Arizona may be on the front-lines, but the Latinization of these United States is a much deeper phenomenon

WSJ story about a small town in Nebraska that's coming apart at the seams over a proposed, AZ-like tough law on illegal immigrants.  The town (Fremont) is almost exclusively European, with most residents of Swedish and German background. A substantial meatpacking company presence has--unsurprisingly--boosted the Hispanic presence recently (around 1k out of 25k total population), leading to the tension. Naturally, such a potentially divisive law attracts a lot of outside players joining the fight.

I was just more attracted to the chart, which details the biggest increases of foreign-born residents in states with more than 100k foreign-born already.  I mean, look at the spread that includes the mid-Atlantic/south with the two Carolinas and GA, New England with RI, the plains (NE), the north (WI), Appalachia (KY), and the mountainous West (CO). This is hardly just a SW America issue, thus the rule-set clash currently being played out in Arizona is but a harbinger of a large struggle to come.

My point: welcome the experimentation by states. Some will bad and some will be good, but the churn will help us collectively find the right mix over time.

China: moving ahead with yuan-settled trade

WSJ story noting that "China government will expand a trial program for settling trade deals in yuan to most of the country . . . in an effort to accelerate the internationalization of the Chinese currency after a slow start."

The program started just last July, replacing the long-held norm of denominating trade deals using dollars or other foreign currencies.  Until now, only Shanghai and Guangdong-province companies could settle in yuan and only with companies based in Hong Kong, Macau and a few foreign nations.  Now the program grows to 20 provinces and major cities.

The goal?

... to gradually make its currency more important internationally, and reduce is reliance on the dollar, which [Chinese officials] have said leads to outsize impact from U.S. economic policy on China and other countries.

The fear is natural enough:  ". . . U.S. deficits could lead to inflation that weakens the value of the dollar."

This shift will be slow, because as China proceeds, it moves into an undiscovered territory.  But it's a good thing and an inevitable shift. Frankly, we need China to make the dollar less relevant as a global reserve currency.  It won't stop being one--ever.  But it should not dominate as it has in the past, because that reality allows us too much freedom for fiscal irresponsibility.

As I have said here many times, I would like a future global economy where the euro and the yuan (or some "asia" that includes the yuan) can, in combination, overshadow the dollar and force its corrections in value. This is the next, most natural iteration of the global economy, and however China moves itself and us collectively down that path, we must welcome the evolution, as unsettling as it may seem to us in the here-and-now.

Do not fall into the fallacy of thinking this shift only benefits China and only penalizes us. The discipline we gain is much needed, and China will find itself ever more constrained by this new financial connectivity.

France raises it retirement age from 60 to 62

WSJ story.

Of course, we'll see this headline countless times in coming years as the rest of Europe moves in a similar direction as all those Euro Boomers head into retirement age.

I mean, really France, 58?

I think people my age should expect to work to at least 70 and probably 75.  My kids should add a decade to those numbers.

Why? As more people make it into their 60s in solid health, the actual life expectancy for that cohort extends much farther than the norm.

In fact, I foresee more intra-generational tension over that divergence than inter-generational.

Iran getting by with black-market gas

WSJ story that suggests the 4th round of sanctions won't be as "crippling" as the administration suggests, citing a "shadowy network of Middle East gasoline suppliers is already undermining" our efforts.

By definition, a Gap region has sophisticated black markets.  It's a primary reason why sanctions don't work, even as they drive up the prices, which Tehran can then blame on the West.

But we continue with sanctions because they make us feel good, and they appeal to our obey-the-rules mentality, which is good, of course, but kind of meaningless when applied to rogue regimes inside the Gap.

Africa: the stronger hand this time around?

FT special report on African oil & gas.  The somewhat optimistic but seemingly justified vibe:  this time around Africans hold a stronger hand:

African countries with oil and gas reserves have grown accustomed to hearing how exciting they are. Less explored and than the Middle East, possessed of sweeter crude than Latin America and in no position to imitate Russia’s strongarm tactics, they are, energy experts keep telling them, the future.

Explorers have opened up new swathes of the continent, from Lake Albert in the east to the 1,100km offshore frontier discovered in the Gulf of Guinea. Ghana and Niger are due to pump their first barrels in the coming months.

Billions of dollars have poured into deepwater and natural gas developments in Nigeria and Angola, the industry’s linchpins.

“In the past 10 years, African oil producers have become the beautiful brides,” says Charles Ukeje, an international relations specialist at Nigeria’s Obafemi Awolowo University. “We are witnessing a new scramble.”

But crude is trading at roughly three times the average of the previous two decades and African governments have begun to respond to the surge of interest by asking with increasing vehemence: “What’s in it for us?”

Their hand is certainly strengthening. US dependence on African crude is projected to hit 25 per cent by 2015. Late last year, Nigeria surpassed Saudi Arabia as the third biggest supplier of crude to the US.

In April, China imported more oil from  Angola than anywhere else. Europe is hoping a gas pipeline across the Sahara will reduce its dependence on Russian oil – and was rattled when Gazprom tried to muscle in on the project. 

But the days when international institutions exhorted African countries to offer incentives to lure investment at all costs are gone.

“African states are entitled to receive a fair deal for the exploitation of their natural resources,” said the authors of a survey of the continent’s economies last month by the African Development Bank (AfDB) and the Organisation for Economic Co-operation and Development.

Oil investors’ ability to strike workable bargains in Africa will go some way to deciding whether what are believed to be the world’s biggest untapped hydrocarbon stocks will remain in the ground or whether the region will shoulder a greater share of global production.

Nigeria, home to 60 per cent of sub-Saharan Africa’s proven oil reserves and 70 per cent of its gas, although hampered by graft and mismanagement, has been the most abrasive battleground for this renewed reckoning.

While I will still maintain our Africom has nothing to do with this: the big oil producers for the US are in West Africa, whereas all the AQ activity is to the north and east.  Plus, quite frankly, the oil flows out of Angola and Nigeria no matter the level of violence--sad fact (although the truth is that Angola, after all those years of violence, is amazingly stable right now).

More to the point: the bulk of the new suitors are Asian--not American.

The difference this time for Africa?  In the past, the Western interest was always defined by boom-and-bust mechanics, whereas the Asian demand this time around will be substantial and sustained.  America's long efforts to encourage marketization and integration in Asia have helped create this historic opportunity. That's why Africom's primary focus, in my opinion, should be in enabling this "scramble" by improving local capacity for security provision (yes, target the baddies, such as they appear, but focus most on making this good happen in a sustainable fashion).

There is no question that social tensions will be created, and that governments in Africa will respond sub-optimally, but this is a huge opportunity not to be screwed up, and a perfect locale for Sino-American strategic partnership to emerge.

Saudis success rate at militant rehabilitation? About 90% normally, dropping to 80% with the toughest cases.

Reuters by way of Michael Smith, who I know wants me to focus on the 20% versus the 80%:

Around 25 former detainees from Guantanamo Bay camp returned to militancy after going through a rehabilitation program for al Qaeda members in Saudi Arabia, a Saudi security official said on Saturday.

The United States have sent back around 120 Saudis from the detention camp at the U.S. naval base in Cuba, set up after the U.S. launched a "war on terror" following the September 11 attacks by mostly Saudi suicide hijackers sent by al Qaeda.

Saudi Arabia, the world's top oil exporter, has put the returned prisoners along with other al Qaeda suspects through a rehabilitation program which includes religious re-education by clerics and financial help to start a new life.

The scheme, which some 300 extremists have attended, is part of anti-terrorism efforts after al Qaeda staged attacks inside the kingdom from 2003-06. These were halted after scores of suspects were arrested with the help of foreign experts.

Around 11 Saudis from Guantanamo have gone to Yemen, an operating base for al Qaeda, while others have been jailed again or killed after attending the program, said Abdulrahman al-Hadlaq, Director General of the General Administration for Intellectual Security overseeing the rehabilitation.

He pinpointed strong personal ties among former prisoners but also tough U.S. tactics as the reason why some 20 percent of the returned Saudis relapsed into militancy compared to 9.5 percent of other participants in the rehabilitation program.

But honestly, I read the piece and I have to agree with the Saudis calling the program "a success," a claim pretty much mocked throughout the US press.  We're talking probably the most committed (the ones we went after) and the ones with the biggest resulting gripes (time in Guantanamo) and the Saudis still got 4 out of every 5 to walk away from the cause?  To me, that's a pretty amazing success rate.  Good God, I'd take that for the average American convict (more like half go right back to crime once out of prison), so I guess I don't see where we get off pointing fingers on this one.

I think we're awfully unrealistic on this score (indeed, one version of this story in NY state proclaimed that "scores" of Saudi terrorists were back at work, because apparently 25 equals "scores").  Any program that sidelines 90% of a population (only those returned by America scored a mere 80%, as the Saudi standard is 9 out of 10 successfully rehabilitated) has to be deemed a serious success.  I doubt we get that share in most of our efforts in Af-Pak right now, so retract the finger!

Chart of the day: % Indian population living on less than $1.25/day

From WSJ story where India is considering whether or not to liberalize its welfare rolls by lowering the threshold definition of poverty.

But what caught my eye here is the clear trend.  We can argue about what the cut-off for welfare should be, but it gets hard to make the case that globalization and marketization has impoverished Indians.

They left the Carolinas, then the Caribbean, then Mexico, and now China?

WSJ story:

Rising labor costs in China are forcing U.S. apparel and accessories retailers, such asAnnTaylor Stores Corp. and Coach Inc., to consider relocating at least some of their production to countries with cheaper work forces. But doing so could risk increasing other expenses, such as shipping.

"We are looking to move production into lower-cost geographies, most notably Vietnam and India," Mike Devine, Coach's chief financial officer, said at a conference last week. The luxury-handbag retailer already produces goods in those countries, but plans to increase its presence in both of them.

Guess Inc. is thinking along similar lines. Dennis Secor, the fashion brand's chief financial officer, said in an interview that Guess is looking to build its production capabilities in Vietnam, Cambodia and Indonesia.

JC Penney says its apparel makers have been leaving China for Indonesia, Vietnam, India and Bangladesh for the past five years.

Nobody can sit still on the production chain, and China, with its rapidly aging population, has to move faster than most.

One thing to chase the race leader, another thing to lead the race

Nice Fareed Zakaria piece in Newsweek.

The quote below struck me:

A Chinese businessman said to me over lunch in Beijing, “In many ways the financial crisis and the discrediting of the American model has been bad for us. You see, we don’t really have an ideology anymore. We don’t know what we believe in. We used to think it was some version of the American Dream—liberalize, open up, grow. But then you had your crisis. We can say, it proves we’re strong. But where do we go now?”

Leading a race is VERY hard, because you're never quit sure how fast to run.

The Chinese are coming! The Chinese are coming!

Maddeningly inscrutable people! What could they possibly be thinking?

Old "Blueprint" citation said 100m Chinese tourists by 2020.  Chart in this FT piece showed 50m by 2010, so right on target.

The Chinese have something to learn on touring:  their tendency, just like when they emigrate, is to stay highly enclaved (one Balinese guide:  "The problem we have is they come on package tours with their own guides, stay in their own hotels, and east in their own restaurants.")

Training-wheels, perhaps, for now, but getting them to branch out will be natural enough over time:  they'll learn more foreign languages, and more of us will learn Chinese.

It is a common theme of great science fiction that someday, we'll all speak some Mandarin.

Iran: doing its best to block out sat TV

Iranians' love of foreign media is a well-documented fact, from the obsession with "Lost" to South Korea soaps.

Newsweek reports that the regime maintains its insane enmity to the Brits and the BBC, though.  After the putsch, the Revolutionary Guards made a supreme effort to block BBC's Persian TV channel. They blocked it by uplinking static to the satellite, but in doing so they scrambled a lot of popular fare from the same satellite.  

The problem:

Iran's domestic TV broadcasts--key to the regime's ability to maintain control and stability--depend on the very European satellites Iran is toying with to get its signals distributed across the country. (Arab-owned satellites have quit carrying Iran's broadcasts, and Iran has no satellies of its own.)

So chairman of broadcasting in Iran admits that when Iran messes with other people's broadcasts, they can easily retaliate, "So we have to make sure that we don't overreach ourselves."

Connectivity comes with code.

The Chaiwan free trade deal moves that much closer to fruition

The lastest on the deal's advance from the FT (6/14):

China and Taiwan have reached agreement on a wide-ranging trade deal that would be an important milestone for the warming of relations between the two cold war rivals.

The deal, called the Economic Co-operation Framework Agreement, or Ecfa, would also pave the way for Taiwan to join in the flurry of free trade deals being made by other Asian countries. China had previously blocked such efforts by Taiwan as it claims sovereignty over the democratically ruled island, but that opposition is expected to fade with the signing of the new agreement.

Without the opportunity to participate in trade deals, Ma Ying-jeou, Taiwan president, said last week that his country would be “sure to lag behind, to be forced out of the global economic sphere and to be marginalised”.

Negotiators from both sides said they had made key breakthroughs after a third round of talks held in Beijing on Sunday, particularly in the “early harvest list” of what sectors would be included in the initial round of opening. The contents of that list had been the main sticking pointin previous negotiations.

The breakthroughs allow the deal to be formally signed at the next semi-annual talks between the two sides. It also secures the centrepiece of Mr Ma’s policy of rapprochement with China, which is by far Taiwan’s biggest export market and where more than 1m Taiwanese already live and work.

The agreement, however, is facing strong political opposition within Taiwan, amid fears that economic integration could lead to political reunification and that the economic benefits of the deal will not be as great as Mr Ma has indicated.

My continuing point:  this is the third great member to join China's future Asian Union, after Macau and Hong Kong. Eventually, we are talking one Asia, many systems.

Jordan--the next nuclear power

WSJ story about Jordan's ambition to become a uranium-enriching, nuclear-power-using pillar in the region:

Jordan is among a slew of Arab countries, including Egypt, the United Arab Emirates and Bahrain, that are seeking to become among the first Mideast countries to develop a civilian nuclear-power industry. Israel is the lone country in the region believed to possess atomic weapons, but it hasn't moved to build nuclear power plants.

Jordan's nuclear ambitions are driven by economics. Wedged between Israel and oil giants Saudi Arabia and Iraq, the kingdom is 95% dependent on imported oil and has among the world's smallest reserves of potable water.

But the discovery of at least 65,000 tons of uranium ore in the deserts outside Amman in 2007 has led King Abdullah to order a drastic reshaping of his nation's economic strategy.

America wants to put Jordan on the same leash as Iran:  no producing its own enriched uranium but only ordering it from more trustworthy sources.

Jordan is balking at this, saying it's an NPT signatory and enjoys that right--and needs that economic payoff--the goal being to become a regional nuclear fuel source.

I have to go with Jordan on this one.  If you want lesser powers to act responsibly, you have to grant them responsibilities.

Chart of the day: China's dependency on foreign oil surpassing our own "addiction"!

NYT source.

This is why Sino-American cooperation--especially in the naval realm--on security access to oil is a crucial building block of global security.

The Chinese have already voiced this possibility.  We need to make it a reality, and end this pointless friction over the now-dead-in-the-water Taiwan scenario.

WPR's The New Rules: China’s Factory Unrest Signals Peak of Cheap Labor

China’s spreading labor unrest is rightfully portrayed in the Western press as an immense challenge to that country’s status as the “world’s factory floor.”  But to Beijing’s bosses, it’s likewise a tool for addressing rising income inequality, which is why the Communist Party has remained most reticent to address it head on.  Such a hands-off approach carries additional dangers, however, the most prominent being that, once emerging labor activists get a taste for pressing their collective demands, China’s political leaders could find themselves riding a Solidarnosc-like trade-union tiger that’s not easily tamed.

Read the entire column at World Politics Review.

Bergsten: the imbalance threat is still there

Fred Bergsten op-ed in FT.

The key logic:

Global imbalances are about to jump again. New estimates from the Organisation for Economic Co-operation and Development suggest that the sharp decline in the exchange rate of the euro, along with tepid European growth, will produce eurozone surpluses of at least $300bn (€251bn, £208bn) annually within the next few years. The tightening of fiscal policies throughout Europe in response to the crisis, along with the new balanced budget amendment in Germany, will both depress domestic demand and require easier monetary policy that will weaken the euro further . . . 

Whatever the intent, these European developments will have effects similar to the overt steps taken by other major countries to enhance their trade competitiveness. The most extreme case is the massive intervention by China and surrounding countries to keep their currencies severely undervalued. Other emerging markets are likewise seeking to expand further their war chests of foreign exchange by running large external surpluses. . . The eurozone has joined this “new mercantilism” and the result will be a sharp rise in global imbalances.

The counterpart increases in deficits will again accumulate mainly in the US as no other country could attract the requisite financing. The large deficit countries within the eurozone must reduce their imbalances. Along with the large surpluses of China and other Asian countries, the new European surpluses will probably double the American current account deficit beyond its previous record of $800bn in 2006. The US could then maintain its recovery only by continuing to run large budget deficits and again tolerating debt-financed consumer demand. This is the opposite of the rebalancing strategy agreed by the Group of 20 leading economies as critically important for sustaining global expansion and reiterated by its finance ministers last weekend.

Many regard this scenario as a desirable resolution of the current European crisis . . . 

There are three glaring problems with this vision, however, all centred on the US. First, the sharp escalation of its own domestic and international imbalances would intensify the risk of future market attacks on the dollar and US financial assets. As soon as Europe and other alternatives regain their acceptability to investors, the unsustainability of the US situation would return to centre stage at even more dangerous levels.

Second, the higher imbalances themselves could sow the seeds of a new financial crisis just as they helped sow the seeds of the last crisis . . .

Third, a renewed explosion of the US trade deficit could well trigger the outbreak of protectionist trade policies that has been largely avoided to date.

My sense of the past two decades: every crisis of the global economy triggers fixes that eventually beget their own crisis, but nowadays that cycle is getting faster and faster because of the growing hyperconnectivity and interdependence.

I would expect more debates on ever-more ambitious rules.

If they're afraid to be seen with you, your COIN effort can only go so far

USA Today front-pager and Banyan column in Economist.

From the first:

Dur Mohammad doesn't walk a straight path to the school where he teaches. He takes a meandering route and then lingers in fields along the way to make it look as if he's a farmer tending his crops.

When U.S. Marines stop by the school, Mohammad begs them to be on their way.

"We cannot stand for a couple of minutes with you," he says. "If someone sees us, we'll be in trouble."

From Banyan:

The problem of knowing what Afghans think is an obstacle more generally. When World Bank workers attempt to take surveys, they have to memorise the questions and answers, since villagers speaking to strange folk with clipboards are at risk from insurgents. 

These anecdotes suggest a trust-building process unlikely to be much consummated by the summer of 2011. Obama will have to make a tough call:  stick with something that's working--but slowly, or cash in the Afghan people.

Gates to EU: I blame you on Turkey!

WSJ story.

Gates just being blunt.

The EU began membership talks with Turkey in 2004--about a half century after the country first expressed interest in joining anything Europe put together on economics.  The talks have gone nowhere, despite Ankara's heroic efforts to meet requirements.

Thank-you France and Germany:  your racism comes back to haunt you once again!

I agree with those who says Turkey's "turn east" is exaggerated, but you reap what you sow, my friends.

China to world: screw off on global warming, we got coal to burn

NYT piece analyzing China's future energy plans.

Bradsher story comes with pretty pics of solar panels and wind farms, but this photo from previous Bradsher story more applicable to the content.

Gist:  secure sources win out over the environment--meaning lots more coal to be used.  You have to understand that China's energy profile is already stunning skewed toward coal--like no other major economy on the planet.

But get used to this logic:

In other words, as China counts on more years of global leadership in economic growth, global warming remains a secondary concern. Secure sources of energy to fuel that growth are what matter most, whatever the implications for world energy markets and the global environment — not to mention foreign investors, who may or may not have a significant role to play in China’s energy industry under the draft law.

The proposed law, which is expected to be adopted by early next year, says that “energy supply should be where you can plant your foot on it,” meaning that as much as possible should come from within China, said Li Junfeng, a senior energy policy maker and member of the interagency committee drafting the law.

That belief has underpinned China’s rapid expansion in renewable energy, because it tends to be made in China, Mr. Li said. China has just emerged as the world’s largest manufacturer of wind turbines and solar panels, and plans to be the world’s biggest builder of nuclear power plants in the coming decade. It invested nearly twice as much as the United States last year in renewable energy.

But energy security also explains the continued reliance on coal, for which China has the world’s third-largest reserves, after the United States and Russia. Burning coal, which produces four-fifths of China’s electricity, has already turned China into the world’s largest emitter of greenhouse gases by an ever-widening margin each year since 2006.

The vaunted China model will take a severe beating as the leadership stubbornly sticks to this path, because it will reveal to the world that China puts itself before the planet when it comes to energy--just like everybody else.

Mining co's: Exploitation of Afghan mineral resources years off

NYT's James Risen's second piece on the "miracle" find.  As the map (quickly Googled) above and left [click to enlarge] demonstrates, the notion of Afghanistan's mineral deposits not exactly a bolt from the blue.  Lack of security held up serious exploration in the past, and mining co's say the same is true today--go figure.

Given the high-risk, frontier environment, the most risk-tolerant explore first:

 A few high-risk investors are sufficiently intrigued by the country’s potential to take an early look. JP Morgan, for instance, has just sent a team of mining experts to Afghanistan to examine possible projects to develop.

“Afghanistan could be one of the leading producers of copper, gold, lithium and iron ore in the world,” said Ian Hannam, a London-based banker and mining expert with JP Morgan. “I believe this has the potential to be transforming for Afghanistan.”

But as for main-line efforts .  . . 

But executives with international mining firms said in interviews that while they believed that Afghanistan’s mineral deposits held great potential, their businesses were not planning to move into the country until the war was over and the country more stable.

“There are huge deposits there,” said David Beatty, chief executive of Rio-Novo Gold, a mining company based in Toronto. “But as chief executive, would I send a team to Kandahar?  And then call a guy's wife after he gets shot?  No."

After all the hype triggered by his original piece, which was obviously spoon-fed by the Administration's team for maximum effect, this Risen piece seems decidedly designed to reduce expectations and present a more realistic appraisal.  I do like the goofily Biblical "covet" in the headline, though.

It has long been known that Afghanistan had significant deposits of gemstones, copper and other minerals, but United States officials say they have discovered and documented major, previously unknown deposits, including copper, iron, gold and industrial metals like lithium.

A Pentagon team, working with geologists and other experts, has shared its data with the Afghan government, and is working with the Afghan Ministry of Mines to prepare information for potential investors in hopes of placing some mineral exploration rights up for auction within the next six months. On Thursday, Afghan officials said they believed that the American estimates of the value of the mineral deposits — nearly $1 trillion — were too conservative, and that they could be worth as much as $3 trillion . . .

At a news conference in Kabul, Wahidullah Shahrani, the mines minister, pledged to make the bidding and contracting of mining rights as transparent as possible to reduce the possibility of corruption. He said the ministry would post contracts on its Web site.

Mr. Shahrani and his advisers cautioned against overly high expectations, underscoring that development would take years and that there were many obstacles to overcome, not least of all the lack of security in some of the areas with the most minerals and the lack of a transportation infrastructure.

International mining officials and independent experts echoed that view. Jim Yeager, a Colorado-based geologist and former consultant to the Afghan mines ministry, said that poorly written mining regulations could also hamper future development.

Remember that NorKo has about $6T in minerals--for comparison's sake.