts expire in their entirety. Instead, Fletcher is talking about the trade deficit, the difference between what we buy from the world and what we sell to the world.

Full Story Here: “Free Trade Doesn’t Work: What Should Replace It and Why”.

Newly Elected Sen. Portman Pushing Disastrous Trade Agreement

Citizens should be asking ourselves who leaders like Rob Portman trying to represent? It is clearly NOT the American people.

In a speech to a business group Thursday in Toledo, OH, new U.S. Sen. Rob Portman (R-OH), called for support on the misguided South Korean Free Trade Bill (KORUS) that could be voted on in Congress as soon as March.

Clearly, the representatives that favor this bill are either extremely ignorant of its potential for disaster or are in the pockets of foreign lobbyists, and do not have America’s best interests at heart, as it poses several immense problems in its current form.

“The Korean deal is based on the same trade model as NAFTA, which has led to significant job losses and reductions in our manufacturing sector in Maine. These were the actual results of NAFTA, even though we were told at the time that it would generate thousands of new jobs,” Rep. Mike Michaud (D-ME) said in a statement. As NAFTA has done in Maine and the rest of the country, KORUS will do yet again.

Full Story Here: Newly Elected Sen. Portman Pushing Disastrous Trade Agreement | Economy In Crisis.

Globalization Increasingly Viewed As a Bad Thing

In the latest polling just 36 percent of Americans view globalization as a good thing. That is a dramatic turnaround from 2001, when six in 10 Americans viewed globalization positively.

The tide continues to turn on the public’s view of free trade and how it affects the American economy, according to a new Washington Post poll.

“A growing number of Americans consider the accelerating trend toward globalization a bad thing for the United States. At the same time, a majority now see being the world’s No. 1 economic power as an important national goal,” according to the paper.

In the latest polling just 36 percent of Americans view globalization as a good thing. That is a dramatic turnaround from 2001, when six in 10 Americans viewed globalization positively.

Full Story Here: Globalization Increasingly Viewed As a Bad Thing | Economy In Crisis.

OPS: Even the Sheep are waking up

Investor Rights Yet Another Reason to Scrap Korea FTA

Not only will the proposed South Korean Free Trade Agreement almost certainly decimate the automotive, textile, electronic and iron industry in America, it will also provide foreign investors the right to sue the U.S. government over laws and regulations in the public interest that happen to impede on their profits.

Foreign investor rights are a controversial but largely overlooked portion of America’s failing trade policy. The standard was set with the North American Free Trade Agreement, and nearly every trade pact the U.S. has entered since then contains some from of investors rights.

Under the provision, foreign investors can sue governments – including those on the state, local and federal level – if they believe that a labor, environmental or any other law is getting in the way of their profit margin or value of their investment.

Full Story Here: Investor Rights Yet Another Reason to Scrap Korea FTA | Economy In Crisis.

Message from WTO to U.S.: Ignore the Trade Deficit

Unable to quell fear and anger in some corners about America’s persistently high trade imbalances, the head of the World Trade Organization is now claiming that the way trade deficits are measured is a flawed process.

“The statistical bias created by attributing commercial value to the last country of origin perverts the true economic dimension of the bilateral trade imbalances,” World Trade Organization Director-General Pascal Lamy writes in a Financial Times Op-Ed. “This affects the political debate, and leads to misguided perceptions.”

Because global supply chains allow inputs to come from all over the world, very few if any products on store shelves can be easily classified as “Made in America” or “Made in China.” Instead, today’s consumer goods should probably read “Made Globally,” he claims.

Full Story Here: Message from WTO to U.S.: Ignore the Trade Deficit | Economy In Crisis.

The WTO Vetoes America’s Constitution

The WTO’s laws supersede those of our own constitution. Our laws, regulations and administrative procedures must now conform to the WTO treaty – making them the highest law and the highest court ruling over the United States, with no input from the American people

The World Trade Organization is run by powerful multinational corporations. It is a self-serving and undemocratic organization that operates outside of our control. The WTO’s laws supersede those of our own constitution. The U.S. Constitution states that all treaties made under the authority of the United States become supreme law of the land. When our government stymied under pressure from foreign-represented lobbyists and signed the WTO treaty the government effectively sold away our sovereignty.

Our laws, regulations and administrative procedures must now conform to the WTO treaty – making them the highest law and the highest court ruling over the United States, with no input from the American people.

One of the biggest disasters that has come about as a direct result of the WTO was China’s entrance in 2001. Since entering, trade with China has resulted in the loss of over 3.1 million jobs, according to the Economic Policy Institute. Those fortunate enough to retain their jobs witnessed their annual earnings decrease by roughly $1,400. American workers are put in direct competition with one another as more and more employers look to offshore production to nations with lower wage rates.

Full Story Here: The WTO Vetoes America’s Constitution | Economy In Crisis.

President Pushed South Korea FTA in SOTU Address

Despite evidence to the contrary, the president said the bilateral trade pact will create hundreds of thousands of American jobs.

President Barack Obama used his State of the Union address to urge lawmakers to pass a free trade pact between the U.S. and South Korea, a line that drew applause from Republicans but did not sit as well with Democrats.

Despite evidence to the contrary, the president said the bilateral trade pact will create hundreds of thousands of American jobs.

“Last month, we finalized a trade agreement with South Korea that will support at least 70,000 American jobs,” he said. “This agreement has unprecedented support from business and labor; Democrats and Republicans, and I ask this Congress to pass it as soon as possible.”

Full Story Here: President Pushed South Korea FTA in SOTU Address | Economy In Crisis.

American Policy on the Brink

Juan Cole

Secretary of State Hillary Clinton recently took a four-day tour of the Middle East, at each stop telling various allies and enemies, in classic American fashion, what they must do. And yet as she spoke, events in Lebanon, Iraq, Algeria, and even Egypt seemed to spin ever more out of American control. Meanwhile, the regime in Tunisia, one of the autocratic and repressive states Washington has been supporting for years even as it prattles on about “democracy” and “human rights,” began to crumble.

In Doha, Qatar, in front of an elite audience peppered with officials from the region, Clinton suddenly issued a warning to Arab leaders that people had “grown tired of corrupt institutions and a stagnant political order” and that “in too many ways, the region’s foundations are sinking into the sand.” With Tunisia boiling over and food riots in Algeria and Jordan, she insisted that it was time for America’s allies to mend their ways and open themselves to “reform.” A New York Times report, typical of coverage here, described her talk as a “scalding critique” which also “suggested a frustration that the Obama administration’s message to the Arab world had not gotten through.”

And there, of course, was the rub. After all, since Barack Obama entered the Oval Office in January 2009, U.S. foreign policy has essentially been in late-second-term-Bush mode and largely on autopilot, led by a holdover Secretary of Defense and a Secretary of State who might well have been chosen by John McCain, had he won the presidency. Look at Clinton’s address again and, beyond a reasonably accurate description of some regional problems (and that frustration), only the vaguest of bromides are on offer.

Full Story Here: Tomgram: Juan Cole, American Policy on the Brink | TomDispatch.

Chinese Manufacturers of Toxic Drywall Take No Responsibility

Thousands of American homeowners whose residences were damaged by defective Chinese drywall are not likely to be compensated for their losses anytime soon, according to Reuters.

“We have not been able to get any of the Chinese manufacturers to come to the table to discuss our scientific findings and what, if any, they think their responsibility is to the American homeowner,” U.S. Consumer Product Safety Commission Chairwoman Inez Tenenbaum told Reuters.

In the wake of Hurricane Katrina, Chinese drywall manufacturers pumped millions of pounds of drywall into the Gulf Coast region to profit from the rebuilding effort.

Full Story Here: Chinese Manufacturers of Toxic Drywall Take No Responsibility | Economy In Crisis.

America’s Backward Thinking

The most significant flaw with free trade agreements is that they are impossible to enforce, making competition impossible

Theoretically, free trade sounds like a great idea. Consumers get the benefit of increased competition for their buying dollars, manufacturers get to locate or source from the lowest cost labor pool and exporters have the opportunity to sell into new markets with no tariffs. Unfortunately, there are fundamental real-world flaws that exist with free trade that have led to the most massive wealth transfer in the history of the world. The United States has not witnessed a trade surplus since 1975, and since then $4 Trillion has been lost through trade deficits caused by elimination of tariffs.

The most significant flaw with free trade agreements is that they are impossible to enforce, making competition impossible. Free trade depends on the premise that all countries will play by the same rules. However, in the real world assuring that this occurs is incredibly expensive, time consuming, and inefficient to contest. The reality is, tariffs are not the only barrier to fair trade. Trade is impacted by much more intangible state-sponsored “trade weapons” such as currency manipulation, technology transfer requirements, joint-venture policies, selective customs policies, underhanded government subsidies and countless other tools. Under free trade agreements, the U.S. essentially relies on faith-based economic policy with other countries.

Full Story Here: America’s Backward Thinking | Economy In Crisis.

Government Needs to Abandon Free Trade with South Korea

Our poor economic conditions are the result of a flawed trade policy that current free trade agreements exacerbate. The current Korean FTA fails to address many non-tariff trade issues, that are a result of Korea’s state capitalist economic system.

Washington’s view of trade agreements, where shrewd negotiating will result in gains for specific sectors of the economy, with formerly closed markets, fails to account for the state capitalism system of our trading partners and rivals.

International trade is important to domestic growth, but more importantly something must be done to allow American producers to reach American consumers. It sounds like a crazy idea, but one so crazy it might just work. Last year, American companies made a larger share of their profits overseas than at home.

The issue is not one of individual blunders or poor decisions, it is a systemic failure on the part of our leaders to recognize the nature of state capitalist systems, where the government directly supports and protects its domestic industry. Such economic policy is incompatible with the ideals of free trade as espoused in this nation, and has led to record trade deficits, long-term unemployment and economic stagnation.

Full Story Here: Government Needs to Abandon Free Trade with South Korea | Economy In Crisis.

Global Plans to Replace the Dollar

Project Censored:

Nations have reached their limit in subsidizing the United States’ military adventures. During meetings in June 2009 in Yekaterinburg, Russia, world leaders such as China’s President Hu Jintao, Russia’s President Dmitry Medvedev, and other top officials of the six-nation Shanghai Cooperation Organisation took the first formal step to replace the dollar as the world’s reserve currency. The United States was denied admission to the meetings. If the world leaders succeed, the dollar will dramatically plummet in value; the cost of imports, including oil, will skyrocket; and interest rates will climb.

Foreigners see the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) as Washington surrogates in a financial system backed by US military bases and aircraft carriers encircling the globe. But this military domination is a vestige of an American empire no longer able to rule by economic strength. US military power is muscle-bound, based more on atomic weaponry and long-distance air strikes than on ground operations, which have become too politically unpopular to mount on any large scale.

As Chris Hedges wrote in June 2009, “The architects of this new global exchange realize that if they break the dollar they also break America’s military domination. US military spending cannot be sustained without this cycle of heavy borrowing. The official US defense budget for fiscal year 2008 was $623 billion. The next closest national military budget was China’s, at $65 billion, according to the Central Intelligence Agency.”

Full Story Here: 1. Global Plans to Replace the Dollar | Project Censored.

US to Vatican: Genetically Modified Food Is a “Moral Imperative”

Secret United States diplomatic cables released by WikiLeaks detail efforts to promote genetically modified (GM) crops and biotechnology across the globe, including the Vatican, where US diplomats pushed the Roman Catholic Church to support biotech food in developing nations.

Cables from embassies in Spain, Austria and even Pakistan reveal the US diplomats have clearly sided with the biotech industry, even as court cases and public debates over GM food raged in the US and abroad.

In 2005, a US diplomat and a USAID official met with Catholic leaders in Rome to discuss biotech foods, according to a leaked cable. The diplomats reported that Catholic leaders said the science and safety of GM food would soon be a “non-issue” in the Vatican and signaled a cautious acceptance of biotech products despite active opposition among the faithful:

Full Story Here: US to Vatican: Genetically Modified Food Is a “Moral Imperative”.

‘Homeland’ security coming to hotels, malls

The United States is stepping up security at “soft targets” like hotels and shopping malls, as well as trains and ports, as it counters the evolving Al-Qaeda threat, a top official said Sunday.

A year after a foiled plot to bomb a US-bound passenger plane, Homeland Security Secretary Janet Napolitano told CNN’s “State of the Union” program that other places and modes of transportation must now be scrutinized.

“We look at so-called soft targets — the hotels, shopping malls, for example — all of which we have reached out to in the past year and have done a fair amount of training for their own employees,” Napolitano said.

Full Story Here: ‘Homeland’ security coming to hotels, malls | Raw Story.

U.S. Worldview Flawed In Its Approach to Trade

As China pursues a relentless strategy to gain economic superiority on the world stage, U.S. politicians continue to engage in harmful trade policies.

China may have a Communist regime, but it long ago abandoned that flawed economic model for the brand of state capitalism invented by the Japanese, now perfected by the Chinese. Mercantilist behavior (such as export subsidies through currency manipulation), technology theft (through egregious transfer agreements and outright violations of intellectual property laws), and a protected domestic market are tell-tale signs of such policy.

Washington’s weak reaction has been an occasional denunciation of these policies along with failure to pass necessary reforms such as penalizing currency manipulation or the TRADE Act. Instead, planners have predicted China’s behavior will eventually cause runaway inflation that will force change. However, it increasingly appears that by the time that happens, it will be a moot point.

Full Story Here: U.S. Worldview Flawed In Its Approach to Trade | Economy In Crisis.

Senate Should Effectively Ban Chinese Chicken

Inserted in the continuing resolution funding of the government through the fiscal year is a provision that would crack down on Chinese poultry exports unless producers agreed to more stringent oversight of their products.

This week, after passing the Food Safety Modernization Act, the U.S. Senate could take another giant step toward securing the nation’s food supply by effectively banning the import of Chinese poultry products.

Inserted in the continuing resolution funding of the government through the fiscal year is a provision that would crack down on Chinese poultry exports unless producers agreed to more stringent oversight of their products.

The measure would require USDA inspections of producers’ facilities along with increased inspection of slaughter and processing plants.

Full Story Here: Senate Should Effectively Ban Chinese Chicken | Economy In Crisis.

Bush’s Tragic Legacy at Home and Around the World

Len Hart:

One hopes that thinking about Iraq has gotten clearer since Bush violated U.S. laws and international commitments in order to: 1) seize the oil fields of Iraq; 2) exploit the ‘threat of terror’ to consolidate his ‘base’ at home, 3) subvert Constitutional guarantees that give Americans the right to denounce incompetent and/or traitorous ‘leaders’. An evil legacy of this idiocy is the recent decree that would allow the government to ‘sanction’ i.e, kill its vocal opposition.

Civil liberties advocates and legal authorities struck back Friday at what they describe as the “deliberate targeted killing of U.S. citizens far away from any active hostilities, as long as the executive branch determines unilaterally that they meet a secret definition of who the enemy is.”

In an admission that took the intelligence community and its critics by surprise, Director of National Intelligence Dennis Blair acknowledged in a congressional hearing … that the U.S. may, with executive approval, deliberately target and kill U.S. citizens who are suspected of being involved in terrorism.

–William Fisher, Legal Experts Slam Assassinations of US Citizens, February 06, 2010

Full Story Here:  The Existentialist Cowboy: Bush’s Tragic Legacy at Home and Around the World.

Mitch McConnell Announces He Will Oppose New START Treaty

Senate Minority Leader Mitch McConnell will oppose the new START Treaty, a bilateral arms reduction treaty between the United States and Russia that is one of President Obama’s top foreign relations priorities.

“I’ve decided I cannot support the treaty,” said McConnell on CNN’s “State of the Union” Sunday morning. “I think the verification provisions are inadequate, and I do worry about missile defense implications.”

On Saturday, the Senate defeated an amendment by Sen. John McCain (R-Ariz.), another opponent of the agreement, to amend the treaty’s preamble by separating the issue of missile defense from efforts to reduce American and Russian stockpiles of nuclear weapons.

Full Story Here: Mitch McConnell Announces He Will Oppose New START Treaty.

OPS :  To the Republicans it’s about control, regardless of the consequences to anyone or anything. They are willing to destroy the Nation or anyone in it to gain control. They are mentally disturbed individuals.  We will continue to crash and fail as a Country until we understand this about them, AND ACT Accordingly.

Richard Holbrooke Last Words….

“You’ve got to stop this war in Afghanistan.”

Richard Holbrooke Dead: Diplomat Dies At 69

Richard Holbrooke, a brilliant and feisty U.S. diplomat who wrote part of the Pentagon Papers, was the architect of the 1995 Bosnia peace plan and served as President Barack Obama’s special envoy to Pakistan and Afghanistan, died Monday, the State Department said. He was 69.

Calling Holbrooke “a true giant of American foreign policy,” Obama paid homage to the veteran diplomat as “a truly unique figure who will be remembered for his tireless diplomacy, love of country, and pursuit of peace.” Holbrooke deserves credit for much of the progress in Afghanistan and Pakistan, the president said.

Holbrooke, whose forceful style earned him nicknames such as “The Bulldozer” and “Raging Bull,” was admitted to the hospital on Friday after becoming ill at the State Department. The former U.S. ambassador to the U.N. had surgery Saturday to repair a tear in his aorta, the body’s principal artery.

Full Story Here: Richard Holbrooke Dead: Diplomat Dies At 69.

Free Trade Doesn’t Work: Interview With Economist Ian Fletcher

Free trade doesn’t work, the global economy is a myth and the U.S. has been duped during trade negotiations for the past 40 years according to Ian Fletcher, an adjunct fellow with the U.S. Business and Industry Council and author of Free Trade Doesn’t Work: What Should Replace It and Why, who relayed these concepts to me in an exclusive interview.

During our exchange I discovered that Mr. Fletcher certainly is not opposed to capitalism, underlined by his experience working for hedge funds and private equity firms as an economist, but what he is opposed to are bad economic policies that have led to an ever-burgeoning U.S. trade deficit well on its way to hitting $500 billion this year.

You argue that protectionism is more “American” than free trade. How would you respond to libertarian types who might see this as an assault on America’s deeply-held capitalistic values?

Full Story Here: Michael Hughes: Free Trade Doesn’t Work: Interview With Economist Ian Fletcher.

U.S.: Israel Settlement Freeze Demand Dropped

President Barack Obama has abandoned attempts to persuade Israel to slow West Bank settlement activity, officials said Tuesday, dealing a major blow to the resumption of Israeli-Palestinian peace talks and one of the president’s top foreign policy initiatives.

After months of trying to broker a formula under which Israel would impose a new, temporary settlement freeze in return for U.S. promises and incentives, two American officials said the administration has concluded that course won’t work. The decision was expected to be announced later Tuesday.

Talks stalled in September, barely a month after they started. The Palestinians refused to return to direct negotiations until a new freeze was in place following the expiration of an earlier, 10-month Israeli slowdown in settlement expansion.

Full Story Here: U.S.: Israel Settlement Freeze Demand Dropped.

U.S. Labeling Law Under Fire

Of the 21,000 transactions totaling $3.3 trillion made through the emergency lending programs set up by the Fed, foreign banks and their U.S. subsidiaries made up a large portion of those.

While a piece of legislation designed to better protect the nation’s food supply is lost in the legislative process and is in danger of not passing before the current Congressional session ends, another policy that requires certain food products to list where they originated from on the packaging is in danger of being struck down at the World Trade Organization.

Country-of-origin labeling, which went into effect in 2010, is being challenged at the WTO by both Canada and Mexico.

The second round of oral arguments concluded Thursday. A ruling is expected by July at the latest.

Full Story Here: U.S. Labeling Law Under Fire | Economy In Crisis.

WikiLeaks Ready to Release Giant ‘Insurance’ File if Shut Down

Julian Assange, the WikiLeaks founder, has circulated across the internet an encrypted “poison pill” cache of uncensored documents suspected to include files on BP and Guantanamo Bay.

One of the files identified this weekend by The Sunday Times — called the “insurance” file — has been downloaded from the WikiLeaks website by tens of thousands of supporters, from America to Australia.

Assange warns that any government that tries to curtail his activities risks triggering a new deluge of state and commercial secrets.

Full Story Here: FoxNews.com – WikiLeaks Ready to Release Giant ‘Insurance’ File if Shut Down.

Dem congressman: Afghanistan conflict ‘not a winnable war’

With President Obama on the ground in Afghanistan Friday, Rep. Jim Moran (D-Va.) declared the U.S.-led war in that country unwinnable.

In an appearance on MSNBC’s “Hardball” with Chris Matthews, the Democrat said the war is costing the U.S. far too much and the military effort is misdirected at best.

“The problem is this is not a winnable war, Chris,” Moran said. “Even our combatant commanders know that we can’t win this militarily.”

Moran warned that while a Republican-led Congress may continue to support the president’s current path in Afghanistan, Obama has “a political problem at home.”

via Dem congressman: Afghanistan conflict ‘not a winnable war’ – The Hill’s Blog Briefing Room.

Steelworkers Not Jumping On Board Obama’s South Korea Free Trade Deal

President Barack Obama announced Saturday the government has reached a trade agreement with South Korea that would strengthen economic ties between the two countries, the largest pact by the United States since the North Atlantic Free Trade Agreement in 1994.

If ratified by Congress, the U.S.-South Korea Free Trade Agreement would eliminate 95 percent of tariffs on consumer and industrial goods within the next five years.

With the unemployment rate at 9.8 percent for November — a seven-month high — Obama is under heavy pressure to create and protect American jobs and critics of the deal insist that it will further erode the manufacturing base when cheaper South Korean cars and other products enter the market. United Stated and South Korean officials have been in negotiations on the agreement for several years, including a failed effort to reach a deal during the G-20 summit in November.

Full Story: Steelworkers Not Jumping On Board Obama’s South Korea Free Trade Deal.

The 10 most important WikiLeaks revelations

From Iran to Yemen to Israel to North Korea to the U.N. — what the leaked documents tell us about the world

The AP has concluded that there is nothing “particularly explosive” so far in the archive of State Department cables that has begun to be released by WikiLeaks. That assertion is debatable in itself. But anyone who takes time to browse through the documents will find both fascinating and solidly new and newsworthy information about U.S. foreign policy and international relations.

WikiLeaks says the documents will be released in stages “over the next few months,” so much of what we know now comes through the filter of the handful of media organizations who had access to the full archives. Only a few hundred cables have been released. Here are the top 10 revelations so far:

Full Story: The 10 most important WikiLeaks revelations – War Room – Salon.com.

Scowcroft on START: ‘Partisan’ GOP Doesn’t Want To Give Obama ‘A Foreign Policy Victory’

Sen. Richard Lugar (R-IN) has been the leading Senate Republican urging the upper chamber of Congress to ratify the New START arms control treaty with Russia. However, the Republican obstructionism that has become so routine throughout the past two years of President Obama’s tenure is standing in the way. Sen. Jon Kyl (R-AZ) has been the face of the GOP hamstringing and despite the fact that this non-controversial treaty — one that closely mirrors the one President Reagan signed with the Soviet Union — has been thoroughly debated in the Senate for nearly a year, Kyl told the New York Times, “If they try to jam us [in the lame-duck session], if they try to bring this up the week before Christmas, it’ll be defeated.”

Lugar has been reluctant to criticize his colleagues’ obstruction. When asked last week if they were just playing politics, Lugar said, “I am not ascribing motivations to anybody.” But other Republicans don’t seem to be holding back. Brent Scowcroft served as national security adviser to two Republican presidents and has been pleading with Congress to ratify New START. Profiling Lugar’s awkward position vis-a-vis other Senate Republicans on this issue, Politico reports today that Scrowcroft isn’t being as diplomatic as Lugar on the GOP’s incentive for holding up START:

In an attempt to rally bipartisan support for the treaty, the White House

Full Story: ThinkProgress » Scowcroft on START: ‘Partisan’ GOP Doesn’t Want To Give Obama ‘A Foreign Policy Victory’.

OPS: Title should read: “GOP willing to destroy the nation to defeat Obama“.   Kind of reminds you of  Hitlers orders at the end of WWII to burn everything (Bridges, Crops, Factories, etc) so the Allies would have anything to work with to rebuild Germany after the war.   It also sounds like a  disturbed child who  breaks his toy rather than have to share it with his brother.

On Korea, Here We Go Again!

If American journalism should have learned one thing over the years, it is to be cautious and skeptical during the first days of a foreign confrontation like the one now playing out on the Korean Peninsula. Often the initial accounts from the “U.S. side” don’t turn out to be entirely accurate.

While you can delve back through history for plenty of examples, today’s U.S. journalists might remember events like the Gulf of Tonkin clash that opened the door to the disastrous Vietnam War and the misplaced certainty about Iraq’s WMD that led to a bloody U.S. invasion and occupation.

In both cases, contrary claims from the “enemy side” were discounted and mocked as U.S. journalists puffed out their chests and waved the flag.

Today’s Korean crisis over an exchange of artillery fire between North Korea and South Korea is similar. Though the evidence is that South Korea fired first, you wouldn’t know that if you’ve been watching most U.S. news shows and reading the major newspapers, which have laid the blame squarely at the doorstep of North Korea.

Full Story: On Korea, Here We Go Again!.

WikiLeaks: U.S. warns of diplomatic shame

WikiLeaks is set to release diplomatic cables, American leaders are briefing to brace for embarrassment

U.S. allies around the world have been briefed by American diplomats about an expected release of classified U.S. files by the WikiLeaks website that is likely to cause international embarrassment and could damage some nations’ relations with the United States.

In Britain, Prime Minister David Cameron’s spokesman, Steve Field, said Friday that the government had been told of “the likely content of these leaks” by U.S. Ambassador Louis Susman. Field declined to say what Britain had been warned to expect.

“I don’t want to speculate about precisely what is going to be leaked before it is leaked,” Field said.

Full Story: WikiLeaks: U.S. warns of diplomatic shame – WikiLeaks – Salon.com.

WikiLeaks imminent document release has many squirming

Anticipating great damage to some of its diplomatic ties, people in the Obama administration have been calling allies in an attempt to blunt the impact of what might be revealed in the WikiLeaks documents.

I caught a two minute preview of General Petraeus talking with Fareed Zakaria, most probably a clip from this Sunday’s GPS program, wherein Petraeus is predicting the great damage this leak will inflict on our troops and our allies. He attempted to call on the ‘people in charge’ of WikiLeaks, but wouldn’t call Assange by name, to feel responsibility for the alleged harm he will have unleashed unto unsuspecting victims.

A most interesting JSS report has indicated that part of the WikiLeaks thunderbolt will include incriminating evidence against Turkish PM Erdogan. They have alleged that US copies of the documents prove, without a doubt, personal implication against Erdogan’s financial and logistical support of al-Qaida in Iraq and Afghanistan. Seriously? This is Turkey, one of our most important allies on the Eurasian continent. There is also a revelation that the US Pentagon is convinced that the creation of a democratic Kurdish state between Turkey and Iraq is not such a bad idea.

Oh?

Full Story: WikiLeaks imminent document release has many squirming – National Foreign Policy | Examiner.com.

Talking to the Taliban about life after occupation

Special report: In the last of his series from Afghanistan, Ghaith Abdul-Ahad asks Taliban leaders past and present what kind of regime they would run – and whether there is a chance of negotiated peace

…snip…

The Americans had a right to know that Afghanistan would not be used as a base for attacks against them, he said, but that was all.

“The Americans have one right only, and that is their right to be assured that Afghanistan will not be used against them and that is something the Taliban should give.

“Apart from that they have no rights, they have no right to tell us about democracy and human rights. That’s an Afghan issue and it will be decided by the Afghans.

Full Story: Talking to the Taliban about life after occupation | World news | The Guardian.

Is America on the path to ‘permanent war’?

Critics says U.S. troops, such as this patrol in Afghanistan, cannot afford to keep fighting perpetual wars around the globe

When the president decided to send more troops to a distant country during an unpopular war, one powerful senator had enough.

He warned that the U.S. military could not create stability in a country “where there is chaos … democracy where there is no tradition of it, and honest government where corruption is almost a way of life.”

“It’s unnatural and unhealthy for a nation to be engaged in global crusades for some principle or idea while neglecting the needs of its own people,” said Sen. J. William Fulbright, then chairman of the Senate Foreign Relations Committee, in 1966 as the Vietnam War escalated.

Full Story: Is America on the path to ‘permanent war’? – CNN.com.

Dennis Kucinich: Fake Taliban Leader, Fake Elections, Fake Deadline, Real Trouble

Afghanistan War, Nightmare without End for Troops, Innocent Civilians and US Taxpayers

Washington D.C. (November 23, 2010) – Congressman Dennis J. Kucinich, a leading proponent of peace, today renewed his call to end the Afghan war after it was revealed that a self-proclaimed senior Taliban negotiator working with President Hamid Karzai and NATO officials was in an imposter.

“The war in Afghanistan is taking place in a netherworld where facts and common sense have no place. Elections are fake. Our deadline to withdraw is a fake. Now, we learn that a fake Taliban leader has been leading us to believe that NATO was facilitating high-level talks between Taliban leadership and the corrupt Afghan central government we’re propping up. It was truly amazing that our government said we were negotiating with high-level Taliban leadership while at the same time we were stepping up air strikes to wipe them out.

Full Story: t r u t h o u t | Dennis Kucinich: Fake Taliban Leader, Fake Elections, Fake Deadline, Real Trouble.

Opposition to Free Trade Mounts

A Pew Research poll conducted after the 2010 elections found that a plurality (44 percent) of Americans now believe that NAFTA and the WTO have had a negative impact on America. This is a major change from last year, where 43 percent of people felt that such policies were good.

As the number of Democrats who are against free trade has grown, the number of Republicans against free trade rose from 36 percent in 2009, to 54 percent this year. Across every sector, from young to old, liberal to conservative, etc. support for free trade policy dropped significantly. The only demographic that still has a positive view of free trade is the 18 to 29 age range.

Does this mean anything for the upcoming Congress? Possibly. While traditional elected Republicans are still free traders for the most part, their Tea Party colleagues are far less likely to support such policy. And with a recent policy of being the ‘party of no,’ why not oppose free trade policies espoused by President Obama, especially when their supporters are against it?

Full Story: Opposition to Free Trade Mounts | Economy In Crisis.

America’s Failed War of Attrition in Afghanistan

Jeremy Scahill:

At the end of the NATO summit in Lisbon, Portugal this weekend, the leadership of the Afghan Taliban issued a statement characterizing the alliance’s adoption of a loose timeline for a 2014 end to combat operations as “good news” for Afghans and “a sign of failure for the American government.” At the summit, President Barack Obama said that 2011 will begin “a transition to full Afghan lead” in security operations, while the Taliban declared: “In the past nine years, the invaders could not establish any system of governance in Kabul and they will never be able to do so in future.”

While Obama claimed that the US and its allies are “breaking the Taliban’s momentum,” the reality on the ground tells a different story. Despite increased Special Operations Forces raids and, under Gen. David Petraeus, a return to regular US-led airstrikes, the insurgency in Afghanistan is spreading and growing stronger. “By killing Taliban leaders the war will not come to an end,” said the Taliban’s former foreign minister, Wakil Ahmad Muttawakil, in an interview at his home in Kabul. “On the contrary, things get worse which will give birth to more leaders.”

Former and current Taliban leaders say that they have seen a swelling in the Taliban ranks since 9-11. In part, they say, this can be attributed to a widely held perception that the Karzai government is corrupt and illegitimate and that Afghans—primarily ethnic Pashtuns—want foreign occupation forces out. “We are only fighting to make foreigners leave Afghanistan,” a new Taliban commander in Kunduz told me during my recent trip to the country. “We don’t want to fight after the withdrawal of foreigners, but as long as there are foreigners, we won’t talk to Karzai.”

Full Story: America’s Failed War of Attrition in Afghanistan | The Nation.

Darkness at the End of the Tunnel

When will we wake up to the realization that some of the agreements we have signed, most specifically our agreement with the World Trade Organization (WTO) and our agreement with Canada and Mexico, the North American Free Trade Agreement (NAFTA), are preventing us from doing what is in our best interest? Currently, we are being controlled and directed – told what to do – by other nations, for their benefit and to our detriment. Our current direction in so-called “free trade” is not just hurting us – it is destroying us. One look at our current condition and present direction will clearly show we are in a mode of self destruction.

Every year the U.S. spends $1 trillion on the military, stretched too thin all across the globe, yet we have no one protecting us at home economically. Despite all our fire power, we absolutely cannot determine our own fate as members of the WTO. We are now guided economically by the agreements we signed. We must, must, must be our own masters. We must be able to run our own country for our own benefit, which we, attributable to our agreements with the WTO and NAFTA, are not allowed to do.

We must not let other nations act with predatory intent as they currently are, which prevents us from competing on a global scale. Our “free trade” agreements are only giving our competitors the freedom to deliver their goods to our country with prices deliberately devalued to predatorily put our companies out of business. This has made us jobless – a servant economy reliant on foreign debt and foreign products.

Full Story: Darkness at the End of the Tunnel | Economy In Crisis.

U.S. Multi-national Companies vs. America’s Future – Balanced Trade Legislation is The Best Answer !

Our trade deficits needn’t have happened at all! America’s multi-national companies are the main culprits. The U.S. is the only large industrial nation that runs those deficits.

For the decade just ended on 12/31/2009, the U.S total trade deficit with all nations totaled $6 trillion, by far the largest amount in our history! Why is this figure important? Answer it’s the best single measure of how well America is competing in its own domestic market, by far the largest and richest in the world. The huge, ever-growing trade debt says we’re losing badly in that competition. Every day, the U.S. borrows $2 billion abroad, mostly through issuance of U.S. treasury bonds to our foreign creditors.

(1)How did this happen, and why is there so little concern expressed by our nation’s leaders in government, business, and academia?(2) Who benefits from this folly, and who is hurt by it? (3) Most important, can it be stopped and turned to America’s advantage? Here are the blunt answers.

Full Story: U.S. Multi-national Companies vs. America’s Future – Balanced Trade Legislation is The Best Answer ! | Economy In Crisis.

United States Lacking Strategic Vision to Deal With Asian Rivals

While the opportunities and challenges afforded by the rise of Asian rivals is far more subtle than a battle for king of the hill, the United States is currently unprepared to productively understand and take advantage of the situation due to economic and political shortfalls.

As the Asian economies continue to gain strength, and with that political and military power, the United States remains stuck in a strategic haze that begins with President Obama.

His op-ed in the New York Times last week was deplorable. It summed up his behavior as well during his Asian trip: not a statesman, but a salesman for America. The job of the president is to be a leader, guider and defender of this nation, not a beggar to foreign nations to get them to invest in our businesses.

Full Story: United States Lacking Strategic Vision to Deal With Asian Rivals | Economy In Crisis.

China’s Telecom Industry Poses National Security Risk

Not only is China’s rise a potential problem for American businesses in the field, but there is the potential that state-owned telecommunications companies could use their products to conduct espionage.

China’s growing role in the global telecommunications industry poses a serious national security risk for America, according to a report written by the U.S.-China Economic and Security Review Commission and reviewed by The Wall Street Journal.

Not only is China’s rise a potential problem for American businesses in the field, but there is the potential that these Chinese state-owned telecommunications companies could use their products to conduct espionage.

“China will effectively become the principal market driver in many sectors, including telecom,” according to the report. “National security vulnerabilities attributable to having critical infrastructure components manufactured, implemented, operated or maintained by foreign actors are increasing at an escalated rate.”

Full Story: China’s Telecom Industry Poses National Security Risk | Economy In Crisis.

U.S. offers Israel $3 Billion in Arms in return for new settlement freeze

Netanyahu presents security cabinet with Clinton’s incentive of 20 F-35 fighter planes and security guarantees in exchange for 90-day West Bank building moratorium.

Prime Minister Benjamin Netanyahu’s seven-member inner cabinet discussed Saturday an offer by the United States to reinstate a freeze on West Bank Settlement construction in return for a package of incentives.

Netanyahu presented Saturday the U.S. offer, which was discussed by Netanyahu and U.S. Secretary of State Hillary Clinton on Thursday, to the forum of seven.

Full Story: U.S. offers Israel warplanes in return for new settlement freeze – Haaretz Daily Newspaper | Israel News.

OPS:  $3Billion more borrowed from China to be paid by your grandchildren - insanity

Karzai: U.S. Should Reduce Intensity, Stop Night Raids In Afghan War

Afghan President Hamid Karzai said the United States must reduce the visibility and intensity of its military operations, especially night raids that fuel anti-American sentiment and could embolden Taliban insurgents.

Karzai’s remarks in an interview Saturday with The Washington Post come as the international military coalition has stepped up pressure on insurgents at the same time that the president has set up a peace council in hopes of reconciling with the top echelon of the Taliban.

“The time has come to reduce military operations,” Karzai said in the interview. “The time has come to reduce the presence of, you know, boots in Afghanistan … to reduce the intrusiveness into the daily Afghan life.”

Full Story: Karzai: U.S. Should Reduce Intensity, Stop Night Raids In Afghan War.

Related Story:
Afghan Forces Sleep In Tents While U.S. Pays Millions For Contracts

Obama set to escalate secret war in Yemen

U.S. has already killed dozens of people, including civilians, in air strikes, and that may be just the beginning

The Obama Administration has U.S. military trainers on the ground in Yemen and has already launched an attack and possibly multiple attacks in the country, drawing relatively little public attention and virtually no debate in Congress. Analysts and news reports suggest that the administration is now poised to escalate the secret war in Yemen, possibly by launching drone attacks targeting suspected terrorists.

The attention of the U.S. media briefly re-centered on Yemen late last month after explosives originating from the Gulf nation were found on two cargo planes in Britain and Dubai. The Obama Administration has fingered the Yemen-based group Al Qaeda in the Arabian Peninsula (AQAP) as responsible for the failed attempt. (AQAP also claimed responsibility.)  This is the same group that claimed responsibility for the failed attempt by Nigerian national Umar Farouk Abdulmutallab to blow up a Detroit-bound plane on Christmas Day 2009.

Full Story: Obama set to escalate secret war in Yemen – War Room – Salon.com.

Has the Dollar ALREADY Lost Its Status As World Reserve Currency?

These are headlines from the past 2 days:

• Is China’s Renminbi Already The New Reserve Currency?

• World Bank chief calls for new gold standard

• China Downgrades US Again, From AA To A+, Outlook Negative, Sees “Long-Term Recession”, Blasts QE2, Expects Creditor Retaliation

• Citi: Central Banks Are Going To Start Dumping Dollars In The Coming Weeks

• ICE Starts Accepting Gold As Initial Margin Collateral For All Energy And CDS Trades

It’s not yet clear whether the Renminbi, gold, SDR, Bancor or something else will eventually take the throne of the new world’s reserve currency. See this and this.

Full Story: Washington’s Blog.

Mystery missile launch off California could be ICBM

Everyone is left wondering, not so much about the mysterious missile launch that appeared in spectacular sunlight off the Coast of California, but more about the fact that the Defense Department denied it had anything to do with it. Surely, we can only be that smug if we know for a fact that we had something to do with it. Otherwise, there would be presidential orders to scramble to the skies and intercept, destroy,-in short something to demonstrate to the American people that Homeland Security is awake and functioning.

A plausible hypothesis was offered by former U.S. Ambassador to NATO Robert Ellsworth, who is also a former Deputy Secretary of Defense. As he watched in amazement the video footage shown to him by CBS Station KFMB, he said that it could have been an intentional show of force of our military prowess to Asia, as our President is currently visiting the continent. It certainly would be a great way to win the hearts of minds of say, the Chinese.

As you’ll hear in the video, during the time of the cold war, the US had launched an ICBM from the Atlantic Ocean side for the USSR’s benefit. Ellsworth assumes that this maneuver is being repeated, most likely from a submarine.

Full Story: Mystery missile launch off California could be ICBM – National Foreign Policy | Examiner.com.

Obama, Gates And Clinton In Asia: U.S. Expands Military Build-Up In The East

Obama, Gates And Clinton In Asia: U.S. Expands Military Build-Up In The East

President Barack Obama arrived in Mumbai, India on November 6 and announced $10 billion in business deals with his host country which he claimed will contribute to creating 50,000 new American jobs. By some accounts half the transactions will be for India’s purchase of U.S. military equipment and half the new jobs will be created in the defense sector.

Secretary of State Hillary Clinton is completing a nearly two-week tour of the Asia-Pacific region which will culminate in meeting up with Defense Secretary Robert Gates and Chairman of the Joint Chiefs of Staff Admiral Michael Mullen in Australia on November 8 to among other matters secure the use of the country’s military bases.

Full Story: Obama, Gates And Clinton In Asia: U.S. Expands Military Build-Up In The East « Stop NATO.

Criminal DEA Provides Material Support to Terrorists

D.E.A. Deployed Mumbai Plotter Despite Warning

American authorities sent David C. Headley, a small-time drug dealer and sometime informant, to work for them in Pakistan months after the Sept. 11, 2001, attacks, despite a warning that he sympathized with radical Islamic groups, according to court records and interviews. Not long after Mr. Headley arrived there, he began training with terrorists, eventually playing a key role in the 2008 attacks that left 164 people dead in Mumbai.

The October 2001 warning was dismissed, the authorities said, as the ire of a jilted girlfriend and for lack of proof. Less than a month later, those concerns did not come up when a federal court in New York granted Mr. Headley an early release from probation so that he could be sent to work for the United States Drug Enforcement Administration in Pakistan. It is unclear what Mr. Headley was supposed to do in Pakistan for the Americans.

“All I knew was the D.E.A. wanted him in Pakistan as fast as possible because they said they were close to making some big cases,” said Luis Caso, Mr. Headley’s former probation officer.

Full Story: D.E.A. Deployed Mumbai Plotter Despite Warning – NYTimes.com.

Business Group Wants a U.S.-India FTA

The U.S.-India Business Council released their Partners in Prosperity report Monday, which calls for greater cooperation on defense, education, agriculture, infrastructure and, of course, trade

Ahead of the president’s trip to India later this week, an advocacy group for American businesses operating in India released a report on strengthening economic ties between the two nations.

The U.S.-India Business Council released their Partners in Prosperity report Monday, which calls for greater cooperation on defense, education, agriculture, infrastructure and, of course, trade.

“It is high time we begin treating one another as genuine partners – both in terms of our strategic relationship – in defense, security, and in space, as well as in our very special knowledge partnership,” said USIBC president Ron Somers.

Full Story: Business Group Wants a U.S.-India FTA | Economy In Crisis.

OPS; Say good-bye to the remaining decent paying Jobs in this country

Job-Killing Trade Pacts Likely to Be At Top of Republican’s Agenda

Beyond extending budget-busting tax cuts for the richest Americans, both repealing health care reform and Wall Street reform and opposing a raise in the national debt ceiling, Republicans are likely to have more free trade at the top of their agenda.

American voters, fed up with an economy that seems to be stagnant, directed their ire at Democrats and voted to change direction Tuesday, sweeping Republicans into power in the House and narrowing the Democratic majority in the House. But, that is likely to do more harm than good to the economy.

Beyond extending budget-busting tax cuts for the richest Americans, both repealing health care reform and Wall Street reform and opposing a raise in the national debt ceiling, Republicans are likely to have more free trade at the top of their agenda.

On trade, Republicans are likely to press for passage of stalled trade pacts with South Korea, Columbia and Panama. Legislators may also have to vote on Russia’s ascension into the World Trade Organization next year. And Congressional hearings in the House on trade issues such as currency manipulation and China’s other illegal trade-distorting practices are likely to grind to a halt.

Full Story: Job-Killing Trade Pacts Likely to Be At Top of Republican’s Agenda | Economy In Crisis.

Reversing the Slide in Manufacturing

Senator Bernie Sanders:

The manufacturing sector in Vermont and throughout the United States has eroded significantly in recent years and must be rebuilt to expand the middle class, Sen. Bernie Sanders said.

“During the Bush years, Vermont lost more than 14,000 manufacturing jobs, about one-third of all manufacturing jobs in the state. These were jobs that paid people a living wage often with health care and other benefits,” Sanders said Tuesday.

When Congress reconvenes, Sanders plans to introduce legislation that would prevent American companies that are outsourcing jobs oversees from receiving corporate welfare such as government grants and low-interest loans.

Not only is unfettered, free trade leading to the destruction of traditional manufacturing and blue collar jobs, it is also leading to the loss of hundreds of thousands of high-tech, information technology jobs, as well. During the Bush administration, the U.S. lost over 820,000 jobs in the information sector. “These are the jobs, we have been told for years, that our children would be inheriting,” Sanders said.

Full Story: Reversing the Slide in Manufacturing – Newsroom: U.S. Senator Bernie Sanders (Vermont).

Loss of U.S. Industrial Base a Threat to National Security

The disintegration of the U.S.’s industrial base has transformed into a matter of national security. Experts told a congressional panel Sept. 22 that America’s dependence of foreign contractors is a direct threat to U.S. security.

Manufacturing industry experts appeared at a National Security Oversight Subcommittee on Capitol Hill in order to argue that the long and slow degradation of America’s manufacturing base has put control of technologies and industries vital to national security in the hands of America’s competitors.

“We have allowed our industrial base to deteriorate for the last two to three decades. As a result, just in national defense terms, our supply lines for strategic parts and materials have been stretched around the world,” said Jeff Faux of the Economic Policy Institute, according to CNN.

Full Story: Loss of U.S. Industrial Base a Threat to National Security | Economy In Crisis.

China Said to Expand Rare Earths Embargo to West

China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted some shipments of those materials to the United States and Europe, three industry officials said this week.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.

Full Story: China Said to Expand Rare Earths Embargo to West – NYTimes.com.

Trade War

Quit whining about China. China’s not the problem. Washington has to stop waiting, get into the trade war and develop a plan or industrial policy for this country to survive.

Ernest F. Hollings – Former Senator (D-SC)

The United States has been engaged in a trade war since the end of World War II. Having the only industry after World War II, we spread the doctrine of free trade to open markets in Europe and the Pacific. But the most important country in the East, Japan, closed its market, subsidized its manufacture, and sold its export at cost, making up the profit in the closed market.

By 1960 the country was losing a substantial portion of its textile industry and jobs due to the predatory practices of Japan. I testified before the old International Tariff Commission as Governor of South Carolina on behalf of the Northern and Southern textile industries about the loss of jobs and the trade war that ensued. When the Commission ruled against us, President John F. Kennedy, in May 1961, promulgated his seven-point program saving and protecting the textile industry. The War Production Act of 1950 called on the president to ensure that we had the equipment and materiel necessary to the nation’s security. President Kennedy called for a cabinet hearing; I helped bring the witnesses, and the hearing concluded that, next to steel, textiles were the most important to our national security. At the time the saying was: “We can’t send them to war in Japanese uniforms and Gucci shoes.”

Full Story: Trade War | Economy In Crisis.

How to Fix the Economy, Experts Ignore the U.S. Trade Deficit

Foreigners now own between 15 to 20 percent of all U.S. businesses and only employ about 3.5 percent of the workforce. American businesses and jobs are for sale and the U.S. will continue on this destructive path until U.S. economists can see the rug being pulled from under them.

On September 7th, 2010, a highly distinguished Bloomberg Businessweek panel of experts discussed How to Fix the U.S. Economy [1]. These out-of-touch experts failed to discuss what most Americans know the key problem is, the U.S. $7.85 Trillion Trade Deficit which causes outsourcing and off-shoring job losses. In addition, due to constant trade deficit, job losses equate to serious loss of tax revenues putting the U.S. in more debt and [2] threatening our future. This goes to show how out-of-touch with reality distinguished experts can be in the U.S.A. We need experts who not only can think outside the box but can relate to the Millions of Americans who can’t find work. For example, they at least could have acknowledged the trade deficit and how it has affected the economy. They might look at some out of the box type proposals such as The Balance of Trade Restoration Act of 2006 [3, 4] which would not violate the WTO. America’s trade deficit is nearly 10 times worse than any other trade deficit country! Pretending that China’s currency manipulation will be solved and cure our trade deficit problems is another fantasy economists wrapped up in “free trade” ideology have, rather than understanding that global economic greed can’t be stopped without a proper trade policy.

We need a trade policy that stops cheating such as a balance of trade proposal that will help bring back U.S. manufacturing jobs. Until then, the trade deficit will just keep empowering foreigners to cheat, make huge profits, and buy up American businesses with their reinvested U.S. dollars they earn. Foreigners now own between 15 to 20 percent of all U.S. businesses and only employ about 3.5 percent of the workforce [5]. American businesses and jobs are for sale and the U.S. will continue on this destructive path until U.S. economists can see the rug being pulled from under them.

Full Story: How to Fix the Economy, Experts Ignore the U.S. Trade Deficit | Economy In Crisis.

China’s Growing Independence and the New World Order

Noam Chomsky:

Of all the “threats” to world order, the most consistent is democracy, unless it is under imperial control, and more generally, the assertion of independence. These fears have guided imperial power throughout history.

In South America, Washington’s traditional backyard, the subjects are increasingly disobedient. Their steps toward independence advanced further in February with the formation of the Community of Latin American and Caribbean States, which includes all states in the hemisphere apart from the U.S. and Canada.

For the first time since the Spanish and Portuguese conquests 500 years ago, South America is moving toward integration, a prerequisite to independence. It is also beginning to address the internal scandal of a continent that is endowed with rich resources but dominated by tiny islands of wealthy elites in a sea of misery.

Full Story: China’s Growing Independence and the New World Order — In These Times.

Why China Owns US

Len Hart,:

The U.S. used to make things and export them. Some said that the U.S. fed the world from a mid-western ‘bread-basket’. At the same time, the U.S. had a viable labor movement which seems to have simply withered away with the decline of American industries and productivity. After all, a nation cannot limp along on one leg. It was the Reagan regime which cut off the labor leg. Amputated, we have not gone far but backward, at best, in circles.

That the U.S. trails the world is proven by the CIA’s own ‘World Fact Book’ which lists the U.S. on bottom with the World’s Largest Negative Current Account Balance. Our benefactor/owner, China, is on top with the World’s Largest Positive Current Account Balance. Simply that is because the China makes things and thus employs its population. China sells those things to us (the U.S.) but only because it props up the U.S. dollar in order to get it back via sales. It’s a scheme that will eventually collapse.

The U.S., I seem to recall, once led the world in steel manufacturing, and, I believe automotive manufacturing as well. The US boasted a viable electronics industry but that is now found in Japan and elsewhere and throughout Asia. We lead in NONE of those areas today. China even sends IT pros to America where they took those jobs from Americans. The collapse of U.S. industry must be traced to Nixon’s visit to China. I spoke with Bush Sr but could never pin the bastard down. I still want to know: what DEALS were cut and why?

Full Story: The Existentialist Cowboy: Why China Owns US.

GAO: Iraq’s Government, Requesting Billions, Has Billions in Surplus

Back in 2003 as the invasion of Iraq was getting underway, Paul Wolfowitz famously told Congress that “We are dealing with a country that can really finance its own reconstruction and relatively soon.”

Last month, nearly eight years after Wolfowitz’s flawed prediction, as tens of thousands of troops left Iraq, a House subcommittee stamped its approval on President Barack Obama’s controversial request for $2 billion in 2011 to arm and train Iraq’s military. It is unclear if the Senate will follow suit, but they have approved some funding. On top of the $2 billion, the proposed State Department budget allocates an additional $2.5 billion to step up its operations in Iraq.

All that money is being sent to Iraq based on a simple presumption, that Iraq’s government, run by Prime Minister Nouri al-Maliki, is bankrupt and running a massive deficit. The Iraqi government, a caretaker regime now, was created according to a constitution and timetable drawn up under US occupation and is now considered both fragile and corrupt.

Full Story: GAO: Iraq’s Government, Requesting Billions, Has Billions in Surplus | The Nation.

White House: No taxpayer cash to bail out Afghan bank

The US Treasury Department denied media reports Saturday that American taxpayer funds would be put towards bailing out Afghanistan’s beleaguered Kabul Bank.

The White House said the allegations were not true and pointed to a statement from Deputy Treasury Secretary Neal Wolin that said the bank’s troubles were “an Afghan issue.”

“They are taking immediate steps to ensure the stability of Kabul Bank and to protect the financial assets of the Afghan people,” Wolin said.

Full Story: White House: No taxpayer cash to bail out Afghan bank | Raw Story.

OPS: just another fascist lie started by Drudge

“Why the Hell Do We Have Forces in Germany?” How Our Vast Empire Saps Our Strength

Our empire does not enhance our power, it squanders it and leaves us bankrupt.

Andrew Bacevich is a professor of international relations and history at Boston University and the author of the new book, Washington Rules: America’s Path to Permanent War. You can read a review of this book here. Bacevich talks with FPIF’s Andrew Feldman about current U.S. military policy and the ethics of intervention.

Andrew Feldman: One of the main premises of your new book is that our current military policies are not working for the United States. You don’t really address the question of if it did work for the United States, would it be a kind of policy that we could or should use?

Andrew Bacevich: My previous book, The Limits of Power, argues that there was a time when an expansionist policy served to enhance American power and American prosperity. And so, setting aside moral considerations, during the Mexican war, we took Texas and California. And guess what? It benefited the United States of America tremendously, whether the war was just or not.

Full Story: “Why the Hell Do We Have Forces in Germany?” How Our Vast Empire Saps Our Strength | World | AlterNet.