Tag: China

Kim Jong-il Is Dead

The AP and others are reporting that North Korean leader Kim Jong-Il has died at the age of 70. This has long been expected, but what comes next is unclear. The best case scenario would be a smooth transition to new leadership, one that is committed to opening up North Korea’s ossified political system and reforming its decrepit economy. That is unlikely, however. If a power struggle ensues, the North Korean people will be caught in the middle. The countries with the most at stake in the event of a complete collapse of the DPRK – especially South Korea and China – should take the lead in helping the North Koreans to sort out their future.

Citizens! Do You Know the Source of Your Honey?

Some disturbing news indeed reached my inbox today (HT: David Boaz). Apparently honey is entering the United States under assumed identities. Chinese honey, once ubiquitous, was largely shut out of the American market through anti-dumping measures. So, this article from NPR.org alleges, it started to be sold through a third country (perhaps Indonesia, Thailand, or Malaysia) and was falsely labelled to evade the duties. (Apparently we know this because the honey can be tested for peculiar types of pollen.) The U.S. government wasn’t having any of that of course, and so they held up suspicious shipments through regulations, inspections, and documentary requirements.  So now the Chinese honey is allegedly being sold through India.

The domestic honey industry is now starting to worry that all of this nefarious, subversive honey-related activity will suppress the market for all types of honey, including their own, and are starting a fair trade-esque system called True Source Honey, which will trace the honey to a proper, ‘merican source. None of that Chinese muck.

Eric Wenger is president of True Source Honey. Soon, he’s going to Vietnam to help with the first audit of a Vietnamese honey exporter.

“The question we want to answer is: Does that exporter only purchase honey from beekeepers in that country?” he says.

The exporter will give the True Source auditor a list of the beekeepers from whom it buys honey. “Then the auditor will randomly select a number of those beekeepers, go out to that beekeeper’s apiary, and evaluate the capacity of that beekeeper to produce the volume that that exporter claimed was purchased and shipped,” says Wenger.

If everything checks out, that exporter is certified. But even after that, True Source will take samples from every shipment of honey and send those samples to a lab in Germany to see if the pollen matches the flowers that are actually blooming in Vietnam.

True Source wants to expand this system globally. One exporter in India is already certified.

Jill Clark, from Dutch Gold Honey, says these sorts of audited, verified supply chains are getting more common throughout the food business. In some cases, governments are requiring it.

“With all the food safety and food security issues, knowing where your food comes from right now is incredibly important,” she says.

Shouldn’t consumers be the ones to decide that? Removing the anti-dumping duties and discriminatory regulations will reduce the incentive for Chinese honey to be labelled falsely, and then we can decide for ourselves what is “incredibly important.” Or maybe we don’t care, and True Source will be a massive flop.

On a positive note, there are an encouraging number of libertarian comments to the article.

Hillary Clinton Heads to Burma

On Wednesday, Secretary of State Hillary Clinton travels to the isolated nation of Burma, officially known as Myanmar, in an attempt to spur the reform process. “After years of darkness, we’ve seen flickers of progress,” said President Barack Obama of the troubled country. By visiting Burma Secretary Clinton can test the new government’s willingness to do more.

Of course, the Clinton initiative may fail. But the main argument for the policy change is not that it is certain to work, but that the alternative has failed. Isolating Burma has achieved nothing.

Burma long has been one of the most tragic of nations. The military regime brutally suppressed the democracy movement led by Nobel laureate Aung San Suu Kyi. Even more deadly has been the half-century long battle with ethnic groups like the Karen, which have sought autonomy in the east.

The United States and Europe responded with sanctions, but to no avail. China took advantage to secure a position of political influence and economic dominance. The military regime continued to live up to its reputation for brutality and corruption.

Now there are “flickers of progress,” as the president suggested. A badly flawed election last year; a new, nominally civilian government; the release of a few political prisoners; liberty for Ms. Suu Kyi, who also has been meeting with government ministers; and a slight break between Burma and its chief patron, Beijing.

Individually these are but small changes, and the Burmese military has previously offered tantalizing reforms only to reverse course, intensifying its brutal suppression of any opposition. However, the combination of many small steps offers hope that something more real may be happening this time. Even Suu Kyi has expressed optimism, and is preparing to reenter politics—legally.

Equally important is the increasing evidence that Burma wants to balance the influence of its imperious neighbor China. For all of the worries in America about Beijing’s growing clout around the world, the People’s Republic of China is finding out—just as the United States discovered years ago—that friends can be expensive to buy and often don’t stay bought.

Engaging Burma could encourage that state to continue on a more independent course—separate from China. The regime isn’t likely to dump its patron, but any distance between the two would be progress. The PRC’s churlish reaction to the Clinton initiative suggests that Beijing is concerned.

An adjustment in U.S. policy toward Burma was sorely needed. Isolation resulted in few positive outcomes. For the most part Asian nations, even America’s friends, ignored U.S. and European sanctions. The regime did not fall; Suu Kyi was not freed; democracy did not come; the ethnic groups did not enjoy peace. The generals simply tightened their grip.

Although this policy failure long has been obvious, no one wanted to “reward” the Burmese regime by dropping economic penalties. This left U.S. policy stuck in a political cul-de-sac. Sanctions were ineffective, doing nothing to advance human rights. But they could not be changed for the sake of appearance.

Nascent reform in Burma now offers Washington an opportunity to shift course. No one should get their hopes up. The regime may intend to only adopt a few reforms as window-dressing to win Western aid. Even if the commitment to change is real, the road to a better life for the Burmese people remains long and hard.

Nevertheless, for the first time in years there truly are “flickers of progress” in Burma. The administration is right to try to turn these flickers into something more. A desperately poor and oppressed people deserve a better life.

Cross-posted from the Skeptics at the National Interest.

Trade Law, Trade War, and the Case of Multilayered Wood Flooring from China

Public angst over China’s rise and the threat of populist currency legislation have prompted speculation about a U.S.-China “Trade War.” With the 2012 elections still a whole year away, there is ample opportunity for campaigning politicians to ignite that fuse.

But pyrotechnics aren’t necessary. Rather than a 1930s-style free-for-all, a trade war—if one were to begin—is more likely to be of the lowercase, “rules-based” variety, where trade restrictions are imposed in compliance (or under the pretense of compliance) with global trade rules. Many of the battles would be waged behind the façade of so-called trade remedy laws.

Antidumping and countervailing duty measures are the most commonly invoked forms of “contingent protectionism” permitted under World Trade Organization rules. Those rules allow member governments to maintain and administer national antidumping and countervailing duty laws to remedy—through the imposition of customs duties—the effects of imports determined to be sold at unfairly low prices (antidumping) or determined to be unfairly subsidized by a government (countervailing). But imposing “remedies” under these laws is contingent upon certain conditions being met. Two core conditions are that the administering authorities need to demonstrate that the imports in question are being dumped or subsidized, and that those dumped or subsidized imports are causing or threatening material injury to the domestic industry.

A determination expected tomorrow from the U.S. International Trade Commission offers a case in point. The Commission will vote on the question of whether dumped and subsidized imports of multilayered wood flooring (MLWF) from China are causing or threatening material injury to the U.S. MLWF industry. An affirmative determination could invite Chinese retaliation because the evidence of a causal connection between imports from China and injury to the U.S. industry is weak to non-existent. If the U.S. government is going to stretch or skirt the evidentiary standards established by domestic law and international treaty, the Chinese government may be inclined to do the same. (In fact, the Chinese government is already alleged to have broken those rules – and the United States is seeking recourse in the WTO – when it imposed antidumping and countervailing duties on U.S. chicken exports in 2010.)

Multilayered wood flooring is a floor covering product—used for the same practical purposes as hardwood flooring, tile, and carpeting. Sales of MLWF are highly dependent upon new housing starts and remodeling expenditures, both of which tanked when the housing bubble burst in 2008. As a result of U.S. housing starts declining from a seasonally adjusted annual rate of 1.1 million units in February 2008 to just 505,000 units in March 2009, as well as the large decline in remodeling activity over the same period, MLWF industry prices, shipments, revenues, and profits declined substantially, as did imports from China and other countries. But since the second quarter of 2009, housing starts have been stable at about 600,000 units per year and remodeling activity has been steady at about $112 billion per year.

Importantly for the injury analysis, this period of stability in housing starts and renovation activity enables an analysis that isolates the effects of imports on the domestic industry. And what is evident is that, as domestic consumption of MLWF picked up, so did U.S. imports, producer shipments, revenues, and profits (from -9.9 percent in 2009 to -1.0 percent in the first half of 2011). Increasing volumes of subject imports correlate with an improving condition of the domestic industry. Throughout the period of stabilization, prices in the U.S. market have been steady, as well. If imports from China were to have an injurious effect on the domestic industry, one would expect the increasing volume of such imports to drive down prices in the United States. But imports from China, on average, do not underprice domestic MLWF. According to the public version of the USITC Staff Report in this matter:

…prices for MLWF from China were below those for U.S.-produced MLWF in 60 of 110 instances; margins of underselling ranged from 1.5 to 36.4 percent. In the remaining 50 instances, prices for MLWF imported from China were above those for U.S.-produced MLWF; margins of overselling ranged from 0.1 to 30.4 percent.

An affirmative finding of injurious dumping and/or subsidization from the USITC tomorrow would require disregard of these and other crucial facts and would warrant closer scrutiny of the antidumping regime. It would also invite similar actions from Chinese trade remedies authorities and then who know where it will lead.

A Step Forward in Afghanistan, If We Are Willing to Take It

The Washington Post reports the Obama administration has revised its Afghan war strategy to include “more energetic efforts to persuade” Afghanistan’s neighbors—including India, China, and the Central Asian republics—to “support a political resolution.” Just yesterday, the New York Times reported that the administration was also relying on Pakistan’s Inter-Services Intelligence spy agency “to help organize and kick-start reconciliation talks aimed at ending the war in Afghanistan.”

This is good news, but also déjà vu. The administration called for “pursuing greater regional diplomacy” back in 2009. It also said it would ask “all countries who have a stake in the future of this critical region to do their part.” Countries in the region do have a stake in Afghanistan’s future; America, however, has few effective instruments for submerging the differences among competing powers.

Take our relationship with Iran. It has made significant inroads with Afghanistan’s Hazara and Tajik communities and is well-positioned to be a key player in the region. But Tehran and Washington seem neither close to engaging in direct talks nor willing to make reciprocal concessions for the cause of furthering peace. The irony is that after 9/11, American and Iranian interests initially converged in Afghanistan: Tehran cooperated with Washington to overthrow the Taliban regime, and during the Bonn negotiations helped broker a compromise between President Karzai and the Northern Alliance.

America’s complicated relationship with Iran is one reason why what U.S. officials perceive to be in America’s best interests may not be synonymous with the pursuit of peace. Isolating Iran, or even Pakistan for that matter, will hurt the substance of negotiations, increase the incentive for these countries to sabotage peace, and hinder Washington’s ability to shape a coherent regional strategy. Even if Washington were to engage Tehran and Islamabad, they may very well decide to protract the bargaining process to convey that time is on their side (it is). One reason why the administration’s 2009 effort may have faltered was that Pakistan—a major player in Afghanistan’s internal affairs (to the consternation of many Afghans)—has come to feel that it can manage the terms of reconciliation. In fact, it is this belief that tempers Pakistan’s eagerness to be more accommodating toward the United States, which is why the case for American humility is key when it comes to the subject of negotiations.

Peace will not be perfect. Problems will rise when competing interests collide on certain core issues. Nevertheless, all parties must be sufficiently dedicated to reaching a consensus on what constitutes a manageable settlement. After all, some countries will seek to stymie their enemy’s provision of assistance to Kabul (i.e. Pakistan vis-à-vis India). Getting these countries to think otherwise will necessitate a shift in said country’s perceptions of others’ intentions.

As I wrote last week, U.S. officials understand the enormity of problems they confront in this vexing region. Proponents of peace are not blind to these difficulties. Unfortunately, much like the current nation-building effort, when it comes to regional engagement, U.S. officials could be making yet another ambitious commitment that is beyond their ability to carry out.

Cross-posted from The Skeptics at the National Interest.

The Lives of Others 2.0

Tattoo it on your forearm—or better, that of your favorite legislator—for easy reference in the next debate over wiretapping: government surveillance is a security breach—by definition and by design. The latest evidence of this comes from Germany, where there’s growing furor over a hacker group’s allegations that government-designed Trojan Horse spyware is not only insecure, but packed with functions that exceed the limits of German law:

On Saturday, the CCC (the hacker group) announced that it had been given hard drives containing “state spying software,” which had allegedly been used by German investigators to carry out surveillance of Internet communication. The organization had analyzed the software and found it to be full of defects. They also found that it transmitted information via a server located in the United States. As well as its surveillance functions, it could be used to plant files on an individual’s computer. It was also not sufficiently protected, so that third parties with the necessary technical skills could hijack the Trojan horse’s functions for their own ends. The software possibly violated German law, the organization said.

Back in 2004–2005, software designed to facilitate police wiretaps was exploited by unknown parties to intercept the communications of dozens of top political officials in Greece. And just last year, we saw an attack on Google’s e-mail system targeting Chinese dissidents, which some sources have claimed was carried out by compromising a backend interface designed for law enforcement.

Any communications architecture that is designed to facilitate outsider access to communications—for all the most noble reasons—is necessarily more vulnerable to malicious interception as a result. That’s why technologists have looked with justified skepticism on periodic calls from intelligence agencies to redesign data networks for their convenience. At least in this case, the vulnerability is limited to specific target computers on which the malware has been installed. Increasingly, governments want their spyware installed at the switches—making for a more attractive target, and more catastrophic harm in the event of a successful attack.

With Friends Like Sen. Sessions, Free Trade Is in Trouble

According to a story in Politico today, Senator Jeff Sessions of Alabama has been whipping his Republican colleagues to vote in favor of the China currency legislation that appears to be headed for passage in the Senate. (My Cato colleague Dan Ikenson has explained  why raising tariffs on imports from China would be a mistake.)

The Politico story says that Sessions is “traditionally a proponent of free trade,” but his actual voting record indicates otherwise. According to the trade vote data base we maintain on the home page of the Herbert A. Stiefel Center for Trade Policy Studies at Cato, Sen. Sessions has voted in favor of lower trade barriers on a bare majority (26 out of 49) of the significant trade votes we’ve recorded.

Since 1997, Sen. Sessions has voted in favor of protectionist farm bills (2002, 2007, 2008), banning safety-certified Mexican trucks from U.S. roads (2007), country-of-origin labeling (2003), the WTO-illegal Byrd amendment (2003, 2005), the original Schumer-Graham bill to impose a 27.5 percent tariff against imports from China (2005), sugar import quotas (1999, 2000, 2001), and steel import quotas (1999)

Meanwhile, he’s voted against the Morocco free-trade agreement (2004), trade promotion authority (1998, 2002), and normal trade relations with Vietnam (2001) and China (1997, 1999).

And to top it all off, it was Sen. Sessions who single-handedly scuttled renewal last year of the Generalized System of Preferences, the long-standing program that had allowed certain imports from poor countries to enter the United States duty free. As my Cato colleague Sallie James has chronicled (here and here), the good senator refused to allow the program to be renewed because of a dispute affecting a small number of his constituents who are employed making sleeping bags.

Like too many of his fellow senators, Sen. Sessions supports our freedom to trade only as long as it does not affect any noisy special interests in his own state.