Editor's Note: The following is reprinted with the permission of the Council on Foreign Relations.
The U.S. Senate passed legislation yesterday that would tax the goods of countries with "misaligned" currencies (WSJ). The bipartisan measure is meant to target China, a trading partner that the United States has routinely criticized for devaluing its currency. China warned that such a move could instigate a trade war (BBC) between the nations.
U.S. officials have argued that by holding down the yuan, China is able to keep its exports inexpensive for U.S. consumers, thus undermining the U.S. manufacturing sector. The measure has gained traction because of the perception that China's alleged unfair trade advantage (NYT) is allowing it to steal U.S. jobs, contributing to an already-bleak employment outlook.
However, leaders in the House of Representatives have voiced strong opposition (Politico) to the bill, indicating that it will likely not be taken up by legislators in that chamber. The White House has not taken an official stance, but has cautioned that the bill could be inconsistent with World Trade Organization rules.
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This Independent Task Force report encourages the Obama administration and Congress to adopt a "pro-America" trade policy that brings to more Americans the benefits of global engagement.
The aftermath of the Great Depression saw a burst of competitive currency devaluations and protectionism that undermined confidence in an open global economy. As countries recover from the financial crisis today, they need to heed the lessons of the past and avoid the policies of the 1930s, writes Liaquat Ahamed in Foreign Affairs.
Sizeable trade and currency imbalances between China and the United States have fueled tensions over China's exchange-rate policies vis-à-vis the dollar and intensified debate over the proposed remedies to the problem, explains this CFR Backgrounder.
U.S. Accuses Iran of Plot to Kill Saudi Ambassador
The United States accused Iranian officials of plotting with an assumed Mexican drug cartel (NYT) to assassinate Saudi Arabia's ambassador in Washington, and blow up the Israeli embassy in Washington and the Saudi and Israeli embassies in Argentina. Iran denied the accusations.
Iran's ambitions as a regional power and links to suspected terrorist groups pose stiff challenges to its neighbors and the world. These are magnified by upheaval in the Middle East and tensions within the Iranian regime, explains this CFR Crisis Guide.
ISRAEL: Israel and Hamas, the militant group that controls the Gaza Strip, agreed to a prisoner swap (al-Jazeera), in which Israel will free over one thousand Palestinians in exchange for an Israeli soldier, Gilad Shalit, who was captured by Hamas in 2006.
Putin in China for Bilateral Talks
Russian Prime Minister Vladimir Putin met with Chinese officials to advance a long-delayed gas deal that would see Russia pump fuel into China for thirty years. Over the course of Putin's two-day visit, the countries agreed on$7 billion in trade deals (AFP) in energy, finance, and agriculture.
AUSTRALIA: In a victory for Australian Prime Minister Julia Gillard, the lower house of parliament passed acarbon tax (Australian) that would require five hundred of the country's biggest polluters to pay for each ton of carbon dioxide they emit. The bill is expected to pass the upper house next month.
SOUTH AND CENTRAL ASIA
U.S. Open to Peace Deal with Haqqani
U.S. Secretary of State Hillary Clinton indicated that the United States would be open to a peace deal in Afghanistan that included the militant Haqqani network (Reuters). But Clinton cautioned that it was too soon to tell whether the group was serious about negotiating.
The Institute for the Study of War provides an overview of the strategy of the Haqqani network, an insurgency group in Afghanistan with connections to al-Qaeda and Pakistan.
PAKISTAN: U.S. Defense Secretary Leon Panetta said the situation in Afghanistan cannot be resolved without a"stable and secure Pakistan" (ExpressTribune). But he acknowledged that tensions remained between the United States and Pakistan because of the latter's ties to militant groups.
Pakistan's stability is of great consequence to regional and international security. Examine the roots of its challenges, what it means for the region and the world, and explore some plausible futures for the country with this CFR Crisis Guide.
Hundreds Protest in Khartoum
Three hundred protesters demonstrated in the Sudanese capital of Khartoum against high food prices (Reuters)and for better public transportation. The rare protests came amid rising inflation, compounded by the country losing most of its oil reserves when South Sudan became independent this summer.
UGANDA: The country's parliament voted to suspend all new oil deals after it revelations that government ministers allegedly took multi-million-dollar bribes (BBC) from UK-based Tullow Oil. Tullow denied the accusations.
Senate Rejects Obama's Jobs Bill
The U.S. Senate voted to block the advancement of President Barack Obama's $447 jobs bill (NYT). The White House and Senate Democrats are expected to push through some individual pieces of the bill that can muster bipartisan support as early as next week.
Slovakia Rejects EU Bailout Expansion
The Slovakian parliament voted against the expansion of the temporary eurozone bailout mechanism, theEuropean Financial Stability Facility (DerSpiegel), bringing down the government of Prime Minister Iveta Radicova. The measure, which has been passed by the other sixteen eurozone member states, is expected to pass in Slovakia in a second vote later this week.
GREECE: Auditors from the EU, the European Central Bank, and the IMF said Greece is likely to receive the next €8 billion tranche (Guardian) of last year's EU-IMF bailout by November. The review must be approved by eurozone finance ministers and the IMF's executive board.
As Greece inches closer to defaulting on its pile of sovereign debt, European leaders must move quickly torecapitalize the continent's exposed banking sector, says EU economics expert Jacob Funk Kirkegaard in this CFR Interview.
Much cheaper using Senate as a weapon than the armed forces. Though not sure how much effect it will have. If we believe in free market economy then we need to believe in the laws of supply and demand. Then why restrain China? US and others can always buy the Yuan to bring the value up, if they so desire.
China's banks spend a lot of time and money to make sure the Yuan stays pegged at that value against US$. They prevent Yuan to "free-float" to its realistic value.
"The U.S. Senate passed legislation yesterday that would tax the goods of countries with "misaligned" currencies". China would be affected, yet it realised that it has to shift from manufacturing of cheap goods to high-end products, as there are other countries in South East Asia which have even lower labour-costs
The leader of the Haqqani network, Jalaluddin, is a Jadran tribesman in the Paktika province. He owns land in Pakistan's North Waziristan, where he set up a base for planning raids against the Red Army in the 1980o's in Afghanistan. After the Sovjets left the country the Haqqanis joined the Afghan Taliban – the Quetta Shura under Mullah Omar. He came to visit the ISI in Islamabad before the 9/11 attacks on the U.S. As Bush II waged war on Afghanistan in October he disappeared. Several months later he resurfaced in North Waziristan and planned attacks on the ISAF in Afghanistan ever since. The local recruits in Afghanistan are not the die-hard Haqqani fighters. The more lethal ones are the Punjabi Taliban by locals in Waziristan, and the so-called foreign fighters of Arab and central Asian origin. These insurgents make up of the bulk of Haqqani network's fighting force.
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