Spring 2007

Letter from the Editor

The Waiting Game

On both sides of the Atlantic, these are times of suspense, almost of suspended animation—as if people were waiting for a new direction.

One factor in this sense of uncertainty has been a series of great miscalculations in the last five years. The United States did not anticipate that Iraq would jeopardize so many long-term interests and global stakes in the Middle East. Leaders of the EU did not expect to see the draft constitution derailed to such damaging effect. A sudden qualitative change in elite perceptions about global warming suddenly raised a combined challenge of environmental rescue and energy security. (The latter problem has a special face in Europe because of Russia’s emergent leverage as the main natural-gas provider for the EU.) Even the Doha round may fall prey to over-optimistic assumptions in its timetable.


U.S. Farming: The Politics

Dan MorganSometimes things happen that embarrass even the most ardent supporters of U.S. farm policy. One such thing occurred after the Space Shuttle Columbia broke up over the United States in 2003, spewing debris over dozens of counties along its flight path. Astonishingly, the event turned out to be a minor windfall for ranchers and dairymen in the affected counties. They were made eligible for up to $40,000 in “disaster” payments - whether or not their herds or pastures had been damaged by falling shuttle parts.

Such stories lend credence to the view that the American farm subsidy system, now a key stumbling bloc in the Doha Round of global trade negotiations, is simply “crazy.” In a nine-part series on farming in The Washington Post last year, two colleagues and I combed through a huge mother-load of statistical data and then did nationwide reporting on U.S. agriculture, finding and describing a number of situations that seemed to defy logic.



Wall Street: Master of the Universe No Longer?

J. Paul HorneIn a shift that appears to have surprised and dismayed U.S. experts, American dominance in the world’s financial system seems to be waning as foreign rivals— including the Euro zone—win a growing share of rapidly expanding global capital markets and international financial activity. The trend has shaken many American business leaders as a worrisome symptom of declining U.S. power and influence, with negative consequences for the economy and for asset prices in New York and other U.S. markets. Needless to say, in Europe and elsewhere, the development is viewed as long-overdue recognition that Manhattan, however lively its trading zeitgeist and reputation for financial power, had no monopoly on skill at deal-making, innovative financing, nose for new ventures— or even the kind of greed that drives people to succeed in the most competitive markets.



WTO: Caught In a Minefield?

François ClemenceauIt has been 12 years since that the GATT (General Agreement on Tariffs and Trade) was replaced by the World Trade Organization. The change that can now be seen as a milestone marking the end of what can now be seen as an era— perhaps the good old days—in the modern history of international negotiations to liberalize trade. The GATT framework dated from the post-World War II Bretton Woods agreement to reduce barriers to international trade as part of a larger plan for economic recovery. It was an agreement, not an organization and its history can be viewed as three periods: initially, it focused on commodities and freezing existing tariff levels, then on reducing tariffs and finally, in a phase that consisted only of the Uruguay Round from 1986 to 1994, it extended the agreement fully to new areas such as intellectual property, services, capital and agriculture. Out of this successful round the WTO was born out of a feeling that it was now time to institutionalize trade negotiations in an organization.



Competition Among Capital Markets: Focus on Facts not Factoids

The declining competitiveness of U.S. capital markets has become the topic of the moment among those with a professional interest in the financial sector. Concurrent with three high-profile groups’ substantial recent reports on the issues facing capital markets in the United States, Treasury Secretary Henry Paulson has placed this issue near the top of his domestic agenda. What is more, in a political environment where the prospects for collaboration on most public issues seem increasingly dim, the concern over U.S. capital formation is a refreshing oasis of bi-partisanship, with political interest in corrective action ranging from prominent Democrats in New York such as Governor Eliot Spitzer and Senator Chuck Schumer to the senior officials of the Bush administration.