US stimulus bill termed as 'protectionist'

Martin Khor

President Barack Obama had just signed a US$787 billion fiscal stimulus package passed on to him by the US Congress. It was hailed in the United States as Obama's first big legislative victory and a bold step to get the American economy out of recession.
   But outside the United States, the stimulus bill was not so popular because it contains a protectionist section which stipulates that only US-made steel and manufactured products can be used in government projects funded by the stimulus package.
   The protectionist clause especially affects developing countries, since most developed countries are to a large extent exempted from this buy-American condition. The bill stipulates that none of the funds appropriated may be used for public works projects "unless all of the iron, steel and manufactured goods used in the project are produced in the United States."
   China's state-owned Xinhua news agency attacked the "buy American" clause in a commentary entitled: "Protectionism a poison to financial crisis solutions." It said "history and economics have told us, facing a global financial crisis, trade protectionism is not a solution, but a poison to the solution."
   China's Commerce Ministry spokesman said it was deeply concerned over trade protectionist measures some countries were adopting in the face of the economic crisis.
   "Some countries raised clauses to prioritise the purchase of products of their own countries in their economic stimulus packages," said Yao Jian.
   "We express deep concern about these measures."
   In contrast to the US move, China had avoided "buy China" protectionist measures in its own multi-billion-dollar stimulus effort. Deputy Commerce Minister Jiang Zengwei said in early this month that "China would treat domestic and foreign goods equally so long as we need them."
   World Bank President Robert Zoellick, attending a G7 finance ministers' meeting in Rome, told journalists that "the 'buy American' provision is very dangerous".
   The response from developed countries was muted. When a draft of the bill containing the "buy American" clause was made known a few weeks ago, it led to protests from political leaders in Europe and Canada.
   Obama then promised that the bill would be amended to avoid protectionism. The final bill adds this line: "This section shall be applied in a manner consistent with US obligations under international agreements." This is taken to mean that the buy American principle would not be implemented if it violates the obligations the US has undertaken under the World Trade Organisation and bilateral free trade agreements.
   This is cold comfort to most developing countries because WTO multilateral rules do not forbid a country from having buy-local measures in government projects. The WTO does, however, have 'an agreement of plurality' on government procurement (GPA), under which members agree to open up their procurement business to other members of the agreement through a schedule listing the sectors offered and the extent offered.
   There are currently 39 members in the GPA, and most of them are developed countries. Only three developing country members of the WTO - Singapore, South Korea and Hong Kong (China) - are members of the GPA.
   Under the stimulus bill, the United States is to meet its obligations under the GPA by continuing to open the business in its public-sector projects and expenditure to the other GPA members in line with what it has offered under the GPA.
   It is also to keep open its offers contained in the procurement chapter of the free trade agreements it has signed. Only a few developing countries have signed FTAs with the United States.
   The clause that the buy American condition in the stimulus package will be applied in a manner consistent with US obligations under international agreements seems to have placated the other developed countries since their companies' market access in the GPA and FTAs will be maintained.
   The bill also enables least developed countries to have access. However, these poor countries generally lack the supply capacity to take advantage of this.
   The larger developing countries such as China, India or Brazil that are more equipped to benefit from the stimulus package are the ones that may be affected by the buy American clause. This may explain why the Xinhua opinion article described the protectionist measure as "poison", especially since Chinese officials said China did not have a buy-local clause in its own fiscal stimulus package.
   The Xinhua commentary said: "There is no doubt that the re-emergence of trade protectionism will not only stimulate trade disputes, cause an impact on the international trade system, but also exacerbate poverty in the world and give rise to more tragedies ... Trade protectionism will only deepen and prolong the crisis."
   -Third World Network Features

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Bangladesh should get transit to Pakistan, China via India

Muhammad Afsar Ali Farajee

Bangladesh is a very small country having population of 150 million. Though Bangladesh is a poor country yet her physical position is of great importance for many big powers and India. A great debate is going on about the question of providing transit/corridor to India through Bangladesh. The nation is already divided on many issue like whether we are Bangalee or Bangladeshi, trial of Bangladeshi war criminals without trial of Pakistani war criminals, question of spirit of Liberation War and other problems.
   I was a principal and lecturer of political science of non-govt Degree College for more than three decades; but I always consider myself to be a student and an observer of different current affairs of Bangladesh and the world. As a citizen my comments are as follows:
   The nation should know the difference between transit and corridor. Trade between Nepal and Bangladesh crossing India or between Bhutan and Bangladesh is called transit.
   Trade between western portion of India with eastern seven sisters of India using the territory of Bangladesh is never transit but corridor. India is demanding not transit but corridor.
   All people are not fools: There may be a group of people of our country who may be fools but all people of Bangladesh are never fools and it is the legal and moral duty of the present Awami League Govt. to disclose total proposal of India in the Jatio Sangsad. The Govt. must also publish a whitepaper very soon. Moha Jote or Mega Alliance led by Sheikh Hasina may have vast majority in the Sangsad but they are not the owners of Bangladesh. We the common people are the actual owners. People will not tolerate any treaty with India or any other country if our very sovereignty and independence are threatened.
   The foreign policy of Bangladesh versus the foreign policy of India: Our foreign policy is fully based on the principle of "friendship to all and malice to none"; but in the foreign policy of India there is always a big brotherly attitude. The Govt. should be aware of it.
   There are some outstanding irritats between India and Bangladesh which need just, amicable and peaceful solution. These are noted below:
   Barbed wire fencing in the border: Electrified barbed wire fencing on the India Bangladesh border is never a solution to smuggling, trans-border trafficking, illegal trade and trespassing. So our Govt. and India have to stop all these practice.
   Exchange of enclaves: As per Mujib-Indira Treaty of 1974, exchange of enclaves between India and Bangladesh is a must but the treaty has not yet been implemented. The matter should be expedited as the exchange of enclaves is of great importance to Bangladesh.
   Sovereignty over Tin-Bigha corridor: Pakistan was fully sovereign over Tin-Bigha till 1971; as per the above treaty India is supposed to restore sovereignty to Bangladesh. But that has not been implemented.
   Demarcation of maritime boundary: There should be just, amicable and judicious solution to maritime boundary between India and Bangladesh through UN or international arbitration.
   Sovereignty over South Talpatty: This is a Bangladesh territory so India should disclaim it. Bangladesh may refer the issue to the UN.
   Killing by BSF: India has killed several hundred Bangladeshi innocent civilians. This practice must be stopped by India.
   Destruction of infrastructure: railway, Road, port and such other infrastructure should be counted.
   National security and sovereignty: National security and sovereignty must be counted by Bangladesh
   Tradability: Tradability of Bangladesh with India should be minimized.
   Demand of Bangladesh goods Indian sever sisters: Bangladesh may incurr loss to these areas
   Transit/corridor is a trump card: Bangladesh should demand Transit via India with Pakistan and China and vice versa. Bangladesh should take proper action for it.
   The writer is an advocate based at Kaunia, Rangpur.

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Holiday Report

Bangladesh Supermarket Owners Association in its 2nd annual general meeting demanded of the government to recognize the supermarket retail business as a service sector since it provides services to consumers with convenience, quality product, health and hygienic environment and the value addition for the customers.
   The president of Bangladesh Supermarket Owner's Association, Niaz Rahim said that the supermarket was contributing to over all development of the agricultural sector through supporting farming and encouraging entrepreneurship in other sector too creating job opportunities for the skilled and unskilled manpower.
   Moreover, the supermarkets are generating internal revenue and contributing to national development.
   Among others Secretary General of the Organization Zakir Hossain, Treasurer Kazi Enam Ahmed, Vice President Group Cap (Retd.) Solimullah, Joint Secretary Shafiqul Alam Jewel and member Alhaj Rezaul Kabir Saju also spoke on the occasion.

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ADB REDUCES GROWTH TO SIX PER CENT

Dhaka attains steady economic progress

Holiday Report

The global financial crisis is yet to significantly affect Bangladesh. However, economic performance in the July-September had held up reasonably well with steady progress in domestic economic activity and satisfactory growth in exports and remittances.
   According to ADB's quarterly economic updates released earlier this week, growth in Bangladesh ready-made garment production, together with improved business confidence and recovery in housing and construction, stimulated industrial activity. Services, especially wholesale and retail trade and transport and telecommunications, also performed well.
   In the October-December quarter, export growth decelerated affecting the export-based industrial production, and remittances growth also moderated. The agriculture sector nonetheless looked poised for robust growth, aided by favourable weather conditions and proactive policy support from the Government.
   Before the onset of the global financial crisis, a 6.5% growth target for FY2009 appeared attainable. With the financial crisis in the advanced economies unfolding and recession appearing to last longer than earlier anticipated, a growth rate in the range of 5.5%-6.0% seems more likely in FY2009.
   In the first half of the current financial year, climate conditions remained favourable and strong government support was reaffirmed for boosting agriculture sector growth. As a result, agriculture sector is expected to attain the target growth rate of 4.0%, up from the actual growth of 3.6% last year. Production of rice and wheat for FY2009 is targeted at 34.3 million tons (rice, 33.3 million tons and wheat, I million tons), a 15.1% rise from actual production in FY2008. Bumper harvests of aman (monsoon) rice, maize, wheat, and potato in FY2009 have already been reported.
   Favourable outlook is maintained also for the upcoming boro (dry season) rice crops because of good weather conditions together with strong support from the Government to ensure availability of key agricultural inputs. The prospects for output of various non-crop sub-sectors of agriculture also appear bright. The fishery sub-sector has performed well because of growing domestic demand.
   Meanwhile, exports declined (-1.4%) in the October-December of FY2009 implying slowdown in export-based industrial production. The country's export-based industry sector is likely to experience a slowdown in the coming months. Industrial growth is thus expected to be in the range of 6.6%-7.2% compared with 6.9% in FY2008 with production for exports continuing the slowing trends that became evident in the October-December of FY2009. The lack of gas supplies will also constrain power generation and new investment in manufacturing activities. To promote the industry sector, the prevailing shortages in power and gas supplies need to be urgently addressed, the ADB report suggested
   According to the ADB report, the inflation moved steadily downward as the October-December of FY2009 unfolded, sliding from 10.2% year-on-year in September to 6.0% in December. The rapid decline in international commodity prices and improved domestic food supplies are the main factors pushing inflation lower. The decline in food inflation (6.8% in December from 12.1% in September) was steeper than that for nonfood inflation (4.8% in December from 7.2% in September). The cut in the domestic administered price of oil in October and December 2008, after a rise in July, also helped to ease price pressures.
   ADB observes that government revenues are showing signs of deceleration, with the growth of revenue collections falling from 20.5% during July-September of FY2009 to 13.2% during July-December, over the corresponding periods of FY2008. Slower private sector activity, as the impact of the global economic slowdown takes hold, could further affect revenue collection.
   The report warns that a major challenge to the new government is to raise utilization rate of Annual Development Program (ADP). Both quantity and quality of ADP need to be stepped up by addressing capacity constraints and better interagency and aid coordination, so that infrastructure provision can support increased private investment and help address the country's development needs. Despite the recent rise in subsidy on fertilizer, the budget deficit is expected to be around 4.7%, within the budgeted level of 4.9%.

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