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August 25, 2006, Alert No. 1,439.
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Bernanke Discusses Trade

8/25. Ben Bernanke, Chairman of the Federal Reserve Board (FRB), gave a speech in Jackson Hole, Wyoming, titled "Global Economic Integration: What's New and What's Not?". He reviewed the history of international trade, discussed the role of technology innovation and communications in trade, offered several conclusions about the history of trade, and commented on recent developments in trade, government policy, and protectionism.

rightBernanke (at right) said that "Perhaps the clearest conclusion is that new technologies that reduce the costs of transportation and communication have been a major factor supporting global economic integration. Of course, technological advance is itself affected by the economic incentives for inventive activity; these incentives increase with the size of the market, creating something of a virtuous circle. For example, in the nineteenth century, the high potential return to improving communications between Europe and the United States prompted intensive work to better understand electricity and to improve telegraph technology -- efforts that together helped make the trans-Atlantic cable possible."

He said that another "conclusion from history is that national policy choices may be critical determinants of the extent of international economic integration."

Also, "A third observation is that social dislocation, and consequently often social resistance, may result when economies become more open. An important source of dislocation is that -- as the principle of comparative advantage suggests -- the expansion of trade opportunities tends to change the mix of goods that each country produces and the relative returns to capital and labor. The resulting shifts in the structure of production impose costs on workers and business owners in some industries and thus create a constituency that opposes the process of economic integration. More broadly, increased economic interdependence may also engender opposition by stimulating social or cultural change, or by being perceived as benefiting some groups much more than others."

He said that recently, "technological advances continue to play an important role in facilitating global integration. For example, dramatic improvements in supply-chain management, made possible by advances in communication and computer technologies, have significantly reduced the costs of coordinating production among globally distributed suppliers."

He added that there "is the continued broadening of the range of products that are viewed as tradable. In part, this broadening simply reflects the wider range of goods available today -- high-tech consumer goods, for example -- as well as ongoing declines in transportation costs. Particularly striking, however, is the extent to which information and communication technologies now facilitate active international trade in a wide range of services, from call center operations to sophisticated financial, legal, medical, and engineering services."

Moreover, said Bernanke, "production processes are becoming geographically fragmented to an unprecedented degree. Rather than producing goods in a single process in a single location, firms are increasingly breaking the production process into discrete steps and performing each step in whatever location allows them to minimize costs. For example, the U.S. chip producer AMD locates most of its research and development in California; produces in Texas, Germany, and Japan; does final processing and testing in Thailand, Singapore, Malaysia, and China; and then sells to markets around the globe."

He also discussed recent developments in international capital markets. He noted that "capital flows now take many more forms than in the past: In the nineteenth century, international portfolio investments were concentrated in the finance of infrastructure projects (such as the American railroads) and in the purchase of government debt. Today, international investors hold an array of debt instruments, equities, and derivatives, including claims on a broad range of sectors." (Parentheses in original.)

He also said that the role of government policy remains critical. He commented that "Progress in trade liberalization has continued in recent decades -- though not always at a steady pace, as the recent Doha Round negotiations demonstrate. Moreover, the institutional framework supporting global trade, most importantly the World Trade Organization, has expanded and strengthened over time. Regional frameworks and agreements, such as the North American Free Trade Agreement and the European Union's ``single market,´´ have also promoted trade. Government restrictions on international capital flows have generally declined, and the "soft infrastructure" supporting those flows -- for example, legal frameworks and accounting rules--have improved, in part through international cooperation."

He continued that as has happened at previous times in history, "social and political opposition to rapid economic integration has also emerged."

He cautioned that "Further progress in global economic integration should not be taken for granted", both because of "international tensions and the risks of terrorism", and because of "social and political opposition to openness".

He elaborated that "this opposition ... arises because changes in the patterns of production are likely to threaten the livelihoods of some workers and the profits of some firms, even when these changes lead to greater productivity and output overall. The natural reaction of those so affected is to resist change, for example, by seeking the passage of protectionist measures. The challenge for policymakers is to ensure that the benefits of global economic integration are sufficiently widely shared -- for example, by helping displaced workers get the necessary training to take advantage of new opportunities -- that a consensus for welfare-enhancing change can be obtained."

Mandelson Urges US to Extend Trade Promotion Authority

8/23. Peter Mandelson, the EC Commission for Trade, wrote a piece that is published in his web site, and in New Straights Times, in which he addressed Doha round negotiations.

Peter MandelsonHe (at left) wrote that "The suspension of negotiations in the WTO Doha Round is a painful blow for the global trading system. The potential costs of indefinite suspension are high, both politically and economically. It will hearten those who oppose more open trade in Europe, ASEAN and elsewhere. It has dented the credibility of the WTO at a time of global economic and geopolitical uncertainty."

He added that "Doha is now losing the race against time. It cannot now be concluded by the end of 2006. This means that the fast-track negotiating authority granted to the US President by Congress will expire before the final deal can be approved. Unless President Bush persuades Congress to renew his negotiators’ mandate, the talks have little prospect of concluding for some years."

USTR Meets With ASEAN Ministers

8/25. The Office of the U.S. Trade Representative (USTR) stated in a release the USTR Susan Schwab and representatives of the member nations of the Association of Southeast Asian Nations (ASEAN) signed a Trade and Investment Framework Arrangement (TIFA).

In addition, the US and ASEAN released a joint statement regarding this TIFA. It states that "The Ministers agreed that at the initial stage the Work Plan will include initiatives to support the development of the ASEAN Single Window, which will facilitate the flow of goods within ASEAN and between ASEAN and the United States.  It also will include cooperation on sanitary and phytosanitary (SPS) issues to foster additional trade in specific agricultural goods as well as cooperation on pharmaceutical regulatory issues aimed at speeding the delivery of innovative medicines to ASEAN countries."

The joint statement also addresses Doha negotiations. It states that "The United States and ASEAN Members expressed regret on the suspension of the Doha Development Agenda negotiations following the failure of WTO Members to demonstrate the necessary flexibility to provide momentum for the final push to conclude the negotiations." They also pledged close cooperation "to putting the Doha Development Round back on track before the end of 2006".

Susan SchwabSchwab (at right) also stated in the USTR release that "I welcome the strong message from my ASEAN counterparts affirming their commitment to work for a breakthrough in the agriculture and non-agriculture market access negotiations, so we can put the Doha Round back on track before the end of this year. New market access opportunities will be the litmus of the Round’s success."

Singapore, Indonesia, Malaysia, Thailand, and other nations are members of ASEAN.

Washington Tech Calendar
New items are highlighted in red.
Friday, August 25

The House will next meet at 2:00 PM on Wednesday, September 6. See, Republican Whip Notice.

The Senate will next meet at 11:00 AM on Tuesday, September 5.

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division regarding its draft [159 pages in PDF] of Special Publication 800-53, Revision 1 (Second Public Draft), titled "Recommended Security Controls for Federal Information Systems".

Monday, August 28

Deadline to submit comments to the Department of Homeland Security (DHS) regarding its proposed rule changes that would amend its United States Visitor and Immigrant Status Indicator Technology (US-VISIT) rules to extend US-VISIT requirements to all aliens with the exception of aliens who are specifically exempted and Canadian citizens applying for admission as B1/B2 visitors for business or pleasure. See, notice in the Federal Register, July 27, 2006, Vol. 71, No. 144, at Pages 42605-42611.

Deadline to submit nominations of individuals for appointment to the National Institute of Standards and Technology's (NIST) Visiting Committee on Advanced Technology (VCAT). See, notice in the Federal Register, August 11, 2006, Vol. 71, No. 155, at Pages 46199-46200.

Tuesday, August 29

LOCATION CHANGE. 10:00 AM. The Internal Revenue Service (IRS) will hold a hearing regarding its notice of proposed rule making pertaining to the application of 26 U.S.C. § 199, which provides a deduction for income attributable to domestic production activities, to certain transactions involving computer software. See, notice in the Federal Register, June 1, 2006, Vol. 71, No. 105, at Pages 31128-31129, and notice in the Federal Register, July 31, 2006, Vol. 71, No. 146, at Page 43085. Location: IRS Auditorium (New Carrollton location), 5000 Ellin Road, Lanham, MD.

Wednesday, August 30

Deadline to submit comments to the Internal Revenue Service (IRS) in response to its notice of proposed rule making pertaining to the application of 26 U.S.C. § 199, which provides a deduction for income attributable to domestic production activities, to certain transactions involving computer software. See, notice in the Federal Register, June 1, 2006, Vol. 71, No. 105, at Pages 31128-31129.

Thursday, August 31

11:00 AM. The Cato Institute will host a panel discussion titled "Prospects for Reform of U.S. Agricultural Policy -- With or without Doha". The speakers will include Mike Johanns (Secretary of Agriculture), former Rep. Cal Dooley (D-CA) (head of the Food Products Association), and Robert Thompson (University of Illinois). See, notice and registration page. The event will be webcast by Cato. Lunch will follow the program. Location: Cato, 1000 Massachusetts Ave., NW.

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division regarding its draft [ZIP] of Special Publication (SP) 800-69, titled "Guidance for Securing Microsoft Windows XP Home Edition: A NIST Security Configuration Checklist. See also, summary. This document provides guidance to telecommuting employees and those who maintain home offices and use Windows XP Home Edition.

Friday, September 1

8:50 AM - 12:20 PM. The American Enterprise Institute (AEI) will host an event titled "The Keys to the Kingdom: Intellectual Property Rights and Trade". At 9:00 AM there will be a panel titled "Achievements and Challenges Two Years after the Enactment of the U.S.--Chile Free Trade Agreement:. At 10:40 AM there will be a panel titled "Intellectual Property as a Tool for Greater Economic Growth". See, notice. Location: AEI, 12th floor, 1150 17th St., NW.

Effective date of the Federal Trade Commission's (FTC) final rule amending Section 310.8 of its Telemarketing Sales Rule (TSR) by revising the fees charged to entities for accessing the National Do Not Call Registry. See, notice in the Federal Register, July 31, 2006, Vol. 71, No. 146, at Pages 43048-43054.

Deadline to submit initial comments to the Federal Communications Commission (FCC) for its 2006 biennial review of telecommunications regulations. See, FCC notice [10 pages in PDF] and notice in the Federal Register, August 23, 2006, Vol. 71, No. 163, at Pages 49400-49401. This is CG Docket No. 06-152, EB Docket No. 06-153, IB Docket No. 06-154, ET Docket No. 06-155, WT Docket No. 06-156, WC Docket No. 06-157, and FCC 06-115.

Monday, September 4

Labor Day.

There will be no issue of the TLJ Daily E-Mail Alert.

The Federal Communications Commission (FCC) and other federal offices will be closed. See, Office of Personnel Management's (OPM) list of federal holidays.

People and Appointments

8/22. Tina Dam was named Internationalized Domain Names Program Director at the Internet Corporation for Assigned Names and Numbers (ICANN). In addition, Craig Schwartz was named Chief gTLD Registry Liaison. See, ICANN release.

More News

8/24. The White House press office released a short document titled "Notice: Intention to Enter Into a Free Trade Agreement with Colombia". In addition, President Bush sent a letter to the Speaker of the House and the President of the Senate regarding this proposed FTA. He wrote that it will "will generate export opportunities for U.S. farmers, ranchers, and companies, help create jobs in the United States, and help American consumers save money while offering them more choices. The Agreement will also benefit the people of Colombia by providing economic opportunity and by strengthening democracy."

8/24. The Copyright Office announced that some of its units have temporarily moved within the James Madison Memorial Building of the Library of Congress, due to renovation. Telephone numbers and e-mail addresses remain unchanged. The units, and their new locations, are as follows:
  Copyright Card Catalog: LM 464
  Records Room: LM 464
  Public Information Office: LM 430
  Certifications & Documents: LM 436

8/21. The Progress and Freedom Foundation (PFF) released its Digital Economy Fact Book: Eighth Edition, 2006 [135 pages in PDF].

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