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CHINA BOOM, LATIN STABILITY BOOST PANAMA TRADE ZONE
The latest trade figures from Panama’s Colon Free Zone show business is brisk compared to the same period last year thanks to China’s economic boom and increased regional political stability, officials said. The CFZ – the world’s largest after Hong Kong – is located at the Atlantic entrance to the Panama Canal. All goods except firearms and petroleum products may be imported, stored, modified, repacked, and re-exported there without being subject to usual duties. In August this year, turnover in the CFZ amounted to $1.145 billion, an increase of 25.9% over last year, which saw transactions totaling $909.6 million.
Raul Moreira, chief statistics officer at the CFZ, said regional political stability had also contributed to the pronounced increases. The CFZ’s performance is linked closely to the economic performance of its neighbors. The principal users of the CFZ are Latin American, including Central American nations, and the U.S.Link here.
Fallacies about Panama Canal.
I never cease to be amazed how many fallacies are out and about in the U.S.A. about little Panama. Chris Parkhurst’s letter on the Panama Canal is a classic example. To wit: 1) “Our country’s workers built this Canal.” Actually, it was an international work force that built the Panama Canal. Five out of six canal construction workers were black people from the West Indies, particularly from the islands of Barbados and Jamaica, but from all over. More than 10% of all Panamanians are descended from these Antillean workers, but a lot of this community over the years emigrated to the U.S.
2) “… a phony front company called Hutchison Wampoa …” Actually, it is the largest port management company in the world. Now, if because of the minority stake that the Chinese government holds in this company – less than 10% – that makes it a front for the Peoples Liberation Army, then the Panama Canal is small potatoes. London, a much bigger piece of the world economy, is surrounded by three Hutchison Whampoa ports.
3) “Hutchison Whampoa demanded and received the rights to control anchorages on both sides of the canal, hire new pilots to guide ships through the waterway, block all passage that interfere with their company’s business, take control of public roads near the Canal and first refusal for control over the former U.S. military bases throughout as well as our crucial air bases near the Canal. Red China now controls passage for at least one third of the world’s shipping. Red China can now refuse the U.S. passage of war ships through the Canal or worse.”
None of this is true. About 4% of the world’s shipping passes through the Panama Canal. It is important for the U.S., and also China’s vital commercial link with Brazil, Venezuela and the Caribbean, but more than anything is the vital industrial asset for Panama’s economy. It is not something that Panama is about to give away to anybody if Panama can help it. Neither Hutchison Whampoa nor China have anything at all to do with such aspects of canal management as selection or assignment of canal pilots, control of anchorages, guiding ships through the waterway or determining which ships get through in which order. The canal is run by the Panama Canal Authority, a semi-autonomous Panamanian governmental institution. Hutchison hires pilots to take ships into and out of the ports of Balboa and Cristobal only, subject to the licensing and regulation of the Panama Maritime Authority, another Panamanian public institution.
At the moment there is a local controversy about whether Panama should follow the US lead and downgrade our relations with Taiwan in order to establish full diplomatic ties with the Beijing government. Like most Panamanians, I oppose this. Taiwan has been a good friend of Panama’s for a long time, and I think it is a matter of a small nation’s dignity not to allow big countries to tell it which friendships it can or cannot maintain.Link here.
Hats off to our man in Panama.
You would expect to be greeted by a runner-up from the auditions for the role of the man from Del Monte. A cream suit, Panama hat and a penchant for oranges … But Jim Malcolm – literally our man in Panama – could not be further from the stereotype of a British government man based in foreign climes. In fact, when we meet, it is rather disappointing that he is not even wearing a Panama hat. The 59-year-old Edinburgh diplomat is back home on a long overdue family holiday, taking time out from his position as British Ambassador in Panama to visit his family home in Corstorphine and his younger brother, Forth 2 DJ Bob Malcolm.
Jim says, “It’s always great to come home and we do so once a year.” Home for the past 3½ years is Panama City, in a district aptly named Caledonia. It seems a world away from his Scottish roots, but Jim is keen to point out that Panama is a lot closer to home than many would first assume. “Panama is an interesting country – there’s a strong Scottish connection a lot of people wouldn’t know about and, most importantly, Britain is the biggest foreign investor in Panama,” he says. “This is because the UK runs the telecommunications system in Panama. It’s now a telecommunications hub for the whole area, and the Panama Canal is used to transit a lot of goods to the UK. Commercially, it’s an important place.”
With Panama set to embark upon a $8 billion (£4.5 billion) expansion of the canal to bring it into the 21st century, Jim is also keen to ensure the Scottish links remain strong. “There are huge opportunities for Scottish companies in the field of consultancy and engineering and I’ve led a number of delegations from the UK.” He adds, “Historically, Scotland has links with Panama. The largest British bank operating in Panama is HSBC, whose roots also lie in Scotland. There are a number of Panamanian families whose roots also lie in Scotland, including artist Alfredo Sinclair whose father was a Scottish engineer who came in the early part of the 20th century and built the water and sewerage system. His daughter Olga is also a renowned painter now.”
It is the Scottish connection which has left Jim in need of a holiday. Three weeks ago, after months of hard work, he inaugurated an exhibition which portrays the human drama behind the ill-fated Scots venture to establish a colony in Darien which left the country almost bankrupt. That is the more light-hearted side of his job there. Multi-linguist Jim’s principal role is to protect British citizens and interests, encourage more investment and establish good relations with the government. And as Panama is a major cocaine shipping point and money laundering center for the narcotics industry, Jim also works with local authorities to try to stem the flow of drugs from Columbia – as the largest supply of cocaine to the UK comes through Panama.
Jim says, “Panama possesses the second-largest free zone in the world after Hong Kong so it attracts a lot of undesirable individuals who are involved in money laundering. But the government has made huge efforts to clamp down on corruption, trafficking and money laundering.” Despite his unwillingness to name his favourite country, he speaks with the most passion and verve about Panama. “It’s a lively place. Most people have the impression it’s a sleepy city in the tropics, but it’s a very dynamic place.”Link here.
Noriega gets a parole date
On September 9 Michael Truman, a spokesman for the U.S. Bureau of Prisons announced that former Panamanian dictator Manuel Antonio Noriega has a September 7, 2007 parole date. The announcement has sparked a fair amount of discussion and speculation, but the Torrijos administration by and large does not want to talk about it.
Whisked away from Panama in the wake of the December 1989 U.S. invasion without benefit of legal extradition proceedings, Noriega was convicted in a Miami federal district court of drug trafficking and conspiracy charges and sentenced to 40 years in prison. That term was later reduced to 30 years. William Hoeveler, the trial judge in the case, upheld the general’s claim to prisoner of war status, which has given Noriega some unique privileges at the federal detention center in Miami where he is held. U.S. federal prisoners ordinarily serve two-thirds of their sentences, with further time reductions if they behave themselves while incarcerated. By all accounts the former strongman has been a model prisoner.
The legal complications in this case are that Noriega was tried in absentia by Panama and convicted three times of murder and for several other offenses, for which he received prison sentences ranging from eight to 20 years. In 1994 Panama formally requested his extradition from the U.S., but Washington has never bothered to answer that petition.
The political complications are first that Noriega once dominated the Democratic Revolutionary Party (PRD) which now controls the Panamanian government’s legislative and executive branches, and second that the man is a symbol of both the abuses of 21 years of dictatorship and of an American invasion in which hundreds of innocent non-combatant Panamanians were killed and thousands were left homeless. His return to this country would entail the reopening of old social wounds that have never entirely healed.
The Torrijos administration has tried to duck questions about Noriega’s release date. A spokesman for the Presidencia said that Martín Torrijos will not have anything to do with whether Noriega returns to Panama after release by American authorities, arguing that this is a judicial matter over which the executive branch has no control. However, extradition requests, though they may originate with prosecutors and courts that are independent of presidential authority, must be sent to foreign governments through the Ministry of Foreign Relations, which is very much answerable to the president.Link here.
WHERE TO RETIRE MAGAZINE FEATURES PANAMA
The title of a feature story in Where to Retire magazine is “Retiring in Panama”. “Pacific beach towns, Caribbean isles and fertile highlands are among places drawing retirees.” Where to retire is a subscription based magazine published 6 times a year and reaches over 100,000 subscribers. It is not available on the Internet. The article has 8 full pages of content and photos of Panama. It covers the Mountains, beaches and city. Click on the images (included in article) in order to read the story.Link here.
Private construction investment in Panama for 2005 will be approximately $625 million.
According to the Panamenian Construction Chamber (CAPAC), private construction investment for year 2005 – based on construction permits – will be approximately $625 million. Global economy growth, low interest rate and buyers income capabilities are just some of the circumstantial facts that have positively influenced the industry growth trend, said Mr. Javier Cardoze the CAPAC President. Favorable incentive policies, adequate rules, politic stability and lack of social conflicts have contributed to encourage local and offshore investors.
For H1 2005, the construction activity reached $427 million. During this half-year, the construction permission registries on the five main metropolitan counties increased 76% compared to year 2004. According to Cardoze, the construction investment growth as well the whole construction industry represented 4.63% of the country’ GDP, and this trend should be maintained despite the construction workers strike against the Social Security Reforms held last June.Link here.
Panama extends tax exemption on new residential construction for 20 years.
One has up to 1st September 2006 to obtain Construction Permits, and until 1st September 2007 to complete construction, obtain Occupancy Permit and register the improvements. One then gets the 20 year exemption on new construction. This law has been used politically by each administration to boost construction. The last President ended the exoneration in 2004 to get a building boom going as she was trying to get her party reelected. The current administration then gave extensions after he was elected at the last moment in order to keep the ball rolling. Now it is extended again. This has gone on for a long time and is no surprise though it is a welcome relief!Link here.
THE FORBES 400 FOR 2005 IS OUT
For the third consecutive year the rich got richer. In this, the 24th annual edition of The Forbes 400, the collective net worth of the nation’s wealthiest climbed $125 billion, to $1.13 trillion. All but 26 people on our roster are billionaires. Surging real estate and oil prices drove up several fortunes and helped pave the way for 33 new members (and 9 retreads). Gulf Coast oilman Tracy Krohn landed on the list after taking his W&T Offshore drilling operation public in January. Developers Jorge Perez and Steven Roth are two of the six real estate tycoons added to the list. Another newcomer is James Leprino, who built a $1.3 billion fortune supplying cheese to pizza joints Little Caesars and Papa John’s.
The year’s biggest gainer was casino mogul Sheldon Adelson, whose net worth jumped $8.5 billion on a big bet he is making on the peninsula of Macau, China. Gambling is also the source of wealth for Ruth Parasol and Russell DeLeon, a husband-and-wife team who run their online casino, PartyGaming, from Gibraltar.
For every arrival, there is an exit. Eight members of last year’s list died, including Wal-Mart heir John Walton, in a plane crash in June. He is replaced by his wife, Christy. 33 fortunes simply could not keep pace with the rising minimum needed to get on the list, which this year was $900 million, a $150 million jump from 2004. Among the notables on whom the curtain descended: DreamWorks cofounder Jeffrey Katzenberg.Link here.
LAW FIRMS SEND CASE WORK OVERSEAS TO BOOST EFFICIENCY
Law firms are outsourcing some of the work on their cases to other countries, joining a growing national trend of trying to cut costs by using a labor force paid at a lower rate than American workers. Indian firms can do legal work for about $40 an hour, compared with $120 an hour charged by many U.S. law firms.
Washington law firms that occasionally outsource legal work include Arnold & Porter LLP and Howrey LLP. Although most of Howrey’s outsourcing is done in the U.S., some of its contractors have partnerships with companies overseas. The work is limited to coding and electronic data processing, said Brian Conlon, Howrey’s chief information officer. About 695,000 lawyers and 200,000 paralegals were employed in the U.S. in 2002, according to the U.S. Bureau of Labor Statistics.
About 1,300 Indian workers provide services for U.S. lawyers, generating about $52 million in revenue, according to Evalueserve, a business and legal research firm with more than 800 employees in India. By 2015, their billings to U.S. firms would increase to $970 million at the current growth rate.Link here.
CHINA ALLOWS VISIT BY DEMOCRACY ADVOCATES FROM HONG KONG
Hong Kong’s chief executive led all but one member of the city’s legislature across the border to mainland China, starting a two-day trip that marks the first time Beijing authorities have let in prominent Hong Kong advocates of democracy since the Tiananmen Square killings on June 4, 1989. The lawmakers’ trip marks the latest in a series of steps by the Chinese government to placate critics here who want greater democracy. Democracy advocates have long criticized Beijing, but agreed to the trip without conditions.
The visit produced a heated discussion in Guangzhou over events in Tiananmen Square at a closed-door meeting between Hong Kong lawmakers and a powerful member of China’s Politburo, said Ronny Tong, a former chairman of the Hong Kong Bar Association who is now a pro-democracy lawmaker and attended the meeting. The lawmakers met Zhang Dejiang, one of the 23 members of the Chinese Communist Party’s ruling Politburo and the party secretary for Guangdong province, which abuts Hong Kong and includes some of China's wealthiest cities.Link here.
Hong Kong officials stir conflict on tour.
Hong Kong’s pro-democracy lawmakers, some of whom had been barred from China for more than a decade, crossed into the mainland at Beijing’s invitation and held a contentious meeting Sunday with a member of the ruling Communist Party’s Politburo about political reform and the 1989 Tiananmen Square massacre. The Chinese government had long refused to hold any official talks with Hong Kong’s democrats but invited the entire 60-member Legislative Council on a two-day tour of the southeastern province of Guangdong. The move was a conciliatory gesture after months of acrimony over China’s refusal to expand direct elections in the former British colony.
The schedule on the first day of the visit was heavy on sightseeing, with mainland officials eager to highlight the remarkable economic progress that China has made in the past decade. Hong Kong’s democrats acknowledged the achievement but said it was not enough. “I was not too surprised to see the rapid economic development in China,” said Lee Cheuk-yan, a lawmaker banned from the mainland since being arrested and expelled in 1989 for giving money raised in Hong Kong to the students leading pro-democracy demonstrations in Tiananmen Square. “I would have been much happier if I had been able to see developments in human rights, democracy and people’s freedoms here.”
In a meeting with the provincial party chief, Zhang Dejiang, in Guangzhou, Lee pressed for a reversal of the party’s official position that the government’s use of force that day was justified. The military crushed the protests on June 4, 1989, leaving hundreds if not thousands dead and prompting widespread outrage in Hong Kong ahead of its scheduled return to Chinese rule in 1997. Participants said Zhang replied that only a minority of people supported “redressing June 4” and insisted the party had handled the “incident” correctly. When other pro-democracy lawmakers in the closed-door meeting objected, Zhang said the conversation had grown disagreeable and that any further discussion of the subject would be a “waste of breath,” participants said. “That was really bad,” said Emily Lau, leader of the pro-democracy Frontier party. “Mr. Zhang had said we could have an honest dialogue, but when we raised the issues that the Hong Kong people are concerned about, he got angry.”Link here.
Hong Kong legislators test limits of griping.
Visiting Hong Kong legislators badgered a top Chinese official about Beijing’s bloody crackdown on protesters in Tiananmen Square in 1989, shouted pro-democracy slogans, complained about the pollution and went to church in an officially atheist state. But as the legislators’ historic trip to China’s southern Guangdong province wound down, the big question was whether Communist officials had reached the limits of their tolerance. “If this [trip] is a first step, then I think it’s OK. But no one knows if there will be a next step,” said legislator Martin Lee, Hong Kong’s most prominent pro-democracy figure, once branded a “traitor” by Beijing.
China, despite its economic reforms in recent years, is still known for its tight political controls. But for a weekend, they did not apply to the visiting Hong Kong legislators, some of whom had been banned from the mainland for years. Radical Hong Kong legislator Leung Kwok-hung shouted “Long live democracy” in a hotel lobby.
In a Sunday meeting with Zhang Dejiang, Guangdong’s most senior Communist official and a member of China’s policymaking Politburo, some legislators said China needed to be more democratic. Other pro-democracy legislators said China should rethink its decision to crack down on pro-democracy protests in Beijing’s Tiananmen Square in June 1989, killing hundreds and perhaps thousands. The Chinese Communist Party still maintains the move was necessary for national security.Link here.
Invest Hong Kong welcomes latest regional office stats.
Hong Kong’s Census and Statistics Department has just released the results of its 2005 Annual Survey of Regional Offices Representing Overseas Companies in Hong Kong, showing that the number of local offices operated by overseas and mainland companies has reached an all-time high. According to the Survey, there were 1,167 companies that were regional headquarters (RHQs) and 2,631 companies that were regional offices (ROs) in Hong Kong set up by their parent companies outside Hong Kong, as at June 1, 2005. The corresponding numbers as at June 1, 2004 were 1,098 and 2,511 respectively.
The U.S. topped the list of countries/territories with companies having RHQs in Hong Kong. A total of 262 American companies had RHQs in Hong Kong in 2005. This was followed by Japan, with 204 companies, and the United Kingdom, with 115 companies. The major lines of business of the RHQs in Hong Kong were wholesale, retail and import/export trades, business services, and transport and related services. The major lines of business of the ROs in Hong Kong were wholesale, retail and import/export trades, business services, and finance and banking.
For the purpose of the survey, a regional headquarters (RHQ) is an office that has control over the operations of offices in the region (Hong Kong plus one or more other place/s), and manages the business without frequent referrals to its parent company outside Hong Kong.Link here.
IMF CHIEF OPPOSES UNITED STATES ON CHINA
Response defies efforts to crack down on possible currency manipulation.
An unusual public rift between the International Monetary Fund and the Bush administration deepened as the IMF’s top official made it clear that he will not cooperate with any U.S. plan to label China as a currency manipulator. Rodrigo de Rato, the IMF’s managing director, said in an interview that “we don’t see evidence” that China is violating the fund’s rules against maintaining an artificially cheap currency. He also suggested that the U.S. Treasury is staking out a position on the issue that contradicts its previous stance.
Rato’s comments were a defiant response to a demand by a senior administration official for the IMF to crack down on currency manipulation, and they appeared likely to inflame members of Congress and labor and industry groups that are pressing for tough action against China over the currency issue. Beijing’s critics complain that the exchange rate of the Chinese yuan, which has been held at slightly more than 8 yuan per dollar for years, is far out of line with market forces and gives Chinese manufacturers a major advantage in competing with foreign firms. Some lawmakers are threatening to enact legislation that would slap across-the-board tariffs on Chinese goods if Beijing fails to significantly raise the yuan’s value.
Rato’s remarks came in answer to questions about a speech by Timothy D. Adams, the Treasury undersecretary for international affairs, who attacked the IMF for being “asleep at the wheel” in policing currency systems. Although Adams’s speech did not mention China explicitly, its thrust was clearly aimed at prodding the IMF to take a much more aggressive approach in tackling the currency issue. He criticized the fund for seldom invoking its power to cite countries that are “manipulating exchange rates” to gain “unfair competitive advantage”. In the interview, Rato, a former Spanish finance minister, showed no sign of backing down in the confrontation between his institution and a top official of the U.S. government, which is the fund’s largest shareholder and is sometimes described as the puppet master behind its policies.
On the contrary, the IMF chief went beyond comments he made at the same conference addressed by Adams. Rato flatly disputed claims that China was violating IMF rules against currency manipulation for competitive gain. “My information here is strictly what the [IMF] staff has given me – that there is no evidence,” he said. “There is a strong argument by the Chinese authorities that their main objective” in keeping the yuan steady against the dollar “is the stability of the economy.” Rato asserted that the IMF has been, if anything, well ahead of the curve compared with other governments and economists in urging China to allow its currency to move upward. In a pointed barb, he noted that the Treasury itself has refrained from tagging China for manipulation in its own semiannual reports on foreign exchange policies. “Up to now, we have had the same position as the U.S. Treasury,” he said.
Rato’s statements would appear to undercut any hope by the Treasury of using the IMF to batter the Chinese. Some economists argue that strong pressure from an international body like the IMF is much more likely to be effective with the Chinese than bilateral threats and would reduce the risks of a tit-for-tat trade war between the U.S. and China.Link here.
OECD says corruption threatens Chinese economy.
The severe and widespread nature of corruption in China is becoming a major source of social discontent and poses a threat to the legitimacy of the country’s leaders, according to experts at the Organisation for Economic Co-operation and Development. Researchers at the Paris-based think-tank, which released its first comprehensive survey of China’s economy earlier this month, also said that the problem posed a threat to the country’s economic progress.Link here (subscribers only).
SWISS SUPPORT FOR EU LABOR ACCORD BEATS EXPECTATIONS
56% of Swiss voters have agreed to extend an accord on the free movement of people to the ten new EU member states. The result was clearer than expected and represents a victory for the government. German- and French-speaking areas of the country voted “yes”, while Italian-speaking Ticino said “no”. Just seven of the 26 cantons said “no” to opening up the labour market, mainly those in the conservative heartland of central Switzerland. Approval of the accord was particularly strong in western Switzerland. Turnout was above average at just under 54%.
Sunday’s ballot was the second nationwide vote on Swiss-EU relations this year. In June the electorate came out in favour of closer security and asylum cooperation with Brussels. “In saying yes, Swiss voters have once again confirmed their support for the bilateral path,” said President Samuel Schmid. Schmid said Switzerland had taken a step towards opening up, which would help it to remain attractive to business. But he said he understood the fears of a sector of the population about wage dumping and cheap migrant labor. There would be “a long transition period” as Switzerland opened up its market as well as “strict limits on immigration.”Link here.
Swiss vote is “clear and simple”.
The Swiss press has welcomed Sunday’s vote in favor of extending a labor accord with the EU, saying pragmatism had won over fear. But analysts agree that the result does not mean the end of negotiations, since bilateral ties are still evolving. After all the uncertainty and nail-biting, nowhere in the Swiss press will you find mention of just “the yes vote” – it is, without exception, “the clear yes vote”. The result was clearer than expected and the press is unanimous in its approval.Link here.
EU will not be drawn on Swiss membership issue.
A day after the Swiss voted to extend a labor accord to the new EU states, Brussels is tight-lipped about whether Switzerland should join the EU. The European Commissioner for External Relations, Benita Ferrero-Waldner, said it was up to the Swiss to decide whether to continue with the bilateral approach or to become an EU member.
Diana Wallis, who heads the EU parliamentary delegation responsible for Swiss relations, said that the “unusual and complex” system of bilateral agreements had run its course. As an alternative to membership, Switzerland has taken the “bilateral” route, concluding 16 agreements with Brussels in two separate rounds of negotiations. After voters twice this year approved closer ties with the EU, attention is turning to the question of what Switzerland should do with its membership application, which has been on ice in Brussels since 1992. Swiss ministers are to discuss that question next month. In the meantime, the EU is making it clear that any decision about membership is one for the Swiss to initiate.Link here.
LARGEST SWISS BANK CONFIRMS STAKE IN BANK OF CHINA
Switzerland’s largest bank, UBS, has confirmed it is taking a SFr645 million ($500 million) or 1.6% stake in Bank of China (BOC). Unconfirmed reports also suggest that UBS rival Credit Suisse has failed with an investment plan of the same value in China Construction Bank. UBS said in a statement that it was entering into a strategic partnership deal with state-backed BoC in investment banking and the securities business.
“We regard this agreement as a natural development of our long-term relationship with Bank of China,” said UBS chief executive Peter Wuffli. “The combination of Bank of China’s brand, distribution and customer base and UBS’s products, services and experience will be powerful.” UBS confirmed it was in talks to restructure and take over Chinese brokerage Beijing Securities. The bank said it expected to invest SFr270 million ($210 million) in the restructuring in return for an equity stake. If the deal goes through, UBS will become the first foreign financial institution to buy into a Chinese brokerage. Meanwhile Credit Suisse is remaining tight-lipped about a report from news agency Reuters claiming that China Construction Bank had pulled the plug on their investment plans.Link here.
U.S. PASSPORT LAW A TOURISM DISASTER FOR CANADA
Canada’s ambassador to the U.S. says many Americans will stop traveling to Canada if new U.S. entry laws make it too much of a hassle to get back home. Frank McKenna told the annual meeting of the Canadian Chamber of Commerce that the U.S. policy requiring passports to enter the United States by Dec. 31, 2007, could spell disaster for Canadian tourism operators. “This is a big sleeper issue,” McKenna told the chamber. “It could result in the reduction of 7.7 million visits to Canada (annually), with a loss of almost $2 billion in revenue, mostly tourism revenue from people who won’t cross the border because they can’t return home without a passport or something similar.”
McKenna said the only good news is that the U.S. administration is taking a second look at the passport requirement and may opt for some other form of identification that establishes citizenship. “The devil is in the detail of trying to figure out what that would be and getting it into as many hands as possible in the United states,” he said. The problem, McKenna said, is that not many Americans bother with passports, and Canada would lose out on a lot of casual, cross-border traffic in the form of impulse tourists who cross to catch a hockey game or shop.Link here.
CHINA A “CENTRAL” SPYING THREAT
China’s intelligence services are mounting wide-ranging efforts to acquire U.S. technology and are among the most active of nearly 100 nations whose spying has undermined U.S. military advantages, according to a senior U.S. counterintelligence official. China’s“qnational-level intelligence services employ a full range of collection methodologies, from the targeting of well-placed foreign government officials, senior scientists and businessmen to the exploitation of academic activities, student populations and private businesses,” Michelle Van Cleave, the national counterintelligence executive, said at a recent congressional hearing on foreign spying. Miss Van Cleave said spies from nearly 100 nations are working to obtain sensitive U.S. technology, and “two countries that always rank near the top of the list are, of course, Russia and China.”
Although private-sector spies are a problem, “state-directed espionage remains the central threat to our most sensitive national security technology secrets,” she said. Chinese intelligence agents are “very aggressive” in business and at obtaining information through elicitation. Additionally, “they’re adept at exploiting front companies, [and] they also have very capable intelligence services that target U.S. national security secrets,” she said.
Chinese and other state-run and private spies use a variety of simple methods to acquire U.S. technology, including e-mail, facsimile and telephone solicitation or in-person requests, she said. Other methods include visits by spies to U.S. businesses, military bases, national laboratories and private defense contractors. The public identification of China and Russia as spying threats by a senior official is a departure from past policy, when the identities of foreign spies were kept secret to avoid upsetting diplomatic ties. Miss Van Cleave declined to identify other nations involved in technology spying but said they include some of America’s closest allies.
Larry Wortzel, a former defense intelligence official, told the subcommittee that China is methodical in its intelligence-gathering efforts in the U.S. “The U.S. faces an organized program out of China that is designed to gather high technology information of military use,” Mr. Wortzel said.Link here.
TAX EVASION OR AVOIDANCE? COPING WITH NEW EU RULES
Let us look at three examples of the impact the new EU rules could have on non-residents.
British national. Thailand resident. House in UK. Bank deposits in Channel Islands. All EU nationals who hold money on deposit in EU jurisdictions, and who do not meet the requirements designated by their native country’s judiciary, will essentially suffer. They will be forced to disclose all their holdings or pay 15% (escalating to 35% by 2011) via withholding or retention taxes on their income gains. This will be in addition to punitive inheritance, wealth, estate and gift taxes. Once their incomes, investments and bank deposits are a matter of public record, it will be practically impossible to hide or dispose of those assets. Secondly, and importantly, their partners, children and heirs will see inheritances affected through death duties and probate levied on estates not suitably protected in advance.
European passport holder. Director of a Thai company. Monies in Swiss numbered account. Although not strictly under the new enforcement provisions yet, Swiss banks are likely to be forced to disclose assets held on behalf of numbered accounts by as soon as summer 2006. They will be compelled to offer clients the choice of either (a) disclosure of information on the account holder’s behalf, (b) exempt qualifying individuals who can produce respective tax certification proving they are not EU residents for tax purposes, or (c) not disclose any information whatsoever. In which case, they will deduct 15% in retention taxes for the next three years, 20% in capital gains for the following three years, and a massive 35% in retention tax penalties from 2011 onward.
Americans, Canadians and other non-EU nationals holding offshore deposits? While not necessarily affected by the EUSD directive now, they should be aware of considerable implications for various nationalities who have moved their money “offshore” or, who have their salaries from overseas paid into EU-member state bank accounts. This will apply especially to those who hold MasterCard, Amex, Diners Club or U.S.-domiciled Visa credit/debit cards. Pressure is mounting from various directions.Link here.
CANADIAN GOVERNMENT TO CANCEL CORPORATE TAX CUTS
The minority Liberal government of Prime Minister Paul Martin has scrapped plans to cut corporate tax until after the next election, in an attempt to head off a bid by opposition parties to topple the government from its precarious position in power. According to a report in the Globe and Mail, sources confirmed to the paper that, facing a possible defeat in the House of Commons, the government has cancelled its tax cut plans.
Under proposals presented in the 2005 budget, Prime Minister Martin’s government had hoped to cut corporate tax to 19% from 21% by 2010 and remove the corporate surtax by 2008. However, the government was forced to remove the tax cut in the face of opposition from the New Democratic Party, which demanded that an additional C$4.6 billion, (US$3.7 billion) be spent on low-income housing, the environment and foreign aid. Instead, the Martin administration proposed that the tax cuts would be presented in a new bill, separate from the budget proposals.
But, with the present government desperately clinging on to power, and with little hope that the budget will be passed before an election is called, Finance Minister Ralph Goodale is set to reintroduce the tax proposals in a new budget in February, should the Liberal government win another electoral mandate.Link here.
TAX REVIEW LEAVES CANADIAN INVESTORS FEARFUL OVER FUTURE OF INCOME TRUSTS
The Canadian Association of Income Funds has told a Senate banking committee hearing that it is being inundated by enquiries from investors worried about their retirement savings after the government’s decision to review the taxation of income trusts cast doubt on the future of the savings vehicles. “Over the past few days, we have been inundated by phone calls, letters, faxes and e-mails from individual Canadians who are frightened and worried,” Stephen Probyn, chairman of the CAIF, told the Senate banking, trade and commerce committee. “We know that one million Canadians across the country are direct owners of units, and many more millions across the country own units through their mutual funds,” he added.
The Federal government shocked the income trust market last week when it announced a halt to advance tax rulings on income trust offerings, a sign that many have taken as the first step towards a reduction in the tax advantages of the vehicle, an action which prompted a sell off in the income trust market. Fearful that the growing use of income trusts and FTEs is costing the government substantial amounts of tax revenues, on September 8, a consultation was issued on the economic and fiscal implications of FTEs. According to the Finance Department, the federal government has foregone about C$300 million in potential corporate tax payments in the last year because of income trusts. Finance Minister Ralph Goodale has also expressed concern that the current income trust set up is eroding Canadian productivity by encouraging firms to pass earnings on to investors rather than reinvest the gains.
However, the CAIF stated that it is “puzzled” by the government’s decision to suspend advanced tax rulings so soon after the launch of the consultation.Link here.
ITALIAN GOVERNMENT DITHERS ON BUSINESS TAX CUTS
Reports in the Italian press have suggested that the government remains uncertain about how to proceed with plans to cut business taxes, with the national budget continuing to come under funding pressures. According to a report in the Italian daily La Stampa, Finance Minister Giulio Tremonti revealed in a meeting with trade union leaders that a decision on how and when to phase out a regional business tax known as IRAP is still to be made.
In an opinion released in March, Francis Jacobs, an advocate general to the European Court of Justice, argued that IRAP is too similar to the existing value added tax system, in contravention of the EU’s sixth directive. In June, Prime Minister Silvio Berlusconi, no doubt aware that the ECJ follows the opinions of advocates general in about 80% of cases, duly pledged to eliminate the tax in three stages beginning in 2006 and continuing through to 2008. However, a further report by the daily Il Corriere della Sera has suggested that the government will instead seek to bring about EUR2 billion in other tax cuts while maintaining IRAP.
Either way, Italy’s room for manoeuvre on the fiscal front is severely constrained by its need to reduce its budget deficit to below the level deemed acceptable by the EU. Currently the government is planning to save €11.5 billion through spending cuts and revenue raising measures in an attempt to reduce the deficit to 3.8% of GDP – still above the 3% ceiling permitted by the eurozone Stability Pact.Link here.
JAPANESE PM CALLS FOR MORE DEBATE ON CANCELLATION OF TAX CUT
Japanese Prime Minister Junichiro Koizumi has sounded a cautionary note on the government’s plan to end a temporary income tax rebate, arguing that the reinstatement of tax levels at former rates should not be allowed to jeopardize the fragile economic recovery. Introduced in 1999 in an attempt to kickstart the languishing economy, the temporary tax cut reduced the income tax burden at the national level on workers by 20%, and at the local level by 15%. But, with the economy showing signs of recovery and with the government keen to shore up its finances as it prepares to meet challenging budgetary targets, the ruling Liberal Democrat led coalition is planning to phase out the tax break from fiscal 2006.
However, responding to a question from the opposition leader Seiji Maehara in parliament earlier this week, Koizumi appeared to backtrack on the plans to abolish the tax rebate by calling for further talks on the issue.Link here.
CHINA HOLDS PUBLIC HEARING ON INCOME TAX REFORM
China’s highest legislative body conducted its first roundtable meeting with a cross section of the Chinese public, at which important new reforms to the income tax system were the main point of discussion. The meeting involved 40 Chinese citizens from various walks of life who were drawn from a list of 5,000 applicants. The main point at issue was the proposal to amend the Law on Personal Income Tax, increasing the threshold at which income tax becomes payable on monthly income to 1,500 yuan ($185) from 800 yuan. Currently, Chinese workers pay income tax on a sliding scale starting off at 5% for those earning above 800 yuan and rising to a maximum of 45% for those making more than 100,000 yuan a month.
If the amendment is approved, it will be the first time since 1993 that the government has moved to increase the personal tax threshold, something that is being considered in the light of rapidly rising wages, living costs and inflation. An increase in the income tax threshold is widely supported by the public, and a survey of the 20 members of the public delegated to speak at the special legislative session this week revealed that 85% were in favour of raising the exemption limit to 1,500 yuan.
However, there are others that believe the exemption point should be pushed even higher, including the China Federation of Trade Unions, which says that 80% of workers surveyed from five provinces would back an income tax threshold of between 2,000 and 3,000 yuan.Link here.
THE MORAL CASE FOR TAX HAVENS
Places like Switzerland and the Cayman Islands serve a valuable economic role by enabling oppressed taxpayers to escape the reach of tax authorities in places like France and Germany. This pressures high-tax governments to lower tax rates and be less profligate. But tax havens also should be lauded for their role in protecting human rights. Most governments in the world are corrupt and there is still rampant persecution in many places based on ethnic, religious, economic, social, and political characteristics. Tax havens provide a refuge for victims of discrimination, enabling them to hide their assets – and thus make themselves less of a target for venal governments. For ethnic Chinese in Indonesia, businessmen in Venezuela, and Jews in North Africa, tax havens can be a genuine life-saver.Link here.
… while Welsh MP sets his sights on offshore tax havens.
The MP who tried to impeach Tony Blair over the Iraq war has now set his sights on offshore tax havens. Plaid Cymru’s economy spokesman Adam Price wants an all-out international effort to crack down on rich individuals and companies who are robbing developing countries of an estimated $500 billion a year in tax revenue. Mr. Price, the MP for Carmarthen East and Dinefwr, will be tabling an Early Day Motion at Westminster on the issue as soon as Parliament resumes. Rhodri Glyn Thomas, who represents the same seat at the National Assembly, is putting down a similar statement of opinion in Cardiff Bay.
The MP said, “We are calling on the UK Government to act urgently to ensure that developing countries get their rightful tax receipts. Of the 72 tax havens in the world, 35 are British territories or Commonwealth members. If this Government is serious about tackling poverty in the developing world, then the closing of tax loopholes should be a key part of the strategy.”
Mr. Price added, “At the moment, if there is a balance of power between democratically elected governments and multinational corporations, it is the latter which are winning. On an international basis, countries are competing to drive down corporation taxes in order to attract more investment. Eventually, rates could be driven down to zero. This is highly destabilizing to developing economies, and makes it very difficult for such countries to provide a proper social infrastructure.”
He added that offshore tax havens also had implications for the UK. “Multinational companies are able to ensure through shrewd accounting that they make losses in high tax countries and profits where there is little or no tax to pay,” he said.
Mr. Price’s intervention follows the publication last week of a joint report by Christian Aid and the Tax Justice Network criticizing giant business conglomerates and some of the world’s large accountancy firms and banks. According to the report, corrupt leaders, criminals and terrorists are hiding away their ill-gotten gains by piggybacking on the systems set up for tax avoidance. Many big businesses secret company funds in tax havens outside the poor countries they are working in. By taking advantage of offshore banks, companies, banks, multinationals and some rich individuals manage to dodge national taxes. The “illicit capital flight” costs $500g billion a year in lost revenues, a sum that dwarfs annual overseas aid, Christian Aid claims.Link here.
FOR 3 LITTLE MILLIONAIRES, A SERIES OF PAINFUL EVENTS
Even in Greenwich, the $15 million to $18 million fortune they stand to inherit stands out as serious money. And yet few would trade places with them. They are 11-, 8- and 5-year-old siblings who have endured nearly as much tragedy in their short lives as the waifs of the Lemony Snicket stories who lurch from crisis to crisis. Last month, their mother was convicted of killing their father in 2003 at their luxurious Hong Kong home, after he learned of her affair with a television repairman. Their maternal grandfather moved them to Illinois to live with him but changed his mind after two weeks.
Then the rich uncle who gave them refuge at his picture-perfect home in Greenwich was charged with orchestrating a fraud that is punishable by years in prison and could leave him penniless. His wife, the person primarily in charge of taking care of the children in the last year and a half, is seeking a divorce. She has said she would like to keep custody, but must battle creditors to preserve any semblance of the life she has led.
The question, then, of who will raise the three Kissel children, and, not coincidentally, what happens to the money their father left behind, will now be left to the American judicial system. Stamford Superior Court has begun revisiting the issue of temporary custody, and Surrogate’s Court in Manhattan, which probated their father’s will, is scheduled to take up the larger question of guardianship.Link here.
SINGAPORE, CAYMANS ARE MAJOR SOURCES OF BUYING IN SOUTH KOREAN STOCK MARKET
Singapore and the Cayman Islands are emerging as major investors in South Korea’s stock markets. The U.S. and Britain maintained the first and second spots in terms of investment in Seoul’s main bourse as of the end of 2004, according to the report by the Financial Supervisory Service. The U.S. led with 81.1 trillion won ($78.7 billion), followed by Britain with 17.9 trillion won and Singapore with 9.3 trillion won. In particular, Singapore jumped to third on the latest list from ninth in 1998.
In the tech-heavy KOSDAQ market, the Cayman Islands, an international tax haven, rose to second from sixth by investing 486 billion won as of last year, exceeding Britain with 390 trillion won. The Cayman Islands, located in the Caribbean Sea, are home to a growing number of hedge funds.Link here.
GIBRALTAR POISED TO GIVE IN ON EU SAVINGS DIRECTIVE
The Gibraltar government is poised to give in to UK pressures on the savings issue, whereby Gibraltar will give up its right not to disclose information to the UK on taxation savings matters concerning UK residents. Since Gibraltar is not a separate EU member state to the UK, the savings directive does not apply. What London has been demanding since the summer is that Gibraltar should give up its EU rights and be treated as if it were a separate member country by entering into a bilateral agreement that will effectively deny Gibraltar its rights. This issue arose when the Channel Islands and the Isle of Man threatened the UK with dropping its bilateral arrangements with UK, whereby they provide such information. However, the difference between Gibraltar and the islands is that Gibraltar is part of the EU and they are not.
Jersey, Guernsey and the Isle of Man feared that if Gibraltar was not brought into line it was they who would lose out. Thus, while the islanders were required to provide information to London about UK resident’s accounts, Gibraltar was not. The fear was that there could be a wave of investors switching over to Gibraltar. The EU Savings Directive means that information on savings must be made available between one member state and another. Since Gibraltar is deemed to be part of the UK member state, it does not have to provide any information to the UK itself (even if it has to other member states).
The Government is expected to try and mitigate any political damage by saying that, in giving up its EU rights on this matter, it expects to gain something else in return.Link here.
AIRLINE PASSENGERS ARE CAUGHT IN EVER-TIGHTER SECURITY MEASURES
Passengers on flights to the U.S. could face further delays at check-in after next week, when U.S. immigration authorities will require extra information about travelers as part of increased security measures to counter terrorism. From October 4, airlines must pass on extra data not available on passports, such as a traveler’s country of residence and an address for his or her first night’s stay.
To avoid delays at check-in, airlines are urging customers to provide them with the extra information before they travel. If that does not happen, staff will have to quiz travelers and manually key the information into computers, which will slow down check-in procedures. Passing on passport details to U.S. officials as part of the Advance Passenger Information System (APIS) is instant, because the documents are scanned electronically at check-in.
The new requirement is another inconvenience for travelers, who in the past year or two have been subject to increased security checks on entry to the U.S. All passengers are now fingerprinted and photographed as they enter the country and, when departing from U.S. airports, are often subject to thorough searches, which include having their shoes removed and examined.Link here.
CHINA SETS NEW RULES ON INTERNET NEWS
China set new regulations on Internet news content, widening a campaign of controls it has imposed on other Web sites, such as discussion groups. “The state bans the spreading of any news with content that is against national security and public interest,” the official Xinhua news agency said in announcing the new rules, which took effect immediately. The news agency did not detail the rules, but said Internet news sites must “be directed toward serving the people and socialism and insist on correct guidance of public opinion for maintaining national and public interests.” Established news media needed permission to run a news Web site, it said. New operators had to register themselves with government information offices.
China has a dedicated band of cyber police who patrol the Internet with the aim of regulating content. Postings that criticize the government or address sensitive topics are quickly removed. Since March, university on-line discussion groups have been restricted to students, removing a once popular outlet for Chinese keen to publicize their views on sensitive issues. Student users and site managers must register using their real names. Access to many foreign news Web sites is routinely blocked.Link here.
FBI TO GET VETO POWER OVER PC SOFTWARE?
The Federal Communications Commission thinks you have the right to use software on your computer only if the FBI approves. No, really. In an obscure “policy” document released around 9 p.m. ET last Friday, the FCC announced this remarkable decision. According to the three-page document, to preserve the openness that characterizes today’s Internet, “consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.”
Read the last seven words again.
The FCC did not offer much in the way of clarification. But the clearest reading of the pronouncement is that some unelected bureaucrats at the commission have decreeed that Americans do not have the right to use software such as Skype or PGPfone if it does not support mandatory backdoors for wiretapping. (That interpretation was confirmed by an FCC spokesman on Monday, who asked not to be identified by name. Also, the announcement came at the same time as the FCC posted its wiretapping rules for Internet telephony.)
What is also worth noting is that the FCC’s pronunciamento almost tracks the language of the 1996 Telecommunications Act. Almost. But where federal law states that it is the policy of the U.S. to preserve a free market for Internet services “unfettered by federal or state regulation,” the bureaucrats have adroitly interpreted that to mean precisely the opposite of Congress said. Ain’t that clever?Link here.
JURY AWARDS $2.45 MILLION TO MAN CLEARED OF TERRORISM LINK
An Egyptian-born radiologist initially suspected of having terrorist ties in the wake of Sept. 11, 2001 and later cleared was awarded $2.45 million yesterday by a federal jury that decided his right to privacy was violated. Dr. Basem Moustafa Hussein, 40, won the award from his former landlord in Neshannock Township outside New Castle, where he was living in 2001.
The jury said his building manager at The Meadows Apartments, Sherri Lynn Wilson, was liable along with her company for violating his privacy when she walked into his unit on Sept. 11 and saw, among other items, a compact disc jacket that showed a jetliner flying through two buildings next to a fireball. Wilson called state police, leading to a federal investigation that ended a few days later when the FBI concluded Hussein had nothing to do with terrorism. The disc jacket turned out to be part of a flight simulator computer game, as was a flight manual Wilson saw next to it.
Hussein filed suit later that year, saying he had endured repeated questioning from agents, lost his job in New Mexico, was evicted from his apartment and had his name mentioned as a potential terrorist in news reports. He said Egyptian police also ransacked his parent’s apartment in Egypt at the request of U.S. authorities and caused $200,000 in damage. The jury actually ruled against Hussein on three of his four civil rights claims, saying the defendants did not trespass and did not discriminate against him because of his race. But the jury did say she invaded his privacy.Link here.
HURRICANES SPAWN DEBATE ON MILITARY ROLE IN DOMESTIC LAW ENFORCEMENT
Military units have been battling the ravages of hurricane winds and flooding for nearly four weeks along the Gulf Coast. Now their leaders must navigate a different turbulent path: Congress. Political leaders led by President Bush are considering how and when the military should take greater control of relief efforts during national disasters. And one answer may be to ensure that the president has the authority to bring in the armed forces during extraordinary circumstances.
The White House said Monday that Congress should considering setting the circumstances – some level of significant natural disaster or terrorist attack – that would designate the military as the lead agency in the response. White House press secretary Scott McClellan said the push is “one of the lessons learned” from Hurricane Katrina. McClellan would not say precisely what the president wants that trigger to be other than an extraordinary catastrophe. But putting the military in charge should not require a request from a governor or presidential action, he said.
House Majority Leader Tom DeLay, R-Texas, sounded a sharp dissent. “I don’t want the federal government to take over disaster response, believe me,” DeLay said in a telephone interview from his home in suburban Houston. DeLay said he could not support a system that did not allow local first responders to remain in charge during a catastrophe. Asked why, he replied, “Bureaucracy. Bureaucracy. Bureaucracy.”
Sen. Mary Landrieu, D-Louisiana, sounded a note of caution as well. Landrieu said that while the military has a strong role to play, “we do have a democracy and a citizenship that has elected mayors, county commissioners and governors, particularly. I’m not sure the governors association or all the mayors in America would be willing to sort of step aside.”Link here.
1878 military law gets new attention.
The Posse Comitatus Act was championed by far-sighted Southern lawmakers in 1878. They had experienced a 15 year military occupation by the U.S. Army in post-Civil War law enforcement. They understood the heel of a jackboot. In a nutshell, this act bans the Army, Navy, Air Force and Marines from participating in arrests, searches, seizure of evidence and other police-type activity on U.S. soil. The Coast Guard and National Guard troops under the control of state governors are excluded from the act.
Deputy Defense Secretary Paul Wolfowitz, testifying in October 2001 before the Senate Armed Services Committee, agreed that it might be desirable to give federal troops more of a role in domestic policing to prevent terrorism. “In certain cases we can do more than anyone else in the country because of the special capabilities that we have,” he said.
Dennis Corrigan, a retired colonel who taught the law at the Army’s Judge Advocate General’s school, says legislators should resist the urge to change it. The military is not trained to be a police force, he says, so it should stick to the skills for which it is trained – surveillance, information gathering, logistical support. All of these activities are allowable under Posse Comitatus. “I’m not sure, even with what’s going on today, that Congress wants the military arresting people.”
any American politicians and bureaucrats hold what might be called a “Consumerist” interpretation of freedom. In a nation where liberty is defined by the ability to choose from a variety of breakfast cereals, it may not be long before the supermarket cash register will be nicknamed “Checkpoint Charlie”.Link here.
The Myth of Posse Comitatus
The Posse Comitatus Act has traditionally been viewed as a major barrier to the use of U.S. military forces in planning for homeland defense. In fact, many in uniform believe that the act precludes the use of U.S. military assets in domestic security operations in any but the most extraordinary situations. As is often the case, reality bears little resemblance to the myth for homeland defense planners. Through a gradual erosion of the act’s prohibitions over the past 20 years, posse comitatus today is more of a procedural formality than an actual impediment to the use of U.S. military forces in homeland defense.
When law enforcement goes military …
The seizing of Elian Gonzalez will earn a Pulitzer Prize for photographer Alan Diaz, who caught the federal agent waving a machine gun at the terrified boy. The picture shocked many Americans, but there is something even more shocking that is not in the picture: Similar events – in which people are assaulted in their homes by SWAT teams waving machine guns, spewing foul language, threatening to shoot people, and trashing the house as a tactical distraction – happen every day in the U.S., without media attention.
Because of the war on drugs, law enforcement throughout the U.S. has been militarized. The Founding Fathers worked hard to prevent oppression by standing armies, but the militarization of law enforcement is making more and more Americans subject to precisely the kind of violence the Founders worried about. The Los Angeles police department started the trend in the 1960s when future police chief Daryl Gates created the first Special Weapons and Tactics (SWAT) team. Gates had originally wanted to call it a “Special Weapons Attack Team”, but changed the name for public-relations purposes. In the 1980s, violent home invasions under the pretext of drug-law enforcement became routine. In 1988, for example, LAPD officers, including members of the department’s task force on gangs, broke into and destroyed four apartments on Dalton Avenue. The apartments were suspected to be crack dens, but in fact were not. The officers who participated in the raid were promoted.
New York University law professor Paul Chevigny points out that in the long run, the police will be the biggest losers from police militarization and its accompanying mentality: “The police think of themselves as an occupying army, and the public comes to think the same. The police lose the connection with the public which is a principal advantage to local policing, and their job becomes progressively more difficult, while they become more unpopular.” An erosion of public confidence in the police has to be a matter of grave concern for anyone who cares about the future of law and order.Link here.
DON’T LIKE PATRIOT ACT? BE CAREFUL OF SAYING SO
You have the obligation to remain silent. That is what the anti-terrorism law known as the USA Patriot Act says to librarians who have been asked by authorities to hand over records about patrons’ activities. Talking is against the law. Last week, an appeals court panel upheld that view, at least temporarily.
Librarians believed to be part of a Connecticut consortium have challenged authorities’ use of the Patriot Act. But the very law that they are challenging includes a provision that forbids them from talking about the law or its implementation. Earlier this month, a federal district court in Bridgeport, Connecticut, ruled that imposing silence upon the librarians was a violation of their rights under the First Amendment to the Constitution. Last week’s order puts that ruling on hold. The First Amendment states, in part, “Congress shall make no law … abridging the freedom of speech.” But the Patriot Act, of course, did just that.
Here is the situation: Federal authorities can talk all day and all night about the USA Patriot Act. They can praise it. They can sanctify it. They can tell the citizenry that it is keeping us safe from more terrorist attacks. But someone who is questioning the use of the act, someone who has been required to help the federal government do some snooping, can say nary a word. When Congress was debating whether certain provisions of the Patriot Act should be renewed – including the controversial provisions regarding library records – the Connecticut librarians were not allowed to be a part of that debate.
What do you call a discussion that allows for only one side to be heard? Certainly not democratic. And what do you call a law that imposes such a one-sided discussion? Certainly not patriotic. And having named the provisions the USA Patriot Act does not change those facts.Link here. ACLU client remains gagged as clock ticks in Patriot Act debate – link.
NUN TERRORIZED BY TERROR WATCH
Sister Glenn Anne McPhee is a busy woman. As the U.S. Conference of Catholic Bishops’ secretary for education, Sister McPhee oversees Catholic education in the U.S., from nursery school through post-graduate. Her job includes working with the Department of Education, speaking frequently at conferences and scrutinizing religious textbooks to clear them with the teachings of the church.
For nine months in 2003 and 2004, Sister McPhee also took on the task of clearing her name from the government’s no-fly list, an endeavor that proved fruitless until she called on a higher power, the White House. “I got to the point I could hardly go to the airport, because I couldn’t anticipate what would happen and I couldn’t do anything,” she said. “I missed key addresses I was to give. I finally got to the point where I always checked my bag, because after I got through the police clearance, then they would put me through special security where they wand you from head to foot all over. They would dump out everything in your bag, then roll it into a ball and hand it back to you.”
McPhee is not the first high-profile individual to be caught by the government’s watch lists. Sen. Edward Kennedy and former presidential candidate John Anderson both found that their names matched names on the list, but like McPhee, were able to resolve the problem by contacting powerful officials. But, thanks to documents obtained under the Freedom of Information Act, her ordeal offers one of the most illuminating illustrations of the failures of the airport screening system that has come to light since 9/11. The Electronic Privacy Information Center plans to release the results of the FOIA request this week, handing the latest black eye to a government initiative aimed at preventing terrorists from boarding commercial flights that originate in the U.S.
EPIC obtained the call logs of the Transportation Security Administration, the agency in charge of maintaining and enforcing the no-fly list, and found a pattern of complaints from citizens who charged they were mistakenly scooped up time and time again by the anti-terrorist program. In addition, innocent people whose names wound up matching the suspect list, like McPhee, found they had no way to fix the situation, short of pulling strings.Link here.
Stuck on the No-Fly List.
The Transportation Security Agency uses two different watch lists. The best known is the no-fly list, a list of people who are not allowed to get on a plane. The other is called the selectee list and contains the names of people whose boarding passes will always be marked with SSSS and who have to undergo intensive extra screening of their person and carry-ons. According to TSA documents obtained by the Electronic Privacy Information Center, call-center employees were at one time told they could only clear the names of those who incorrectly matched the no-fly list. Travelers who were on the selectee list were simply told that they were not on the no-fly list and there could be a number of reasons they were selected for extra screening. The boilerplate language did not mention the possibility that their names matched those on a watch list different from the no-fly list.
he TSA has since revised its policy and now helps those whose names are similar to those on both the no-fly and selectee list, according to spokeswoman Deirdre O’Sullivan. TSA cannot remove names from the no-fly list, but it can put names on a cleared list, which can help travelers bypass red tape. Erroneous entries on the watch lists can only be removed by the law enforcement or intelligence agency that put the name on the list.Link here.
Brace yourself for a hoot.
Honestly, does anyone other than politicians and bureaucrats take the Transportation Security Administration (TSA) seriously? The agency, renowned for its Totally Senseless Actions by Tremendously Stupid Airheads, pulled another boner lastweek. It seems a woman wearing a metal leg brace triggered the metal detectors at Oakland International Airport. The brace should have been a clue for anyone of even vegetative intelligence. Naturally, that exempts TSA screeners. Lots of terrorists these days are females wearing leg braces, so they pulled her aside for what the Airheads euphemize as a “secondary screening”. The lady was late for her flight. She hobbled away before they could feel her up.
Let us pause to savor this Keystone Kops moment. The victim’s wearing a brace, there are how many able-bodied screeners standing around paid to suspend their rationality and act as if she is a terrorist because said brace rang alarms, yet when she has had enough of their nonsense, off she stumps, bum leg and all. It gets better. The TSA announced a manhunt. This shut down both terminals of Oakland’s airport. Apparently, screeners were not only unable to stop a terrorist who had difficulty walking, they also failed to note the direction in which she was limping. Oakland’s cops joined the search. Even so – or perhaps because of that – their quarry was still at large after almost an hour’s hunt. We who fear the surveillance state can take heart. It is remarkably easy to elude it.
And it gets still better. During the interval between our heroine’s disappearance and the time the search started, five flights left the airport. Eventually, given the “suspect’s” complaint that she would miss her plane’s imminent departure, it dawned on even the Airheads that perhaps she had escaped completely: she and her brace were on the loose in the air, aboard one of those flights! And what action do you suppose the Airheads then took to secure American aviation? Yes! They re-screened the passengers from those five flights when they landed. No reason to search only women with leg braces. Apparently, the TSA can harass us now whether we are trying to enter or escape the gulags masquerading as airports.
As ludicrous as the incident itself is the gravity with which the Airheads are treating the aftermath. Fred Lau, the Federal Security Director for Oakland International, is beating himself up over it, though not for his sheer inanity and utter idiocy. No, he is upset that a paying customer made her flight and deprived screeners of a good grope. Fred’s best line crackles with the smarts that have made him a Federal Security Director: “We wanted to make sure we did all we could after the incident to make sure people were safe.”
Ah, the TSA. A laugh a day as they strip our freedom away.Link here.
WORLD BANK APPLAUDS ABACHA MONEY HANDOVER BY SWISS
The World Bank has hailed the return of Sani Abacha’s funds from Swiss banks as an important precedent. But Nigeria criticized the delay in making the move. The Swiss government officially returned $290 million (SFr377 million) to Nigeria. This total is part of the funds stolen by the late dictator from his country. Nigeria and Switzerland have agreed on a process to return $458 million stolen by Abacha. The balance will come when Abacha possessions are transferred into liquid assets.
The World Bank and Nigeria are to conduct a joint review to ensure that the repatriated funds are used to support key sectors, such as education, health, HIV/Aids and basic infrastructure. One of the main conditions set by Switzerland was for the bank to monitor how Nigeria spends the funds. Nigeria says Abacha looted oil-rich Nigeria of more than $2.2 billion from when he seized power in 1993 until his death in 1998. The hunt for the money began in earnest after a restored democracy elected Olusegun Obasanjo president in 1999. Nigerian Finance Minister Ngozi Okanjo-Iweala said Nigeria was searching for funds Abacha may have sent to other countries but did not name them. She said Obasanjo was determined to fight corruption. “There are no sacred cows.”
Jean-Daniel Gerber, a senior official at the Swiss economics ministry, said Switzerland was “the first and so far the only country where a court of law ordered the transfer of Abacha funds back to Nigeria.” He said repatriating illegally-acquired funds was an important tool in the fight against corruption because it closed safe havens for such funds and promoted greater accountability.
But Swiss non-governmental organizations (NGOs) are doubtful about the effectiveness of the cooperation between the World Bank and Nigeria. “There are NGOs in the field which would be much more experienced to supervise spending of the funds,” commented Andreas Missbach from the Berne Declaration. The organization said it had suggested that the Swiss State Secretariat for Economic Affairs (Seco) and the Swiss Agency for Development and Cooperation as well as Nigerian NGOs should take on this watchdog role. “The deprived Nigerian people must be compensated. That’s why the use of this money is so important,” added Missbach. However, the Nigerian side has expressed the view that the accord with the World Bank is “legitimate”.Link here.
BLAIR ANNOUNCES SWEEPING POLICE POWERS AGAINST “ANTI-SOCIAL” BEHAVIOR
UK police and local authorities will be given sweeping summary powers to fight crime and anti-social behaviour, Prime Minister Tony Blair has said. A complete rethink is needed to end the Dickensian approach to 21st century crime, the Prime Minister told Labour’s party conference. “For eight years I have battered the criminal justice system to get it to change,” he said in Brighton. “And it was only when we started to introduce special anti-social behavior laws we have made a difference. … I now understand why. The system itself is the problem.”
He continued, “The whole of our system starts from the proposition that its duty is to protect the innocent from being wrongly convicted. Don’t misunderstand me. That must be the duty of any criminal justice system.”But surely our primary duty should be to allow law-abiding people to live in safety.
“It means a complete change of thinking. It doesn’t mean abandoning human rights. It means deciding whose come first.” The summary powers will deal with drinking, drug-dealing and organized crime. Teams of local police and community officers will be put in place across the country. And head teachers will be given “the full disciplinary powers they want,” he said.Link here.
JOSE PADILLA: CONSTITUTIONAL UNPERSON?
John Roberts’s confirmation hearings focused heavily on abortion, judicial philosophy, and the powers of Congress – all important issues, to be sure. But soon the Supreme Court may be called upon to decide an even more important question: Does the president have the power to seize an American citizen on American soil, strip him of his constitutional rights, and hold him in a military prison for the duration of the war on terror – perhaps forever?
Judge J. Michael Luttig, who is said to be on the president’s “short list” to fill a second Supreme Court vacancy, believes the answer is yes. On Sept. 9, in Padilla v. Commander C.T. Hanft, Luttig and two other federal appellate court judges reversed the federal district court that had ordered the government either to charge suspected terrorist Jose Padilla with a crime, or release him.
Padilla, a Brooklyn-born American, was arrested by federal agents at O’Hare International Airport in May 2002, and held on a material witness warrant. Two days before a hearing in federal court on the validity of that warrant, the president declared Padilla an “enemy combatant” plotting a “dirty bomb” attack in the U.S., and ordered him transferred to a naval brig in South Carolina, hundreds of miles away from his lawyer. Padilla has been held there for over three years without charges or meaningful access to counsel. There is little in Padilla’s background to suggest he is an innocent man wrongly accused – he is a violent ex-con with apparent ties to Al Qaeda. But “the innocent have nothing to fear” is cold comfort and poor constitutional argument. The very principle that imprisons the guilty can be used to seize the innocent.
The principle the Bush administration has advanced to justify Padilla’s detention is broad indeed. It amounts to the assertion that the executive branch can serve as judge, jury, and jailer in cases involving terrorist suspects. Of all the powers claimed by the president since September 11, that power is the one most to be feared – not least because, due to the nature of the war on terrorism, it is a power unlikely ever to be relinquished. If the Supreme Court upholds the September 9th ruling in the Padilla case, ordinary constitutional processes could be suspended at the will of the president. No president should be trusted with a power that vast.Link here.
LET SENSE, NOT FEAR, GUIDE THE PATRIOT ACT
The Patriot Act, now up for reauthorization, was passed at a time of maximum fear. America had been attacked. Security was the urgent concern. Now is a more normal time, and Congress needs to rewrite this law to make it consistent with our civil liberties. The Constitution promises all Americans “due process of law” before government takes away life, liberty or property. It also guarantees “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.” The police may search, but first they need to convince a judge that they know what they are looking for, need to have it and have “probable cause” to look in a specific place. The current Patriot Act compromises these principles, sometimes severely. One section of the act allows the police to secretly search a home and not tell the owner for six months. “Sneak-and-peek” searches existed before the Patriot Act, and may be justified when evidence is vulnerable to quick destruction. The Patriot Act makes such searches easier.
The act also allows the FBI to seize a person’s medical, business, library and gun-purchase records by getting an order from a special court that does not demand probable cause. This “FISA Court” was set up under a 1978 law for espionage cases only. The Patriot Act expanded it to other cases. It also declared that no one who receives a FISA warrant can tell anyone else about it, which means a FISA warrant cannot be contested.
The act also expands the use of National Security Letters, which are a kind of warrant that the Justice Department writes for itself, authorizing its agents to seize such things as records of money movements, telephone calls and Internet visits. Recipients of a National Security Letter are not allowed to tell anyone about them, and so cannot contest them. National Security Letters were authorized by a 1986 law for terrorism only. The Patriot Act expanded them for other uses.
The House and Senate have each passed bills reauthorizing the Patriot Act. The House bill fixes none of these problems. The Senate bill fixes some of them. It is not ideal, but is the better alternative.Link here.
AUSTRALIAN LEADERS AGREE TO TOUGHEN SECURITY LAWS
Australia’s national and state governments agreed to toughen the country’s security laws to enable police to arrest suspected terrorists and detain them for up to 14 days without charge. The controversial new laws could be enacted before the end of this year. The measures represent the latest attempt by Australian intelligence and police forces to prevent a domestic terrorist attack akin to the July London bombings, in which 56 people died. “We live in unusual circumstances. In other circumstances I would never have sought these additional powers,” said John Howard, Australia’s prime minister. “But we do live in very dangerous and different and threatening circumstances.”
Australia’s intelligence agencies can already detain suspects for long periods without charge. But Canberra needed the consent of state governments, which control the main police forces, to give teeth to its new anti-terrorism measures. Australia has not suffered a major domestic terrorist attack and the official threat level since September 11, 2001 has remained unchanged at medium, meaning an attack is “feasible and could occur”.
Katie Wood, human rights and security campaigner from Amnesty International, said the proposed laws were draconian and unnecessary. “What we are looking for is a rational justification for taking these further steps.” But Mr. Howard and the leaders of Australia’s six state governments and two autonomous territories argued that the London attacks presented a “clear case for Australia’s counter-terrorism laws to be strengthened”. Australia is a strong ally of the U.S. and has deployed troops to Iraq. Gareth Evans, head of the International Crisis Group, said Australia’s support for the U.S. has raised its profile among jihadist groups.
“I think the chilling reality that home grown terrorists exist a lot of Australians, I guess all of us, found that a bit hard to accept,” Mr. Howard told reporters. “We are worried there are people in our community who might just [launch an attack]. We need the power to the extent that it’s possible to stop it happening.” State government leaders, all of whom represent the center-left Australian Labor party, persuaded Mr. Howard, leader of Australia’s ruling conservative coalition, to introduce a 10-year “sunset” clause for the laws to expire.Link here.
AMERICA IS RUNNING OUT OF TIME
George W. Bush will go down in history as the president who fiddled while America lost its superpower status. Bush used deceit and hysteria to lead America into a war that is bleeding the U.S. economically, militarily, and diplomatically. The war is being fought with hundreds of billions of dollars borrowed from foreigners. The war is bleeding the military of troops and commitments. The war has ended the U.S. claim to moral leadership and exposed the U.S. as a reckless and aggressive power.
Focused on a concocted “war on terrorism”, the Bush administration diverted money from the New Orleans levees to Iraq, with the consequence that the U.S. now has a $100 billion rebuild bill on top of the war bill. The U.S. is so short of troops that neoconservatives are advocating the use of foreign mercenaries paid with U.S. citizenship. U.S. efforts to isolate Iran have been blocked by Russia and China, nuclear powers that Bush cannot bully. The Iraqi war has three beneficiaries: (1) al Qaeda, (2) Iran, and (3) U.S. war industries and Bush-Cheney cronies who receive no-bid contracts. Everyone else is a loser.
The Bush administration is churning out red ink in excess of $1 trillion annually. The federal budget deficit is approaching $500 billion. The U.S. trade deficit is approaching $700 billion. The budget deficit is being financed by foreigners, primarily Asians who now hold enough U.S. government debt to exercise power over U.S. interest rates and the value of the dollar whenever they decide to use the power that Bush has placed in their hands. The trade deficit is being financed by turning over the ownership of U.S. assets and future income streams to foreigners, making Americans forever poorer from the loss of accumulated wealth.
When the dollar goes, it will affect costs, profits, interest rates and living standards in dramatic ways. Costs and interest rates will soar, and profits, living standards, equity values, bond prices and real estate will plummet. These unpleasant events await only Asia’s decision to curtail its support for U.S. red ink. That will happen when this support no longer serves Asia’s interest. When Asia pulls the plug on the dollar, the U.S. government will find that monetary and fiscal policy are powerless to offset the consequences. Compared to U.S. budget and trade deficits, terrorists are a minor concern. The greatest danger that the U.S. faces is the dollar’s loss of reserve currency role. This would be an impoverishing event, one from which the U.S. would not recover.
An intelligent government sincerely concerned with homeland security would find a way to halt the global labor arbitrage that is stripping the American economy of high value-added jobs and manufacturing capability. The loss of tax base that results when U.S. companies outsource jobs and relocate production abroad makes it ever more difficult to balance a budget strained by war, natural disasters, and demographic impact on Social Security and Medicare. Global labor arbitrage is rapidly dismantling the ladders of upward mobility and thereby endangering American political stability. This threat is far greater than any Osama bin Laden can mount.
Time is running out for Republicans and Democrats to escape from the distraction of a pointless war and to focus on the real threats that endanger the United States of America.Link here.
JUST AS EXPECTED, BUSH WANTS MORE POWER
It should come as no surprise that on the heels of hurricanes Katrina and Rita, Bush is asking for more dictatorial power. Just as 9-11 provided the supposed justification of the gutting of our Constitutional rights through the “Patriot” and other related Acts, now Bush wants to be allowed to send in the military to respond to “national disasters” without anyone’s authority but his own.
This notion is so wrong for so many reasons, it will no doubt be seriously considered by our geniuses in Congress and may even become law. Ignoring for the moment that this will mean that while our National Guard is deployed overseas, the military will be “assisting” us here at home – a topsy-turvy use of resources that only to Bush & Co. would seem logical – it also means that upon the slighest pretext, the Commander-in-Chief could declare an emergency, direct the invasion of any state by the military and – if Katrina is any example, confiscate all weapons. Folks, this is why the 2nd Amendment was added to the Constitution. This is what Great Britain did and why state militias were formed in the first place.
Once again, the state governors should not take this lying down. Any such law should be rejected and if passed by Congress, declared immediately unConstitutional. Further, the states should begin reimplementation of state militias. Otherwise, we will be naked and defenseless when the army comes knocking at our doors.
Our weak, gutless and witless Congress will not doubt rubber-stamp this crazy notion as a supposed “necessary response” to the Katrina mess. If so, our days as a free nation are truly numbered. The problem is, we the people have basically asked for it. By complaining of the failure of the government to act more responsively to Katrina, the government is responding to that complaint by a demand for more power. In an earlier article, I said we should be careful what we ask for as we just might get it. Well, here it comes.Link here.
PUBLIC EDUCATION’S COMING COLLAPSE
It has been said that one can build a crooked house on a strong foundation, and the house will stand. Conversely, one can build a well-crafted house on a substandard foundation, and the house will fall. Consider public schooling in America, for it is doubly flawed – a crooked structure atop a crumbling foundation – and its collapse is inevitable. The flaws are too many, reform is a pipedream … gravity is a force too powerful to be resisted. When we apply an architectural analogy to schools and schooling, we better understand the problems, as well as the eventual repercussions, of the public education system.
Legislators, far removed from the various “construction” sites, unable to conceptualize the goals and processes of the project, and lacking consistent, unifying blueprints, have developed top-heavy, illogical, unmanageable warehouses. Their policies have crafted an infrastructure that lacks symmetry, balance, and effectiveness. If this “house of errors” does not topple due to its defective construction, then it will fall because of its fractured and damaged foundation. Federal regulations have called for counterproductive and unnecessary repairs – repairs, which replaced the solid materials and intelligent constructs found in prior schooling designs. Poorly conceived mandates have demanded that all foundations be modified using mortars developed from weak and destructive elements.
Consider schooling structures of the past. Buildings were well crafted using local workmen applying local wisdom. Hundreds of those buildings still stand and house families, township halls, community centers. Education in these earlier structures was based on values, strengthened by familial and neighborhood loyalties, bound with mortar made of honor, decency, and hard work. This strong mixture cemented and held the foundational “stones” – literacy, arithmetic, core knowledge, true U.S. History and government, philosophy, classical rhetoric and literature, problem solving. But strong local cohesiveness threatened to undermine a federal government intent on overstepping its Constitutional limitations. Legislators, pretending to be architects, designed “consolidation” and set the stage whereby children’s ties and loyalties – to parents, to communities, to churches – could be broken.
The goal of these anti-family and constitutionally unlawful actions – consolidations, Goals 2000, School-to-Work, Leave No Child Behind – is to leave no child who might miss indoctrination towards a “changed America” in its new and global role. Neighbors, no longer bonded together around the neighborhood school, will be less likely to form groups, alliances, even militias, to resist the final stages in the takeover of public education – of public life – by the federal superstructure.
Considering the rate at which it is disintegrating, the public education cartel cannot continue to stand much longer. We have our child out of public schooling and he is kept at a safe distance from the decay. Have you yet taken steps, or made plans, for your children’s escape to safety at home, or within real schools founded on strong ethics and principles? If not, you may want to act soon. Every day of a child’s life is precious, and every lesson learned should be parent-approved and sensitively taught.Link here.
INDIRECT 9/11 DEATH TOLL KEEPS CLIMBINGAttacks convinced more Americans to hit the roads, where more have died.
19 terrorists killed more than 2,700 Americans when they commandeered four planes and flew them into buildings and the ground. However, those terrorists, even though dead these four years, may very well have indirectly killed and maimed as many or more Americans since 9/11. How can that be? On 9/11, the terrorists immediately increased the overall cost of flying by increasing many potential air passengers’ perceived risk of flying. Since 9/11, most air travelers have feared that terrorists would strike again using commercial aircraft.
The terrorists, of course, motivated the U.S. government to dramatically beef up security checks at airports, the result of which has been an increase in travel time for all passengers. The time spent in security lines at airports has translated into a greater overall cost of air travel, relative to ground travel. Hence, since 9/11, more Americans than otherwise have been more inclined to make their trips by car, leading to more miles driven and greater highway congestion. Since vehicle travel is far more deadly per mile than air travel, it should surprise no one that auto accidents, injuries, and deaths have increased as a consequence of the greater cost of air travel imposed by the 9/11 terrorists (independent of other changes – for example, road conditions – that can be expected to affect car-travel deaths).
Garrick Blalock, Vrinda Kadiyali, and Daniel Simon, Cornell University economists, have reported in two working papers the econometric findings of the potential tie between the terrorists’ actions and car-travel deaths. They found that the 9/11 events and resulting security measures reduced air-travel volume, independent of other forces, by about 5% nationwide (and 8% from the nation’s major airports). The resulting increase in car travel led to approximately 242 more traffic deaths per month than would otherwise have been predicted for the last three months of 2001.
It is no stretch to think that the greater count of American road deaths over the past four years attributable to greater flying risks and 9/11 security measures have surpassed the 9/11 deaths.Link here.
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