Category: International Commerce

So Now The Europeans Sound Like Washington State Congressmen

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There is no evidence that this is happening yet, but US merchants of death are worried that it might(paid subscription required):

Access to the European defense market for U.S. companies could be one of the first areas where the GAO decision will leave its mark. One senior U.S. industry official developing business opportunities in Europe says there’s concern that European countries will react by excluding U.S. products for consideration in competitions on their home turf.

If the Northrop Grumman/EADS North America team were to be stripped of the tanker contract, it would have “unpleasant” implications for the transatlantic security relationship on a broader scale, notes Giles Merritt, director of the Security & Defense Agenda, a Brussels-based think tank. “Europe will be in a distinctly unfriendly frame of mind” when it comes to matters such as troop commitments to Afghanistan and other initiatives that would require burden-sharing, he states.

Let’s be clear. This is not yet happening. What’s going on is that Americans are afraid that the Europeans will act like them.

Econ 101: Free Trade Does Not Necessarily Bring Lower Prices

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Dani Rodrik has a good analysis:

Advocates of globalization love to argue that free trade lowers prices, and the argument seems sensible enough. Think of all the cheap goods from China that we can buy at Wal-Mart. But anyone who understands comparative advantage knows that free trade affects relative prices, not the price level (the latter being the province of macro and monetary factors). When a country opens up to trade (or liberalizes its trade), it is the relative price of imports that comes down; by necessity, the relative prices of its exports must go up! Consumers are better off to the extent that their consumption basket is weighted towards importables, but we cannot always rely on this to be the case.

Consider your typical Argentinian for example, who consumes a lot of wheat and beef. Since these are export products for Argentina, free trade implies a rise in the relative price of the Argentine consumption basket. (The gains from trade are still there, of course, but they derive from the usual allocative efficiency improvements, not from lower prices across the board.) And in the U.S., the Wal-Mart effect has to be qualified to take into account the fact that the relative price of the goods that the U.S. exports (including for example agricultural commodities) is higher than it would have been absent trade. Similarly, when the U.S. gets better market access abroad for its agricultural exports (a key demand under the Doha round), you can be sure that this will raise domestic prices for these goods, not lower them.

Highly recommended.

Congress Attempting to Regulate Satellite Launches Without US Content

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The House 2009 Defense Authorization Bill has a section that allows for punitive actions to be taken against “a foreign-owned company that is engaged with the People’s Republic of China in the development, manufacture or launch of certain satellites” (Paid Subscription Required).

This is about Thales Alenia Space, which has communications satellites that use no US content, and they are cleaning up by using the dirt cheap Chinese Long March boosters to launch satellites that have no ITAR (International Traffic in Arms Regulations) components.

It appears that something got Duncan Hunter’s (R-CA) nose out of joint about this, but given the restrictions on what are commercial technology present in the ITAR regulations, it was inevitable that this would happen.

I wonder if the WTO will end up getting involved in this.

Steven Pearlstein Gets the Economy

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In his article, which I recommend that you all read, The Fading of the Mirage Economy, he nails what is going on in the first three paragraphs:

Suddenly, it seems, we’re getting hit from all directions.

Energy and food prices are soaring. The housing market continues to collapse. Government revenue is falling, and taxes are rising. Airlines are jacking up fares and fees while reducing service. Banks are pulling credit lines. Auto companies are cutting production once again. Even investment bankers are losing their jobs.

The tendency is to see these as separate developments, each with its own causes and dynamic. Fundamentally, however, they are all part of the same story — the story of the global economy purging itself of large and unsustainable imbalances that for a time allowed many Americans to think they were richer than they really were.

I disagree on one point. I do not think that this was some sort of random confluence of events.

I think that this has been mainstream economic policy for the past 28 years. It is the gradual removal of wealth from the bottom 90+% and its transfer to those at the top, with free, easy, and increasingly unregulated credit and credit markets to create the temporary illusion of a high standard of living.

The goal was to create debt peonage, to make our society less like the industrialized world, and more like Mexico.

African Leaders Get the Finer Points of Free Trade

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At a summit, they complained that these deals allow for barriers to their products while requiring those of the industrialized nations into their markets.

Cotton is a classic case of this, where US subsidies allowed under the current regime undercut what would otherwise be competitive 3rd world supplies.

That’s because “free trade” deals are really not about free trade. They are about establishing an economic regime that favors stake holders such as investors and IP holders.

If you look at the economic development of the US though, it was built on what is now called “piracy” of European, largely British, technologies.

Nuclear Waste Import Standoff

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This is a nice rundown of the sh^% storm coming down about the importation of nuclear waste from Italy for processing and disposal.

Obviously, it all has to go somewhere, and the proliferation issues involved with it staying somewhere unsafe bear some careful thought.

Beyond that, I have no comment….I am currently working in the biz, though not on this specific project, and it would be inappropriate for me to make any further comment.

Spirit AeroSystems Snags Airbus A350 Fuselage Section 15

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Sprint just signed a contract with Airbus to design and build this component. (See picture below)

The kicker is that until 2005, Spirit was Boeing, but they spun the company off to appease shareholders, and now the expertise, including experience with the complex composite structures it developed for the 787, will be benefiting Airbus.

Boeing’s aircraft’s current business model appears to be similar to the Lead System Integrator (LSI) concept that has consistently underperformed in all of its large defense related contracts so badly that Congress is looking to ban the practice.

Was BAE’s Purchase of United Defense the Beginning of a Trend?

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When I was working at United Defense*, the Carlyle Group sold it to the UK firm BAE, and used the proceeds to buy Dunkin Donuts.

BAE paid a significant premium in order to buy UD, because they saw it as an entry point into the US defense market.

Well, Finmeccanica has now purchased the defense electronics firm DRS Technologiesat a 32% premium for what appears to be much the same reason.

I believe that we will see more of this, particularly with the dollar weak, as the US now spends more on its military than the rest of the world combined.

Additionally, we will see many more of the joint ventures of the type that EADS and Northrop Grumman have entered into for the tanker competition.

*Yes, I have worked everywhere. Maybe I can’t hold down a job, but more likely this has been my role as “technical hit man”, where you are parachuted in to take care of a specific need.

Real Exports are Not Growing

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Interesting…When correcting for raw materials, and that is a lot of US exports, things like ore, food, and hides, exports are not growing.

Our export economy is that of a 3rd world nation. It’s raw materials and food, not finished goods.

One of the problems that we are facing is that if the dollar falls, we lack the domestic industrial capacity to pick up the slack. It has been dismantled over the past 30 years, and it may take it 30 years for it to recover in any significant way.

The Pelosi “Victory” on the Colombia Free Trade Deal is Actually Another Cave to Bush and His Evil Minions™

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The initial reports, that Pelosi’s move to change to House Rules after Bush officially submitted the Columbia Free Trade Agreement, Pelosi will change the house rules, so they won’t be forced to vote in 90 days.

While everyone else was cheering, David Sirota thought that the celebration was premature. He thought that it might not be a way to kill the CFTA, but rather a way to save it.

Well, he has now seen references that the Democrats are actually using the delay to push it out past the elections, so that they can get more votes ( see here and here).

It looks like they are planning for a lame duck session to approve it:

Rep. Jim Moran (D-VA) was confident that House leaders would schedule a vote on the trade pact in a post-election session, when wavering members would be more willing to support it. “I think there’ll be a vote in the latter part of November, or early December,” he said, adding it would likely be approved in those circumstances.

Let’s be clear on this. Columbia has been using its government to murder labor organizers, and under Uribe, it continues to do so.

This is not a government that we want to cut this deal with.

Mark Penn is a Complete Asshole

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It appears that while Hillary Clinton was condemning the Columbia free trade pact, mark pen, in his capacity as CEO of Burson-Marsteller Worldwide, was having meetings with representatives of the Columbian government in order to lobby for the agreement.

Penn subsequently apologized for this, but the Change to Win union alliance is now demanding that Penn be fired by the Clinton campaign:

FOR IMMEDIATE RELEASE
Friday, April 4, 2008

CONTACT: Greg Denier
Noreen Nielsen
(202) 721-0660

WASHINGTON, DC – The following is a statement from Change to Win executive director Greg Tarpinian concerning the latest revelation that Hillary Clinton’s chief campaign strategist Mark Penn met Monday with Colombia’s ambassador regarding the Colombia Free Trade Agreement.

“It’s time for Senator Hillary Clinton to send her vaunted ‘chief strategist’ Mark Penn packing — back to his job consulting for union busting corporations and anti-labor governments for good.

“We have questioned Penn’s role in the Clinton campaign in the past for his representation of union busting employers like Cintas. At that time, Penn said there was a wall between him and his firm’s representation of union busters. The latest revelation that Penn — whose firm represents the Colombian government in its effort to secure passage of a so-called free trade agreement — is actively involved in securing its passage in the middle of Senator Clinton’s presidential campaign is outrageous. It also suggests that he has been playing a double role – advising the Senator on what to say to curry Democratic voters and advising the Colombian government on what to say to curry a majority of votes in Congress.

“The vast majority of Americans do not believe that we should be granting preferential trade status to a government that coddles death squads that target union organizers. Colombia remains the most dangerous country in the world for union members, where more than 2,200 workers have been murdered since the 1980s by Colombian death squads for trying to form unions while the government has done nothing to effectively stop the murders. It is time for Penn to go.”

A postscript to all this is that Columbia has now fired Burson-Marsteller Worldwide, saying that, “The Colombian government considers this a lack of respect to Colombians, and finds this response unacceptable.”

Bummer of a birth mark, Hal.

Mo Tanker, Mo Tanker, Mo Tanker

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I think that I missed a couple of things from the March 10 Aviation Week issue that I need to address now, specifically some rather telling comments in the “Hometown Hubris” article.

Interesting stuff:

  • IBoeing’s proposal was, “far too risky and expensive”. The 767-200LRF “Frankentanker” used the, “767-200 airframe; over-wing exits from the -300; floors, doors and structurally enhanced wings from the -300F; a cockpit, tail section and flaps from the -400ER, a completely new and not yet produced configuration.
    • By comparision, the A-330 proposal was nearly identical to the Australia tanker currently in test.
  • Boeing felt that, “Air Force purchase of tankers capable of hauling large amounts of cargo could jeopardize Boeing’s already tenuous C-17 production line”.
    • It’s worth noting that Boeing has already purchased long lead C-17 items for 10 airframes in the expectation of more orders.
  • Boeing did consider the 777, and considered pitching both the 767 and 777, but decided on pitching just the 767. There are claims that someone “discouraged” submittal on the 777, but no name or time are given.
  • The U.S. requirements were similar to Australia’s. The Australian defense forces wanted a tanker that could refuel 3+ fighters, and carry maintenance crew and spares to a distant Pacific airport. The smaller airports of Europe and the Middle East were not as important in their scenarios.
    • The 767 could not do this. You would need a 2nd freighter to carry crew and spares.

Now I get it. They pitched the 767, and not the 777 because they thought that the latter would compete with the C-17.

Additionally, to the degree that there was a short field requirement, the 777’s short field performance is lacking, with its wing optimized toward the cruise efficiency end of the spectrum,

Note, the boom is not rocket science. McDonnell Douglas developed their own in the 1970s, and Airbus is testing theirs for Australia as as I write.