Obama’s Trip to Latin America
As Ted Carpenter notes below, President Obama is departing on an important trip to Latin America. The countries that he will visit exemplify the macroeconomic stability and advancement of democratic institutions now found in much of the region.
Brazil, by far the largest Latin American economy, has enjoyed almost a decade of sound growth and poverty reduction. Chile is the most developed country in the region thanks to decades of economic liberalization, a process that has also made it Latin America’s most mature democracy. And El Salvador is undergoing a delicate period in its transition to becoming a full-fledged democracy with its first left-of-center president since the end of the civil war in 1992.
In an era when most Latin American nations are moving in the right direction—albeit at different speeds, with some setbacks, and with notable exceptions—the United States can serve as a catalyst of change by contributing to more economic integration and the consolidation of the rule of law in the region.
Unfortunately, despite President Obama’s assurances that he’s interested in strengthening economic ties with Latin America, his administration is still delaying the ratification of two important free trade agreements with Colombia and Panama. President Obama also continues to support a failed war on drugs that significantly exacerbates violence and institutional frailty in the region, particularly in Mexico and Central America.
It’s good that President Obama’s trip will highlight significant progress in Latin America, but his administration’s policy actions still don’t match the U.S. goals of encouraging economic growth and sound institutional development in the region.
Obama’s Latin America Trip
President Obama’s trip to Latin America is likely to focus on economic topics, but two security issues deserve scrutiny during his stops in Brazil and El Salvador.
Washington’s diplomatic relationship with Brazil has become somewhat frosty, especially over the past year. U.S. leaders did not appreciate Brazil’s joint effort with Turkey to craft a compromise policy toward Iran’s nuclear program. The Obama administration regarded that diplomatic initiative as unhelpful freelancing. And when Brazil joined Turkey in voting against a UN Security Council resolution imposing stronger sanctions on Tehran, the administration’s resentment deepened. Obama should not only try to soothe tensions, he should shift Washington’s policy, express appreciation for Brazil’s innovative efforts to end the impasse on the Iranian nuclear issue, and consider whether the milder approach that the Turkish and Brazilian governments advocate has merit.
In El Salvador, worries about Mexico’s spreading drug-related violence into Central America are likely to come up. El Salvador and other Central American countries are seeking a bigger slice of Washington’s anti-drug aid in the multi-billion-dollar, multiyear Merida Initiative. President Obama should not only resist such blandishments, he should use the visit to announce a policy shift away from a strict prohibitionist strategy that has filled the coffers of the Mexican drug cartels and sowed so much violence in Mexico, and now increasingly in Central America as well. Prohibition didn’t work with alcohol and it’s not working any better with currently illegal drugs.
Bribes to Brazil to Continue
An amendment to end what Congressman Barney Frank (D-MA) rightly called “lunacy” failed this afternoon in a depressing show of cowardice on cotton subsidies. The amendment [Amendment No. 89] would have ended payments to Brazilian [yes, sic] cotton farmers that cost U.S. taxpayers $150 million a year. The House rejected the amendment 183 to 246.
Republicans — those stalwart fiscal conservatives! — voted 75 in favor and 164 against. The Democrats showed more courage and voted in favor of the amendment 108 to 82. (These numbers are according to C-SPAN; I will post an update if they prove to be incorrect).
The deal on cotton is one of the more shameful aspects of U.S. trade policy. As I blogged last year, U.S. taxpayers are paying millions of dollars to Brazilian farmers in a deal to ward off retaliatory tariffs Brazil has the right to impose on U.S. goods. That right was granted them by the World Trade Organization in the face of the United States’ continued failure to bring its cotton subsidy program into line with its obligations to other WTO members. Rather than cut off the subsidies to the powerful cotton lobby, though, the United States Trade Representative instead opted to do a deal with the Brazilian government. (No bribes for the poor African cotton farmers also harmed by the price-suppressing effects of U.S. subsidies, though.)
The Hill article (linked to in the first paragraph of this post) points out that some members (presumably the Republicans who voted against the amendment) were concerned that ”the move [to cease the payments to Brazil] could create a trade war if Brazil decided to retaliate.” It doesn’t seem to occur to those concerned members that one way to avoid a trade war would be to abide by international obligations and cease subsidizing U.S. cotton farmers. It would also shave a few million from that huge deficit about which they profess to be concerned.
Dilma Announces Spending Cuts in Brazil
The new Brazilian government of President Dilma Rousseff has announced spending cuts of 50 billion reais (approximately $30 billion) this year. This amounts to approximately 1.3% of the country’s estimated GDP for 2011. Despite good intentions, that is still a very timid effort in curbing the size of government in Brazil: Total government spending (including state and local levels) runs at almost 40% of GDP.
Perhaps the timidity of the proposal is explained by the fact that curbing the size of government is not the motivation for the spending cuts. Nor is it to avoid a looming fiscal crisis. Brazil’s estimated budget deficit for 2010 was 2.3% of GDP; not good, but still a far cry from the fiscal woes of Europe or the U.S.
Dilma’s reason for cutting spending lies in the helplessness of Brazil’s Central Bank in containing the rise of the real without harming the economy. The real has appreciated against the dollar by 38% in the last two years (thanks in large part to Ben Bernanke’s policies at the Fed). Efforts to contain this appreciation by intervening in the foreign exchange market and building up reserves led to a rise in inflation, which closed at 5.9% last year. The Central Bank has raised interest rates in order to curb inflation, but at 11.25% they are already too high and constitute a heavy burden on Brazil’s productive sector. Moreover, high interest rates are a magnet for foreign money seeking high returns, which drives up the value of the real even further.
Cutting government spending wouldn’t seem like the favored policy alternative of a left-wing technocrat such as Dilma Rousseff. However, it is the best way to bring down interest rates and control inflation under the present circumstances. It remains to be seen if the cuts do the trick, but they are certainly a positive sign from Brazil’s new president.
Brazil’s Drug Czar: Let’s Look at Portugal’s Experience with Decriminalization
In yesterday’s Brazilian daily, O Globo, Pedro Abramovay, the drug czar of the new Brazilian administration, said that Portugal’s experience with drug decriminalization should be considered as an alternative to Brazil’s current anti-narcotics policy. This comes on top of Rio Governor Sergio Cabral’s call for drug legalization and of former President Fernando Henrique Cardoso’s criticism, along with other prominent Latin Americans, of drug prohibition. By officially weighing in on the side of harm reduction, Latin America’s giant can have a significant effect on the debate over this hemisphere’s drug war.
Brazil Caves
Notwithstanding the efforts of four brave congressmen, the belated concession to reality by House Agriculture Committee Chairman Collin Peterson, and the misgivings of trade analysts including myself, it appears that the “temporary” deal struck by Brazil and the United States in April to ward off Brazil’s retaliation for WTO-illegal U.S. cotton supports is here to stay:
The government said a deal agreed between the two countries in April to head off up to $829 million in World Trade Organization-sanctioned retaliation against U.S. goods would stay in place until a new U.S. farm bill is passed [in 2012]…
“Brazil doesn’t rule out taking countermeasures at any moment,” Roberto Azevedo, Brazil’s envoy to the World Trade Organization, told reporters in Brasilia. “It is just a suspension of this right”.
He said Brazil could retaliate at any time if the United States did not uphold the agreement, but added that Brazil had no interest in retaliating.
“This process of negotiation and reform is better than retaliation that doesn’t bring benefits to anyone in Brazil’s private sector.” [Reuters]
You will recall that the deal includes about $147 million worth of taxpayers’ money given to Brazilian cotton farmers in the form of “technical assistance,” just so we can continue our own insane cotton support programs without fear of U.S. exporters (including holders of patents and copyrights) being hit by retaliatory trade barriers and unpunished piracy.
Brazil in some senses has the right idea, of course. They recognize, correctly, that retaliation in the form of increased tariffs on American imports only hurts their own consumers, hence their stated desire for “negotiation and reform” instead of santions. But they sure do have a lot of faith in the willingness of Congress to enact reform without serious pressure from, among others, aggrieved trade partners.
I hope their faith and saint-like patience is rewarded. In the meantime, we have (at least) two more years of subsidizing Brazilan farmers in addition to our own.
Is Hillary Clinton Ignorant about Geography, Fiscal Policy, or Both?
Hillary Clinton recently opined that Brazil was a great role model for the idea of soaking the rich with higher tax rates. She didn’t really offer evidence for that specific assertion, but Politico reports that she did say that “Brazil has the highest tax-to-GDP rate in the Western Hemisphere and guess what — they’re growing like crazy.”
I’m not sure if “growing like crazy” is an accurate description, particularly since poor nations normally have decent growth rates because they start from such a low baseline.
But let’s excuse that bit of rhetorical excess and focus on the really flawed portion of her remarks.
Contrary to her direct quote, Brazil does not have the “highest tax-to-GDP rate in the Western Hemisphere.” It may have the highest tax burden in South America. And it may even have the highest tax burden in all of Latin America, but its overall tax burden of about 24 percent of GDP is slightly below the aggregate tax burden in the United States.
I suppose I should issue a caveat and say there’s a very slight chance that the recession has temporarily pushed U.S. tax receipts as a share of GDP below the Brazilian level, but that isn’t apparent from the IMF data. Moreover, there’s no doubt that the tax burden in Canada is significantly higher than the Brazilian burden.
So Secretary Clinton either was unaware that the United States and Canada are in the Western Hemisphere, or has no clue how to read fiscal statistics.
The Four Congressmen of the Cotton Subsidy Apocalypse?
Yet another show of that rare commodity, bipartisan efforts to reduce the size of government today. Four members of the House—two Republican and two Democrat—have sent a letter to President Obama, calling on him to reverse the insane policy of bribing Brazilian farmers with subsidies in an attempt to correct, in accordance with the perverse two-wrongs-make-a-right school of logic, for illegal U.S. subsidies. (There were other questionable parts of the deal with Brazil).
Barney Frank (D, MA), Ron Kind (D, WI), Paul Ryan (R, WI) and Jeff Flake (R, AZ) make compelling arguments for finding a better and more permanent solution to the dispute than the current (dodgy) deal with Brazil, including arguments about fiscal responsibility, the adverse effects of distorting markets in this way, and the implications for the U.S. economy of continuing to operate the cotton program in its current form.
They also cleverly allude to President Obama’s emphasis on enforcement in his trade policy, pointing out that enforcement runs two ways:
Should we fail to effectively reform [the cotton] program now, American businesses and workers wil pay the price because we refused to write a law that complies with our international obligations. We cannot expect our trading partners to play by the rules if we are not willing to do the same. [emphasis added]
The press release from Rep. Flake’s office contains some great quotes, too. Flake, for example, says, “This proposal takes our federal farm subsidy policy from the impractical to the absurd.”
But I’ll give the last word to Rep. Frank, who has this gem to offer:
[T]he Obama administration apparently feels compelled to preserve our right to subsidize American cotton farmers by extending that subsidy to Brazilian cotton farmers. People looking for an illustration of the meaning of the phrase, ‘from bad to worse,’ need look no further.
Ms. Weaver Goes to Washington
Today in Washington: actress Sigourney Weaver testifies before the Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard of the Senate Committee on Commerce, Science and Transportation Committee on the topic of ocean acidification. Because, you know, she played an environmental scientist in Avatar. It’s the best fit since Jane Fonda, Jessica Lange, and Sissy Spacek — all of whom had played farm women — testified on America’s agricultural crisis.
Congress doesn’t have time to vote on presidential nominations. It doesn’t bother engaging in serious oversight of presidential power and civil liberties abuses. It looks at the ceiling and whistles as the national debt approaches Greek levels. But members of Congress have time to listen to an actress discuss the topic of ocean acidification.
This seems like a topic for “Really!?! with Seth and Amy” on Saturday Night Live. Really, Senate Commerce Committee? You think Sigourney Weaver has important information that you need to know? Really? And you’re not just doing this to get yourselves on television? Really!?! And you think the most important thing members of Congress could be doing today is getting their pictures taken with Sigourney Weaver? Really!?!
Of course, this is not just a one-day thing for Sigourney Weaver. She also traveled this month to Brazil to try to stop the construction of a dam. Because who would know better than a Hollywood-Manhattan actress how to make tradeoffs between energy needs and environmental risks in Brazil?
Now let me just say that I’m not arguing that ocean acidification isn’t an important topic. And I’m not criticizing Avatar or its defense of property rights. I’m just questioning whether Sigourney Weaver, Sissy Spacek, Jeff Daniels, Nick Jonas, and the Backstreet Boys have the kind of expertise that Congress ought to draw on in deciding how to run my life. Or then again, maybe planning the economy and running other people’s lives is farce at best, and Congress should just hold hearings with Will Ferrell and John Cleese.
Peterson (Finally) Changes His Tune
I’ve written before about Rep. Collin Peterson’s (D, MN) disdain for the World Trade Organization, and its rulings against U.S. farm programs. However, in launching his 2012 Farm Bill listening tour, the Brownfield blog reports that he sees that perhaps some changes might be necessary after all. And, lo and behold, he cites the WTO rulings as the reason:
One of the key issues [in the 2012 Farm Bill] will be what to do about the way that cotton farmers are subsidized. The committee’s chairman, Rep. Collin Peterson, D-Minn., said today that the cotton program will have to be overhauled in the wake of Brazil’s successful challenge to the subsidies at the World Trade Organization. The Obama administration agreed to change the program in a deal to avert retaliation against U.S. exports to Brazil. [link added]
Subsidies for cotton currently mirror those for corn, soybeans, wheat and other commodities, but there’s no reason why they have to be the same for each crop in the future, said Peterson. “In the past we’ve tried to have a one-size-fits-all approach, but maybe that’s not the case in the future. I’m willing to consider that,” he said. “If we don’t address it, we may be back in the soup again with potential retaliation issues.” [emphasis mine]
Finally, the penny drops.
Deal or No Deal?
It appears that the United States has reached a temporary deal with Brazil over U.S. cotton subsidies, which were deemed illegal under world trade rules many years ago. (Here’s Cato adjunct scholar Dan Sumner on the case and its implications. Bloomberg’s Mark Drajem and the New York Times’ Sewell Chan have more details on the deal.)
This comes not a minute too soon from the U.S. perspective: the deal was reached just one day before Brazil was to begin imposing over $800 million worth of tariffs and WTO-approved intellectual property rights violations against American firms in retaliation for U.S. intransigence in complying. (Snarky aside: where’s your commitment to ”trade enforcement” now, Mr. Obama?)
What’s in the deal, you ask? Well, it is certainly not, as might have been hoped, an end to all cotton subsidies immediately. What it does include are some “interesting” sweeteners to Brazil. First, over $147 million in “technical assistance” to Brazilian cotton growers. In an excellent blog post at SFGate, Carolyn Lochhead makes the obvious-to-everyone-except-policymakers point that now taxpayers are paying for support to Brazilian farmers as well as American ones.
Second, the United States will make some changes to the export subsidy-esque parts of the cotton program, and promise to address some of the broader issues in contention as part of the next farm bill. (I’ll believe that when I see it.)
The third element, though, is pretty worrying. Apparently the United States has also agreed to evaluate whether a certain area of Brazil is “disease free,” so that farmers from that area can export their beef to the United States. The reason why I find that a concern is that under the terms of the WTO Agreement on Sanitary and Phytosanitary Measures, recognizing disease-free areas on a scientific basis is an obligation the United States has to WTO members. The area is either disease free or it is not, and the United States should not be using it as a compensatory tool (nor should Brazil accept it as such) . The International Food and Agricultural Trade Policy Council’s Carlo Perez del Castillo (a former Uruguayan trade minister) put it well, if subtly: “[P]ublically linking what should really be a scientific issue of whether a specific state in Brazil is or is not free of certain animal diseases, to a more political agreement such as this one on cotton, is rather unusual.”
I’m not a trade lawyer, and I have no inside knowledge of Brazil’s long-term legal strategy here. But I sure hope this isn’t the end of the saga. If they have caved in to (1) a bribe that puts money in the hands of U.S. farming consultants, and out of the hands of U.S. taxpayers, (2) a good dose of ”your cheque is in the mail,” and (3) a final insult of “OK, as a special favour to you, we’ll do what we were supposed to have been doing all along,” then it’s a sad day for the WTO’s dispute settlement system.
My good friend, ex-Catoite, trade lawyer, and all around smart fellow Scott Lincicome offers his excellent-as-usual perspective on the deal here.
Eat, Pray, Love, Marry–as Long as You’re Heterosexual
Elizabeth Gilbert, the bestselling author of the memoir Eat, Pray, Love, is back with a new book, Committed: A Skeptic Makes Peace With Marriage. In her earlier book Gilbert reflected on her broken marriage, her travels around the world “looking for joy and God and love and the meaning of life,” and her determination never to marry again. In the new book we learn that she surprised herself by meeting a man worth settling down with, a Brazilian living in Indonesia. So they became a couple and settled near Philadelphia, with Jose Nunes regularly leaving the country to renew his visitor’s visa.
But then came a legal shock:
She was in the early stages of research for that book when Nunes was detained, after a visa-renewing jaunt out of the country, by Homeland Security Department officials at the Dallas-Fort Worth International Airport. Popping in and out of the country as he’d been doing was not legal, Nunes was told, and if he wanted to stay permanently they would have to marry.
Gilbert didn’t want to marry. She and Nunes spent 10 months traveling in Asia. But then, reading about marriage, writing about her aversion to marriage, getting closer to her new partner, she decided to marry. And so they did. And they lived happily ever after in the New Jersey suburbs.
A happy ending all around. As long as you’re heterosexual. Because, of course, if you’re gay, the U.S. government will tell you that your life partner from Brazil may be allowed to visit the United States, but he won’t be allowed to stay. And guess what? He could stay if you were married, but you can’t get married. Catch-22. And even though you could now marry in some foreign countries and some American states and the District of Columbia, the Defense of Marriage Act still prevents the federal government — including its immigration enforcers — from recognizing valid marriages between same-sex partners.
Is this just a theoretical complaint? As a matter of fact, not at all. At least two well-known writers have recently faced exactly the same situation Gilbert did: a Brazilian life partner who couldn’t live in the United States. Glenn Greenwald, a blogger, author of bestselling books, and author of a Cato Institute study on drug reform in Portugal, has written about his own situation and that of others. Like Greenwald, Chris Crain, former editor of the Washington Blade, has also moved to Brazil to be with his partner.
Carolyn See, reviewing Gilbert’s book in the Washington Post, wrote, “The U.S. government, like a stern father, proposed a shotgun marriage of sorts: If you want to be with him in this country, this Brazilian we don’t know all that much about, you’ll have to marry him.” A shotgun marriage, sort of. But at least the government gave Gilbert a choice. It just told Greenwald and Crain no.
This unfairness could be solved, of course, if the government would have the good sense to listen to Cato chairman Bob Levy, who wrote last week in the New York Daily News on “the moral and constitutional case for gay marriage.” And it may be solved by the lawsuit seeking to overturn California’s Proposition 8 that is being spearheaded by liberal lawyer David Boies and conservative lawyer Ted Olson, writes Newsweek’s cover story this week, “The Conservative Case for Gay Marriage.” Until then: eat, pray, love, marry — as long as you’re heterosexual.
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