ECONOMIC REPORTING REVIEW | July 23, 01

"Bush Urges Shift to Direct Grants for Poor Nations," by David E. Sanger in the New York Times, July 18, 2001, page A1.

"Protestors at Bay, Rich Nations' Chiefs to Meet in Genoa," by Alessandra Stanley and Warren Hoge in the New York Times, July 18, 2001, page A10.

"Fortress Genoa Awaits G-8 Leaders and Foes," by Alessandra Stanley in the New York Times, July 19, 2001, page A12.

"Bush Scolds Protesters at Genoa Talks," no byline, New York Times, July 19, 2001, page A12.

The Times article by Sanger discusses a speech in which President Bush advocated that the World Bank convert many of its loans to grants. The other Times articles report on preparations for the G-8 summit in Genoa, Italy. All of these articles include criticisms directed against those who have protested the recent course of globalization, including comments from President Bush and British Prime Minister Tony Blair. For example, the Stanley and Hoge article quotes Blair saying, "If the public knew [the protesters'] views, they'd disagree with them," but neither this article nor any of the others cited above present the protesters' views.

The theme repeated by the protesters' critics is that developing nations must export to the industrialized nations in order to escape poverty. It is worth noting that a large share of export earnings, especially for the poorest nations, are used to service past debt. If this debt were cancelled, poor nations would have to divert far fewer resources to producing goods for export and would be better able to develop their domestic economies. The TRIPS agreement, which extends U.S.-type patent and copyright protection to developing nations, will increase the flow of royalty payments and licensing fees from developing nations, further increasing the need for developing nations to export. In short, the industrialized nations are seeking to impose a situation in which developing nations must increase their exports. This need is not a natural development, as implied by the protesters' critics.

The article by Sanger notes that the World Bank's programs "often go awry," but attributes this fact to "local corruption or the conflict between the bank's plans and those of local and national leaders." It is also possible that the World Bank's programs go awry because they are poorly designed or driven by ideological motives -- such as the promotion of privatization -- rather than a serious examination of conditions. This was an argument made by Joseph Stiglitz, the former chief economist at the World Bank.
 

"U.S., E.U. Near Accord on Trade Talks," by Paul Blustein in the Washington Post, July 18, 2001, page E1.

This article reports on negotiations between the European Union and the United States over the agenda for the WTO summit in November. Much of the article is ostensibly devoted to the concerns of developing nations, discussing efforts to increase their access to markets in the industrialized nations.

In spite of this focus, the article never mentions the reconsideration of the TRIPS agreement, the one item that developing nations insisted be on the agenda at the WTO talks. By imposing U.S.- type copyright and patent protection on developing nations, TRIPS could drain hundreds of billions of dollars in royalty payments and licensing fees from developing nations over the coming decades.

It is also worth noting that at one point the article refers to the views of "free-trade advocates," without identifying any groups or individuals. Most people who claim to support "free trade" also support protectionist measures like copyrights and patents, and do not object to professional restrictions that maintain high salaries for doctors, lawyers and other professionals. It is unlikely that the people referred to in this quote can accurately be described as "free trade advocates."
 

"U.S., Japan Are Pressed on Kyoto," by William Drozdiak in the Washington Post, July 17, 2001, page A11.

This article reports on an international conference designed to reach an agreement to curb global warming, which is taking place in Germany. At one point the article reports that the previous conference in the fall of last year broke down over a dispute over trading pollution credits between countries. The article also reports that the delegates will attempt to determine the extent to which forests and farmlands -- which pull greenhouse gases out of the atmosphere -- "should be factored into the equation."

According to reporting at the time, the last conference in the Hague broke down primarily over a demand by the United States that it be allowed to emit at levels above those agreed to in the Kyoto conference in 1997, based on the fact that it has large amounts of forests and farmlands (see "Global Warming Talks Collapse," by William Drozdiak, Washington Post, November 26, 2000, page A1; "Treaty Talks Fail to Find Consensus In Global Warming," by Andrew C. Revkin, New York Times, November 26, 2000, Section 1, page 1; "Envoys Could Not Agree on Value of Forests to World Environment," by Andrew C. Revkin, New York Times, November 26, 2000, Section 1, page 16; and ERR 12-1-00). The Clinton administration took the position at the Hague conference that it should be able to count the carbon dioxide pulled out of the atmosphere by its forests and farmland against the ceiling it had agreed to three years earlier. Since everyone at the Kyoto conference knew that the United States, like other nations, has forests and farmlands, and set the ceilings with this in mind, the U.S. was effectively demanding that it be granted a higher ceiling than the one that it had originally accepted.

There would be little dispute among the nations that increasing their forests, farmlands, or other sinks for carbon dioxide, should be counted against the limits. The issue that created controversy was the U.S. effort to raise the limits based on existing carbon sinks. This would seriously reduce the effectiveness of the treaty in curbing global warming.
 

"Argentine with a Headache: The Economy," by Clifford Krauss in the New York Times, July 18, 2001, page A12.

This article examines the situation of Domingo Cavallo, Argentina's economy minister, as he tries to get Argentina out of its current economic crisis. The article begins by asserting that Mr. Cavallo was viewed as "the knight in shining armor who would lift Argentina out of its three-year long recession," when he took over the position four months ago. It is worth noting that many of Argentina's current problems actually are the result of Mr. Cavallo's policies in a previous government.

Mr. Cavallo made the decision in the early 1990s to tie Argentina's currency to the dollar as a way to curb hyper-inflation. While the policy was successful in taming inflation, it had predictable consequences, which Argentina is now experiencing. When the U.S. dollar rose against other major currencies, the Argentine currency rose with it, making its goods uncompetitive in world markets. The problem was exacerbated in 1999, when Brazil, Argentina's major trading partner, devalued its currency.

Argentina's situation became even worse when Alan Greenspan began raising interest rates in 1999 in order to slow the U.S. economy. In order to maintain the link to the dollar, Argentina had to raise its interest rates, even though it was already in a recession. Current efforts to maintain the peg with the peso significantly overvalued have led to even higher interest rates, enormous foreign borrowing, and other measures that are hurting the economy.

At one point the article quotes Mr. Cavallo as saying that when he became economics minister four months ago, he "didn't realize our credit had totally evaporated." Argentina's financial difficulties had been widely reported in the international business press at the time (see "Speedy Start on Emergency Economic Plan in Argentina," by Clifford Krauss, New York Times, March 24, 2001, page B1; and "Argentina Presses for Ways to Jolt Its Economy Out of Recession," by Clifford Kraus, New York Times, March 25, 2001, section 1, page 11). If Mr. Cavallo was unaware of the extent of the nation's credit problems it would suggest that he was an extraordinarily ill-informed person to become the government's top economic official.