Government-Run Cyber Security? No, Thanks. By Jim Harper
Cato, March 13, 2009
Most people assume, and it's probably true, that our nations networks and databases aren't secure enough. The risks range from corporate espionage to data breach and identity fraud to "cyber warfare." The White House is taking on this problem—it's conducting a 60-day cyber security review. The review should explicitly deny federal responsibility for securing private infrastructure.
The president regards his budget as a "blueprint for America's future." His opponent in the recent election wanted to be commander-in-chief of the United States. So it wouldn't be surprising if the review set the stage for a federal takeover of communications networks in the name of cyber security. But owning cyber security may be an unappealing prospect even for federal authorities with an expansive view of their roles. The surveillance needed for government-run cyber security would create prohibitive threats to civil liberties and privacy. And government folks seem aware that they don't know how to do cyber security any better than anyone else.
How do you improve security without exploding government power? How do you do it without giving the government de facto surveillance over the Internet? And, most importantly, how do you actually figure out how to do it?
The economic statement of the problem is this: Network operators, data owners, and users sometimes create externalities—risks to others that don't affect their own bottom lines. Getting them to internalize those risks can be done one of two ways: Regulation—you mandate it—or liability—you make them pay for harms they cause others. Regulation and liability each have strengths and weaknesses, but a liability regime is ultimately superior.
One of the main problems with regulation—especially in a dynamic field like technology—is that it requires a small number of people to figure out how things are going to work for an unknown and indefinite future. Those kinds of smarts simply don't exist. So regulators often punt: When the Financial Services Modernization Act tasked the Federal Trade Commission with figuring out how to secure financial information, it didn't. Instead, the "Safeguards Rule" simply requires financial institutions to have a security plan. If something goes wrong, the FTC will go back in and either find the plan lacking or find that it was violated, much like the body-bagging the SEC does.
Another weakness of regulation is that it tends to be too broad. In an area where risks exist, regulators will ban entire swaths of behavior rather than selecting among the good and bad. In 1998, for example, Congress passed the Children's Online Privacy Protection Act, and the FTC set up an impossible-to-navigate regime for parental approval of the websites their children could use. Today, no child has been harmed by a site that complies with COPPA because there really aren't any. The market for serving children entertaining and educational content is a shadow of what it could be.
Regulators and regulatory agencies are also subject to "capture." In his recent caution against network neutrality regulation, Tim Lee shows how industries have historically co-opted the agencies intended to control them and turned those agencies toward insulating incumbents from competition.
And regulation often displaces individual justice. The Fair Credit Reporting Act preempted state law causes of action against credit bureaus that, thus, cannot be held liable for defamation when their reports wrongfully cause someone to be denied credit. "Privacy" regulations under the Health Insurance Portability and Accountability Act gave enforcement powers to an obscure office in the Department of Health and Human Services. While a compliance kabuki dance goes on overhead, people who have suffered privacy violations are diverted to seeking redress by the grace of a federal agency.
Tort liability is based on the idea that someone who does harm, or allows harm to occur, should be responsible to the injured party. When a person drives a car, builds a building, runs a hotel, or installs a light switch, he or she owes it to anyone who might be injured to keep them safe. A rule of this type could apply to owners and operators of networks and databases.
A liability regime is better at discovering and solving problems than regulation. Owners faced with paying for harms they cause will use the latest knowledge and their intimacy with their businesses to protect the public. Like regulation, a liability regime won't catch a new threat the first time it appears, but as soon as a threat is known, all actors must improve their practices to meet it. Unlike regulations, which can take decades to update, liability updates automatically.
Liability also leaves more room for innovation. Anything that causes harm is forbidden, but anything that does not cause harm is allowed. Entrepreneurs who are free to experiment will discover consumer-beneficial products and services that improve health, welfare, life, and longevity.
Liability rules arent always crystal clear, of course, but when cases of harm are alleged in tort law, the parties meet in a courtroom before a judge, and the judge neutrally adjudicates what harm was done and who is responsible. When an agency enforces its own regulation, it's not neutral: Agencies work to "send messages," to protect their powers and budgets, and to foster future careers for their staffs.
Especially in the high-tech world, it's hard to prove causation. The forensic skill to determine who was responsible for an information age harm is still too rare. But regulation is equally subject to evasion. And liability acts not through lawsuits won, but by creating a protective incentive structure.
One risk unique to liability is that advocates will push to do more with it than compensate actual harms. Some would treat the creation of risk as a "harm," arguing, for example, that companies should pay someone or do something about potential identity fraud just because a data breach created the risk of it. They often should, but blanket regulations like that actually promote too much information security, lowering consumer welfare as people are protected against things that don't actually harm them.
As complex and changing as cyber security is, the federal government has no capability to institute a protective program for the entire country. While it secures its own networks, the federal government should encourage the adoption of state common law duties that require network operators, data owners, and computer users to secure their own infrastructure and assets. (They in turn will divide up responsibility efficiently by contract.) This is the best route to discovering and patching security flaws in all the implements of our information economy and society.
The White House's 60-day cyber security review should explicitly deny federal responsibility for securing private communications infrastructure. This is the best way forward—and an essential route if we are to keep the government from monitoring and controlling Americans' private communications.
Jim Harper is the director of information policy studies at the Cato Institute in Washington, D.C. To subscribe, or see a list of all previous TechKnowledge articles, visit TechKnowledge Newsletter - Technology and Telecom Studies.
Friday, March 13, 2009
A Modest Proposal for a Competing Public Health Plan
A Modest Proposal for a Competing Public Health Plan. By Len Nichols & John M. Bertko
New America Foundation, March 11, 2009
For the full text of the paper, please click here.
For a brief summary of the paper, please click here.
Executive Summary
Many comprehensive reform proposals reflect the fundamental need to control health care costs and create a marketplace wherein insurers compete on value and customer satisfaction, rather than risk selection and marketing. Several leading proposals promote competition between private health plans and a “public” health insurance option. Unfortunately, the debate over this issue has become polarized unnecessarily.
It is possible to structure a new insurance marketplace so that public and private health plans compete on a level playing field. This will require separating the oversight of the public plan from that of the managers of the marketplace or exchange(s). It will also require that all rules of the marketplace – benefit package requirements, insurance regulations, and risk adjustment processes – apply to all plans equally, whether public or private. Finally, this model requires that we address cost growth containment systemically and avoid relying heavily on the public plan’s potential market power. In turn, this will require a commitment on the part of policymakers to acquire a health information infrastructure, develop best practice information, and encourage re-aligned incentives that promote high-quality, efficient care for all.
New America Foundation, March 11, 2009
For the full text of the paper, please click here.
For a brief summary of the paper, please click here.
Executive Summary
Many comprehensive reform proposals reflect the fundamental need to control health care costs and create a marketplace wherein insurers compete on value and customer satisfaction, rather than risk selection and marketing. Several leading proposals promote competition between private health plans and a “public” health insurance option. Unfortunately, the debate over this issue has become polarized unnecessarily.
It is possible to structure a new insurance marketplace so that public and private health plans compete on a level playing field. This will require separating the oversight of the public plan from that of the managers of the marketplace or exchange(s). It will also require that all rules of the marketplace – benefit package requirements, insurance regulations, and risk adjustment processes – apply to all plans equally, whether public or private. Finally, this model requires that we address cost growth containment systemically and avoid relying heavily on the public plan’s potential market power. In turn, this will require a commitment on the part of policymakers to acquire a health information infrastructure, develop best practice information, and encourage re-aligned incentives that promote high-quality, efficient care for all.
How the Obama Administration Should Deal with Russia's Revisionist Foreign Policy
How the Obama Administration Should Deal with Russia's Revisionist Foreign Policy. By Ariel Cohen, Ph.D.
Heritage Backgrounder #2246
March 12, 2009
See full article w/references here.
Barack Obama and Joe Biden will address the challenge posed by an increasingly autocratic and bellicose Russia by pursuing a new, comprehensive strategy that advances American national interests without compromising our enduring principles.
—"Meeting the Challenges of a Resurgent Russia" http://www.barackobama.com
President Barack Obama has expressed concerns over Russia's increasingly truculent behavior and the threat it poses to the current international system. These concerns are valid and the threat of a resurgent Russia is palpable.[1] Moscow's efforts at carving out a "sphere of privileged interests" throughout Eurasia and rewriting the rules of European security have negative implications for U.S.– Russia relations, international security, the autonomy of the newly independent former Soviet states, and Europe's independence.
Despite these circumstances, the Obama Administration seems to be rushing ahead with a "carrots-and-cakes" approach to the Kremlin, judging by Vice President Joe Biden's recent speech at the annual Munich international security conference. In this speech, the Vice President outlined the Obama Administration's foreign policy vision for the first time on the world stage and suggested that America push "the reset button" on relations with Russia.[2] Notably absent from this speech was any mention of recent events in Eurasia.
While in Moscow, U.S. Under Secretary of State for Political Affairs William Burns mirrored this approach. Burns stated that the U.S. was willing to review "the pace of development" of its missile defense shield in Europe in exchange for Russian cooperation on dissuading Iran from pursuing a nuclear weapon, and downplayed the importance of a U.S. air base in Kyrgyzstan from which the U.S. military has just received an eviction notice.3 Other diplomatic efforts to thaw U.S.–Russian relations are underway as well.[3]
According to The New York Times, President Obama sent a secret, hand-delivered letter to President Dmitry Medvedev one month ago. The letter reportedly suggests that if Russia cooperated with the United States in preventing Iran from developing long-range nuclear-missile capabilities, the need for a new missile defense system in Europe would be eliminated—a quid pro quo that President Obama has denied. The letter proposes a "united front" to achieve this goal.[4] Responding to the letter, Medvedev appeared to reject the offer and stated that the Kremlin was "working very closely with our U.S. colleagues on the issue of Iran's nuclear program," but not in the context of the new missile defense system in Europe. He stated that "no one links these issues to any exchange, especially on the Iran issue." Nevertheless, Medvedev welcomed the overture as a positive signal from the Obama Administration.[5]
Secretary of State Hillary Clinton met with Sergei Lavrov, Russia's foreign minister, in Geneva on March 6, following a gathering of NATO foreign ministers in Brussels.[6] President Obama is also likely to meet President Medvedev in London at the G-20 summit in April.[7] These meetings occur in a context where both the Obama Administration and Russia want a new legally binding treaty for limiting strategic nuclear arms. Ostensibly, this new treaty would be designed to replace the 1991 Strategic Arms Reduction Treaty (START).[8] START is scheduled to expire late this year, which both Washington and Moscow see as problematic.
Recent Russian media leaks seemed to reciprocate American overtures and suggested that the Kremlin may not deploy its Iskander short-range missiles in Kaliningrad. Prime Minister Vladimir Putin's statements in Davos onJanuary 28 that great powers need to cooperate to find an exit from the current global economic crisis may be signals that Moscow is exploring ways to improve relations with Washington, albeit driven by the plummeting economy at home.[9]
While an improvement in U.S.–Russian relations is certainly desirable, haste is ill advised for the Obama Administration, which has not yet announced its key officials in charge of Russia policy, nor conducted a comprehensive assessment of U.S.–Russian relations. Foremost, the Obama Administration must not allow Moscow to rewrite the geopolitical map of Europe or to pocket the gains that it has recently made in Georgia, including expanding military bases on its territory and evicting the U.S. from an air base in Kyrgyzstan.
Privileged Sphere of Influence
Since the watershed war with Georgia last August, Russia has been on the offensive across Eurasia and has been seeking to re-impose itself over much of the post-Soviet space. So concerned is the Kremlin with the expansion of its "privileged" sphere of influence that even the severe economic crisis—which has sent the ruble plunging 50 percent against the dollar and dropped Moscow stock market capitalization 80 percent—has not slowed Russia's push into the "near abroad."
Currently, Russia has a number of military bases in Europe and Eurasia. (See Map 1.) The Russian military recently announced the establishment of three military bases in the secessionist Abkhazia (a naval base in Ochamchira, the Bombora air base near Gudauta, and an alpine Special Forces base in the Kodori Gorge) and is building two more in South Ossetia (in Java and in the capital, Tskinvali). (See detail of Map 1.)[10] Not only do these deployments violate the spirit and the letter of the cease-fire[11] negotiated by French President Nicolas Sarkozy after the 2008 Russo–Georgian war,but they extend Russia's power projection capabilities into the Southern Caucasus, threatening the already precarious position of Georgia and the East–West corridor of oil and gas pipelines and railroads from the Caspian Sea to Turkey and Europe.[12]
[map 1: Russia's Expanding Military Presence in Eurasia]
More recently, Washington received an eviction notice for the U.S. military by Kurmanbek Bakiyev, president of Kyrgyzstan. With Russian President Medvedev at his side, Bakiyev announced in Moscow last month that he wants the U.S. to leave Manas Air Base, a key military cargo hub at the airport of the Kyrgyz capital Bishkek used by NATO and U.S. troops in Afghanistan since 2001.[13] With this move, the Kremlin signaled the West that to gain access to Central Asia, Western countries must first request permission from Moscow and pay the Kremlin for transit. This stance further reflects the thinking behind Russian calls for an "exclusive sphere of interests"—geographically undefined— formulated by Medvedev during his August 31, 2008, televised address.[14]
Closing Manas Air Base for the U.S. military will complicate efforts to send up to 30,000 more troops to Afghanistan—a key objective of the Obama Administration. Russia's pressure on the Kyrgyz government to evict the U.S. from this base raises questions about long-term strategic intentions of the Moscow leadership and its willingness to foster a NATO defeat in Afghanistan.
Russia has taken additional steps to secure its clout from Poland to the Pacific. It initiated a joint air-and-missile defense system with Belarus, which may cost billions, and initiated a Collective Security Treaty Organization (CSTO) Rapid Reaction Force (RRF), intended to match the forces of NATO's Rapid Response Force. The CSTO's RRF not only could be used to fight external enemies, but is likely to be available to put down "velvet revolutions" and quell popular unrest.[15] Russia also announced the creation of a $10 billion stabilization fund for the seven countries that are the members of the Eurasian Economic Community (EEC), most of which ($7.5 billion) Moscow will front.[16] The reason for the spending spree is simple: Money and weapons consolidate control over allies.
Russia's effort to secure a zone of "privileged interests" is consistent with policies formulated almost two decades ago by Yevgeny M. Primakov, leader of the Eurasianist school of foreign policy, Boris Yeltsin's intelligence chief, later a foreign minister, and then prime minister. In 1994, under Primakov's direction, the Russian Foreign Intelligence Service published a report calling for Russian domination of the "near abroad"—referring to the newly independent states that emerged from the rubble of the collapsed Soviet empire.
Since the Iraq war, the Kremlin championed the notion of "multipolarity," in which U.S. influence would be checked by Russia, China, India, and a swath of authoritarian states. Today, Putin and Medvedev are calling for a new geopolitical and economic architecture—not only in Europe but throughout the entire world—based on massive spheres of influence.
Global Revisionism
Despite the economic crisis that provided a reality check for Moscow, Russia is doing its best to continue a broad, global, revisionist foreign policy agenda that seeks to undermine what it views as an U.S.-led international security architecture. Russia's rulers want to achieve a world order in which Russia, China, Iran, Syria, and Venezuela will form a counterweight to the United States. Moscow is doing so despite the dwindling currency reserves and a severe downturn in its economic performance due to plummeting energy and commodity prices.[17]
In December 2008, the Russian navy conducted maneuvers in the Caribbean with Venezuela, while the Russian air force's supersonic Tupolev TU-160 "Blackjack" bombers and the old but reliable TU-95 "Bear" turboprop bombers flew patrols to Venezuela, as well as close to U.S. air space in the Pacific and the Arctic.[18] Russia is also developing the Syrian ports of Tartus and Latakia in order to manage an expanded Russian naval presence in the Mediterranean, and may possibly revive an anchorage in Libya and Yemen. (See Map 2.)[19] These are only some examples of how Moscow is implementing its global agenda. While some of these moves may be mostly symbolic, combined with a $300 billion military modernization program they signal a much more aggressive and ambitious Russian global posture. Russia is also overtly engaging the Hezbollah and Hamas terrorist organizations.
[map 2: Russian Bases in the Middle East]
If Moscow's vision were to be realized, given the large cast of state and non-state "bad actors" currently on the international stage, Russia's notion of "multipolarity" would engender an even more unstable and dangerous world. Additionally, the very process of trying to force such a transition risks destabilizing the existing international system and its institutions while offering no viable alternatives.
Russia's Strategic Energy Agenda
On the energy front alone, the Obama Administration will face a multiplicity of challenges emanating from Moscow. The Bush Administration signed a "123 agreement" on civilian nuclear cooperation and non-proliferation with Russia in May 2008, before the war in Georgia. The 123 agreement, so called because it falls under section 123 of the U.S. Atomic Energy Act, is necessary to make nuclear cooperation between the countries possible.The agreement would facilitate Russia's foray into the international nuclear waste management and reprocessing business by potentially providing Russian access to U.S. commercial technologies.[20]
The agreement, however, ran into severe congressional opposition: Representative John Dingell (D–MI), then-chairman of the Energy and Commerce Committee, announced that, "Even without Russia's incursion into Georgia, Russian support for Iranian nuclear and missile programs alone is enough to call into question the wisdom of committing to a 30-year agreement to transfer sensitive nuclear technologies and materials to Russia."[21] As the Obama Administration is signaling a new thaw in the relationship, senior Russian officials hope that the Administration will revive the agreement, which could bring billions of dollars to the lean Russian coffers.[22]
Europe's Dependence on Russian Gas. The Europeans, especially the Germans, are concerned with carbon emission reductions, while downplaying nuclear energy and coal as alternative sources of energy to natural gas. Russia is the primary source of Europe's gas habit. Thus, an environmental concern becomes a major geopolitical liability. Bulgaria, Slovakia, and Finland depend on Russian gas for up to 100 percent of their imports, and are not pursuing alternatives, such as liquefied natural gas (LNG). Germany depends on Russian gas for 40 percent of its consumption, a share that is set to increase to 60 percent by 2020.
Russia strives to dominate Europe, particularly Eastern and Central Europe, including Germany, through its quasi-monopolistic gas supply and its significant share of the oil market and of other strategic resources. (See Map 3.) Russia controls a network of strategically important pipelines and is attempting to extend it by building the Nord Stream pipeline along the bottom of the Baltic Sea to Germany, building the South Stream pipeline across the length of the Black Sea, and even controlling gas pipelines from North Africa to Europe.
[map 3: Primary Russian Oil and Gas Pipelines to Europe]
Moscow has shown a pattern of using revenues from its energy exports to fuel its strategic and foreign policy agendas. It grants selective access to Russian energy resources to European companies as a quid pro quo for political cooperation and government lobbying on the Kremlin's behalf. It has selectively hired prominent European politicians, such as former German Chancellor Gerhard Schroeder and former Finnish Prime Minister Paavo Lipponen, to promote Russian interests and energy deals and has offered positions and lucrative business deals to other European political heavyweights, such as former Italian Prime Minister Romano Prodi.
Russian energy giant Gazprom has been on a shopping spree, acquiring European energy assets. Europe is projected to be dependent on Russia for over 60 percent of its gas consumption by 2030, with some countries already 100 percent dependent on Gazprom.[23] Russia has shown a willingness to use this dependency and its energy influence as a tool of foreign policy, shutting down or threatening to shut down the flow of gas to countries perceived to be acting against Moscow's interest, as in the cases of Ukraine, Georgia, and Azerbaijan.
The Kremlin is in the process of creating an OPEC-style gas cartel with Iran, Qatar, and other leading gas producers, to be headquartered in Moscow. This cartel would allow Moscow and Tehran to dictate pricing policy, weigh in on new projects, and oppose any new pipelines they want. This may bring about even greater domination of Europe's gas supply than they currently enjoy, and eventually, domination of the global LNG markets as well.[24] Any EU dependence on such a cartel will diminish its ability to support gas-exporting countries whose pipelines bypass Russia, will challenge EU energy liberalization and gas deregulation policies, and may have dire foreign policy consequences.
The U.S. certainly should explore all available diplomatic avenues to curb Russian anti-American policies, yet the new Administration must be prepared for the contingency that the United States may have no choice but to counter Russian revisionism through disincentives, rather than limiting itself to trying to persuade the Kremlin to embrace the international system.
Russia Policy for the Obama Administration
To meet today's challenges and preserve the security of Europe and Eurasia, the Obama Administration should conduct a comprehensive assessment of U.S.–Russian relations and then prepare a detailed foreign policy agenda that protects American interests; checks the growing Russian influence in Europe, the Middle East, and Eurasia; deters aggression against the U.S., its allies, and its strategic partners; and encourages Russia to adhere to the rule of law at home and abroad and to act as a responsible player in the international system.
Specifically, the Obama Administration should:
Maintain and expand transatlantic unity. The Obama Administration should use its political capital and show leadership within NATO. Russia is seeking to divide the United States and its European allies, not only through energy sources, but also by exploiting existing differences over missile defense, the Iraq war, and other issues. In its attempt to undermine the global posture of the U.S. and its allies, the Kremlin offers incentives for European powers to distance themselves from the United States. Germany's growing dependence on Russian natural gas and its opposition to further NATO enlargement and missile defense deployment in Central Europe is a good example. Essentially, in order for Russia to successfully carry out its foreign policy agenda it needs to delay and thwart any strong, unified energy-policy response from the United States and its allies. Moscow is seeking to gain power and influence without being countered by any significant challenge.
Refrain from resubmitting the 123 nuclear agreement with Russia for congressional approval until Russia meets the following three conditions:
Oppose the Kremlin's support of anti-American state and non-state actors (Venezuela, Cuba, Iran, Syria, Hamas, Hezbollah). Russia's revisionist foreign policy agenda has extended to cultivating de facto alliances and relationships with a host of regimes and terrorist organizations hostile to the United States, its allies, and its interests. Even as the United States seeks Russia's assistance in ending Iran's nuclear program, Moscow is selling Tehran sophisticated air-defense systems and other modern weapons and technologies, including dual-use ballistic missile know-how, ostensibly for civilian space purposes. Russia cannot improve relations with the United States while maintaining ties with aggressive powers and terrorists. The Obama Administration should advise Russia to distance itself from the likes of Hugo Chavez, Mahmoud Ahmadinejad, and other troublemakers with global reach.
Undertake necessary strategic planning before initiating new strategic nuclear arms control negotiations with Russia. The White House and the Kremlin appear eager to negotiate a new arms control treaty governing strategic nuclear forces on both sides. But at this early juncture in the Obama Administration, the White House has not conducted the necessary reviews of the broader national security strategy, let alone more technical analyses regarding the future military requirements of the U.S. strategic nuclear force. At the outset, the Obama Administration needs to establish a new policy that pledges to the American people and U.S. friends and allies that it will serve to "protect and defend" them against strategic attack. The Administration, therefore, should defer negotiations on a new strategic nuclear arms treaty with Russia until after it has drafted the national security strategy and the national military strategy, issued a new targeting directive, and permitted the military to identify and allocate targets in accordance with the protect-and-defend strategy.[28]Further, the Obama Administration need not be overly concerned about the expiration of START. U.S. and Russian strategic nuclear weapons, specifically those that are operationally deployed, will be controlled under the 2002 Strategic Offensive Reductions Treaty (SORT, commonly called the Moscow Treaty for the city where it was signed). The Moscow Treaty requires both sides to reduce the number of operationally deployed strategic nuclear warheads to between 1,700 and 2,200. The treaty will not expire until the end of 2012. Thus, there is no reason for the U.S. and Russia to negotiate a new treaty limiting strategic nuclear arms against the artificial deadline of START's expiration. Indeed, it would be unwise to do so because an effective arms control treaty requires careful planning and preparation.
Maintain missile defense plans for Poland and the Czech Republic. The Obama Administration should not cancel America's ballistic defense program in response to Russian threats—or in response to recent promises by President Medvedev not to deploy short-range ballistic missiles to the Belarussian–Polish border or to the Kaliningrad exclave. To cancel this program as a concession to the Russians would send a clear signal of American weakness, encouraging further aggression against Russia's neighbors. Russia must not come to believe it can succeed in altering U.S. policy through threats, or it will continue to use these and other destabilizing gestures more consistently as tools of foreign policy—to the detriment of American and world security. Backing down on missile defense would also strengthen the pro-Russian political factions in the German Foreign Ministry, dominated by Social Democrats, in the German business community, and elsewhere in Europe. However skeptical some in the Obama Administration may be of the functionality and cost-effectiveness of the missile-interceptor system, the fact is that it is the only defense the U.S. and its allies currently have against a potential Iranian ballistic missile launch, as well as a powerful symbolic bargaining chip in discussions with Russia. The U.S. should also engage Russia in discussions on ballistic missile cooperation—without granting Moscow a veto over missile deployment in Europe.
Support Georgia's and Ukraine's territorial integrity and sovereignty. During the presidential campaign, Candidate Obama made multiple laudable statements expressing firm support for Georgia's territorial integrity, denying the validity of Russia's recognition of Abkhazia and South Ossetia, and expressing a willingness to extend NATO Membership Action Plans (MAPs) to Georgia and Ukraine (which were recently replaced by the Bush Administration with Strategic Cooperation Charters). President Obama should now provide the firm foundation for a policy devoted to deterring Russia from taking similar action in the future, for example against Ukraine or Azerbaijan. The Obama Administration should implement the Strategic Cooperation Charters signed with Ukraine and Georgia on December 19, 2008, and January 9, 2009, respectively. While there is little chance that Russia will renounce its recognition of Abkhazia or South Ossetia, the Obama Administration should explore every option for making Russia pay a diplomatic and economic price for its recent acts of aggression against Georgia's territorial integrity, its sovereignty, and against international law. To do otherwise will only invite Russia to try more of the same in the future. The White House should rethink the format of the G-8. It should expand the current G-8 to G-20, in which Russia, China, Brazil, India, and other major powers participate, while holding future meetings of the leading industrial democracies in the G-7 format. This will send a clear signal to Moscow that if it chooses to remove itself from the boundaries of acceptable behavior in the club of the largest democracies, it will no longer enjoy the benefits of being part of that club.
Boost American presence in the Arctic. Russia has designs on a great part of the Arctic—an area the size of Germany, France, and Italy combined. (See Map 4.) Recently, the deputy chairman of the Duma, the polar explorer Artur Chilingarov, announced that Russia will control the Northern Sea Route, which is in international waters.[29] The Arctic has tremendous hydrocarbon and strategic mineral reserves. Controlled by Moscow, the Artic would offer Moscow another means of consolidating Russia's global energy dominance. The United States should ensure that its interests are respected in the region by modernizing and expanding its icebreaker fleet, updating its surveys of strategic resources, and expanding efforts with NATO and other Nordic states (Canada, Norway, and Denmark, etc.) to develop and coordinate Arctic policy. As much as the Arctic may seem a distant priority given the economic and defense challenges facing the Obama Administration, the United States cannot afford to ignore this strategically vital region.
[map 4: US and Russian Interests in the Artic]
Conclusion
Russia is and will remain one of the most significant foreign policy challenges facing the Obama Administration. Despite the recent toned-down rhetoric stemming from the economic downturn, the Kremlin needs an "outside enemy" to keep its grip on power at home. Yet, this truculence clashes with Russia's need to fight the financial crisis in cooperation with major economic powers; attract foreign investment; switch the engine of its economic growth from natural resources to knowledge and technology; and ensure steady commodities exports. From the Kremlin's perspective, and due to the democracy deficit in Russia, the legitimacy and popularity of the current regime necessitates confrontation with the West, especially with the United States. The image of an external threat is exploited to gain popular support and unite the multi-ethnic and multi-faith population of the Russian Federation around Prime Minister Putin and President Medvedev.
Despite the need to attract investment, the Kremlin is likely to pursue an anti-status quo foreign policy as long as it views the United States as weakened or distracted due to the combined effects of the economic crisis, U.S. involvement in Afghanistan and Iraq, the presence of the Taliban and al-Qaeda in Pakistan, the need to deal with the fast-developing prospect of a nuclear-armed Iran, and preoccupation with the Arab–Israeli conflict.
The Obama Administration must raise the profile of Russian, Eurasian, and Caspian affairs on the U.S. foreign policy agenda. Further failures to stem Russia's revisionist efforts will lead to a deteriorating security situation in Eurasia and a decline of American influence in Europe and the Middle East. If Russia, however, reconsiders its anti-American stance, the United States should be prepared to pursue matters of common interest, such as the recent agreement on military supplies to Afghanistan and the strategic weapons limitations agreement.
History has shown that the most dangerous times are the ones when new powers (or in this case, resurgent ones) attempt to overturn the status quo. The United States and its allies must remain vigilant and willing to defend freedom and prevent Russia from engendering shifts in the global power structure detrimental to U.S. national security interests.
Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation. Owen Graham, Research Assistant at the Allison Center, contributed to this paper.
Heritage Backgrounder #2246
March 12, 2009
See full article w/references here.
Barack Obama and Joe Biden will address the challenge posed by an increasingly autocratic and bellicose Russia by pursuing a new, comprehensive strategy that advances American national interests without compromising our enduring principles.
—"Meeting the Challenges of a Resurgent Russia" http://www.barackobama.com
President Barack Obama has expressed concerns over Russia's increasingly truculent behavior and the threat it poses to the current international system. These concerns are valid and the threat of a resurgent Russia is palpable.[1] Moscow's efforts at carving out a "sphere of privileged interests" throughout Eurasia and rewriting the rules of European security have negative implications for U.S.– Russia relations, international security, the autonomy of the newly independent former Soviet states, and Europe's independence.
Despite these circumstances, the Obama Administration seems to be rushing ahead with a "carrots-and-cakes" approach to the Kremlin, judging by Vice President Joe Biden's recent speech at the annual Munich international security conference. In this speech, the Vice President outlined the Obama Administration's foreign policy vision for the first time on the world stage and suggested that America push "the reset button" on relations with Russia.[2] Notably absent from this speech was any mention of recent events in Eurasia.
While in Moscow, U.S. Under Secretary of State for Political Affairs William Burns mirrored this approach. Burns stated that the U.S. was willing to review "the pace of development" of its missile defense shield in Europe in exchange for Russian cooperation on dissuading Iran from pursuing a nuclear weapon, and downplayed the importance of a U.S. air base in Kyrgyzstan from which the U.S. military has just received an eviction notice.3 Other diplomatic efforts to thaw U.S.–Russian relations are underway as well.[3]
According to The New York Times, President Obama sent a secret, hand-delivered letter to President Dmitry Medvedev one month ago. The letter reportedly suggests that if Russia cooperated with the United States in preventing Iran from developing long-range nuclear-missile capabilities, the need for a new missile defense system in Europe would be eliminated—a quid pro quo that President Obama has denied. The letter proposes a "united front" to achieve this goal.[4] Responding to the letter, Medvedev appeared to reject the offer and stated that the Kremlin was "working very closely with our U.S. colleagues on the issue of Iran's nuclear program," but not in the context of the new missile defense system in Europe. He stated that "no one links these issues to any exchange, especially on the Iran issue." Nevertheless, Medvedev welcomed the overture as a positive signal from the Obama Administration.[5]
Secretary of State Hillary Clinton met with Sergei Lavrov, Russia's foreign minister, in Geneva on March 6, following a gathering of NATO foreign ministers in Brussels.[6] President Obama is also likely to meet President Medvedev in London at the G-20 summit in April.[7] These meetings occur in a context where both the Obama Administration and Russia want a new legally binding treaty for limiting strategic nuclear arms. Ostensibly, this new treaty would be designed to replace the 1991 Strategic Arms Reduction Treaty (START).[8] START is scheduled to expire late this year, which both Washington and Moscow see as problematic.
Recent Russian media leaks seemed to reciprocate American overtures and suggested that the Kremlin may not deploy its Iskander short-range missiles in Kaliningrad. Prime Minister Vladimir Putin's statements in Davos onJanuary 28 that great powers need to cooperate to find an exit from the current global economic crisis may be signals that Moscow is exploring ways to improve relations with Washington, albeit driven by the plummeting economy at home.[9]
While an improvement in U.S.–Russian relations is certainly desirable, haste is ill advised for the Obama Administration, which has not yet announced its key officials in charge of Russia policy, nor conducted a comprehensive assessment of U.S.–Russian relations. Foremost, the Obama Administration must not allow Moscow to rewrite the geopolitical map of Europe or to pocket the gains that it has recently made in Georgia, including expanding military bases on its territory and evicting the U.S. from an air base in Kyrgyzstan.
Privileged Sphere of Influence
Since the watershed war with Georgia last August, Russia has been on the offensive across Eurasia and has been seeking to re-impose itself over much of the post-Soviet space. So concerned is the Kremlin with the expansion of its "privileged" sphere of influence that even the severe economic crisis—which has sent the ruble plunging 50 percent against the dollar and dropped Moscow stock market capitalization 80 percent—has not slowed Russia's push into the "near abroad."
Currently, Russia has a number of military bases in Europe and Eurasia. (See Map 1.) The Russian military recently announced the establishment of three military bases in the secessionist Abkhazia (a naval base in Ochamchira, the Bombora air base near Gudauta, and an alpine Special Forces base in the Kodori Gorge) and is building two more in South Ossetia (in Java and in the capital, Tskinvali). (See detail of Map 1.)[10] Not only do these deployments violate the spirit and the letter of the cease-fire[11] negotiated by French President Nicolas Sarkozy after the 2008 Russo–Georgian war,but they extend Russia's power projection capabilities into the Southern Caucasus, threatening the already precarious position of Georgia and the East–West corridor of oil and gas pipelines and railroads from the Caspian Sea to Turkey and Europe.[12]
[map 1: Russia's Expanding Military Presence in Eurasia]
More recently, Washington received an eviction notice for the U.S. military by Kurmanbek Bakiyev, president of Kyrgyzstan. With Russian President Medvedev at his side, Bakiyev announced in Moscow last month that he wants the U.S. to leave Manas Air Base, a key military cargo hub at the airport of the Kyrgyz capital Bishkek used by NATO and U.S. troops in Afghanistan since 2001.[13] With this move, the Kremlin signaled the West that to gain access to Central Asia, Western countries must first request permission from Moscow and pay the Kremlin for transit. This stance further reflects the thinking behind Russian calls for an "exclusive sphere of interests"—geographically undefined— formulated by Medvedev during his August 31, 2008, televised address.[14]
Closing Manas Air Base for the U.S. military will complicate efforts to send up to 30,000 more troops to Afghanistan—a key objective of the Obama Administration. Russia's pressure on the Kyrgyz government to evict the U.S. from this base raises questions about long-term strategic intentions of the Moscow leadership and its willingness to foster a NATO defeat in Afghanistan.
Russia has taken additional steps to secure its clout from Poland to the Pacific. It initiated a joint air-and-missile defense system with Belarus, which may cost billions, and initiated a Collective Security Treaty Organization (CSTO) Rapid Reaction Force (RRF), intended to match the forces of NATO's Rapid Response Force. The CSTO's RRF not only could be used to fight external enemies, but is likely to be available to put down "velvet revolutions" and quell popular unrest.[15] Russia also announced the creation of a $10 billion stabilization fund for the seven countries that are the members of the Eurasian Economic Community (EEC), most of which ($7.5 billion) Moscow will front.[16] The reason for the spending spree is simple: Money and weapons consolidate control over allies.
Russia's effort to secure a zone of "privileged interests" is consistent with policies formulated almost two decades ago by Yevgeny M. Primakov, leader of the Eurasianist school of foreign policy, Boris Yeltsin's intelligence chief, later a foreign minister, and then prime minister. In 1994, under Primakov's direction, the Russian Foreign Intelligence Service published a report calling for Russian domination of the "near abroad"—referring to the newly independent states that emerged from the rubble of the collapsed Soviet empire.
Since the Iraq war, the Kremlin championed the notion of "multipolarity," in which U.S. influence would be checked by Russia, China, India, and a swath of authoritarian states. Today, Putin and Medvedev are calling for a new geopolitical and economic architecture—not only in Europe but throughout the entire world—based on massive spheres of influence.
Global Revisionism
Despite the economic crisis that provided a reality check for Moscow, Russia is doing its best to continue a broad, global, revisionist foreign policy agenda that seeks to undermine what it views as an U.S.-led international security architecture. Russia's rulers want to achieve a world order in which Russia, China, Iran, Syria, and Venezuela will form a counterweight to the United States. Moscow is doing so despite the dwindling currency reserves and a severe downturn in its economic performance due to plummeting energy and commodity prices.[17]
In December 2008, the Russian navy conducted maneuvers in the Caribbean with Venezuela, while the Russian air force's supersonic Tupolev TU-160 "Blackjack" bombers and the old but reliable TU-95 "Bear" turboprop bombers flew patrols to Venezuela, as well as close to U.S. air space in the Pacific and the Arctic.[18] Russia is also developing the Syrian ports of Tartus and Latakia in order to manage an expanded Russian naval presence in the Mediterranean, and may possibly revive an anchorage in Libya and Yemen. (See Map 2.)[19] These are only some examples of how Moscow is implementing its global agenda. While some of these moves may be mostly symbolic, combined with a $300 billion military modernization program they signal a much more aggressive and ambitious Russian global posture. Russia is also overtly engaging the Hezbollah and Hamas terrorist organizations.
[map 2: Russian Bases in the Middle East]
If Moscow's vision were to be realized, given the large cast of state and non-state "bad actors" currently on the international stage, Russia's notion of "multipolarity" would engender an even more unstable and dangerous world. Additionally, the very process of trying to force such a transition risks destabilizing the existing international system and its institutions while offering no viable alternatives.
Russia's Strategic Energy Agenda
On the energy front alone, the Obama Administration will face a multiplicity of challenges emanating from Moscow. The Bush Administration signed a "123 agreement" on civilian nuclear cooperation and non-proliferation with Russia in May 2008, before the war in Georgia. The 123 agreement, so called because it falls under section 123 of the U.S. Atomic Energy Act, is necessary to make nuclear cooperation between the countries possible.The agreement would facilitate Russia's foray into the international nuclear waste management and reprocessing business by potentially providing Russian access to U.S. commercial technologies.[20]
The agreement, however, ran into severe congressional opposition: Representative John Dingell (D–MI), then-chairman of the Energy and Commerce Committee, announced that, "Even without Russia's incursion into Georgia, Russian support for Iranian nuclear and missile programs alone is enough to call into question the wisdom of committing to a 30-year agreement to transfer sensitive nuclear technologies and materials to Russia."[21] As the Obama Administration is signaling a new thaw in the relationship, senior Russian officials hope that the Administration will revive the agreement, which could bring billions of dollars to the lean Russian coffers.[22]
Europe's Dependence on Russian Gas. The Europeans, especially the Germans, are concerned with carbon emission reductions, while downplaying nuclear energy and coal as alternative sources of energy to natural gas. Russia is the primary source of Europe's gas habit. Thus, an environmental concern becomes a major geopolitical liability. Bulgaria, Slovakia, and Finland depend on Russian gas for up to 100 percent of their imports, and are not pursuing alternatives, such as liquefied natural gas (LNG). Germany depends on Russian gas for 40 percent of its consumption, a share that is set to increase to 60 percent by 2020.
Russia strives to dominate Europe, particularly Eastern and Central Europe, including Germany, through its quasi-monopolistic gas supply and its significant share of the oil market and of other strategic resources. (See Map 3.) Russia controls a network of strategically important pipelines and is attempting to extend it by building the Nord Stream pipeline along the bottom of the Baltic Sea to Germany, building the South Stream pipeline across the length of the Black Sea, and even controlling gas pipelines from North Africa to Europe.
[map 3: Primary Russian Oil and Gas Pipelines to Europe]
Moscow has shown a pattern of using revenues from its energy exports to fuel its strategic and foreign policy agendas. It grants selective access to Russian energy resources to European companies as a quid pro quo for political cooperation and government lobbying on the Kremlin's behalf. It has selectively hired prominent European politicians, such as former German Chancellor Gerhard Schroeder and former Finnish Prime Minister Paavo Lipponen, to promote Russian interests and energy deals and has offered positions and lucrative business deals to other European political heavyweights, such as former Italian Prime Minister Romano Prodi.
Russian energy giant Gazprom has been on a shopping spree, acquiring European energy assets. Europe is projected to be dependent on Russia for over 60 percent of its gas consumption by 2030, with some countries already 100 percent dependent on Gazprom.[23] Russia has shown a willingness to use this dependency and its energy influence as a tool of foreign policy, shutting down or threatening to shut down the flow of gas to countries perceived to be acting against Moscow's interest, as in the cases of Ukraine, Georgia, and Azerbaijan.
The Kremlin is in the process of creating an OPEC-style gas cartel with Iran, Qatar, and other leading gas producers, to be headquartered in Moscow. This cartel would allow Moscow and Tehran to dictate pricing policy, weigh in on new projects, and oppose any new pipelines they want. This may bring about even greater domination of Europe's gas supply than they currently enjoy, and eventually, domination of the global LNG markets as well.[24] Any EU dependence on such a cartel will diminish its ability to support gas-exporting countries whose pipelines bypass Russia, will challenge EU energy liberalization and gas deregulation policies, and may have dire foreign policy consequences.
The U.S. certainly should explore all available diplomatic avenues to curb Russian anti-American policies, yet the new Administration must be prepared for the contingency that the United States may have no choice but to counter Russian revisionism through disincentives, rather than limiting itself to trying to persuade the Kremlin to embrace the international system.
Russia Policy for the Obama Administration
To meet today's challenges and preserve the security of Europe and Eurasia, the Obama Administration should conduct a comprehensive assessment of U.S.–Russian relations and then prepare a detailed foreign policy agenda that protects American interests; checks the growing Russian influence in Europe, the Middle East, and Eurasia; deters aggression against the U.S., its allies, and its strategic partners; and encourages Russia to adhere to the rule of law at home and abroad and to act as a responsible player in the international system.
Specifically, the Obama Administration should:
Maintain and expand transatlantic unity. The Obama Administration should use its political capital and show leadership within NATO. Russia is seeking to divide the United States and its European allies, not only through energy sources, but also by exploiting existing differences over missile defense, the Iraq war, and other issues. In its attempt to undermine the global posture of the U.S. and its allies, the Kremlin offers incentives for European powers to distance themselves from the United States. Germany's growing dependence on Russian natural gas and its opposition to further NATO enlargement and missile defense deployment in Central Europe is a good example. Essentially, in order for Russia to successfully carry out its foreign policy agenda it needs to delay and thwart any strong, unified energy-policy response from the United States and its allies. Moscow is seeking to gain power and influence without being countered by any significant challenge.
Refrain from resubmitting the 123 nuclear agreement with Russia for congressional approval until Russia meets the following three conditions:
- The Obama Administration should compel Russia to discontinue support of Iran's military nuclear energy program and provide full disclosure. Indeed, it is Russian nuclear fuel that undermines Iran's claim that it needs uranium enrichment. Russia must discontinue any efforts that advance Iran's heavy-water-reactor program, enrichment activities, spent-fuel reprocessing programs, missile technology transfer, or engineer and scientist training for nuclear and missile technology. Russia must disclose its past activities in support of the Iranian program, as well as what it knows about any third party assistance. Russia should work with the United States and other nations to compel Iran to discontinue any fuel enrichment or spent-fuel reprocessing, which would give Iran access to bomb-grade material. The U.S. should use the prospect of the 123 agreement as an incentive to halt Russia's interactions with Iran on nuclear issues.[25]
- The Obama Administration should also request that Russia provide adequate liability protection for U.S. companies doing business in Russia. Even with a 123 agreement in place, U.S. companies would likely forgo commercial activities in Russia due to a lack of liability protection. Indeed, many countries use the lack of liability protection for U.S. companies as a means to protect their domestic nuclear industry from U.S. competition.[26]
- The Obama Administration should demand that Russia provide two-way market access to American companies. This agreement should not be simply an avenue to bring Russian goods and services to the U.S. market; it is equally important that U.S. companies are allowed to compete for business in Russia. While Russian nuclear technology is second to none, foreign competition will assure that the highest quality standards are maintained throughout the country.[27]
Oppose the Kremlin's support of anti-American state and non-state actors (Venezuela, Cuba, Iran, Syria, Hamas, Hezbollah). Russia's revisionist foreign policy agenda has extended to cultivating de facto alliances and relationships with a host of regimes and terrorist organizations hostile to the United States, its allies, and its interests. Even as the United States seeks Russia's assistance in ending Iran's nuclear program, Moscow is selling Tehran sophisticated air-defense systems and other modern weapons and technologies, including dual-use ballistic missile know-how, ostensibly for civilian space purposes. Russia cannot improve relations with the United States while maintaining ties with aggressive powers and terrorists. The Obama Administration should advise Russia to distance itself from the likes of Hugo Chavez, Mahmoud Ahmadinejad, and other troublemakers with global reach.
Undertake necessary strategic planning before initiating new strategic nuclear arms control negotiations with Russia. The White House and the Kremlin appear eager to negotiate a new arms control treaty governing strategic nuclear forces on both sides. But at this early juncture in the Obama Administration, the White House has not conducted the necessary reviews of the broader national security strategy, let alone more technical analyses regarding the future military requirements of the U.S. strategic nuclear force. At the outset, the Obama Administration needs to establish a new policy that pledges to the American people and U.S. friends and allies that it will serve to "protect and defend" them against strategic attack. The Administration, therefore, should defer negotiations on a new strategic nuclear arms treaty with Russia until after it has drafted the national security strategy and the national military strategy, issued a new targeting directive, and permitted the military to identify and allocate targets in accordance with the protect-and-defend strategy.[28]Further, the Obama Administration need not be overly concerned about the expiration of START. U.S. and Russian strategic nuclear weapons, specifically those that are operationally deployed, will be controlled under the 2002 Strategic Offensive Reductions Treaty (SORT, commonly called the Moscow Treaty for the city where it was signed). The Moscow Treaty requires both sides to reduce the number of operationally deployed strategic nuclear warheads to between 1,700 and 2,200. The treaty will not expire until the end of 2012. Thus, there is no reason for the U.S. and Russia to negotiate a new treaty limiting strategic nuclear arms against the artificial deadline of START's expiration. Indeed, it would be unwise to do so because an effective arms control treaty requires careful planning and preparation.
Maintain missile defense plans for Poland and the Czech Republic. The Obama Administration should not cancel America's ballistic defense program in response to Russian threats—or in response to recent promises by President Medvedev not to deploy short-range ballistic missiles to the Belarussian–Polish border or to the Kaliningrad exclave. To cancel this program as a concession to the Russians would send a clear signal of American weakness, encouraging further aggression against Russia's neighbors. Russia must not come to believe it can succeed in altering U.S. policy through threats, or it will continue to use these and other destabilizing gestures more consistently as tools of foreign policy—to the detriment of American and world security. Backing down on missile defense would also strengthen the pro-Russian political factions in the German Foreign Ministry, dominated by Social Democrats, in the German business community, and elsewhere in Europe. However skeptical some in the Obama Administration may be of the functionality and cost-effectiveness of the missile-interceptor system, the fact is that it is the only defense the U.S. and its allies currently have against a potential Iranian ballistic missile launch, as well as a powerful symbolic bargaining chip in discussions with Russia. The U.S. should also engage Russia in discussions on ballistic missile cooperation—without granting Moscow a veto over missile deployment in Europe.
Support Georgia's and Ukraine's territorial integrity and sovereignty. During the presidential campaign, Candidate Obama made multiple laudable statements expressing firm support for Georgia's territorial integrity, denying the validity of Russia's recognition of Abkhazia and South Ossetia, and expressing a willingness to extend NATO Membership Action Plans (MAPs) to Georgia and Ukraine (which were recently replaced by the Bush Administration with Strategic Cooperation Charters). President Obama should now provide the firm foundation for a policy devoted to deterring Russia from taking similar action in the future, for example against Ukraine or Azerbaijan. The Obama Administration should implement the Strategic Cooperation Charters signed with Ukraine and Georgia on December 19, 2008, and January 9, 2009, respectively. While there is little chance that Russia will renounce its recognition of Abkhazia or South Ossetia, the Obama Administration should explore every option for making Russia pay a diplomatic and economic price for its recent acts of aggression against Georgia's territorial integrity, its sovereignty, and against international law. To do otherwise will only invite Russia to try more of the same in the future. The White House should rethink the format of the G-8. It should expand the current G-8 to G-20, in which Russia, China, Brazil, India, and other major powers participate, while holding future meetings of the leading industrial democracies in the G-7 format. This will send a clear signal to Moscow that if it chooses to remove itself from the boundaries of acceptable behavior in the club of the largest democracies, it will no longer enjoy the benefits of being part of that club.
Boost American presence in the Arctic. Russia has designs on a great part of the Arctic—an area the size of Germany, France, and Italy combined. (See Map 4.) Recently, the deputy chairman of the Duma, the polar explorer Artur Chilingarov, announced that Russia will control the Northern Sea Route, which is in international waters.[29] The Arctic has tremendous hydrocarbon and strategic mineral reserves. Controlled by Moscow, the Artic would offer Moscow another means of consolidating Russia's global energy dominance. The United States should ensure that its interests are respected in the region by modernizing and expanding its icebreaker fleet, updating its surveys of strategic resources, and expanding efforts with NATO and other Nordic states (Canada, Norway, and Denmark, etc.) to develop and coordinate Arctic policy. As much as the Arctic may seem a distant priority given the economic and defense challenges facing the Obama Administration, the United States cannot afford to ignore this strategically vital region.
[map 4: US and Russian Interests in the Artic]
Conclusion
Russia is and will remain one of the most significant foreign policy challenges facing the Obama Administration. Despite the recent toned-down rhetoric stemming from the economic downturn, the Kremlin needs an "outside enemy" to keep its grip on power at home. Yet, this truculence clashes with Russia's need to fight the financial crisis in cooperation with major economic powers; attract foreign investment; switch the engine of its economic growth from natural resources to knowledge and technology; and ensure steady commodities exports. From the Kremlin's perspective, and due to the democracy deficit in Russia, the legitimacy and popularity of the current regime necessitates confrontation with the West, especially with the United States. The image of an external threat is exploited to gain popular support and unite the multi-ethnic and multi-faith population of the Russian Federation around Prime Minister Putin and President Medvedev.
Despite the need to attract investment, the Kremlin is likely to pursue an anti-status quo foreign policy as long as it views the United States as weakened or distracted due to the combined effects of the economic crisis, U.S. involvement in Afghanistan and Iraq, the presence of the Taliban and al-Qaeda in Pakistan, the need to deal with the fast-developing prospect of a nuclear-armed Iran, and preoccupation with the Arab–Israeli conflict.
The Obama Administration must raise the profile of Russian, Eurasian, and Caspian affairs on the U.S. foreign policy agenda. Further failures to stem Russia's revisionist efforts will lead to a deteriorating security situation in Eurasia and a decline of American influence in Europe and the Middle East. If Russia, however, reconsiders its anti-American stance, the United States should be prepared to pursue matters of common interest, such as the recent agreement on military supplies to Afghanistan and the strategic weapons limitations agreement.
History has shown that the most dangerous times are the ones when new powers (or in this case, resurgent ones) attempt to overturn the status quo. The United States and its allies must remain vigilant and willing to defend freedom and prevent Russia from engendering shifts in the global power structure detrimental to U.S. national security interests.
Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation. Owen Graham, Research Assistant at the Allison Center, contributed to this paper.
President Obama promises to rein in earmarks. Soon.
He'll Quit Tomorrow. WaPo Editorial
President Obama promises to rein in earmarks. Soon.
WaPo, Friday, March 13, 2009; A16
LIKE A DIETER who allows himself just one more slice of cake before starting to count calories, President Obama signed the $410 billion omnibus spending bill, then pledged to get tough on congressional earmark spending -- next time. "This piece of legislation must mark an end to the old way of doing business," Mr. Obama announced. As with the dieter, skepticism is appropriate. The old way was supposed to have ended already. After all, Mr. Obama, in his inaugural address, proclaimed that "those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits."
The political demands of the moment led Mr. Obama to sign this measure despite its imperfections. That's understandable, but the same pressures will arise next time, too, as members of Congress will be well aware as they consider whether to take the president on over earmarks. Tradeoffs come with the territory, but Mr. Obama is accepting them after holding himself out as -- indeed, while continuing to hold himself out as -- the avatar of a new way of doing business. "Barack Obama is committed to returning earmarks to less than $7.8 billion a year, the level they were at before 1994, when Republicans took control of Congress and the level of earmarks began rising dramatically," the Obama campaign proclaimed. "I've pledged to slash earmarks by more than half when I am president of the United States," Mr. Obama said in September. Somehow, that commitment was missing from Wednesday's announcement of future restraint. The dieter didn't set a weight-loss goal.
Earmarks account for only a sliver of spending, and the Constitution does give Congress the power of the purse. As Mr. Obama said Wednesday, "Done right, earmarks give legislators the opportunity to direct federal money to worthy projects that benefit people in their district." Moreover, some ugly excesses associated with them have already been curtailed. The amount of earmarked funds has been brought down in the past three years, and disclosure has improved. Mr. Obama's after-the-omnibus-has-left-the-barn proposals would expand on these changes by requiring lawmakers to identify not only the earmarks they receive but the ones they request. Earmarks for private, for-profit companies would be subject to competitive bidding.
But earmarks are symbols of broader indiscipline, and they also are conducive to corruption. So it was disappointing that Mr. Obama shied away from a tougher stance even as he congratulated himself for doing more. He called earmarks for private companies "the single most corrupting element of this practice." Why, then, not do away with such earmarks entirely? As a senator, Mr. Obama eventually renounced private-sector earmarks. Likewise, Mr. Obama said that he would work to strip out unjustified earmarks from future bills -- but he proposed no mechanism for giving him that authority. "He looks forward to working through a process that allows that to happen," press secretary Robert Gibbs said. So do we.
President Obama promises to rein in earmarks. Soon.
WaPo, Friday, March 13, 2009; A16
LIKE A DIETER who allows himself just one more slice of cake before starting to count calories, President Obama signed the $410 billion omnibus spending bill, then pledged to get tough on congressional earmark spending -- next time. "This piece of legislation must mark an end to the old way of doing business," Mr. Obama announced. As with the dieter, skepticism is appropriate. The old way was supposed to have ended already. After all, Mr. Obama, in his inaugural address, proclaimed that "those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits."
The political demands of the moment led Mr. Obama to sign this measure despite its imperfections. That's understandable, but the same pressures will arise next time, too, as members of Congress will be well aware as they consider whether to take the president on over earmarks. Tradeoffs come with the territory, but Mr. Obama is accepting them after holding himself out as -- indeed, while continuing to hold himself out as -- the avatar of a new way of doing business. "Barack Obama is committed to returning earmarks to less than $7.8 billion a year, the level they were at before 1994, when Republicans took control of Congress and the level of earmarks began rising dramatically," the Obama campaign proclaimed. "I've pledged to slash earmarks by more than half when I am president of the United States," Mr. Obama said in September. Somehow, that commitment was missing from Wednesday's announcement of future restraint. The dieter didn't set a weight-loss goal.
Earmarks account for only a sliver of spending, and the Constitution does give Congress the power of the purse. As Mr. Obama said Wednesday, "Done right, earmarks give legislators the opportunity to direct federal money to worthy projects that benefit people in their district." Moreover, some ugly excesses associated with them have already been curtailed. The amount of earmarked funds has been brought down in the past three years, and disclosure has improved. Mr. Obama's after-the-omnibus-has-left-the-barn proposals would expand on these changes by requiring lawmakers to identify not only the earmarks they receive but the ones they request. Earmarks for private, for-profit companies would be subject to competitive bidding.
But earmarks are symbols of broader indiscipline, and they also are conducive to corruption. So it was disappointing that Mr. Obama shied away from a tougher stance even as he congratulated himself for doing more. He called earmarks for private companies "the single most corrupting element of this practice." Why, then, not do away with such earmarks entirely? As a senator, Mr. Obama eventually renounced private-sector earmarks. Likewise, Mr. Obama said that he would work to strip out unjustified earmarks from future bills -- but he proposed no mechanism for giving him that authority. "He looks forward to working through a process that allows that to happen," press secretary Robert Gibbs said. So do we.
Conservative views on BHO's embryonic stem cell policy and scientific integrity
Obama's 'Science' Fiction. By Charles Krauthammer
Friday, March 13, 2009; Page A17
Last week, the White House invited me to a signing ceremony overturning the Bush (43) executive order on stem cell research. I assume this was because I have long argued in these columns and during my five years on the President's Council on Bioethics that, contrary to the Bush policy, federal funding should be extended to research on embryonic stem cell lines derived from discarded embryos in fertility clinics.
I declined to attend. Once you show your face at these things you become a tacit endorser of whatever they spring. My caution was vindicated.
President Bush had restricted federal funding for embryonic stem cell research to cells derived from embryos that had already been destroyed (as of his speech of Aug. 9, 2001). While I favor moving that moral line to additionally permit the use of spare fertility clinic embryos, President Obama replaced it with no line at all. He pointedly left open the creation of cloned -- and noncloned sperm-and-egg-derived -- human embryos solely for the purpose of dismemberment and use for parts.
I am not religious. I do not believe that personhood is conferred upon conception. But I also do not believe that a human embryo is the moral equivalent of a hangnail and deserves no more respect than an appendix. Moreover, given the protean power of embryonic manipulation, the temptation it presents to science and the well-recorded human propensity for evil even in the pursuit of good, lines must be drawn. I suggested the bright line prohibiting the deliberate creation of human embryos solely for the instrumental purpose of research -- a clear violation of the categorical imperative not to make a human life (even if only a potential human life) a means rather than an end.
On this, Obama has nothing to say. He leaves it entirely to the scientists. This is more than moral abdication. It is acquiescence to the mystique of "science" and its inherent moral benevolence. How anyone as sophisticated as Obama can believe this within living memory of Mengele and Tuskegee and the fake (and coercive) South Korean stem cell research is hard to fathom.
That part of the ceremony, watched from the safe distance of my office, made me uneasy. The other part -- the ostentatious issuance of a memorandum on "restoring scientific integrity to government decision-making" -- would have made me walk out.
Restoring? The implication, of course, is that while Obama is guided solely by science, Bush was driven by dogma, ideology and politics.
What an outrage. Bush's nationally televised stem cell speech was the most morally serious address on medical ethics ever given by an American president. It was so scrupulous in presenting the best case for both his view and the contrary view that until the last few minutes, the listener had no idea where Bush would come out.
Obama's address was morally unserious in the extreme. It was populated, as his didactic discourses always are, with a forest of straw men. Such as his admonition that we must resist the "false choice between sound science and moral values." Yet, exactly 2 minutes and 12 seconds later he went on to declare that he would never open the door to the "use of cloning for human reproduction."
Does he not think that a cloned human would be of extraordinary scientific interest? And yet he banned it.
Is he so obtuse as not to see that he had just made a choice of ethics over science? Yet, unlike Bush, who painstakingly explained the balance of ethical and scientific goods he was trying to achieve, Obama did not even pretend to make the case why some practices are morally permissible and others not.
This is not just intellectual laziness. It is the moral arrogance of a man who continuously dismisses his critics as ideological while he is guided exclusively by pragmatism (in economics, social policy, foreign policy) and science in medical ethics.
Science has everything to say about what is possible. Science has nothing to say about what is permissible. Obama's pretense that he will "restore science to its rightful place" and make science, not ideology, dispositive in moral debates is yet more rhetorical sleight of hand -- this time to abdicate decision-making and color his own ideological preferences as authentically "scientific."
Dr. James Thomson, the pioneer of embryonic stem cells, said "if human embryonic stem cell research does not make you at least a little bit uncomfortable, you have not thought about it enough." Obama clearly has not.
Friday, March 13, 2009; Page A17
Last week, the White House invited me to a signing ceremony overturning the Bush (43) executive order on stem cell research. I assume this was because I have long argued in these columns and during my five years on the President's Council on Bioethics that, contrary to the Bush policy, federal funding should be extended to research on embryonic stem cell lines derived from discarded embryos in fertility clinics.
I declined to attend. Once you show your face at these things you become a tacit endorser of whatever they spring. My caution was vindicated.
President Bush had restricted federal funding for embryonic stem cell research to cells derived from embryos that had already been destroyed (as of his speech of Aug. 9, 2001). While I favor moving that moral line to additionally permit the use of spare fertility clinic embryos, President Obama replaced it with no line at all. He pointedly left open the creation of cloned -- and noncloned sperm-and-egg-derived -- human embryos solely for the purpose of dismemberment and use for parts.
I am not religious. I do not believe that personhood is conferred upon conception. But I also do not believe that a human embryo is the moral equivalent of a hangnail and deserves no more respect than an appendix. Moreover, given the protean power of embryonic manipulation, the temptation it presents to science and the well-recorded human propensity for evil even in the pursuit of good, lines must be drawn. I suggested the bright line prohibiting the deliberate creation of human embryos solely for the instrumental purpose of research -- a clear violation of the categorical imperative not to make a human life (even if only a potential human life) a means rather than an end.
On this, Obama has nothing to say. He leaves it entirely to the scientists. This is more than moral abdication. It is acquiescence to the mystique of "science" and its inherent moral benevolence. How anyone as sophisticated as Obama can believe this within living memory of Mengele and Tuskegee and the fake (and coercive) South Korean stem cell research is hard to fathom.
That part of the ceremony, watched from the safe distance of my office, made me uneasy. The other part -- the ostentatious issuance of a memorandum on "restoring scientific integrity to government decision-making" -- would have made me walk out.
Restoring? The implication, of course, is that while Obama is guided solely by science, Bush was driven by dogma, ideology and politics.
What an outrage. Bush's nationally televised stem cell speech was the most morally serious address on medical ethics ever given by an American president. It was so scrupulous in presenting the best case for both his view and the contrary view that until the last few minutes, the listener had no idea where Bush would come out.
Obama's address was morally unserious in the extreme. It was populated, as his didactic discourses always are, with a forest of straw men. Such as his admonition that we must resist the "false choice between sound science and moral values." Yet, exactly 2 minutes and 12 seconds later he went on to declare that he would never open the door to the "use of cloning for human reproduction."
Does he not think that a cloned human would be of extraordinary scientific interest? And yet he banned it.
Is he so obtuse as not to see that he had just made a choice of ethics over science? Yet, unlike Bush, who painstakingly explained the balance of ethical and scientific goods he was trying to achieve, Obama did not even pretend to make the case why some practices are morally permissible and others not.
This is not just intellectual laziness. It is the moral arrogance of a man who continuously dismisses his critics as ideological while he is guided exclusively by pragmatism (in economics, social policy, foreign policy) and science in medical ethics.
Science has everything to say about what is possible. Science has nothing to say about what is permissible. Obama's pretense that he will "restore science to its rightful place" and make science, not ideology, dispositive in moral debates is yet more rhetorical sleight of hand -- this time to abdicate decision-making and color his own ideological preferences as authentically "scientific."
Dr. James Thomson, the pioneer of embryonic stem cells, said "if human embryonic stem cell research does not make you at least a little bit uncomfortable, you have not thought about it enough." Obama clearly has not.
Review of Wayne Kramer's "Crossing Over"
'Crossing': Over the Top. By Ann Hornaday
Message Movie Is Tripped by Its Excesses -- and Earnestness
WaPo, March 13, 2009
"Crossing Over" is the kind of movie that gives Hollywood liberalism not a bad name, nor a good name, but an irritating, self-righteous and ultimately fatuous name.
The multilinear story involving illegal immigrants clearly takes its structural cue from such similarly tangled roundelays as "Crash" and "Babel." But the cinematic comparisons don't end there. As "Crossing Over" makes its patronizing points, by way of two-dimensional characters and billboarded plot points, it recalls other, better movies that dealt with the same subjects far more deftly. This will come as a particular surprise to fans of director Wayne Kramer's Las Vegas thriller "The Cooler," which was one of the most understated and subtle surprises of 2003.
Harrison Ford does his level, gruffly sardonic best playing Max Brogan, a Los Angeles Immigration and Customs Enforcement agent under whose scarred exterior beats a bleeding heart of gold. ("This man is having a [expletive] heart attack!" he bellows on behalf of one of his charges at one point. "I want him seen to!") When he arrests an illegal garment worker, she begs him to take care of her young son, an encounter that sends him on a journey of -- what else? -- personal redemption.
Ray Liotta, Ashley Judd and Jim Sturgess also appear, as an immigration official, a lawyer and a musician on the prowl for a green card, respectively. In supporting roles, the terrific New Zealand-born actor Cliff Curtis plays Brogan's fiery Iranian American partner; Summer Bishil ("Towelhead") portrays a 15-year-old Muslim girl whose naivete leads to preposterous ends; and Alice Eve, who looks like a digitally morphed combination of Naomi Watts and Nicole Kidman, plays an actress who wants to be the next Naomi Watts or Nicole Kidman.
But wait, there's more! We haven't even gotten to the Korean kid being tempted by gangbangers. Indeed, there's always more in "Crossing Over," whose characters, story lines, plot twists and polemical talking points are way too numerous -- and tiresome, and predictable -- to mention. Through it all, Ford and Judd manage best to overcome the script, with Ford retaining his craggy dignity and Judd ever-radiant despite dialogue so stilted you can hear the keystrokes behind every word.
It takes a particular kind of warped skill to make a movie that's simultaneously didactic and exploitative, but Kramer manages to thread just that unfortunate needle, alternating windy speeches about the American dream with lurid scenes of sex and violence.
The themes of tradition, assimilation, post-9/11 paranoia, random acts of bureaucratic injustice and intercultural tension have been adroitly portrayed in such recent releases as "Under the Same Moon," "Persepolis," "The Visitor" and "Gran Torino," to name just a few. Each of those films tapped into the timeless, universal themes Kramer seems unable to wrap his arms around. Maybe if he had kept "Crossing Over" simpler, he would have made a less simplistic movie.
Message Movie Is Tripped by Its Excesses -- and Earnestness
WaPo, March 13, 2009
"Crossing Over" is the kind of movie that gives Hollywood liberalism not a bad name, nor a good name, but an irritating, self-righteous and ultimately fatuous name.
The multilinear story involving illegal immigrants clearly takes its structural cue from such similarly tangled roundelays as "Crash" and "Babel." But the cinematic comparisons don't end there. As "Crossing Over" makes its patronizing points, by way of two-dimensional characters and billboarded plot points, it recalls other, better movies that dealt with the same subjects far more deftly. This will come as a particular surprise to fans of director Wayne Kramer's Las Vegas thriller "The Cooler," which was one of the most understated and subtle surprises of 2003.
Harrison Ford does his level, gruffly sardonic best playing Max Brogan, a Los Angeles Immigration and Customs Enforcement agent under whose scarred exterior beats a bleeding heart of gold. ("This man is having a [expletive] heart attack!" he bellows on behalf of one of his charges at one point. "I want him seen to!") When he arrests an illegal garment worker, she begs him to take care of her young son, an encounter that sends him on a journey of -- what else? -- personal redemption.
Ray Liotta, Ashley Judd and Jim Sturgess also appear, as an immigration official, a lawyer and a musician on the prowl for a green card, respectively. In supporting roles, the terrific New Zealand-born actor Cliff Curtis plays Brogan's fiery Iranian American partner; Summer Bishil ("Towelhead") portrays a 15-year-old Muslim girl whose naivete leads to preposterous ends; and Alice Eve, who looks like a digitally morphed combination of Naomi Watts and Nicole Kidman, plays an actress who wants to be the next Naomi Watts or Nicole Kidman.
But wait, there's more! We haven't even gotten to the Korean kid being tempted by gangbangers. Indeed, there's always more in "Crossing Over," whose characters, story lines, plot twists and polemical talking points are way too numerous -- and tiresome, and predictable -- to mention. Through it all, Ford and Judd manage best to overcome the script, with Ford retaining his craggy dignity and Judd ever-radiant despite dialogue so stilted you can hear the keystrokes behind every word.
It takes a particular kind of warped skill to make a movie that's simultaneously didactic and exploitative, but Kramer manages to thread just that unfortunate needle, alternating windy speeches about the American dream with lurid scenes of sex and violence.
The themes of tradition, assimilation, post-9/11 paranoia, random acts of bureaucratic injustice and intercultural tension have been adroitly portrayed in such recent releases as "Under the Same Moon," "Persepolis," "The Visitor" and "Gran Torino," to name just a few. Each of those films tapped into the timeless, universal themes Kramer seems unable to wrap his arms around. Maybe if he had kept "Crossing Over" simpler, he would have made a less simplistic movie.
Climatologist J Theon: political pressure prevented him from firing Hansen, global warming is a fraud
Muzzling Science, by Henry Payne
Planet Gore/NRO, Mar 12, 2009
America’s media over the years has hung on NASA climatologist James Hansen’s every word as he accused the Bush Administration of muzzling the facts about government climate science. For example, here, or here, or here, or. . . .
At the International Climate Change Conference this week, however, Hansen’s former boss, climatologist John Theon, put Mr. Hansen’s NASA career in perspective saying not only that political pressure prevented him from firing an out-of-line Hansen but that global warming is a “fraud.” As Reason’s Ronald Bailey reported from New York:
Retired NASA climatologist John Theon rose to lament the fact that he hadn't fired James Hansen, the head of NASA's Goddard Institute for Space Studies and an ardent advocate of the idea that man-made global warming is a catastrophe in the making. Theon called Hansen an “embarrassment” . . . (and) admitted that he actually couldn't have fired Hansen, who had powerful political protectors, most notably then-senator and later vice president Al Gore. So had Theon tried to do it, it's much more likely that he himself would have been out on the street rather than Hansen.
Theon told the audience that while he remained silent on the issue of global warming when he retired from NASA, he now felt he needed to speak out. “This whole thing is a fraud,” said Theon. “We need to educate the public about what we're going to get into unless we stop this nonsense.” The nonsense being the deleterious effect that carbon rationing would have on economic growth and jobs.
That’s news. And how did our national media react to these blockbuster revelations from one of the nation’s top ex-government scientists? [Crickets.]
[Ahem.] Isn’t that muzzling the facts?
Planet Gore/NRO, Mar 12, 2009
America’s media over the years has hung on NASA climatologist James Hansen’s every word as he accused the Bush Administration of muzzling the facts about government climate science. For example, here, or here, or here, or. . . .
At the International Climate Change Conference this week, however, Hansen’s former boss, climatologist John Theon, put Mr. Hansen’s NASA career in perspective saying not only that political pressure prevented him from firing an out-of-line Hansen but that global warming is a “fraud.” As Reason’s Ronald Bailey reported from New York:
Retired NASA climatologist John Theon rose to lament the fact that he hadn't fired James Hansen, the head of NASA's Goddard Institute for Space Studies and an ardent advocate of the idea that man-made global warming is a catastrophe in the making. Theon called Hansen an “embarrassment” . . . (and) admitted that he actually couldn't have fired Hansen, who had powerful political protectors, most notably then-senator and later vice president Al Gore. So had Theon tried to do it, it's much more likely that he himself would have been out on the street rather than Hansen.
Theon told the audience that while he remained silent on the issue of global warming when he retired from NASA, he now felt he needed to speak out. “This whole thing is a fraud,” said Theon. “We need to educate the public about what we're going to get into unless we stop this nonsense.” The nonsense being the deleterious effect that carbon rationing would have on economic growth and jobs.
That’s news. And how did our national media react to these blockbuster revelations from one of the nation’s top ex-government scientists? [Crickets.]
[Ahem.] Isn’t that muzzling the facts?
Remembering the Old James Hansen
Remembering the Old James Hansen (give him some credit). By Robert Bradley
Master Resource, March 12, 2009
I have previously posted on NASA scientist and leading climate alarmist James Hansen as a “scientist behaving strangely.” His mixing of politics and science–controversial science at that–has raised eyebrows among friend and foe.
But then there is the old, more moderate Jim Hansen. Below, I offer some quotations for the historical record. There are undoubtedly other quotations that can be added–and should be in the “comments” section, whether by Hansen or by colleagues of Hansen.
Perhaps Dr. Hansen can say that his thinking has evolved toward greater alarm. But if so, with temperatures little or no higher today than when he wrote a decade or more ago, the question must be asked: why has his alarm gone up rather than down?
Hansen on a “modest” anthropogenic climate impact
” The prospects for having a modest climate change impact instead of a disastrous one are quite good, I think.”
- James Hansen, quoted in Andrew Revkin, “Study Proposes New Strategy to Stem Global Warming,” New York Times, August 19, 2000, p. A12.
Hansen on “skepticism” in science
“Skepticism thus plays an essential role in scientific research, and, far from trying to silence skeptics, science invites their contributions. So, too, the global warming debate benefits from traditional scientific skepticism.”
- James Hansen, “The Global Warming Debate,” http;//www.giss.nasa.gov/edu/ gwdebate, January 17, 1999, p. 1.
Hansen on Mixing Politics and Science
“Injection of environmental and political perspectives in midstream of the science discussion cannot help the process of inquiry. I believe that persons with relevant scientific expertise should concentrate, with pride, on cool objective analysis, providing information to the public and decision-makers when it is found, but leaving the moral implications for later common consideration, or at most for summary inferential discussion.”
- James Hansen, 1998: book review of Sir John Houghton’s Global Warming: The Complete Briefing. Journal of Atmospheric Chemistry, 30, 409-412, at 410.
Jerry North on Hansen’s Concern about Gore’s Exaggeration
“I am also a great admirer of [James] Hansen. In my last conversation with him, he told me of a book review he just did on a book by Houghton (editor of IPCC Report). He said he blasted the book because it was too ideological. He said some people seem to have a ‘religious’ attachment to global warming like ‘Al Gore.’ He says this is not the way science is done.”
- Gerald R. North to Rob Bradley, email communication, May 4, 1998.
Hansen on Richard Lindzen
“While I don’t agree with Dick Lindzen’s viewpoint on climate change, he is a member of the National Academy of Sciences with outstanding accomplishments to his credit (and incidentally, an intellectual and a very effective debater).”
- James Hansen to Gerald North (cc: Rob Bradley), email communication, May 18, 1998.
[Note: Hansen's statement is germane to this post by Joseph Romm critical of Lindzen at Climate Progress]
Master Resource, March 12, 2009
I have previously posted on NASA scientist and leading climate alarmist James Hansen as a “scientist behaving strangely.” His mixing of politics and science–controversial science at that–has raised eyebrows among friend and foe.
But then there is the old, more moderate Jim Hansen. Below, I offer some quotations for the historical record. There are undoubtedly other quotations that can be added–and should be in the “comments” section, whether by Hansen or by colleagues of Hansen.
Perhaps Dr. Hansen can say that his thinking has evolved toward greater alarm. But if so, with temperatures little or no higher today than when he wrote a decade or more ago, the question must be asked: why has his alarm gone up rather than down?
Hansen on a “modest” anthropogenic climate impact
” The prospects for having a modest climate change impact instead of a disastrous one are quite good, I think.”
- James Hansen, quoted in Andrew Revkin, “Study Proposes New Strategy to Stem Global Warming,” New York Times, August 19, 2000, p. A12.
Hansen on “skepticism” in science
“Skepticism thus plays an essential role in scientific research, and, far from trying to silence skeptics, science invites their contributions. So, too, the global warming debate benefits from traditional scientific skepticism.”
- James Hansen, “The Global Warming Debate,” http;//www.giss.nasa.gov/edu/ gwdebate, January 17, 1999, p. 1.
Hansen on Mixing Politics and Science
“Injection of environmental and political perspectives in midstream of the science discussion cannot help the process of inquiry. I believe that persons with relevant scientific expertise should concentrate, with pride, on cool objective analysis, providing information to the public and decision-makers when it is found, but leaving the moral implications for later common consideration, or at most for summary inferential discussion.”
- James Hansen, 1998: book review of Sir John Houghton’s Global Warming: The Complete Briefing. Journal of Atmospheric Chemistry, 30, 409-412, at 410.
Jerry North on Hansen’s Concern about Gore’s Exaggeration
“I am also a great admirer of [James] Hansen. In my last conversation with him, he told me of a book review he just did on a book by Houghton (editor of IPCC Report). He said he blasted the book because it was too ideological. He said some people seem to have a ‘religious’ attachment to global warming like ‘Al Gore.’ He says this is not the way science is done.”
- Gerald R. North to Rob Bradley, email communication, May 4, 1998.
Hansen on Richard Lindzen
“While I don’t agree with Dick Lindzen’s viewpoint on climate change, he is a member of the National Academy of Sciences with outstanding accomplishments to his credit (and incidentally, an intellectual and a very effective debater).”
- James Hansen to Gerald North (cc: Rob Bradley), email communication, May 18, 1998.
[Note: Hansen's statement is germane to this post by Joseph Romm critical of Lindzen at Climate Progress]
Who Pays for Cap and Trade? -- II
Who Pays for Cap and Trade? -- II. WSJ Editorial
WSJ, Mar 13, 2009
We don't mind an intellectual fight, and in a nearby letter, two economists at Resources for the Future take aim at our Monday editorial on how the costs of cap and trade will be distributed across regions and income groups. Dallas Burtraw and Richard Sweeney call it "a bait-and-switch argument." Mr. Sweeney added on his blog that "The Wall Street Journal is an idiot."
That's how the global-warming clerisy debates these days, but we'll try to take their argument seriously. They claim that by citing state-level CO2 production data, rather than CO2 consumption data, we exaggerated regional differences. This is distortion disguised as verisimilitude.
It's true that discrepancies in per capita emissions -- 73 tons in West Virginia versus 12 tons in Rhode Island, for instance -- reflect the fact that carbon-heavy power plants and industries are based in some states and not others. It's also true that electricity crosses state lines, and that -- as cap and trade raises prices -- a consumer in California who buys a car built in Michigan, say, will bear some of its carbon costs.
However, one reason we didn't mention per capita consumption figures is that, strictly speaking, they don't exist. The economic literature on the incidence of cap and trade extrapolates carbon consumption by region from the government's Consumer Expenditure Survey. But nearly every human activity has some carbon cost associated with it. Consider the emissions of "consuming" french fries at a fast food restaurant:
There's CO2 in fertilizing and harvesting the potatoes; processing, freezing, then transporting them; and still more when they're cooked. Now multiply that by the entire economy. One danger of a carbon tax -- especially if it is poorly designed -- is it that its costs will ripple throughout complex energy chains in ways that economic modeling can't quantify.
Still, in the spirit of comity, we'll mention the work of Messrs. Burtraw and Sweeney, who wrote a 2008 paper finding that cap and trade disproportionately hits the poorest households and that those effects are exacerbated in some regions over others. That was our argument too.
Of course, ultimately the incidence of a carbon tax depends on how the revenues it takes from the public are redistributed back to the public. Yet Congress, being Congress, is incapable of designing even a marginally efficient system -- and given environmental politics and state carbon realities, the losers will be concentrated in noncoastal regions that rely most on coal and manufacturing.
And therein lies the value of emissions production data. Not only does cap and trade tax at the point of production (even if some of those costs are ultimately borne by consumers elsewhere), but it also shifts economic activity away from those industries. The states that produce the most emissions are going to see the strongest ancillary declines in income and increases in unemployment. The top carbon states -- in absolute, not per capita, emissions -- include Ohio (No. 3), Pennsylvania (No. 4), Indiana (No. 7) and Michigan (No. 9).
What really drives cap-and-trade idolaters like Messrs. Burtraw and Sweeney to schoolboy taunts is their fear that the American people might figure this out. Then their dreams of having government command a huge new chunk of the economy might collapse.
WSJ, Mar 13, 2009
We don't mind an intellectual fight, and in a nearby letter, two economists at Resources for the Future take aim at our Monday editorial on how the costs of cap and trade will be distributed across regions and income groups. Dallas Burtraw and Richard Sweeney call it "a bait-and-switch argument." Mr. Sweeney added on his blog that "The Wall Street Journal is an idiot."
That's how the global-warming clerisy debates these days, but we'll try to take their argument seriously. They claim that by citing state-level CO2 production data, rather than CO2 consumption data, we exaggerated regional differences. This is distortion disguised as verisimilitude.
It's true that discrepancies in per capita emissions -- 73 tons in West Virginia versus 12 tons in Rhode Island, for instance -- reflect the fact that carbon-heavy power plants and industries are based in some states and not others. It's also true that electricity crosses state lines, and that -- as cap and trade raises prices -- a consumer in California who buys a car built in Michigan, say, will bear some of its carbon costs.
However, one reason we didn't mention per capita consumption figures is that, strictly speaking, they don't exist. The economic literature on the incidence of cap and trade extrapolates carbon consumption by region from the government's Consumer Expenditure Survey. But nearly every human activity has some carbon cost associated with it. Consider the emissions of "consuming" french fries at a fast food restaurant:
There's CO2 in fertilizing and harvesting the potatoes; processing, freezing, then transporting them; and still more when they're cooked. Now multiply that by the entire economy. One danger of a carbon tax -- especially if it is poorly designed -- is it that its costs will ripple throughout complex energy chains in ways that economic modeling can't quantify.
Still, in the spirit of comity, we'll mention the work of Messrs. Burtraw and Sweeney, who wrote a 2008 paper finding that cap and trade disproportionately hits the poorest households and that those effects are exacerbated in some regions over others. That was our argument too.
Of course, ultimately the incidence of a carbon tax depends on how the revenues it takes from the public are redistributed back to the public. Yet Congress, being Congress, is incapable of designing even a marginally efficient system -- and given environmental politics and state carbon realities, the losers will be concentrated in noncoastal regions that rely most on coal and manufacturing.
And therein lies the value of emissions production data. Not only does cap and trade tax at the point of production (even if some of those costs are ultimately borne by consumers elsewhere), but it also shifts economic activity away from those industries. The states that produce the most emissions are going to see the strongest ancillary declines in income and increases in unemployment. The top carbon states -- in absolute, not per capita, emissions -- include Ohio (No. 3), Pennsylvania (No. 4), Indiana (No. 7) and Michigan (No. 9).
What really drives cap-and-trade idolaters like Messrs. Burtraw and Sweeney to schoolboy taunts is their fear that the American people might figure this out. Then their dreams of having government command a huge new chunk of the economy might collapse.
EFCA replaces collective bargaining with government-imposed contracts for newly organized companies
EFCA Authorizes Government Control of 4 Million Small Businesses. By James Sherk
Heritage WebMemo #2341, March 12, 2009
The Employee Free Choice Act (EFCA, H.R. 1409, S. 560) does more than take away secret ballot elections: It empowers the federal government to impose contracts on newly organized companies. The government would set wages, benefits, work assignments, promotion procedures, and any major changes to business operations. Because EFCA has no meaningful small businesses exemption, it would authorize federal control of up to 4 million small businesses employing 39 million Americans. Consequently, bureaucrats with no management experience would effectively control these small businesses.
Four Million Small Businesses Affected
The misnamed Employee Free Choice Act affects both large and small businesses. The National Labor Relations Act (NLRA) has a small business exception. However, this exemption has not been updated for inflation since 1959.[1] It covers all non-retail businesses with gross revenues of $50,000 a year and retail businesses with gross revenues over $500,000 a year.[2]
To put those figures into perspective, the average private-sector worker costs his or her employer $56,000 a year in wages and benefits--before the cost of any capital needed to do the job.[3] A business with one worker earning average pay would not qualify. Consequently, the law has no meaningful small businesses exemption.
The Heritage Foundation used Census Bureau data to calculate how many small businesses EFCA would affect: The act covers 4,180,000 businesses employing 38,934,000 workers.[4]
EFCA's Other Provision
EFCA takes away these workers' right to a secret ballot vote on joining a union--a consequence that has attracted considerable controversy. However, the bill has a second provision of equal if not greater significance to small businesses that has attracted much less attention: EFCA replaces collective bargaining with government-imposed contracts for newly organized companies. Section 3 of the act provides that, after unions organize a business, the company has 10 days to meet with union officials to begin collective bargaining. After 90 days of bargaining, either party may request mediation by the Federal Mediation and Conciliation Service (FMCS). Thirty days later, if the parties have not settled on a contract or agreed to extend negotiations, the FMCS shall refer the dispute to an arbitration board established in accordance with such regulations as may be prescribed by the service. The arbitration panel shall render a decision settling the dispute, and such decision shall be binding upon the parties for a period of two years, unless amended during such period by written consent of the parties.[5]
In place of collective bargaining, the government would impose a contract for two years. In practice, EFCA will effectively eliminate collective bargaining for initial contracts because the system provides no reason for unions not to hold out for a government contract. Unions would have strong incentives to make extreme demands and hope the FMCS appointed arbitrator splits the difference between these demands and management's position.[6]
Bureaucrats Control the Workplace
Granting such a radical amount of power to the FMCS puts control of workplaces in the hands of unaccountable government bureaucrats. Labor contracts do not simply set wage and benefit levels but cover many aspects of how businesses operate. Under EFCA government bureaucrats would impose:
Additionally, the government would also be empowered to make critical decisions regarding business operations. Any business operation that significantly affects workers' jobs or working conditions would be set by arbitrators--even the equipment employees use.[8] The government would determine what tasks a firm subcontracts out for and what work gets performed in-house. For two years, government bureaucrats would set most major business decisions for newly organized businesses. Given the power the government would now wield over the private sector, EFCA effectively allows the government to run these companies.
Businesses at Risk
Government control would harm any company, but it would be particularly hard for small businesses to recover from government mistakes because they have less money with which to absorb losses. Consider a small car-repair shop that employs five mechanics. Teamster organizers take three of the mechanics out for beer after work and persuade them to sign union cards before hearing opposing arguments. The Teamsters--under EFCA's card check recognition requirements--then represent all five workers in the shop. If, after four months of negotiations, the owner and the union had not reached a contract--perhaps because the union insisted on extreme demands such as firing any worker who did not join the Teamsters--the union could request meditation through the FMCS. After a lengthy process, approximately 15 months in the public sector, the government would impose a contract.[9]
At that point both the small business owner and the mechanics would lose all control over their workplace. Workers have no vote on the contract and they cannot go on strike; workers must accept whatever the government chooses for them.
For instance, the government could:
Government Control of Small Businesses
The misnamed Employee Free Choice Act puts control of small businesses in the hands of government bureaucrats because it contains no meaningful small business exemption. About 39 million employees from 4 million small businesses would lose their right to a secret ballot. EFCA then allows the government to impose contracts on newly organized small business employees. The federal government, not workers or their employers, would decide how much workers should earn, how--and if--they are promoted, and what benefits they receive. The government would assign work tasks and set business operations. The government would take control of every significant aspect of the small business workplace.
James Sherk is the Bradley Fellow in Labor Policy at The Heritage Foundation.
Heritage WebMemo #2341, March 12, 2009
The Employee Free Choice Act (EFCA, H.R. 1409, S. 560) does more than take away secret ballot elections: It empowers the federal government to impose contracts on newly organized companies. The government would set wages, benefits, work assignments, promotion procedures, and any major changes to business operations. Because EFCA has no meaningful small businesses exemption, it would authorize federal control of up to 4 million small businesses employing 39 million Americans. Consequently, bureaucrats with no management experience would effectively control these small businesses.
Four Million Small Businesses Affected
The misnamed Employee Free Choice Act affects both large and small businesses. The National Labor Relations Act (NLRA) has a small business exception. However, this exemption has not been updated for inflation since 1959.[1] It covers all non-retail businesses with gross revenues of $50,000 a year and retail businesses with gross revenues over $500,000 a year.[2]
To put those figures into perspective, the average private-sector worker costs his or her employer $56,000 a year in wages and benefits--before the cost of any capital needed to do the job.[3] A business with one worker earning average pay would not qualify. Consequently, the law has no meaningful small businesses exemption.
The Heritage Foundation used Census Bureau data to calculate how many small businesses EFCA would affect: The act covers 4,180,000 businesses employing 38,934,000 workers.[4]
EFCA's Other Provision
EFCA takes away these workers' right to a secret ballot vote on joining a union--a consequence that has attracted considerable controversy. However, the bill has a second provision of equal if not greater significance to small businesses that has attracted much less attention: EFCA replaces collective bargaining with government-imposed contracts for newly organized companies. Section 3 of the act provides that, after unions organize a business, the company has 10 days to meet with union officials to begin collective bargaining. After 90 days of bargaining, either party may request mediation by the Federal Mediation and Conciliation Service (FMCS). Thirty days later, if the parties have not settled on a contract or agreed to extend negotiations, the FMCS shall refer the dispute to an arbitration board established in accordance with such regulations as may be prescribed by the service. The arbitration panel shall render a decision settling the dispute, and such decision shall be binding upon the parties for a period of two years, unless amended during such period by written consent of the parties.[5]
In place of collective bargaining, the government would impose a contract for two years. In practice, EFCA will effectively eliminate collective bargaining for initial contracts because the system provides no reason for unions not to hold out for a government contract. Unions would have strong incentives to make extreme demands and hope the FMCS appointed arbitrator splits the difference between these demands and management's position.[6]
Bureaucrats Control the Workplace
Granting such a radical amount of power to the FMCS puts control of workplaces in the hands of unaccountable government bureaucrats. Labor contracts do not simply set wage and benefit levels but cover many aspects of how businesses operate. Under EFCA government bureaucrats would impose:
- Wages and bonuses;
- Employment levels;
- Retirement and health care plans;
- Changes in business operations;
- Promotions procedures;
- Work assignments;
- Subcontracting; and
- Closure, sale, or merger of a business.[7]
Additionally, the government would also be empowered to make critical decisions regarding business operations. Any business operation that significantly affects workers' jobs or working conditions would be set by arbitrators--even the equipment employees use.[8] The government would determine what tasks a firm subcontracts out for and what work gets performed in-house. For two years, government bureaucrats would set most major business decisions for newly organized businesses. Given the power the government would now wield over the private sector, EFCA effectively allows the government to run these companies.
Businesses at Risk
Government control would harm any company, but it would be particularly hard for small businesses to recover from government mistakes because they have less money with which to absorb losses. Consider a small car-repair shop that employs five mechanics. Teamster organizers take three of the mechanics out for beer after work and persuade them to sign union cards before hearing opposing arguments. The Teamsters--under EFCA's card check recognition requirements--then represent all five workers in the shop. If, after four months of negotiations, the owner and the union had not reached a contract--perhaps because the union insisted on extreme demands such as firing any worker who did not join the Teamsters--the union could request meditation through the FMCS. After a lengthy process, approximately 15 months in the public sector, the government would impose a contract.[9]
At that point both the small business owner and the mechanics would lose all control over their workplace. Workers have no vote on the contract and they cannot go on strike; workers must accept whatever the government chooses for them.
For instance, the government could:
- Decide that the shop needed to hire two new mechanics while setting wage rates higher than competing repair shops,
- Take away employee health benefits,
- Prevent the shop from installing new labor saving machines,
- Force the shop to fire any worker who does not pay union dues,
- Force the workers into an under-funded union pension plan,
- Impose work rules that prevent the most experienced mechanic from handling the most difficult jobs (unpleasant tasks would be assigned to less senior mechanics), and
- Determine which employee gets the next promotion, irrespective of merit.
Many of these provisions would drive up costs and force the repair shop to raise prices. But if higher prices drove customers to a competitor, putting the shop out of business, the government would not protect the mechanics' jobs. EFCA forces workers to accept whatever the government gives them and live with the consequences.
Government Control of Small Businesses
The misnamed Employee Free Choice Act puts control of small businesses in the hands of government bureaucrats because it contains no meaningful small business exemption. About 39 million employees from 4 million small businesses would lose their right to a secret ballot. EFCA then allows the government to impose contracts on newly organized small business employees. The federal government, not workers or their employers, would decide how much workers should earn, how--and if--they are promoted, and what benefits they receive. The government would assign work tasks and set business operations. The government would take control of every significant aspect of the small business workplace.
James Sherk is the Bradley Fellow in Labor Policy at The Heritage Foundation.
Taiwan and China Make Strides: Can America Respond?
Taiwan and China Make Strides: Can America Respond? By Rupert Hammond-Chambers, President, U.S.-Taiwan Business Council
The Brookings Institution, Mar 12, 2009
On March 22, 2008, Taiwan voters went to the polls and declared a return to Kuomintang (KMT) rule. The KMT’s Ma Ying-jeou won a landslide election against Frank Hsieh of the incumbent Democratic Progressive Party (DPP), and the end result was rarely in question as voter frustration over DPP rule – accumulated over 8 years – spilled over into a convincing 58.45 percent victory for Ma and his running mate Vincent Siew.
Ma’s contention that Taiwan’s economy had fared poorly from 2000-2008 played well to Taiwan’s electorate - somewhat unfairly, as in fact Taiwan enjoyed average annual GDP growth of 3.63 percent during that period, according to the National Statistics Database maintained by Taiwan’s Directorate-General of Budget, Accounting and Statistics (DGBAS). But voter perception was centered on missed opportunities and a Taiwan that had mostly stood still for eight years while its regional competitors advanced their interests.
But Ma won the election also by highlighting the angst that former President Chen Shui-bian had caused Taiwan’s most important interlocutors – China and the United States. China was never interested in offering President Chen a dialogue during his 8 years as president of Taiwan, other than under terms and conditions that ran contrary to DPP principles. However, President Chen’s diplomatic isolation was exacerbated by his rhetoric that so often caught policymakers in Beijing and Washington off guard. This left the Chinese increasingly concerned about Chen’s intentions – even in the face of obvious constitutional limitations on his power – and left the U.S. frustrated both with constant Chinese harping and Chen’s erratic behavior. This tense situation appeared to cast a shadow over much else that the Bush administration was attempting to accomplish in its relationship with China.
Fairly or unfairly, the picture that evolved – particularly after Chen’s second election victory in March of 2004 – was of a Taiwan actively undermining peace and security in north Asia, and by extension hurting its own commercial and diplomatic interests. This perception neatly teed up candidate Ma’s campaign, where he pitched Taiwan voters on the importance of returning to the safe and steady hands of the technocratic KMT and of addressing Taiwan’s core economic, domestic and foreign relationships.
Ma’s Campaign Commitments
Candidate Ma’s general campaign pitch was a return to balanced and experienced rule under the KMT. He focused acutely on the perception that Taiwan had been treading water during a period of global economic expansion, thereby missing opportunities to grow global markets as well as to reform domestically. In addition, he noted that Taiwan’s global diplomatic isolation had increased under the DPP, and contended that the course of confrontation with China and the U.S. was unsustainable. Ma argued that it was essential to reach a new accommodation with China that would allow for meaningful representation of Taiwan in global organizations – including but not limited to the World Health Assembly (WHA).
Candidate Ma’s choice for vice president spoke volumes for his campaign’s focus on the economy. Vincent Siew is a former premier and was Minister of Economic Affairs under former president Lee Teng-hui. His role would be to spearhead both comprehensive domestic economic reform, including further deregulation of services like banking; and to take charge of implementing the i-Taiwan 12 projects – a large infrastructure package valued at approximately US$117 billion over 8 years. In addition, Vincent Siew is strongly identified with the concept of a Cross-Strait Common Market, an idea that he formulated and championed over several years. Ma even incorporated this initiative into his election manifesto as a central goal in a plan to harmonize commercial activity between Taiwan and what is now Taiwan’s largest market, China.
Cross-Strait economic engagement had another equally important deliverable for the Ma camp; it was a natural platform to reduce tensions and map a more reasonable path for increased cooperation with China, while staving off the need to engage on pricklier matters concerning sovereignty. The Ma campaign promised that this issue, often and rather simplistically viewed through the logistical challenge of flying between Taiwan and China, was to be tackled early on through an incremental resumption of cross-Strait transportation links, coupled with more comprehensive agreements on air travel and mail. Ma and Siew also saw an increase in mainland tourists visiting the island as an important objective, given their potential impact on a broad cross-section of Taiwan’s economy.
During his campaign, Ma also articulated the need to improve relations with the United States, with which ties had soured terribly since about 2003. Chen’s erratic behavior, coupled with a Bush team more interested in improving relations with China, made for a difficult set of circumstances and an increasingly reflexive urge to press Taiwan into a box. While this attitude was initially focused on Chen and his colleagues, it drifted into an overall view of Taiwan that drew no distinctions. In the end, Taiwan could do no right. Ma noted that Taiwan-U.S. relations would likely improve simply as a function of improved Taiwan relations with China. However, he also put great weight on improved communications between Taipei and Washington, and the need to avoid surprising and confrontational actions.
Policies & Developments
President Ma hit the ground running when he assumed office on May 20, 2008.
The newly appointed chairman of the Strait Exchange Foundation (SEF), Chiang Pin-kung, went to China in mid-June of 2008 to consummate an initial deal on cross-Strait transportation as promised by the Ma campaign. The deal allowed for an expanded charter flight schedule, based on the holiday flight framework already in place. While the agreement included a limited number of direct routes on weekends only – and involved aircraft flying over Hong Kong airspace but not alighting – the agreement also stipulated that both sides would work toward normalized passenger and cargo air traffic with direct routes. This early triumph was seen in all three capitals as a positive sign and raised hopes that a more sustainable relationship might be within their grasp.
However, the Ma government had not seen cross-Strait transportation links as the only low-hanging fruit. To remain committed to his election platform, Ma quickly expanded his SEF - Association for Relations Across the Taiwan Straits (ARATS) dialogue to include:
· Opening currency exchanges for Chinese Yuan/New Taiwan Dollar trade
· Loosening of capital restriction for Chinese investment in Taiwan equities, companies, and property
· An agreement on tourists that hypothetically could dramatically increase the number of Chinese citizens visiting Taiwan daily
· Signing agreements for direct cross-Strait sea, air, and mail travel
· Simplifying procedures for Chinese professionals to visit and work for limited periods in Taiwan.
In addition, the Ma administration launched negotiations to allow Chinese students to visit and study in Taiwan, and a whole host of smaller initiatives have been negotiated and are in the early stages of implementation. This is a substantive and impressive body of work for approximately 8 months of dialogue. That said, Ma upped the ante substantially in late February when he and his colleagues responded positively to Chinese President Hu Jintao’s offer to negotiate and sign a Comprehensive Economic Cooperation Agreement (CECA) with Taiwan, now referred to on the island as the Economic Cooperation Framework Agreement (ECFA).
Despite this improvement in cross-Strait relations, Ma did not see the early gains he might have hoped for with the United States. By President Bush’s last year in office, the fact that Chen Shui-bian was no longer president of Taiwan was immaterial. America’s positive relationship with China was viewed as an important part of President Bush’s legacy, and the change in leadership in Taipei did not automatically change Taiwan’s value in the equation. President Ma was treated with minimal cordiality, and as he left office President Bush’s penultimate substantive Taiwan action – an October 3, 2008 decision to notify several weapons systems to Congress – created more confusion and frustration over the breakdown in the arms sales process on the U.S. side. Thus America’s defense relationship with Taiwan was bequeathed with unaddressed platforms and a broken arms sales process, a mess that President Obama and his colleagues will have to address.
China’s Role
From China’s perspective, Taiwan’s democratic transition has been decidedly unpleasant. Chen Shui-bian’s actions and statements were deemed highly provocative, and he replaced the reviled Lee Teng-hui whose late 1990s statements had made him persona non-grata with Beijing. So China stewed for the past eight years, happy only when President Bush or one of his colleagues made a statement or undertook an action or non-action that China saw as contrary to Taiwan’s interests, or beneficial to China at Taiwan’s expense. While the short term approach of demonizing Taiwan presidents might have played well in Beijing, it was having a profoundly negative effect on the view of China from Taiwan.
This was not China’s “Taiwan policy” per se. China mostly understood that Taiwan’s democratization and demographic changes were undermining what support existed on Taiwan for unification with China. A sustained churlish attitude toward the island would only accelerate these trends, making the possibility of resolution of the fundamental dispute that much more remote. Therefore, Ma’s election placed great import on the need to put China’s relations with Taiwan back on a path that at least held the possibility of peaceful resolution. President Hu and his civilian colleagues viewed Ma’s policy of economic engagement as a positive and reasonable momentum builder for relations. So under the guidance of ARATS’s chairman Chen Yunlin, China responded substantively to Ma’s outreached hand.
In a December 31, 2008 speech commemorating the 30th anniversary of an important Taiwan policy speech, China’s President Hu expanded the possibilities in bilateral cross-Strait relations when he made a six point proposal that included, 1) scrupulously abiding by the One-China principle and enhancing political mutual trust; 2) strengthening commercial ties, partly though negotiating an economic cooperation agreement; 3) promoting personnel exchanges of personnel between the two sides; 4) highlighting common cultural links; 5) allowing Taiwan’s “reasonable” participation in international organizations and 6) the negotiation of a peace agreement.
The notion of China’s “One-China Principle” – that there is only one China, it is the People’s Republic of China, and Taiwan is a part of it – is anathema to a majority of the people of Taiwan. According to the latest Mainland Affairs Council poll, 91 percent of Taiwan citizens support the status quo with less than 10 percent in favor of unification with the mainland. But President Hu’s Points 2 and 5 were well received in Taiwan by the current leadership and its supporters, if not by the entire population. If his policies are going to enjoy majority support in Taiwan, Ma must be seen domestically to be making progress with China and he needs for China to be viewed as making real concessions. As argued in his election campaign, Ma places great stock in maximizing Taiwan’s economic relationship with China while reconstituting Taiwan’s global diplomatic position in a more sustainable and accommodating framework under improved relations with China. The overall outcome should also meet another of Ma’s campaign commitments – improved security through increased economic opportunity as well as a reduction in the overall threat from China after 6 plus years of heightened tension. However, as noted below China’s continued massive military modernization efforts and the degree to which their efforts are focused on Taiwan remains a major barrier to sustainable security improvements in the Taiwan Strait.
Evidence of improved relations are already manifest, with clear progress on economic cooperation but with nascent diplomatic progress as well. A small but positive action was Taiwan’s inclusion in the International Health Regulations (IHR) under the World Health Organization (WHO), which will allow the island to contact the body directly. That said, a far larger test will come this spring with Taiwan’s annual attempt to gain observer status at the World Health Assembly (WHA). It’s an important moment for China, one which it must seize both to serve its own interests on Taiwan through an improved view of its attitude, as well as to reinforce Ma’s ability to maintain domestic support for cross-Strait engagement by making a substantive concession.
Finally, it is important to highlight an inconsistency in China’s recent attitude toward Taiwan and a major challenge for the U.S. While Beijing’s civilian leadership continues to frame a positive path for Taiwan-China relations, China’s military modernization continues unabated and actively undermines these gains. There has been no Chinese slowing in defense spending, training, or deployment of forces directed at Taiwan. This marks a stark contrast to the political and economic efforts, and creates a genuine conundrum for Ma as well as for the Obama administration. How do they maintain positive engagement while discouraging China from pursuing such a provocative military posture?
President Obama should certainly use resumed military-to-military exchanges to impress upon the People’s Liberation Army that there is a direct correlation between Chinese force modernization and U.S. support for Taiwan’s defense, including arms sales. In addition, continued material support for President Ma’s move to an all volunteer force, coupled with a more integrated and modern military, will require continued supplies of modern weaponry. This support will positively underpin Taiwan’s engagement with China and will provide continued legitimacy to Ma’s efforts – a dynamic Ma himself understands well, as he continues to make the case for replacement fighters through a second tranche of F-16s, Black Hawk helicopters, and other modern equipment.
The Global Recession & Trade Policy
The Economist Intelligence Unit (EIU) recently noted that of the 55 major global economies tracked in detail, Taiwan has been hit harder than almost anyone else by the global downturn. Based on industrial production alone, Taiwan’s output has fallen by 32 percent in the 12 months to December 2008. GDP figures released on February 18, 2009 showed that Taiwan’s economy contracted by approximately 8.4 percent in Q4 2008, basically wiping away the last two and a half years of economic expansion. Taiwan’s DGBAS is predicting economic contraction of approximately 3 percent in 2009, while the aggregate analyst prediction is closer to 6 percent. Taiwan exports 70 percent of its industrial production, and with its main markets America, China, Japan, and the European Union all experiencing degrees of economic distress, Taiwan is affected acutely. This has added greatly to the urgency of Ma’s domestic economic reform, liberalization, and trade liberalization agenda.
The Ma administration has responded to the crisis, albeit with mixed results to date. The Taiwan government has issued spending vouchers worth approximately US$100 per citizen, vouchers intended to act as a catalyst for domestic demand. Taiwan’s Central Bank of China (CBC) has cut rates aggressively – 7 times since last September – with the latest cut bringing Taiwan interest rates to 1.25 percent. The government has also hastened to implement the 12 i-Taiwan infrastructure projects. In addition, it has allowed Taiwan’s currency to continue to depreciate against its major trading partners, down to a 6 year low against the U.S. dollar. These actions, except for the currency depreciation, are commensurate with those of other major global economies. That said, Taiwan has a high savings rate, and nothing suggests that Taiwan citizens are going to drop the savings habit in order to increase domestic demand for goods and services. Therefore, it seems likely that the Taiwan government will combine a loose economic policy with infrastructure investment, and then wait for its major trading partners to recover.
Taiwan did achieve two major trade policy goals over the past quarter, one being its signing of the Agreement on Government Procurement (GPA) at the World Trade Organization (WTO) in December, and the second being its removal from the United States Trade Representative’s Special 301 Watch List for IPR violators in mid January of 2009. With the GPA, President Ma has signed an agreement that will give Taiwan companies access to government procurement contracts in over 40 global economies, thereby increasing market access dramatically. It will also open Taiwan’s market to increasing competition and competitiveness, as well as to new foreign direct investment. The removal from USTR’s Special 301 Watch List is the culmination of 4-5 years of hard work, and considerable credit must also be given to the Chen administration for implementing many of the policies that resulted in this positive development. While Taiwan’s IPR regime is now well placed to manage the bulk of the challenges, IPR theft remains a massive global problem. Taiwan will be looked to for leadership, particularly in Asia.
President Ma’s economic team views renewed efforts to liberalize Taiwan’s major trading markets as essential to recovery and increased future growth. It is also a way to break out of its current economic isolation, absent of any meaningful role for Taiwan in bilateral and multilateral regional trade liberalization efforts. The Ma government views the ECFA not as a goal unto itself, nor only in the narrow prism of Taiwan-China relations, but as a part of its overall global trade strategy. Both the Taiwan government and businesses are particularly concerned about the impact of ASEAN +1 and ASEAN +3 on Taiwan’s competitiveness in the China market. President Ma also believes that improved Taiwan-China relations and the willingness of China to engage in free trade negotiations will assist Taiwan in breaking out of its trade liberalization isolation and allow it to sign FTAs with the U.S., Japan, Singapore, and other major trading partners. China’s offer of an ECFA has been well received, but it is but a part of what should also be an appropriate U.S. and pan-Asian response to Taiwan’s efforts to liberalize its markets in the shadow of improved Taiwan-China relations.
At this time, Taiwan has a Trade and Investment Framework Agreement (TIFA) with the United States that has acted as a periodic platform for discussing bilateral economic issues. This mechanism is a modest foundation that allows America and its trading partners to manage the myriad trade issues that characterize large commercial relationships. That said, for the second time in 5 years America has frozen the TIFA – in this instance due to its displeasure over Taiwan’s restrictions on imports of American beef. While beef, and indeed rice and pork too, are important export commodities for America, they represent a relatively small percentage of our bilateral trade – in the case of beef it’s considerably less than 1 percent of bilateral trade. The Bush administration felt that it had been misled over commitments to re-open aspects of the beef market (some beef is already being sold), and shut the TIFA process down in 2008 until those commitments were fulfilled. Now we must wait until the Obama administration trade team is confirmed and in place before we can ascertain its intentions on the TIFA freeze. Whatever the outcome, however, America’s last foray into such a freeze – in 2003-2004 over IPR – was generally viewed to have been a failure. Furthermore, as in the case of last year’s arms sales freeze, there are no other cases of global partners being treated in this fashion.
At such time as beef imports resume, or President Obama’s trade team decides to resume the TIFA prior to such a resolution, Taiwan and the Obama administration must look for ways to allow the relationship to mature. America has treated Taiwan in uniquely punitive ways, to the increasing detriment of our interests in this major market. If we cannot find a way to respond to Taiwan and China’s detente, we run the very real risk of adding wind to the economic impetuses that are pushing this top 10 U.S. market further into the purview of China’s economic embrace. A good place to start would be adding consistency to our approach to Taiwan and begin treating it the same way we do our other major trading partners, even when we disagree. In the longer term, we need to start representing our equities more assertively with Taiwan, not, as in the past, in reaction to Beijing’s displeasure on any number of issues but in substantive strategic ways such as free trade agreements. America needs to look at what it can accomplish in the light of improved Taiwan-China relations.
The subject of FTAs at this time may seem ridiculous given the lack of support for such agreements amongst America’s ruling party. However, it is likely that as President Obama grows more comfortable in his new post he’ll look to shape a trade policy consensus that will allow his government to support global trade liberalization. This will be particularly needed in Asia, which continues to remove barriers to trade and accelerate integration. In the absence of U.S. leadership, or even basic participation, this process will continue to center around the China market at the expense of our own. If China and Taiwan see fit to negotiate a free trade agreement then what possible reason should America have for not doing likewise with Taiwan?
In addition, it is certainly time for the U.S. to return to the policy of sending economic cabinet officers to Taiwan annually to boost our interests in the market. This policy was started by President Bush in 1992 with the visit of then United States Trade Representative Carla Hills, and continued throughout the 1990s under President Clinton. While the recent Bush administration had legitimate concerns over how President Chen would react to the presence of such a high ranking U.S. official, now is the time to re-engage this policy. Other countries see high-level interaction with Taiwan as in their economic interest: the U.K.’s commerce secretary visited Taipei within a month of Taiwan’s acceptance of GPA commitments, for example. In light of Ma’s commitment to spend almost US$120 billion on infrastructure in the coming 8 years, the U.S. should also be making every effort to promote its own companies in the market.
What’s Next?
For Taiwan, like with the United States, there are considerable unknowns associated with this latest economic recession. While Taiwan’s financial institutions are not burdened to the same extent with the toxic assets weighting down our own institutions, the notion that Asian economies have decoupled from the U.S. and Europe is nonsense. Asia shares our economic pain, and cannot hope to launch a sustained recovery until America and Europe turn the corner and its export markets return. In the meantime, President Ma will continue to focus on what he can control – namely domestic efforts to increase investment, along with external efforts to open new markets or address trade-diverting developments such as FTAs from which Taiwan has been excluded.
The CECA, or Comprehensive Economic Cooperation Agreement as referred to by President Hu in his recent speech, with China has very real legs, and we can expect to hear a great deal more on this matter as Ma moves it through the Taiwan court of public opinion and shapes a policy response that P.K. Chiang can take into SEF-ARATS negotiations. Indeed, President Ma has already made a significant adjustment by changing the name with which Taiwan will refer to such an agreement to Economic Cooperation Framework Agreement (ECFA). This adjustment was made in response to early domestic criticism of the effort and the similarity of the CECA name to Hong Kong and Macau’s Closer Economic Partnership Agreement (or CEPA) with China. I believe that Ma has made the decision to proceed with the ECFA with a basic framework agreed to and signed with the Chinese at the end of 2009, and the specifics to be worked out in a series of SEF-ARATS negotiations running several years. This will generate much discussion about what sovereignty positions are being sacrificed to secure preferential market access and how transparent the process will be. However, I believe that Ma will work hard to mitigate both negative public perceptions as well as any real attempts by China to use this economic initiative to move the sovereignty line. China wants this agreement too, and this provides real leverage for Ma to strike a good deal for Taiwan.
The ECFA provides a tremendous opportunity for the U.S. as well. We have large interests in the Taiwan market, and the triangular economic relationship between America, Taiwan, and China comes only behind Europe and NAFTA in its strategic importance to U.S. economic prosperity. If China and Taiwan are genuinely seeking a free trade agreement with one another, albeit under a different name, then the United States must seize this opportunity and likewise engage Taiwan. America is not without equities in this discussion; preferential market access for China in the Taiwan market and vice versa should press the U.S. to respond in kind. In addition, the U.S. is vested in continued Taiwan-China rapprochement. But as the negotiations expand so will domestic angst on Taiwan. If the U.S. agrees to negotiate its own FTA with Taiwan, that could assuage domestic Taiwan concerns that this is part of a KMT effort to promote unification with China, and would thereby provide Taiwan’s people with options and a semblance of balance, calming fears and keeping support for improved cross-Strait relations on the right track.
President Obama and his team haven’t yet had an opportunity to shape a cohesive trade policy, but as he ventures out into the world in his capacity as president he will quickly note the importance of U.S. leadership on trade – both in setting sound examples for trade policy as well as leading on trade liberalization. America does not have the luxury of taking a trade “timeout,” particularly with the rest of the global economy looking for ways to accelerate bilateral, regional multilateral, and global trade liberalization.
President Ma’s election and his cross-Strait policies have markedly improved cross-Strait relations. But to what ultimate end, if all parties including the United States cannot use this period to move away from past policies that have retarded the maturing of this complex triumvirate? Taiwan and China are not missing this opportunity to allow their relationship to mature, and America shouldn’t either.
The Brookings Institution, Mar 12, 2009
On March 22, 2008, Taiwan voters went to the polls and declared a return to Kuomintang (KMT) rule. The KMT’s Ma Ying-jeou won a landslide election against Frank Hsieh of the incumbent Democratic Progressive Party (DPP), and the end result was rarely in question as voter frustration over DPP rule – accumulated over 8 years – spilled over into a convincing 58.45 percent victory for Ma and his running mate Vincent Siew.
Ma’s contention that Taiwan’s economy had fared poorly from 2000-2008 played well to Taiwan’s electorate - somewhat unfairly, as in fact Taiwan enjoyed average annual GDP growth of 3.63 percent during that period, according to the National Statistics Database maintained by Taiwan’s Directorate-General of Budget, Accounting and Statistics (DGBAS). But voter perception was centered on missed opportunities and a Taiwan that had mostly stood still for eight years while its regional competitors advanced their interests.
But Ma won the election also by highlighting the angst that former President Chen Shui-bian had caused Taiwan’s most important interlocutors – China and the United States. China was never interested in offering President Chen a dialogue during his 8 years as president of Taiwan, other than under terms and conditions that ran contrary to DPP principles. However, President Chen’s diplomatic isolation was exacerbated by his rhetoric that so often caught policymakers in Beijing and Washington off guard. This left the Chinese increasingly concerned about Chen’s intentions – even in the face of obvious constitutional limitations on his power – and left the U.S. frustrated both with constant Chinese harping and Chen’s erratic behavior. This tense situation appeared to cast a shadow over much else that the Bush administration was attempting to accomplish in its relationship with China.
Fairly or unfairly, the picture that evolved – particularly after Chen’s second election victory in March of 2004 – was of a Taiwan actively undermining peace and security in north Asia, and by extension hurting its own commercial and diplomatic interests. This perception neatly teed up candidate Ma’s campaign, where he pitched Taiwan voters on the importance of returning to the safe and steady hands of the technocratic KMT and of addressing Taiwan’s core economic, domestic and foreign relationships.
Ma’s Campaign Commitments
Candidate Ma’s general campaign pitch was a return to balanced and experienced rule under the KMT. He focused acutely on the perception that Taiwan had been treading water during a period of global economic expansion, thereby missing opportunities to grow global markets as well as to reform domestically. In addition, he noted that Taiwan’s global diplomatic isolation had increased under the DPP, and contended that the course of confrontation with China and the U.S. was unsustainable. Ma argued that it was essential to reach a new accommodation with China that would allow for meaningful representation of Taiwan in global organizations – including but not limited to the World Health Assembly (WHA).
Candidate Ma’s choice for vice president spoke volumes for his campaign’s focus on the economy. Vincent Siew is a former premier and was Minister of Economic Affairs under former president Lee Teng-hui. His role would be to spearhead both comprehensive domestic economic reform, including further deregulation of services like banking; and to take charge of implementing the i-Taiwan 12 projects – a large infrastructure package valued at approximately US$117 billion over 8 years. In addition, Vincent Siew is strongly identified with the concept of a Cross-Strait Common Market, an idea that he formulated and championed over several years. Ma even incorporated this initiative into his election manifesto as a central goal in a plan to harmonize commercial activity between Taiwan and what is now Taiwan’s largest market, China.
Cross-Strait economic engagement had another equally important deliverable for the Ma camp; it was a natural platform to reduce tensions and map a more reasonable path for increased cooperation with China, while staving off the need to engage on pricklier matters concerning sovereignty. The Ma campaign promised that this issue, often and rather simplistically viewed through the logistical challenge of flying between Taiwan and China, was to be tackled early on through an incremental resumption of cross-Strait transportation links, coupled with more comprehensive agreements on air travel and mail. Ma and Siew also saw an increase in mainland tourists visiting the island as an important objective, given their potential impact on a broad cross-section of Taiwan’s economy.
During his campaign, Ma also articulated the need to improve relations with the United States, with which ties had soured terribly since about 2003. Chen’s erratic behavior, coupled with a Bush team more interested in improving relations with China, made for a difficult set of circumstances and an increasingly reflexive urge to press Taiwan into a box. While this attitude was initially focused on Chen and his colleagues, it drifted into an overall view of Taiwan that drew no distinctions. In the end, Taiwan could do no right. Ma noted that Taiwan-U.S. relations would likely improve simply as a function of improved Taiwan relations with China. However, he also put great weight on improved communications between Taipei and Washington, and the need to avoid surprising and confrontational actions.
Policies & Developments
President Ma hit the ground running when he assumed office on May 20, 2008.
The newly appointed chairman of the Strait Exchange Foundation (SEF), Chiang Pin-kung, went to China in mid-June of 2008 to consummate an initial deal on cross-Strait transportation as promised by the Ma campaign. The deal allowed for an expanded charter flight schedule, based on the holiday flight framework already in place. While the agreement included a limited number of direct routes on weekends only – and involved aircraft flying over Hong Kong airspace but not alighting – the agreement also stipulated that both sides would work toward normalized passenger and cargo air traffic with direct routes. This early triumph was seen in all three capitals as a positive sign and raised hopes that a more sustainable relationship might be within their grasp.
However, the Ma government had not seen cross-Strait transportation links as the only low-hanging fruit. To remain committed to his election platform, Ma quickly expanded his SEF - Association for Relations Across the Taiwan Straits (ARATS) dialogue to include:
· Opening currency exchanges for Chinese Yuan/New Taiwan Dollar trade
· Loosening of capital restriction for Chinese investment in Taiwan equities, companies, and property
· An agreement on tourists that hypothetically could dramatically increase the number of Chinese citizens visiting Taiwan daily
· Signing agreements for direct cross-Strait sea, air, and mail travel
· Simplifying procedures for Chinese professionals to visit and work for limited periods in Taiwan.
In addition, the Ma administration launched negotiations to allow Chinese students to visit and study in Taiwan, and a whole host of smaller initiatives have been negotiated and are in the early stages of implementation. This is a substantive and impressive body of work for approximately 8 months of dialogue. That said, Ma upped the ante substantially in late February when he and his colleagues responded positively to Chinese President Hu Jintao’s offer to negotiate and sign a Comprehensive Economic Cooperation Agreement (CECA) with Taiwan, now referred to on the island as the Economic Cooperation Framework Agreement (ECFA).
Despite this improvement in cross-Strait relations, Ma did not see the early gains he might have hoped for with the United States. By President Bush’s last year in office, the fact that Chen Shui-bian was no longer president of Taiwan was immaterial. America’s positive relationship with China was viewed as an important part of President Bush’s legacy, and the change in leadership in Taipei did not automatically change Taiwan’s value in the equation. President Ma was treated with minimal cordiality, and as he left office President Bush’s penultimate substantive Taiwan action – an October 3, 2008 decision to notify several weapons systems to Congress – created more confusion and frustration over the breakdown in the arms sales process on the U.S. side. Thus America’s defense relationship with Taiwan was bequeathed with unaddressed platforms and a broken arms sales process, a mess that President Obama and his colleagues will have to address.
China’s Role
From China’s perspective, Taiwan’s democratic transition has been decidedly unpleasant. Chen Shui-bian’s actions and statements were deemed highly provocative, and he replaced the reviled Lee Teng-hui whose late 1990s statements had made him persona non-grata with Beijing. So China stewed for the past eight years, happy only when President Bush or one of his colleagues made a statement or undertook an action or non-action that China saw as contrary to Taiwan’s interests, or beneficial to China at Taiwan’s expense. While the short term approach of demonizing Taiwan presidents might have played well in Beijing, it was having a profoundly negative effect on the view of China from Taiwan.
This was not China’s “Taiwan policy” per se. China mostly understood that Taiwan’s democratization and demographic changes were undermining what support existed on Taiwan for unification with China. A sustained churlish attitude toward the island would only accelerate these trends, making the possibility of resolution of the fundamental dispute that much more remote. Therefore, Ma’s election placed great import on the need to put China’s relations with Taiwan back on a path that at least held the possibility of peaceful resolution. President Hu and his civilian colleagues viewed Ma’s policy of economic engagement as a positive and reasonable momentum builder for relations. So under the guidance of ARATS’s chairman Chen Yunlin, China responded substantively to Ma’s outreached hand.
In a December 31, 2008 speech commemorating the 30th anniversary of an important Taiwan policy speech, China’s President Hu expanded the possibilities in bilateral cross-Strait relations when he made a six point proposal that included, 1) scrupulously abiding by the One-China principle and enhancing political mutual trust; 2) strengthening commercial ties, partly though negotiating an economic cooperation agreement; 3) promoting personnel exchanges of personnel between the two sides; 4) highlighting common cultural links; 5) allowing Taiwan’s “reasonable” participation in international organizations and 6) the negotiation of a peace agreement.
The notion of China’s “One-China Principle” – that there is only one China, it is the People’s Republic of China, and Taiwan is a part of it – is anathema to a majority of the people of Taiwan. According to the latest Mainland Affairs Council poll, 91 percent of Taiwan citizens support the status quo with less than 10 percent in favor of unification with the mainland. But President Hu’s Points 2 and 5 were well received in Taiwan by the current leadership and its supporters, if not by the entire population. If his policies are going to enjoy majority support in Taiwan, Ma must be seen domestically to be making progress with China and he needs for China to be viewed as making real concessions. As argued in his election campaign, Ma places great stock in maximizing Taiwan’s economic relationship with China while reconstituting Taiwan’s global diplomatic position in a more sustainable and accommodating framework under improved relations with China. The overall outcome should also meet another of Ma’s campaign commitments – improved security through increased economic opportunity as well as a reduction in the overall threat from China after 6 plus years of heightened tension. However, as noted below China’s continued massive military modernization efforts and the degree to which their efforts are focused on Taiwan remains a major barrier to sustainable security improvements in the Taiwan Strait.
Evidence of improved relations are already manifest, with clear progress on economic cooperation but with nascent diplomatic progress as well. A small but positive action was Taiwan’s inclusion in the International Health Regulations (IHR) under the World Health Organization (WHO), which will allow the island to contact the body directly. That said, a far larger test will come this spring with Taiwan’s annual attempt to gain observer status at the World Health Assembly (WHA). It’s an important moment for China, one which it must seize both to serve its own interests on Taiwan through an improved view of its attitude, as well as to reinforce Ma’s ability to maintain domestic support for cross-Strait engagement by making a substantive concession.
Finally, it is important to highlight an inconsistency in China’s recent attitude toward Taiwan and a major challenge for the U.S. While Beijing’s civilian leadership continues to frame a positive path for Taiwan-China relations, China’s military modernization continues unabated and actively undermines these gains. There has been no Chinese slowing in defense spending, training, or deployment of forces directed at Taiwan. This marks a stark contrast to the political and economic efforts, and creates a genuine conundrum for Ma as well as for the Obama administration. How do they maintain positive engagement while discouraging China from pursuing such a provocative military posture?
President Obama should certainly use resumed military-to-military exchanges to impress upon the People’s Liberation Army that there is a direct correlation between Chinese force modernization and U.S. support for Taiwan’s defense, including arms sales. In addition, continued material support for President Ma’s move to an all volunteer force, coupled with a more integrated and modern military, will require continued supplies of modern weaponry. This support will positively underpin Taiwan’s engagement with China and will provide continued legitimacy to Ma’s efforts – a dynamic Ma himself understands well, as he continues to make the case for replacement fighters through a second tranche of F-16s, Black Hawk helicopters, and other modern equipment.
The Global Recession & Trade Policy
The Economist Intelligence Unit (EIU) recently noted that of the 55 major global economies tracked in detail, Taiwan has been hit harder than almost anyone else by the global downturn. Based on industrial production alone, Taiwan’s output has fallen by 32 percent in the 12 months to December 2008. GDP figures released on February 18, 2009 showed that Taiwan’s economy contracted by approximately 8.4 percent in Q4 2008, basically wiping away the last two and a half years of economic expansion. Taiwan’s DGBAS is predicting economic contraction of approximately 3 percent in 2009, while the aggregate analyst prediction is closer to 6 percent. Taiwan exports 70 percent of its industrial production, and with its main markets America, China, Japan, and the European Union all experiencing degrees of economic distress, Taiwan is affected acutely. This has added greatly to the urgency of Ma’s domestic economic reform, liberalization, and trade liberalization agenda.
The Ma administration has responded to the crisis, albeit with mixed results to date. The Taiwan government has issued spending vouchers worth approximately US$100 per citizen, vouchers intended to act as a catalyst for domestic demand. Taiwan’s Central Bank of China (CBC) has cut rates aggressively – 7 times since last September – with the latest cut bringing Taiwan interest rates to 1.25 percent. The government has also hastened to implement the 12 i-Taiwan infrastructure projects. In addition, it has allowed Taiwan’s currency to continue to depreciate against its major trading partners, down to a 6 year low against the U.S. dollar. These actions, except for the currency depreciation, are commensurate with those of other major global economies. That said, Taiwan has a high savings rate, and nothing suggests that Taiwan citizens are going to drop the savings habit in order to increase domestic demand for goods and services. Therefore, it seems likely that the Taiwan government will combine a loose economic policy with infrastructure investment, and then wait for its major trading partners to recover.
Taiwan did achieve two major trade policy goals over the past quarter, one being its signing of the Agreement on Government Procurement (GPA) at the World Trade Organization (WTO) in December, and the second being its removal from the United States Trade Representative’s Special 301 Watch List for IPR violators in mid January of 2009. With the GPA, President Ma has signed an agreement that will give Taiwan companies access to government procurement contracts in over 40 global economies, thereby increasing market access dramatically. It will also open Taiwan’s market to increasing competition and competitiveness, as well as to new foreign direct investment. The removal from USTR’s Special 301 Watch List is the culmination of 4-5 years of hard work, and considerable credit must also be given to the Chen administration for implementing many of the policies that resulted in this positive development. While Taiwan’s IPR regime is now well placed to manage the bulk of the challenges, IPR theft remains a massive global problem. Taiwan will be looked to for leadership, particularly in Asia.
President Ma’s economic team views renewed efforts to liberalize Taiwan’s major trading markets as essential to recovery and increased future growth. It is also a way to break out of its current economic isolation, absent of any meaningful role for Taiwan in bilateral and multilateral regional trade liberalization efforts. The Ma government views the ECFA not as a goal unto itself, nor only in the narrow prism of Taiwan-China relations, but as a part of its overall global trade strategy. Both the Taiwan government and businesses are particularly concerned about the impact of ASEAN +1 and ASEAN +3 on Taiwan’s competitiveness in the China market. President Ma also believes that improved Taiwan-China relations and the willingness of China to engage in free trade negotiations will assist Taiwan in breaking out of its trade liberalization isolation and allow it to sign FTAs with the U.S., Japan, Singapore, and other major trading partners. China’s offer of an ECFA has been well received, but it is but a part of what should also be an appropriate U.S. and pan-Asian response to Taiwan’s efforts to liberalize its markets in the shadow of improved Taiwan-China relations.
At this time, Taiwan has a Trade and Investment Framework Agreement (TIFA) with the United States that has acted as a periodic platform for discussing bilateral economic issues. This mechanism is a modest foundation that allows America and its trading partners to manage the myriad trade issues that characterize large commercial relationships. That said, for the second time in 5 years America has frozen the TIFA – in this instance due to its displeasure over Taiwan’s restrictions on imports of American beef. While beef, and indeed rice and pork too, are important export commodities for America, they represent a relatively small percentage of our bilateral trade – in the case of beef it’s considerably less than 1 percent of bilateral trade. The Bush administration felt that it had been misled over commitments to re-open aspects of the beef market (some beef is already being sold), and shut the TIFA process down in 2008 until those commitments were fulfilled. Now we must wait until the Obama administration trade team is confirmed and in place before we can ascertain its intentions on the TIFA freeze. Whatever the outcome, however, America’s last foray into such a freeze – in 2003-2004 over IPR – was generally viewed to have been a failure. Furthermore, as in the case of last year’s arms sales freeze, there are no other cases of global partners being treated in this fashion.
At such time as beef imports resume, or President Obama’s trade team decides to resume the TIFA prior to such a resolution, Taiwan and the Obama administration must look for ways to allow the relationship to mature. America has treated Taiwan in uniquely punitive ways, to the increasing detriment of our interests in this major market. If we cannot find a way to respond to Taiwan and China’s detente, we run the very real risk of adding wind to the economic impetuses that are pushing this top 10 U.S. market further into the purview of China’s economic embrace. A good place to start would be adding consistency to our approach to Taiwan and begin treating it the same way we do our other major trading partners, even when we disagree. In the longer term, we need to start representing our equities more assertively with Taiwan, not, as in the past, in reaction to Beijing’s displeasure on any number of issues but in substantive strategic ways such as free trade agreements. America needs to look at what it can accomplish in the light of improved Taiwan-China relations.
The subject of FTAs at this time may seem ridiculous given the lack of support for such agreements amongst America’s ruling party. However, it is likely that as President Obama grows more comfortable in his new post he’ll look to shape a trade policy consensus that will allow his government to support global trade liberalization. This will be particularly needed in Asia, which continues to remove barriers to trade and accelerate integration. In the absence of U.S. leadership, or even basic participation, this process will continue to center around the China market at the expense of our own. If China and Taiwan see fit to negotiate a free trade agreement then what possible reason should America have for not doing likewise with Taiwan?
In addition, it is certainly time for the U.S. to return to the policy of sending economic cabinet officers to Taiwan annually to boost our interests in the market. This policy was started by President Bush in 1992 with the visit of then United States Trade Representative Carla Hills, and continued throughout the 1990s under President Clinton. While the recent Bush administration had legitimate concerns over how President Chen would react to the presence of such a high ranking U.S. official, now is the time to re-engage this policy. Other countries see high-level interaction with Taiwan as in their economic interest: the U.K.’s commerce secretary visited Taipei within a month of Taiwan’s acceptance of GPA commitments, for example. In light of Ma’s commitment to spend almost US$120 billion on infrastructure in the coming 8 years, the U.S. should also be making every effort to promote its own companies in the market.
What’s Next?
For Taiwan, like with the United States, there are considerable unknowns associated with this latest economic recession. While Taiwan’s financial institutions are not burdened to the same extent with the toxic assets weighting down our own institutions, the notion that Asian economies have decoupled from the U.S. and Europe is nonsense. Asia shares our economic pain, and cannot hope to launch a sustained recovery until America and Europe turn the corner and its export markets return. In the meantime, President Ma will continue to focus on what he can control – namely domestic efforts to increase investment, along with external efforts to open new markets or address trade-diverting developments such as FTAs from which Taiwan has been excluded.
The CECA, or Comprehensive Economic Cooperation Agreement as referred to by President Hu in his recent speech, with China has very real legs, and we can expect to hear a great deal more on this matter as Ma moves it through the Taiwan court of public opinion and shapes a policy response that P.K. Chiang can take into SEF-ARATS negotiations. Indeed, President Ma has already made a significant adjustment by changing the name with which Taiwan will refer to such an agreement to Economic Cooperation Framework Agreement (ECFA). This adjustment was made in response to early domestic criticism of the effort and the similarity of the CECA name to Hong Kong and Macau’s Closer Economic Partnership Agreement (or CEPA) with China. I believe that Ma has made the decision to proceed with the ECFA with a basic framework agreed to and signed with the Chinese at the end of 2009, and the specifics to be worked out in a series of SEF-ARATS negotiations running several years. This will generate much discussion about what sovereignty positions are being sacrificed to secure preferential market access and how transparent the process will be. However, I believe that Ma will work hard to mitigate both negative public perceptions as well as any real attempts by China to use this economic initiative to move the sovereignty line. China wants this agreement too, and this provides real leverage for Ma to strike a good deal for Taiwan.
The ECFA provides a tremendous opportunity for the U.S. as well. We have large interests in the Taiwan market, and the triangular economic relationship between America, Taiwan, and China comes only behind Europe and NAFTA in its strategic importance to U.S. economic prosperity. If China and Taiwan are genuinely seeking a free trade agreement with one another, albeit under a different name, then the United States must seize this opportunity and likewise engage Taiwan. America is not without equities in this discussion; preferential market access for China in the Taiwan market and vice versa should press the U.S. to respond in kind. In addition, the U.S. is vested in continued Taiwan-China rapprochement. But as the negotiations expand so will domestic angst on Taiwan. If the U.S. agrees to negotiate its own FTA with Taiwan, that could assuage domestic Taiwan concerns that this is part of a KMT effort to promote unification with China, and would thereby provide Taiwan’s people with options and a semblance of balance, calming fears and keeping support for improved cross-Strait relations on the right track.
President Obama and his team haven’t yet had an opportunity to shape a cohesive trade policy, but as he ventures out into the world in his capacity as president he will quickly note the importance of U.S. leadership on trade – both in setting sound examples for trade policy as well as leading on trade liberalization. America does not have the luxury of taking a trade “timeout,” particularly with the rest of the global economy looking for ways to accelerate bilateral, regional multilateral, and global trade liberalization.
President Ma’s election and his cross-Strait policies have markedly improved cross-Strait relations. But to what ultimate end, if all parties including the United States cannot use this period to move away from past policies that have retarded the maturing of this complex triumvirate? Taiwan and China are not missing this opportunity to allow their relationship to mature, and America shouldn’t either.
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