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Politicsthisweek

Apr10th2008

FromTheEconomistprintedition

GeneralDavidPetraeus,thecommanderofAmericanforcesinIraq,andRyan

Crocker,America'sambassadorinBaghdad,providedCongresswithanupdateon

theprogressofthewar.Bothmenemphasisedtheachievementsinreducing

violence,butGeneralPetraeussaidthatthegainswere“fragileandreversible”.He

recommendedthattrooplevelsbemaintainedataround140,000oncethe

withdrawalof30,000troopssenttoIraqina“surge”operationiscompletedinJuly.

Seearticle

Inarenewedflare-upofviolence,atleast73peoplediedinSadrCity,ineastern

Baghdad,asAmericanandIraqitroopscontinuedtofightShiamilitias;15

Americanswerekilledinthesameperiod.

HillaryClinton,JohnMcCainandBarackObamaallgottheirchancetoquestion

GeneralPetraeusinSenatecommitteehearings.Theeventwasawelcome

distractionforMrsClintoninparticular,whoearliersackedherchiefcampaign

strategist,MarkPenn,fortalkingprivatelytoColombianofficialsabouta

free-tradedealthatsheopposes.MrPennhasalsocomeinformuchcriticismforhis

handlingofMrsClinton'spresidentialbid.

Seizingthemoment,GeorgeBushdecidedtosendtheColombianfree-tradepact

toCongressforapproval.ColombiaandtheUnitedStatessignedtheagreementin

November2006;withtheDemocratsopposed,itspassageisfarfromcertain.See

article

MichaelBloomberg'sproposalforacongestionchargeinManhattancollapsed

whentheDemocratsdecidednottosupportit.NewYork'smayorwanteddriversto

pay$8toenterabusyzoneinManhattanaspartofanefforttoeasecongestionand

reducethecity'semissions,buttheplanwasopposedbypoliticiansinNewYork's

otherboroughs.

AuthoritiesinTexascarriedoutaraidontheranchofapolygamistreligioussect

160milesnorth-westofSanAntonioafterreportsofchildabuseandforced

marriages.Morethan400childrenand130womenwereremovedandthepremises

searched.Seearticle

Liberty,equality.Fraternity?

Kosovomoveditsrecentlydeclaredindependenceforwardwhenitsparliament

adoptedanewconstitution.ThedocumentprotectstherightsofKosovo'sminorities,

includingSerbs.Serbiacalledthecharteranillegalact.

Vandalsdesecrated148MuslimgravesataFrenchcemeteryforsoldierswho

foughtinthefirstworldwar.Some78,000menfromFrenchcoloniesdiedinthewar,

manyfromAlgeriaandTunisia.Neo-NazisdaubedswastikasonMuslimgravesat

thesitelastyear.

AnewOlympicsport

London,ParisandSanFranciscosawprotestsagainsttheGettyImages

BeijingOlympicTorchRelaybypro-Tibetan

demonstrators.InLondon37peoplewerearrested,the

flamehadtobeextinguishedinParis,andSanFrancisco

changedtherouteofitsceremony.Chinaresistedcallsto

curtailtheglobalrelayandtorethinkplanstosendthe

torchthroughTibetitself.Seearticle

Asuicide-bombattackatthestartofamarathonracein

SriLankakilled14people,includingthehighways

ministerandsomeofthecountry'sstarathletes.The

attack,blamedontheTamilTigers,alsoinjuredmore

than90people.

TherulingjuntainMyanmarannouncedthatareferendumonadraftnew

constitutionwouldbeheldonMay1Oth.Itpublishedthedraftforthefirsttime,

confirmingexpectationsthatitwillentrenchmilitaryruledespiteallowinglimited

multipartyelectionsin2010.Seearticle

Fifty-fourBurmesemigrantsdiedaftersuffocatinginalorrysmugglingtheminto

Thailand.Theyhadbeenpackedintoanairtightcontainerforthejourney.

AheadofelectionsonApril10th,Nepalwasscarredbyviolence.Inoneofthemost

seriousincidents,sevenMaoistactivistswereshotdeadbysecurityforces.See

article

Hungerpains

InHaiti,ahungrymobtriedtostormthepresidentialpalaceinthecapital,

Port-au-Prince,incontinuingprotestsoversoaringfoodprices.UNtroopsfired

rubberbulletsandteargastodispersethem.

FrancecalledoffahumanitarianmissiontoColombiatosecurethereleaseof

IngridBetancourt,aFrench-Colombianpolitician,aftertheFARCrebelswhoare

holdingherhostagesaidtheywouldnotallowthedeliveryofemergencymedical

aid.

Ecuador'stopfourmilitarycommandersresignedafterPresidentRafaelCorrea

accusedthearmyofaidingtheUnitedStatesinoperationsagainsttheFARC.The

resignationscamehoursafterEcuador'sdefenceministersteppeddownwithout

explanation.

FourmembersofanarmydeathsquadinPeruwereconvictedofthemurderin

1992ofninestudentsandaprofessorsuspectedoflinkswithMaoistrebels.The

verdictislikelytoaffectthetrialofAlbertoFujimori,aformerpresident,whois

accusedofauthorisingthedeathsquad.

Presidentialambition

TwelvedaysafterZimbabwe'spresidentialelection,resultshadyettobeofficially

declared,thoughmostindependentanalystspresumedthatPresidentRobert

MugabehadlosttoMorganTsvangiraiandthattheincumbent'shardlinesupporters

weretryingtoenforcearun-off.AfterregionalleadersfailedtopersuadeMrMugabe

tostepdown,ZambiacalledanemergencymeetingoftheSouthernAfrican

DevelopmentCommunity,whichitchairs.Seearticle

ViolenceeruptedinKenyaagainaftertalksbrokedownbetweenPresidentMwai

Kibakiandtheoppositionleader,RailaOdinga,overthedistributionofministriesin

apower-sharinggovernment.MrOdingahadrejectedtheresultsofanelectionin

Decemberthatmostobserversthoughtwasriggedinfavouroftheincumbent,Mr

Kibaki.Se>article

TensionbetweenIsraelandthePalestinianauthoritiesintheGazaStriproseafter

twoPalestinianmilitantsattackedtheNahalOzbordercrossing,wherefuelis

carriedfromIsraelintothestrip,killingtwoIsraelis.TwoPalestinianfightersandat

leasttwoPalestiniancivilianswerekilledbyIsraeli

counter-strikes.

Reuters

IndiahostedthefirstIndia-Africasummit,with14

Africanleadersattending.TheeventreflectedIndia's

growingcommercialinterestinAfrica;itwasalsodeemed

anattempttocounterthegrowinginfluenceofChinain

thecontinent.Seearticle

Businessthisweek

Apr10th2008

FromTheEconomistprintedition

MasaakiShirakawawasapprovedastheBankofJapan'snewgovernor.A

stand-offbetweenthecountry'sgovernmentandoppositionhadlefttheposition

vacantsinceToshihikoFukui'sretirementonMarch19th.However,theopposition

stillblockedthenominationofHiroshiWatanabeasoneofhisdeputies.Inits

monthlyreportthebankgavewarningthattherisingcostsofenergyandraw

materials,coupledwiththeglobalcreditcrisis,wouldcauseJapan'seconomyto

slow.

ThedatesforthetestflightandfirstdeliveryofBoeing's787Dreamliner

passengerjetwerepushedbackbyaroundsixmonths,thethirdsuchdelaytothe

programmebecauseofproductionmishaps.Thefirstdeliveryisnowdueinthethird

quarterof2009.

Somethingcompelling

AmericanAirlinescancelledthousandsofflightsoverseveraldaystocarryout

safetyinspections,causingfurtherdisruptiontopassengers.AirlinesintheUnited

Statesareboundtocomplywithascheduleofgovernmentinspections.Lastmonth

theFederalAviationAdministrationsaiditwasconsideringfiningSouthwestAirlines

$10.2mforflying46jetsthathadmissedtheirallottedcheck-uptimes.

NovartisstruckadealthatwilleventuallygiveitcontrolofAlcon,theworld's

biggesteye-carecompany.Inanall-SwisstransactionNovartis,adrugcompany,is

payingNestle,Alcon'sowner,$11billionfora25%stakewithanoptiontobuy

Nestle'sremaining52%holdingfor$28billionatalaterdate.Seearticle

WashingtonMutualboosteditscapitalpositionbyraising$7billioninasaleof

newsharestoinvestorsledbyTPG,aprivate-equityfirm.America'ssixth-biggest

bank,whichhasitsheadquartersinSeattleandisoneofthecountry'sleading

mortgagelenders,isreininginitshome-financingoperationsandshedding3,000

employees.Snearticle

ItwasabusyweekforTPG.Thefirmalsoagreedtotakea50%stakeinSIA

International,aRussiandrugs-distributionfirm,for$800m,thebiggest-ever

private-equityinvestmentinRussia.

AcourtruledthatBritain'sSeriousFraudOfficehadactedunlawfullywhenit

droppedaninvestigationintoallegedbriberyinanarmsdealinvolvingBAESystems

andSaudiArabia.TheSFO'sdecisioninDecember2006toenditsinquiriesiswidely

believedtobetheresultofpoliticalpressure.

Gettingtough

AfterMicrosoftthreatenedtomakeahostilebidforYahoo!ifthecompanydidn't

acceptitsfriendlyoffer,marketsponderedreportsthattheinternet-searchengine

wasabouttoteamupwithAOL,andthatNewsCorpwouldjoinMicrosoft'sbid.

LachlanMurdoch'sattempttobuyoutAustralia'sConsolidatedMediaHoldings

collapsedafterdisagreementsaboutapriceforthedealcouldnotberesolved.

HearingsbeganinGermany*sbiggestshareholderlawsuit.Some16,000peopleare

suingDeutscheTelekomforallegedlyovervaluingassetsinashareissuein2000.

Thevalueoftheshareshassincefallenbyaround80%andthesuitseekseuro80m

($125m)indamages.DeutscheTelekomsettledasimilarcaseinAmericain2005,

whichwouldhavegonebeforeajury.ThedisputeinGermanywillbedecidedbya

judge.Seearticle

Partylikeifs1992

FearsaboutnegativeequityreturnedtohauntBritishhomeowners,withone

indexreportingthathousepricesfellby2.5%inMarchcomparedwithFebruary,the

sharpestsuchdeclinefor16years.Seearticle

TherewasanotherdropinAmerica'snon-farmpayrolls.

Around80,000jobswereeliminatedinMarchUSunemploymentrate

comparedwiththepreviousmonth.The

unemploymentrateroseto5.1%.Seearticle

Eurotunnelreporteditsfirstannualprofitsinceitwas

formedin1986.Lastyeartheoperatorofthetunnel

linkingBritainandFrance,whichopenedin1994,

rejiggeditsbusiness,changeditsofficialnameto

GroupeEurotunnel,andrestructureditsmassivedebt

overtheoppositionofsomebondholders.Itmadea

profitin2007ofeuroIm($1.6m).

China'scurrencytradedbelowsevenyuantothedollarforthefirsttimesince1994

China'scentralbankcontrolsthemarketforthecurrency.Itabandonedapeg

againstthegreenbackin2005andhasallowedtheyuantoappreciaterapidlyover

thepastfewmonthsaspartofagovernmentefforttodampenrisinginflation.Hank

Paulson,America'streasurysecretary,recentlyvisitedBeijingwherehewelcomed

thecurrency'sappreciationandsaidhehopeditwouldcontinue.

Chinasigneditsfirstfree-tradeagreementwithadevelopedcountry:New

Zealand.

KAL'scartoon

Apr10th2008

FromTheEconomistprintedition

IllustrationbyKevinKallaugher

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Theworldeconomy

ThegreatAmericanslowdown

Apr10th2008

FromTheEconomistprintedition

Therecessionmaynotbeassevereasmanyfear,buttherecoverycould

takelonger—andthatisdangerous

Getarticlebackground

AMERICANSareunaccustomedtorecessions,particularlyonesthatinvolve

shoppingless.Duringthepastquarter-century,theworld'smostpowerfuleconomy

hassufferedonlytwoofficialdownturns,in1990-91and2001.Bothwereshortand

shallow.In2001consumerspendingbarelyskippedabeat;adecadeearlieritfell,

butonlybriefly.Buoyedbyrisingassetpricesandfinancialinnovationsthatallowed

evermorepeopletotapevermoredebt,thecollectiveAmericanwallethasnot

snappedshutinalmosttwodecades.

Thatmaybeabouttochange.Evidenceismountingthattheeconomyhasslipped

intorecession—andthistimeconsumerweaknessistothefore(seearticle).The

doughtyAmericanshopperisbeingpummelledbyfourthings:thehousingbust,the

creditcrunch,higherfuelandfoodcostsand,mostrecently,aweakeninglabour

market.Theunemploymentrateroseto5.1%inMarch,whiletheprivatesectorlost

jobsforthefourthmonthinarow.Feelingpoorerandwithfewerpeoplepreparedto

lendthemmoney,consumersarecuttingback:witnesstheslumpincarsales.And

seeingthatconsumerspendingaccountsfor70%ofAmericandemand,thathurts,

especiallywhenitiscoupledwithacollapseintheoncemightyconstructionindustry

TheIMFnowofficiallypredictsanAmericanrecessionin2008;manyattheFederal

Reservethinkoutputiscontracting.

Shallowbutlengthy:youcouIddoalotworse

TherearetwobigquestionsaboutthisdownturnforAmericaandtheworld:how

long?Andhowdeep?Onthesecondcount,thereisroomforguardedoptimism:

althoughAmericanrecessionshaveusuallysenttheworldeconomyintoafunk,this

timetheslowdownneednotbesosevere—especiallyfortheemergingworld.The

economictestsinsteadmaycomefromthelengthofthisdownturn:anAmericathat

stayssluggishforseveralyearscouldcauseallsortsofproblems.

Thatisnottoimplythatasevereglobalslowdownisoutofthequestion.TheIMF

reckonsthatthereisa25%chanceoftheworldeconomygrowingbylessthan3%

in2008and2009,theequivalentofrecession,initsview.Theoriginsofthiscrisis

lieinthebiggestassetbubbleinhistory;financialmarketshavealreadysuffered

arguablytheirbiggestshockfor80years;andAmericaisnottheonlydeveloped

economysuffering(Britain'shousingmarket,forinstance,isshowingthesame

symptomsasAmerica's—seearticle).Butsofaratleastthereislittleevidencethat

theworldeconomyisfallingoffacliff.

ThepaceofjoblossesinAmericahasbeenmildcomparedwithpreviousdownturns,

andthereareacoupleofreasonstosupposeitwillstaythatway.Thefirstisthe

activismofAmericanpolicymakers.Congressstartedthrowingmoneyatthe

problemearly,andasecondfiscalstimulusisalreadybeingdiscussed(alongsidea

bail-outforthehousingmarket).TheFedhasslashedinterestrates,promisedmore

cutsiftheeconomystaysweakand—perhapsmostimportant—sharplyreducedthe

oddsoffinancial-marketcatastrophebyextendingitssafetynettoinvestment

banks.

Thesecondisthechangingstructureoftheworldeconomy.Thedynamismand

resilienceofemergingmarketsmeanthatAmericadoesnotmatterasmuchasit

oncedid.TheIMFexpectsglobalgrowthtofallfrom4.9%in2007to3.7%this

year—hardlycatastrophic.Moreover,theseforeignerscannowdoabittocushion

theblowforAmericans:alreadyglobaldemand,coupledwithaweakdollar,is

boostingAmericanexports.Meanwhile,somelossesfromAmerica'shousingbust

havebeenborneabroad,althoughnotwithoutpain.

Withtheseprops,Americacanavoidadeepslump,butdon'texpectavigorous

recovery.Spendingwillbesupportedbytaxrebatesinthesecondhalfoftheyear,

butthehangoverfromthehousingbustwilllingermuchlonger.Judgingbythe

experienceofotherrichcountriesthathavesufferedfinancialcrisesspawnedby

housingbusts,suchasSwedenandNorwayintheearly1990s,weakbalancesheets

willweighonconsumers'spendingforyearsratherthanmonths.The2008

recessionmaybemild,butthe2009recoverywillbefeeble.

Bewaretheslitheringsnail

Iftheworldeconomy'sbiggestproblemturnsouttobeAmericaremainingsnail-like

forlongerthanmostpeopleexpect,manywillbreatheasighofrelief.Giventhe

scaleofthefinancialmess,itcouldbealotworse.Youcanevenarguethatafterfive

yearsofbreakneckgrowth,amoresedateglobalexpansionwouldbenobadthing:

itwoulddampeninflationarypressuresintheemergingworld,andweakerdomestic

demandshouldshrinkAmerica'sgapingexternaldeficit—alreadydownfromabove

6%ofGDPtobelow5%.

Butthatisaboutasfarasoptimismcantakeyou.Themainfearisthattherestof

theworldproveslessresilientthannowseemslikely:commodityexporters,say,

mayrelyonAmericandemandlessthantheydid,butarehardlycutofffromit.The

weakdollaralsocausesproblems.ImportingAmerica'sloosemonetarypolicywill

becomehardertosustainforcountries,suchastheGulfstates,thatpegtheir

currenciestothegreenback.Theywillneedtolettheirexchangeratesrise.

Politicstoocandoplentyofdamage.AsluggishAmericanextyearwillbeahard

inheritanceforthenextpresident.Withthebudgetdeficitrising,bigdomestic

reforms,suchasexpandinghealth-carecoverage,willbecomemoredifficult;witha

fragileeconomy,theDemocrats,iftheygetin,mayhavetorethinktheirplantoroll

backGeorgeBush'staxcuts.

Anddonotforgetpopulismandprotectionism.AlreadyeightoutoftenAmericans

saytheircountryisonthewrongtrack.Aprotractedmalaisewillspawnanangry

searchforscapegoats.EventhoughfreetradeishelpingsaveAmericansfroma

worsedownturn,MrBushisstrugglingtogetatradedealwithColombiathrough

Congress(seearticle):heavenhelptheDoharound.Meanwhile,themomentumto

re-regulatefinancialmarketsandpunishtheoilindustry,credit-cardfirmsorindeed

anyothermalefactorsofgreatwealthwillgrow.ThegreatAmericanslowdownmay

belesscalamitousthanmanypeoplefear;butitisfraughtwithdangers.

EuropeansecurityandRussia

Thinkpipesnotrockets

Apr10th2008

FromTheEconomistprintedition

TheEuropeanUnionshouldworryaboutgas,notjustmissiledefences

IllustrationbyDavidSimonds

BELIEVEthespin,andAmericaanditsEuropeanalliesaredoingagreatjobin

bolsteringthefuturesecurityofaEuropewholeandfree.TheNATOsummitin

Bucharestgavean(undated)promiseoffuturemembershiptoUkraineandGeorgia

andendorsedAmerica'splansforalimitedmissile-defencesysteminPolandandthe

CzechRepublic.

Realityisratherdifferent.GeorgeBush'seffortstoburnishhispresidentiallegacy

ledtoavenomousrow.SomeNATOmembersinoldEuropethoughttheywere

beingrailroadedbyAmericaintohastyexpansion(seearticle).Someineastern

EuropeworriedthataRussia-friendlycampcentredonGermanywastakingshape

insidethealliance.Meanwhile,thechirpytoneofalatermeetinginSochibetween

MrBushandVladimirPutinbeliedalackofsubstance.

Helpforthosewhohelpthemselves

ButtherealworryforEuropeisadifferentone.Itgetsaquarterofitsgasfrom

Russiaandtheproportionissettorisesharply.TheKremlinusesitsmonopolyof

east-westgaspipelines,andoffersoflucrativebilateralgasdeals,tointerferein

Europe'senergybusiness.ItreliesonfriendslikeGermanytoblockeffortsto

liberaliseEuropeanmarketsanddiversifysupply.

RussiaisalsopushingaheadwithSouthStream,a$15billionpipelinetobringgas

acrosstheBlackSeatocentralEuropeviatheBalkans.ThreeEuropeanUnion

members,Bulgaria,HungaryandItaly,havesignedup,andAustriaisinterested.

ThisweakensthechancesofanEU-backedalternative,Nabucco,alreadystymied

bylackofgas,partlybecauseofRussia'sCaspianarm-twistingandalsobecause

politicsprecludesusingsuppliesfromIran.

Theenergy-securityoutlookisbleak,buttheEUcouldhelpitselfinthreeways.First,

bypushingharderfornewpipelinesthatweakenRussia'sgripongasfromtheeast.

EffortstoreviveNabuccoshouldcontinue.Butpoliticalsupportshouldalsobe

garneredforWhiteStream,aningenioussmaller-borepipelinethataimstobring

CaspiangasacrosstheBlackSeatoEurope,bypassingawkwardTurkey.Serious

talksonthatwouldconcentratemindsonRussia'stroublingmonopoly.TheWest

alsoalreadyhasaccesstotwinoilandgaspipelinesfromtheCaspiantoTurkey.

Second,theEUneedstodriveaharderbargainwithRussiaonthegasitdoesbuy.

ItspopulationismorethanthreetimesRussia's;itis13timesricherbyGDP.Andit

isafterallinRussia'sinteresttootomakesurethatCentralAsia'sgasissoldto

Europe(ie,mostlyviaRussia)notdirectlytoChina.Europeisalsothemost

plausiblemarketforthebignewgasfieldRussiaplanstodevelopintheArctic.Its

ill-run,debt-soakedgasindustryneedsWesternexpertiseandcashtomodernise.

ButEuropealsoneedstoinsistonmoreliberalisationandtransparencyinthegas

industry.AdeepandliquidmarketwouldmakeitharderfortheKremlinto

manipulatesupply.Gazprom—thetradingnameofthegasdivisionofKremlin,

Inc—shouldbeabletoinvestinEuropeonlyifitobeystherules.TheEUshouldtreat

GazpromwiththesametoughnessthatithasshowntowardsMicrosoft,obligingit

topublishdetailsofitscontractsandopenthebooksofshadowyintermediary

companiessuchasRosUkrEnergo.Theseoftenseemtoexistsolelytosiphonoff

exportrevenues,forthebenefitofhiddenowners.AndGazpromneedstoseparate

itstransmission,distributionandstorageassetstoallowfullthird-partyaccess—as

theEUshouldhaveforceditsowncompaniestodo.

TheintricateeconomicsofthegasbusinessmayseemlessexcitingthantheStar

Warstechnologyofmissiledefence.ButforEurope'sunityandsecurity,theymatter

more.

ChinaandMyanmar

Keepingtheflamealight

Apr10th2008

FromTheEconomistprintedition

TwowaystorepairChina*simage:endthetorchrelayandtakealeadover

Myanmar

GettyImages

Getarticlebackqround

WEREshootingoneselfinthefootanOlympicevent,Chinawouldsurelybewell

placedforagold.TheBeijing2008OlympicTorchRelay,takingtheflamearound

theworldbeforethegamesbegininAugust,wasalwaysarisk.Ofcoursetheflame

woulddrawprotesterslikemoths.ButthesuppressionofriotsandprotestsinTibet

hasensuredthetorch'sprogresshasgraduatedfromminordiplomatic

embarrassmenttofull-scalepublic-relationsdisaster(seearticle).

Anexerciseintendedtoflauntthenew,outward-lookingandconfidentChinahas

displayeditsdarkside:nervous,repressive,pricklyandstubborn.That

stubbornnessmayruleouttheobviousremedy:callingthewholefarceoffbefore

someoneisbadlyhurt.AtleasttheInternationalOlympicCommitteeshouldhave

nothingmoretodowithit.ProteststhisweekinLondon,ParisandSanFrancisco

wereill-temperedenough.ThepassagethroughDelhionApril17thcouldbeuglier.

Indiaishometosome100,000Tibetans.Theonlystoponthetorch'sworldtour

suretobetrouble-freeisPyongyang.AsforitsproposedprocessionthroughTibetin

June,itishardtoimagineamoreprovocativeorinsensitivegesture.

ToaccuseChina'scriticsof"politicising"asportingeventisnonsense.Whathasthe

relaytodowithsport?Itisnotsometimewornpracticeintegraltothegames.

Rather,theideaofarelayfromGreecetotheOlympicvenuewasrevivedbythe

Nazisforthe1936BerlinOlympics,whichishardlyaprecedentChinawantsto

advertise.Thefirst"globar*relayonlytookplaceforthemostrecentOlympics,in

Athensin2004.Butthatwasnotsuchacircus.China'spridemayprecludeany

concession,howeverface-saving,onTibet,oronhuman-rightsabusesingeneral.

Butitisalsofacingcriticismforitsforeignpolicy—itslinkswiththegovernmentsof

SudanandMyanmarinparticular.Here,intheory,itcandosomethingtoshowthat

itisindeedaresponsibleinternational“stakeholder”，withdiplomaticmaturityas

wellaseconomicclout.

TakeMyanmar.Afterthebloodyquellingofthe“saffronrevolution"lastSeptember,

therulingjuntathrewafewsopstointernationalopinion.Itacceptedvisitsfroma

UnitedNationsenvoy,openedtalkswiththedetainedoppositionleader,AungSan

SuuKyi,andgaveatimetableforapoliticaltransition.Chinadeservessomecredit

forforcingthejunta'shand.Myanmar'sgeneralsarenobody'spuppets.ButChina,

withitsbigcommercialinterestsinthecountry,anditssupportintheUNSecurity

Council,isnowthejunta'sbestfriend.

Itistimetousethatpositionagain.Confidentthattheoutsideworld'sfocusontheir

misdeedshasshiftedelsewhere,thegeneralshavestalledondialoguebothwith

theiropponentsathomeandtheUN'senvoy.Theplightoftheircountryremains

desperate(seearticle).Thepolitical“process”hasdegeneratedintoadriveto

imposeaconstitutionentrenchingmilitaryrule.Areferendumonthissolutionwill

beheldonMay10thinaclimateofviciousintimidation.

MembersoftheSecurityCouncilaremullinganewstatement,callingforsomeof

theminimumreformsneededforacrediblevote—suchasthereleaseofopposition

leaders,includingMissSuuKyi.ThefirstthingChinacandoistoallowthe

statementtobeissuedinthenameofaunitedoutsideworld.Morethanthat,China

couldhelpresolvethesteriledebatethathasragedfortwodecadesover

“engagement”oruisolation^^.Isolationhasneverworked,becauseChina,Indiaand

South-EastAsiancountriesseetoomuchcommercialandstrategicbenefitinlinks

withthejunta.Butnorhas“engagement”，sinceWesterncountrieshaveimposed

sanctionsofvaryingseverity,andthejuntahaslittleinterestinengaginganyway.

Nobodywinsgoldforsittingonafence

Despitethis,thereisabroadconsensusabouttheneedforreforminMyanmar.With

anti-ChinesefeelingmountinginMyanmar,itisnotinChina'sintereststobe

perceivedasthepropthatalwaysholdsupaloathedregime.Itcouldtakethe

initiativeinformingacontactgrouptoengagethejuntaintalksoneconomic

co-operationandpoliticalreform.EvenifitexcludedEuropeandAmerica,sucha

gro