Sunday, January 03, 2010

DTN News: Britain, U.S. To Jointly Fight Yemeni-Based Terrorists, Over 70% Of Americans In Favor Of U.S. troops In Yemen – Poll

DTN News: Britain, U.S. To Jointly Fight Yemeni-Based Terrorists, Over 70% Of Americans In Favor Of U.S. troops In Yemen – Poll *Source: DTN News / Int'l Media (NSI News Source Info) - January 04, 2010: Britain and the U.S. have agreed to join forces in a fight against Islamist groups in Yemen, BBC said. The TV channel quoted Downing Street officials as saying the two countries would jointly fund a counter-terrorism police unit in the Asian state. The decision was taken following an alleged Christmas Day bomb airline attack over Detroit. A 23-year-old Nigerian national, Umar Farouk Abdulmutallab, a passenger on board an A330 passenger jet bound from Amsterdam to Detroit on December 25, tried to blow up the plane that was carrying some 300 people. He was detained and charged with attempted terrorist attack. CNN said quoting a senior U.S. government source Gen. David Petraeus, head of the U.S. Central Command, met with Yemeni President Ali Abdullah Saleh in Yemen on Saturday. Saleh reportedly offered more support for U.S. counterterrorism efforts and pledged to continue providing assistance for the investigation into the attempted airline bombing. U.S. President Barack Obama said on Saturday the bomb suspect was apparently trained by a Yemen-based Al Qaeda offshoot. Abdulmutallab also allegedly claimed after his arrest that he acted on instructions from Al Qaeda. U.S. security officials have confirmed that his name was on the U.S. list of terrorist suspects. Al Qaeda said in a statement posted on radical Islamist websites the attack carried out by its "brother" was retaliation for alleged U.S. strikes on Yemeni soil in December. On Monday, Obama pledged a harsh response to terrorist attacks. "Those who would slaughter innocent men, women and children must know the United States will do more than simply strengthen our defenses," he said.
Over 70% of Americans would favor sending U.S. troops to Yemen to combat Al Qaeda militants, a poll posted on the website said. With over 20,000 people taking part in the poll, 71% voted that "the problem is not going away," and "troops need to be sent there to eliminate Al Qaeda and the threat it poses to national security." Meanwhile, 23% voted against saying that "the U.S. military is already engaged in a costly war in Afghanistan," and "sending soldiers to Yemen would jeopardize that mission." Six percent of the poll said they are "undecided" on the issue. The United States and Britain announced on Sunday they had closed their embassies in the Yemeni capital due to the threat of an Al Qaeda attack. The decision was taken following an attempt to blow up an airliner over Detroit on December 25. A 23-year-old Nigerian national, Umar Farouk Abdulmutallab, a passenger on board an A330 passenger jet bound from Amsterdam to Detroit on December 25, tried to blow up the plane that was carrying some 300 people. He was detained and charged with attempted terrorist attack. Al Qaeda said in a statement posted on radical Islamist websites the attack carried out by its "brother" was retaliation for U.S. strikes on Yemeni soil in December. Gen. David Petraeus, head of the U.S. Central Command, met with Yemeni President Ali Abdullah Saleh in Yemen on Saturday as part of the plan to expand bilateral military and intelligence cooperation to increase pressure on militants operating in the country.

DTN News: Airlines News TODAY January 4, 2010 ~ Boeing And Airbus End 2009 With Solid Ordering – Suppliers Share Wrap

DTN News: Airlines News TODAY January 4, 2010 ~ Boeing And Airbus End 2009 With Solid Ordering – Suppliers Share Wrap *Source: DTN News / Int'l Media (NSI News Source Info) NEW YORK, NY- January 04, 2010: Boeing’s latest update to its orders and deliveries website revealed what must be a pleasing end to 2009 for the US manufacturer. Not only did All Nippon Airways order five B767s and five B777s but “Unidentified Customer(s)” also placed orders for 24 B737s and 11 B787s. However, the manufacturer has not been able to escape the spectre of cancellations, with unidentified customers cutting orders for three B737s and three B777s in the month to 22-Dec-2009. Boeing finished 2009 with 142 net orders Boeing ended 2009 with 259 gross orders. However, 118 cancellations have seen the net total plummet to 141 for the year. Most heavily affected by cancellations has been Boeing’s new B787, which finally flew for the first time in Dec-2009. The new aircraft suffered 83 cancellations in 2009. Also affected was the B777 programme, which suffered ten cancellations over the year. Proportionally, narrowbodies accounted for the strongest ordering at Boeing, with 193 gross and 174 net orders for the year, or approximately three quarters of all orders. 19 B737s were struck off Boeing’s order book by airlines over the year. Airbus ends 2009 with over 280 net orders Major competitor, Airbus, was less heavily affected than Boeing by cancellations last year. The European manufacturer had 225 net orders to the end of Nov-2009, but a strong December has seen the manufacturer near its target of 300 (gross) orders for the year. LAN Airlines ordered 30 A320s, Malaysia Airlines ordered 15 A330s and China Eastern Airlines ordered 16 A330s in Dec-2009. Record deliveries likely in 2010 Aircraft output has been reduced by both manufacturers, but only marginally. 2009 promises to be a record year for aircraft deliveries, approaching 500 from both manufacturers. 2010 deliveries are forecast to be somewhat slower, although production decisions on output levels are locked in well in advance, meaning that if production is to be slowed further, it will not be until at least 2H2010. In trading on Friday, Boeing dropped 1.5%, ending the year 19.6% higher overall. EADS gained 2.8% in trading, ending the year 11.6% higher.

DTN News: Japanese Prime Minister Yukio Hatoyama Vows To Pursue More Equal Ties With US

DTN News: Japanese Prime Minister Yukio Hatoyama Vows To Pursue More Equal Ties With US *Source: DTN News / Int'l Media (NSI News Source Info) TOKYO, Japan - January 04, 2010: Japanese Prime Minister Yukio Hatoyama pledged Monday to pursue more equal relations with the United States as Tokyo seeks to defuse a row with its close ally over where to move an American military base. "I want to create ties in which we can enhance our relations of trust by telling each other what each of us should say clearly," he said in a televised new year address.Japanese Prime Minister Yukio Hatoyama speaks during the new year press conference at Hatoyama's official residence on January 4, 2010 in Tokyo, Japan. The Hatoyama administration has to tackle many issues including economic recovery, unemployment and a relocation of Futemma airfield in Okinawa Prefecture. "It's important to show that Japan and the United States are in a relationship in which we need each other." Japan should avoid a situation where "we just give up what we want to say only because it's difficult, or where one simply obeys the other," he said. Soon after coming to power in September, Hatoyama's government provoked irritation in Washington by announcing a review of a 2006 agreement to move a US air base from an urban area to a coastal region on the island of Okinawa. Tokyo is currently considering alternative sites for the US Marine Corps' Futenma Air Station, but Washington has repeatedly called for Tokyo to stick to the 2006 deal, which is opposed by local residents. The agreement was part of a broader realignment of US forces in Japan that includes the redeployment of around 8,000 Marines from Okinawa to the US Pacific territory of Guam. Hatoyama said he aimed to find a solution to the relocation issue within the coming months. "I don't mean to waste any time at all," he said. Hatoyama's government has previously said it aims to make a decision on Futenma by May. The United States, which defeated Japan in World War II and then occupied the country, now has 47,000 troops stationed there, more than half of them on Okinawa, the site of one of the bloodiest battles of the war. Hatoyama last month marked a troubled first 100 days in office with his public approval rating falling sharply and one of his former aides being indicted for allegedly misreporting millions of dollars of political donations.

DTN News: U.S. Intensifies Screening For Travelers From 14 Nations

DTN News: U.S. Intensifies Screening For Travelers From 14 Nations *Source: DTN News / The New York Times By Eric Lipton ~ Courtesy Sanaya A. Hoon (NSI News Source Info) WASHINGTON - January 04, 2010: Citizens of 14 nations, including Pakistan, Saudi Arabia and Nigeria, who are flying to the United States will be subjected indefinitely to the intense screening at airports worldwide that was imposed after the Christmas Day bombing plot, Obama administration officials announced Sunday. (John Brennan, U.S. President Barack Obama's assistant for Homeland Security and Counterterrorism, speaks during an interview on Fox News Sunday in Washington January 3, 2010. Brennan said on Sunday that there are indications that al Qaeda is planning an attack against the Yemeni capital of in Sanaa) . But American citizens, and most others who are not flying through those 14 nations on their way to the United States, will no longer automatically face the full range of intensified security that was imposed after the attempted bombing of a Northwest Airlines flight, officials said. The change represents an easing of the immediate response to the attempt to set off a bomb on a flight from Amsterdam to Detroit. But the restrictions remain tougher than the rules that were in effect before Dec. 25. And the action on Sunday further establishes a global security system that treats people differently based on what country they are from, evoking protests from civil rights groups. Citizens of Cuba, Iran, Sudan and Syria, countries considered “state sponsors of terrorism,” and those of “countries of interest” — including Afghanistan, Algeria, Lebanon, Libya, Iraq, Nigeria, Pakistan, Saudi Arabia, Somalia and Yemen — will face the special scrutiny, officials said. Passengers holding passports from those nations, or taking flights that originated or passed through any of them, will be required to undergo full-body pat downs and will face extra scrutiny of their carry-on bags before they can board planes to the United States. In some countries that have more advanced screening equipment, travelers will also be required to pass through so-called whole-body scanners that can look beneath clothing for hidden explosives or weapons, or may be checked with a device that can find tiny traces of explosives. On Sunday, Prime Minister Gordon Brown of Britain announced that whole-body scanners would be introduced in that country’s airports. Officials in Amsterdam announced last week that they would begin using the scanners on passengers bound for the United States. The changes will mean that any citizen of Pakistan or Saudi Arabia will for the first time be patted down automatically before boarding any flight to the United States. Even if that person has lived in a country like Britain for decades, he now will be subject to these extra security checks. Nawar Shora, the legal director at the American-Arab Anti-Discrimination Committee, says the rule wrongly implies that all citizens of certain nations are suspect. “I understand there needs to be additional security in light of what was attempted on Christmas Day,” Mr. Shora said, adding that he intended to file a formal protest on Monday. “But this is extreme and very dangerous.” In the United States, an order for a “second screening” has already been in effect for a dozen countries. Charles Oy, 28, of Chicago, is an American who was born in Nigeria. He said that he detected heightened security over the weekend — not in Nigeria but upon his arrival Sunday at O’Hare International Airport in Chicago. The suspect arrested in the Northwest Airlines episode, Umar Farouk Abdulmutallab, 23, was Nigerian, but Mr. Oy said that the added scrutiny did not leave him discouraged. “I feel it is very isolated, and is something not characteristic of Nigeria,” he said. Meanwhile, flights out of one terminal at Newark Liberty International Airport were temporarily halted Sunday evening as officials investigated a possible security breach. After a man was seen walking the wrong way down the exit lane between the secured, or “sterile,” area and the public area around 5:20 p.m., the Transportation Security Administration stopped screening. More than two hours later, the T.S.A. ordered all passengers on the sterile side to move back to the public side for rescreening. While it was unclear who first alerted the authorities to the potential breach, the person was not an employee of the T.S.A., an official of the agency said. Micheline Maynard contributed reporting from Detroit, Mark Guarino from Chicago, and Sarah Wheaton from New York.

DTN News: 15 F-22A Raptors Being Sent From Alaska To Guam

DTN News: 15 F-22A Raptors Being Sent From Alaska To Guam *Source: DTN News / Inside (NSI News Source Info) HICKAM AIR FORCE BASE, Hawaii (AFNS) - January 03, 2010: Fifteen F-22 Raptors are scheduled to deploy to Andersen Air Force Base, Guam, in January 2010 for approximately three months. Fifteen F-22 Raptors from the 90th Fighter Squadron at Elmendorf Air Force Base, Alaska, are slated to deploy to Andersen AFB, Guam, in January. The deployment supports U.S. Pacific Command's theater security packages in the Western Pacific. (U.S. Air Force photo/Senior Airman Cynthia Spalding)
The fighters and associated personnel will deploy from the 90th Fighter Squadron at Elmendorf AFB, Alaska.
The deployment supports U.S. Pacific Command's theater security packages in the Western Pacific and follows the recent departure from the theater of two deployed squadrons of F-22s that also were supporting U.S. PACOM's TSP. The fighters and personnel deployed to Andersen AFB, Guam, and Kadena Air Base, Japan, completed their redeployment in October 2009. The F-22 is a transformational combat aircraft that can avoid enemy detection, cruises at supersonic speeds, is highly maneuverable, and provides the joint force an unprecedented level of integrated situational awareness.
As part of continuing force posture adjustments to address worldwide requirements, U.S. officials continue to deploy additional forces throughout the Western Pacific. This is the latest example of the flexibility U.S. forces have to meet their ongoing commitments and security obligations throughout the pacific region.

DTN News: Jockeying Has Begun For $7.5 Billion In US Funding To Pakistan

DTN News: Jockeying Has Begun For $7.5 Billion In US Funding To Pakistan
*Source: DTN News / Int'l Media
(NSI News Source Info) WASHINGTON - January 03, 2010: - The Obama administration has sketched out wide-ranging plans to spend $7.5 billion in aid to Pakistan over the next five years, an ambitious effort billed as crucial Marshall Plan-style support for Pakistan at a time when its fragile government is fighting the Taliban and other extremists. But thorny questions remain about how the administration will disburse the money, sparking a flurry of behind-the-scenes jockeying by governmental and nongovernmental institutions trying to secure a piece of it. The long-anticipated plan - submitted to Congress in late December and obtained by the Globe - calls for $1.5 billion for health and education to be spent in Pakistani regions vulnerable to extremism; $3.5 billion on big-ticket infrastructure projects, such as helping build hydroelectric dams and update power stations; $2 billion to strengthen and reform Pakistan’s government; and $500 million for humanitarian assistance for people displaced by Pakistani military operations against the Taliban. The plan also suggests as much as $1 billion in future funding to Pakistan’s military to purchase 20 AH-1Z Cobra attack helicopters from US defense contractors, but notes that the aim of the money is to signal long-term US support for Pakistan’s people, not just its military in a time of war. “It is an incredibly important symbol that our civilian assistance now will exceed our military assistance,’’ Paul Jones, deputy to Richard Holbrooke, the administration’s special envoy to Afghanistan and Pakistan, said in an interview. But the aid, pushed through Congress by Senator John F. Kerry of Massachusetts, comes at a time of increasing tension between Washington and the troubled South Asian ally, as many Pakistanis accuse the United States of meddling in their internal affairs and trying to micromanage the fight against the Taliban and Al Qaeda. Deciding who will receive funds, and who won’t, will be a delicate matter. For instance, in the education sector, Pakistan’s government believes it should receive the lion’s share of the money at a time when half of the population is under age 18 and nearly half of all school-age children do not attend school. “The government of Pakistan’s preference is that it should go through the government,’’ said Husain Haqqani, Pakistan’s ambassador to the United States, who is on leave from Boston University. Haqqani said the money could be used to send millions of children to school, train teachers, and improve curriculum. He noted that other groups that care about education are welcome, but that only Pakistan’s government could solve the large-scale challenges of the country’s education system. But a host of other groups are also lining up to fight for funds. The Hub School, a nonprofit being built by a former Pakistani diplomat, has already begun meeting with members of Congress for funds to help complete its $20 million campus in Karachi.
The school, which had been funded in part by wealthy Pakistani-Americans, including Boston-based consultants Ilyas Bhatti and Shahid Ahmed Khan, says it will give 800 boys a top-notch education. A girls school will be built later. “We are looking for as much support that we can get,’’ said Barry Hoffman, Pakistan’s longtime honorary consul general in Boston, adding that the school needs $10 million more in funding. “Our view is that you also have to support private schools like the Hub School that are developing young leaders. . . . We’re looking for support from Congress and US companies to complete what we have already gotten from the larger Pakistani community.’’ Silbi Stainton, executive director of the Marshall Direct Fund, an organization based in both Colorado and Pakistan that runs two schools in Pakistan and a vocational training program, says she is also planning to make a case for the funding, although she said: “It’s been a little bit of a mystery in the [nongovernmental organization] world exactly what we have to do to apply.’’ Sara Abbasi, chairwoman of the board of directors at Developments in Literacy, an organization funded by Pakistani-Americans that operates schools serving 15,000 children across Pakistan, said Congress should fund alternatives to government schools because a significant number of them are “ghost schools’’ that exist only on paper, with teachers who don’t show up pocketing salaries. “A lot of these government schools aren’t even safe places for children to go to,’’ she said, asserting that some of the local schools in remote areas promote extremism. Jones, the administration official, offered few clues as to what institutions would get funds for education, saying only that the money would be aimed at poor districts in areas like southern Punjab, where radical groups linked to terrorist bombings - such as Lashkar-e-Taiba - operate schools, clinics, and media outlets. “The challenge is with Lashkar-e-Taiba, in particular, that their organization is quite popular, because they have delivered services,’’ Jones said. According to the administration’s work plan, funds for education will be aimed at areas where “there is a demonstrated susceptibility to extremist organizations providing services that undermine the legitimacy of the Pakistani government.’’ But Shuja Nawaz, an analyst who leads the South Asia Center of the Atlantic Council, a Washington-based think tank, said Pakistan’s government does not yet have the capability of managing aid effectively to deliver those needed services. “It is important for the US to sequence its aid properly, to build governmental capacity first,’’ he said. Daniel Markey, a former State Department specialist on Pakistan who is now at the Council on Foreign Relations, suggested that a tug-of-war over money will be inevitable because there is not enough to go around. “Even the amounts we are talking about is more like seed money than solution money,’’ he said. “The scale of the problems are just so huge.’’

DTN News: Afghanistan And Pakistan Face Decisive Year 2010

DTN News: Afghanistan And Pakistan Face Decisive Year 2010 *Source: DTN News / BBC (NSI News Source Info) KABUL, Afghanustan - January 03, 2010: Guest columnist Ahmed Rashid says 2010 looks like presenting Afghanistan and Pakistan with their most difficult set of challenges since the end of the Cold War. People in the South Asia region will be holding their breath in the new year.If both nations fail to achieve a modicum of political stability and success against extremism and economic growth, the world will be faced with an expansion of Islamic extremism, doubts about the safety of Pakistan's nuclear weapons and major questions about US prestige and power as it withdraws from Afghanistan. The challenges for both countries are deeply interlinked and enormous. Without Pakistan eliminating Taliban sanctuaries or forcing the Afghan Taliban leadership into talks with Kabul, US success in Afghanistan is unlikely. The primary task is whether both countries can work together with the Western alliance to roll back the Taliban and al-Qaeda threat they face. That in turn rests on the success of the US and Nato's new strategy in both countries over the next 18 months as President Barack Obama has pledged to stabilise Afghanistan's political and economic institutions and start handing over Afghan security to the Afghan armed forces, starting in July 2011. Karzai undermined For that to happen much will depend on whether the West is able to find effective government partners in both Islamabad and Kabul. So far the prospects are not all that hopeful. Mr Karzai won a deeply flawed election. President Hamid Karzai has emerged as the victor after intensely controversial elections that undermined his domestic and international credibility, while the Afghan army is still far from being able to take over major security responsibilities. There will be renewed political wrangling as the West and the Afghans have to decide whether to hold parliamentary elections in the new year. The Afghan army is still undermanned, undertrained and has yet to be equipped with heavy weapons and an air force. The Afghan army also suffers from 80% illiteracy and a lack of recruits from the Pashtun belt, which are essential if the army is to be effective in the Taliban-controlled southern and eastern parts of the country. In the midst of what will certainly be a hot and possibly decisive summer of fighting in 2010 between Western forces and the Taliban, the other primary tasks of providing jobs and economic development, while building sustainable capacity within the Afghan government to serve the Afghan people, will be even more important and difficult to achieve. The Taliban strategic plan for the summer is likely to be to avoid excessive fighting in the south and east which is being reinforced with 30,000 new American soldiers. Instead, the Taliban will try to expand Taliban bases in the north and west of the country, where they can demoralise the forces of European Nato countries that are facing growing opposition at home about their deployment. The militants will also stretch the incoming US troops - forcing them to douse Taliban fires across the country - while they try to create greater insecurity in Central Asia. Pakistan crisis At the same time the Pakistan military, which now effectively controls policy towards India and Afghanistan, shows no signs of giving up on the sanctuaries that the Afghan Taliban have acquired in Pakistan. Pakistan has been wracked by violence Without Pakistan eliminating these sanctuaries or forcing the Afghan Taliban leadership into talks with Kabul, US success in Afghanistan is unlikely. Pakistan itself faces a triple crisis ~ acute political instability - President Asif Ali Zardari may soon be forced to resign, which could trigger long-term political unrest ~ an ever-worsening economic crisis that is creating vast armies of jobless youth who are being attracted to the message of extremism ~ the army's success rate in dealing with its own indigenous Taliban problem. The key to any improvement rests on the army and the political forces coming to a mutual understanding and working relationship with each other and providing support to Western efforts in Afghanistan. However, for the moment that appears unlikely while the army is hedging its bets with the Afghan Taliban, as it is fearful about a potential power vacuum in Afghanistan once the Americans start to leave in 2011. Other neighbouring countries - India, Iran, Russia and the Central Asian republics - may start thinking along the same lines and prepare their own Afghan proxies to oppose the Afghan Taliban, which could result in a return to a brutal civil war similar to that of the 1990s. Pakistan's fight against its own Taliban is going well but that is insufficient as long as the army does not move militarily or politically against the Afghan Taliban or other Punjab-based extremist groups now allied with the Taliban. Impasse Pakistani calculations also involve India - and the failure of both nations to resume the dialogue halted after the 2008 attacks in Mumbai (Bombay). India fears that extremist Punjabi groups could launch another Mumbai-style attack and are demanding that Pakistan break up all indigenous extremist groups that fought in Indian-administered Kashmir in the 1990s. Islamabad is refusing to do so until Delhi resumes talks with it. The Obama administration has so far failed to persuade India and Pakistan to resume a dialogue or settle their differences and if that remains the case in the new year, Pakistan is more than likely to continue defying US pressure to help with Afghanistan. There is growing anti-Americanism in Pakistan despite Washington's pledge of an annual $1.5bn aid package for the next five years. With the present lack of security in Pakistan - and the volatile mood towards the US and India that is partly being fuelled by the military - it is difficult to see how US aid can be effectively spent or how other economic investments can take place. At present there is an enormous flight of local capital from both Afghanistan and Pakistan that has increased since the Obama plan was announced. The recent arrests in the US and Europe of suspects linked to the Afghanistan-Pakistan region indicate that the world could face a wider extremist threat if it fails to effectively stabilise Afghanistan and help Pakistan towards a quick economic and political recovery. Ahmed Rashid is the author of the best-selling book Taliban and, most recently, of Descent into Chaos: How the war against Islamic extremism is being lost in Pakistan, Afghanistan and Central Asia.

DTN News: Krugman, Protectionism, And The RMB

DTN News: Krugman, Protectionism, And The RMB *Source: James Fallows ~ The Atlantic ......Link to this story
(NSI News Source Info) - January 03, 2010: This is the next installment in a catching-up-with-the-week's-events series, as advertised here. Today's topic: US-China relations, economic imbalances, and the value of the Chinese RMB.
In his NYT column yesterday, Paul Krugman discussed the Chinese government's refusal to let the RMB rise against the dollar, which (since the dollar is falling versus most other currencies) means that the RMB is rapidly sinking in value against the Euro and yen, even as China runs up huge trade surpluses. This, Krugman said, was a "predatory" policy that should and would provoke retaliation from the rest of the world.
My reaction on reading the column was, Matte mashita!, roughly "I've been waiting for this!", the phrase that audiences at Japanese kabuki performances may yell at the appearance of a favored character or famous line. For nearly a year, I have been watching the economic press in anticipation of just this kind of article.
It was about a year ago, in the devastation of China's manufacturing-export business that followed the world economic collapse, that I spoke with the financial-markets expert Michael Pettis, at Guanghua School of Business in Beijing. I wrote about his views (and others') in this article last spring in the Atlantic.
The heart of Pettis's argument was that China's economy in this past year was like America's in the early 1930s. Each had been the workshop of the world in the preceding decade; each had piled up huge trade surpluses and financial reserves; and -- the underappreciated part -- each suffered big job losses when its foreign customers could no longer buy its excess production. Having had more than "its fair share" of the world's manufacturing jobs in the 1920s, the US had more of them to lose in the 1930s. So too with China as demand fell around the world last year. Relatively more of China's people had depended on foreign customers for their jobs, thus relatively more of them were at risk than in Europe or the US. And indeed, tens of millions of Chinese factory jobs disappeared last year, especially in the southern part of the country.
The crucial part of Pettis' analysis was the next step: whether China would respond to this loss the way the U.S. had in the 1930s. Back then, desperate to protect American factory jobs, the U.S. Congress passed the Smoot-Hawley tariff, with levies on thousands of product categories. In itself, that tariff was not the cause of the world Depression (contrary to the implications of "Smoot Hawley" in the standard political speech or op-ed column). But as other countries retaliated, the cascading failure of demand intensified the hard times worldwide.
To bring this back to Krugman and China: Pettis concluded that the natural result of last year's economic slowdown would be the shrinkage of China's export economy and global trade surplus. Anything else would delay the "rebalancing" of economies that was necessary worldwide. If China tried too hard to prevent this, then that step would be the modern Smoot Hawley equivalent. As I put it in the article: "The real damage of Smoot-Hawley, [Pettis] says, was less economic than political. Other countries understood that the United States was trying to protect its trade surplus and therefore its workforce. They didn't like it as a political matter, and they struck back. "If that were to happen again... the real counterpart to Smoot-Hawley would be Chinese protectionism--or rather, any effort by China to defend its huge trade surpluses, as the U.S. once did. China's government is unlikely to rely on outright Smoot-Hawley-style tariffs. Instead it could increase subsidies to exporters; it could try to push the RMB's value back down, after three years of letting the currency rise; it could encourage manufacturers to restrain wages; it could impose indirect barriers to imports, as with its recent pressure on China's airlines to cancel outstanding orders for Boeing and Airbus airplanes. By early this year, China's government was in fact doing every one of these things."
That is the context for Krugman's article, in my view. Political leaders around the world talk about the need to "rebalance" their economies; this means more saving and less overconsumption in the United States; but it also means less under-consumption in China, in the sense of relying less on foreigners as customers. As long as the Chinese government holds the line on the RMB, it is doing its best to resist and thwart that balancing process. As I argued in another article, the value of the RMB is not at all the main reason for China's manufacturing success or the shift of world jobs to China. But the refusal to let that value change will become a major impediment to the global economic adjustment that China's leaders (with all others) say is necessary.
The bottom line of Krugman's column is: if China's government doesn't change this policy, it is inviting trouble for itself and everyone else. To me this seems obviously right.
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