Tuesday, February 03, 2009

We were warned

During the recent US Presidency election, two warnings about a Barack Obama victory stuck in my mind. The first was about his commitment to significantly increase the number of troops in Afghanistan - perhaps with Britain expected to pick up part of the increase. We know that 'the surge' changed the direction of the war in Iraq, and this may have influenced Obama. But Afghanistan is not Iraq, and its not next door to Pakistan. Anyway I'm not qualified to take up a firm opinion on this, but the person who warned me that this was a most unwise policy is a man with Cabinet experience. He told me that he expects the US President to change his mind.

The first warnings about the second issue came from Dr Christopher Woods on my blog. He kept informing us that Obama was into protectionism in a big, big way - concluding that this would damage the economies of the US's trading partners, including Wales. It was certainly one of Obama's main election pitches. We're soon going to find out to what extent he meant it. Boris Johnson has written a splendid article today, which informs us that President Obama has enacted a Buy America Act, which restricts the $850 billion that forms his 'financial stimulus' to businesses which use American steel. I don't know whether the final decision has been taken or not.

This is very bad news for the rest of the world. Tit for tat action against the US will follow. Today, there is a deafening amount of sabre-rattling. In Britain we are watching the fallout from Gordon Brown's ridiculous claim that he supported 'British Jobs for British workers'. And we are hearing US commentators making aggressive and dismissive noises about China. I'm just watching John Bruton, ex Prime Minister of Ireland refusing to believe that Obama is not going to veto this - and went on to concede there will be retaliation if he doesn't. Could it be that some of the shine may come off Barack Obama rather more quickly than we were expecting.

11 comments:

Dr. Christopher Wood said...

I'm in a huge rush to finish a project ... so excuse my rushed typing/typos ... also scrawl if you don't want to read ...

Along the lines of the Telegraph article that you cited Glyn: "The EU trade commissioner vowed to fight back after the bill passed in the House of Representatives late on Wednesday included a ban on most purchases of foreign steel and iron used in infrastructure projects." Telegraph: US-EU trade war looms as Barack Obama bill urges 'Buy American'

http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/4389597/US-EU-trade-war-looms-as-Barack-Obama-bill-urges-Buy-American.html

So looks like Europe is not too keen on Obama's ‘stimulus bill” - the EU Trade Commissioner is going to "fight back".

“Beware what you wish for”; people forget that President Obama is going to put America first. President Obama is already calling on the UK government to send more British combat troops to Afghanistan and only a few days ago President Obama gave the go ahead for an air-strike that killed women and children in a village in Pakistan. As Biden explained, Obama flagged several times that if he made President he would go on the offensive in Afghanistan/Pakistan.

And Guantanamo – I have heard some say Guantanamo is closed – errrr, it’s still there. The President signed an EO (Executive Order) to close up by a date given – expect the closure date to be moved to a new date given.

Many Brits have their heart ahead of their heads. Rational thinking goes out, as the saying goes, "out the window". Corus saw the writing on the wall - the US Steel industry has a MEGA-HUGE lobby group, Obama wants to win a 2nd term - he promised jobs for Americans in Ohio and other blue collar states. Where did Brits get the idea that Obama was more open to free trade than McCain?

Who did President Obama throw open the doors to a few days ago? Free trade advocates? No siree - he threw open the doors of the White House to American union leaders - or as the saying goes here, he threw open the doors to “organized labor" (the American term for unions).

And guess what 'organized labor' wants? You don't know? Why: jobs for its union members - and guess what, President Obama is going to bend over backwards, sideways, upside down to get their endorsements for 2012. President Obama wants to do two terms!

Now don't get me wrong, I want jobs for Welsh workers - high paying jobs, a Welsh economy transformed from a low GVA to a high GVA economy, a nation where Welsh families and I am going to spend a LOT of my time helping educate Welsh legislators in improving the commercialization of Welsh intellectual property ...

But in putting your hearts before rational thinking/pragmatic thinking many of my fellow countrymen just didn't 'get it' and now many of my fellow countrymen, Welsh families are going to pay the piper's price - job protectionism.

It's like I said on BBC's Question Time special from Washington, DC: it's going to be about jobs*jobs*jobs*jobs*jobs* ... for American workers in blue collar states and that means jobs in steel etc.

And as pointed out several times, N. Wales is going to take a serious hit In re Airbus (EADS), the HUGE Pentagon order for the next generation of in-flight air refueler tankers that went to Boeing then to Airbus/Lockheed (c/o Senator McCain) will almost certainly be won by Boeing - and the next order (which is likely to be much larger than the first) will go to Boeing - all Boeing has to do is avoid telling whoppers.

Could anyone seriously imagine President Obama tied at every joint to American blue-collar unions sanctioning a contract worth thousands of American jobs to Airbus (EADS)?

Like I warned ages ago - Wales will pay a price in jobs - a serious price, but hey, don't listen to rational critical thinking, go with your hatred of Bush (who was not up for re-election) and worship the ground that President Obama walks on - even though it will cost jobs in Wales.

Hell, act like lemmings if you want to, but don't gnash teeth and groan about it when the truth settles in.

Footnotes:
1) The “Buy America Act” (supposed to be a stimulus bill) is up before the Senate so it has not been enacted President Obama (though figuratively speaking the “stimulus” package has President Obama’s name stamped all over it) – it sailed through the House of Representatives but with (from memory) all GOP (Republican) members of the House plus 11 Democrats voting against it, but it still passed comfortably. If Senate passes the bill then it will become law. But I suspect President Obama will want some changes to the ‘stimulus bill’ because right now the American public are seeing it for the most part as a pork-laden bill and if it fails to stimulate the American economy President Obama will lose a lot of face, so Obama has cottoned on to the fact that the Democrat Congressman that wrote chunks of it (with Pelosi, the Speaker of the House, throwing some pork in) has put so much port into the bill to pay off Democratic core constituents (almost akin to pay for play politics) that President Obama, anxious as he is to be a two term President, will not suffer being ‘stitched up’ by his own party and might well listen to the Republicans (GOP) in the Senate over members of his own party. So I do expect the stimulus package to be squeezed of at least some pork, but for all the GOP complaints, the GOP (Republicans) don’t have a lot to say on how to improve the bill beyond the usual ‘don’t make government bigger, put more money into the private sector’; frankly, imho, both the GOP and Democrats don’t have much of a clue on how to fix the recession, but the free-market will likely fix it of its own accord; meaning if there is one thing I have learnt about the American market for goods and services – it is a force of nature and will go up and down and then up again largely on its own time scale – so expect the US housing market to recover, expect private sector business to emerge leaner and more competitive – but hopefully the big inefficient auto-makers will adopt a new business model and banks to stop discounting risk, but allow loans to small businesses that have a track record of ‘being there’ through thick and thin (like my wee business).

2) Expect lots of flowery words of comfort from President Obama that the “buy American message” will be stripped out. Expect instead for the Democrats to come up with some other wordage that sounds different, but means much the same thing. RECALL: during the election campaign President Obama made lots of promises to the Unions and voters in blue collar states like Ohio about renegotiating international trade deals; this alarmed the Canadian government who got nervous and asked team-Obama if this was really true, that if elected Obama would protect American jobs – team-Obama said it was just rhetoric, and not to worry. Well, Obama was elected and within just a couple of weeks of office the “Buy America Act” sailed through the House of Representatives (even though every GOP member voted against it – the GOP is in favour of world trade) – so the words of comfort to Canada were just that, so expect President Obama (and team-Obama) to offer fresh words of comfort to mollify Europe/UK concerns – but expect those fresh words of comfort to be just that.

3) The current Congress is the most protectionist since the last depression – so plan accordingly. Expect Congress to be very aggressive with China’s perceived policy of currency manipulation and unfair trading practices.

4) Of course there is a solution staring Wales in the face. It’s like I have said a million times or more now, Wales is of a size where enacting its IP (intellectual property) effectively would transform the low GVA economy to a high GVA Welsh economy.

5) The solution also bypasses Congress’s current protectionist spasm. All Wales has to do is turn Swansea/Cardiff Universities into an MIT of the Welsh coast. (MIT is located on America’s East coast). I had two patent lawyer job interviews with two top Boston law firms, one of which had a whole IP section devoted to handling MIT inventions/inventors. It’s like Professor Dylan Jones-Evans said: “MIT students, alumni and faculty have founded more than 5,000 companies, and approximately 150 new MIT-related companies are founded each year. These companies now account for employment of over 1.1 million people and annual sales of more than £200 billion.” MIT has over 3,000 U.S. registered patents. As far as I can tell, Cardiff and Swansea universities combined (which together have about 3,000 more postgraduates than MIT) has fewer than 100 U.S. registered patents, yet both Swansea and Cardiff universities are otherwise excellent universities and are noted for producing world-class research. So there is a serious issue here which is hampering (nay, destroying) the ability of Wales to generate good high paying jobs. Professor Jones-Evans identified a choke point: lack of venture capital to commercialize Welsh IP.

6) The solution: File enabled academic research papers under the US Patent and Trademark Office’s provisional patent filing program, which gives a grace period of up to one year after publication of the research papers.

Then twice a year put selected provisional filings up for auction to the highest bidder and use the cash generated to fund a Welsh venture capital fund for commercializing future Welsh innovation to generate employment with the goal of creating over 1.1 million Welsh jobs and annual world sales of more than £200bn – MIT has done that with fewer post-grads than CU.

7) If the Welsh Assembly Government (WAG) doesn’t tune into sanity and show leadership of the kind that turns Swansea/Cardiff universities into an MIT for Wales, then expect the Welsh economy to ‘enjoy’ another decade of low GVA ‘progress’, more Welsh families to suffer needlessly.

Aled said...

Attractive short term measures always have consequences in the years to come. It is still true today, even in this economic climate, you cannot buck the market.
If the market is abused as has happen in this decade with the financial sector, the market will turn and bite you very hard, the greater the abuse the harder the bite. This applies to the “America first” policy, short term boost long term cost, it also applies to Gordon Browns “save the world” exercise. The explosion in borrowing will I guess produce a short term boost and reduce the depth of the slump but our future generation will be weighed down by the debt and very sluggish growth
The Prime Minister, I guess, is only looking 15 mths down the track and is happy.
I just wish he would think for a moment about our children

Jimgriff said...

Wow Chris!- I'd hate to see a "normal length" - non rushed answer!!!

Frank H Little said...

There is one ray of hope: Obama's first official foreign visit is to Canada, which has as much to fear from US protectionism as we in the EU do, and has said so.

Glyn Davies said...

The America First policy will be a disaster for the world. People are going to have to look beyond the attractiveness of Obama. He is a wonderfully charismatic person, (and that is great as far as it goes) but its his policies that really matter, and this is a very bad one.

Anonymous said...

Afghanistan is next door to Pakistan.

Dr. Christopher Wood said...

Jimgriff> your comment (deserved) reminds me of that funny line in Shakespeare’s Hamlet: "I will be brief"!

As one critic put it, "Shakespeare as an amusing attack on those who are verbose or say a great deal without really saying anything of substance..."

But going with Tommy Cooper, "As it happens ..."

As it happens, there's a lot of beef in "what she wrote". I'll be brief: there's a solution to the choke point identified by Prof. Jones-Evans ... if anyone doubts auctions of IP - just have to look at, for example, Chicago based Ocean Tomo.

See, e.g.,

http://www.oceantomo.com/auctions.html

http://news.zdnet.com/2422-13568_22-196446.html

http://news.cnet.com/Patent-auctions-Lawyers-dream-or-way-of-the-future/2100-1014_3-6045371.html

NOT LEGAL ADVICE - GENERAL DISCUSSION PURPOSES ONLY.

Sarah said...

Press grabbing, headline grabbing, short term measures are always otherwise known as a ‘quick fix’ and will always yeald penalties in the following years, no doubt when our children and elderly will pay the consequences.

This is as true today, as it was 10 years ago.

If you abuse something, treat it with contempt it will eventually turn bite you back very hard, the greater the abuse the harder the bite.

It seems to me that the “America first” policy, short term gain long term rate of payback,.

Any possible increase in borrowing will I would think produce a short term gain and reduce the depth of the sagging economy.

However my sons generation will be saddled with the payback.

The Prime Minister is presumably only looking to the time between now and the next general election and is happy to continue as is from now till then. What else can you reasonably expect from a man not elected by the people?.

Glyn Davies said...

Anon - Yes, which is why making war in Afghanistan is so much more unpredictable and problematic than making war in Iraq.

Sarah - One month ago, our Prime minister would have dismissed you as being out of line with every other country and leading economist in the world. By today, more and more voices are taking the same view. This week its the Liberal Opposition in Australia. Another month and the Prime Minister will be agreeing with you and will claim to have been saying thebsame thing for ten years, and the BBC will report him saying it without challenge.

Welshman in DC metroland said...

Sarah> the “America first” policy is still in place (‘trust me’). All Senate has done is put in some words to mollify the Europeans. Essentially, the "Buy American" provision has been mollified to allow for ‘exceptions’ as required by US trade agreements. Since the states of the Union don’t have international trade agreements and since State Governors will be making the decisions on how the money is actually spent … so the wording gets the US Federal government out of a legal pickle, but the states will be free to act as they see fit – and the mega huge steel lobby are free to lobby state apparatchik. It’s like ‘what she wrote’ in footnote #2 (see above), “Expect instead for the Democrats to come up with some other wordage that sounds different, but means much the same thing.”

Most Europeans don’t understand how America is governed, it’s part Federal and part State.

Most Brits wanted a Democratic Senate, House of Representatives and White House (i.e., a Democratic federal legislature and Executive) and guess what: YOU GOT IT.

“Careful What You Wish For”

It really does seem that as the truth of the error settles in (re: having a job protectionist party control all Congress and the White House)

Wales’s cure for this is found in footnote #5 (repeated below). If the Welsh Assembly Government (WAG) finally puts out some decent leadership and gets Welsh IP into commercialization mode over 1 million high paying jobs can be generated in Wales – and guess what: the protectionist stance of the current make-up of Congress/White-House will be by-passed – because US patents are just that: US patents, enforceable inside all US territories (which includes all 50 States of the Union – hence the term “United States”)

Footnotes continued:

Footnote #8: I don’t know if anyone picked up on this, but Senator McCain wanted the “Buy America” provision stripped out, but the majority in the Senate supported instead some wordage to mollify the “Buy America” provision. You see, McCain is in favour of open free trade, but hey, Europeans thought that dull. Expect “Airbus” (EADS) to NOT get the contract for the next generation of in-flight refueling tankers. This is worth thousands of American jobs – can you see President Obama signing off on that? Just think of the outcry among American workers. Incidentally the wildcat stoppages/strikes in the UK (re: Jobs for British workers) is being reported over here.

From above, repeat of Footnote #5:

5) The solution also bypasses Congress’s current protectionist spasm. All Wales has to do is turn Swansea/Cardiff Universities into an MIT of the Welsh coast. (MIT is located on America’s East coast). I had two patent lawyer job interviews with two top Boston law firms, one of which had a whole IP section devoted to handling MIT inventions/inventors. It’s like Professor Dylan Jones-Evans said: “MIT students, alumni and faculty have founded more than 5,000 companies, and approximately 150 new MIT-related companies are founded each year. These companies now account for employment of over 1.1 million people and annual sales of more than £200 billion.” MIT has over 3,000 U.S. registered patents. As far as I can tell, Cardiff and Swansea universities combined (which together have about 3,000 more postgraduates than MIT) has fewer than 100 U.S. registered patents, yet both Swansea and Cardiff universities are otherwise excellent universities and are noted for producing world-class research. So there is a serious issue here which is hampering (nay, destroying) the ability of Wales to generate good high paying jobs. Professor Jones-Evans identified a choke point: lack of venture capital to commercialize Welsh IP.

Telling how it is from DC metroland said...

To sum up then: the State verses Federal legal system here will be the “get out of jail card” – and some Europeans still don’t get it yet: “the fix is in”. There are a few things I have learnt this past 10 years since selling my house in Cardiff and settling in the USA – folks here like to ‘follow the smart money’. The trick is spotting which way but loose the smart money will go. The smart money (not necessarily $$$$, just a way of thinking) is on US steel getting the orders at State Level. Does anyone think a State Governor will risk his governorship by not buying steel from US Steel? Governors in blue-collar states like Ohio and Michigan? Just who are the blue-collar voters going to vote for? The state governor that gives ‘their jobs’ to an overseas steel supplier or the governor who buys US steel? Yeah right, and tomorrow the Pentagon is going to source all the metal alloys in the new Joint Strike Fighter from Mars. Those metals in short supply will be sourced from outside the USA – but I don’t think there’s much call for titanium in bog standard bridges, roads, intersections (US version of roundabouts), ramps (slip-roads), etc.