TLJ News from August 21-25, 2006

Bernanke Discusses Trade

8/25. Ben Bernanke, Chairman of the Federal Reserve Board (FRB), gave a speech in Jackson Hole, Wyoming, titled "Global Economic Integration: What's New and What's Not?". He reviewed the history of international trade, discussed the role of technology innovation and communications in trade, offered several conclusions about the history of trade, and commented on recent developments in trade, government policy, and protectionism.

rightBernanke (at right) said that "Perhaps the clearest conclusion is that new technologies that reduce the costs of transportation and communication have been a major factor supporting global economic integration. Of course, technological advance is itself affected by the economic incentives for inventive activity; these incentives increase with the size of the market, creating something of a virtuous circle. For example, in the nineteenth century, the high potential return to improving communications between Europe and the United States prompted intensive work to better understand electricity and to improve telegraph technology -- efforts that together helped make the trans-Atlantic cable possible."

He said that another "conclusion from history is that national policy choices may be critical determinants of the extent of international economic integration."

Also, "A third observation is that social dislocation, and consequently often social resistance, may result when economies become more open. An important source of dislocation is that -- as the principle of comparative advantage suggests -- the expansion of trade opportunities tends to change the mix of goods that each country produces and the relative returns to capital and labor. The resulting shifts in the structure of production impose costs on workers and business owners in some industries and thus create a constituency that opposes the process of economic integration. More broadly, increased economic interdependence may also engender opposition by stimulating social or cultural change, or by being perceived as benefiting some groups much more than others."

He said that recently, "technological advances continue to play an important role in facilitating global integration. For example, dramatic improvements in supply-chain management, made possible by advances in communication and computer technologies, have significantly reduced the costs of coordinating production among globally distributed suppliers."

He added that there "is the continued broadening of the range of products that are viewed as tradable. In part, this broadening simply reflects the wider range of goods available today -- high-tech consumer goods, for example -- as well as ongoing declines in transportation costs. Particularly striking, however, is the extent to which information and communication technologies now facilitate active international trade in a wide range of services, from call center operations to sophisticated financial, legal, medical, and engineering services."

Moreover, said Bernanke, "production processes are becoming geographically fragmented to an unprecedented degree. Rather than producing goods in a single process in a single location, firms are increasingly breaking the production process into discrete steps and performing each step in whatever location allows them to minimize costs. For example, the U.S. chip producer AMD locates most of its research and development in California; produces in Texas, Germany, and Japan; does final processing and testing in Thailand, Singapore, Malaysia, and China; and then sells to markets around the globe."

He also discussed recent developments in international capital markets. He noted that "capital flows now take many more forms than in the past: In the nineteenth century, international portfolio investments were concentrated in the finance of infrastructure projects (such as the American railroads) and in the purchase of government debt. Today, international investors hold an array of debt instruments, equities, and derivatives, including claims on a broad range of sectors." (Parentheses in original.)

He also said that the role of government policy remains critical. He commented that "Progress in trade liberalization has continued in recent decades -- though not always at a steady pace, as the recent Doha Round negotiations demonstrate. Moreover, the institutional framework supporting global trade, most importantly the World Trade Organization, has expanded and strengthened over time. Regional frameworks and agreements, such as the North American Free Trade Agreement and the European Union's ``single market,´´ have also promoted trade. Government restrictions on international capital flows have generally declined, and the "soft infrastructure" supporting those flows -- for example, legal frameworks and accounting rules--have improved, in part through international cooperation."

He continued that as has happened at previous times in history, "social and political opposition to rapid economic integration has also emerged."

He cautioned that "Further progress in global economic integration should not be taken for granted", both because of "international tensions and the risks of terrorism", and because of "social and political opposition to openness".

He elaborated that "this opposition ... arises because changes in the patterns of production are likely to threaten the livelihoods of some workers and the profits of some firms, even when these changes lead to greater productivity and output overall. The natural reaction of those so affected is to resist change, for example, by seeking the passage of protectionist measures. The challenge for policymakers is to ensure that the benefits of global economic integration are sufficiently widely shared -- for example, by helping displaced workers get the necessary training to take advantage of new opportunities -- that a consensus for welfare-enhancing change can be obtained."

USTR Meets With ASEAN Ministers

8/25. The Office of the U.S. Trade Representative (USTR) stated in a release the USTR Susan Schwab and representatives of the member nations of the Association of Southeast Asian Nations (ASEAN) signed a Trade and Investment Framework Arrangement (TIFA).

In addition, the US and ASEAN released a joint statement regarding this TIFA. It states that "The Ministers agreed that at the initial stage the Work Plan will include initiatives to support the development of the ASEAN Single Window, which will facilitate the flow of goods within ASEAN and between ASEAN and the United States.  It also will include cooperation on sanitary and phytosanitary (SPS) issues to foster additional trade in specific agricultural goods as well as cooperation on pharmaceutical regulatory issues aimed at speeding the delivery of innovative medicines to ASEAN countries."

The joint statement also addresses Doha negotiations. It states that "The United States and ASEAN Members expressed regret on the suspension of the Doha Development Agenda negotiations following the failure of WTO Members to demonstrate the necessary flexibility to provide momentum for the final push to conclude the negotiations." They also pledged close cooperation "to putting the Doha Development Round back on track before the end of 2006".

Susan SchwabSchwab (at right) also stated in the USTR release that "I welcome the strong message from my ASEAN counterparts affirming their commitment to work for a breakthrough in the agriculture and non-agriculture market access negotiations, so we can put the Doha Round back on track before the end of this year. New market access opportunities will be the litmus of the Round’s success."

Singapore, Indonesia, Malaysia, Thailand, and other nations are members of ASEAN.

People and Appointments

8/25. Jot Carpenter was named Vice-President, Government Affairs of the CTIA. He previously worked for AT&T, the Telecommunications Industry Association (TIA), and Rep. Mike Oxley (R-OH). See, CTIA release.

US Attorney in New York Prosecutes Provider of Hizballah TV Broadcasts

8/24. The U.S. Attorney for the Southern District of New York charged Javed Iqbal by criminal complaint [2 pages in PDF] with one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) in connection with his providing to customers the satellite broadcasts of al Manar, a television station owned by Hizballah, which the U.S. government has designated as a terrorist entity.

The complaint alleges violation of 50 U.S.C. § 1705(b), which is the penalties section of the IEEPA, and 18 U.S.C. § 371, the federal conspiracy statute. Notably, the complaint does not allege violation of 18 U.S.C. § 2339B, which criminalizes providing material support to a foreign terrorist organization.

See, full story.

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8/24. The White House press office released a short document titled "Notice: Intention to Enter Into a Free Trade Agreement with Colombia". In addition, President Bush sent a letter to the Speaker of the House and the President of the Senate regarding this proposed FTA. He wrote that it will "will generate export opportunities for U.S. farmers, ranchers, and companies, help create jobs in the United States, and help American consumers save money while offering them more choices. The Agreement will also benefit the people of Colombia by providing economic opportunity and by strengthening democracy."

8/24. The Copyright Office announced that some of its units have temporarily moved within the James Madison Memorial Building of the Library of Congress, due to renovation. Telephone numbers and e-mail addresses remain unchanged. The units, and their new locations, are as follows:
  Copyright Card Catalog -- LM 464
  Records Room -- LM 464
  Public Information Office -- LM 430
  Certifications & Documents Section -- LM 436

Mandelson Urges US to Extend Trade Promotion Authority

8/23. Peter Mandelson, the EC Commission for Trade, wrote a piece that is published in his web site, and in New Straights Times, in which he addressed Doha round negotiations.

Peter MandelsonHe (at left) wrote that "The suspension of negotiations in the WTO Doha Round is a painful blow for the global trading system. The potential costs of indefinite suspension are high, both politically and economically. It will hearten those who oppose more open trade in Europe, ASEAN and elsewhere. It has dented the credibility of the WTO at a time of global economic and geopolitical uncertainty."

He added that "Doha is now losing the race against time. It cannot now be concluded by the end of 2006. This means that the fast-track negotiating authority granted to the US President by Congress will expire before the final deal can be approved. Unless President Bush persuades Congress to renew his negotiators’ mandate, the talks have little prospect of concluding for some years."

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8/23. Qwest issued a release regarding proposals to mandate data retention by internet service providers. In this release, Qwest's Chief Privacy Officer, Jennifer Mardosz, states that "To clarify recent news reports, Qwest is not calling for mandatory federal data retention laws." She continued that "As a matter of corporate policy, Qwest voluntarily retains IP address assignments -- not the underlying content -- obviating the need for federal or state requirements. We strongly believe the best way to address this issue is to have the market drive data retention policies. Companies should voluntarily retain records of IP address assignments to protect customer privacy while also safeguarding citizens from online predators." She concluded that "We will continue to work closely with officials in their efforts to make the Internet experience safer while at the same time, remain a strong advocate for the privacy and safety of our customers."

Bush Issues Executive Order Regarding Health Care Information Technology

8/22. President Bush issued an executive order titled "Executive Order: Promoting Quality and Efficient Health Care in Federal Government Administered or Sponsored Health Care Programs".

This order states that "It is the purpose of this order to ensure that health care programs administered or sponsored by the Federal Government promote quality and efficient delivery of health care through the use of health information technology", and other things.

It provides that "As each agency implements, acquires, or upgrades health information technology systems used for the direct exchange of health information between agencies and with non-Federal entities, it shall utilize, where available, health information technology systems and products that meet recognized interoperability standards."

It further provides that "Each agency shall require in contracts or agreements with health care providers, health plans, or health insurance issuers that as each provider, plan, or issuer implements, acquires, or upgrades health information technology systems, it shall utilize, where available, health information technology systems and products that meet recognized interoperability standards."

Finally, it states that "Agencies shall comply with the requirements of this order by January 1, 2007."

Bush also gave a speech on August 22, 2006, in Minneapolis, Minnesota, in which he discussed his executive order. He said that "medicine is really behind the times when it comes to information technology. And one of the things we'll talk about here is how to use information technology to wring the costs out of medicine, and yet be able to deliver good quality care to our citizens."

He said that "It's estimated that between 25 -- that we can reduce costs by 25 to 30 percent with the advent of what we call medical -- electric medical records, so each person has got their own electronic medical record that you've got to add on -- in other words, we'll be passing information from provider to provider via the Internet, via new technology as opposed to handwritten files that are carried from one office to the other."

Robert Laurence, President of the Information Technology Association of America (ITAA) praised the order. He said in a release that "Standard IT systems spell an end to paper records; interoperable data means beneficiaries can understand which plans are of higher quality than others; transparency will promote more efficient and effective programs; and ultimately commercial providers can follow suit."

1st Circuit Construes Visual Artists Rights Act

8/22. The U.S. Court of Appeals (1stCir) issued its opinion in Phillips v. Pembroke Real Estate, a copyright case regarding the Visual Artists Rights Act of 1990 (VARA), which is codified at 17 U.S.C. § 106A. The Court of Appeals affirmed the judgment of the District Court, although on different grounds. The Court of Appeals rejected the legal theory that the VARA protects site specific art.

This case illustrates some of the risks that owners, lessors and purchasers of buildings, land, and other real property interests face when their property incorporates, or is the location of, works or features that may be construed as "visual art" within the meaning of the VARA. Artists might enjoin the owner or lessee of the property from freely using and improving the property, on the grounds that doing so would impair the rights of the artist.

David Phillips, a sculpture artist, filed a complaint in the U.S. District Court (DMass) against Pembroke Real Estate, seeking to enjoin Pembroke from moving certain of his sculpture works from a public park managed by Pembroke. Phillips alleged violation of the VARA and state law.

Subsection 106A(a) provides, in part, that "the author of a work of visual art ... shall have the right ... to prevent any intentional distortion, mutilation, or other modification of that work which would be prejudicial to his or her honor or reputation, and any intentional distortion, mutilation, or modification of that work is a violation of that right, and ... to prevent any destruction of a work of recognized stature, and any intentional or grossly negligent destruction of that work is a violation of that right."

Then, Subsection 106A(c) provides, in part, that "The modification of a work of visual art which is the result of conservation, or of the public presentation, including lighting and placement, of the work is not a destruction, distortion, mutilation, or other modification described in subsection (a)(3) unless the modification is caused by gross negligence."

The statute makes no reference to site specific art.

The District Court held that Phillips' sculptures are "site specific art", for which movement of the art is deemed destruction of the art. However, it also held that Pembroke could move the works under the "public presentation" exception of Subsection 106A(c).

The Court of Appeals affirmed the judgment that Pembroke may move the art. However, it did so upon its conclusion that the "plain language of VARA does not protect site-specific art".

This case is David Phillips v. Pembroke Real Estate, Inc., U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 05-1970, an appeal from the U.S. District Court for the District of Massachusetts, Judge Patti Saris presiding. Judge Lipez wrote the opinion of the Court of Appeals, in which Judges Cyr and Stahl joined.

People and Appointments

8/22. Michael Petricone was promoted to Senior Vice President, Government Affairs, of the Consumer Electronic Association (CEA). See, CEA release.

8/22. Tina Dam was named Internationalized Domain Names Program Director at the Internet Corporation for Assigned Names and Numbers (ICANN). In addition, Craig Schwartz was named Chief gTLD Registry Liaison. See, ICANN release.

FTC's Majoras Discusses Network Neutrality

8/21. Deborah Majoras, Chairman of the Federal Trade Commission (FTC), gave a speech [21 pages in PDF] regarding network neutrality at a conference hosted by the Progress and Freedom Foundation (PFF) in Aspen, Colorado.

She discussed recent and ongoing FTC activities related to the internet, announced the formation of an Internet Access Task Force, offered comments on the net neutrality debate, and asserted FTC jurisdiction over broadband internet access services.

See, full story.

Majoras and Gonzales Offer Contrasting Views of the Internet

8/21. Deborah Majoras, Chairman of the Federal Trade Commission (FTC), and Alberto Gonzales, the Attorney General, both gave speeches on Monday, August 21, 2006, in which they expressed divergent views of the uses and benefits of the internet. See, Majoras speech [21 pages in PDF] and Gonzales speech.

Majoras expressed a view of the internet as an enormously beneficial network. Majoras expressed faith in free markets and limited regulation. Gonzales expressed a dark and sinister view of the internet, where children are sexually solicited, perverts procure pornography, and criminals have anonymity. Gonzales called for more laws, in the U.S. and abroad.

Majoras said that "The Internet has created enormous benefits for consumers through increased convenience, choice, and efficiency. It empowers consumers by providing them easy access to large amounts of information, allowing them to quickly research and compare product attributes and prices and to purchase products and services from all over the country or even the world without leaving home. The expanded choices and increased information that the Internet offers have intensified competition in a number of markets, all of which benefits consumers. Retail book stores and music sellers must compete with on-line sellers; wine shops now must compete with wine sellers throughout the country; traditional real estate agents face competition from online agents and even home sellers themselves, thanks to the Internet; and virtually all sellers of retail goods must compete with the market for used goods, as consumers now can buy from and sell to one another with ease.

Gonzales said that "It is a wrenching reality that, every day, children are sexually solicited online. Every day. Every day, these criminals are looking for children to hurt. Every day, they are visiting chat rooms where our children think they are safe. Every day, they look at child pornography with hopes of performing those sick acts themselves, and perhaps documenting their crimes for bragging rights with other depraved individuals."

He said that the internet has "provided elements that criminals love: a cloak of anonymity, speed of communication, and global access to potential victims. The Internet has provided pedophiles with limitless back rooms, dark shadows, and escape routes. It has made it hard to find the criminal but terribly easy to see the crime."

"The internet also allows them to brag about their crimes, creating a sick field of competition to see who can produce the most unthinkable photos or videos of rape and molestation. In their perverse eyes, this means the younger, the better", said Gonzales.

He called for new state laws and new laws in other countries, including laws providing greater subpoena powers, and longer prison sentences.

Majoras spoke at a conference hosted by the Progress and Freedom Foundation (PFF) in Aspen, Colorado. Gonzales spoke at a conference in Dallas, Texas, titled "18th Annual Crimes Against Children Conference". He also spoke theologically. He referred to the "predators who crush the very souls of their victims", and asked that "May God bless and guide your important work".

Bush Says Judge Taylor Wrote a Terrible Opinion Re NSA Surveillance

8/21. President Bush held a news conference at the White House in Washington DC. He spoke about the war on terrorism. He spoke briefly about electronic surveillance and the August 17, 2006, opinion [44 pages in PDF] written by Judge Anna Taylor of the U.S. District Court (EDMich) in ACLU v. NSA. He said "it was a terrible opinion". See, transcript.

Bush said this. "It's like the other day I was critical of those who heralded the federal judge's opinion about the terrorist surveillance program. I thought it was a terrible opinion, and that's why we're appealing it. And I have no -- look, I understand how democracy works: quite a little bit of criticism in it, which is fine; that's fine, it's part of the process. But I have every right, as do my administration, to make it clear what the consequences would be of policy, and if we think somebody is wrong or doesn't see the world the way it is, we'll continue to point that out to people."

He continued that "those who heralded the decision not to give law enforcement the tools necessary to protect the American people simply don't see the world the way we do. They see, maybe these are kind of isolated incidents. These aren't isolated incidents, they're tied together. There is a global war going on. And somebody said, well, this is law enforcement. No, this isn't law enforcement, in my judgment. Law enforcement means kind of a simple, singular response to the problem. This is a global war on terror. We're facing extremists that believe something, and they want to achieve objectives."

He concluded that Washington DC is "an amazing town", because people in Washington state both "you can't have the tools necessary ... to defend the people" and "how come you don't have the tools necessary to defend the people?" He said "that's the way we think around this town".

Michelle Connolly Named Chief Economist at FCC

8/21. Michelle Connolly was named Chief Economist at the Federal Communications Commission (FCC). See, FCC release [PDF]. She began work on August 21. She replaces Leslie Marx, who worked in this position for only one year.

Connolly is a thirty-something junior professor at Duke University whose curriculum vitae [PDF] lists no papers or other works related to telecommunications, the internet, networked industries, or competition analysis. Nothing in her curriculum vitae or web site indicates that she has any expertise regarding the business practices, technologies, or participants in the communications, internet or technology sectors.

FCC Chairman Kevin Martin stated in the FCC's release only that "I am pleased Michelle has agreed to serve in the critical role of Chief Economist. Her talent and expertise will be a great asset for the Commission and will strengthen our policy-making."

Connolly has written about international trade, including intellectual property rights (IPR) in the context of trade. See for example, paper [12 pages in PDF] titled "Implications of Intellectual Property Rights for Dynamic Gains from Trade", co-authored with Diego Valderrama, and published in the American Economic Review, May 2005.

However, her work regarding IPR focuses on technological innovation and patents. In contrast, the FCC deals with IPR mostly in the context of entertainment industry copyrights in songs, movies, and programming, as for example, in the FCC's ill fated broadcast flag proceeding.

A major responsibility of the Chief Economist is to assist in the review of mergers. The Chief Economist may also be asked to provide economic analysis of the network neutrality issue, and a la carte programming. Connolly's curriculum vitae reflects no experience in any of these areas.

The Chief Economist is a short term position traditionally held by an outsider. Some former Chief Economists, such as Gerald Falhauber, had considerable experience in communications economics, policy and business practices at the time of their appointment to the FCC.

Chairman Martin's selection of Connolly suggests that he intends to continue to relegate independent economic analysis to a minimal and ineffective role in the FCC's decisions and policy making.

The Chief Economist serves in the Office of Strategic Planning and Policy Analysis (OSP). The head of the OSP is Cathy Bohigian, an attorney who was previously a legal advisor to Martin. Both Martin and Bohigian previously worked for the law firm of Wiley Rein & Fielding.

People and Appointments

8/21. Alan Durell was appointed Economic Fellow in the Securities and Exchange Commission's (SEC) Office of Economic Analysis, for a term ending in June of 2007. See, SEC release.

More News

8/21. The Progress and Freedom Foundation (PFF) released its Digital Economy Fact Book: Eighth Edition, 2006 [135 pages in PDF].

Go to News from August 16-20, 2006.