Thursday, July 26, 2007

Herbert Hoover Redux

The mills of the Internet grind slow but exceeding fine, and I am grateful to Professor Brad DeLong for discovering and excerpting my post, Herbert Hoover: Made in China , describing Hoover’s role in the alienation of the Kaiping coal fields, on his website on July 26, 2007, about a half year after I wrote it.

By coincidence, I had been intending to repost my pieces on Hoover in commemoration of his role in the summer movie blockbuster Transformers. I don’t think I am spoiling the film for serious cineastes by revealing that Herbert Hoover is depicted as the leader of the government/business consortium that covers up and exploits the capture of arch Decepticon Megatron in the early 20th century.

This evocation of Hoover’s powerful industrialist/financier/insider mojo is a welcome reminder that he was more of an implacable, relentless, and reflexively secretive Dick Cheney type than the hapless Elmer Fudd depicted by his post-Depression critics.

For interested readers, here are links to the two other Hoover-related posts I wrote at the same time.

Walter Liggett, Last of the Muckrakers , provides a history of the journalist who brought the story of Hoover’s role in the Kaiping affair before the American public in his 1930s biography, The Rise of Herbert Hoover. A well-known journalist and progressive in his time who was murdered for his crusade against crime and corruption in Minnesota, he was smeared as a blackmailer by Herbert Hoover’s supporters and virtually forgotten. That he is known to us today is a tribute to the indefatigable efforts of his daughter, Marda Woodbury, to document her father’s life and contributions and defend his reputation.

The Coolie Quagmire: Flogging, Sodomy, and Imperial Overreach on the Rand describes an early attempt to turn labor into a controlled, scientifically-managed global commodity to maximize the profitability of resource projects in distant corners of the world: the export 50,000 Chinese laborers to work in the South African gold fields in the 1900s. The project—for which Hoover’s China Mining and Engineering Corporation, owner of the Kaiping mines, organized the supply of coolies—was a disaster. How this system collapsed, as Chinese workers perversely refused to respond as expected to the array of positive and negative incentives designed to elicit submission and productivity, and helped bring down the Tory government at the same time, is one of the great cautionary tales of 20th century capitalism.

Friday, July 20, 2007

In Case Any More Proof Was Needed That Patriot Act Section 311 Are Politically-Motivated Nonsense...

...This Article Should Do the Trick

A propos the Patriot Act Section 311 investigation against Banco Delta Asia in Macau that caused so much heartburn for the Six Party Agreement, I described an apparent worldwide campaign of financial warfare against North Korea and wrote :

A general picture emerges.

The December 2005 Advisory [warning banks away from North Korea] appears to represent an overt politicization of Patriot Act Section 311 actions.Instead of targeting individual banks or jurisdictions for derelictions in their anti-money laundering controls, Treasury appeared to overstep its Patriot Act Section 311 mandate by telling banks overseas—in the absence of international or national sanctions or local enforcement actions—not to do business with any North Korean account holders or else suffer under the U.S. assumption that they are money laundering.

I’m speculating—and I don’t think I’m out of line here—that there were sticks brandished (i.e. threats of Patriot Act Section 311 actions).

Well, speculate no more. Reuters delivers a crate of smoking guns in its reporting on another hardliner bugbear—Cuba.

International banks shun Cuba under U.S. scrutiny

By Anthony Boadle

HAVANA (Reuters) - Heightened scrutiny of banking transactions by the United States since the September 11 attacks has led European and Canadian banks to curtail dealings with Cuba, bankers and businesses say.

The result -- perhaps intended -- is that Western businessmen in Havana are having nightmares moving funds in dollars to and from Cuba because banks are increasingly refusing their business.

HSBC , Barclays , Credit Suisse , Royal Bank of Canada and the Bank of Nova Scotia, also known as Scotiabank , have closed accounts of Cuban companies or reduced business tied to Cuba since last year to comply with U.S. regulations.


ING Groep NV , the first big Western bank to set up business in Communist Cuba, doing so in 1994, said two weeks ago that it will close its Havana office.

ING said it was purely a business decision, but it followed the blacklisting last year by the United States of its banking joint venture with Cuba.

"The banks don't want to risk a fine by the Federal Reserve. Banks like ING and HSBC have much bigger fish to fry than Cuba," said Simonato.

Scotiabank last year ended dollar transactions by the Cuban embassy in Jamaica and was criticized for bowing to U.S. rules.

The move to comply with U.S. regulations came in the wake of the heaviest penalty in banking history.

In 2004, Switzerland's largest bank, UBS AG , was fined an unprecedented $100 million by the U.S. Federal Reserve for helping Cuba, Iran, Libya and the former Yugoslavia swap old dollar banknotes for new currency.

UBS said it had "substantially completed" its exit from dealings with Cuba, Iran, North Korea, Myanmar, Sudan and Syria by the end of last year.

Shunned by Swiss banks, Cuba has had trouble funding its U.N mission in Geneva, a European diplomat in Havana said.

Last month, Cuba complained that UBS and Panama-based Banistmo, owned by HSBC, had refused to process the payment of its annual membership fee in the Latin American parliament.

The U.S. Securities and Exchange Commission last month posted a list of companies whose annual reports contain any references to Iran, Sudan, Syria, North Korea and Cuba.

The online tool is meant to allow investors to search for businesses with ties to state sponsors of terrorism. Companies on the list were outraged because it did not make clear what were their exact ties with the five countries.

"The Patriot Act gave U.S. authorities a tool to do what they could not do before: chase foreign banks to comply with U.S. sanctions," he said.

A note on that $100 million fine. Apparently it was related to the discovery of $650 million in brand-new US bills in one of Saddam’s stashes after the invasion—which he apparently acquired by dealing through Cuba, Libya, and the former Yugoslavia, who had got the greenbacks through UBS and traded them onward.

Presumably, Saddam was understandably nervous about his foreign bank accounts getting locked up by future UN action. So he cashed out.

Ironically, Saddam un-laundered his money, removing it from the world financial system and piling it in neat stacks in his hidey-hole to be discovered by the U.S. Army. So I’m not sure what laws were violated here.

Therefore, connoisseurs of due process will enjoy this, from the financial site Finextra :

Apparently, it is not a crime for non-US banks to trade US currency with these countries, even thought they were under sanctions, and so UBS employees had been doing this since the mid-1990's. And, just to be absolutely clear, UBS was not charged with any criminal matters as a result of the enquiries, but was given the hefty fine primarily to demonstrate the Federal Reserve's displeasure at its activities.

$100 million fine from Treasury for doing legal business outside U.S. jurisdiction. I’m sure UBS and the Swiss government were just thrilled.

There are two more interesting aspects to this report.

First, it confirms that Patriot Act Section 311—meant to perfect the international anti money-laundering system-- is being misapplied as an instrument of policy against regimes we don’t like.

Second, other governments may finally be getting fed up with their banks being puppets in Washington’s theater of pain and are starting to go public with their objections to a U.S. program of harassment that invades their sovereignty without any transparency, due process, or effective recourse in the pursuit of unilateral American objectives that they haven’t endorsed.

Cuba is a pretty obvious test case.

Nobody likes Kim Jung Il, and Europe may be willing if not eager to go along on Iran, Libya, and Syria to keep the lid on in the Middle East, but Cuba?

Cuba, the land of sugar, sex tourism, great medical care, and the clave?

The only country in the world that maintains an economic sanctions regime against Cuba is the U.S. of A.

And pretty much the only country that is serious about harassing Cuba is the United States, which has enlisted Poland, the Czech Republic, and Britain to block an effort led by Spain and supported by Italy and Germany to normalize relations.

Threatening to cripple European banks in the service of a U.S. policy directed more at Florida’s 27 electoral votes than any legitimate financial, foreign policy, or security goal is not going to be real...popular.

Will European objections make a difference?

These days it seems the riposte to any challenge to the Bush administration is a brisk display of the middle finger by our unpopular, back-against-the-wall prez.

It will be interesting to see if the Europeans go public with objections to the PA Section 311 campaign, or just hunker down for the next year and a half and hope for better days come 2009.

Thursday, July 19, 2007

Two Lost Years

History Gets Whacked by Lazy Time Magazine Stenography on North Korean “Soprano State”...

...But Lawrence Wilkerson Provides a Much Needed Corrective

With the shutdown of the reactor at Yongbyon, the Six Party agreement to denuclearize North Korea has lumbered into its next stage.

That means it’s time for all the hardliners who eagerly predicted the collapse of the agreement (and, indeed, may have worked actively to sabotage it by hindering the unfreezing of the North Korean accounts at Banco Delta Asia in Macau) to avoid unwelcome comparisons between their own counterproductive measures and the current success of the engagement policy.

Facts must be spun, failure must be obfuscated, reputations must be burnished and, I suppose, think tank sinecures must be defended until indifference and fading memory permit these indefatigable and unchastened screwups to return to positions of power within the U.S. foreign policy bureaucracy.

So it looks like it’s time once again for a complacent press will provide political cover to anxious Beltway apparatchiks in return for access to a selective slice of the inside story... that glosses over a crucial two year period of failure—2005 and 2006—during which North Korea policy was under the undisputed control of the hardliners.

Case in point: Time Magazine’s expose of Kim Jung Il, “The Tony Soprano of North Korea.”

The article draws on assertions by David Asher, currently at the Heritage Foundation, who worked as a senior advisor in the State Department until mid-2005.

Mr. Asher was the driving force behind the hardliners’ aggressive implementation of the Illegal Activities Initiative (IAI). The IAI focused the enforcement actions of various U.S. departments on alleged illegal activities by North Korea, including cigarette counterfeiting, the meth trade, Supernote counterfeiting, money laundering and trade in protected species.

Mr. Asher’s twin legacies will probably be 1) using the IAI to instigate the Patriot Act Section 311 investigation of Banco Delta Asia in Macau that turned into an embarrassing fiasco and 2) his notorious but publicly unsupported statement that the investigation was a part of a planned effort to intimidate China by “killing the chicken to scare the monkeys”.

Time’s authors, Bill Powell and Adam Zagorin, could have grilled Mr. Asher about his role in the Bush administration’s hardline North Korean diplomacy in 2005/2006, which ended in North Korea’s detonation of its first atomic bomb, the failure to create an effective regional coalition to support Washington’s policy of confrontation against Pyongyang, the departure of the key hardline architects, Bolton, Joseph, et. al., and the laborious dismantling (and discrediting) of the ineffectual U.S.-led financial blockade that failed to bring Kim Jung Il to his knees.

Too bad they didn’t.

The story of how the hardliners drove America’s North Korea policy into a ditch is an interesting and important one, and it isn’t too hard to dig out.

Recently, I had the pleasure of corresponding with Lawrence Wilkerson, Secretary of State Colin Powell’s Chief of Staff during the first George W. Bush administration.

My attention had been drawn to Mr. Wilkerson by the contrast between his perspective on the IAI and a recent claim of Mr. Asher’s.

Lawrence Wilkerson, as reported in the Wall Street Journal in 2005, had this to say about the IAI:

Larry Wilkerson, who was former Secretary of State Colin Powell's chief of staff, said in an interview that the effort -- which officials named the Illicit Activities Initiative -- was launched to augment, rather than undercut, diplomacy.

In Congressional testimony in 2007, David Asher spoke of his resistance to the U.S. concession on Banco Delta Asia that ended the standoff concerning the frozen North Korean funds, and provided his characterization of the IAI::

“We designed this initiative with the goal of countering these [illicit] activities themselves...not necessarily supporting the Six Party talks.”

Well, which was it? Was the IAI designed for diplomacy...or something else?

Mr. Wilkerson, who, one might say, was present at the creation, commented to China Matters:

[The North Korea Working Group] was the most successful interagency group of the first Bush administration. It had members from every element of the federal bureaucracy. We forged a consensus, a way ahead, a plan of attack...

The primary reason of the Illicit Activities Initiative was to give us a tool for negotiating the Six Party agreement. That tool would be the "stick" with which we would attempt to make the DPRK negotiators more receptive to our desires with regard to their nuclear and missile programs, as well as their illicit activities. ...

David Asher liked to assume there was a real crimefighter I’m going to get you [component to the IAI]. [But it was always meant to be] orchestrated with astute diplomacy.

... I believe that once we had gone, John Bolton and others put the IAI to use as a stand-alone policy to attempt to force regime change in Pyongyang by drying up the money with which Kim Jong-il essentially kept his generals happy.

As to whether getting the North Koreans to walk out of the Six Party talks was part of the original, devilishly clever scheme for the Illicit Activities Initiative, I had this exchange with Mr. Wilkerson:

Was the BDA investigation part of the plan? Was the North Korean walkout in 2005 a contingency you had planned for?

No. [In President Bush’s second term] other people, John Bolton, Bob Joseph took away the dual track. They lusted after it, got ahold of it [the IAI], went whole hog [to use it to destabilize North Korea ].

That wasn’t so hard, was it?

In contrast to Mr. Asher’s assertion, Mr. Wilkerson states that the Illicit Activities Initiative was designed to complement American diplomacy in the Six Party talks.

So it might be enlightening for Mr. Asher to explain how the Illicit Activities Initiative was repurposed at the beginning of President Bush’s second term as an acceptable substitute for Six Party diplomacy... that North Korea walked out of the Six Party talks, detonated a bomb, and demanded a humiliating retreat by the United States on the signature action of the Illicit Activities Initiative—the action against BDA... that the talks could resume in early 2007 under China’s aegis at essentially the same point we were at in early 2005...

...or during the Clinton administration for that matter...

...except of course that North Korea now has the atomic bomb...

...and enough plutonium stockpiled to make several more.

Hardly a glowing endorsement for the decision to pursue the Illicit Activities Initiative independently of (and seemingly at the expense of) Six Party diplomacy

I did request a comment from Mr. Asher, but he didn’t respond.

Maybe Time had the same problem.

Of course, now that the hardliner policy failed with a thud (or the crump of an underground nuclear test), it seems to be in Mr. Asher’s interest to downplay the marked discontinuity in North Korea policy during the first two years of President Bush’s second term, as well as the role Mr. Asher played in that redirection.

Instead, Time got another retelling of Mr. Asher’s increasingly shopworn tales concerning Royal Charm and Smoking Dragon stings against alleged illicit North Korean activity, albeit with some of that patented Time factchecking.

That would seem to be the point, as far as Mr. Asher is concerned: keeping the focus on continued North Korean perfidy instead of the spasm of hardliner ineptitude that gave North Korea the bomb and left America playing second fiddle to China in North Asia.

There is some news, albeit of a negative sort, buried deep in the end of the article--the relative softpedaling of North Korean counterfeiting allegations.

Time writes:

According to U.S. and South Korean intelligence reports, the North has been producing the counterfeit bills at least since 1994. The South Korean intelligence service two years ago said it could confirm production only until 1998, but at least twice in recent years, claim U.S. and South Korean sources, the U.S. has presented the South Korean government with supernotes said to have been produced in 2001 and 2003.

A 2006 State Department estimate puts the amount of counterfeit currency in circulation at $45 million to $48 million. Estimate is the key word. Of all the illicit businesses from which North Korea profits, counterfeiting is the one about which outsiders know the least. U.S. officials say they don't believe the North Koreans produced the equipment to print such high-quality counterfeit bills. If that's the case, where did they get it from? No U.S. agency interviewed for this story, including Treasury, State and the Secret Service, could say. U.S. sources also say they do not know where in North Korea the notes are produced.

It does seem likely, however, that Kim's government is running the scam. [emphasis added]

Pretty weak beer, especially when compared to the prior allegations of extensive Supernote counterfeiting by North Korea that formed the central justification for the global financial campaign orchestrated against North Korea in 2005 and 2006 by the hardliners.

Heritage Foundation researcher Balbina Hwang—who currently occupies Mr. Asher’s advisor slot at the State Department—asserted that North Korea annually produced hundreds of millions of dollars worth of Supernotes.

Supernote counterfeiting was deemed an act of economic warfare, an act that Ed Royce (Rep., California, and the voice of the hardliners on the House Foreign Affairs Committee) darkly opined would justify the financial implosion of the Pyongyong regime by the United States.

In 2006, David Asher characterized North Korea’s Supernote involvement as follows :

The US Secret Service has been investigating the circulation of the “supernote” counterfeit dollars since 1989. Last year it charged that the counterfeit US notes were “manufactured in, and under auspices of the government of, the Democratic People’s Republic of Korea (“North Korea”). Individuals, including North Korean nationals acting as ostensible government officials, engaged in the worldwide transportation, delivery, and sale of quantities of Supernotes.” As the Secret Service has now revealed, the Federal Reserve Bank has come into the possession of roughly $48 million of these notes in the last fifteen years. Some argue that this shows that counterfeiting is just a drop in the bucket. Let me argue against this view.

To be fair, it wasn’t just David Asher.

According to Mr. Wilkerson, when he was at State before 2005 the briefings were pretty categorical:

I sat in meetings with the Treasury and Secret Service and they essentially convinced me [that North Korea was producing Supernotes inside North Korea and trafficking in them].

Now he adds a self-deprecating verbal shrug:

But I thought there were WMDs inside Iraq too.

Maybe the reporting of McClatchy and the investigations of Karl Bender concerning the immense technical and logistical hurdles Pyongyang would have had to overcome—and the paucity of evidence for any significant operation--are persuading the administration to back away from the North Korean Supernote allegations.

Or maybe, with the North Korean crisis cooling off, the government decided simply to stop yanking our chain about Kim Jung Il’s private Supernote factory, and allow the location of the purported facility to continue its hegira to our next designated boogie man (prior to North Korea, the United States had cited Lebanon’s Bekaa Valley a.k.a. Hezbollah, and then Iran as sources for the insidious notes).

In any event, the shift from a casus belli involving hundreds of millions of dollars in Supernotes produced inside North Korea to Time’s “we don’t know where or how much or how they do it or if they’re still even making them” is quite a step back.

While Mr. Powell and Mr. Zagorin missed the significance of the apparent retreat on the Supernote story, they also managed to add a few errors to their reporting about this hot-button issue:

a) Contra their statement quoted above, “estimate” is not the “key word” in describing the $45-$48 million number for circulating counterfeit currency; the key word is “confidence”.

Mr. Asher has energetically hyped the possibility of an enormous undetected North Korean Supernote menace by dismissing Treasury’s data on counterfeits as a mere “estimate”.

However, the Treasury Department has studied the international traffic in counterfeit U.S. currency exhaustively in a multi-year effort by the Federal Reserve Board involving visits to dozens of countries and is confident—with considerably more authority than Mr. Asher can muster-- that there is no significant reservoir of undetected counterfeit notes of any kind, including Supernotes.

b) The total of $45--$48 million in circulation is all counterfeit currency, not just Supernotes.

c) Only $45 million in Supernotes has been seized in the last fifteen years, as Asher himself says in his other statement. That’s an average of $3 million a year (for perspective, about $500 billion in US currency is in circulation worldwide).

Humph. I’ll bet Mr. Luce only needed one reporter to get it all wrong, back in the day.

Extensive Supernote counterfeiting was an important allegation not only because of the provocative and symbolic character of the outrage against America’s currency.

It was the only case in which the United States could claim to be the primary injured party and assert the right to lead a global action against North Korea outside the frustratingly incremental, multi-lateral Six Party and UN processes reserved for the nuclear, WMD, and missile issues.

The other major examples of alleged North Korean illicit activities did not have the United States as their primary target—they were concerns for China and Japan.

In both these cases, even with Japan’s highly confrontational stance toward North Korea, the injured parties did not see fit to characterize the North Korean activity as a casus belli that could not be handled by local and international law enforcement.

If the North Koreans are churning out huge quantities of counterfeit cigarettes, the main destination would be China, where an astounding percentage--over 90%--of imported cigarettes on the market are illicit—either smuggled or counterfeit.

If North Korean factories were making meth, the primary market would be Japan.

According to reports I’ve seen, meth is tolerated in Japan, presumably because it encourages the get-up-and-go-and-go-and-go-go-go ethos that is supposed to make Japanese society tick, and the yakuza’s drug trafficking is tolerated as long as it sticks to meth and stays away from cocaine and opiates. As a result, the market is served by immense illegal factories in the Philippines, Taiwan, and/or whatever locale offers the best combination of access to ephedrine, lax enforcement, and corruption.

The business is run by sophisticated, flexible, and internationalized criminal cartels whose entrepreneurial acumen is one of the true faces of 21st century globalism.

Which brings me to a gripe about the soundbite du jour on North Korea, “the Soprano State.”

David Asher et. al. probably found this formulation very useful, as the concept of a North Korean state fundamentally criminal in its nature justified an attack against any and all North Korean activities without the need to build a persuasive case in each and every instance.

I wouldn’t be surprised if the North Korean government, at a high level, countenances some dirty dealing. But I don’t think they’re the Sopranos; I think they’re the Gang Who Couldn’t Shoot Straight, relatively ineffectual amateur criminals stuck in the low-profit links of the Asian criminal supply chain.

Does anybody think the North Korean bureaucrats and generals can outhustle and outmuscle the fearsome Chinese triads who, if one might recall, were the designated Asian menace back in the 1990s?

I believe North Korea’s fundamental identity is that of a sclerotic dictatorship trying to cling to power and revive its moribund economy in an environment of overt US and Japanese hostility and Chinese malign indifference. Its willingness to engage in criminal activity is moderated by the requirements of its diplomacy and the need to achieve some sort of modus vivendi with the West that will allow Pyongyang to share in the immense river of trade and investment cash flowing through North Asia via South Korea, Europe, and China today.

Which means I believe this piece of analysis in the Time article is just plain wrong:

But even if Pyongyang agrees to disarm, there's little reason to believe that the regime will abandon its nefarious business dealings. By keeping Kim's top military and security officials happy, such lucrative enterprises help the dictator maintain his grip on power and resist pressure to open up the North's broken, Stalinist economy. [emphasis added]

Fact is, Kim Jung Il is trying to strengthen his regime by a controlled opening to the West—as the Chinese did in the 1980s—through special economic development zones and preferential policies to attract foreign investment.

Kim would love to preside over a one-party post-socialist business-friendly state that could claim US appreciation and support for acting as a counterweight to China in Asia.

Prospects for a Nixon-goes-to-China rapprochement have, of course, been pretty dim during the Bush administration.

The US campaign to block North Korea’s foreign trade and investment-related initiatives—and prevent Kim from prolonging his rule by presiding over a more prosperous and globalized North Korean economy—would make for an interesting story by itself.

The story would include items like our serial harassment of the Daedong Credit Bank—the foreign-owned North Korea bank meant to promote foreign investment in the Hermit Kingdom, that happened to account for 25% of the money tied up in Banco Delta Asia—and efforts to discourage participation in the Kaesong Industrial Park, North Korea’s flagship export processing zone catering to foreign manufacturers.

But I guess it’s too complicated.

The simple narrative of North Korea as a “Soprano State” is comforting, because it allows us to ignore or disdain the forces acting against American diplomacy in the region.

That, of course, is the problem.

It’s reckless and dangerous to simplify the North Korean issue to that of a repulsive toad king that the world would gladly spit out of its mouth, if only it got a strong enough slap on the back from the United States.

That kind of mindset makes it too easy for lazy and cynical bureaucrats to promote badly-conceived policies and then excuse and obscure their own failures by exploiting the genuine but also carefully cultivated abhorrence that America feels for Kim Jung Il.

Looking at the current state of play on the Korean peninsula, we should be asking:

Was it worth it to abandon nuclear diplomacy for two years to pursue provocative but relatively insignificant allegations of North Korean wrongdoing in a futile effort to get Kim Jung Il to dance to our tune?

In other words, was pursuing the Illicit Activities Initiative more important than supporting the Six Party talks, as Mr. Asher seems to think?

Now, with North Korea possessing the bomb, and lined up with China, Russia, and South Korea in a position of advantage in North Asia, the answer seems obvious.

I just wish Time had asked the question.

Friday, July 13, 2007

By Order of the President...

Was there a secret executive order targeting North Korea?

Recent news reports concerning the gentle treatment of A. Q. Khan—acknowledged mastermind of the world’s most extensive proliferation network for nuclear weapons technology—bring home the point that U.S. nuclear policy is a tangle of contradictions.

We ignore a proliferator like Pakistan, reward a defiant nuclear program like India’s with a legitimizing treaty, and go hammer-and-tongs after regimes like Iran and North Korea that interfere with our geopolitical objectives.

It’s difficult, if not impossible to conduct such an arbitrary, unilateral, and self-serving foreign policy through international institutions. That’s why the Bush administration has preferred to act through executive orders.

By Presidential Executive Order , we’re living in a state of national emergency.

Because the proliferation of weapons of mass destruction and the means of delivering them continues to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States, the national emergency first declared on November 14, 1994, must continue in effect beyond November 14, 2006. In accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency declared in Executive Order 12938, as amended.
This notice shall be published in the Federal Register and transmitted to the Congress.
October 27, 2006. [emphasis added]

Betcha didn’t know that.

And in early 2006, the Bush administration considered issuing an Executive Order commanding the world either to be with us or against us in an effort to destroy North Korea through a financial blockade.

Betcha didn’t know that either.

Executive Orders come in various flavors: In addition to the plain vanilla Executive Order, there are National Security Presidential Directives (issued with the advice of the National Security Council), Homeland Security Presidential Directives, and Presidential Decision Directives.

Executive order authority may even be delegated to government departments, it seems.

Maybe even to John Bolton.

Betcha didn’t know that.

For the Bush administration, executive orders appear to be the preferred method for making lemonade from the cornucopia of foreign policy lemons it has on its hands.

Consider this application of executive order power in a nuclear imbroglio involving North Korea in 2003, as demonstrated by this press release from the State Department (released on April Fools’ Day! somebody at State’s got a sense of humor):

North Korea-Pakistan: Missile-Related Sanctions and Executive Order 12938 Penalties

There has been some confusion regarding the penalties that were imposed March 24 on the Pakistani entity Khan Research Laboratories (KRL) under Executive Order 12938, as amended, and the penalties that were imposed March 24 on the North Korean entity, Changgwang Sinyong Corporation under the missile sanctions law. These sanctions were for a specific missile-related transfer.

Changgwang Sinyong Corporation is a North Korean missile marketing entity and has been sanctioned repeatedly in the past for its missile-related exporting behavior. Changgwang Sinyong Corporation transferred missile-related technology to KRL. The United States made a determination to impose penalties on both Changgwang Sinyong Corporation and KRL as a result of this specific missile-related transfer. These sanctions do not pertain to any other activity, including nuclear-related ones. We informed the Congress on March 12 that the Administration had carefully reviewed the facts relating to the possible transfer of nuclear technology from Pakistan to North Korea, and decided that the facts do not warrant the imposition of sanctions under applicable U.S. laws. [emphasis added]
Released on April 1, 2003

Mmmm...the sweet smell of ”confusion”.

That’s bloody chum to a contrarian blogger like myself.

Allow me to explain:

The most egregious nuclear proliferator on the face of this planet is Pakistan, in the person of A.Q. Khan.

Khan’s network provided nuclear technology to Libya, Iran, and North Korea.

Much as President Musharraf would like to claim that Mr. Khan’s efforts were after hours and on his own dime, the North Korean transaction involved not the payment of cash to Mr. Khan’s private bank account but the delivery of North Korean No Dong missiles and technology to the Pakistan government.


Makes it look like the Pakistan government was proliferating nuclear weapons technology—the type of activity that, if Kim Jung Il’s experience was any guide, would provoke the formation of a worldwide alliance to destabilize and if possibly destroy the culprit’s regime, at the very least cut off its supply of cash and cognac, etc. etc. etc.

But since Pakistan is our ally in the war on terror, the nature of the transaction—and the character of the crime—were neatly reversed.

As the Bush administration saw it, the offense was North Korea’s supply of the missiles to Pakistan...and the fact that they got paid for them with nuclear weapons equipment and technology was of secondary importance.

Actually, it was no laughing matter.

The State Department had to step up and pre-emptively define the transaction as a missile purchase and sanction Khan’s laboratories itself. Otherwise, Pakistan would have been vulnerable to much more serious, legislative sanction—a total cutoff of aid under the Solarz Amendment--as a proliferator.

So the State Department made a valiant if “confusing” effort to present the sanctions against Khan’s laboratory as an ad hoc punishment for the Pakistani government’s buying the missiles—because “the end-user of the missile purchase cannot be sanctioned under the Arms Export Controls Act” (according to Nicholas Kralev’s report, Pakistan purchases N. Korean missiles, in the March 31, 2003 Washington Times)...and we’ve got to sanction somebody, after all!

So let’s just sanction this Pakistani nuclear lab over here.

There, that’s all better.

The primary public executive order governing North Korean sanctions is E.O. 12938 –the same one that establishes the state of national emergency, interestingly enough.

If I’m reading the order correctly, Treasury and State are delegated to carry this policy out. The Secretary of State makes the determination, and, when the president decides not to issue a waiver for national interest reasons, State places a sanctions notice in the Federal Register.

Kralev’s report in the Washington Times stated that the sanction against Pakistan in the North Korean missile/nuke boondoggle was enacted through a “State Department Executive Order” signed by none other than John Bolton.

Let us pause a moment to reflect on the appalling vision of John Bolton possessing executive authority to issue sanctions.

I have been unable to find another reference to State Department executive orders, which makes me hope the report was simply a misunderstanding—or a typical piece of Boltonian self-aggrandizement propagated by his eager enablers in the press.

In passing, I should point out that apparently violence was done not only to logic and common sense, but to the careers of people who tried to do their job and investigate and combat Pakistan’s proliferation activities.

Australian journalist Luke Ryland makes a persuasive case for analyst Richard Barlow, who claims he was hounded out of government because he insisted on investigating Pakistan’s proliferation activities while at the CIA and Department of Defense.

Beyond coddling Pakistan, the No Dong boondoggle highlighted another problem with implementing an aggressive strategy against North Korea—North Korea has no business ties with the United States, so any sanctions are strictly symbolic.

For this reason, Executive Order 12938, authorizing sanctions against North Korean missile exporter Changwang Sinyong Corporation from doing business with the United States for two years—when it was already doing no business with the United States at all—would not be satisfying to people of the hardline persuasion.

The Executive Order’s focus is explicitly domestic.

The significance of the E.O. is to enable what I would characterize as drive-by sanctions, broad-brush sanctions against terrorists, proliferators “and their support networks” that can be applied unilaterally and immediately by the executive branch against assets in the United States without the legal and judicial frou frou that has been rendered quaint in our ticking time bomb, mushroom-clouded smoking gun, Jack Bauer world.

But North Korea doesn’t have squat in the United States.

There’s nothing to sanction here.

So Executive Order 12938, even with its intoxicating vision of unilateral executive freedom of action, is pretty much useless.

That’s a problem.

There’s another problem.

Financially speaking, North Korea doesn’t own squat anywhere outside of North Korea.

The last North Korean bank overseas, in Vienna, was closed down under US pressure years ago.

Anything that North Korea has outside its borders that’s worth owning is in a third country bank, in some financial institution that’s not owned by North Korea, in the jurisdiction of some country that’s got its own laws and foreign policy, isn’t under UN sanctions, and—heaven forbid—might not be interested in harassing the Norks as aggressively as we are.

What to do?

How to extend U.S. reach beyond U.S. borders and U.S. corporations to attack North Korean financial activities and assets in non-Nork corporations in other countries...and do it in a way that the lack of any enabling UN resolution, potential infringement of sovereignty, and violence to the rights and protections afforded to law-abiding corporations by their home governments could be conveniently disregarded?

It’s clear that in 2005 and 2006 Section 311 of the Patriot Act emerged as a key instrument in Bush administration North Korean policy a la hardliner.

Patriot Act Section 311 is a provision originally designed to allow the U.S. government to sanction foreign banks and jurisdictions for deficiencies in their anti-money laundering (AML) regulations and practices overseas by threatening a cutoff of their access to the US banking system.

In general, the Treasury Department has been doing the Lord’s work on money laundering, primarily targeting the drug dealers who try to park hundreds of billions of illegal revenues in U.S. banks and, when they can’t do that, hunt for lax, lazy, and greedy banks overseas.

Patriot Act Section 311 gives Treasury a powerful weapon—the ability to deny foreign banks free access to the U.S. banking system if it is worried that terrorists and criminals could exploit their weak controls and indifferent enforcement to gain access to the world financial system and move money with impunity.

The unilateral power to cut off uncooperative foreign banks from the U.S. financial system was apparently irresistibly attractive to the hardliners, who, in my view, misappropriated the process to the application of coercive diplomacy against banks and countries willing to do business with North Korea.

After the first Patriot Act Section 311 investigation against a North Korea-related target—Banco Delta Asia—was announced in September 2005, officials of the Treasury Department’s Office of Terrorism and Financial Intelligence (OTFI) criss-crossed the globe serving notice on banks in places like Mongolia, Vietnam, Singapore, and Bulgaria that their current or potential involvement with North Korea made them vulnerable to US designation as banks of potential money laundering concern.

However, Patriot Act Section 311 investigations and regulations are meant to hassle banks and regulators. They are not a particularly appropriate tool for pursuing depositors—that’s supposed to be a job for local enforcement once the appropriate AML laws and practices are in effect.

Forcing foreign banks to cut off ties with a particular depositor in the absence of UN sanctions and local due process is an infringement of sovereignty and legally dicy for the foreign bank and its government.

The threat of a Patriot Act Section 311 investigation is a drastic—but not particularly efficient or fair--instrument of coercive diplomacy.

To compound these structural problems, judging by the public record, it looks like the anti-Nork dossiers assembled by OTFI were long on assertions, allegations, innuendo, and intimidating chest-thumping...and short on proof.

In other words, I wouldn’t be surprised if the anti-North Korea initiative emerged as an impediment to the trust and close cooperation between Treasury and foreign governments that characterizes the global AML effort against criminals and terrorists.

So I’ve always wondered if another, secret Executive Order would be necessary to authorize this awkward, antagonistic, and risky process—one tasking Treasury to disregard the legal, logical, and diplomatic headaches and selectively apply the threat of Patriot Act Section 311 investigations against banks that were doing any business with North Korea.

After all, if there wasn’t some explicit tasking in an Executive Order, how else can one account for Treasury, a branch of the famed Bush administration unitary executive, openly defying the State Department and stated U.S. policy for four embarrassing months on the repatriation of North Korean funds from Banco Delta Asia?

Another reason I wouldn’t be surprised by the existence of a secret Executive Order targeting foreign financial ties with North Korea is because apparently we came thisclose to getting it issued publicly.

I stumbled across this interesting report in the January 27, 2006 Chosun Ilbo :

The U.S. is readying fresh sanctions against North Korea over the regime’s alleged financial crimes that will be significantly more severe than the ones already in place. Raphael Perl, a congressional researcher in charge of tracking Pyongyang’s drug dealings and counterfeiting, said Friday authorities completed a rough draft of an executive order that would stop any financial firms involved in transactions with North Korea from conducting business in the U.S.

That will mean all banks, brokerage houses and insurance firms and refers not only to illegal transactions but to any financial deals with the North, Perl told the Chosun Ilbo on the phone. Once the regulations are finalized, “the message to financial institutions operating in the U.S. will be that the time has come for them to choose between the U.S. or North Korea,” he added.


But under the draft order, almost all finance companies would be effectively prohibited from doing business with North Korea. That would also affect international financial institutions outside the U.S. and thus deal a heavy blow to North Korea’s overseas trade.
In Perl’s reading, financial institutions would have a choice whether they are with or against the U.S., but given the importance of their U.S. interests, it would in effect force most major international firms to stop dealing with the North. (emphasis added)

An executive order of this sort, coming after the announcement of the Banco Delta Asia Section 311 investigation for deficient money laundering controls in September 2006, would represent a significant escalation.

It would be moving beyond regulatory activity initiated ostensibly to protect the US financial system to the overt use of domestic U.S. regulatory power to coerce foreign corporations and governments to modify their activities outside US jurisdiction in order to further US foreign policy goals.

Recently, I had the pleasure of speaking with Mr. Perl, who stated that he recalled the interview but the reporter a) didn’t speak English very well b) didn’t understand the sanctions process c) wanted to get a big story and d) got it all wrong.


Despite Mr. Perl’s denial, I would have to say that the story sounds credible.


Because, for the hardliners, something more was needed.

Because direct U.S. sanctions against North Korea weren’t coming close to inducing the systemic crisis in Kim Jung Il’s regime that would place the hardliners crowing triumphantly on top of the North Korean dunghill.

North Korea provides no high value targets for traditional, direct sanctions under U.S. law and Executive Order 12938.

And the U.N. had demonstrated no interest in systemic sanctions beyond the targeting of North Korean entities directly involved in Pyongyang’s nuclear, WMD, and missile programs.

If one assumes that the Bush administration was impatient with global footdragging on the matter of axis of evil charter member North Korea:

...and was frustrated by the fact that any financial attacks on North Korea would have to occur in third-party jurisdictions...

...and the key jurisdictions included China and Russia, who have very little interest in extending North Korea sanctions beyond those carefully and narrowly defined by the U.N. Security Council...

...and the only effective way to compel immediate, concerted action by these countries would be through the threat of crippling their financial institutions...

...I would not be very surprised if somewhere there wasn’t an executive order of some sort authorizing the application of PA Section 311 to create a financial crisis in North Korea...

...and that this order would be secret because it would involve the misuse of the U.S. regulatory apparatus as an instrument of coercion against countries that are, if not our allies, at least according to our laws, not hostiles.

That’s probably why the Treasury Department went through all sorts of contortions to deny the obvious—that its Office of Terrorism of Financial Intelligence was circling the globe trying to force every tiny bank and half-assed country to cut off its banking ties with Pyongyang with the threat of a Patriot Act Section 311 sanction.

Because we were sanctioning our own friends and allies, not the North Koreans.

That looks a lot like economic warfare—ironically, against the very countries we were purporting to defend against North Korean efforts to undermine their financial and criminal laws.

Considering there was talk of citing North Korean economic warfare—those shaky counterfeiting allegations—as a casus belli, I would guess we wouldn’t be keen to announce our own doctrine of economic warfare--against third countries--in order to get at North Korea.

Unfortunately, I don’t think an unpopular campaign of unilateral global covert economic warfare against North Korea worked all that well.

China and Russia apparently defied the U.S., Kim Jung Il cobbled together an atomic bomb despite the partial financial blockade, engagement promptly became the order of the day in North Korean affairs, and the BDA investigation became little more than an embarrassing impediment to America’s North Asian diplomacy.

Of course, the trademark of a genuine Bush administration policy is that when an initiative of dubious effectiveness and legality runs into trouble, the first and easily obeyed impulse is not to backtrack and concede that critics might have a point; it’s to double-down with some middle-finger escalation.

So, in contrast to the appearance of restored normality in North Korean diplomacy, I’d like to put in my two cents’ worth concerning the presidential finding authorizing CIA destabilization campaign against Iran blessed by Elliott Abrams and Steven Hadley and ostentatiously leaked to ABC’s The Blotter:

The sources, who spoke on the condition of anonymity because of the sensitive nature of the subject, say President Bush has signed a "nonlethal presidential finding" that puts into motion a CIA plan that reportedly includes a coordinated campaign of propaganda, disinformation and manipulation of Iran's currency and international financial transactions.

I think the implication of this finding—and its leak—have been misunderstood.

When one recalls that the main U.S. initiative against Iran has been to isolate the regime financially through Treasury’s Office of Terrorism and Financial Intelligence—the same bunch that went after North Korea—and things haven’t been going all that great, the indication here is that hardliners feel they need a better way of winning hearts and minds.

The effective threat here is, I believe, “manipulation financial transactions” e.g. that some Swiss bank is going to wake up one morning and find that the CIA has hacked into its mainframe and erased a few million dollars from an Iranian account.

The Swiss aren’t supposed to like it, and the Swiss government isn’t going to like it either. But it’s supposed to convince them that the risks of handling Iranian money has been upgraded from “reputational” to “operational” and it’s better not to handle any Iranian money at all.

It would also be a sign that a lot of banks and jurisdictions have not been sufficiently responsive to Bush administration jawboning on Iran backed up by Patriot Act Section 311 threats, and the hardliners want them put on notice through a pointed leak that Elliott Abrams will be rummaging through their mainframes and twisting their testicles as punishment.

If our Commander in Chief harbored any moral qualms about extralegal financial sabotage against the financial institutions of our friends and allies, I’m sure the plan’s architects whispered that the threat would be sufficient to peel financial institutions away from Tehran...or maybe just one publicized demonstration of the Death Star would be sufficient to bring the world financial community to heel...

...after all, that’s how it worked with BDA...

...didn’t it?

Well, it didn’t work that way.

Despite hardliner claims, it appears the Patriot Act Section 311 campaign against North Korea sputtered to an ignominious conclusion as Pyongyang’s nuclear capability and Chinese good offices became the driving forces in North Asian diplomacy.

It’s an interesting paradox.

To the hardliners, as the need to compromise with the U.N., our allies, Congress, international practice, and our laws is stripped away by executive order, they can ascend to the pinnacle of objectivity and make the tough calls with absolute clarity, ruthlessness, and will.

But to the rest of us, it looks more like the Bush administration has fallen into an ever-deepening pit of delusion, shielding its deliberations under executive privilege and its actions behind executive orders, not because these policies demand absolute secrecy and freedom of action, but because they are profoundly flawed policies promoted by self-serving and unrealistic bureaucrats...

... and we would be a lot better off if these disastrous tactics could be made to wither away under the light of day and the harsh scrutiny of logic, law, and common sense.

The lazy reliance on Executive Orders to enable the pursuit of policies that were not just unpopular and illegal but fundamentally flawed may very not only define the Bush administration approach to North Korea diplomacy, but its entire legacy.

Friday, July 06, 2007

McClatchy did a big feature on the little bank in Macau, Banco Delta Asia.

Stanley Au, the bank’s principal stockholder, is adamant about getting his bank back.

The US Treasury is resisting, not a surprise, since the bank’s “potential for recidivism” under Au’s leadership was the rather lame justification for not giving Banco Delta Asia a clean bill of health after BDA and the Macau Monetary Authority spent 18 months jumping through Treasury’s hoops on improved anti money laundering (AML) practices—the ostensible objective of the Patriot Act Section 311 investigation.

The interesting piece of news is that the Chinese government is apparently backing Mr. Au:

China, which took back control of Macau from Portugal in 1999, has quietly come to Au's defense, resisting U.S. pressure to force him to sell the bank, saying the pressure amounts to interference. Quinones said senior Chinese officials had told him that "if the U.S. Treasury Department begins to intrude into private banking and business, then foreign investors will pack up and leave."

That posture has put Beijing at loggerheads with Treasury Secretary Henry Paulson, who hails the use of financial sanctions to rein in "rogue" nations and terrorists, and encourages other nations to give their finance ministries similar tools.

I think Henry Paulson and Treasury are asking China to save U.S. face by letting them have Stanley Au’s head on a pike, so we can claim that we weren’t wasting the world’s time for a year and a half on BDA.

As I wrote concerning the sorry denouement of the Strategic Dialogue, it’s always dangerous to presume on a Chinese friendship, especially if you admit that you’re in a weak position and want a little help from your buddies in Beijing to look good.

In the BDA matter, beyond the pleasure of beating the dog in the water (exploiting the opposite party’s unfavorable position to gain additional advantage and administer some rough justice), I suspect the Chinese feel that Treasury, instead of asking the them to acquiesce in the sacrifice of their loyal ally, Stanly Au, has to make amends for all the heartburn that its Office of Terrorism and Financial Intelligence inflicted on them.

My take on the Chinese state of mind is that they deeply resented the bullying that OTFI subjected them to in its quixotic effort to cut North Korea off from Chinese banks, typified by the notorious remark by the mastermind of our hardline anti-North Korea policy, David Asher, that the move against BDA was an exercise in intimidation against Chinese banks, “killing the chicken to scare the monkeys”, as he put it.

The message the Chinese received from the U.S. climbdown on the North Korean funds in BDA—arranging the remittance to Russia via the Fed—was that Patriot Act Section 311 investigations against foreign banks are not mere matters of U.S. domestic regulation.

The U.S. government can no longer hide behind the feeble fiction that these investigations are not an exercise in foreign policy, or that the State Department and the President are helpless to intervene in what they pretend are Treasury’s tenacious, apolitical efforts to protect the U.S. financial system against criminal and terrorist contamination.

And the fact that the Six Party Agreement was held hostage to the hardliners’ BDA vendetta for over three months probably convinced the Chinese that putting the Patriot Act Section 311 tiger back in its cage—or beyond the reach of determined bureaucrats willing to unleash a devastating regulatory assault on Chinese banks—is a matter of considerable importance and urgency.

To the Chinese, I believe it’s time for the U.S. government to acknowledge the foreign policy dimension of Patriot Act Section 311 investigations targeting Chinese banks, and make their imposition and resolution the subject of explicit prior bilateral negotiations between Beijing and Washington.

In particular, I think the Chinese have told the State Department that any unilateral Treasury Department actions targeting Chinese banks will be interpreted as--and responded to--as a hostile piece of anti-diplomacy.

And I don’t think Henry Paulson is going to get anywhere with the Chinese until he privately assures them that Patriot Act investigations against Chinese banks--and demands on Chinese regulators that go beyond AML processes and infringe on Chinese sovereignty--are off the table, and confirms the concession publicly by acquiescing to Stanley Au’s return to BDA in some form.

Thursday, July 05, 2007

Catfish Blues

Another Salvo in the Moderate-Intensity US-China Trade War

Planning to eat 100 tons of Chinese catfish? Relax. The FDA's got your back.

The FDA import alert targeting Chinese catfish, eel, basa, dace, and shrimp contaminated with antibiotics and anti-microbial agents revived recollections of the Chinese aquaculture industry.

Based on my past experience, the FDA’s prime directive vis a vis Chinese aquatic imports has traditionally involved preventing American consumers from becoming violently, acutely ill by products that had been improperly handled or stored after harvesting.

I remember a grizzled veteran of the shrimp trade telling me that unscrupulous importers faced with the rejection of a load of nasty frozen shrimp by the FDA could divert the rejected container to Mexico, thaw the product, wash it with chlorine to lower the bacteria count, refreeze it, and import it as Mexican product.

Yum! as Rachel Ray would say.

The current to-do about Chinese aquatic products has to do with an entirely opposite issue: China’s use of drugs as feed additives to prevent the spread of disease among live creatures in the ponds--and the long term risk of prolonged exposure to these drugs for U.S. consumers.

Farm-raised fish and shrimp are a huge business in China and throughout Asia. In China, enclosing coastal areas and creating fish ponds is seen as a way to utilize marginal coastal lands and improve farmers’ incomes through production of high-value, exportable crop. Chinese governments, corporations, and the World Bank have pitched in to create the necessary, expensive infrastructure of ponds and processing plant.

The downside of farm-raised aquatic products is that density=profits.

Which means you have a gazillion shrimp or carp swimming around inside an enclosed pond that is basically a gigantic fish toilet. To add to the biological load, you dump feed into this stew and hope that the critters eat (most of) it before it sinks to the bottom.

All sorts of bacterial, fungal, and algal yuck breeds in the ponds, can spread like wildfire through the population, and can even contaminate the mud at the bottom so thoroughly that the pond has to be drained, limed, and left to rest for a couple seasons until it is usable again.

Just as in the poultry industry, dosing the feed with antibiotics is a way to keep a pond full of sellable product, instead of thousands of pounds of dead, dying, or sick fish with fungus on their lips and gills or with holes eaten their heads by rampant bacterial infections.

In the United States, the FDA bans a certain class of antibiotics—fluoroqinolones—because widespread use quickly results in the emergence of nasty, resistant strains of bacteria.

If fluoroquinolones ring a bell it’s because one of the varieties—one used as a veterinary product, as a matter of fact—is ciprofloxacin a.k.a. Cipro a.k.a. the anthrax-killer that Americans hysterically stockpiled in the aftermath of 9/11.

Three states—Mississippi, Alabama, and Lousiana—banned Chinese catfish when it tested positive for fluorquinolones. An Alabama congressman, Artur Davis, made it a national issue, Chuck Schumer pontificates, and bingo there’s an FDA import alert, not just against certain importers but the whole country.

Even though the director of the Mississippi Poison Control Center stated (h/t to Left in Alabama) that you’d have to eat 220,000 pounds of Chinese catfish before getting sick...

...and the potential advantages of ingesting huge quantities of Cipro-laced Chinese catfish as an anthrax prophylactic have been inexplicably unaddressed.

Well, maybe not so inexplicably.

Mississippi, Alabama, and Louisiana may not be at the forefront of food safety, but they are the leading producers of farm-raised catfish and shrimp, the very products threatened by Chinese imports.

The Mississippi Delta, home of the blues, is also heart of the U.S. catfish industry. Big farms in places like Tupelo—Elvis’s home town--and the euphoniously-named Belzoni produce catfish, votes, and political clout.

This clout was displayed in 2005, when the same three states sounded the fluoroquinolone alarm against Vietnam, and Vietnam banned use of the antibiotic in response (the Mises Institute provides the protectionist backstory and waxes indignant here).

This year, I guess because it’s China, the FDA decided to pile on, dinging China for traces of carcinogenic anti-microbial e.g. anti-fungus agents malachite green, gentian violet, and nitrofuran in its aquaculture exports as well as fluoroquinolones.

You have to wonder how bad gentian violet can be, considering it’s used on tampons and to treat thrush in infants.

China’s injection of trace quantities of fluoroquinolones and carcinogenic anti-microbials in a limited sector of the U.S. food supply certainly isn’t an acute health risk.

As the FDA itself said ,

The products "could cause serious health problems if consumed over a long period of time," said [FDA Assistant Commissioner for Food Protection David Acheson].

Still, Acheson added, the low levels of contaminants means that there is "no imminent threat" to the public health.

And from the LA Times :

FDA officials, however, said the small quantities of the banned chemicals found in testing were not enough to pose an immediate threat to human health.

"We are not asking for this product to be withdrawn from the market or for people to take it out of their freezer and throw it away," said Margaret Glavin, head of the FDA's enforcement branch. "This is a long-term health concern … not an acute concern."

You get the feeling there’s a lot of things in the U.S. food supply that’s going to kill us a lot quicker than Chinese dace, basa, eels, shrimp, and catfish.

And that the FDA, by issuing an import alert against the entire country of the PRC, is making some kind of political statement instead of a public health move.

After fluoroquinolones were detected in Vietnamese catfish in 2005, the FDA response was kinda different:

Under FDA regulations, when an outlawed chemical is found in a product imported into the US, the importer is placed on a black list, and five more shipments from that importer would be tested before the import ban would be lifted.

Nevertheless, it’s not a bad idea to bring the Chinese feed and food industry in line with higher U.S. standards, so it’s easy to forgive the FDA for a piece of enforcement that’s a teeny bit politically motivated and selective.

In a heartening example of positive blowback, the Chinese central government is apparently responding to Western investigative reporting by making food safety a focus , and try to make the case for the CCP as steward of the Chinese peoples’ well-being and not just the reckless enabler of a grab the buck and damn the rules post socialist oligarchy.

Despite these potentially laudable outcomes, regulatory activities on the international stage that are skewed by politics and protectionism bring a certain set of problems with them.

Selective enforcement begets selective enforcement, or tit begets tat.

Torn from the headlines :

BEIJING - China said Saturday it had rejected a shipment of pistachios from the United States because it contained ants, the latest indication the government may be retaliating as Chinese products are turned back from overseas because of safety concerns.

The state television report, which showed inspectors wearing face masks and sealing the shipping container that held the pistachios, indicated an increasing push to show that other countries also have food safety issues. On Friday, Chinese food safety watchdog announced that shipments of health supplements and raisins from the U.S. had been returned or destroyed because they did not meet quality control standards.

If we want to turn food and product quality into an anti-China club, China has signaled it’s going to hit back.

Obliquely harassing China through a campaign of trade-related enforcement actions may seems to be a good match for the tactical impotence of the Bush administration and the passive-aggressive tendencies of the Democrats in negotiating with China.

However, the same unilateralism, tactical expediency, and political opportunism that make these enforcement actions cheap and easy to apply also signal the dearth of political will and international consensus backing them...

...and will encourage the targeted party to escalate instead of compromise if it believes it holds the stronger hand.

Time will tell if the Bush administration's targeted application of anti-dumping, anti-subsidy, and inspection measures against China will yield anything more than rancor and stalemate.

In our moderate-intensity trade war with China, the benefits to the United States, its businesses, and its consumers may be nugatory.

Perhaps the Chinese consumer protection movement will emerge as the real victor instead.

Monday, July 02, 2007

Darfur Sideshow

It’s Time to Focus on the Key Elements in the China-Sudan-US Equation

The Christian Science Monitor does the usual handwringing over Darfur and fingerpointing at China in Danna Harman’s article How China’s Support Shields a Regime Called Genocidal.

But before she can move on to Darfur and provide a hook for the genocide tag in the article, Ms. Harman does the public a service by devoting a few paragraphs to the true driving force in Sudanese security affairs—and China’s involvement: Sudan’s conflict with the oil rich south, an old fashioned, brutal, and desperate but non-genocidal incipient once-and-future civil war.

When it comes to what makes Sudan tick, Darfur is simply a tragic, terrible sideshow.

It’s a sideshow that the Western media has fixated on, perhaps because the Bush administration is unwilling to draw attention to the fatal rot at the heart of the Comprehensive Peace Agreement (CPA) it brokered between the South and Khartoum in January 2005.

I blogged in detail on the Bush administration’s remarkable, even bizarre engagement with Sudan’s Islamicist, bin-Laden-friendly regime in the service of its African objectives last year, but here’s the gist:

The Bush administration reversed the Clinton administration’s ostracization of Khartoum and went to enormous lengths to close a deal between Khartoum and rebels in the south that includes provisions for power sharing, revenue-sharing—and also for a referendum in 2011 that virtually guarantees the partition of Sudan between the Islamicist north and the pro-U.S. south.

In order to maintain its post-2011 viability, the Sudanese regime, with the help of China, is desperately and duplicitously creating “facts on the ground”: hogging the oil revenues, encroaching on oil fields on the southern side of the future border zone, destabilizing the area through the use of supposedly arms-length militias, and amassing a war chest, weapons, and dual-use infrastructure that will deter the south from contesting Khartoum’s aggression.

On one level, the catastrophe in Darfur can be seen as unexpected blowback from the North-South deal, with some forces in the west of Sudan playing the civil war card to place a me-too claim to oil revenue sharing—a ploy that backfired as Khartoum pushed back hard and tipped the whole country into failed-state status with a brutal anti-insurgency campaign conducted through its janjaweed militia proxies.

The Bush administration’s Sudan diplomacy, though in many ways the antithesis of the militarized coercion displayed in Iraq, shares in its execution much of the “hope is not a plan” fecklessness that doomed our adventure in Mesopotamia.

Washington has consistently appeased the Khartoum regime, citing its supposed contributions in the war on terror but probably anxious to forestall its repudiation of the CPA, the one clear-cut success in six unhappy years of Bush administration diplomacy.

If DEBKAfile is to be believed, in 2004 the Bush administration entertained Sudan-fueled fantasies almost too puerile and embarrassing to credit:

For the first time ever, American diplomacy will have succeeded in converting a country dominated by radical Muslims – in Sudan’s case since the 17th century - into a secular democracy... On the agenda too is a highly evocative ritual at the White House at which Sudan’s president will solemnly forswear his country’s dark past as recruiter of slaves for America and the Arab caravans carrying African slaves around the world.

If the US president has his way, the White House lawn will be fully booked this year with ceremonies centering on the Sudanese reconciliation...National security adviser Condoleezza Rice has set up a committee with heads of the African American community. Working out of an undisclosed location in Los Angeles, they are assess [sic] the next moves on Sudan and their impact on voting patterns in November...the president’s senior political adviser Karl Rove is taking charge of strategy on Sudan and its exploitation as campaign fodder.

Once the agreement was in place, the State Department apparently gave little thought to preserving and enhancing the leverage needed to ensure its proper implementation, let alone achieve dramatic displays of Arab penance for the slave trade on the White House lawn--or Rove-orchestrated gains among the African-American electorate.

The State Department’s anxiety to protect the CPA has apparently translated into an anxiety to do nothing vis a vis the South—such as meaningful economic and infrastructure support—that might antagonize Khartoum.

With the CPA as its hostage, no wonder Khartoum feels free to flout us and the world on Darfur.

If execution of the CPA is meant to be a demonstration project for the advantages of soft-power diplomacy by the career professionals at the State Department, it almost makes one wish the middle-finger hardliners with their brutal zeal were running the Sudan show.

Preoccupied with America's staggering problems in the Middle East, the State Department has been unable to focus its attention and resources on Africa. But even within this context, U.S. neglect of South Sudan is striking.

Our special envoy for Sudan, Andrew Natsios fills the position part-time while teaching at Georgetown. The U.S. presence in the South has actually been reduced while our staffing in Sudan’s capital has been boosted. USAID's chief resides in Khartoum, not the southern capital of Juba. Little has been done to help reorganize the South's chief rebel force, the Sudan People’s Liberation Army or SPLA, into a regular army and viable counterweight to Khartoum's military.

According to Sudan analyst Eric Reeves, turning our back on the South and giving Khartoum a free hand to undermine the CPA could have devastating consequences:

[The SPLA] is the key guarantor of the security arrangements (and hence all terms) of the CPA--and yet the SPLA is probably weaker today than a year ago, and Khartoum continues an aggressive policy of purchasing advanced weapons systems. The oil roads in southern Sudan would allow for all-weather projection of mechanized military power in the event of resumed war---something without precedent. When in 2003 I was talking with SPLA commanders on the ground in southern Sudan, and with John Garang personally, all made the same statement: if war resumes (a shaky ceasefire was in place while I traveled to various locations), then it will be the most destructive phase of a civil war that had at that point killed over 2 million and displaced as many as 5 million. [e-mail to China Matters, 6/30/07]

Contra the hopeless muddle in Darfur, we’ve got real assets and opportunities in the South: a functioning state, viable, pro-American government authority with battle-hardened leaders, legitimacy, and, thanks to its Christian element, a reservoir of potent political clout among the evangelical base in the United States.

And the South has got oil, of course.

South Sudan’s leaders came to the United States in January to testify before Congress and sound the alarm concerning Khartoum’s duplicity in implementing the CPA.

In supporting testimony , Roger Winter, the former special envoy to Sudan, also called for strengthening South Sudan’s army and drew, I believe, a proper distinction in between bolstering the SPLA as a genuine nascent national army versus the generally irresponsible and/or malicious U.S. practice of arming of useful factions around the world:

It is in the U.S. interest to invest significantly in the conversion of the SPLM’s military force, the SPLA, into a modern, well-trained and well- managed military. Unlike many situations in the developing world, the SPLM is a positive rebel political force that, despite many limitations and liabilities, was recognized by the U.S. as the key to creating a new, democratic Sudan. Similarly, with the SPLA, all the forces of Khartoum, formal and informal, collectively could not defeat the SPLA. In a very real sense, the very existence of a strong SPLA is the best guarantor of CPA implantation. Policy realism would, I believe, indicate that, of all the military forces in Sudan, only the SPLA has both the vested interest in seeing the CPA scrupulously implemented(i.e. so the Referendum is actually held) and, having fought off the NIF forces already, the capacity to protect the CPA without foreign military intervention. U.S. efforts in this regard are too limited and moving too slowly.

He concluded his testimony with a message to President Bush that our preoccupied lame-duck supremo will probably be unable to heed:

A note to President Bush: Achieving peace in Sudan was a goal you set for your Administration at the very beginning of your tenure. Your initiative succeeded beyond expectations in the South. The CPA, your legacy to all of Sudan, was a solid win, but is now at risk. It needs your personal attention.

Given the major investment of American prestige in the Sudanese powersharing arrangement and Khartoum’s serial malfeasance in the matters of the South and Darfur, one might think that the United States would muster the will and resources to maximize our leverage in Sudan and buttress the Comprehensive Peace Agreement.

Instead, we get impotent jawboning from the Bush administration and griping that China is not doing enough to save our bacon in Sudan—the nation that was supposed to be America’s foreign policy beachhead in Africa but has turned into another one of our geopolitical headaches instead.

If the Bush administration had expended half the effort it committed to the lost cause of coercive diplomacy against North Korea and China—an effort doomed to failure in North Asia, where China is the 800 pound gorilla with vital interests and every conceivable military, economic, and diplomatic lever—and bolstered the South instead, we might be looking at a different situation in Sudan.

For all the blather about China’s soft power in Africa, China lacks the ability to force its way in Sudan.

It can only expand its influence when American neglect and incompetence leave a vacuum.

We might have seen a situation in which China—a long way from home, with zero military power projection and linked to an unsavory and unpredictable ally—would back away from backing Sudan in a proxy war against a U.S. client, and think twice about opportunistically enabling Khartoum’s encroachment upon the military, political, and economic security of the South...

...and Darfur.

Instead we are passive, deluded, and despairing spectators at the Darfur sideshow--while the decisive tragedy of Sudan unfolds elsewhere.