As I wind down my stint on the Glom with many thanks to my generous hosts and indulgent audience, I am floored at how far I have strayed from the plan.  Two months ago, this was going to be an orderly rollout of brainwaves on somewhat scholarly topics and works in progress.  Two weeks ago, this was going to be an interesting way to practice our countercyclical trade.  But events intervened with way too many notes for my meagher processing capacity.  Paper piles grew, laptop froze, phone, TV and radio talked over one another.  I hereby abandon any attempt at coherence with the following loose parting thoughts:

• Following up on David's post, here is today's word from Anne-Marie Slaughter on regulatory networks in the aftermath of the crisis.  Slaughter highlights the role of the Basel Committee.  At the G-7 press conference this evening, Paulson pointed to the Financial Stability Forum for future regulatory coordination.  Note their April and October reports on "Enhancing Market and Institutional Resilience".
• With deposit guarantees and bank nationalizations proliferating, the question of who is responsible for deposits with foreign bank branches is sure to resurface in many ways and many places.  Iceland's banks in the U.K. are controversy du jour, but it will not stop there.  This old spat between Citi and Wells Fargo over WF's deposits in Citi's Manila branch looks poignant in light of current events:  Citibank, N.A. v. Wells Fargo Asia Ltd. (Citibank I) 495 U.S.660 (1990) and Wells Fargo Asia Ltd. v. Citibank (Citibank II) 936 F.2d 723 (1991).
• As to the executive compensation controversy, EU finance ministers have announced principles of their own here (see pp. 13-14; the whole document is a worthwhile window on the EU crisis response).  It may look general verging on platitudinous, but French Economy Minister Lagarde suggested this morning that at least some national authorities plan rather substantial measures.
• Those interested in circuit breakers may want to take note of broken circuits in Iceland, Indonesia, Romania, Russia and Ukraine this week.  Shutting down stock markets has not done much for confidence so far, but of course who knows how much worse it could have been without, whether this translates to larger markets, etc.  Proving negatives is tricky.
• Bloomberg has a readout of the Lehman CDS auction here.  It will be fascinating to see how the CDS stock affects what happens in bankruptcy.
• There are people who make a living interpreting G-7 communiques (here is today's).  I know not to go there, but refer you to Felix Salmon for the day's accomplishments.  David Wessell called it "theater" on Washington Week -- not a compliment in this environment.  Let us see what the G-20 do tomorrow.
• Morris Goldstein has a lucid take on regulation in the aftermath.  See his recent talk here; video here.
• Further to the mark-to-market controversy, regulatory accounting adventures are crisis perennials. U.S. v. Winstar 518 U.S. 839 (1996) is famous.  My favorite example is this 1989 letter from the SEC to the U.S. Treasury, which allowed banks to reduce developing country debt by 30-50% without booking losses. Download sec.Mulford Letter.pdf (reprinted from Hay & Paul, Regulation and Taxation of Commercial Banks during the International Debt Crisis).

Many thanks and all the best.

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Iceland may ask for a loan from the IMF to go along with the $5 billion from Russia.  Until this bit of news, many folks I know were scratching their heads in wonder at why Russia and not the Fund.  Maybe it was false pride.  Maybe they thought Russia's friendship (see Ed Luce in the FT) was preferable to IMF conditionality.  Maybe in today's weird world, where raising money from foreign sovereigns is Wall Street Normal, a Russian loan looked like a market solution.

Today's New York Times feature on Iceland starts with the improbable "People go bankrupt all the time.  Companies do, too.  But countries?"  Actually, countries probably go bankrupt way more often than people on a per capita basis (if only because there are fewer countries and most live longer than people or companies).  Here are some examples.  Deep inside, a concession:  "Nations have gone bankrupt before, of course, but countries like Argentina -- not a country that thinks of itself as closer to Europe than the developing world."  Actually, Argentina often thinks of itself as Italy.  And Russia is in the G-8.  And the U.K. is nationalizing banks.  Anyway, it goes to show that we are all emerging markets now.  Submerging, actually.

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Apropos David's and Gordon's posts, for years now, G-7 gatherings have served to highlight the group's waning relevance.  Having China to lunch every summer made no dent in the global imbalances that landed us in the current puddle, and made the old-power finance ministers look less, not more important.  As reform proposals mushroomed (e.g., Bradford and Linn at Brookings, Bergsten at the Peterson Institute), G-groups old and new seemed to just plod along in search of coherent missions.

Today's tandem rate cut is a hopeful sign for good old-fashioned macro coordination, especially in the wake of recent European flailing.  The officially-coordinating cutters were the central banks of Canada, the United States, the United Kingdom, Sweden and Switzerland, along with the European Central Bank. This covers six out of the seven G-7 and ten out of the eleven (yes) G-10 (Japan cheered).  China and a few other G-20 went along without admitting to formal coordination.  This FT exposition is most helpful.

Wednesday's actions make the G-7 and IMF meetings in a few days a much more interesting prospect.  Recent events do not exactly rebut criticisms of the G-7, but they may spur its morphing into a credible successor and/or prod a sensible evolution of the G-missions.  To wit, Bloomberg reports a special meeting of G-20 finance officials this weekend (they will be in Washington anyway for the IMF/World Bank annual meetings). 

It will be interesting to see the extent to which all this translates into regulatory convergence.

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While Larry Ribstein is shadow boxing with SOX II, I am looking at today's interest rate cut by central banks around the world and wondering how long it will take before talk of a new global financial services regulator begins to gain traction in the US.

We in the US tend to be a tad self-absorbed, so we see Lehman failing and other U.S.-based investment banks floundering, and we reflexively think about domestic solutions. In the meantime, the rest of the world is absorbing the shock waves emanating from New York and thinking that a global financial system may require supranational oversight. The idea is already being promoted in England and elsewhere.

Will it catch on here?

It's not surprising that the global coordination described by David was initiated by central banks, not elected politicians. Civil servants are more inclined to take a long view and less inclined to play to local interests. My hunch is that U.S. politicians will remain focused on domestic solutions (is there any doubt that SOX II is already being drafted?), but the SEC, the Fed, and other domestic agencies will step up their efforts at global coordination, encouraged by the IMF, the World Bank, and other existing institutions. These things take time, but the drift in the direction of a new global financial services regulator is already perceptible.

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My friends who practice international political economy have long flogged the fuzzy line between states and firms, public and private capital.  It has been truly striking in recent days to see the distinctions dissolve in mainstream policy talk.

• Lehman 2008 is Argentina 2001 – a long-overextended debtor whose lenders should have known better.  Both marked lines in the sand for official assistance; Argentina’s turned out to be cleaner – no one else collapsed in its wake.
• Wall Street now is Asia ten years ago.  In this view, both are victims of liquidity runs that brought about self-fulfilling collapse, except “[f]or countries then, read banks (or markets) today.”

• Iceland is a hedge fund. Russia, poised to inject capital in Iceland, must be … an offshore billionaire … or China.

This rhetorical turn has interesting implications for regulation.  There is no true lender of last resort or regulator for countries going down the tubes – the IMF’s attempt to fill that role in recent decades illustrates the point, sometimes tragically so.  Does the new talk reveal regulatory impotence? ... (And for the optimists:) reframe the mandate for international cooperation?

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Since the credit crisis began, “beggars can’t be choosers” (BCBC) has become an increasingly prominent argument against restrictions on sovereign wealth fund investments in the United States. Here is one of my favorite examples, arguing against disclosure lest the citizens of Wealthland get wind of their government losing money on Wall Street while being badmouthed in Washington. Whatever your views might be on sovereign investment, BCBC strikes me as a lousy premise for regulation. Even now. But I heard a more nuanced and sensible variation on the argument at a conference yesterday: the fact that investment flows are drying up raises the potential cost of regulatory overreach; it should not preempt a debate on the merits.

Of course this may be a distinction without a difference. Greg Ip at The Economist observed at a talk today that Sen. Schumer had led the fight against the Dubai Ports deal a few years ago, but now may send banks hither and yon in search of capital. Here is some evidence of Schumer moderation, but hardly a turnabout. Schumer puts a surprising lot of stock in the IMF-brokered (NOT/NOT IMF-written) principles coming out next week. My two cents on the principles and the sovereign wealth brouhaha are here (a short version sans footnotes coming up in The International Economy).

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Fortis, the failed financial conglomerate jointly rescued on Sunday by the governments of Belgium, the Netherlands, and Luxembourg, has assets several times the size of the Belgian economy.  Each of the three governments took 49% of Fortis’s banking subs in their respective countries; the total price tag was just over $16 billion.  Gives one pause about the prospects of financial regulation at the national level.  At least we have a global lender of last resort, says Brad Setser.

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The folks at the Glom kindly scheduled this guest blog to coincide with the release of the IMF-brokered code of conduct for sovereign wealth funds, due out in early October.  Who knew we would be in the middle of the Greatest Crisis since the Great Depression.  With the Paulson package defeated and oblivion upon us, it seems appropriate to start with a long view on sovereign wealth and crises:

Earlier this month, the FT reported that KAMCO, Korea’s state-owned asset management company, is looking to buy just under a billion dollars’ worth of distressed U.S. assets.  Ten years ago, KAMCO was reorganized in the wake of the Asian Financial Crisis to take bad loans off the books of Korean banks.  At the time, there was huge opposition to selling assets to foreign investors at fire-sale prices.  KAMCO more or less finished cleaning up at home by 2003, and began developing its international asset management and advisory business.  Now it is time to go shopping.  Assuming some version of an AMC will come out of the U.S. Congress before the world ends, at least we have something to look forward to in a few years.  FWIW, Badbank Harmony (KAMCO’s consumer arm) is a fetching name.

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Can it be true that the Doha Round is dead?  Or is this just yet another "I really mean it, we are totally doomed" failure before the deal gets done?  The Times appears to have gone, hook, line, and sinker for the "Doha is dead" take, and it may be right (note also the WaPo's Trade Talks Crumble.

Trade rounds have never failed in the end, so the failure - and there was lots of trumpeting that this would be the big week for a breakthrough - of the last and final (for now) effort to save Doha is big.  But let's step back and think about how big:

• tariffs on goods are at zero or so, and that won't change.
• this round was supposed to be about helping out the developing world (though really it was about taking down the farmers in the EU, Japan and US, in the name of helping out the developing world), and the developing world comprises a minute proportion of global trade.
• others know more than I, but if you want one takeaway on why things failed, it is this: the developing world wanted more agricultural concessions (i.e., fewer barriers, but maybe most of all fewer subsidies, which have always been sorta okay under the GATT and WTO) than the US and EU were willing to give, and if they were willing to give on services (ie, letting American banks and lawyers operate more freely abroad), it just didn't turn out to be a priority.
• my view: if you aren't going to get serious about services, this was the least important trade round ever.  Its failure isn't quite the crisis that it may be portrayed to be.
• you won't feel that way if you find first world farm support annoying, though.
• everyone loves free trade, and China and India basically enjoy it.  But if you want to conclude that the failure of Doha would mean that we are entering an era of unfree trade (not true, in my view), then the continued rapid growth of the big Asian countries will be an interesting comment on the relationship between trade and development.

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I've got a post up at Opinio Juris responding to Susan Franck's essay on the promise of empirical research in international economic law.  Susan keeps track of the outcomes of investment arbitration disputes, a real service to anyone interested in the field, and a ton of work, given that the awards, panels, etc in those disputes are a. nominally kept secret, and b. not organized in a useful fashion anywhere else.  Anyway, she thinks empirical research is the way to go.  I hem and haw in response here.

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This looks like an idea destined for a free-thinking town near you: local currency. Marketplace ran a story about the Lewes Pound, which is just the latest in a number of local currency launches. Check out BerkShares, Salt Spring Island Dollars, and the Totnes Pound, among others.

Why local currency?  The Community Currency Guide explains the aspiration:

Community Currency allows localities and regions to create real wealth in their local economy by matching the unmet needs with the underutilized resources. It also provides a way for the wealth that is produced locally to benefit local people, rather than being siphoned off to distant companies.

Does it work? Any readers from Ithaca?

UPDATE: If this topic interests you, check out John Chung's new and mind-expanding article on SSRN entitled "Money as Simulacrum." That title may send you running for the exits, but take a closer look. This is an ambitious paper exploring the role of money in modern society. Here is the motivating idea, but you'll have to read the paper to see the implications Chung draws from it:

Our money is now pure simulacra, pieces of paper completely decoupled from any tangible backing. The only reason our money functions as money is because the law requires us to treat it as such by fiat, and because the result is that we believe that the money has use and value. Our money is therefore a pure abstraction supported only by two other astractions, law and faith. (p. 71)

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Two economists at the Kauffman Foundation, Robert Litan and Tim Kane, have started Growthology, a new blog on entrepreneurship and economic growth.  Gotta love the name.  The Kauffman Foundation announcement is here.

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Some interesting findings on CEO hirings and firings from a recent Economist piece:

1.  Importance of finance.  One-fifth of US CEOs in 2005 were formerly CFOs, almost twice the percentage from a decade prior.  Increased focus on financial reporting and SOX compliance has likely augmented the CFO's overall importance within companies.

2.  Build or buy?  Both in Europe and the US (among the FTSEurofirst 300 and the S&P 500), "lifers" make it to the executive suite more quickly on average than "hoppers," defined as those who jump through 4 or more companies.  Lifers make it in 22 (US) or 24 (EU) years on average, while hoppers take at least 26 years.  Information asymmetry probably explains this difference.

3.  Women at the top.   Eleven percent of US CEOs were women in 2001.  In the early 1980s, by contrast, there were none.

4.  Time to the top.  The average climb to the top took 28 years in 1980.  By 2001, it took only 24.  The average CEO had fewer jobs on the way up (five instead of six) and spent less time at each intermediate job (only four years) than before.

5.  Naked capitalism.  In a set of surprising (to me) results, EU capitalism appears to be a bit more rough-and-tumble than in the US, at least as regards CEO tenure.  EU CEOs have much shorter tenures than in the US and have a tougher time staying there.  They're also much less likely to be lifers in Europe (18% versus 26% in the US). Average CEO tenure over the past decade was just over 9 years in the US, but under 7 years in Europe.  European CEO firings accounted for 37% of turnover, but only 27% in the US.  European CEOs are also younger on average than in the US--54 versus 56 years of age.   

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Thanks to the gang here at the Glom for giving me the chance to blog with them over the past two weeks.

Although every day seems to bring another take on sovereign wealth funds, I was interested in the comments of Knut Kjaer, who ran Norway's SWF for years.  First, he argues that

Particular regulations for SWFs would be a step in the wrong direction. Instead, we should discuss what conditions are needed for the professional management of publicly owned financial assets.

He then contrasts the delegating and "empowering" money-management culture to the "top-down" public governance culture that often results in group-think and that may result in SWFs "giving away returns and, in some cases, taking dangerously wrong decisions" (not that delegation doesn't create risks to be managed; see Kerviel, Jerome and Leeson, Nick).  He also notes that transparency of results is an important component of professional management since it creates accountability, and accountability forces the management to explain its investments objectives and strategy to the media and public.

Finally, he reminds of the dangers of a quick and one-size-fits-all management model for public funds:

None of the current governance models are perfect. But the end game is not a universal model. The huge variety of purpose in fund as well as cultural and political considerations will lead to different ways of building successful management.

Good advice, since Norway and even the Middle-Eastern SWFs don't worry legislators very much--the big concerns are obviously Russia and China (which apparently hopes to operate its SWF as transparently as Norway's SWF, according to the recent 60 Minutes report).  He implies that China will need to do even more than Norway currently does to allay fears about its activities.  For now, though, I'd just take a basic annual report from China. 

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Marketplace is spending the week in the Middle East and is focusing on Dubai. Extraordinary stuff.

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While we're on the subject of the would-be governors of financial globalization, let me point you to Frederic Mishkin's anodyne defense of the phenomenon and Dani Rodrik's latest critique of it.  Mishkin is the newest member of the Federal Reserve, and it means that his speech is pretty rah-rah and yet check-it-with-the-boss bland, but check it out if you want the pleasant basics.  Rodrik's editorial says this:

It is time for a new model of financial globalisation, one that recognises that more is not necessarily better. As long as the world economy remains politically divided among different sovereign and regulatory authorities, global finance is condemned to suffer deformations far worse than those of domestic finance. Depending on context, the appropriate role of policy will be as often to stem the tide of capital flows as to encourage them.

I'll mildy suggest that Rodrik - the skeptic of all things global - seems to be animated by a particular interest in certainty, or an inclination that the traumas of creative destruction and financial crises on the workers who exchanged free trade commitments for a social safety net ought to be avoided.  Or at least he is when he's thinking about the developed world.  I could be misreading him, though, and he doesn't appear to be interested in placidity in the economic programs of developing countries.  Anyway, the editorial isn't just a wringing of hands.  He and Arvind Subramanian propose two globalization countermeasures:

First, some variant of petrol tax in the main oil-importing countries (including the US, China and India) is essential to cut demand and reduce oil prices and hence the current account surpluses of oil exporters. That such measures should be taken for environmental reasons or that they would reduce the size of sovereign wealth funds only adds to their attractiveness. Second, some appreciation of east Asian currencies is necessary to reduce their surpluses. Even though undervaluation is a potent instrument for promoting growth in low-income countries in general, at this juncture self-interest on both sides calls for an orderly unwinding of current account imbalances.

This appreciation can be achieved either unilaterally or, if necessary, multilaterally through the World Trade Organisation, as a recent Peterson Institute paper has proposed.

Hat tip: Dingel.

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• Iceland is thinking of unilaterally, and uninvitedly, adopting the Euro, which, if it happens, will put the Mid-Atlantic firmly in the E-denominated camp.  Will the Maritimes retain their affection for the Canadian dollar?  HT: Trade Diversion.

• As if Doha didn't have enough problems, they're trying for a services breakthrough too.  Interestingly, the negotiations have been delegated to rich countries, and the division appears to be the old US-EU one.  HT: BNA.

• It took until 2008 before China - now the most sued and most countervaling dutied WTO member - lost its first case.

• Dissatisfaction with the fundamentalist options in Pakistan leads Dan Drezner to conclude that "fundamentalist parties stink at governance."  I'm not sure that anti-corruption advocates would agree.  I'd be interested in knowing whether fundamentalist parties tend to pursue statist/dirigiste domestic policies or relatively free-market-but-closed-on-sabbath ones.

• And congratulations from the Glom to IntLawGrrls, which has just celebrated a first birthday and turns out interesting content every single day.

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A recent piece in the Economist notes the various orderings of CSR priorities across different countries.  For example, the 3 most important CSR issues in the US are health care, the environment, and job losses from outsourcing, according to survey data.  In Brazil, only the environment makes it into the top 3.  Job losses from outsourcing ranks 13th in Brazil.  Brazil's other two top CSR concerns are safer products and affordable products.  Besides priorities, CSR institutional endowments--NGOs, think tanks, technical expertise--and traditions likewise vary across countries, such that countries' progress and priorities may tend to diverge over time. 

Developing countries, especially the BRICs--Brazil, Russia, India, China--are likely to grow in influence as their economies expand.  They may become important sources of standards setting, especially for the developing world.  Observers predict that China, for example, will be "deeply involved in the management of standards" in the next five years, and then "they'll build their own, and they'll become exporters of standards."  Given their differing priorities from industrial countries, China and other emerging markets are likely to want to define corporate responsibility to account for these differing priorities. 

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A new sign of our tremendous influence here at the Glom is that we're banned in China.  Even our name must tip our hand that we're a hotbed of capitalist roaders.

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A recent W$J poll on globalization and immigration ...

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Who should you hire to arbitrate your way out of a terrible international deal?  It's all about Freshfields and Sherman & Sterling, according to the lawyer listmakers supreme Chambers and Partners.  Those are the only two firms in the top band, but one band back is

• Allen & Overy
• Clifford Chance
• Debevoise & Plimpton
• White & Case
  

If these rankings are accurate, it shows not just that the London firms fare well in this niche, but that said niche has little relationship with with the Amlaw 200, even where the firms are American.  I guess the Chicago, New York, and Los Angeles megafirms would rather direct their attentions away from arbitrations of this sort.

Inspired by: Opinio Juris.

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Anti-dumping - or slapping tariffs on imports because their prices are too low - is thought to be one of the last bastions of unfree markets in the developed world.  Since the 90s, the US and the EU have grown their anti-dumping cases, but according to the WTO, there's some new anti-dumping sheriffs in town - and it's  possible that the old ones are thinking about retiring. 

• First, 57 new final anti-dumping measures were applied by countries during the first semester of 2007, compared with 71 new measures for the corresponding period of 2006.  That's a decline, of course.
• Second, the leading initiator of anti-dumping investigations was India (with 27), following by the EU (18), Argentina (13), Brazil (13), China (11).  The US had 8. 
• Third, developing countries accounted for two-thirds of the new investigations.  That's growth, and it is growth led by India, which has been a leading anti-dumping investigator for some time now.
• Finally, though it doesn't have much to do with anti-dumping, it's worth noting that the WTO continues to be criticized by developing countries for its lack of transparency - particularly the lack of transparency by private standard setters, on which it sometimes relies.

The stories are here and here (hat tip, BNA).

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Harvard Professor Charlie Nesson loves poker so much, he thinks it should be taught to adolescents.  Harvard Professor Alan Dershowitz claims to play in the summers with Larry David.  Now they are both somehow using their criminal and cyber skills to get involved in the defense of poor little Antigua's so-far successful efforts to force the US to let in its online poker providers.

How successful?  Well, successful enough that the US has just tried to make online gaming a new issue in the Doha round.  It's also in talks to pay billions in damages to Antigua and other countries with online poker providers based on the litigation so far.  But settling out of court may not be enough for Antigua, which has a hole card in the WTO tribunal itself, before which the island country is seeking the right to slap $3.4 billion in punitive tariffs on American intellectual property.

So maybe Nesson and Dershowitz aren't WTO experts.  But they do know a laydown hand when they see one.

With apologies to Vic - our poker guy - for glomming onto the subject of the post.

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What exactly do you have to arbitrate in a contract dispute with an arbitration clause?  In light of the House of Lords' reformulation of the English approach on Wednesday - the Times is calling it landmark, and English lawyers think it is a "big win for London arbitrators" - it seems wise to check in with Susan Franck.   She says - if I got the gist of our interaction right - that “arising under” language in contracts has been more narrowly tailored in the UK than “arising out of or related to” language – which meant there was more scope to go straight to court if the "arising under" language appeared in the dispute settlement part of the contract.

German courts never bought this rather technical distinction.  Nor, now, do those in the UK.  On Wednesday, Lord Hoffman held that "the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal.  The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction"

Okay, so a clear statement about what's excluded from the scope of arbitration is required before you can go to court on that issue.  How will it play out?  In the case Lord Hoffman decided, the "arising under" language was interpreted severably, so that even a contract induced by fraud could be subject to mandatory arbitration if the parties to the fraudulent contract so agreed.

Which certainly is a broad interpretation of "arising under" language.  I'll leave it to our wise commenters to speculate as to how the new UK rule matches the approach of American arbitrators.

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South Korea is a surprisingly active player in the WTO (the most active are the US and EU, China also gets sued a ton, but it doesn’t sue much yet), and if you want another piece of evidence that trade is moving away from exclusively North-North and North-South dynamics, check out the South-South litigation between Indonesia and Korea on paper products.  Korea has been found to have created a trade barrier through its anti-dumping investigation of Indonesian imports, which is the sort of thing the US and EU do all the time (opinion on enforcement here).

The US, meanwhile, is re-examining the way it analyzes export dumping in intellectual property cases.  That used to be the province of proceedings before four well-versed ALJs in the International Trade Commission; now Congress is considering adding new, less-insulated judges to the mix.  This is not earth-shattering, but reflective of its own little trend – federal agencies don’t use traditional independent administrative law judges like they used to, which has created lots of confusing new categories of IJs, MSPB adjudicators, semi-formal adjudications, and the like.  The administrative law section of the ABA is angry, mostly on account of its general view that Congress should “apply the … requirement that ALJs preside over APA hearings, in new or existing federal programs.” (link to letter currently unavailable)

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Dani Rodrik is the development economist who likes to zig where everyone else zags.  He appears to think that Korean, Singaporean, etc, style dirigiste economics often works better than shock therapy transitions to absolutely free markets, if you're interested in economic growth.

Okay, great, got him ... he's one of the few people willing to defend industrial policy as a tool of development.  Savvy place to be, given that so many countries in practice think industrial policy can promote growth, but so many economists in theory think it doesn't.  He can arbitrage that.

But wait: even though shock therapy isn't good, Rodrik thinks that Naomi Klein's uber-paranoid book on how shock therapists like Jeff Sachs and Milton Friedman control the world needs to be trashed.  (So does Geoff Manne, in language at least as zippy as Klein's.)

And double-wait: Rodrik thinks that "fair trade" programs, under which consumers choose to purchase products with sustainability guarantees, may not create suitably high prices.  Plus the decision about what exactly goes into fair trade certification is not transparent (sounds like Rodrik thinks there needs to be a Global Administrative Law).

Huh.  Maybe Rodrik is all about public, as opposed to private, development initiatives.  But whatever the case, he doesn't appear to be a big coalition builder.

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Does globalization create races to the bottom or the top?  David Law suspects that in at least one area, the cycle is a virtuous one.  In his view, countries now “compete for financial capital and human talent is by offering bundles of rights and freedoms that are attractive to investors and elite workers.”   Moreover, he suggests that “states bid for elite workers by offering both pecuniary and non-pecuniary inducements that include more or less generous bundles of rights and freedoms. Countries that do not boast an attractive bundle of this kind must compensate by offering what this article calls a freedom premium, which amounts to a competitive disadvantage in the global market for human talent.”

Here’s Larry Ribstein on the paper, which I like lots.  It seems to turn on an idea that the migration of talented workers is both a) particularly widespread, in light of the advent of knowledge-related industries that depend on human talent, and b) a source of regulatory competition.  And while only 3%ish of the world has migrated from one country to another, and many of those who have left have gone to the Gulf, I find the claim to be plausible now, and likely to only become more accurate as more of the Ph.D.s minted in the west but hailing from elsewhere decide to stay where they have studied.

Here’s the WTO conference, attended by Pascal Lamy and keynoted by Jagdish Bhagwati, on regionalism (like the EU and NAFTA), a possible competitor to global markets.  Here’s what happened to one global corporation, TimeWarner, when one of its magazines dared to critique an Indonesian dictator.  And here, in honor of the day, is a comparison of sales figures between 9/11 fiction and nonfiction.

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International tribunals theoretically don’t follow precedent. But in reality, they cite prior decisions all the time making the conventional aphorism “there is no stare decisis in international law” one of the least important and most inaccurate rules of international procedure. I like citation studies, and I like Jeffery Commission’s work on ICSID. He has compiled a table of each authority cited in each ICSID decision that he could find (see table A).

By my very rough count, the most cited case by ICSID panels is the Barcelona Traction case, decided by the International Court of Justice in 1970. In Barcelona Traction, the “World Court” encouraged states to create investor protections via treaty, rather than relying on other principles of international law (here is Andreas Lowenfeld on the case). Something of a throat-clearing decision, in other words, it has been cited in 18 of 151 publicly available ICSID arbitration decisions between 1972 and 2006.

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People who have been following the Antigua/US internet gambling case won't find much new in the Times' recent wrap.  Antigua has won the case - its internet gambling sites are barred from the US, but domestic providers of online track wagers and lottery ticket sales are not, and that, the WTO tribunal has concluded, is a violation of the national treatment obligations in the GATS, which requires the US to treat foreign and domestic service providers in the same way.  The question now turns on the remedy, which raises interesting fundamentals of international law and international relations.  Will the US ignore its treaty obligations to tiny Antigua?  Will the WTO dare to impose a remedy that really hurts America?  These questions suggest that the dispute could turn on whether a country strong enough and interested enough to ignore a particular international legal obligation will do so.  And that is the sort of thing that realists - who are skeptical of international law - often think will happen.

But there's much more litigation that needs to occur before these questions are answered.  Still the Times's article is pretty good, not least because it offers Charlie Nesson, a professor who doesn't do much with trade, saying: 

“Think of this from the W.T.O.’s point of view,” said Charles R. Nesson, a professor at Harvard Law School. “They’re this fledgling organization dominated by a huge monster in the United States. People there must be scared out of their wits at the prospects of enforcing a ruling that would instantly galvanize public opinion in the United States against the W.T.O.”

A useful corrective to WTO specialists who like to think of their organization as all but all-powerful.

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Susan Franck and Jeffery Commission are my go-to sources for information on the exploding universe of investment arbitration claims against countries. Think NAFTA, or, more commonly, arbitrations done pursuant to bilateral investment treaties by a World Bank outfit known as ICSID. If a foreign investor thinks that, say, Argentina treated it differently than it did domestic investors when it passed that currency stability law, then it can go to ICSID after a straightforward exhaustion process. The idea is that foreign investors don’t want their rights judged by the domestic courts of less developed countries; ICSID is the mechanism used to contract out of that default presumption.

But you probably knew that. What you didn’t know is which American arbitrators are most likely to handle ICSID disputes. Commission has come up with the answer (see tables D and E). Charles Brower is our iron man, with 6 concluded and 6  pending arbitrations under his belt. He is an emeritus White & Case partner. Michael Reisman (Yale, 4 pending)), and Andreas Lowenfeld (NYU, 2 pending + 2 concluded), looked like our most commonly used professors, though Ronald Cass (BU), David Gantz (Arizona)  and David Caron (Berkeley) have also received work, as has Thomas Buergenthal (a professor/international judge), Benjamin Civiletti (a former AG), and Fred Fielding (the White House counsel).

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Last March, I made my first trip to mainland China with a fortnight's stay in Shanghai.  Like so many other recent visitors to that city, I was impressed with the Gattaca skyline and relentless construction.  Also notable was the incredible work ethic of my students, who practiced law during business hours, attended classes for three hours each evening, and then stayed up for several more hours reading homework in a foreign language and alphabet. 

(The painfully delicious xiaolong bao also left an impression.)

It's easy to see -- and practically impossible to miss -- the surging energy and potential that has won China so many magazine covers and votes for nation most likely to be the next superpower.

But as well as providing glimpses into the future, the visit also suggested plenty of the past, evoking in particular what I suppose an English person must have experienced upon traveling to America in the late-nineteenth century: a mixture of awe, anticipation, and apprehension.  In another historical parallel, today's New York Times reports that the Chinese may also be replicating the scramble for Africa, complete with cries of colonialism and economic exploitation.

What's going to be interesting to watch is whether the taste of capitalism will whet citizens' desire for all-out political revolution or if, instead, the Starbucks and shopping malls are the bread and circus that dampen enthusiasm for upheaval. 

For what it's worth, Chinese acquaintances have assured me that political change is coming -- and pointed out that every dynastic change in the country's history has been accompanied by a certain amount of chaos.

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The classic instantiation of globalization's horror is, presumably, a Starbucks kiosk in the heart of the Forbidden City.  That is to say, some piece of crass and corporate Americana lurking amidst the world's antient cultural treasures like a mouldy gobbet of cheese on a platter of fresh crudité.  Indeed, globalization is often characterized primarily in terms of toxic U.S. exports.

But two recent variants of the phenomenon strike me as encouraging examples of the beneficence of a global economy.  The first is not the export of an American creation but the import of a foreign one.  HBO is now running "Flight of the Conchords," a show with two New Zealanders in the lead roles.  No, they aren't dubbed or subtitled -- their accents are thick, authentic, and not surprisingly a regular source of the humor (humour?).  And unlike "The Office," the show hasn't jettisoned its comedic sources for U.S. simulacra.  Here's an example of the show's signature, a musical cutaway from quotidian struggles (in this case, eating a samosa alone at a party):

The second is, again, not a U.S. export but rather a (possible) U.S. purchase of something foreign, somewhere foreign.  In this case, the looming interest by yet another American in the purchase of an English Premiership soccer team: Arsenal by Stan Kroenke.  If successful, he would join Malcolm Glazer of Manchester United, Tom Hicks & George Gillett of Liverpool, and Randy Lerner of Aston Villa as an American team owner.  While the English are no doubt lamenting the loss of their sporting institutions to these Yanks (after similar depredations by Russians, Thais, and Scandinavians), these purchases strike me as evidence of the vitality of the league, not its demise.  (As an aside, the majority of these acquisitions involve private takeovers of publicly traded businesses, without the encouragement of SOX.)

Perhaps the time to worry will be when foreign owners (like Chinese purchasers of U.S. Treasuries) stop buying and start selling.

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Careful readers of the blog may have noticed that I'm quite interested in globalization, particularly the globalization of regulation.  But sometimes people give international trade a superstatus that I find, um, only marginally persuasive.  Take Floyd Norris.  In his view, "the Chinese economy that has taken world leadership. So long as it remains strong, many companies will prosper no matter what the prospects for their home markets."  Really?  I know stock markets are supposed to be leading indicators, and a trillion dollars in exports is a lot of money.  But it is a small fraction of world GDP, at least as the IMF sees it, and trade is a small proportion of every nation's national product.  By the same token the Chinese economy is one fifth the size of the United States', half the size of Japan's, and approximately the size of Italy's.  But no one talks about continued Italian prosperity being the key for global financial health.

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The World Bank came out with its latest report on corruption and governance, including a handy, Robert Parker-like one hundred point rating system of each country's governance on six factors: Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption.  Some of the interest in the quality of government in economic development is due to priorities of the last two corruption-obsessed bank presidents, Wolfowitz and Wolfensohn, and some of it, I suspect, is due to the increasing interest in development economists in the role of law in economic growth, including the LLSV hypothesis about the importance of independent courts.

I'm sold on the importance of the rule of law, but this worldwide study, like many of its ilk, pulls its punches.   As the Times notes:

These sorts of results can only be obtained by holding different countries to different standards, and especially by not controlling for the availability of data in developed countries (such as where the press reports bad news, the police count crime, etc).  And so Australia scored a 75 on Political Stability and Absence of Violence.  As the Australian Age notes, "You'd think a developed country that's had three prime ministers in 24 years might do better on that score, especially as the incumbent leader has held power since March 1996."

It's not a great score.  But it's better than the US, which gets a 58 - about the same as Ghana, which gets a 55.  I've spent some time in Ghana, and I'm delighted that there hasn't been a coup there since the 1980s.  But I think it serves few uses to assess its stability as comparable to that of the US - or its violence, however that is defined.

China, on the other hand, appears to being trying to up its scores (government effectiveness 55, regulatory quality, 46) by executing regulators in the wake of regulatory failures.  Yikes.  Talk about a personal sanction.

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. . . until I went to Ethiopia:

1.    The world's highest capital city is LaPaz, at 11,913 feet above sea level.  The world's second highest capital city is Quito, at 9,350 feet.  These elevations make the mile-high city seem like small beer, right?  These capitals dwarf even the peaks of many ski resorts in the US.  So why do these factoids matter for Ethiopia?  Well . . .

2.    The world's third highest capital city is Addis Ababa, elevation c. 8,000 feet.  At least according to local lore, this ranking is accurate.  The city's elevation is important for at least two reasons. 

First, the elevation means mild weather all year round and no mosquitos.  During my short stay (the last week of June), it was cooler in Addis than in Atlanta.  No mosquitos also means no malaria, no yellow fever.  So while I got the full panel of vaccinations before I left (hep A, polio, typhoid, meningitis, DPT, as well as yellow fever), at least the weather was mild, and mosquitoes and the mosquito-borne diseases were not a worry.

Second, the elevation in Addis, according to local sports fans, helps explain Ethiopian dominance in distance running.  Many (most?) of Ethiopia's elite runners train in Addis, where the thin air makes for superior conditioning.  When they race at locales closer to sea level, the advantage is apparently similar to blood doping (which increases red blood cell counts to improve performance).

3.    Addis has a growing Chinese population!  My first night there, I'm sitting in the lobby of my hotel having a beverage when I hear Mandarin being spoken behind me.  Two Chinese fellows had just walked in, and they sat down at the next table.  We started chatting, and it turns out they work for a Chinese engineering/ construction company that has a big road project going on in Addis.  One of the fellows said he'll probably be staying in Addis for a couple of years until the project finished. 

Addis is clearly booming with construction projects--buildings and roads.  Apparently all the roads are being built by Chinese contractors.  Both cabbies and my lawyer companions at the Ministry of Justice confirmed that Chinese firms are the dominant players on infrastructure projects in Addis, and that apparently Chinese firms are involved in construction all over Africa.  One night, I also noticed a table of Chinese expats at one of the nicer Italian restaurants in town.  I guess I knew in the abstract that China always saw potential strategic partners in Africa.   It was interesting to actually see Chinese involvement in the region.

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I'm just back from a week in Ethiopia, where I consulted with the Ministry of Justice on reform of Ethiopia's Commercial Code.  (Yes, you can actually read the Commercial Code online.  This did not surprise me before I left, but seems much more surprising now that I have spent time there, where "broadband" is not so broad.  More on that later . . .).  My short stay there--my first time in Africa--left me with many impressions about business, law, economics, and society, which I am still processing.  I expect I'll blog periodically about Ethiopia over the next few weeks as I sort out my thoughts (and inflict them on you).  That's me there on the left, with lawyers from the Ministry of Justice--warm and gracious hosts to a person--and my friend Claire Di