Ravens reportedly tried to trade entire draft class to get Matt Ryan in 2008

In 2007, the Ravens went 5-11 and that, coupled with the lack of development from 2003 first-round pick Kyle Boller, had a lot to do with the team’s decision to fire Brian Billick. In Atlanta, first-year coach Bobby Petrino quit after 13 games and the Falconslimped to a 4-12 record. Joey Harrington, Chris Redman and Byron Leftwich all started games that season.

Both teams headed into the 2008 NFL Draft desperately in search of a franchise quarterback. The Falcons had the No. 3 pick while the Ravens were No. 8. It was no great secret that Atlanta had designs on Matt Ryan, who had starred at Boston College, but Baltimore wasn’t going to let him go without a fight.

According to NFL.com‘s Ian Rapoport, the Ravens talked with the Rams, who had the second-overall pick, about swapping places so they could leapfrog the Falcons in the race to Ryan. So what was on the table?

Rapoport says the Ravens offered their entire draft class to the Rams, adding that “The trade nearly happened, but the Rams asked for more — they also wanted Baltimore’s second-round pick from 2009 to clinch the deal.”

That was the deal-breaker, apparently, and instead the Ravens traded down to the No. 26 pick (with the Jaguars) and then back up to No. 18 (with the Texans) where they selected Joe Flacco.

As BaltimoreBeatdown.com points out, the Ravens ended up with a strong class:

Rd. 1 Pick 18: QB Joe Flacco
Rd. 2 Pick 55: RB Ray Rice
Rd. 3 Pick 71: LB Tavares Gooden
Rd. 3 Pick 86: S Tom Zbikowski
Rd. 4 Pick 106: WR Marcus Smith

And that 2009 second-rounder turned into another good player, pass rusher Paul Kruger.

Plus, it’s not like Flacco has been a stiff; he caught fire in the playoffs following the 2012 season and had everything to do with the Ravens’ win over the 49ers in Super Bowl XLVII (Flacco was named Super Bowl MVP).

Ryan has been more efficient over the course of his regular-season career, according to Football Outsiders’ metrics. Here’s how the two quarterbacks ranked in value per play in each of their first nine seasons:

Year Ryan Flacco
2008 4th 22nd
2009 15th 7th
2010 7th 15th
2011 7th 18th
2012 8th 17th
2013 9th 35th
2014 9th 8th
2015 18th 26th
2016 1st 29th

Ryan’s numbers are also better in the postseason — in seven games he’s completed 68 percent of his passes with 16 touchdowns and seven interceptions, and a QB rating of 98.8. But the Falcons are 3-4 in those games. Flacco, meanwhile, sports a 10-5 record in the postseason — including the aforementioned Lombardi Trophy — where he’s thrown 25 touchdowns and 10 interceptions, but completed just 57 percent of his throws with a QB rating of 88.6.

The takeaway: Quarterback wins are overrated. But you already knew that. The bigger story is that the Ravens have been successful for much of Flacco’s nine-year career because they were able to surround him with really good players. Ryan might be the better quarterback but there’s no guarantee he would have had Flacco’s success in Baltimore without inferior talent around him.

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Trump may be angling for a new deal on trade with China

There’s only one smart way to take all the heavy breathing since Donald Trump’s 10-minute telephone conversation last Friday with Tsai Ing-wen, Taiwan’s president.

Ignore it: Most of what’s been ricocheting around the press last week misses the point by miles.

There might have been grounds for panic in Washington’s foreign policy circles had Trump signaled his intention to recognize Taiwan’s independence from China.

Since Nixon and Mao signed the Shanghai Communiqué in 1972, the U.S. is committed to accepting Beijing’s “One China” policy. It’s the Chinese leadership’s hottest button.

But repudiating so fundamental a feature of the U.S.-China relationship isn’t remotely an entry in Trump’s playbook. By the evidence, and there’s plenty, geopolitics of this kind doesn’t actually interest the President-elect.

Put simply, Trump wants a new deal with China on the trade and investment side. He has made this clear in bold-faced capitals more or less every day since he announced his run for the White House in mid-2015.

How all the diplomats and think-tank denizens could so thoroughly misunderstand this is hard to fathom. The takeaway here, and it’s not reassuring, is that those responsible for Washington’s China policy are a jumpy, uncertain lot—less than confident that what they’ve put in place is sturdy.

Taiwan's President Tsai Ing-wen speaks after being decorated with the Mariscal Francisco Lopez medal, the country's highest honor, during a ceremony in the Lopez Presidential Palace in Asuncion, Paraguay June 28, 2016. REUTERS/Jorge Adorno Taiwan’s President Tsai Ing-wen speaks after being decorated with the Mariscal Francisco Lopez medal, the country’s highest honor, during a ceremony in the Lopez Presidential Palace in Asuncion Thomson Reuters

Yes, Trump knew there were political and diplomatic implications when he took Tsai’s call. Let’s dispense with the thought that he’s not smart enough to figure that out beforehand—the bull-in-a-China-shop thesis.

But with Trump’s constant complaints about the trade imbalance, exchange rates, and other such matters in mind, that telephone call looks a lot different. It’s the dealmaker as diplomat: That brief chat is Trump’s opening move—the intent being to throw Beijing a touch off balance at the start of what could well be four years of very steady, intense renegotiation of the economic relationship.

Sino-American relations, let’s not forget, are no monument to clever diplomacy. They’re a muddle, to put the point bluntly, and have been for fully several decades.

On one hand, we have two huge economies that are densely interdependent on multiple levels. On the other, Beijing and Washington are sharply at odds on every military and security question lying between them—policing the South China Sea currently the most prominent among them.

President Obama didn’t create this two-headed beast, but he’ll dump it in Trump’s lap come January 20. And let’s admit it: There’s more asymmetry and mess across the Pacific now than there was in 2008—the legacy of Obama’s all-too-fancy “pivot to Asia.”

xi jinping scowl china flagSean Gallup/Getty Images

The Pentagon has turned the South China Sea into a flashpoint over the past several years—this quite beyond necessity. The Trans-Pacific Partnership, Obama’s over-ambitious trade alliance, pointedly excludes the Chinese—drawing a line where there doesn’t have to be one. And China’s now developing its own alternative, the Regional Comprehensive Economic Partnership. (Funny how those smart diplomats didn’t anticipate this perfectly predictable outcome.)

Let’s look briefly at the two sides of China policy Trump will either have to leave as is or refashion.

• The security relationship. Trump inherits a security policy with a fatal flaw. China’s emergence as a regional power has left the Pentagon, which has outsized influence on Washington’s Asia policies, in a time warp. Pretending in the 21stcentury that it’s the 1950s and the Pacific is an American lake is preposterous as a strategic framework—a recipe for conflict.

The question for Trump, and it’s a very good one, is whether he’ll see and address this 800-pound error or carry on with the Pentagon’s indulgence in nostalgia.

No clear signals yet. Trump may not be interested in strategic questions, but a lot of the people around him are. The New York Times reported Wednesday that Bob Dole, long close to the Taiwan lobby, had been advising Trump while the Tsai call was in the planning stage.

Last month a group of Chinese scholars issued a report forecasting that Trump—whom the Chinese leadership subtly favored over Hillary Clinton—will sustain Washington’s tough stance in the South China Sea. No change, with James “Mad Dog” Mattis, Trump’s defense secretary-designate, running the shop.

Maybe, maybe not. Mattis is a tough Marine, but his record indicates he knows the military’s limits.

Donald TrumpDonald Trump speaks at a “Thank You USA” tour rally in Grand Rapids, Michigan, U.S. December 9, 2016.REUTERS/Mike Segar

Here’s Andrew Nathan, a distinguished sinologist at Columbia, in a Foreign Policy forum published just after the election:

“Trump was the practitioner of the art of the deal. If he takes office, he will look for an economic and strategic grand bargain with China, some version of a regional condominium that reduces American resistance to the spread of Chinese military and political influence in Asia in exchange for greater opening of the Chinese economy to U.S. exports and investment, Chinese investment in U.S. infrastructure — and perhaps a few permits for Trump hotels and towers thrown in as side payments.”

I’m with Nathan. Whatever else Trump may be, he’s neither an ideologue nor a saber-rattler. He’s a realist who wants to know what time it is. As backup evidence, Trump’s taking the same approach to Russia, if you think about it: We’re great, you’re great, let’s deal.

• The economic relationship. Trump has a problem here, and a big part of it is of his own making. His take on U.S.-China economic ties is far too simplistic. China’s phenomenal growth doesn’t compute to a big loss the White House needs to remedy.

china military flagChina’s national flag is raised during the opening ceremony of the Beijing 2008 Olympic Games at the National Stadium, August 8, 2008. The stadium is also known as the Bird’s Nest. Jerry Lampe/Reuters

American businesses have put more than $5 trillion into plant and equipment on the mainland since the turn of this century. Some of the resulting production goes into the Chinese market and a lot is exported back to the U.S. There are supply chains to think about—U.S.-based manufacturers sourcing components in China. Now there’s Chinese investment in American assets, too: It’s growing leaps and bounds.

There are bound to be imbalances to negotiate in so complex a relationship, but Trump risks a shoot-in-the-foot problem if he thinks it’s time to bust up a party because only half the people there are having fun.

A 45 percent import tariff on Chinese goods, as Trump promised on the campaign trail is thoroughly unrealistic. This was Dennis A. Muilenburg’s point when the Boeing CEO warned Trump that China could easily retaliate by shifting its formidable order book to Airbus.

Trump needs some tutoring. First order of business is dropping the shrill charge that Beijing manipulates the yuan to its advantage. That problem was resolved years ago. Harping on it makes Trump seem stupid, and that’s not the way he wants to come across with the Chinese.

Bottom line: Consider those jobs Trump got Carrier to keep in Indiana a good cue. Trump will manage some impressive gestures in his dealings with China on the economic side, but it’s unlikely he’ll get far if he tries to reform a very formidable political and economic structure in which both sides have big interests.

Republicans aim to coax Trump toward House trade tax plan

By David Morgan

WASHINGTON (Reuters) – Republicans in the U.S. Congress hope to convince President-elect Donald Trump to support an untested strategy of using the tax code to promote exports while slashing corporate taxes, framing it as a way to fulfill his campaign promises to restore blue-collar jobs.

The plan would be one way to help Republican lawmakers reconcile their long-standing goal of tax cuts with the often populist campaign rhetoric of Trump, who has attacked the North American Free Trade Agreement (NAFTA) and other trade deals as bad for U.S. workers.

Critics say it risks running afoul of global trade rules and increasing costs for U.S. consumers. Analysts also say that any export gains could be short-lived if the strategy causes the dollar to strengthen, wiping out any price advantage for U.S. products in international markets.

It is likely to undergo months of debate as part of a larger package of proposals offered in congressional Republicans’ “A Better Way” economic plan, but at least one Trump adviser already seems to have a favorable view of the export-focused “border adjustability” strategy.

“If we have a border adjustable tax system, that can solve a lot of these trade issues that Trump is talking about,” economic analyst and Trump adviser Stephen Moore said in an interview.

“You’re going to tax what’s imported and not going to tax what’s exported. So we’re going to reduce the trade deficit and we’re going to have more companies come in here,” Moore said.

Border adjustability’s details are not clearly explained in a summary of the “A Better Way” plan from House Speaker Paul Ryan and House tax committee chairman Kevin Brady. But the Tax Foundation, a think tank that closely studies business tax policy, said the strategy would be implemented by making revenue from sales to non-U.S. residents non-taxable, while preventing importers from deducting the cost of goods bought from non-residents.

Brady told Reuters that border adjustability would “virtually eliminate” any tax incentive for U.S. companies to move operations overseas and encourage foreign investment to return to the United States.

“We’ve got a great argument, I think,” he said.

Steven Mnuchin, Trump’s pick for U.S. Treasury secretary and co-author of the president-elect’s tax plan, described tax reform on Wednesday as “something that happens absolutely within the first 90 days of this presidency.” Wilbur Ross, Trump’s nominee for commerce secretary, did not mention tax policy directly but said the Trump administration’s aim would be to increase exports in part by getting rid of “non-tariff” barriers.

The perceived winners under a border adjustability approach would include U.S. manufacturers that export heavily, while large-volume importers, such as U.S. retailers, could be hurt. That distinction was already dividing corporate lobbying groups.

While retailers support an overhaul of the tax code, “the tax on imports proposed in the House blueprint is cause for concern for retailers,” said Christin Fernandez, spokeswoman for the Retail Industry Leaders Association, a Washington group.

The industry group’s members include Wal Mart Stores Inc, Home Depot Inc and Target Corp.

Some version of border adjustability could attract support from Democrats. Senator Ben Cardin, a Maryland Democrat who sits on the Senate Finance Committee and the panel’s tax subcommittee, said he strongly favors the idea. But he called the emerging House plan “very, very questionable” because it would use tax on corporate income rather than a consumption tax.

Tax lawyers and other experts have said such an approach risks violating long-standing world trade rules that allow countries to adjust their trading positions through indirect taxes, such as a sales tax, but not with direct taxes like the U.S. corporate tax. “It would lead to uncertainty on how it would be treated internationally. And that’s bad for business,” Cardin told Reuters.

Trump’s transition team and other Trump advisors on the economy did not respond to requests for comment.

Brady has said border adjustability would pass muster with the World Trade Organization, which polices global trade. The WTO declined to comment on the plan.

Border adjustability is only one component of the “A Better Way” blueprint. It would also slash the corporate income tax rate to 20 percent from a top rate of 35 percent; repeal the corporate alternative minimum tax; and let businesses write off capital investments immediately.

Altogether, the House Republicans’ corporate tax plan would reduce U.S. corporate tax revenues by about $891 billion over 10 years, estimated the non-partisan Tax Policy Center, perpetuating a long-term decline in the corporate tax take.

Combined with an equally ambitious package of individual income tax cut proposals put forward in the “Better Way” package, the Republican plan would boost the federal deficit by about $3.7 trillion over a decade, the center estimated.

Advocates of border adjustability note that U.S. trading partners including China use value-added taxes to favor exports over imports and say the House proposal would level the playing field for U.S. companies.

But some tax experts have questioned how effective it would be. Kyle Pomerleau and Stephen Entin of the Tax Foundation wrote in June that the increased demand abroad for cheaper U.S.-made goods would boost the dollar’s value and cancel out gains for exporters.

Still, supporters of the plan believe it could win the favor of the president-elect, who has railed against U.S. companies that have shifted production abroad and scaled back U.S. operations. Trump has already ruled out U.S. participation in the ambitious Trans-Pacific Partnership (TPP) trade deal and has vowed to renegotiate or quit NAFTA.

“When Trump understands how the blueprint works, particularly the border adjustability provision, which will create a huge incentive to make stuff in the United States, I think he’ll be delirious,” said Ken Kies, one of Washington’s most influential corporate tax lobbyists.

Kies represents major firms including Microsoft Corp, General Electric Co, Pfizer Inc and Caterpillar Inc.

More Wealth, More Jobs, but Not for Everyone: What Fuels the Backlash on Trade

ROTTERDAM, the Netherlands — For as long as ships have ventured across water, laborers like Patrick Duijzers have tied their fortunes to trade.

He is a longshoreman here at Europe’s largest port, and his black Jack Daniel’s T-shirt, hoop earrings and copious rings give Mr. Duijzers the look of a bohemian pirate. His wages put him solidly in the Dutch middle class: He has earned enough to buy an apartment and enjoy vacations to Spain.

Lately, though, Mr. Duijzers has come to see global trade as a malevolent force. His employer — a unit of the Maersk Group, the Danish shipping conglomerate — is locked in a fiercely competitive battle around the world.

He sees trucking companies replacing Dutch drivers with immigrants from Eastern Europe. He bids farewell to older co-workers reluctantly taking early retirement as robots capture their jobs. Over the last three decades, the ranks of his union have dwindled to about 7,000 members, from 25,000.

“More global trade is a good thing if we get a piece of the cake,” Mr. Duijzers said. “But that’s the problem. We’re not getting our piece of the cake.”
Far beyond the docks of the North Sea, such laments now resonate as the soundtrack for an increasingly vigorous rejection of free trade.

For generations, libraries full of economics textbooks have rightly promised that global trade expands national wealth by lowering the price of goods, lifting wages and amplifying growth. The powers that emerged victorious from World War II championed globalization as the antidote to future conflicts. In Asia, Europe and North America, governments of every ideological persuasion have focused on trade as their guiding economic force.

But trade comes with no assurances that the spoils will be shared equitably. Across much of the industrialized world, an outsize share of the winnings have been harvested by people with advanced degrees, stock options and the need for accountants. Ordinary laborers have borne the costs and suffered from joblessness and deepening economic anxiety.

These costs have proved overwhelming in communities that depend on industry for sustenance, vastly exceeding what economists anticipated. Policy makers under the thrall of neoliberal economic philosophy put stock in the notion that markets could be trusted to bolster social welfare.

In doing so, they failed to plan for the trauma that has accompanied the benefits of trade. When millions of workers lost paychecks to foreign competition, they lacked government supports to cushion the blow. As a result, seething anger is upending politics in Europe and North America.

In the United States, the Republican presidential aspirant Donald J. Trump has tapped into the rage of communities reeling from factory closings, denouncing trade with China and Mexico as a mortal threat to American prosperity. The Democratic nominee, Hillary Clinton, has done an about-face, opposing an enormous free-trade deal spanning the Pacific that she supported while secretary of state.

In Britain, the vote in a June referendum to abandon the European Union was in part a rebuke of the establishment, from laborers who blame trade for declining pay. Across the European Union, populist movements have gained adherents as an outraged response to globalization, imperiling the future of major trade deals, including a pact with the United States and another with Canada.

“The trade policy of the European Union is paralyzed,” said the Italian minister of economic development, Carlo Calenda, during a recent interview in Rome. “This is a tragic situation.”

The anti-trade backlash, building for years, has become explosive because the global economy has arrived at a sobering period of reckoning. Years of investment manias and financial machinations that powered the job market have lost potency, exposing longstanding downsides of trade that had previously been masked by illusive prosperity.
This tide of animosity may prove nearly impossible to reverse, given that technological disruption and economic upheaval are now at work in an era of scarcity. Today, many major nations are grappling with weak growth, tight credit and a gnawing sense that a lean future may persist indefinitely.

The worst financial crisis since the Great Depression has left banks in Europe and the United States reluctant to lend. Real estate bonanzas from Spain to Southern California gave way to a disastrous wave of foreclosures, eliminating construction jobs. China’s slowdown has diminished its appetite for raw materials, sowing unemployment from the iron ore mines of Brazil to the coal pits of Indonesia.

Trade did not cause the breakdown in economic growth. Indeed, trade has helped generate what growth remains. But the pervasive stagnation has left little cover for those set back by globalization.

The North American Free Trade Agreement, or Nafta, exposed workers in the United States to competition with Mexico, but its passage came in the mid-1990s, just as investment was pouring into the web, creating demand for a range of manufactured goods — office furniture for Silicon Valley coders, trucks for the couriers delivering e-commerce wares. China’s entry into the World Trade Organization in 2001 unleashed a far larger shock, but a construction boom absorbed many laid-off workers.

The dot-com boom is now a distant memory. The housing bubble burst. Much of the global economy is operating free of artificial enhancements. Lower-skilled workers confront bleak opportunities and intense competition, especially in the United States. Even as recent data shows middle-class Americans are finally starting to share in the gains from the recovery, incomes for many remain below where they were a decade ago.

“The debates that we are having about globalization and the adjustment cost, these are the conversations that we should have been having when we did Nafta, and when China entered the W.T.O.,” said Chad P. Bown, a trade expert at the Peterson Institute for International Economics in Washington. “There were people talking about these things, but they weren’t taken very seriously at the time. There’s a lot of policy regret.”

“We do need to have these trade agreements,” Mr. Bown said, “but we do need to be cognizant that there are going to be losers, and we need to have policies to address them.”

The extent of the damage suffered by these “losers” has accelerated an erosion of faith in the wealth-creating powers of free trade. A profound skepticism has taken root in some of the largest trading powers, notably the United States, France, Italy and Japan.

Successive administrations in the United States, led by Democrats and Republicans alike, have embraced liberalized trade as a central component of the nation’s foreign policy. Yet only 19 percent of American voters said trade with other countries created more jobs in the United States, according to a New York Times/CBS News poll released in July.

Even among those who support trade, doubts are growing about its ability to deliver on crucial promises. A 2014 Pew Research Center survey of people in 44 countries found that only 45 percent of respondents believed trade raised wages. Only 26 percent believed that trade lowered prices.

Volumes of economic data tell a different story.

Workers employed in major export industries earn higher wages than those in domestically focused sectors.

Americans saw their choice of products expand by one-third in recent decades, the Federal Reserve Bank of Dallas found. Trade is how raspberries appear on store shelves in the dead of winter.
Lower-income households have benefited from better prices on basic goods. As imports surged, the cost of baby and toddler clothes in the United States dropped by 10 percent from 1999 to 2013, according to an analysis by Pietra Rivoli, a trade expert at the McDonough School of Business at Georgetown University. The price of shoes went up much more slowly than the overall cost of living.

But the fear and anger over trade are well founded.

Vast numbers of laborers have lost jobs as imported goods from low-wage countries arrived. Mills have closed, while strip malls fill with dollar stores and payday lenders.

In the fallout, the United States maintained limits on unemployment benefits, leaving American workers vulnerable to plummeting fortunes. Social welfare systems have limited the toll in Europe, but economic growth has been weak, so jobs are scarce.

All the while, automation has grown in sophistication and reach. From 2000 to 2010, the United States lost some 5.6 million manufacturing jobs, by the government’s calculation. Only 13 percent of those job losses can be explained by trade, according to an analysis by the Center for Business and Economic Research at Ball State University in Indiana. The rest were casualties of automation or the result of tweaks to factory operations that enabled more production with less labor.

American factories produced more goods last year than ever, by many indications. Yet they did so while employing about 12.3 million workers — roughly the same number as in 2009, when production was roughly three-fourths what it is today.

At APM Terminals, where Mr. Duijzers works, a symphony of motion greets every arriving container ship. Cranes rev, lifting containers. But people are scarce. “Robots Running Things in Rotterdam,” proclaims an article on the company website. “Of the 74 machines operating in the yard, 63 run on their own with no human intervention.”

Manufacturing Losses
Since 2000, manufacturing employment in the United States has fallen about 30 percent, the most among major job sectors.
Yet if robots are a more significant threat to paychecks, they are also harder to blame than hordes of low-wage workers in overseas factories.

“We have a public policy toward trade,” said Douglas A. Irwin, an economist at Dartmouth College. “We don’t have a public policy on automation.”

The China Syndrome

When Michael Morrison took a job at the steel mill in the center of Granite City, Ill., in 1999, he assumed his future was ironclad.

He was 38, a father with three young children.

“I felt like I had finally gotten into a place that was so reliable I could retire there,” he said.
The mill had been there — just across the Mississippi River from St. Louis — since the end of the 19th century. It had changed hands, ultimately landing in the portfolio of United States Steel. But the basics held. For those willing to sweat, the mill was a reliable means of supporting a family.

Mr. Morrison began by shoveling slag out of the furnaces, working his way up to crane driver. From inside a cockpit tucked in the rafters of a cavernous building, he manned the controls, guiding a 350-ton ladle that spilled molten iron.

It was a difficult job requiring finesse and perpetual focus. He was compensated accordingly, earning $24.62 an hour.

He worked overtime shifts, amassing savings to send his children to college. Last year, he took home $86,000.

His eldest daughter recently finished her master’s in epidemiology. His son completed his sophomore year at McKendree University in nearby Lebanon.

But events playing out on the other side of the world would soon upend his life.

China’s relentless development was turning farmland into factories, accelerated by a landmark in the history of trade: the country’s inclusion in the World Trade Organization.

The W.T.O. was born out of the General Agreement on Tariffs and Trade, a compact forged in 1947 that lowered barriers to international commerce in an effort to prevent a repeat of global hostilities.

In the first four decades, tariffs on manufactured wares plunged to nearly 6 percent from about 35 percent, according to the Federal Reserve Bank of Chicago. By 2000, the volume of trade among members had swelled to 25 times that of a half-century earlier.

Most of this trade took place between wealthy countries with similar wages and labor standards. But the rollout of Nafta in the 1990s put American workers in direct competition with counterparts in Mexico, where wages were much lower and labor rights and environmental standards were minimal.

A washing machine maker with factories in the United States now had a ready way to cut costs: set up a plant in Mexico.

Still, Mexico — home to about 123 million people — was not big enough to refashion the terms of trade. When China joined the W.T.O. in 2001, that added a country of 1.3 billion people to the global trading system.

China targeted crucial industries for domination, lavishing favored companies with sweetheart credit terms while investing aggressively in ports, highways and electrical generation. Anyone with ideas about organizing Chinese labor risked landing behind bars.

In the first 13 years after China entered the W.T.O., its exports of goods swelled to nearly $2.3 trillion in 2014 from $266 billion, according to the World Bank.
The beneficiaries of this surge include anyone who has bought practically anything touched by human hands — an iPhone, a car, a Christmas ornament. Corporations that used China to cut costs raised their value, enriching executives and ordinary investors.

The casualties of China’s exports are far fewer, but they are concentrated. The rugged country of western North Carolina suffered mass unemployment as Chinese-made wooden furniture put local plants out of business. So did glassmakers in Toledo, Ohio, and auto parts manufacturers across the Midwest.

A paper published last year by a trio of economists — David H. Autor at the Massachusetts Institute of Technology, David Dorn at the University of Zurich and Gordon H. Hanson at the University of California, San Diego — concludes that Chinese imports eliminated nearly one million American manufacturing jobs from 1999 to 2011. Add in suppliers and other related industries, and the total job losses reach 2.4 million.

Mr. Trump vows to slap punitive tariffs on Chinese goods. But that would very likely just shift production to other low-wage countries like Vietnam and Mexico. It would not turn the lights on at shuttered textile plants in the Carolinas. (Even if it did, robots would probably take most of the jobs.)

Granite City sat smack in the middle of this gathering storm.

From 2005 to 2015, China’s share of global steel production swelled from just less than one-third to fully half, according to data compiled by the Peterson Institute for International Economics. China’s steel exports more than quadrupled.

Last fall, United States Steel began slowing production in Granite City, laying off 40 or so apprentices. As layoffs accelerated, they reached the ranks of more senior workers.

Michael Morrison, who started at United States Steel’s Granite City plant in 1999, was among workers laid off in December. “I’ve worked since I was 12,” he said. Credit Whitney Curtis for The New York Times
Two days before Christmas, Mr. Morrison finished his shift and went into the break room. “Everybody was standing there like zombies, looking at the bulletin board,” he said. A list of names was tacked there, along with instructions for those workers to clean out their lockers.

This is how Mr. Morrison found himself confronting a bewildering new state of affairs — joblessness.

“I’ve worked since I was 12,” he said, recalling a paper route, then a job as a cook at his brother’s taco place.

A blue Steelworkers union T-shirt hugs his burly frame. His calloused hands attest to years of physical labor. Suddenly, his $2,000 biweekly paycheck shrank to a $425-a-week unemployment check, plus some severance. In July, the unemployment checks stopped. He had reached the six-month limit.

He interviewed for a job as a supervisor at an Amazon warehouse, but it required computer skills that he lacked. So he took a position as a “fulfillment associate,” working the night shift, pulling products off warehouse shelves and putting them in boxes. It paid $13 an hour — a little more than half his United States Steel wages.

His first night on the job, his knees gave out. He took painkillers. The next morning he could barely stand up. He called in and said he would not be coming back. He has an interview coming up for a forklift driving position at a warehouse. It pays $12 an hour, another step down.

“I had to tell my son that he can’t go back to McKendree for his junior year,” Mr. Morrison says, straining to choke back tears. “He has to go to community college.”

He swallows hard. Tears emerge from the corners of his eyes.

“It just crushes you,” he says. “I didn’t get to go to college. I wanted my kids to succeed. When you see the disappointment in your kids’ eyes. …”

Falling Without a Net

When Dan Simmons started working at the mill 38 years ago, talk centered on how to make steel. These days, he spends his days at a job for which he feels little prepared — de facto social worker.

Mr. Simmons is the president of the Steelworkers Local 1899, which represents 1,250 workers at the Granite City plant. On a recent morning, only about 375 of his people are employed. He sits at his desk inside the brick union hall, greeting laid-off workers who arrive seeking help.

One man wants guidance scanning online job listings. Another has hit a snag with his unemployment benefits.

A night earlier, Mr. Simmons took a call on his cellphone from the niece of a high school classmate, a laid-off millworker. He had shot himself to death, leaving behind two children.

Trade Adjustment Assistance, a government program started in 1962 and expanded significantly a dozen years later, is supposed to support workers whose jobs are casualties of overseas competition. The program pays for job training.

But Mr. Simmons rolls his eyes at mention of the program. Training has almost become a joke. Skills often do not translate from old jobs to new. Many workers just draw a check while they attend training and then remain jobless.

A 2012 assessment of the program prepared for the Labor Department found that four years after completing training, only 37 percent of those employed were working in their targeted industries. Many of those enrolled had lower incomes than those who simply signed up for unemployment benefits and looked for other work.

European workers have fared better. In wealthy countries like Germany, the Netherlands, Sweden and Denmark, unemployment benefits, housing subsidies and government-provided health care are far more generous than in the United States.

In the five years after a job loss, an American family of four that is eligible for housing assistance receives average benefits equal to 25 percent of the unemployed person’s previous wages, according to data from the Organization for Economic Cooperation and Development. For a similar family in the Netherlands, benefits reach 70 percent.

Yet in Europe, too, the impacts of trade have been uneven, in part because of the quirks of the European Union. Trade deals are cut by Brussels, setting the terms for the 28 member nations. Social programs are left to national governments.

“You’re pursuing trade and liberalization agreements at the E.U. level, and then leaving to the individual member countries how to deal with the damage,” said Andrew Lang, a law professor at the London School of Economics.

In Granite City, the damage now dominates Mr. Simmons’s day.

Inside the union hall, a supply cabinet has been outfitted as a food pantry. He hands out plastic bags full of canned foods — yellow corn, peas, green beans. He hands one to Mr. Morrison, who initially refuses to take it.

“These are some proud steelworkers, and it’s very difficult for them to do this,” Mr. Simmons says. “These guys are used to making a living, and not asking for handouts.”

Kenneth Hahn had been working at the plant for more than 40 years when he was laid off in February. He spends most of his time in his garden, tending to vegetables.

The union hall of Steelworkers Local 1899 in Granite City, Ill. The local represents 1,250 workers at the United States Steel plant there, where many have been laid off. Credit Whitney Curtis for The New York Times
His father lived on a Missouri farm without plumbing or electricity during the Great Depression.

“They grew everything they needed,” he said.

If the mill does not start up again soon, Mr. Hahn is thinking about doing likewise.

“Move down to the holler,” he said. “I can always eat squirrel and rabbit.”

In China, farmers whose land has been turned into factories are making more steel than the world needs.

In America, idled steelworkers are contemplating how to live off the land.

The Bounty of the Sea

Rotterdam has a history of looking across the water and finding things that can be turned into money.

In the 16th century, it was herring. A burgeoning fleet set sail in pursuit. Merchants began salting and drying the catch in barrels for an emerging export trade. By the 17th century, local shipyards were clattering away, constructing vessels for the Dutch East India Company as it plied the spice routes to Southeast Asia.

As waterways linking the port to the industrial communities of the Rhine were deepened and channelized, German automobiles and machinery began flowing through Rotterdam on the way to the rest of the planet. Offices filled with law firms, insurance agents and logistics companies.

“The fortunes of this country have been built on trade,” said Wouter Jacobs, a transportation economist at Erasmus University Rotterdam. “It’s our lifeline.”

Yet even here, unease has entered the conversation.

Jacob van der Vis is paid to promote trade. An adviser on international business for the Netherlands Chamber of Commerce, he advertises innovations playing out at the port. He speaks of trade with China as a golden opportunity.

But Mr. van der Vis is skeptical of the enormous trade deal being negotiated between the United States and the European Union, the Transatlantic Trade and Investment Partnership, better known as T.T.I.P. He singles out a provision that would enable multinational companies to sue governments for compensation when regulations dent their profits.

Esso, a subsidiary of Exxon Mobil, the American petroleum company, has operations in the Netherlands. Suppose the government went ahead with plans to limit drilling to protect the environment?

“They could sue the Dutch state,” he fumed. “We are not so sure in the Netherlands whether we want to give the multinationals so much power. We are a trading country, but it’s not always that trade should prevail against quality of life.”

Out at the docks, the longshoremen fret about robots.

On a recent afternoon, the Mette Maersk, a Danish-flagged behemoth, sat tethered at APM Terminals. Some 18,000 shipping containers are stacked like children’s blocks on a deck longer than three football fields, bearing auto parts, scrap metal, electronics — any conceivable thing made on one continent and sold on another.

Robotic arms grip containers, lift them and deposit them on deck with thunderous rumbles. Trucks drive themselves.

Yet to absorb this scene and conclude that robots are about to render humanity jobless is to miss something vital. At offices a few miles away, coders are designing the software powering the automated port system, earning wages they distribute through the economy.

For the longshoremen still employed, automation has tamed their work.

John Arkenbout remembers working through ceaseless wind and drizzle when he started at the port 25 years ago. He lifted huge bricks from a pile and dropped them into rope sacks that a crane operator lifted skyward. He saw three people die — one crushed by a truck, two flattened by wayward containers.

Now many longshoremen sit in glass-fronted offices set back from the docks, controlling robotic arms via computer terminals.

“Before, it was physically taxing,” Mr. Arkenbout, 51, said. “Now it’s more mental.”

Most longshoremen earn about 50,000 euros a year, or $56,000. Mr. Arkenbout works a maximum of 40 hours a week.

But he sees the robots becoming more sophisticated. He hears from union leadership that as many as 800 jobs could be eliminated by 2020.

The union held a rare strike in January, winning job guarantees while robots are phased in gradually. But labor is playing defense. The robots will win in the end, because robots never strike. Robots improve with time.

Mr. Arkenbout scoffs at the notion that automation and trade are separate. The shipping companies are deploying robots to cut costs.
Trade deals, immigrant labor, automation: As Mr. Arkenbout sees it, these are all just instruments wielded in pursuit of the same goal — paying him less so corporations can keep more.

“When they don’t need me anymore,” he said, “I’m nothing.”

Gaza merchants say Israel withholding permits, stifling trade

Gazan businessmen staged a protest at a crossing point Monday over what they said was the mass cancellation of travel permits by Israel, which they blamed for suffocating trade.

Palestinians accuse the Jewish state of having scrapped hundreds of travel documents allowing them to enter Israel and the West Bank as well as other countries for trade.

The permits are crucial to the economy of the impoverished Gaza Strip, which some international official say is on the brink of collapse after 10-years of Israeli and Egyptian blockades, imposed following the take over of the enclave by Hamas, considered a terror group by Israel and most Western governments.

Israel, which allows hundreds of trucks into the Strip each day, says the blockade, which restricts shipments on certain items, is necessary to prevent Hamas and other terror groups from rebuilding its military infrastructure, including rockets and a network of tunnels.

Palestinian businessmen and traders hold banners and shout slogans during a demonstration to protest after Israel suspended their permits to cross to Israel on August 15, 2016 in Beit Hanun, near the Erez crossing point with Israel, in the northern Gaza Strip. / AFP PHOTO / MAHMUD HAMS

COGAT, the Israeli Defense Ministry body responsible for implementing government policies in the Palestinian territories, refused to comment on Monday.

But an Israeli official confirmed to AFP that the number of permits had declined.

“There are currently 1,600 trading permits, compared to 2,800 in the same period in 2015,” the official said.

Walid al-Hosary, chairman of the Gaza chamber of commerce, said that “more than 1,500 permits and more than 160 authorization cards for merchants and businessmen have been withdrawn.”

He told the demonstrators at the Erez Crossing in the north of the Strip that Israel had cited “security reasons,” for the drop in permits.

He claimed raw goods necessary for industry were not being let into the Palestinian enclave, home to some 1.9 million Palestinians.

Palestinian businessmen and traders hold banners and shout slogans during a demonstration to protest after Israel suspended their permits to cross to Israel on August 15, 2016 in Beit Hanun, near the Erez crossing point with Israel, in the northern Gaza Strip. / AFP PHOTO / MAHMUD HAMS

Israel prevents a long list of materials to enter the Strip it says are used or can be used by Hamas for military purposes, though in recent years it has shortened that list and made efforts to put “forbidden” materials straight into the hands of international aid groups working in Gaza.

Vladimir Putin (Jew) orders government to start ‘normalizing’ trade with Turkey

MOSCOW, Russia — Russian President Vladimir Putin on Wednesday ordered his government to begin the process of lifting sanctions imposed against Turkey after Ankara shot down a Russian warplane last year.

“I ask that the Russian government begins the process of normalizing general trade and economic ties with Turkey,” Putin said at a cabinet meeting following a telephone conversation with Turkish counterpart Recep Tayyip Erdogan.

First on his list were travel restrictions between the countries.

“I want to start with the question of tourism … we are lifting the administrative restrictions in this area,” Putin told government ministers in televised comments.

The move came after earlier in the day Putin and Erdogan held their first phone call since Ankara downed one of Moscow’s jets in Syria last year.

Screen capture from video by Haberturk TV showing a Russian warplane on fire before crashing on a hill as seen from Hatay province, Turkey, November 24, 2015. (Haberturk TV via AP)

A statement from the Turkish presidency said Erdogan and Putin “highlighted the importance of the normalization of bilateral relations between Turkey and Russia.”

The November incident froze relations between the two nations and saw Moscow slap sanctions on Ankara.

Putin also condemned the “heinous” attack at Istanbul’s Ataturk airport Tuesday that killed at least 41 people and offered condolences to the Turkish people, the statement said.

“Reiterating their commitment to reinvigorate bilateral relations and fight terrorism together, the two leaders agreed to remain in contact and meet in person,” Erdogan’s office said.

The Kremlin confirmed that the conversation took place and said a statement would be released.

The breakthrough phone call by Putin came after Erdogan on Monday sent a letter to the Kremlin leader that Moscow said contained an apology.

The downing of the plane in November ruptured relations and saw Moscow impose a raft of sanctions, including an embargo on Turkish food products and a ban on charter flights and the sale of package tours to the country. It also sparked a bitter war of words between the leaders with Putin calling it a “stab in the back” and demanding an apology from Erdogan.

Russian President Vladimir Putin, left, sits down as Turkey's Prime Minister Recep Tayyip Erdogan looks on before a meeting in Istanbul, Turkey, Monday, Dec. 3, 2012. (photo credit: AP/Tolga Bozoglu, Pool)

Ankara has said Erdogan expressed his “regret” over the incident in Monday’s letter to Putin and asked the family of the pilot who died to “excuse us,” but has not explicitly confirmed he apologized for shooting down the plane.

Kremlin spokesman Dmitry Peskov on Tuesday described the letter as an “important step” but warned that “there is no need to think that in several days it will be possible to normalize everything.”

Turkey has argued that the Russian plane strayed into its airspace and ignored repeated warnings, but Russia insisted it did not cross the border and accused Turkey of a “planned provocation.”

The countries are on opposing sides in the Syrian conflict, with Ankara backing rebels fighting to topple President Bashar Assad while Moscow is one of his last remaining allies.

IMF not welcome! Syria and Russia consider joint bank for trade and redevelopment

© AP 
Syrian Prime Minister Wael Nader Halqi 

Syria and Russia are considering the possibility of setting up joint banks to carry out transactions between the two countries, Syrian Prime Minister Wael Nader Halqi told Sputnik.

The Russian-Syrian business council has expressed a wish to open a joint Russian-Syrian bank with an equity participation of 50 percent by each side. The Syrian participation will be provided by Syrian businessmen with sufficient banking experience. This bank would be controlled by the countries’ central banks,” Halqi said.

“At the moment, there is a discussion at the Central Bank of Syria on the most appropriate form for the creation of a Russian bank in Syria, in order to ease the financing of banking transactions between the two countries, which serves mutual interests and will simplify trade,” he added.

Syria and Russia are holding consultations on the possibility of transactions in their national currencies Wael Nader Halqi said.

“Back in 2013, the Central Bank of Syria prepared a detailed bank mechanism on the exchange [of goods] in national currencies and presented it to the Russian side to a representative of the Russian Central Bank’s head. Several rounds of negotiations were held on this mechanism. We were told that consultations with Russian banks were ongoing. Work on examining this issue, as well as the issue of cooperation with Syrian banks in this is still ongoing. Soon we will be told the names of these banks,” Halqi said in an interview.

According to Halqi, the topic was also reflected in a memorandum that the Syrian side presented to the members of the Customs Union, which later turned into the Eurasian Economic Union.

Syria intends to seek financial support from its partners, including Russia, Syrian Prime Minister said.

“Yes, we will request help from friendly countries. As for the amount — restoring the country requires a lot of funding, this will depend on the position of the country wishing to take part in this and invest. Industrial investments in important projects can be carried out either with the full funding of the state or partially through established investment forms, such as, for example, open credit lines in accordance with the financial needs of the social and service sector, loans on favorable terms.. It is impossible to calculate the required amount, as we first and foremost ask friendly countries to be financially involved in accordance with their capabilities,” Halqi said.

[The aid] has a major impact on meeting citizens’ basic needs and supporting vital sectors. This regards rescue and humanitarian activities. As for the strategic period, the aid will be provided in the form of financial investments, which the Syrian government plans to get from friendly states in the form of concessional loans to finance investment projects in strategic fields, most importantly energy, infrastructure, industry, agriculture and others,” he added.

Sources: Colin Kaepernick’s agents request trade from 49ers

SANTA CLARA, Calif. — While new San Francisco 49ers coach Chip Kelly gave the impression Thursday that Colin Kaepernick wants to return to the team, sources told ESPN’s Adam Caplan that Kaepernick’s agents have requested permission from the team to seek a trade.

NFL Network first reported the trade request.

That would fly in the face of what Kelly, who chose to speak to beat writers in a private setting rather than at the open podium session, said earlier Thursday at the NFL combine.

“He wants to be here,” Kelly told reporters. “He’s never expressed to me that he didn’t want to be here. He expressed to me that he’s excited about getting healthy and getting going. And we’re excited about him getting healthy and getting going.”

Kaepernick’s future with the team appeared to be in limbo anyway. He is recovering from surgeries to his left shoulder, right thumb and left knee, and on April 1 his $11.9 million base salary for 2016 becomes guaranteed. There also is a seemingly growing mistrust between player and organization after he was benched midway through the season and after a 2-6 start.

Kaepernick chose to have private doctors perform his procedures, rather than team doctors.

Still, Kelly told a different story earlier Thursday.

“He’s seemed excited every time I’ve talked to him,” Kelly said. “I’ve also learned to not believe everything that’s on the Internet.

“There’s a reason he was on IR. I mean, there was something wrong with him.”

Kelly, like Niners general manager Trent Baalke a day earlier, also gave the impression he expected Kaepernick at the team facility for the beginning of the offseason training program on April 4, three days after Kaepernick’s salary becomes guaranteed in case of injury.

“Kap’s really good,” Kelly said. “I mean, he had the ball on the 5-yard line [about] … to win a Super Bowl. You can just look at the tape to see how talented he is. You know, our job is acquiring talent, not getting rid of talent.”

Kelly drew some criticism during his stint with the Philadelphia Eagles after the manner in which he got rid of such players as DeSean JacksonLeSean McCoyand Evan Mathis.

His praise of Kaepernick on Thursday contrasted with the lukewarm endorsement he gave at his introductory news conference, when Kelly also praised the job done by Blaine Gabbert.

“You’ve got to see them in general,” Kelly said Thursday. “I think one of the misconceptions is how somebody can evaluate a tape and say, ‘This guy made the wrong decision.’ You don’t know what the play call was.”

And now, Kelly might not know whether Kaepernick wants to play for him or wants to be traded away from the organization that drafted him in 2011.

The Spoils of War: Afghanistan’s Multibillion Dollar Heroin Trade

Author’s Note

In 2014 the Afghan opium cultivation has once again hit a record high, according to the United Nations Office on Drugs and Crime’s 2014 Afghan Opium Survey

In the course of the last four years, there has been a surge in Afghan opium production.  The Vienna based UN Office on Drugs and Crime (UNODC) reveals that poppy cultivation in 2012 extended over an area of  more than  154,000 hectares, an increase of 18% over 2011. A UNODC  spokesperson confirmed in 2013 that opium production is heading towards record levels.

Source:  United Nations Office on Drugs and Crime’s 2014 Afghan Opium Survey

According to the 2012 Afghanistan Opium Survey released in November 2012 by the Ministry of Counter Narcotics (MCN) and the United Nations Office on Drugs and Crime (UNODC). potential opium production in 2012 was of the order of 3,700 tons, a decline of 18 percent in relation to 2001, according to UNODC data. 

There is reason to believe that this figure of 3700 tons is grossly underestimated. Moreover, it contradicts the UNOCD’s own predictions of record harvests over an extended area of cultivation.

While bad weather and damaged crops may have played a role as suggested by the UNODC, based on historical trends, the potential production for an area of cultivation of 154,000 hectares, should be well in excess of 6000 tons.  With 80,000 hectares in cultivation in 2003,  production was already of the order of  3600 tons. 

It is worth noting that UNODC has modified the concepts and figures on opium sales and heroin production, as outlined by the  European Monitoring Centre for Drugs and Drug Addiction (EMCDDA).  

A change in UN methodology in 2010 resulted in a sharp downward revision of Afghan heroin production estimates for 2004 to 2011. UNODC used to estimate that the entire global opium crop was processed into heroin, and provided global heroin production estimates on that basis. Before 2010, a global conversion rate of about 10 kg of opium to 1 kg of heroin was used to estimate world heroin production (17). For instance, the estimated 4 620 tonnes of opium harvested worldwide in 2005 was thought to make it possible to manufacture 472  tonnes of heroin (UNODC, 2009a). However, UNODC now estimates that a large proportion of the Afghan opium harvest is not processed into heroin or morphine but remains ‘available on the drug market as opium’(UNODC, 2010a). …EU drug markets report: a strategic analysis, EMCDDA, Lisbon, January 2013 emphasis added

There is no evidence that a large percentage of opium production is no longer processed into heroin as claimed by the UN. This revised UNODC methodology has served, –through the outright manipulation of statistical concepts– to artificially reduce the size of of the global trade in heroin. 

According to the UNODC, quoted in the EMCDDA report:

“an estimated 3 400 tonnes of Afghan opium was not transformed into heroin or morphine in 2011. Compared with previous years, this is an exceptionally high proportion of the total crop, representing nearly 60 % of the Afghan opium harvest and close to 50 % of the global harvest in 2011.

What the UNODC, –whose mandate is to support the prevention of organized criminal activity– has done is to obfuscate the size and criminal nature of the Afghan drug trade, intimating –without evidence– that a large part of the opium is no longer channeled towards the illegal heroin market.

In 2012 according to the UNODC,  farmgate prices for opium were of the order of 196 per kg. 

Each kg. of opium produces 100 grams of pure heroin. The US retail prices for heroin (with a low level of purity) is, according to UNODC of the order of $172 a gram. The price per gram of pure heroin is substantially higher.

The profits are largely reaped at the level of the international wholesale and retail markets of heroin as well as in the process of money laundering in Western banking institutions.  

The revenues derived from the global trade in heroin constitute a multibillion dollar bonanza for financial institutions and organized crime.

The following article first published in May 2005 provides a background on the history of the Afghan opium trade which continues to this date to be protected by US-NATO occupation forces on behalf of powerful financial  interests.  

Michel Chossudovsky, January 2014 


The Spoils of War: Afghanistan’s Multibillion Dollar Heroin Trade

by Michel Chossudovsky

Global Research, May 2005

Since the US led invasion of Afghanistan in October 2001, the Golden Crescent opium trade has soared. According to the US media, this lucrative contraband is protected by Osama, the Taliban, not to mention, of course, the regional warlords, in defiance of the “international community”.

The heroin business is said to  be “filling the coffers of the Taliban”. In the words of the US State Department:

“Opium is a source of literally billions of dollars to extremist and criminal groups… [C]utting down the opium supply is central to establishing a secure and stable democracy, as well as winning the global war on terrorism,” (Statement of Assistant Secretary of State Robert Charles. Congressional Hearing, 1 April 2004)

According to the United Nations Office on Drugs and Crime (UNODC), opium production in Afghanistan in 2003 is estimated at 3,600 tons, with an estimated area under cultivation of the order of 80,000 hectares. (UNODC at http://www.unodc.org/unodc/index.html ).An even larger bumper harvest is predicted for 2004.

The State Department suggests that up to 120 000 hectares were under cultivation in 2004. (Congressional Hearing, op cit):

 ”We could be on a path for a significant surge. Some observers indicate perhaps as much as 50 percent to 100 percent growth in the 2004 crop over the already troubling figures from last year.”(Ibid)

“Operation Containment

In response to the post-Taliban surge in opium production, the Bush administration has boosted its counter terrorism activities, while allocating substantial amounts of public money to the Drug Enforcement Administration’s West Asia initiative, dubbed “Operation Containment.”

The various reports and official statements are, of course, blended in with the usual “balanced” self critique that “the international community is not doing enough”, and that what we need is “transparency”.

The headlines are “Drugs, warlords and insecurity overshadow Afghanistan’s path to democracy”. In chorus, the US media is accusing the defunct “hard-line Islamic regime”, without even acknowledging that the Taliban  –in collaboration with the United Nations– had imposed a successful ban on poppy cultivation in 2000. Opium production declined by more than 90 per cent in 2001. In fact the surge in opium cultivation production coincided with the onslaught of the US-led military operation and the downfall of the Taliban regime. From October through December 2001, farmers started to replant poppy on an extensive basis.

The success of Afghanistan’s 2000 drug eradication program under the Taliban had been acknowledged at the October 2001 session of the UN General Assembly (which took place barely a few days after the beginning of the 2001 bombing raids). No other UNODC member country was able to implement a comparable program:

“Turning first to drug control, I had expected to concentrate my remarks on the implications of the Taliban’s ban on opium poppy cultivation in areas under their control… We now have the results of our annual ground survey of poppy cultivation in Afghanistan. This year’s production [2001] is around 185 tons. This is down from the 3300 tons last year [2000], a decrease of over 94 per cent. Compared to the record harvest of 4700 tons two years ago, the decrease is well over 97 per cent.

Any decrease in illicit cultivation is welcomed, especially in cases like this when no displacement, locally or in other countries, took place to weaken the achievement” (Remarks on behalf of UNODC Executive Director at the UN General Assembly, Oct 2001, http://www.unodc.org/unodc/en/speech_2001-10-12_1.html )

United Nations’ Coverup

In the wake of the US invasion, shift in rhetoric. UNODC is now acting as if the 2000 opium ban had never happened:

“the battle against narcotics cultivation has been fought and won in other countries and it [is] possible to do so here [in Afghanistan], with strong, democratic governance, international assistance and improved security and integrity.” ( Statement of the UNODC Representative in Afghanistan at the :February 2004  International Counter Narcotics Conference, http://www.unodc.org/pdf/afg/afg_intl_counter_narcotics_conf_2004.pdf , p. 5).

In fact, both Washington and the UNODC now claim that the objective of the Taliban in 2000 was not really “drug eradication” but a devious scheme to trigger “an artificial shortfall in supply”, which would drive up World prices of heroin.

Ironically, this twisted logic, which now forms part of a new “UN consensus”, is refuted by a report of the UNODC office in Pakistan, which confirmed, at the time, that there was no evidence of stockpiling by the Taliban. (Deseret News, Salt Lake City, Utah. 5 October 2003)

Washington’s Hidden Agenda: Restore the Drug Trade

In the wake of the 2001 US bombing of Afghanistan, the British government of Tony Blair was entrusted by the G-8 Group of leading industrial nations to carry out a drug eradication program, which would, in theory, allow Afghan farmers to switch out of poppy cultivation into alternative crops. The British were working out of Kabul in close liaison with the US DEA’s “Operation Containment”.

The UK sponsored crop eradication program is an obvious smokescreen. Since October 2001, opium poppy cultivation has skyrocketed.   The presence of occupation forces in Afghanistan did not result in the eradication of poppy cultivation. Quite the opposite.

The Taliban prohibition had indeed caused “the beginning of a heroin shortage in Europe by the end of 2001″, as acknowledged by the UNODC.

Heroin is a multibillion dollar business supported by powerful interests, which requires a steady and secure commodity flow. One of the “hidden” objectives of the war was precisely to restore the CIA sponsored drug trade to its historical levels and exert direct control over the drug routes.

Immediately following the October 2001 invasion, opium markets were restored. Opium prices spiraled. By early 2002, the opium price (in dollars/kg) was almost 10 times higher than in 2000.

In 2001, under the Taliban opiate production stood at 185 tons, increasing  to 3400 tons in 2002 under the US sponsored puppet regime of President Hamid Karzai.

While highlighting Karzai’s patriotic struggle against the Taliban, the media fails to mention that Karzai collaborated with the Taliban. He had also been on the payroll of a major US oil company, UNOCAL. In fact, since the mid-1990s, Hamid Karzai had acted as a consultant and lobbyist for UNOCAL in negotiations with the Taliban. According to the Saudi newspaper Al-Watan:

“Karzai has been a Central Intelligence Agency covert operator since the 1980s. He collaborated with the CIA in funneling U.S. aid to the Taliban as of 1994 when the Americans had secretly and through the Pakistanis [specifically the ISI] supported the Taliban’s assumption of power.” (quoted in Karen Talbot, U.S. Energy Giant Unocal Appoints Interim Government in Kabul, Global Outlook, No. 1, Spring 2002. p. 70. See also  BBC Monitoring Service, 15 December 2001)

History of the Golden Crescent Drug trade

It is worth recalling the history of  the Golden Crescent drug trade, which is intimately related to the CIA’s covert operations in the region since the onslaught of the Soviet-Afghan war and its aftermath.

Prior to the Soviet-Afghan war (1979-1989), opium production in Afghanistan and Pakistan was directed to small regional markets. There was no local production of heroin. (Alfred McCoy, Drug Fallout: the CIA’s Forty Year Complicity in the Narcotics Trade. The Progressive, 1 August 1997).

The Afghan narcotics economy was a carefully designed project of the CIA, supported by US foreign policy.

As revealed in the Iran-Contra and Bank of Commerce and Credit  International (BCCI) scandals, CIA covert operations in support of the Afghan Mujahideen had been funded through the laundering of drug money.  “Dirty money” was recycled –through a number of banking institutions (in the Middle East) as well as through anonymous CIA shell companies–, into  “covert money,” used to finance various insurgent groups during the Soviet-Afghan war, and its aftermath:

“Because the US wanted to supply the Mujahideen rebels in Afghanistan with stinger missiles and other military hardware it needed the full cooperation of Pakistan. By the mid-1980s, the CIA operation in Islamabad was one of the largest US intelligence stations in the World. `If BCCI is such an embarrassment to the US that forthright investigations are not being pursued it has a lot to do with the blind eye the US turned to the heroin trafficking in Pakistan’, said a US intelligence officer. (“The Dirtiest Bank of All,” Time, July 29, 1991, p. 22.)

Researcher Alfred McCoy’s study confirms that within two years of the onslaught of the CIA’s covert operation in Afghanistan in 1979,

“the Pakistan-Afghanistan borderlands became the world’s top heroin producer, supplying 60 per cent of U.S. demand. In Pakistan, the heroin-addict population went from near zero in 1979  to 1.2 million by 1985, a much steeper rise than in any other nation.”

“CIA assets again controlled this heroin trade. As the Mujahideen guerrillas seized territory inside Afghanistan, they ordered peasants to plant opium as a revolutionary tax. Across the border in Pakistan, Afghan leaders and local syndicates under the protection of Pakistan Intelligence operated hundreds of heroin laboratories. During this decade of wide-open drug-dealing, the U.S. Drug Enforcement Agency in Islamabad failed to instigate major seizures or arrests.

U.S. officials had refused to investigate charges of heroin dealing by its Afghan allies because U.S. narcotics policy in Afghanistan has been subordinated to the war against Soviet influence there.  In 1995, the former CIA director of the Afghan operation, Charles Cogan, admitted the CIA had indeed sacrificed the drug war to fight the Cold War. ‘Our main mission was to do as much damage as possible to the Soviets. We didn’t really have the resources or the time to devote to an investigation of the drug trade,’ I don’t think that we need to apologize for this. Every situation has its fallout.  There was fallout in terms of drugs, yes. But the main objective was accomplished. The Soviets left Afghanistan.’”(McCoy, op cit)

The role of the CIA, which is amply documented, is not mentioned in official UNODC publications, which focus on internal social and political factors. Needless to say, the historical roots of the opium trade have been grossly distorted.

(See UNODC http://www.unodc.org/pdf/publications/afg_opium_economy_www.pdf

According to the UNODC, Afghanistan’s opium production has increased, more than 15-fold since 1979. In the wake of the Soviet-Afghan war, the growth of the narcotics economy has continued unabated. The Taliban, which were supported by the US, were initially instrumental in the further growth of opiate production until the 2000 opium ban.

(See UNODC http://www.unodc.org/pdf/publications/afg_opium_economy_www.pdf

This recycling of drug money was used to finance the post-Cold War insurgencies in Central Asia and the Balkans including Al Qaeda. (For details, see Michel Chossudovsky, War and Globalization, The Truth behind September 11, Global Outlook, 2002,  http://globalresearch.ca/globaloutlook/truth911.html)

Narcotics: Second to Oil and the Arms Trade

The revenues generated from the CIA sponsored Afghan drug trade are sizeable. The Afghan trade in opiates constitutes a large share of the worldwide annual turnover of narcotics, which was estimated by the United Nations to be of the order of $400-500 billion. (Douglas Keh, Drug Money in a Changing World, Technical document No. 4, 1998, Vienna UNDCP, p. 4. See also United Nations Drug Control Program, Report of the International Narcotics Control Board for 1999, E/INCB/1999/1 United Nations, Vienna 1999, p. 49-51, and Richard Lapper, UN Fears Growth of Heroin Trade, Financial Times, 24 February 2000). At the time these UN figures were first brought out (1994), the (estimated) global trade in drugs was of the same order of magnitude as the global trade in oil.

The IMF estimated global money laundering to be between 590 billion and 1.5 trillion dollars a year, representing 2-5 percent of global GDP. (Asian Banker, 15 August 2003). A large share of global money laundering as estimated by the IMF is linked to the trade in narcotics.

Based on recent figures (2003), drug trafficking  constitutes “the third biggest global commodity in cash terms after oil and the arms trade.” (The Independent, 29 February 2004).

Moreover, the above figures including those on money laundering, confirm that the bulk of the revenues associated with the global trade in narcotics are not appropriated by terrorist groups and warlords, as suggested by the UNODC report.

There are powerful business and financial interests behind narcotics. From this standpoint, geopolitical and military control over  the drug routes is as strategic as oil and oil pipelines.

However, what distinguishes narcotics from legal commodity trade is that narcotics constitutes a major source of wealth formation not only for organised crime but also for the US intelligence apparatus, which increasingly constitutes a powerful actor in the spheres of finance and banking.

In turn, the CIA, which protects the drug trade, has developed complex business and undercover links to major criminal syndicates involved in the drug trade.

In other words, intelligence agencies and powerful business syndicates allied with organized crime, are competing for the strategic control over the heroin routes. The multi-billion dollar revenues of narcotics are deposited in the Western banking system. Most of the large international banks together with their affiliates in the offshore banking havens launder large amounts of narco-dollars.

This trade can only prosper if the main actors involved in narcotics have “political friends in high places.”  Legal and illegal undertakings are increasingly intertwined, the dividing line between “businesspeople” and criminals is blurred. In turn, the relationship among criminals, politicians and members of the intelligence establishment has tainted the structures of the state and the role of its institutions.

Where does the money go?  Who benefits from the Afghan opium trade?

This trade is characterized by a complex web of intermediaries. There are various stages of the drug trade, several interlocked markets, from the impoverished poppy farmer in Afghanistan to the wholesale and retail heroin markets in Western countries. In other words, there is a “hierarchy of prices” for opiates.

This hierarchy of prices is acknowledged by the US administration:

“Afghan heroin sells on the international narcotics market for 100 times the price farmers get for their opium right out of the field”.(US State Department quoted by the Voice of America (VOA), 27 February 2004).

According to the UNODC, opium in Afghanistan generated in 2003 “an income of one billion US dollars for farmers and US$ 1.3 billion for traffickers, equivalent to over half of its national income.”

Consistent with these UNODC estimates, the average price for fresh opium was $350 a kg. (2002); the 2002 production was 3400 tons.  (http://www.poppies.org/news/104267739031389.shtml ).

The UNDOC estimate, based on local farmgate and wholesale prices constitutes, however, a very small percentage of the total turnover of the multibillion dollar Afghan drug trade. The UNODC, estimates “the total annual turn-over of international trade” in Afghan opiates at US$ 30 billion. An examination of the wholesale and retail prices for heroin in the Western countries suggests, however, that the total revenues generated, including those at the retail level, are substantially higher.

Wholesale Prices of Heroin in Western Countries

It is estimated that one kilo of opium produces approximately 100 grams of (pure) heroin. The US DEA confirms that “SWA [South West Asia meaning Afghanistan] heroin in New York City was selling in the late 1990s for $85,000 to $190,000 per kilogram wholesale with a 75 percent purity ratio (National Drug Intelligence Center, http://www.usdoj.gov/ndic/pubs/648/ny_econ.htm ).

According to the US Drug Enforcement Administration (DEA) “the price of SEA [South East Asian] heroin ranges from $70,000 to $100,000 per unit (700 grams) and the purity of SEA heroin ranges from 85 to 90 percent” (ibid). The SEA unit of 700 gr (85-90 % purity) translates  into a wholesale price per kg. for pure heroin ranging between $115,000 and $163,000.

The DEA figures quoted above, while reflecting the situation in the 1990s, are broadly consistent with recent British figures. According to a report published in the Guardian (11 August 2002), the wholesale price of (pure) heroin in London (UK) was of the order of 50,000 pounds sterling, approximately $80,000 (2002).

Whereas as there is competition between different sources of heroin supply, it should be emphasized that Afghan heroin represents a rather small percentage of the US heroin market, which is largely supplied out of Colombia.

Retail Prices

US

“The NYPD notes that retail heroin prices are down and purity is relatively high. Heroin previously sold for about $90 per gram but now sells for $65 to $70 per gram or less. Anecdotal information from the NYPD indicates that purity for a bag of heroin commonly ranges from 50 to 80 percent but can be as low as 30 percent. Information as of June 2000 indicates that bundles (10 bags) purchased by Dominican buyers from Dominican sellers in larger quantities (about 150 bundles) sold for as little as $40 each, or $55 each in Central Park. DEA reports that an ounce of heroin usually sells for $2,500 to $5,000, a gram for $70 to $95, a bundle for $80 to $90, and a bag for $10. The DMP reports that the average heroin purity at the street level in 1999 was about 62 percent.”  (National Drug Intelligence Center, http://www.usdoj.gov/ndic/pubs/648/ny_econ.htm ).

The NYPD and DEA retail price figures seem consistent. The DEA price of $70-$95, with a purity of 62 percent translates into $112 to $153 per gram of pure heroin. The NYPD figures are roughly similar with perhaps lower estimates for purity.

It should be noted that when heroin is purchased in very small quantities,  the retail price tends to be much higher. In the US, purchase is often by “the bag”; the typical bag according to Rocheleau and Boyum contains 25 milligrams of pure heroin.(http://www.whitehousedrugpolicy.gov/publications/drugfact/american_users_spend/appc.html )

A $10 dollar bag in NYC (according to the DEA figure quoted above) would convert into a price of $400 per gram, each bag containing 0.025gr. of pure heroin. (op cit). In other words, for very small purchases marketed by street pushers, the retail margin tends to be significantly higher. In the case of the $10 bag purchase, it is roughly 3 to 4 times the corresponding retail price per gram.($112-$153)

UK

In Britain, the retail street price per gram of heroin, according to British Police sources, “has fallen from £74 in 1997 to £61 [in 2004].” [i.e. from approximately $133 to $110, based on the 2004 rate of exchange] (Independent, 3 March 2004). In some cities it was as low as £30-40 per gram with a low level of purity. (AAP News, 3 March 2004). According to Drugscope (http://www.drugscope.org.uk/ ), the average price for a gram of heroin in Britain is between £40 and £90 ($72- $162 per gram) (The report does not mention purity). The street price of heroin was £60 per gram in April 2002 according to the National Criminal Intelligence Service.

(See:http://www.drugscope.org.uk/druginfo/drugsearch/ds_results.asp?file=%5Cwip%5C11%5C1%5C1%5Cheroin_opiates.html )

The Hierarchy of Prices

We are dealing with a hierarchy  of prices, from the farmgate price in the producing country, upwards, to the final retail street price. The latter is often 80-100 times the price paid to the farmer.

In other words, the opiate product transits through several markets from the producing country to the transshipment country(ies), to the consuming countries. In the latter, there are wide margins between “the landing price” at the point of entry, demanded by the drug cartels and the wholesale prices and the retail street prices, protected by Western organized crime.

The Global Proceeds of the Afghan Narcotics Trade

In Afghanistan, the reported production of 3600 tons of opium in 2003 would allow for the production of approximately 360,000 kg of pure heroin. Gross revenues accruing to Afghan farmers are roughly estimated by the UNODC to be of the order of $1 billion, with 1.3 billion accruing to local traffickers.

When sold in Western markets at a heroin wholesale price of the order of $100,000 a kg (with a 70 percent purity ratio), the global wholesale proceeds (corresponding to 3600 tons of Afghan opium) would be of the order of 51.4 billion dollars. The latter constitutes a conservative estimate based on the various figures for wholesale prices in the previous section.

The total proceeds of the Afghan narcotics trade (in terms of total value added) is estimated using the final heroin retail price. In other words, the retail value of the trade is ultimately the criterion for measuring the importance of the drug trade in terms of revenue generation and wealth formation.

A meaningful estimate of the retail value, however, is almost impossible to ascertain due to the fact that retail prices vary considerably within urban areas, from one city to another and between consuming countries, not to mention variations in purity and quality (see above).

The evidence on retail margins, namely the difference between wholesale and retail values in the consuming countries, nonetheless, suggests that a large share of the total (money) proceeds of the drug trade are generated at the retail level.

In other words, a significant portion of the proceeds of the drug trade accrues to criminal and business syndicates in Western countries involved in the local wholesale and retail narcotics markets. And the various criminal gangs involved in retail trade are invariably protected by the “corporate” crime syndicates.

90 percent of heroin consumed in the UK is from Afghanistan. Using the British retail price figure from UK police sources of $110 a gram (with an assumed 50 percent purity level), the total retail value of the Afghan narcotics trade  in 2003 (3600 tons of opium) would be the order of 79.2 billion dollars. The latter should be considered as a simulation rather than an estimate.

Under this assumption (simulation), a billion dollars gross revenue to the farmers in Afghanistan (2003) would generate global narcotics earnings, –accruing at various stages and in various markets– of the order of 79.2 billion dollars. These global proceeds accrue to business syndicates, intelligence agencies, organized crime, financial institutions, wholesalers, retailers, etc. involved directly or indirectly in the drug trade.

In turn, the proceeds of this lucrative trade are deposited in Western banks, which constitute an essential mechanism in the laundering of dirty money.

A very small percentage accrues to farmers and traders in the producing country. Bear in mind that the net income accruing to Afghan farmers is but a fraction of the estimated 1 billion dollar amount. The latter does not include payments of farm inputs, interest on loans to money lenders, political protection, etc. (See also UNODC, The Opium Economy in Afghanistan,  http://www.unodc.org/pdf/publications/afg_opium_economy_www.pdf , Vienna, 2003, p. 7-8)

The Share of the Afghan Heroin in the Global Drug Market

Afghanistan produces over 70 percent of the global supply of heroin and heroin represents a sizeable fraction of the global narcotics market, estimated by the UN to be of the order of $400-500 billion.

There are no reliable estimates on the distribution of the global narcotics trade between the main categories: Cocaine, Opium/Heroin, Cannabis, Amphetamine Type Stimulants (ATS), Other Drugs.

The Laundering of Drug Money

The proceeds of the drug trade are deposited in the banking system. Drug money is laundered in the numerous offshore banking havens in Switzerland, Luxembourg, the British Channel Islands, the Cayman Islands and some 50 other locations around the globe.  It is here that the criminal syndicates involved in the drug trade and the representatives of the world’s largest commercial banks interact. Dirty money is deposited in these offshore havens, which are controlled by the major Western commercial banks. The latter have a vested interest in maintaining and sustaining the drug trade. (For further details, see Michel Chossudovsky, The Crimes of Business and the Business of Crimes, Covert Action Quarterly, Fall 1996)

Once the money has been laundered, it can be recycled into bona fide investments not only in real estate, hotels, etc, but also in other areas such as the services economy and manufacturing. Dirty and covert money is also funneled into various financial instruments including the trade in derivatives, primary commodities, stocks, and government bonds.

Concluding Remarks: Criminalization of US Foreign Policy

US foreign policy supports the workings of a thriving criminal economy in which the demarcation between organized capital and organized crime has become increasingly blurred.

The heroin business is not  “filling the coffers of the Taliban” as claimed by US government and the international community: quite the opposite! The proceeds of this illegal trade are the source of wealth formation, largely reaped by powerful business/criminal interests within the Western countries. These interests are sustained by US foreign policy.

Decision-making in the US State Department, the CIA and the Pentagon is instrumental in supporting this highly profitable multibillion dollar trade, third in commodity value after oil and the arms trade.

The Afghan drug economy is “protected”.

The heroin trade was part of the war agenda. What this war has achieved is to restore a compliant narco-State, headed by a US appointed puppet.

The powerful financial interests behind narcotics are supported by the militarisation of the world’s major drug triangles (and transshipment routes), including the Golden Crescent and the Andean region of South America (under the so-called Andean Initiative).

Israel only country at UN to join US in supporting Cuba embargo

The UN General Assembly on Tuesday called for an end to the decades-long US embargo on Cuba in a resolution adopted by a near-unanimous vote, three months after US-Cuba diplomatic ties were restored.

The United States and Israel voted against the non-binding resolution, but a resounding 191 countries supported the measure in the 193-member assembly, the highest number ever.

The outcome was a diplomatic victory for Cuba, which has branded the embargo the main obstacle to its economic development and called for immediate steps to end it.

Last year, the United States and Israel had voted against the resolution and three countries — Marshall Islands, Micronesia and Palau — had abstained.

This year’s resolution welcomed the re-establishment of diplomatic ties after a 55-year break and recognized “the expressed will” of President Barack Obama to do away with the embargo.

The final decision however rests with the US Congress where the Republican majority opposes the move.

Cuban Foreign Minister Bruno Rodriguez voiced hope that the US Congress “moves to change this inefficient, cruel and unjust policy, anchored in the past.”

But he stressed that Obama has “broad executive prerogatives to substantially modify” the embargo, imposed in 1960 at the height of the Cold War.

Cuba estimates damage from what it terms a blockade to reach more than $830 billion.

“The lifting of the blockade will be the essential element that will give some meaning to the progress achieved over the past few months in relations between the two countries and set the pace towards normalization,” said Rodriguez.

In his remarks, US diplomat Ron Godard said the United States could not support the text because it did not reflect “the significant steps taken and the spirit of engagement President Obama has championed.”

“If Cuba thinks this exercise will move things forward in the direction that both governments have indicated they wish, it is mistaken,” he said.

The assembly has voted each year since 1992 to approve the resolution that highlights Washington’s isolation over its Cuba policy.