i.want.world

From Robert Peston:

Perhaps more importantly, and at the risk of repeating myself, the downgrades increase the dependence of the big banks on finance from the European Central Bank – and for the economic recovery of the eurozone, that’s a very bad thing.

The less that banks are able to raise funds in a normal commercial way, the more they’re dependent on a central bank, the more reluctant they are to lend to the wider economy – and given the massive dependence of the eurozone economy on finance provided by banks, that leads to a reduction of economic activity, a reinforcement of recessionary conditions…

..the downgraded Italian and French governments would be seen to be less financially capable of bailing out Italian and French banks in a crisis, so other creditors would be shouldering more risk…

So even if the downgrades don’t lead to default by a nation or a bank, they make it much harder for the banks – and in a way the whole eurozone – to get off life support.

…That creates a damaging negative feedback loop (less lending means asset price falls, more bankruptcies, bigger losses for banks, and even less lending by capital-constrained banks) which makes it all the harder for the eurozone to break free of its cycle of decline.

And, as I said in my earlier note, the downgrades also make it harder for the eurozone to establish a proper circuit breaker – in the form of a giant bailout fund – to protect other sovereign creditors in the event that today’s impasse in Greek debt talks lead to a Greek default.

Here is a useful and only slightly overstated summary of where things stand:

The entire eurozone banking system can be seen to have been nationalised – or at least the funding of banks has been nationalised, even if their ownership hasn’t been transferred to taxpayers.

some comments from RBS.

or any central banking institution for that matter. Paul Krugman points to a very important, very recent paper by Hyun Song Shin (pdf), excerpt:

As we will see shortly, foreign banks’ US branches and subsdiiaries drive the gross capital outflows through the banking sector by raising wholesale funding in the US through money market funds (MMFs) and then shipping it to headquarters. Remember that foreign banks’ branches and subsidiaries in the US are treated as US banks in the balance of payments, as the balance of payments accounts are based on residence, not nationality.

The gross capital inflows to the United States represent lending by foreign (mainly European) banks via the shadow banking system through the purchase of private label mortgage-backed securities and structured products generated by the securitization of claims on US borrowers. In this way, European banks may have played a pivotal role in influencing credit conditions in the United States by providing US dollar intermediation capacity. However, since the eurozone has a roughly balanced current account while the UK is actually a deficit country, their collective net capital flows vis-a-vis the United States do not reflect the influence of their banks in setting overall credit conditions in the US. The distinction between net and gross flows is a classic theme in international finance, but deserves renewed attention given the new patterns of gross capital flows due to global banking.

Historical analogies are a dangerous tool, but reading about the founding era while watching the European sovereign debt situation unfold it’s hard to avoid being struck by parallels. The Articles of Confederation were, like the European Union, a form of supranational entity that was more than a treaty by less than a state. The Confederation Congress lacked taxing power, and had a cumbersome decision-making structure. And under the Articles, the United States was troubled by a variety of sovereign debt problems that were eventually resolved by the adoption of the US Constitution and the enactment of Alexander Hamilton’s debt assumption plan. And while a Hamiltonian solution to Europe’s current woes is extremely unlikely, I think it would work economically.

What would that look like?

It would start with the recognition that Greece is insolvent. It can’t pay the money it owes. One or two or maybe three other countries also may be insolvent. And the existence of solvency problems in some states is creating liquidity problems for other larger states. So there’s some insolvency, and even though the insolvency is concentrated in a relatively small number of small states it’s a problem for a much broader set of European people. At the same time, if you look at the total amount of sovereign debt in Europe and compare it to the Eurozone’s total fiscal capacity, the debt is very manageable. The Eurozone as a whole is a very solvent, creditworthy entity. So in principle you could consolidate all that outstanding European debt into a single Eurozone-wide debt financed by a modest European Solidarity VAT Surcharge. Then you’d have to severely curtail (if not eliminate) the EU member states’ ability to engage in deficit spending, limiting them to some kind of authority to borrow from a central European entity. The EU itself would become a debt-issuing, taxing entity like a real country.

This would be exceedingly beneficial as an economic matter, taking a problem that’s currently totally intractable and resolving it at extremely modest cost to taxpayers. What’s more, the thinking of the Founding Fathers of the Eurozone appears to have been that the monetary union would be but one step on a path of “ever-closer union.” But obviously to enact my scheme, Nicholas Sarkozy would have to be willing to sign his name to the end of France as an independent nation state. And lather, rinse, repeat for Portugal, Spain, Italy, Finland, Ireland, etc. And as you can imagine, this isn’t going to happen, so….

The EU is rethinking things:

The European Union intends to increase tariffs on developing countries including China, India and Brazil under a plan to give only the neediest nations preferential access to the world’s biggest market.

The European Commission proposed to deny faster-growing emerging economies tariff reductions granted through the Generalized System of Preferences, under which the EU imported 60 billion euros ($86 billion) of goods in 2009. That figure would fall to about 38 billion euros under the proposal to limit the trade benefits to 80 nations instead of the current 176, according to the commission, the EU’s executive arm.

The EU, battling a Greece-triggered debt crisis after emerging from a recession in 2009, says overhauling decades of trade policy for poorer countries is justified by the economic rise of such nations as China, India and Brazil. Russia and Saudi Arabia are also among the nations that would lose GSP benefits under the proposal, which needs the support of EU governments and the European Parliament.

“Global economic balances have shifted tremendously,” EU Trade Commissioner Karel De Gucht said today in Strasbourg, France. “If we grant tariff preferences in this competitive environment, those countries most in need must reap the most benefits.”

More here: http://trade.ec.europa.eu/doclib/press/index.cfm?id=707

“A large part of the Greek debt is hidden on the balance sheets of the Greek banks,” said Theodore Pelagidis, an economist at the University of Piraeus and the co-author of “Understanding the Crisis in Greece,” a scathing account of Greece’s economic implosion. “So you cannot just say ‘Let’s restructure.’ It is not so easy.”

Goldman estimates that requiring a lender to give up 40 percent on holdings of Greek sovereign debt would result in a loss of 5.3 billion euros for the National Bank of Greece, the country’s largest bank. While that bank, which is in the process of raising fresh cash, probably has the capital to survive such a loss, Greece’s other banks may not be so lucky.

As for Portugal, its domestic debt burden is divided more proportionally among foreign and domestic banks, compared with Greece. Still, two out of the three largest holders of its debt are Portuguese, Caixa Geral de Depósitos and Banco BPI, with 11 billion euros combined.

The No. 2 holder, behind Caixa Geral de Depósitos, is the Spanish giant, Santander, according to Goldman, with 4.9 billion euros.

The article is here.  The problem, of course, is this: if the government stops payment on some of the debt, they then will have to bail out their domestic banks.

Die speziell in Deutschland geführte Attacke der Verlagshäuser auf Google ist mehr als nur das übliche Beißverhalten konkurrierender Konzerne. Es ist auch eine Schlacht um Meinungsmacht und Meinungsfreiheit, um das Oligopol der Verleger und meinungsführenden Redaktionen, das durch das Internet in seinen Grundfesten erschüttert ist.

Das kommerzielle Radio war das letzte Medium in Deutschland, das die Verleger, mit tatkräftiger Hilfe der Politik, weitgehend unter ihre Kontrolle bringen konnten. Deshalb ist es auch so schlecht. Es ist, bar jeden publizistischen Anspruchs, als Gelddruckmaschine für satte, träge und an zweistellige Umsatzrenditen gewöhnte Verlagshäuser ausgelegt.

Das kommerzielle Fernsehen war das erste Medium, das den Verlegern aus den Fingern glitt. Das als Verlegerfernsehen gestartete Sat1 ging erst an den Filmhändler Leo Kirch und fiel später Finanzinvestoren in die Hände. Bertelsmann konnte nur in einem herkulischen Kraftakt die RTL-Gruppe unter seine Kontrolle bringen. Fast hätte die Familie Mohn deshalb an die Börse gehen müssen.

Das Internet nahmen die Verleger in den neunziger Jahren vor allem als weitere Abspielstation für ihre ohnehin vorhandenen Inhalte wahr. Das Ziel war, das Internet wie zuvor das Radio unter verlegerische Kontrolle zu bringen. Früh schon wies die IVW, die Informationsgemeinschaft zur Feststellung der Verbreitung von Werbeträgern, auch die Reichweiten der verlegerischen Onlinemedien aus.

Doch den damit verbundenen Anspruch, den gesamten Markt abzubilden und zu definieren, konnten sie nie vollends einlösen, denn die wirklich großen Spieler wie T-Online, früher AOL und später Google spielten das IVW-Spiel nicht mit. Die AGOF, die Arbeitsgemeinschaft Online-Forschung, krankt bis heute an den damals eingeführten, untauglichen Messgrößen wie Pageimpressions (total absurd) und Visits (nicht viel besser). Für Onlinereichweiten relevanter sind Unique Visitors und vor allem die Nutzungszeit.

Den unsäglichen Bildstreckenklickschindejournalismus im Netz haben sich die Verlage selbst eingebrockt, indem sie untaugliche Messinstrumente in den Markt gedrückt und damit den Zwang zur Pageimpressioninflation geschaffen haben. Und wie das bei Inflationen so ist: Das Überangebot an Inventar hat die Preise ins Bodenlose fallen lassen - und damit die Möglichkeiten, Onlinejournalismus aus Onlinewerbung zu finanzieren, nicht eben vergrößert.

Schwerer noch wiegt indes die Tatsache, dass das Netz kein Oligopol ist, dass es kein Verlagsmonopol auf Onlinejournalismus gibt, sondern dass im Netz, anders als in den meisten angestammten Printmärkten, echter Wettbewerb herrscht. Zweistellige Umsatzrenditen sind in diesem Umfeld nur schwer zu erzielen.

Und der Wettbewerb erstreckt sich auch auf den Markt der Meinungen. Die Redaktionen haben ihre Gatekeeperfunktion verloren. Sie bestimmen nicht mehr alleine, wer und wessen Meinung Zugang zur Öffentlichkeit erhält. Das Internet hat den Zugang zur Öffentlichkeit prinzipiell für jedermann geöffnet. Die meinungsführenden Redaktionen führen nicht mehr alleine.

Google steht in dieser Schlacht paradigmatisch für zwei Dinge: für unerwartete und unerwünschte Konkurrenz auf dem Werbemarkt und für die Öffnung des Meinungsmarktes. Google hat geschafft, was keinem Verlag gelungen ist: einen Milliardenumsatz im deutschen Werbemarkt zu erwirtschaften. Google steht für ein offenes Internet und einen freien Markt der Meinungen, wird dafür in China attackiert, in Italien verurteilt und in Deutschland dämonisiert.

Es geht in dieser Schlacht nicht um Google, sondern um das offene Internet, das Recht auf freie Meinungsäußerung und den Zugang für Jedermann. Es ist die letzte Schlacht der Verleger, und sie versuchen alles, um die Politik auf ihre Seite zu ziehen, wie seinerzeit beim Radio erfolgreich durchexerziert. Vielleicht ist es Zeit, sich an John Perry Barlow zu erinnern, der 1996 den digitalen Raum für unabhängig erklärte.

A Declaration of the Independence of Cyberspace

by John Perry Barlow

Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.

We have no elected government, nor are we likely to have one, so I address you with no greater authority than that with which liberty itself always speaks. I declare the global social space we are building to be naturally independent of the tyrannies you seek to impose on us. You have no moral right to rule us nor do you possess any methods of enforcement we have true reason to fear.

Governments derive their just powers from the consent of the governed. You have neither solicited nor received ours. We did not invite you. You do not know us, nor do you know our world. Cyberspace does not lie within your borders. Do not think that you can build it, as though it were a public construction project. You cannot. It is an act of nature and it grows itself through our collective actions.

You have not engaged in our great and gathering conversation, nor did you create the wealth of our marketplaces. You do not know our culture, our ethics, or the unwritten codes that already provide our society more order than could be obtained by any of your impositions.

You claim there are problems among us that you need to solve. You use this claim as an excuse to invade our precincts. Many of these problems don't exist. Where there are real conflicts, where there are wrongs, we will identify them and address them by our means. We are forming our own Social Contract . This governance will arise according to the conditions of our world, not yours. Our world is different.

Cyberspace consists of transactions, relationships, and thought itself, arrayed like a standing wave in the web of our communications. Ours is a world that is both everywhere and nowhere, but it is not where bodies live.

We are creating a world that all may enter without privilege or prejudice accorded by race, economic power, military force, or station of birth.

We are creating a world where anyone, anywhere may express his or her beliefs, no matter how singular, without fear of being coerced into silence or conformity.

Your legal concepts of property, expression, identity, movement, and context do not apply to us. They are all based on matter, and there is no matter here.

Our identities have no bodies, so, unlike you, we cannot obtain order by physical coercion. We believe that from ethics, enlightened self-interest, and the commonweal, our governance will emerge . Our identities may be distributed across many of your jurisdictions. The only law that all our constituent cultures would generally recognize is the Golden Rule. We hope we will be able to build our particular solutions on that basis. But we cannot accept the solutions you are attempting to impose.

In the United States, you have today created a law, the Telecommunications Reform Act, which repudiates your own Constitution and insults the dreams of Jefferson, Washington, Mill, Madison, DeToqueville, and Brandeis. These dreams must now be born anew in us.

You are terrified of your own children, since they are natives in a world where you will always be immigrants. Because you fear them, you entrust your bureaucracies with the parental responsibilities you are too cowardly to confront yourselves. In our world, all the sentiments and expressions of humanity, from the debasing to the angelic, are parts of a seamless whole, the global conversation of bits. We cannot separate the air that chokes from the air upon which wings beat.

In China, Germany, France, Russia, Singapore, Italy and the United States, you are trying to ward off the virus of liberty by erecting guard posts at the frontiers of Cyberspace. These may keep out the contagion for a small time, but they will not work in a world that will soon be blanketed in bit-bearing media.

Your increasingly obsolete information industries would perpetuate themselves by proposing laws, in America and elsewhere, that claim to own speech itself throughout the world. These laws would declare ideas to be another industrial product, no more noble than pig iron. In our world, whatever the human mind may create can be reproduced and distributed infinitely at no cost. The global conveyance of thought no longer requires your factories to accomplish.

These increasingly hostile and colonial measures place us in the same position as those previous lovers of freedom and self-determination who had to reject the authorities of distant, uninformed powers. We must declare our virtual selves immune to your sovereignty, even as we continue to consent to your rule over our bodies. We will spread ourselves across the Planet so that no one can arrest our thoughts.

We will create a civilization of the Mind in Cyberspace. May it be more humane and fair than the world your governments have made before.

Davos, Switzerland

February 8, 1996

"Kafka was a slightly strange man," Sommer recalls. "He used to come to our house, sit and talk with my mother, mainly about his writing. He did not talk a lot, but rather loved quiet and nature.

Alice Herz-Sommer, who recently celebrated her 103rd birthday, is a pianist and a survivor of the Nazi concentration camps; she recalls her time in Prague:

We frequently went on trips together. I remember that Kafka took us to a very nice place outside Prague. We sat on a bench and he told us stories. I remember the atmosphere and his unusual stories. He was an excellent writer, with a lovely style, the kind that you read effortlessly," she says, and then grows silent. "And now, hundreds of people all over the world research and write doctorates about him."

She says she knows about the ongoing trial in Israel, at the center of which is the question of who owns the rights to Kafka's estate. "Kafka would have been against this.

Don't forget that he asked his friend Max Brod not to publish his writings. That much I know," says Sommer - she is the last person alive who knew Kafka personally.

More here.

Roughly speaking, that's the issue in the EC - Measures Affecting Poultry Meat WTO dispute (DS389), for which the U.S. recently announced it will request a panel. The panel request describes the issue as follows:

The EC prohibits the import of poultry treated with any substance other than water unless that substance has been approved by the EC. The EC has not approved any other substance. Consequently, the EC prohibits the import of poultry that has been processed with chemical treatments ("pathogen reduction treatments" or "PRTs") designed to reduce the amount of microbes on the meat, effectively prohibiting the shipment of virtually all US poultry to the EC. The EC has not published or otherwise made available the process for approving a substance. The EC also maintains a measure regarding the marketing standards for poultry meat, which defines "poultrymeat" as only "poultrymeat suitable for human consumption, which has not undergone any treatment other than cold treatment."

In 2002, the United States requested the European Commission ("Commission") to approve the use of four PRTs in the production of poultry intended for export to the EC: acidified sodium chlorite, trisodium phosphate, peroxyacids, and chlorine dioxide. However, after more than six years, including unexplained delays, the EC has not approved any of these four PRTs and instead has rejected the approval of their use.

The EC's failure to approve is despite the fact that various EC agencies have issued scientific reports regarding a number of different aspects related to the processing of poultry with these four PRTs. Those reports did not find any scientific basis for banning the use of these PRTs. To the contrary, the conclusion of these reports is that the importation and consumption of poultry processed with these four PRTs does not pose a risk to human health.

In a nutshell, the trade issue is the following: U.S. producers use chemicals to clean their poultry, but the EC does not allow the sale of poultry cleaned this way, so U.S. producers can't sell their poultry in the EC.

For SPS disputes, I'm always interested to see how the substance of the dispute is presented, in particular whether the claim is mainly about "discrimination," "necessity," or "science," or some combination of these three.  Here, the parties seem to want to take different approaches to characterizing the dispute. From the USTR press release:

"The U.S. poultry subject to the EU ban is safe. There is no scientific evidence that the use of pathogen reduction treatments pose any health risk to consumers," said Nefeterius McPherson, a USTR spokeswoman.

By contrast, from the DG Trade press release: "we will defend our food safety legislation, which does not discriminate against imported products."  So, in the battle of the press releases, it's about science for the U.S., whereas for the EC it's about discrimination (or lack thereof).

Of course, it's the panel request that really matters in this regard.  Here are some of the key provisions the U.S. cited in the request and what they are mainly about:

SPS Agreement Article 2.2 - Necessity and Science

SPS Agreement Articles 5.1 and 5.2 - Science 

GATT Article III:4 - Non-Discrimination

GATT Article XI:1 -  Quotas and other Import Restrictions.  (This one could be interesting if it explores the intersection between import restrictions and domestic regulations, given that the measure bans all such poultry, not just imports)

TBT Agreement Article 2.1 - Non-Discrimination

It's interesting that the U.S. press release does not mention discrimination, but the panel request cites some discrimination provisions.  I'm not sure what to make of that.  I would have thought it would be a good idea to sell the case as being about discrimination, at least in part.

It's also worth noting that in the consultations request, the U.S. left out explicit references to the non-discrimination provisions.  There, the U.S. cited SPS Agreement Articles 2.2, 5, 8 and Annex C(1); GATT Articles X:1 and XI:1; Agriculture Agreement Article 4.2; and TBT Agreement Article 2 (without mentioning which sub-provisions).

The substance of the discrimination claims will also be worth following.  From what I can tell, this will be a claim of de facto discrimination, as the measures apply to all products regardless of origin.  It is these kinds of claims that often give the most insights into the scope of the non-discrimination standard.

While reading a study commissioned by the EU with the objective of determining "to what extent the European standardization system in its present form can guarantee appropriate access to all interested parties" along with accompanying recommendations for "avenues of exploration", I came across this paragraph:

"The participation of SMEs and societal stakeholders can be hampered by a lack of resources and technical expertise. This can, in turn, affect the consensus reaching process and therefore cause delays in standards development. The Commission is therefore providing financial support to European organizations and associations representing SMEs and societal stakeholder interests."

The Commission pays these guys in order to gain 'consensus' and the 'participation' of stakeholders - so called 'private organizations' - during the standardization process. I really would like to know, how does that work?