Lazy Saturday Reads

Peruvian artist Hugo Lecaros

from the brush of Peruvian artist Hugo Lecaros

How’s your Saturday going?

I have a few odds and end reads  on Brazil and Venezuela that I’d like to suggest today.  I’m trying to take a breather from US politics so let’s look to two Southern neighbors with economic and political crises.  I’m going to start out with a few articles on Venezuela.  The country is having serious issues on the economic and political front.  It’s never good when one of our trading partners experiences such disruption.

Venezuela is experiencing hyperinflation which is something that is rare these days in places that we generally view as having functioning and non-politically manipulated central banks.  Usually, hyperinflation occurs in countries when the central government tries to solve its problems by printing money or devaluing its currency internationally and the central bank obliges. Venezuela’s debt is also out of control given the range and value of the countries assets.  Usually, these kinds of things will start transmitting instability to the region and to the country’s trading partners because prices of goods and services, interest rates, and exchange rates will fluctuate.

 There is civil unrest also as the country is experiencing food shortages and riots.  None of this is good and we’re really not hearing much about this in the traditional US media outlets.  Most of this analysis comes from the British Press and analysts focused on the region.

The rumour was there would be chicken.

Word had spread that a delivery of poultry meat was due at the Central Madeirense supermarket, and long before dawn a queue of shoppers was snaking around the block.

Kattya Alonzo was one of them. The 48-year-old mother of three was already planning to make the traditional chicken and rice dish arroz con pollo – if she could also find some rice.

“I haven’t been able to buy chicken in more than a month, so I was there early at about 4am,” she said.

At about 6.30, two trucks finally drew up outside the store, but before the drivers could start to unload, national guardsmen told them to drive on.

Perhaps it was not surprising that the mood outside the supermarket quickly turned ugly: frustration turned to despair, anger to violence. Before long, the incident on Tuesday had escalated.

Mobs tried to loot several bakeries and delis and another food delivery truck.

The unrest soon spread throughout this city of 200,000 just outside the capital, Caracas. Protesters shouted “We want food” as they blocked intersections with burning tyres and clashed with security forces.

Police and the national guard quickly controlled the outburst, with some 14 people reportedly arrested, and at least one person was injured, according to witnesses.

The protests were not related to marches in Caracas and other major cities, which were called this week by opposition leaders seeking to cut short the term of President Nicolás Maduro who they say has driven the country into the ground through mismanagement.

But spontaneous outburst such as the one in Guarenas may present a more serious challenge to Maduro’s rule than any efforts by his political rivals.

Things are not going well in Venezuela since global oil prices are down.  There are black markets everywhere since the food shortages began. Vendors get rich selling basics like diapers and milk.  The government has been trying to control prices but what this has done is lead to folks turning to side channels in black markets where the price is set by desperation and greed.  These black market shoppers are called “bachaqueros”  which is a play on the name of the bachaco leaf-cutting ant that carries several times its weight.  This place is no longer the socialist dream of the late Hugo Chavez who ruled the country for 14 years.  It is an example of socialism gone very wrong.

Epic Mural in Chile Mexican artist Jorge González Camarena, assisted by Chilean painters, Eugenio Brito and Albino Echeverría.

Epic Mural in Chile by Mexican artist Jorge González Camarena, assisted by Chilean painters, Eugenio Brito and Albino Echeverría.

It wasn’t always this way. Diego Moya-Ocampos, senior political risk analyst at IHS, says the current crisis is the result of years of “economic mismanagement” by the ruling socialist party.

Led by Hugo Chávez, the country’s firebrand former president, the country embarked on a wave of expropriation and redistribution with the charismatic leader offering  cut-price fridges, appliances and even new homes to poor Venezuelans.

Chávez wanted to create a socialist paradise, an ideology that has been reinforced by his successor Maduro following his death in 2013.

But the oil price collapse a year later served as a wake-up call for a country that chose profligacy over prudence in the hope that a rainy day would never come.

Oil accounts for 98pc of total exports and 59pc of fiscal revenues, but Moya-Ocampos says the price slide isn’t the country’s only problem.

“Even under Chavez and $100 a barrel oil, debt was rapidly rising and there were already food shortages,” he says, “This is ultimately to do with an interventionist model that is not sustainable and has reached a tipping point.”

Maduro’s declaration of a fresh three month state of emergency has sparked fears that the government will try to seize control of more private companies.

Many Venezuelans have already left the country, including Francisco Flores. “Venezuela has taken good working companies, given them to the poor but not equipped them with the skills to run them so they go bankrupt,” he says.

“That’s just a recipe for destroying a country.”

The NHS therapist, who now lives in London, says the regime is based on a principle of keeping everyone “equal but poor”.

Brazilian artist Adelio Sarro is known for portraits

Brazilian artist Adelio Sarro is known for portraits

I’ve always been interested in South American countries and their various economic crises.  The Mexican Peso Crisis is still taught in basic International Economics/Finance courses as a cautionary tale that’s frequently forgotten.   It’s also called The Tequila Crisis and happened while Bill Clinton was President in 1994. A country in crisis transmits economic and political instability to its neighbors through trade.  Here’s a an example of that from the current Venezuela crisis.  Coca Cola is one of those ubiquitous US products that basically is every where in the world.  Its recipe may be slightly different depending on the sugar dependency of a country’s consumers, but the trademark and product packaging are quite recognizable.  Venezuela’s access to Coke is gone.

And so we will have to chalk this up as another of those great successes of Bolivarian socialism. Yes, as I’ve been saying for some time now, this is not because of some misplaced zeal in making the lives of the poor better: it’s simply because messing with markets is not the way to achieve anything at all. Well, not unless your actual goal is to have a country run out of everything.

The news itself:

CARACAS, Venezuela— Coca-Cola KO -0.83% is halting production in Venezuela of its namesake beverage due to a sugar shortage brought on by the country’s economic crisis.

Production of sugar-sweetened beverages will be suspended in the coming days after local suppliers reported they had run out of the raw material, the Atlanta company said in an emailed statement Friday.

This isn’t even about the currency and import problems that have affected beer production:

The move comes as Venezuela’s economy is teetering on the edge of collapse with widespread food shortages and inflation forecast to surpass 700 percent. Last month, Empresas Polar, Venezuela’s largest food and beverage company, stopped production of beer because of a lack of imported barley.

I think teetering on the edge is using the wrong tense there. I think teetered would be better, making sure that we use the past tense. In any realistic sense that consumer economy has gone …

All countries have modified market economies.  Some markets function perfectly well with very little interference.  Some markets would not exist without government provision or if they did, would be prohibitively expensive.  There are three

Mexican Street artist Spaik and work in Michoacan

Mexican Street artist Spaik and work in Michoacan

primary agents in an domestic economy. That would be the government, the sellers, and the buyers.  Whenever any one of those agents gets into any market and has more unchecked power than the rest, you’re going to have issues. Market excesses can result from power and profit seeking private enterprise or from Government overreach.   You can find many examples of each throughout the modern history of many South American Countries.

Brazil is another country that is experiencing both economic and political troubles.   Its President was removed and is now fighting impeachment proceedings.

Brazil’s economy sank into the deepest recession in recent history last year amid low prices for key exports, soaring inflation and depressed confidence levels. Moreover, as the economy plummeted so did President Dilma Rousseff’s political career. A wide-spread corruption scandal and the economy’s abysmal performance caused approval levels to fall to all-time lows and resulted in the commencement of impeachment proceedings last year. On 12 May, the Senate voted to continue with these proceedings, forcing Rousseff to step down for a maximum of 180 days while a trial is conducted. Vice President Michel Temer took over as interim president and his first task will be to find a way to halt the sinking ship. However, a number of daunting challenges lie in Temer’s path and recent economic data remain poor: retail sales returned to contraction in March and the manufacturing PMI fell to the lowest level in over seven years in April.

A change in leadership will not be a magic bullet for Brazil’s economy and the recession is expected to continue throughout this year. FocusEconomics panelists see the economy contracting 3.7% in 2016, which is down 0.2 percentage points from last month’s forecast. For 2017, the panel sees the economy recovering slightly and growing 0.7%.

It’s never good when your president is impeached and on trial.  Rouseff was interviewed several days ago.   Dilma Rousseff argues that the Old Brazilian oligarchy behind ‘coup’ (FULL INTERVIEW).  This is her explanation of the events.

DR: I think it’s an impeachment process, to remove me from the office. Our Constitution provides for an impeachment, but only if the President commits a crime against the Constitution and human rights. We believe that it’s a coup, because no such crime has been committed. They put me on trial for additional loans [from state banks]. Every president before me has done it, and it has never been a crime. It won’t become a crime now. There is no basis for considering it a crime. A crime has to be legally defined. So we believe this impeachment is a coup, because it’s clearly stated in the Constitution that only a crime of malversation can serve as basis for impeachment. The actions currently under scrutiny do not, strictly speaking, fall under that category. Besides, Brazil is a presidential republic. You can’t remove a president or a prime minister who hasn’t committed a crime. We’re not a parliamentary republic, where a president can dissolve the congress, which, in turn, can call for a vote of no confidence out of purely political reasons. So it’s impossible to impeach a president in Brazil based solely on political reasons or political distrust. We believe that what’s happening now in Brazil is an attempt to replace an innocent president involved in no corruption-related legal proceedings in order for the politicians that lost the 2014 election to control the state bypassing the new election. That’s what’s happening. This is an attempt to replace the entire political program that includes both the social and economic development aspects and is aimed at tackling the crisis that Brazil has been going through in recent years with a program clearly neoliberal in nature. This program provides for minimizing our social programs in accordance with the minimal state doctrine. This doctrine is at odds with all the Brazilian legal norms regarding healthcare, construction and ensuring that our people have their own houses, availability of high-quality education and minimum wages guaranteed to the poorest part of the Brazilian population. They want to do away with these rights and at the same time they conduct an anti-national policy, for example, when it comes to Brazil’s oil resources. Significant subsalt oil reserves, lying 7,000 m below the surface, were discovered recently. The ministers were saying that exploring these reserves was impossible, but now we’re extracting a million barrels daily from subsalt oil reserves. Undoubtedly, they were saying that thinking to change the legislation in order to guarantee access to these reserves to international companies. Moreover, in terms of foreign policy, starting from Lula da Silva and throughout my presidency, we have been seeking to strengthen ties with Latin American, African, BRICS countries and other developing nations, in addition to the developed world – the US and Europe. I think that BRICS is one of the most important multilateral groups created in the last decade. But the interim government holds different views on BRICS and the importance we place on Latin America. They are even discussing the possibility of closing embassies in some African countries. We have very special relations with Africa. Brazil is the country with the highest percentage of population of African descent in the world, second only to African countries. We have a lot of people of African descent, so over the last few years we’ve been putting particular emphasis on our relations with the African countries, and not only Portuguese-speaking ones. This shows a wider approach to the world, as opposed to the traditional one, supported by those who have usurped the power now and are taking steps that are at odds with the program approved by the Brazilian people, by 54 mln votes, on the day I was elected.

AG_obra_zK9HNNghf8ca

Early 20th century Brazilian artist Francisco da Silva

Brazil’s crisis is being transmitted to its neighbors.   Again, this is always likely between close trading partners. The crisis country will not likely have their trading partners interests so much as their own, however.

Yet as Brazil is consumed by the worst political and economic crisis in decades, the country has turned inward. This has contributed to a regional power vacuum and a sense of paralysis when it comes to devising regional approaches to South America’s most pressing challenges. For example, Venezuelan President Nicolás Maduro’s increasingly blatant disregard for even basic democratic standards has seen a less meaningful regional reaction because of Brazil’s problems. Given Brazil’s dominant role in South America – representing roughly half its GDP, population and territory – its travails are inevitably bad news for the continent.

The current crisis is only part of the story. Even prior to reelection in 2014, when the government refused to acknowledge that Brazil’s economy was in trouble, Dilma Rousseff failed to articulate a coherent foreign policy doctrine. Brazil’s international strategy since 2011 was shaped, above all, by the president’s astonishing indifference to all things international and officials’ incapacity to convince Rousseff that foreign policy could be used to promote the government’s domestic goals.

Her predecessors knew better: Fernando Henrique Cardoso (1995-2002) helped establish a series of regional mechanisms to preserve democratic governance, thus reducing the number of external political crises that could hurt the Brazilian economy. Luiz Inácio Lula da Silva (2003-10) promoted regional integration further to facilitate the entry of Brazilian companies into neighboring markets. Lula not only had a trusted foreign minister and a special adviser for international affairs, but also a highly active minister of defense who embraced foreign policy to promote Brazil’s interests, for example by using the newly established South American Council of Defense to enhance trust between the continent’s armed forces.

Paradoxically, just as the bitter political battle to unseat Rousseff is reaching its climax, the president has at last begun to accept the importance of foreign affairs. She and Vice President Michel Temer (poised to become president if she is removed from office) have engaged in an international war of narratives about the legitimacy of impeachment proceedings. Rousseff traveled to New York, where she denounced Temer as a “coup-monger” on the sidelines of a UN meeting. Temer reacted swiftly, giving interviews to major international newspapers, and sending allies abroad to make his case.

Rousseff also broadened her fight to regional bodies and leaders. In somewhat vague terms, she announced she would ask Mercosur to invoke its democracy clause, arguing that a democratic rupture was underway in Brazil. From New York, Brazil’s foreign minister and special foreign policy adviser traveled directly to Quito to make Rousseff’s case at Unasur. Maduro and Bolivia’s President Evo Morales are among those who agree Rousseff is facing a “coup.” For the government in Caracas, which recently assumed the temporary presidency of Unasur and will soon assume the presidency of Mercosur, it is an opportunity to try to draw attention away from the catastrophic situation at home.

It is easy to forget that we do have neighbors and some of them may have issues that will suddenly impact our economy in our own election year with so much focus on ISIS and the middle east.  This is one of the reasons I trust Hillary Clinton.  I can guarantee that if you ask her about either of these countries, their leaders, and their issues she will have insightful analysis and probably know the players personally.  Many of the biggest issues in these countries have roots in populist leaders of one extreme or another.   My guess is that the other two choices standing for President at this point will be clueless as to the situations, causes, and ramifications. You can tell that not only by their words and polices but also by the absence of discussion on these two important neighbors in crisis.

What’s on your reading and blogging list today?  This is an open thread!!!  Please share!

 

Advertisements

Friday Reads: Bump on the Fast Track Trade Deal

Good Afternoon!

wo-ai678c_jtrad_g_20120206184206I’m moving slow today.  I was in a recording studio on the North Shore yesterday and it just wore me out. So, I’m catching up on life right now. A meteor could’ve hit the planet yesterday and I probably wouldn’t have noticed at all.

So, the House just tanked Obama’s demands for enhanced negotiating ability on the Pacific region trading deal.  The President actually showed up on the Hill to lobby for the bill.  (Wonk Trigger Alert!)

House Democrats rebuffed a dramatic personal appeal from President Obama on Friday, torpedoing his ambitious push to expand his trade negotiating power — and, quite likely, his chance to secure a legacy-defining trade accord spanning the Pacific Ocean.

In a remarkable rejection of a president they have resolutely backed, House Democrats voted to kill assistance to workers displaced by global trade, a program their party created and has stood by for four decades. By doing so, they brought down legislation granting the president trade promotion authority — the power to negotiate trade deals that cannot be amended or filibustered by Congress — before it could even come to a final vote.

“We want a better deal for America’s workers,” said Representative Nancy Pelosi of California, the House minority leader who has guided the president’s agenda for two terms and was personally lobbied by Mr. Obama until the last minute.

Republican leaders tried to muster support from their own party for trade adjustment assistance, a program they have long derided as an ineffective waste of money and sop to organized labor. But not enough Republicans were willing to save the program.

4prObama seems to be staking the end game of his Presidential legacy on this deal which begs the question “Why Does Obama Want This Trade Deal So Badly?”.  William Finnegan writes this bit for The New Yorker.

The Senate passed fast-track last month, sixty-two to thirty-seven, with only fourteen Democrats voting yes. Boehner and Ryan expect to be able to produce two hundred Republican votes. That means eighteen Democratic votes are needed. Nancy Pelosi, the minority leader, is reported to be working closely with Boehner and Ryan to come up with the number they need—although she still hasn’t said which way she’ll vote herself. That’s how strange the legislative politics of the T.P.P. have become. Nearly every constituency in the Democratic Party opposes it; and the more they learn about it, the more they oppose it. And yet their leader, Obama, wants it badly.

But why? Maybe it’s a better agreement—better for the American middle class, for American workers—than it seems in the leaked drafts, where it appears bent to the will of multinational corporations. John Kerry, the Secretary of State, and Ashton Carter, the Secretary of Defense, co-authored a column on Mondayin USA Today arguing, in evangelical tones, that the T.P.P. will usher in a glorious new era of American-led prosperity, a “global race to the top” for all parties. Meanwhile, the A.F.L.-C.I.O. sees only a race to the bottom. Organized labor, by all accounts, plans to punish any elected Democrat who supports the T.P.P., or even supports fast-track for Obama, in the next campaign. It’s difficult, again, to evaluate the agreement when we can’t see it. And it will be difficult for Congress to do its job if its members can’t study each part of the many-tentacled T.P.P. on its merits, but must simply vote yes or no on the whole shebang. What’s the rush? Is it simply Obama’s wish to make his mark on history and to complete his pivot toward Asia before his time is up? Politicians are often accused of supporting pro-corporate policies to please wealthy backers, looking toward the next campaign. That can’t be Obama’s motive now.

I’m going to use my own analysis here and will begin by letting you know that my doctoral dissertation and my research area is the existing trade and development deals in the region of ASEAN+3.  ASEAN is a group of small countries that are quite diverse that first banded together under the CIA to oppose the spread of communism in the region.  Now, the group actually has some of those very communist countries it feared in its numbers.

It includes some of the most politically and economically diverse countries in the world.  Seriously.  It’s members include the Sultanate of Brunei, Singapore, Myanmar, Cambodia, Vietnam, Lao PDR, Malaysia and Indonesia.  Indonesia is an Islamic Democracy.  Brunei is a monarchy. Myanmar is for all intents and purposes run by a military junta.  You’ll notice there are also several single party communist states.  Brunei has oil. Singapore is an offshore banking haven and international financial center. Many of the other countries are mostly agricultural and traditional economies with production facilities of other countries basically paying labor badly while ignoring any environmental impact of the manufacturing process.  But the deal is that this small group of countries along with their plus three neighbors (Japan, South Korea, and China) are the economic dynamos of the global economy for the next century.

It’s the region and area where the most potential for economic growth and development will occur.  So, the US needs to be there for many reasons that include economic and political.  Most of these countries are emergent democracies and most of these countries are liberalizing their markets which means less state ownership of things.  New Zealand and Australia are huge players in the region already. For many reasons, we need to get into their trade deals to remain relevant in THE KEY region of the next century.

The biggest deal with this region is that it doesn’t have the political instability and outright strife that’s impacting Southern Africa and MENA. It’s also not stagnant like Europe.  It has political issues but they haven’t blown up into perpetual terrorism and even the near dictatorships are reforming peacefully.  Contrast this to what’s going on in the Middle East, then look South to Africa. Those regions appear to be clusterfucks into eternity.

So, it’s atppre safer place for Western Foreign Direct Investment and it’s economies are developing at phenomenal rates. There are plans to turn the region into a European style Union in the works with a single currency and banking system.  All of this decreases the tricky parts of international trade in a region. The region has already successfully negotiated huge trade and currency deals with its neighbors.  They all are serious about development.  The US cannot maintain its leader of the world nation status and not be a major player in this region.  It clearly hands the role over to the PR of China if we can’t get in there. And believe it or not, it makes Australia more of a player than Europe in the near future. The TPP also includes Latin America Countries that border the pacific so it’s a diverse group of nations.

The deal is, however, at what cost do we join in?  Why do we seem to be negotiating so much independent power for multinational corporations (MNCs)?

While every other president from Ford onward has been granted similar powers, today’s vote has turned out to be anything but routine. Critics who oppose the TPP and other pending agreements are working to stop the bill—and thwart the anticipated trade deals.

The fast-track process was set out in 1974’s Trade Act, which empowered Congress to pass Trade Promotion Authority bills—like the one slated to be voted on today—that allow presidents to negotiate and sign trade deals with less involvement from the legislative branch. Congress still gets to vote yes or no on any final agreement, but amendments are generally prohibited. In exchange, TPA bills let legislators lay out trade priorities and negotiating objectives for the president, and set requirements on how and how often the administration must check in while negotiations are underway.

This TPA, if passed, will guide presidential trade negotiations through 2021. It builds upon a bill that expired in 2007, and is likely more complex than any other in history, expanding congressional oversight and consultation while including new provisions on intellectual property, cross-border data protection, and the environment and human rights. It also increases transparency, requiring presidential administrations to make agreements public 60 days before signing them.

So, the bill does include increased transparency despite many charges that it does not. It’s just not now and and it’s a fairly small window for reaction.

Nancy Pelosi stood with organized Labor and against the President today.tpp2

House Minority Leader Nancy Pelosi (D-Calif.) in a meandering but dramatic floor speech on Friday announced her vote against a measure providing assistance to workers displaced by trade.

“If TAA slows down the fast-track, I’m prepared to vote against TAA,” Pelosi said.

Pelosi announced her opposition to the Trade Adjustment Assistance (TAA) program just before it went down in the House, with 302 lawmakers voting against it.

The failure of TAA could sink a broader trade package that includes President Obama’s request for fast-track trade authority.
Pelosi’s move is a rare split with Obama, who visited Capitol Hill on Friday morning and pleaded with Democrats to back the measure.

The California Democrat had been under pressure from liberal groups to oppose the trade package. While many had expected Pelosi to vote against fast-track, also known as Trade Promotion Authority (TPA), her opposition to TAA took many by surprise.

Pelosi argued that opposing TAA now would give Democrats leverage for a trade package they view as more favorable.

“We want a better deal for American workers,” Pelosi said.

A group of liberal House Democrats opposed to the trade package, including Reps. Rosa DeLauro (Conn.) and Brad Sherman (Calif.), applauded when Pelosi announced her opposition to TAA.

Richard Trumka, the president of the AFL-CIO who has been aggressively lobbying Democrats to vote against the fast-track deal, praised Pelosi in a statement just minutes after the TAA bill failed on the House floor.

TPP protest new yorkObama is rightly focused on the region and the need to get in there before the US is inched out of the deal. The majority of fears are based in the NAFTA deal that caused some economic chaos–especially with traditional labor union jobs–that went south.  I’m going to do something that will probably shock and say that it’s likely that these concerns are unfounded.

Sending jobs to Mexico is relatively easy. It’s close, stuff ships over land routes, and even though Mexico still has the feel of a narco-state, many of its regions are developed and there’s not anything in the way of civil unrest.  Locating production facilities in Mexico for shipment of final goods and services to the US is a low cost no brainer.

You’re not exactly going to see that happen with Myanmar or Brunei.  Also, there’s so much going on already in places like Vietnam that it’s hard to imagine it’s going to get much worse.  My data and scooby sense tells me that any business located there will be shipping regionally there so I doubt it will have the same impact that the Mexican deal did.  All of these countries have blossoming middle classes that are going to be shopping happy during the next decades. They’ll be able to sell stuff there much more easily than shipping it way over here to a steady state economy.  (That means we’re just about as developed as we’re going to get).

Obama had rushed to Capitol Hill on Friday morning to make a last-ditch plea to an emergency meeting of the Democratic caucus. The president urged members to vote with their conscience and “play it straight,” urging them to support the financial package for displaced workers, which Democrats have long supported.

“I don’t think you ever nail anything down around here,” Obama told reporters on his way out of the Capitol. “It’s always moving.”

But anti-trade Democrats pushed hard to block the financial aid plan, knowing that its defeat would also torpedo a companion measure to grant Obama fast-track authority to complete the TPP. That bill was later approved with overwhelming Republican support in what amounted to a symbolic vote because it could not move forward into law without the related worker assistance package.

The package for displaced workers should be put in place. I’m sorry to see it used as a political tool because Republicans hate it to begin with and it’s a necessary component of any trade deal.  The only issue here–which is the main issue for organized labor–is that many of the displaced workers would likely come from union jobs and go to jobs that are less likely to be union like health care workers. That’s what happened with NAFTA passage. Clinton insisted on the displaced worker clause, got it, and then many Ladies Garment Workers in the South became Nurses as a result.  So, in many ways, this could really change the face of organized labor.  However, labor unions need to get better footholds in the services industries since trade and technology has already eroded its member base.  This deal just exacerbates an already existing issue, if anything.

I’m frankly more worried about the legal implications of making MNCs out of reach of a country’s laws. I expressed that concerned in an April, 2015 post.  Here’s a link to my earlier post on the TPP listing some of the most germane concerns.

But, you can see, Obama’s backers on this deal were definitely Republican in general. Politics continues to make strange bedfellows.17679_600

On the GOP side, Speaker John Boehner (Ohio) cast a vote in favor of TAA. Speakers cast floor votes on relatively rare occasions.

Only 40 Democrats backed TAA, while 144 voted against it. On the GOP side, 158 Republicans voted “no,” while 86 Republicans voted “yes.”

The vote against TAA is a humiliating defeat for Obama, who had spent weeks lobbying House Democrats to support his trade agenda in the face of overwhelming opposition from liberal groups and organized labor.

Under the procedure established for considering the trade package, TAA had been packaged with fast-track authority, and a vote against either doomed the total package.

In a slight surprise, House Majority Leader Kevin McCarthy (R-Calif.) announced after the TAA vote that the House would still vote on the fast-track measure, as well as a separate customs bill.

In the vote on fast-track, the measure was approved in a 219-211 vote. Twenty-eight Democrats backed fast-track, while 54 Republicans voted “no.”

House Republicans said they would bring the TAA bill up for another vote by Tuesday.

House GOP lawmakers maintained that voting on TAA again next week would give the Obama administration time to lobby more Democrats to support it.
“The president has some work yet to do with his party to complete this process. This isn’t over yet. And we hope that they can get together and make sure that we finish this so that America is back leading,” House Ways and Means Committee Chairman Paul Ryan (R-Wis.) said in a hastily scheduled press conference with members of the GOP leadership after the vote.

But it is difficult to see why the Democrats who objected to it on Friday to prevent movement on fast-track would shift their strategy, particularly after Pelosi’s words.

Despite the rebuke from House Democrats, the White House still expressed optimism about passing its trade package.
Press secretary Josh Earnest described the defeat as “another procedural snafu,” comparing it to a failed test vote last month in the Senate on the trade package, which eventually passed the bill.

So, my political scooby senses still say that this move was to basically appease organized labor and environmental concerns.  I’m not sure they’ll win much but a few good enough concessions in the long run.

So, again, sorry for the late posts but my life is bipolar at the moment and it’s wearing on me.  At least I make the bills.  Now, if I could only get a schedule that doesn’t exhaust me.

What’s on your reading and blogging list today?


Monday Reads: Mergers and Trade and Wonks! Oh My!

Good Morning!

political-cartoon-of-jp-morgan-&-co-published-in-the-literary-digest-on-june-10-1933Well, it’s still morning where I’m at although it hardly looks that way since we’ve been inundated by rain for several hours.  I do believe folks have traded in their cars for pirogues as the streets have now filled up pretty quickly with water and leaves.

I have a few odds and ends to pass on to you this morning.First, the Comcast/Time-Warner merger is off which is a very good deal for consumers around the country.  The merger would’ve been a BFD and I can’t imagine the Justice Department letting it go through with the amount of concentration it would’ve caused in several markets.  It would’ve been like Coke, Pepsi and Walmart merging together.

Here’s Senator Al Franken with some thoughts on the failed deal. 

The collapse of Comcast’s plan to buy Time Warner Cable is a big victory for anyone who watches TV or uses the Internet. But it won’t be the last time the interests of consumers clash with the desires of big corporations in the media and technology space. Here are five lessons from this fight I think we should keep in mind going forward.

2. We should empower regulators to do their jobs.

This decision illustrates an important reason why we have the FCC (and federal regulatory agencies in general): to protect the American people from being taken advantage of by big corporations.

That said, far too often, those big corporations are able to wield overwhelming influence over the government agencies (and lawmakers) that are supposed to be keeping them in check. Comcast is represented in Washington by more than 100 lobbyists, more than a few of whom have passed through the “revolving door” between the company and its regulators (for example, less than four months after the FCC approved Comcast’s acquisition of NBCUniversal in 2011, one of the FCC commissioners went to work for Comcast). Last year, it and Time Warner Cable combined to spend $32 million trying to influence the federal government.

So while it’s critical that we empower regulators to do their jobs, we also have to demand that they do them well; our activism has to outweigh the big money on the other side.

3. We should still be worried about lack of competition.

Even without this deal, there is far too little competition in the cable and broadband markets. As it stands now, 55% of U.S. households only have one choice for broadband Internet—and for a majority of those homes, it’s Comcast. Not exactly an incentive for the company to provide first-class service, as many Comcast customers can attest.

And if you want another illustration of how powerful Comcast is, consider that, during the debate over this deal, other companies who did business with Comcast told me they were afraid go public with their opposition because they feared retribution.

The Senator makes five points so you can continue to read this article at–of all places–Time Magazine.51c8d35f0a127.image

Another BFD in the area of the economy is the Trans-Pacific Partnership which I’ve hesitated to write about for several reasons.  First, much of the deal is still classified and not available to the public. Second, I look at the deal through the eyes of some one whose dissertation was about trade in ASEAN+3 so I am supremely disadvantaged by knowing WAY too many details about the region and the existing trade agreements.  My current research area is Foreign Direct Investment through out the entire region so I almost know too much to be able to explain any of it succinctly if that makes any sense.

However, I will point you to a few things.  First, there’s a document from the Congressional Research Service that outlines issues that should concern Congress.  I consider this a good place to start. This quote comes from a portion of the Executive Summary.

The Trans-Pacific Partnership (TPP) is a proposed regional free trade agreement (FTA) being negotiated among the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. U.S. negotiators and others describe and envision the TPP as a “comprehensive and high-standard” FTA that aims to liberalize trade in nearly all goods and services and include rules-based commitments beyond those currently established in the World Trade Organization (WTO). The broad outline of an agreement was announced on the sidelines of the Asia-Pacific Economic Cooperation (APEC) ministerial in November 2011, in Honolulu, HI. If concluded as envisioned, the TPP potentially could eliminate tariff and nontariff barriers to trade and investment among the parties and could serve as a template for a future trade pact among APEC members and potentially other countries. Congress has a direct interest in the negotiations, both through influencing U.S. negotiating positions with the executive branch, and by considering legislation to implement any resulting agreement.

The TPP negotiations have been ongoing for nearly five years and may be concluded in the near term, although several challenging issues remain unresolved. These issues are likely the most sensitive for negotiating parties and may require political-level decisions to reach final agreement. The negotiating dynamic itself is complex. For example, decisions on key market access issues on auto, dairy, sugar, and textiles and apparel may depend on the outcome of rules negotiations involving intellectual property rights or state-owned enterprises, among other issues.

Nearly 30 chapters are under discussion in the negotiations, and reports indicate that 9 have been finished. The United States is negotiating market access for goods, services, and agriculture with countries with which it does not currently have FTAs: Brunei, Japan, Malaysia, New Zealand, and Vietnam. Negotiations are also being conducted regarding disciplines on intellectual property rights, trade in services, government procurement, investment, rules of origin, competition, labor, and environment, among other issues. In many cases, the rules being negotiated are intended to be more rigorous than comparable rules found in the WTO. Some topics, such as state-owned enterprises, regulatory coherence, and supply chain competitiveness, may break new ground in FTA negotiations. As the countries that make up the TPP negotiating partners include advanced industrialized, middle income, and developing economies, the TPP, if implemented, may involve restructuring and reform of the economies of some participants. It also has the potential to spur economic growth in the region.

17679_600It also has the potential to tank some industries in this country as well as provide all consumers with a huge number of extremely cheap things for them to buy.  Trade is always win-win for countries.  However, within each country, there are huge losers.  This is something that always has to be considered.  Some jobs will move to other countries while creating jobs in totally different industries in the domestic economy.  The deal is that most of the folks in the lost jobs usually aren’t just easily transferable to the newly created jobs.  That’s especially true in this country where our advantage is in areas that are extremely technical in nature and require advanced degrees or training.  The NAFTA agreement contained “adjustment assistance” to help such workers.  An example of what it did was train a lot of Ladies Garment Workers in the South in the Health Care Field.  In many cases, the jobs weren’t all that equal but at least there was some consideration.  We’ve heard nothing about this kind of assistance but again, many of the details are still hush hush.  The discussion is heating up so I thought I’d give you some of the basics, however, so we can have a base for further discussion as this seems certain to move forward.

Here’s a good example of concerns and cross-purposes.  This is an example of two Lawyers from Harvard Law school that are distinctly split into opposing camps.

As Congress considers giving another Harvard Law colleague from that era, President Obama, special “fast track” authority to negotiate a 12-nation Pacific trade accord, the two lawyers find themselves on opposing armies in one of the biggest legislative fights of the Obama presidency. Among those nations are Japan, Australia and Chile, and smaller ones like Brunei, Peru and Vietnam.

Loyalties to the two opposing forces are stark.

“I’ve questioned Froman on Brunei. I’ve questioned him on food safety. I’ve questioned him on not doing anything when Peru walked back from environmental regulations. Nothing,” fumed Representative Rosa DeLauro, Democrat of Connecticut, a fierce foe of the trade promotion authority legislation nearing House consideration and of the 12-nation Trans-Pacific Partnership that such authority would ease to completion.

By contrast, “Lori Wallach? She’s got such granular knowledge,” she said. “She’s my source of information and knowledge.”

Republicans have lauded Mr. Froman for his full-throttle effort to secure the trade accord and his constant availability to them. Likewise, Representative Charles B. Rangel of New York, a Democrat more open to the trade bills, shrugged off the hostility expressed by many in his party.

“When I’m asking burning questions about human rights and labor rights and the environment and communist Vietnam, I know I’m dealing with a professional,” he said of Mr. Froman.

Clearly, though, many lawmakers have lost patience with Mr. Froman. As a result, a hard-fought compromise on the trade promotion bill approved by the Senate Finance and House Ways and Means committees last week practically legislates better relations.

One unusual provision says that if members of Congress request a meeting or ask the trade representative a question, his office has to respond. The bill would also allow congressional aides with the proper security clearance to go into rooms with the Trans-Pacific Partnership texts and read them without lawmakers or officials from the trade representative’s office present.

“This is not personal,” said Senator Bernie Sanders, independent of Vermont and another opponent of the trade effort. “It’s clearly the rules that have been established in terms of transparency. It’s been a disgrace, frankly.”

Fomenting much of that umbrage is Ms. Wallach, whose tactics, detailed treatises and Capitol Hill briefings have torn apart the chapters of the Pacific accord that have leaked out. She has castigated Mr. Froman’s tight control over the contents of the agreement and dismissed efforts by Republicans and Democrats to find common ground as smoke screens for a big-business agenda.

22198_600You can see from the list of countries mentioned above that we have a variety of things to be concerned about with this agreement.  We’ve got developed countries, emerging economies, and countries that are barely off the ground in this agreement.  There are democracies, monarchies and communist countries included in the mix.  It’s a very complex situation to say the least.

Many see this as the ultimate nod to huge MNCs (Multinational Corporations).  Here’s an example from Doctors without Borders and their concerns about the costs of pharmaceuticals.

No matter who you are or where you live, it’s time to pay attention to the Trans-Pacific Partnership (TPP) trade deal. If signed in its current form, the TPP will lock in high, unsustainable drug prices, delay the availability of less expensive generic medicines, and price millions of people out of the medical care that they need.

Today, AARP and Doctors Without Borders/Médecins Sans Frontières (MSF) express our deep concerns about the TPP’s impact on drug prices. Intellectual property provisions being proposed by the U.S. put too much emphasis on drug industry priorities at the expense of consumer and patient needs.

Various provisions in the TPP would delay the introduction of lower-priced drugs and worsen an already failing system of research and development that awards patents and other monopolies to companies for producing ‘me-too‘ medicines that provide little to no therapeutic benefits over existing treatments.

More troubling are demands by the U.S. to mandate 12 years of data exclusivity for biologic medicines, which include vaccines and drugs used to treat conditions like cancer and multiple sclerosis. Data exclusivity blocks competing firms from using previously generated clinical trial data to gain approval for generic versions of these drugs and vaccines.

With annual prices that can reach $400,000, the high cost of biologic drugs not only has negative effects on consumers and patients, but also on health care payers, including programs like Medicare and Medicaid, as well as children in developing countries who are most vulnerable to dying from vaccine-preventable diseases.

It is noteworthy that the proposed 12 years of data exclusivity, or when clinical trial data are protected, goes well beyond the monopoly protections already provided in the U.S. Today, biologic drug manufacturers receive four years of data exclusivity that runs concurrently with 12 years ofmarket exclusivity, or when the FDA is blocked from approving generic versions of a brand name product.

Here’s more from a legal standpoint.

The most controversial provision of the TPP is the Investor-State Dispute Settlement (ISDS) section, which strengthens existing ISDS  procedures. ISDS first appeared in a bilateral trade agreement in 1959. According to The Economist, ISDS gives foreign firms a special right to apply to a secretive tribunal of highly paid corporate lawyers for compensation whenever the government passes a law to do things that hurt corporate profits — such things as discouraging smoking, protecting the environment or preventing a nuclear catastrophe.

Arbitrators are paid $600-700 an hour, giving them little incentive to dismiss cases; and the secretive nature of the arbitration process and the lack of any requirement to consider precedent gives wide scope for creative judgments.

To date, the highest ISDS award has been for $2.3 billion to Occidental Oil Company against the government of Ecuador over its termination of an oil-concession contract, this although the termination was apparently legal. Still in arbitration is a demand by Vattenfall, a Swedish utility that operates two nuclear plants in Germany, for compensation of €3.7 billion ($4.7 billion) under the ISDS clause of a treaty on energy investments, after the German government decided to shut down its nuclear power industry following the Fukushima disaster in Japan in 2011.

Under the TPP, however, even larger judgments can be anticipated, since the sort of “investment” it protects includes not just “the commitment of capital or other resources” but “the expectation of gain or profit.” That means the rights of corporations in other countries extend not just to their factories and other “capital” but to the profits they expect to receive there.

It really behooves all of us to look into the items leaking out of this agreement.  I do mean “leaking” too.   Here’s a great, easy-to-read article on concerns on the agreement from Vox. They argue that it’s good for14780_600 “elites” and not so good for every one else.

In the past, debates about trade deals have mostly been about trade. Ross Perot, for example, famously warned in 1992 about a “giant sucking sound” of jobs moving to Mexico if the US signed the North American Free Trade Agreement. In contrast, debates over the TPP mostly haven’t focused on its trade provisions.

That’s partly because even advocates of the treaty acknowledge that the economic effects of TPP’s trade provisions would be modest. It’s difficult to estimate the economic impact of the TPP’s trade provisions, because we don’t know exactly what’s in the deal. But one of the mostwidely cited estimates finds that TPP would add about $77 billion to US incomes in 2025. That’s less than half of 1 percent of current US incomes.

“This is not going to dramatically going to change our lives overnight,” Petri says. “We’re a very big economy, so anything compared to the size of the economy is going to be small in percentage term.”

Petri hopes the TPP will serve as a blueprint for future trade deals that include other big economies, such as the European Union and China. In that case, he says, the economic effects could be several times as large, with annual incomes increasing by as much as 2 percent of GDP.

A big reason for the deal’s modest impact is that trade barriers are already low. There are a few politically sensitive markets, such as agriculture, where significant trade restrictions remain. But previous trade deals have removed so many restrictions that there just isn’t much room for further progress.

As the opportunities for trade liberalization have dwindled, the nature of trade agreements has shifted. They’re no longer just about removing barriers to trade. They’ve become a mechanism for setting global economic rules more generally.

This trend is alarming to Simon Lester, a free trader at the Cato Institute. “We’ve added in these new issues that I’m skeptical of,” he says. “It’s not clear what the benefits are, and they cause a lot of controversy.”

And this system for setting global rules has some serious defects. We expect the laws that govern our economic lives will be made in a transparent, representative, and accountable fashion. The TPP negotiation process is none of these — it’s secretive, it’s dominated by powerful insiders, and it provides little opportunity for public input.

The Obama administration argues that it’s important for TPP to succeed so that the United States — not China — gets to shape the rules that govern trade across the Pacific. But this argument only makes sense if you believe US negotiators are taking positions that are in the broad interests of the American public. If, as critics contend, USTR’s agenda is heavily tilted toward the interests of a few well-connected interest groups, then the deal may not be good for America at all.

So, with that I start the conversation.  Get ready, because it will be wonky as hell!

What’s on your reading and blogging list today?


Friday Reads

Good Morning and Happy Lunar New Year

The Egyptian revolution continues to be the top story around the world. We will continue to run live blog updates to give you the latest reliable news sources on the subject.  There’s a few stories on the economy that I’d like to share this morning beyond that topic.

First, Happy Lunar New Year!!

2011 is the Year of the Metal Rabbit.

Chinese astrologer Alvin Ang of Bazi Destiny foresees “the global situation may be affected by serious political change and global calamities.”

Hong Kong-based feng shui master Joseph Wong gives a different take. “This coming year everything will be better than last year,” he told CNN’s Pauline Chiou. “They will see business go upwards mostly, but take care with the shares and stocks. There will be some fluctuations in August and September.”

Fed Chair Ben Bernanke gave a speech at the National Press Club yesterday that indicated continuing concern about the ability of the current recovery to sustain any reasonable decrease in the unemployment rate.  He also indicated the need for a long term plan to deal with the Federal deficit.  There were a few mentions of the continuing need for QE and statements that the monetary policy to date had worked given the recovery of the equity markets.  He did sound a bit more upbeat than the last time we heard from him and while he acted like the recovery was slower than any one would wish, he did state that he felt it was becoming ‘self-sustaining’.

Here’s some analysis on our unemployment vis a vis the Bernanke Statements from The Economist.

The Fed’s forecast range for the unemployment rate in 2012 is 7.7% to 8.2%, and the Congressional Budget Office  forecasts an unemployment rate of 8.4% (this forecast dates to after the announcement of QE2, but isn’t meaningfully different from its forecasts from the summer of 2010). This would suggest that with QE2 in place, American unemployment is likely to be between 6% and 7% in 2012. That’s not full employment, but it’s pretty close. You can argue that more needs to be done (indeed, I think the Fed itself could do more). But it is worth noting that the Fed has put the American economy on a substantially better recovery path than it faced before (Scott Sumner would say it has returned the economy to the path off which it previously led it).A big risk is that the Fed will back away from its policy too quickly, thinking all is going well and worrying premptively about inflation. As Karl Smith says, today’s speech is somewhat reassuring on that front.

The NYT had an op ed up on Trade indicating that Republicans are trying to remove some provisions that now help workers retrain should they lose their jobs to overseas locations.  It’s worth reading just to see how truly Dickensian the Republicans seem to be these days.

Most Republican lawmakers claim they are pro-trade. Their principled position is evidently no match for parochialism and politics. Last month, a conflict over imported sleeping bags between a company in Alabama and a rival in Kentucky led Senate Republicans to block the extension of the Generalized System of Preferences, or G.S.P., which has granted preferential access to some $20 billion worth of imports from developing countries.

Now Senator Jon Kyl and his colleagues in the Finance Committee are threatening to block the Trade Adjustment Assistance program, which provides income and training for American workers whose employers can’t compete with rising imports. It is due to expire on Feb. 12, and Mr. Kyl and company are refusing to extend it unless the White House promises to advance the long-pending trade deal with Colombia.

Speaking of Dickensian Republican policy, the GOP dropped the ‘forcible rape’ language from HR3.  The Hyde Amendment has long entertained the idiocy of letting one loud and obnoxious group of zealots deny Federal  funding of their personal pet peeve while the rest of us continue to fund all kinds of abominable projects. Tops on my opt out list  are renditions for torture and bail outs of Investment banks.  But, American Fetus Fetishists get special treatment.  At least this attempt at narrowing rape definitions is gone now.

House Republicans plan to sidestep a charged debate over the distinction between “forcible rape” and “rape” by altering the language of a bill banning taxpayer subsidies for abortions.

The provision in question, written as an exemption from the ban for women who become pregnant as a result of “forcible rape,” touched off a firestorm of criticism from women’s groups, and it gained enough attention to become the subject of a satirical segment on Comedy Central’s “The Daily Show with Jon Stewart.”

But a spokesman for the bill’s author, Rep. Chris Smith (R-N.J.), says the modifier “forcible” will be dropped so that the exemption covers all forms of rape, as well as cases of incest and the endangerment of the life of the mother.“The word forcible will be replaced with the original language from the Hyde Amendment,” Smith spokesman Jeff Sagnip told POLITICO, referring to the long-standing ban on direct use of taxpayer dollars for abortion services.

A real Democratic congress and president would’ve gotten rid of this stupid provision by now. However, here is something that if true will make me do the Snoopy dance.

The Obama administration is examining whether the new health care law can be used to require insurance plans to offer contraceptives and other family planning services to women free of charge.

Such a requirement could remove cost as a barrier to birth control, a longtime goal of advocates for women’s rights and experts on women’s health. But it is likely to reignite debate over the federal role in health care, especially reproductive health, at a time when Republicans in Congress have vowed to repeal the law or dismantle it piece by piece. It is also raising objections from the Roman Catholic Church and is expected to generate a robust debate about privacy.

The law says insurers must cover “preventive health services” and cannot charge for them. The administration has asked a panel of outside experts to help identify the specific preventive services that must be covered for women.

Administration officials said they expected the list to include contraception and family planning because a large body of scientific evidence showed the effectiveness of those services. But the officials said they preferred to have the panel of independent experts make the initial recommendations so the public would see them as based on science, not politics.

Many obstetricians, gynecologists, pediatricians and public health experts have called for coverage of family planning services, including contraceptives, without co-payments, deductibles or other cost-sharing requirements.

Will the Cult of the Angry Sky God get the ultimate veto on this too?

Well, back to the exercise equipment folks!  Bloomberg.com says ‘American Waistlines Expand Fastest Among Rich Nations’,

Americans grew fatter at a faster pace than residents of any other wealthy nation since 1980, during a period when obesity worldwide nearly doubled, researchers found.

Almost 10 percent of the world’s population was obese in 2008, according to studies published today by the medical journal The Lancet. The percentage of people with uncontrolled hypertension, or high blood pressure, fell, with high-income countries showing a larger drop. Cholesterol levels declined in North America, Australia and Europe, but increased in East and Southeast Asia as well as the Pacific region, researchers said.

What’s on your reading and blogging list today?

Happy New Year!!!