October 03, 2000

Fed to Take It Easy on Rates Again
A Transatlantic Trade War?
U.S.-Cuba Trade: On the Verge of Openness

Fed to Take It Easy on Rates Again

With the speeding U.S. economy already beginning to slow, the Federal Reserve is widely expected to keep interest rates steady when it meets today, while repeating its standard warning on inflation, according to Reuters. Before the economy began to slow, the Fed boosted rates six times since June 1999.

David R. Henderson challenges the Keynesian mantra that an increase in economic growth leads to an increase in inflation and that decreased growth reduces inflation in "Does Growth Cause Inflation?"

Federal Reserve Board Chairman Alan Greenspan will keynote the Cato Institute's 18th annual Monetary Conference this month. Information of the conference is available online.

A Transatlantic Trade War?

The European Union and the United States have peered over the precipice of trade war and backed away -- at least for now, according to Reuters.

An agreement hammered out by EU and U.S. negotiators in Brussels over the weekend pushed back, probably until the middle of next year, the threat of the EU imposing at least $4 billion of sanctions on U.S. goods in a quarrel over a multibillion-dollar U.S. tax break for exporters. U.S. officials have said that if the EU imposed sanctions on this scale it could unleash a full-scale trade war.

The agreement gives both sides a breathing space to try to resolve their differences over the U.S. Foreign Sales Corporation (FSC) scheme, which has overtaken beef and bananas as the most contentious issue on the EU-U.S. trade menu.

The looming trade hostilities will be the topic of a policy forum at the Cato Institute tomorrow titled, "Will the FSC Dispute Ignite a Transatlantic Trade War?" Discussing the showdown between the world's two largest trading entities will be one of the leading experts in Congress on FSC reform, Rep. Phil English (R-Pa.), European Commission representative John Richardson and other experts. The event can be watched live at 11 a.m. or archived at the Cato Web site.

U.S.-Cuba Trade: On the Verge of Openness

Congressional negotiators yesterday were poised to approve a landmark shift in four decades of U.S. policy toward Cuba, easing an embargo on exports of food and medicine to the communist nation, according to Reuters. Senate and House negotiators were to consider the Cuban embargo as part of talks on a $75 billion agriculture spending bill.

Senate Majority Leader Trent Lott said he was confident that the Cuba provision would be adopted.

"A reasonable compromise has been worked out and will not delay the bill any further," Lott said, referring to negotiations between House and Senate leaders. "I assume that senators and House members from farm states are reviewing that and will be comfortable with it."

The Cato Handbook for Congress calls for ending all trade sanctions against Cuba, allowing U.S. citizens and companies to visit and establish businesses in Cuba, and moving toward the normalization of diplomatic relations with Cuba.

In "A Chance to Rethink Sanctions," Trade Policy Analyst Aaron Lukas writes that "it's time for Congress to realize that disrupting private business transactions is not an effective foreign policy tool. Sanctions damage domestic interests at least as much as the target country and have little chance of inducing policy changes."

		Palm Computing and Windows CE users: now you can read the Cato Institute's Daily Commentary and Daily Dispatch while you're on the go.

Sign-up and get the Cato Institute's Daily Dispatch in your email every weekday morning.