Tuesday, December 29, 2009

Polémique: Minarets en France: passe d'armes à l'UMP / Minarets in France: the UMP firearms pass

LeMatin.ch & les agences, le 23 décembre 2009 -- (Nora Berra a agi en "garante de la laïcité". Image © Keystone). La secrétaire d'Etat aux Aînés, Nora Berra, a expliqué avoir voulu donner un "signal fort" en quittant mardi une réunion de l'UMP où un ancien ministre venait d'évoquer la présence de minarets en France. . . . 

 [The Secretary of State for seniors, Nora Berra explained, have intended to give a "strong signal" leaving Tuesday a meeting of the UMP when a former Minister had mentioned the presence of minarets in France. . . . (Translation by M. Ulric Killion).].

Mesure attendue
Pour la secrétaire d'Etat, un "faux débat" a été créé en France sur les minarets. "Nous avons importé un débat suisse. C'est un fait d'urbanisme qui est géré au niveau des collectivités et qui n'a jamais posé de problème en France", a-t-elle déclaré. La passe d'armes a eu lieu mardi lors d'un débat interne sur l'opportunité de rédiger une proposition de. . . .

[Measure expected]
[For the Secretary of State, a "false debate" was created in France on the minarets. "We have imported a Swiss debate." "This is a fact d'urbanisme managed at Community level and which has never posed a problem in France," she said. The pass of weapons took place Tuesday to an internal debate on the desirability of drafting a proposal for a law prohibiting. . . . (Translation by M. Ulric Killion)]. 

High marks for UNCTAD’s Investment Guide to the Silk Road (2009) as a source of information for trade and investment in Kyrgyzstan, Kazakhstan, Tajikistan, Uzbekistan and Western Chinese provinces

by M. Ulric Killion

A search for information on the polities and economies of Kazakhstan and Uzbekistan led to the discovery of the 2009 UNCTAD (United Nations Conference on Trade and Development) study, which is the UNCTAD’s Investment Guide to the Silk Road (2009). The UNCTAD’s 2009 study as a collection of data, a broad in depth coverage of the subject, and a clear presentation of facts and data deserves high marks.

On September 3, 2009, when launching the Investment Guide to the Silk Road in China, UNCTAD wrote, “As a step towards revitalizing the Silk Road region as a trading and investment location, UNCTAD´s Investment Guide to the Silk Road was launched during the Sixth International Investment Promotion Conference in China.” Additionally, UNCTAD wrote, “Launching the Guide during the Sixth International Investment Promotion Conference is of great significance, as the Conference aims at addressing challenges for investment promotion at a time of global economic crisis and of opportunities in the forthcoming recovery of the world economy.”

For these reasons, the UNCTAD’s Investment Guide to the Silk Road is a highly recommended study and reading for those seeking information concerning Central Asian countries or the Silk Road region. This is because the UNCTAD 2009-study serves as an important source of readily available history, background information, data and practical information regarding trade and investments in the region of the Silk Road. For purposes of the investment guide, the region known as the Silk Road, or more specifically, the Silk Road countries comprise Kyrgyzstan, Kazakhstan, Tajikistan, Uzbekistan and China – the Western Chinese provinces.

An excerpt from the Executive Summary of the Investment Guide to the Silk Road reads:
“The new Silk Road region is emerging from decades of centrally planned economies that were closed to foreign investment, and the current business environment does not meet international best practices in many respects. Despite an overall opening of the economies to international investment, the business/investment legal and regulatory frameworks of the Silk Road countries are still evolving, public institutions are still adjusting to their new roles of providing services and good governance, and certain types of human resource skills such as modern management can be in short supply.
Nonetheless, the Silk Road region may be one of the world’s most potentially lucrative untapped investment locations. It has an abundance of natural resources such as petroleum, natural gas, hydropower and minerals. It also excels at producing agricultural goods such as cotton, fruits and vegetables, meat and animal hides, and seed oils. The famed cities and attractions along the Silk Road make for an intriguing tourism destination.
In addition, the Silk Road countries have an educated workforce. This Investment Guide to the Silk Road is intended to give readers comprehensive introductory information about the investment climate and opportunities in the Silk Road region, but its primary goal is to encourage potential investors to explore in more detail their own ideas for possible regional investment projects.”
The UNCTAD accomplished this purpose by presenting a wealth of readily available data in a well-structured format. The subjects and subparts of the UNCTAD’s study widely range from: the old and new history of the Silk Road, political and economic development, market size and access, the global financial crisis, the business environment, economic performance and structure, trade and trade agreements, legal and regulatory framework for business, foreign direct investment and investment climate, key investment sectors, finance and taxation, capital markets, special economic zones (SEZs), infrastructure issues and demographic economics.

For those who are unfamiliar with the Silk Road countries and seeking information regarding finance and investments in the Silk Road countries, the UNCTAD study will be a wealth of information. This is because the Silk Road countries have been relatively isolated regions of polities and economies, though containing an abundance of natural resources such as oil, natural gas and minerals. As for trade and trade-related issues, the study is equally invaluable. This is because of the five Silk Road countries only two countries – Kyrgyzstan (1998 accession) and China (2001 accession) – are members of World Trade Organization (WTO). All this enhances the importance of garnering an understanding of a broad spectrum of trade-related issues such as the investment climate, financial structures and, especially, legal and regulatory frameworks.

For instance, excerpts from the UNCTAD’s Investment Guide to the Silk Road (2009), at pages 9-14, read as follows.
2. Structure of economies
The Central Asian economies are based largely on services, with that sector accounting for 43–55 per cent of GDP in all four countries (see Figure 5). The agricultural sector is still substantial at around 32 per cent of GDP in Kyrgyzstan and 22-24 percent in Tajikistan and Uzbekistan, but Kazakhstan’s figure of around 6 per cent shows the different economic structures in the region. The sectoral compositions of the four Chinese Silk Road provinces’ economies are remarkably similar, despite variations in their sizes and core industries. . . .
3. Trade
Trade was the foundation of the historical Silk Road and it is still important to the region. However, modern boundaries have complicated the flow of goods across the Silk Road because of the border customs inspections, tariffs, trade documentation, vehicle inspections, visas and other requirements. Many of these issues are being addressed by the World Trade Organization (WTO) to facilitate global trade. . . .
As for the Central Asian countries and their levels of intra-Silk Road trade, the composition of intraregional trade as a percentage of total imports and exports rose gradually between 1999 and 2005. . . .
To put this into a comparative perspective of how intraregional trade within the Silk Road stacks up against various formalized regional cooperation arrangements that have some form of a free trade agreement amongst the members, Table 5 displays the results of intraregional trade in the European Union (EU), the North American Free Trade Agreement (NAFTA), the Association of South-East Asian Nations (ASEAN) and others. . . .
4. Trade arrangements
The Silk Road countries do not have a regional free trade agreement, but they have several bilateral trade agreements (BTAs) with each other that is gradually developing into a trade network for the region. The Commonwealth of Independent States (CIS), which includes the Central Asian countries, have signed or implemented several BTAs with each other, and China is vigorously pursuing BTAs as well.
Table 11 shows the BTAs between the. . . .
5. Legal and regulatory framework for business
The Central Asian countries have made progress with numerous legal reforms since the early 1990s, such as new commercial legislation, but the implementation and enforcement of the legal and regulatory frameworks and the governing institutions upholding them have not always kept pace. Bureaucratic red tape for businesses has been reduced and continues to be addressed through regional trade facilitation programmes, bilateral agreements and unilateral simplification of procedures, but obstacles and delays are still common and increase transaction costs for firms. Gradual improvements are being made in areas such as investor protection and corporate governance standards, and in company, securities and bankruptcy laws, but as a whole Central Asia does not measure up to the standards of the new member of the European Union or the Baltic States. The Chinese Silk Road provinces are also making adjustments in response to the new economic realities in the global marketplace. Presently, their business legal and regulatory frameworks, along with the local government institutions implementing them, are not as ready for the requirements of international business as are China’s eastern provinces. The Silk Road provincial and autonomous regional Governments are introducing local economic policies and regulations that are in line with national economic reforms, Beijing’s “Great Western Development Strategy” (2000), its “Go West” campaign, and other western development plans and policies.
One of the key problems in much of the Silk Road is the implementation and enforcement of laws. . . .
Source: Investment Guide to the Silk Road [PDF, 78 Pages, 3616Kb]; Also 丝绸之路投资指南 is available in: Chinese.  

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.

Uzebekistan and Human Rights: Узбекистан: Фотографа Умиду Ахмедову обвиняют в клевете - Фергана.Ру / Uzbekistan: Photographer Umida Akhmedov accused of libel

This is an excerpt from the origin of an earlier blog that was posted at M. Ulric Killion’s space on December 25, 2009. It is a compelling story of a struggle for human rights in Uzebekistan that directly links to the pending criminal charges against the photographer Umida Akmedova. Her alleged crime, as a documentary photographer, is supposedly taking documentary photographs of the people of Uzebekistan. A sampling of her photographs are reproduced in both blogs. The case of Unida Akhedova deserves our attention. The articles also suggest how Umida Akemdova can be supported in this cause. The articles are now posted at this website in excerpts from both the translated-English version and its original language version.

— M. Ulric Killion

17.12.2009, Фергана.Ру [The Ferghana.ru]--

Как стало известно «Фергане.Ру», в Узбекистане в отношении известного ташкентского фотографа-документалиста и кинооператора Умиды Ахмедовой возбуждено уголовное дело по статьям 139 («Клевета») и 140 («Оскорбление»), максимальное наказание по которым предусматривает исправительные работы от двух до трех лет или арест до шести месяцев.

[As the "Fergane.Ru" reported in Uzbekistan, in Tashkent, on the famous documentary photographer and photographer Umida Akhmedova, she is being prosecuted under Articles 139 (slander) and 140 ( "Insult"), the maximum penalty for which includes remedial work of up to two up to three years or detention for up to six months. (Translation added by M. Ulric Killion)].

По словам Умиды Ахмедовой, следователь Мирабадского РОВД города Ташкента капитан Нодир Ахмаджанов сообщил ей, что по инициативе Узбекского агентства по печати и информации против авторов, сотрудничавших с «Гендерной Программой Швейцарского посольства» в создании ряда книг и фильмов, в том числе и против самой Умиды Ахмедовой, возбуждено уголовное дело по факту клеветы и оскорбления узбекского народа. Непосредственно Ахмедовой вменяют в вину выпуск фотоальбома «Женщины и мужчины: от рассвета до заката», изданного в 2007 году при поддержке «Гендерной Программы Посольства Швейцарии». Альбом состоит из 110 фотографий, отражающих различные бытовые аспекты жизни людей в Узбекистане.

[According to Umida Akhmedova, investigator Mirabad Tashkent and city police department captain Nodir Akhmadzhan told her that on the initiative of the Uzbek Agency for Press and Information against the authors, who had collaborated with the Gender Program of the Swiss Embassy in the creation of a number of books and films, including against mostly Umida Akhmedov, they filed criminal charges of slander and insult of the Uzbek people. Immediately, Akhmedova blamed the released album, "Women and men: from dawn to dusk”, which was published in 2007 with the support of the Gender Program of the Embassy of Switzerland. The Album consists of 110 photographs depicting different aspects of everyday life in Uzbekistan. (Translation added by M. Ulric Killion)].    

Следователь объяснил Умиде Ахмедовой, что дело против нее открыто на основании заключения неких экспертов из Ташкентской городской прокуратуры, признавших фотоальбом «оскорблением и клеветой на узбекский народ». В то же время совершенно непонятно, как документальная фотография (не фотомонтаж, не инсценировка) может быть «оскорблением» и «клеветой». Неясно также, кто и когда уполномочил государственную структуру – Узбекское агентство по печати и информации - отстаивать якобы поруганную честь узбекского народа.

Умида Ахмедова рассказала, что в первый раз ее вызвали в милицию 17 ноября. Капитан Нодир Ахмаджанов по телефону пригласил ее в Мирабадский РОВД для дачи свидетельских показаний по поводу выхода ее фотоальбома «Женщины и мужчины: от рассвета до заката». В течение двух часов следователь задавал вопросы, касающиеся участия Ахмедовой в издании фотоальбома, а также съемок фильмов «Мужчины и женщины: в обрядах и ритуалах» и «Бремя девственности».

Умида Ахмедова. Фото «Фергана.Ру»/ [Umida Akhmedova» Photo "Ferghana.Ru" ]. «Он даже не знает, что такое «этнография», - сообщила «Фергане.Ру» Умида Ахмедова. – «Я ему сказала, что занимаюсь «этнографией». Он спрашивает: «А что это такое?» Я говорю: «В своем творчестве я в основном интересуюсь жизнью народа с этнографической точки зрения. Снимаю народные обряды, традиции, свадьбы. В чем тут клевета?». Вопрос остался без ответа».

He asks: "What is it?" I said: "In my work I mainly interested in the life of people with an ethnographic perspective. Снимаю народные обряды, традиции, свадьбы. Rent folk rituals, traditions, weddings. В чем тут клевета?». What is the slander? ". Вопрос остался без ответа». The question remained unanswered.

Следующий разговор с капитаном милиции Нодиром Ахмаджановым состоялся 16 декабря. Следователь заявил, что, так как Умида Ахмедова является автором фотоальбома, то переводится из разряда свидетелей в разряд подозреваемых, после чего велел ей искать адвоката.

Справка. Умида Ахмедова родилась в городе Паркенте Ташкентской области Узбекистана. В 1986 году закончила кинооператорский факультет Всесоюзного Государственного Института Кинематографии (ВГИК) в Москве, став первой женщиной-кинооператором в Узбекистане. В качестве оператора-постановщика сняла не менее десятка фильмов. К середине 1990-х годов занялась исключительно фотографией. В 2003-2005 годах в Тбилиси состоялись ее персональные фотовыставки в рамках Международной Конференции «Гендер и СМИ». В 2004 году У.Ахмедова получила Гран При в номинации «Современная фотография Центральной Азии» на конкурсе Интер-Пресс-Фото России. В 2006 году прошла ее персональная фотовыставка в Копенгагене. Участвовала в создании документальных фильмов «Мужчина и женщина в обрядах и ритуалах» и «Бремя девственности»; последний был воспринят крайне неоднозначно и вызвал большой шум в Узбекистане.

Ниже – несколько снимков Умиды Ахмедовой, любезно предоставленных для воспроизведения на «Фергане.Ру» автором./ [Below - a few shots by Umida Akhmedova.] . . .

>>more here:

Friday, December 25, 2009

Post-Global Financial Crisis: The Measure of a "Beijing Consensus"

by M. Ulric Killion 
Commencing with the 1992 southern tour, Deng Xiaoping became  officially recognized  as “The chief architect of China’s economic reforms and China’s socialist modernization.” This is the famous billboard of Deng in Shenzhen, one of the most successful Special Economic Zones created under his leadership; Photo by M. Ulric Killion. 

China’s seemingly quick recovery from the US sub-prime mortgage crisis, or post-global financial crisis, is amazing to some, the envy of others. In the midst of the post-global financial crisis, though China admits that its economy still needs tweaking (China Daily, 2009), on Dec. 2, 2009 (Xinhua), Yao Jingyuan, chief economist with the National Bureau of Statistics, announced, “China will, without any doubt, be able to achieve the 8 percent growth in gross domestic product (GDP) this year.” This has also led to conjectures by many of the consequence of China's economic resilience, especially as other (both developing and developed) countries still appear caught in the fangs and claws of a global financial crisis.

Then there are those who would lend superlatives to describe China's recovery. Such as Martin Jacques, who titled his recent book When China Rules the World. Seth Faison (2009) wrote a book review of Jacques’s book. While noting that Jacques presented “a compelling and thought-provoking analysis of global trends that defies the common Western assumption”, he still opines that Jacques “stumbles badly when trying to describe what a new Chinese-led international order might look like.” Although Faison generally perceives that any “books about the future never get it right”, the critical issue of what China presents to a western world may need additional clarification, or simply, a new measure.

In the context of China, there are the issues of whether there is still a western consensus such as the American consensus or Washington consensus, and even whether there is Beijing consensus. There is also the forward-looking issue of whether there are new evolving forms of modern political economy. All of which will prospectively affect all models of development. Such as what Shaun Rein (2009) characterized as The New Post-Lehman Capitalist World.

As for the Washington consensus, it is a concept that many attribute to the British economist John Williamson, though there has always been disagreement about the existence of such a consensus. Then there those who earlier prescribed to the consensus that now declare the consensus as dead. For instance, at the 2009-G20 summit in London, British Prime Minister Gordon Brown did declare the consensus as dead. For Williamson the Washington consensus is still alive so long as there is a successful disassociation from the neo-liberal development model. During his interview or conversation, Williamson actually employed the words “a neoliberal tract” (Washington Post, 2009).

Generally, “an American consensus or Washington consensus that assumes adjusting firms, governments, employees, farmers, and citizens serve the greater good in general to the exigencies of competition within increasingly deregulated and global markets. The American consensus or Washington consensus refers to the policies of neo-liberal economists, which are, essentially, policies for promoting economic growth in Latin American countries and other countries, by promoting free market oriented economic reforms” (Killion, 2007).

Then there is the issue of a Beijing consensus, though also a subject of controversy. An emerging Beijing consensus, as Barry Sautman (Hong Kong University of Science and Technology) explained, “takes seriously some aspirations of developing states often ignored or opposed by the West,” such as “a more equitable international distribution of wealth and power” (Cha, 2009). The problem from a western perspective, however, is that what many describe as a Beijing consensus associates with China's creative international finance methods; i.e., loans to developing, least-developed (LDCs) and third world countries.

For instance, an early perception that China was employing international finance as a tool of international diplomacy so alarmed a western world that, in September 2006, a statement from the G-7 group and a US Treasury report warned China against overloading developing and least-developed African countries, and other developing countries, with “high-priced loans” they cannot avoid to pay. The US Treasury report described loans to African countries such as Ghana, Mozambique and Sudan as opportunistic loans (China Reform Monitor, 2006). It is perhaps a matter of a Beijing-form of creative international financing as opposed to a familiar Washington-form of capitalism.

A problem for both an American or Washington consensus and a China or Beijing consensus is that neither a Washington nor Beijing consensus seems subject to definitive substantiation, thereby still leaving us with controversial topics. Contrary to the beliefs of many, it is difficult to verify the existence of a Beijing consensus. There is not even an accord on the idea of a distinctive “China Model” of development. For instance, in 2009, the Study Times, which is a newspaper run by the Party School of the Central Committee of CPC, to the surprise of many published four articles that directly address the issue of a “China Model”. All the articles conclude for various reasons that the “China Model is not a good saying” (China Daily, 2009).

Additionally, assuming a Beijing consensus is opportunistic or even mercantilist (a term [mercantile] that the physiocrat or economiste Marquis de Mirabeau coined, (Cole, 1965)), it would hardly be distinguishable from a Washington consensus. This is because both forms of consensus, ultimately, intend to influence state or organizational behavior and models of development, though the methods, goals, policies and inherent ideological meanings are distinguishable.

The contrasting ideological meanings, admittedly, present a problem. This is because the issue of how socialist or capitalist “they” are becomes an issue of how socialist or capitalist “we” are, and vice versa. In a post-global financial crisis world, there are no pristine models of either socialism or capitalism and other adjectives intending to describe the polities and economies of the world. But then again, this was a truism that held true as early as the beginning of the twentieth century. For example, even what Williamson characterized as “a neoliberal tract” evidences an earlier evolutionary change in capitalism, notwithstanding other earlier evolutionary changes (i.e., the marginal revolution, Keyesianism, etc.).

Moreover, it is critical to understand that in the twentieth century the classical model of capitalism experiences an evolution (i.e., Darwinism). This is because capitalism evolves from its earlier origins, such as that of Weber’s rational bourgeois capitalism or Adam Smith’s modern capitalism. The evolution did not commence (e.g., 18th-century France, Pierre-Francois Tubeuf and proto-industrialization, (Lewis, 1994) and then end with the advent of the nineteenth century-form of capitalism, which many also hail as modern capitalism. In terms of a historiography of modern capitalism (the 20th-century form), capitalism actually continued to evolve into new and different forms.

As many now recognize, especially those economists who remain proponents of the varieties of capitalism theory, modern capitalism (commencing in the 20th-century) defies description of being a model in the singular sense. For instance, Michel Albert (1998) described the development of two competing models of capitalism or, borrowing from the title of his book, Capitalisme contre capitalisme or capitalism against capitalism. This is attributable to the ending of the Cold War, which produces an Anglo-Saxon model of capitalism (i.e., short-term profit, shareholders, etc.) and a Rhine model (i.e., long-term interest, capital-labor linkage, etc.). Additionally, there are scholars (e.g., Ronald Dore, William Lazonick, Mary O'Sullivan, Meng Jie and others) that have explored and continue to explore varieties of capitalism or the varieties of capitalism theory.

If ever there was moment in time ripe for the crystallization of new thoughts and new forms, it is in the wake of the present global financial crisis. Thus, it seems not only reasonable but also genuinely conceivable that new forms will inevitably emerge from the forces of nature and society. The unpristine ideals of socialism and capitalism and their variety will sway to the evolutionary forces of nature and society. This is because the present forms and shapes of socialism and capitalism hardly represent a beginning, middle and ending for the evolution of new thoughts and new forms. At the end of the day, or post-global financial crisis, these emerging forms will reshape all models of polities and economies of the world, and their attendant old and new concepts and approaches to development, including what hails as a Beijing consensus.

All of this demonstrates the growing irrelevance of issues such as a Washington or Beijing consensus, notwithstanding that neither a Washington nor a Beijing consensus is subject to substantiation as existing in reality. Moreover, as earlier mentioned, in the post-subprime crisis world, it is reasonable to suspect that capitalism, or modern capitalism, will experience further evolutionary changes. As Shaun Rein observed, “In fact, if anything, capitalism is at its strongest right now, with hungry and hardened executives emerging from the panic to guide their companies into a new world. We are in a very Darwinian period, with the smartest and the cash-rich, like Kraft, scooping up assets on the cheap, while the weak and overleveraged, like Linens 'n Things, collapse. This is capitalism at work.”

In the end, in a new world, which Rein described as The New Post-Lehman Capitalist World, old and new concepts and approaches to development, including what hails as a Washington consensus or Beijing consensus, by reason of the necessity of survival, will experience the influence of changes necessary in a post-global financial crisis world. In other words, assuming there is a Washington or Beijing consensus, in a post-global financial crisis world, they now present dual or competing consensus that grow increasingly irrelevant. A so-called Washington or Beijing consensus, admittedly, could garner relevance in the post-global financial crisis era. However, it is relevance necessarily contingent on change or adaptation to the new era, and prospectively, a new model or models of capitalism (e.g., in the post-Cold War era, the World Bank has been attempting to do so by a more pragmatic approach to development or a more pragmatic neo-liberalism, (Killion, 2007)).

He Fan, Economy needs some tweaking, China Daily, Dec. 21, 2009.
China’s 8% economic growth goal achievable: economist, Xinhua, Dec. 7, 2009.
Martin Jacques, When China Rules the World (2009).
Seth Faison, Book review: ‘When China Rules the World’ by Martin Jacques, Washington Post, Dec. 20, 2009.
Shaun Rein, The New Post-Lehman Capitalist World, Forbes, Sept. 15, 2009.
John Williamson Conversation, Washington Post, April 12, 2009.
Ulric Killion, Modern Chinese Rules of Order (2007).
Ariana Eunjung Cha, The Beijing Consensus, Washington Post, April 23, 2009.
WSJ, China blasted for “opportunistic” African loans, China Reform Monitor No. 641, Oct. 2, 2006.
Senior officials and scholars challenge “China Model”, China Daily, Dec. 10, 2009.
Gwynne Lewis and Michael Ed. Lewis, The advent of modern capitalism in France, 1770-1840 (1994).
Charles Woolsey Cole, French mercantilism, 1683-1700 (1965).
Michel Albert, Capitalisme contre capitalisme, (1998).
Ronald Dore, William Lazonick and Mary O'Sullivan, Varieties of capitalism in the twentieth century, Vol. 15 Oxford Review of Economic Policy (1999).
Meng Jie, The hypothesis of economic man and Marxist economics, Social Science in China, Feb. 2008.

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.

Sunday, December 6, 2009

The Failed Chinese Acquisition of Unocal revisited: Issues of WTO Liberalization and future Sino-US Trade

by M. Ulric Killion 

CNOOC's chairman, Fu Chengyu, left, and its executive director, Zhou Shouwei, spoke in March [2005] after the company reported a surge in profit; Photo/Vincent Yu/AP (Heather Timmons, China Oil Giant Expected to Vote Wednesday on Unocal Bid, NY Times, June 22, 2005). In August 2005, Chairman Fu eventually made it official: “after fencing with Chevron, the U.S.-based ‘super major’ oil company, for the right to buy Unocal and its extensive oil and gas assets in Asia, CNOOC was giving up the fight,”  (Bill Powell, Sunset for a Deal, NY Times, August 2005).

There is an article appearing in the China Daily (Dec. 4, 2009), which serves as a reminder of the struggles of Chinese investments in foreign markets, especially the U.S. market. The article is from a column written by Chen Weihua and is titled “Hard journey for Chinese investment in US” (China Daily, Dec. 4, 2009). Chen writes:
"Many Chinese companies have been cashing in on a weak US dollar and stepping up their presence in the US mergers and acquisition (M&A)market in fields ranging from automobiles and oilfields to real estate. The path of snatching up inexpensive assets and operating them successfully is expected to be rocky, yet ultimately rewarding.

Karl Sauvant, executive director of Vale Columbia Center on Sustainable International Investment, a joint center of the Columbia Law School and the Columbia University Earth Institute, as well as several other experts in the field are trying to advise Chinese firms how to cut down on tuition fees in their expansion into the US.

With foreign currency reserves of $2.3 trillion and still rising by at least $200 billion a year, and a current account surplus, China can afford large investments overseas. But while it is a good time to buy inexpensive assets in the US, it is good only if it fits into the overall strategy of the Chinese company. It is believed that 80-90 percent of M&A activity from China is conducted by State-owned enterprises (SOEs), which has led to suspicions in the US that there are motives beyond normal commercial concerns, such as being part of the country's foreign or defense policy.

The Committee on Foreign Investment in the United States, a governmental agency that reviews national security implications of foreign investment, is required to screen every M&A case by a foreign state-owned enterprise, whether it's from China or France. And behind closed doors, screening of projects from China's SOEs might be stricter since many in the US still regard China as an adversary or strategic competitor on many levels.

Still, experts say they believe the US and Europe welcome FDI, and are more open in admitting FDI than China, already the largest FDI recipient among developing countries, including $60 billion from the US in the last three decades.

Before embarking on global expansion, Chinese companies are advised to prepare carefully, especially if it's in a sensitive industry. Sauvant, who also serves on the China International Investment Council under the Ministry of Commerce, attributed the failed acquisition of Unocal by China's CNOOC two years ago to a lack of preparation, such as not knowing how to navigate through the political corridors in Washington DC. [Italics added].

Preparation should also include human resource personnel who know how to make the M&A work in the US. A key to success for Chinese companies is clearly to blend in by helping the local economy and society and becoming a good corporate citizen.

Experts believe that China can learn much from Japan's experience in the 1980s. Studies show that inbound FDI form China in the US today displays a striking similarity to Japanese investment 20 years ago.

Even though Japan was an ally of the United States, investment from the country was criticized harshly by the news media, the public and politicians in the early 1980s for their employment practices and aggressive buying of some landmark assets such as the Rockefeller Center in New York. However, the Japanese learned quickly to adapt and thrive by improving their labor practice and contributing to community development. Today, Japan remains a major source of FDI in the US and Japanese affiliated companies employ some 600,000 US workers. And no one is picking on Japanese FDI like in the 1980s.

Sauvant, who has been editing the book Investing in the United States: Is the US Ready for FDI from China which will come off the press early next year, believes the challenge for Chinese firms will be greater, considering the suspicion toward Chinese firms as well as the bilateral trade deficit, currency dispute and rows over intellectual property rights.

Chinese firms are advised to carefully avoid any operational malpractices that would worsen the negative impressions of Chinese products and corporate conduct. Despite the rocky roads ahead, experts believe that Chinese investment will be finally accepted in the US just like the Japanese FDI two decades ago."
The portion of Chen Weihua’s article, which seems appropriate to italicize or emphasize in this short writing, addresses the August 2, 2005 announcement of the China National Offshore Oil Corporation (CNOOC) to withdraw its bid to purchase California-based Unocal. Before CNOOC’s announcement, on July 20, 2009, the Unocal Board recommended that its shareholders accept the bid by Chevron. The justification for accepting Chevron’s bid is that the bid submitted by CNOOC was not high enough to offset political uncertainties that associate with the purpose (Institutional Shareholders Services Statement, Aug. 1, 2005). The later justification for a failed acquisition may appear spurious to some, but rational to others.

The reason for emphasizing this portion of Chen’s article should now become obvious. This is because the article reminds us of the historical significance of the attempted acquisition by CNOOC. Such as the issues of free and fair trade; old forms and the seemingly evolving new forms of creative protectionism; the acquisition of foreign assets that may be characterizable as strategic; the geopolitics of oil; and of the struggles of China and/or Chinese enterprises in acquiring or investing in foreign assets, especially in the context of the U.S. market.

The attempt at acquisition by CNOOC, admittedly, was not the first instance of China and/or a Chinese enterprise attempting to purchase a U.S. firm or U.S. assets. For instance, in December 2004, China’s Lenovo Group purchased IBM’s PC unit. In the context of a U.S. market, China’s acquisition efforts actually commence as early as 2002. This earlier effort commences, in 2002, when the China Netcom Communications Group purchases the Asian subsidiary of Global Crossing. Notwithstanding the failed acquisition of California-based Unocal, this was also not China’s first foray into the geopolitics of oil. This is because, in 2005, CNOOC did manage to purchase a 17 percent interest in MEG Energy in Canada. During the same period, in 2005, China’s Sinopec also purchased a 40 percent stake in the Canadian oil sands project.

In terms of the political environment of a U.S. market, what follows was a predictable response to the CNOOC’s attempt to purchase Unocal. A U.S. congressional response actually ensues immediately following the submission of a bid by CNOOC, as there was a stir in the halls of congress as early as June 25, 2005. In other words, once the U.S. Congress caught wind of the proposed and potential acquisition by a Chinese firm, some members of the U.S. Congress immediately geared up to take legislative action. Peggy J. Crawford, PhD, and Terry Young, PhD, (Fair Trade or Strategic Concern: The Unocal War, Garziadio Business Report, Vol. 11, Iss. 3 (2005)), summarizes the U.S. congressional response as follows:
“. . . 41 members of Congress sent a letter to Secretary of the Treasury John Snow asking the Committee on Foreign Investments in the United States to “perform a thorough review” of the offer to determine whether CNOOC was using government funds or purchasing sensitive technology. The House of Representatives passed two bills in late June that would block the proposed takeover because it “could threaten to impair the national security of the United States.” Then during hearings on July 13, 2005, Rep. Duncan Hunter (R-Ca.), chairman of the House Armed Services Committee, said that Chinese ownership of Unocal would compromise U.S. national security and that he would try to stop the acquisition if Unocal shareholders or President Bush didn’t. Other witnesses at the hearing, including former CIA Director James Woolsey and Frank Gaffney, president of the Center for Security Policy, emphasized the strategic value of oil and the failure of China to follow international economic rules”. (Internal citations omitted).
As earlier mentioned, the attempt by CNOOC to purchase Unocal serves as a historical lesson and reminder of the roads that both China and the United States have taken into the foray of the world multilateral trade system. The date of CNOOC’s attempt to purchase Unocal, which is in 2005, also corresponds with China’s subsequent accession to the World Trade Organization (WTO).

In the aftermath, as we approach the year 2010, China has admittedly engaged in the global market, while both China and the United States seemingly employ both old and new (or creative) forms of protectionism (e.g., Buy American legislation; Buy China provisions; evolving forms of AD/CVDs, etc). The later is a truism that seems applicable to all members of the WTO.

In these respects, and borrowing from the title of Chen’s article, it is true that there is a “hard journey for Chinese investments in the US.” However, is it not likewise true that there is an arduous journey for American investments in Mainland China? Notwithstanding there are successful American investments in Mainland China, it is still a difficult journey. Both countries present their own distinctive variety of protectionism against foreign acquisition, especially in the market of key industries, geopolitics of oil or strategic assets. The difficulties of foreign investments on both sides of the Trans-pacific share equal blame. Moreover, it is problem that will persist so long as countries continue to employ old and new forms of protectionism, notwithstanding countries truly embracing the ideals and aspirations embodied in the WTO agreement.

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.