not the Monkees’ Daydream Believers

I attended this event organized by the Chicago Council on Global Affairs Daydream Believers: How a Few Grand Ideas Wrecked American Power  The 2 basic premises of his book are that 1.  the fall of the Berlin Wall changed the world more than US politicians realized, & 2.  9/11 didn’t change the world as much as those same politicians thought.  To #1, it’s not just Bush.  In the times of the cold war, it provided a system of security in which other countries were subsumed to America & wars were political.  When the wall fell, each country went its own way & the US had to focus more on alliances.  Bush took the approach that we don’t need allies because we’re omnipotent, but we’re actually weaker. To #2, deterence doesn’t deter if we’re not deterring states.  We need to create coalitions & haven’t done that.  What Kerry suggested in the last election, police & intelligence, have been adopted.  Rumsfeld claimed the biggest danger was the Pentagon bureaucracy  & that the military needed to be overhauled with new technology & fewer troops.  He seemed to be vindicated by Afghanistan when we needed so few troops, but we didn’t play the game long enough to know what to do after “the war was won.”  The US strategy in Iraq was more misconceived than incompetently implemented.

As a businessperson, my main issue is Kaplan’s take on the economic impact of his assertions.  He claims the budgetary changes the government undertook after 9/11 were miniscule & insignificant.  I maintain that the massive redirection of funds which dismantled whole departments & created the Dept. of Homeland Security have altered the course of our economy.  If taken 1 step further that 9/11 led us to the war in Iraq, I think there’s little doubt that the impact of the war has impacted on our national debt, the value of the US$, & our trade balance.

european law presentation

I attended a presentation given by Prof. Paul Storm of (Erasmus?) University-Rotterdam @ John Marshall Law School Center for International Business & Trade entitled “Recent Developments on the European Corporate Scene.” Basically it was simply a lecture on European corporate law. He said basically that the European Union granted 4 freedoms, of the movement of goods, persons, capital, & establishment (of a company). Establishment was the focus of his talk. Establishment provides the basis for harmonisation, creates the backbone for mobility, & new legal forms. The EU has issued 14 directives regarding harmonization, which don’t just prescribe mechanics, rather control mechanisms. 3 amendments to existing directives failed.

Labor/employee participation in management (works councils-management & supervisory boards) have limited cross-border takeovers by giving labor a voice in the negotiations. By moving the headquarters location, certain corporate structures disappear. In the Sevic case in 2005, the German trade register refused to acknowledge a Luxembourg acquisition because German law did not permit cross-border mergers.  The rule of reason could be possible justification.

The EU has authorized a few new forms (legal structures) under European Community law-European Economic Interest Grouping in 1985, which aren’t much used; European Company, (with smaller supervisory boards) in 2001 ,which has been adopted by Alliance, BASF, & Porsche; & European Cooperative Societies in 2003, of which the 1st was adopted in 2005.

Prof. Storm also discussed the divestiture of LaSalle Bank from ABN Amro from the Dutch perspective.  The end result was the supreme court ruled that the deal must maximize the share price for shareholders, which seemd alien to Dutch law, but was expanded to include employees & customers interests as well.

He also commented briefly on Yukos Oil, which was assessed enormous tax bills, given 2 days to pay, & declared bankrupt.  When addressing the Dutch holding company Yukos Finance, the issue became “Could the Dutch court overrule this turn of events?”  The end result was no.

Finally in Q&A, he addressed the following issues

-German managers are trying to get rid of mitbestimmung & reform company law so that they are more attractive for foreign direct investment

-It’s legal in the Netherlands for Americans to found companies in Delaware just for the purpose of opening an office in Europe, but not in Germany

-there must be an actual case for the European Court of Justice to offer an opinion

-A European constitution is not in sight for a long time.

German insurance symposium

I attended the Panel Discussion: Managing the Complexity of International Insurance Programs from a German American Viewpoint  I requested a copy of the powerpoint presentation to put up here & was told GACCOM keeps its content on its own site.  Last I checked, they haven’t put up the presentation yet.  Here’s what I learned.

Traditional Controlled Master Programs-Germany/Reverse Flow Programs are local policies which sit on top of local policies from other countries with difference in conditions (dic) & difference in limits (dil) coverage in other countries.

Traditional Controlled Master Programs-US/Home Foreign Programs  provide master policy dic/dil coverage on top of local policies in other countries aside from US policies.  These are underwritten in the US for foreign clients.

The key to program selection & implementation is effective communication between the insurer, insured, & broker.  Things to consider are global/local expertise, coverage, capacity, price, network, IT capabilities, & claims service.  On an ongoing basis, program maintenance issues to monitor are the changing marketplace & regulations, continued program improvements, loss control & prevention, acquisitions/divestitures, claims.  It’s important to maintain flexibility & adaptability to change in exposure, country, & market conditions.

The panelist from Porsche Business Services has had a Reverse Flow program since y2k & it has been very successful. Their risk management is centralized, so they can now take on greater risks, & their premiums actually went down.

A few other things I picked up:

-The US is 1 of the most feared markets by foreign insurers because of the possibility of product liability claims & it’s highly regulated.   For example, the Germany CEO of a German company setting up in Indiana’s biggest concern was employee liability insurance.

-deductibles vary by country.  They are reputably high in Germany while low in France, but discrepancies are narrowing.

-European underwriters focus on longer term relationships & can be more creative in creating coverages while in the US we’re less so & more litigious.

-cultural differences do come into play in language differences in contracts & levels of risk aversion (the Krauts are conservative risk-avoiders)

Robert Reich @ ACG world markets conference

I attended the Association for Corporate Growth’s “Middle Market Growth in Uncertain World Markets:  Risk & Opportunity” event which featured former Secretary of Labor Robert Reich as keynote speaker. Here’s what I gleaned from his talk:

-Unlike our last recession in y2k-2001, which was an investor-led recession, our current recession is consumer demand led which has been building for years.  Real wages haven’t risen since the 1970’s, but spending & debt has. This is reflected in what RR terms DINS:  double incomes, no sex-couples with 2 incomes & no time for conjugal pleasures.  Despite the fact that we work 450 more hours/year than the Europeans, Europe doesn’t have a demand problem, but we’re now decoupled economically from Europe.  RR predicted the crash in Oct., 1987 & has been making the same prediction for the last 4 1/2 years.  Current fiscal incentives like the tax rebates due in May are worthless-the fate of the economy lies with the Fed.

-Globalization:  there is currently a backlash against trade & immigration, but NAFTA is not the problem because they are not 0 sum games.  Expertise, innovation & skill are still more important than wages in making location decisions, so education is key to economic success.  Technology has displaced more jobs than globalization, so that even China is losing manufacturing jobs.  The problem is not the # of jobs lost, rather the quality of jobs.  Local service jobs are the only shelter.  US demographics/baby boomers retiring dictates that we’ll need immigration, which means we’ll need education & health care.  Social Security will be a much smaller problem than Medicare.

In sum, our budget debt creates problems in global capital markets, but our problems are solvable if we invest wisely.

In Q&A,  here are a few more points

-the Fed is a part of the subprime problem in that there was no oversight for such low interest rates & cheap $

-there will be legislation for alternative energy soon, but timing is key

-low capital gains taxes are not a problem, but unsupervised hedge fund risk/leverage is

-immigration quotas are unnecessary because in 1900 15% of our population was immigrants & now it’s only 12%

-we shouldn’t impose restrictions on incoming foreign capital

-the Clinton budget deficit of 5% puts our current deficit in perspective

-education in a slow crisis is a whipping boy, but is a state/local problem.  We need smaller classes & more authority/accountability for teachers.  No Child Left Behind teaches students to test well, but doesn’t give them a well-rounded education.

Despite what he says, even as an economist, RR has more personality than most any accountant I know.

I was educated as an international economist, so I’m not going to debate him.  I took notes @ the presentations I attended & ACG captured all of the presentations in digital video, but since they’re only available to ACG members, my notes won’t do you any good.  If you have any particular questions, just let me know.

Romanian trade delegation

Gheorghe Gruia, Consul for economic affairs @ the Consulate General of Romania in Chicago, hosted a trade delegation in from Romania for the housewares trade show @ McCormick Place. Gheorghe made a presentation @ a breakfast reception: Romania has a population of 21.7 million people with 2.5 million in Bucharest. GDP has grown 4-8% the last few years in Romania & has received 31 billion Euros of foreign direct investment from the Netherlands, Germany, US, & Italy. Inflation has shrunk from 47% to 5% & unemployment has more than halved from 12% to 5%. Romania should be part of the Euro-zone by 2012. Illinois exported $25.5million of product/services to Romania in 2006. Romania has the lowest tax rates in the area & all sectors have been privatized & are available for investment. Economic advantages include a fast growing economy, low tax rates, & low inflation. Romania offers human resources, technology, IT, & engineering resources. Location is also an advantage with close proximity to the CIS & Middle East.

Here are the companies which paid a visit:

Acormed-environmental protection, water administration

Aquarius Exim-imports yarns, exports fabrics

Astra-security vaults

CIAC-building, construction

Cozia Forest-wood processing

Elpidex-wood garden furniture, log houses

Hobby House-forwarders & movers

Lumetal-recyclable scrap recovery

Prodin-natural fiber textile producer

Sigstrat-moulded plywood processing

banking on Israeli IT

The Israeli Economic Mission to the Midwest hosted an event last week entitled “Banking on Israel IT” sponsored by Grant Thornton, The Israel Export & International Cooperation Institute, AeA, America-Israel Chamber of Commerce, Bird Foundation, Illinois Dept of Commerce & Economic Opportunity, & Katten Muchin Rosenman LLP.

Michael Strauss of the Chicago Federal Reserve Bank made the Keynote presentation on an economic assessment of the US economy which is attached:  strauss israel presentation  It didn’t contain any interesting new international information, so there’s not much I can add.

Mark Schittig, Director of the Division of Risk Management @ the Fed in Chicago, made a presentation on Regulation & IT solution management but since much of the focus was on security, I guess they didn’t want to give hackers any fodder for thought.

Israel Tenenbaum, Director of the ICT Dept of the Israel Export & International Cooperation Institute made a short presentation which essentially introduced the visiting Israeli firms  tenenbaum ieici presentation Although it’s somewhat repetitive, here’s some additional information on the visiting companies  israeli IT co. details  He pretty much just read through the presentation, so there’s not much for me to add to what he presented.

Illinois exported electrical & non-electrical machinery & transportation equipment & other things worth over $148 million in 2005, down 4.68% from 2004. Other products exported to Israel include optic, photo, medical surgical instruments, organic chemicals, precious stones, plastics, non-railway vehicles, pharmaceuticals, articles of iron or steel, & aircraft.  About 200 Illinois companies have subsidiaries in Israel, such as American National Can Co.,  A.Epstein & Sons International, Motorola, Bi-Logic Systems, & Sara Lee.

Israel lists 100 NASDAQ companies & exports $3.6 billion worth of software.   It appeared as if Grant Thornton had arranged all the meetings for the visiting firms & held them in their offices.

Samantha Power’s post monster mash

Samantha Power, Barak Obama’s former foreign policy adviser, spoke recently @ this Chicago Council on Global Affairs event International Institutions: New Roles for the Global Age to promote her new book  “Chasing the Flame:  Sergio Vieira de Mello & the fight to save the world.”   Here are a few things I gleaned from her talk:

-after noting the Rwandan genocide, we need an endangered peoples movement as well as an endangered species movement.

-contrary to how it appears in the media, the U.S. is the biggest helper in Darfur & Burma, which results in 2 lessons  1.  there is a void with insufficient international commitment to these causes, & 2.  US moral commitment is contradictory when we endorse waterboarding.

Sergio:

-reasoned with unreasonable people in nation-building  for the UN

-found killers interspersed with refugees, a difficult task

-found common ground with Bush by mentioning his shoot to kill order in E. Timor.

Lessons learned:  we need to;

- extend 20th century means to address 21st century problems

-change from Roosevelt’s freedom from fear (”fear is a bad adviser”)

-talk to our adversaries so that we can think outside of our black boxes

-promote dignity within democracy

-be humble while being clear-eyed in examining problems

Pardon the pun, but Samantha is a very Powerful & persuasive speaker.  She obviously knows her stuff very well & presents it in a compelling fashion.  However, as intelligent as she is, I question placing her in a foreign policy role.  She stands up for many laudable causes, but I’m not sure they always deal with more practical & economic matters which would be required in a foreign policy position.  I think it’s a shame she was forced to resign from Obama’s campaign, but it might not have made sense for her to take on a role after the campaign anyway.

Austan’s (city?) limits

I read this article by David Greising in the Chicago Tribune Going to school on presidential politic about Austan Goolsbee, a University of Chicago economics professor who’s an economic advisor to Barack Obama. Apparently Goolsbee responded to an invitation from the Canadian consulate in Chicago to explain Barack’s position & ended up being roasted for it. Austan has been roundly chastised for intimating that Barack’s rhetoric against NAFTA is just that.

As a former employee of the Canadian consulate in Chicago & 1 who knows A. Goolsbee, I have to comment. 1st of all, Barack’s issues with NAFTA are labor & the environment. Loonie-rich canucks are not barraging across the border taking US jobs & Canadian factories are not belching out smoke that is polluting the atmosphere of the US. Barack’s issues must be with the neighbor to the south & not the north, so speaking with the Canadians makes little sense because they have little to fear from change. 2ndly, while Barack supposedly could reopen NAFTA talks, because it was passed 10+ years ago & is already pretty firmly-entrenched, he’d have little chance of making major changes. That’s why bluster about changing NAFTA is simply rhetoric with little chance for real change. Potentially populism politics, but poor economics & not reality-based.

Finally, I’ve met & corresponded with Austan. He’s a brilliant guy. I met him @ a this Chicago Council on Global Affairs event I introduced myself to him because he speaks regularly on Marketplace, an NPR business news radio program & at the time, I was trying to get an international business news program on NPR. When we shook hands, he said, “I know you.” We finally figured out that since we both do triathlons, he’d seen me @ Chicago Triathlon Club meetings. He offered to put me in touch the the President of Public Radio International & did that. I had the conference call a few weeks later. He didn’t have to help me out, but he did, & followed through. Few people do that today, so I respect his integrity.

The Canadians should not have leaked information that I’m sure was delivered off the record. Goolsbee provided that information in good faith, & was chastised for it. Austan is a good guy & I’m glad he hasn’t resigned. If Barack has people as intelligent as Austan Goolsbee surrounding him, I have a lot more confidence in him than our current leadership.

Here’s a supposed copy of the memo from the Canadian Consulate in Chicago which was forwarded & presumably leaked in Canada. I question whether it’s the original because of the formatting. They’re not really so old-fashioned as to circulate old-typewriter written looking documents. I don’t know the interviewee (HOM-Head of Mission Georges Rioux) & scribe Joe DeMora because they rotated in after I left the office in 2003.

For the record, check out this editorial Two faces on NAFTA for a more realistic view of where NAFTA stands today.

heparin coverage in Germany

In following up this article by Bruce Japson Similar heparin issue in Germany in the Chicago Tribune, I found out a few additional things in the German press

Süddeutsche Zeitung Heparin-Skandal erreicht Deutschland Heparin scandal reaches Germany: Axel Thiele of the Bundesinstituts für Arzneimittel und Medizinprodukte (BfArM)/Federal Institute for Medicines & Medical products confirmed about 80 cases of allergic shock.  Because of chemical similarities, contamination is difficult to discover.  There are 10 producers of cheaper variants of Heparin, which is no longer patent protected.

die Zeit Lebensbedrohliche Spritze Life threatening shots, claims almost 100 people are affected & traces the problem to specific Chinese firms.  Other quotes from Axel Thiele:  “At the moment, we don’t know what it is.”  When it’s identified, then they can seek other remedies.  Since Heparin is a natural amino sugar, it’s not under surveillance.WirtschaftsWoche picked up HANDELSBLATT’s article Gefährlicher Blutverdünner Rotexmedica muss Medikament vom Markt nehmen Dangerous bloodthinner-Rotexmedica must take medication off the market-Heparin has been pulled from the German market.  Rotexmedica belongs to the French pharmaceutical group Panpharma.

Berliner Zeitung & Frankfurter Allgemeine make no mention of Rotexmedica or Heparin

Atlantic Canada business mission

Canadians were in town last week with a group of businesspeople to meet with potential customers, partners, & investors in Chicago. Because of weather delays, over 1/2 of the delegation couldn’t make the 1st scheduled lunch. All but 1 was able to make it to Chicago by the reception the following evening. Chicago-based Deputy Consul General/Trade Commissioner Maurice Egan spoke for Janice Goguen of Atlantic Canada Opportunities Agency, who didn’t make it down. Here are the participants:

Atlantic Canada Business Network provides foreign direct investment & international business consultation to Atlantic Canada businesses by enabling access to China

Game Face Graphics, Inc. makes “skins”/removable/reusable stickers/decals for phones, mp3 players, gaming gear for WalMart

Headz UP head support system for infant car seats

InternetWorks Ltd. web-based occupancy reporting system for tourism departments & destination marketing organizations

Marcato Digital Solutions web-based management & contact software for the music industry to manage finance, accounting, & scheduling

Pulse Communications developer of software. database-driven applications, network configuration, hardware sales, for print, graphic design, web design/development, & interactive media

Quick Snap 2-piece plastic clip which replaces shoelaces for footwear. sporting goods, & medical health industries

Stark Oil Purification provides transformer maintenance, oil purification, oil & fluid rejuvenation, alternative fluid rejuvenation, hot oil flushing

european patent changes seminar

I attended this seminar @ DePaul University College of Law The USA Business Impact of A Changing European Patent Regulatory Environment which was co-sponsored by the Association of Patent Law Firms

The presentations & my notes for each are included below:

EPO & the London agreement

-All European countries will eventually ratify the London agreement, but it still makes sense to have translations done in appropriate countries just to be sure your back is covered.

appeals to the epo

-the boards of appeal consist of judges, not examiners

-1600 of 2000 cases/year are settled by decisions of the boards of appeal

-early is best for new documents & arguments in general procedures & timings

-oral proceedings take 1 day-1 week, depending on the # of parties & you receive a decision that day, but no reasoning behind it

-there is no unified patent law in Europe, it’s just a bundle of national patent laws-they can contradict 1 another & still stand

-minutes are a joke

-you can still go back to national courts

-there is no doctrine of equivalence

oppositions before the epo
-documents are 90% of the procedure, & it’s better if they’re in the public domain with prior public use & a written trace

-hearing the parties is seldom done

-opinions by experts are unlikely to be considered

-arguments can be thrown out for being badly argued

-markers are needed for thesis documents referenced in university libraries

Since these presentations were given by lawyers, I’m going to reserve my commentary other than to say, if you’re a patent attorney, I’m sure there’s lots of valuable information here. Otherwise, there’s a lot of detail with which you need not concern yourself.

international economic espionage

I attended this presentation by Michael P. Avramovich,  President of Avramovich & Assoc., P.C. @ the Center for International Business & Trade of the John Marshall Law School.  Here’s what I was able to pull out of it:

-FBI estimates losses of $200B.

-Russia & China are #1 & #2

-Because the U.S. is the largest foreign direct investor, that makes the U.S. the # 1 target

-inside agents are the most insidious

-supply chains open up vulnerability

-French flight attendants were bugged as members of the French equivalent of the CIA

-foreign students in the U.S. gather data to take home

He spent a fair amount of time going through the actual code

the U.S. govt must prove

-theft

-perpetrators knew it was a trade secret

-converted to an economic benefit

-knew there was injury

-related to foreign commerce

this controls acts outside of the U.S. as well

to protect trade secrets

-train employees, consultants, licensees

-sign Non-Disclosure Agreements

-limit physical access to secrets

-restrict the # of copies which can be made of secrets

-encrypt data

only 30 cases have been prosecuted in 11 1/2 years

For the record, this is 1 of the driest presentations I’ve ever seen.

He handed out an 18 page report, 6 pages of code on Protection of Trade Secrets, & a 6 page article he contributed to The Globe. Contact him if you’d like copies.

US not only country suffering from subprime loans

I caught this article by Kim Murphy in the Chicago Tribune Subprime woes, with a British accent  which told of the woes of our British cousins suffering from the same maladies of subprime woes as we Americans are.  What seems to be different are a few things:

-”rescue” companies really don’t rescue mortgagees

-the British housing market, & hence mortgage market, accelerated at an even faster rate than that of the US, & is paying the price for it now, reflected in the sharp increase in mortgage defaults

- interest rates there of 9.5% sound kind of high to me

While much of the rest of the world might not be dragged down by the subprime crisis, part of the reason for that is much of the world, & even the developed world, didn’t benefit from home ownership either.  When I lived in Germany, far fewer people owned their own homes.  They were lifetime renters, which gave them flexibility, but also left the succeptable to the whims of their landlords.  They never had the commitment & tax advantages of mortgage interest.  In many ways, America differs from a lot of the rest of the world in making home ownership a pillar of our financial stability.  There is a lot of sense in rewarding people for bettering their home environment.  But in times like these, when too many people took advantage of the system, there are risks for which we are paying now.  Interestingly in contrast, when I spent time in Poland, I saw many houses in the midst of construction, which might or might not have ever been completed.  I don’t know if they owned the houses & land, but  many of them must have been abandoned because  they ran out of money, even though I was told many people built their own houses by themselves.

w daley on nafta

David Greising of the Chicago Tribune scooped me by interviewing William Daley, brother of Chicago’s mayor Richard J. Daley, about the North American Free Trade Agreement in His own free-trade truce This whole hullaballoo over NAFTA kind of surprises me because it was passed during democrat Bill Clinton’s administration. I wasn’t aware that he was accused of letting corporations write that trade treaty. Being educated in international economics, I’m a free trade advocate, so generally, I think NAFTA is good. What’s seldom mentioned is that the US being able to export more to Mexico (the US already had a free trade agreement with Canada even before NAFTA) creates more jobs. Whether or not that offsets the jobs we lose that are outsourced there, I can’t say. Theoretically, the argument against NAFTA is that Mexico is not held to the same standards as the US for labor & the environment, & therefore has an unfair competitive advantage. Because they don’t have the same OSHA standards for workers & EPA standards to protect the Earth, they are able to unfairly pay lower wages to workers there. As Barack correctly notes, the optimal solution is to improve conditions in Mexico so that their workers are happy enough there that don’t want to immigrate here. Exactly that is happening to Turks in Germany-they are returning home because conditions have improved so drastically there. The Mexican market is open to us, we have reciprocal trade, & we are not patsies. China is the far greater threat because the cost differences are so much greater in manufacturing. Attacking trade is an easy political issue which plays well to labor & about which most can/will not do much. Letting low-skill jobs migrate to Mexico is not what’s killing the American economy. Exorbitant trade & budget deficits are. In my mind, it’s all about competition & the US is not doing such a great job in that area these days.

Tellabs to attack international markets

I read this article by Jon Van in the Chicago Tribune Tellabs looks within where it states  ” Part of Pullen’s strategy will include tapping new foreign & domestic customers, such as telecom carriers in Asia & the U.S. government at home.”  Duh, that’s where the growth is.  Tellabs is already pretty international.  Tellabs generated 29% of its revenue outside
of North America in the fourth quarter of 2007.  It has customers outside the U.S. like Ericsson (Sweden), NTT (Japan), Telecom Italia, Telekom Malaysia, Telstra (Australia), Vodacom SA (South Africa) and Vodafone (Hungary).  Tellabs has regional headquarters in Singapore — Asia Pacific; London— Europe, Middle East and Africa; Ft. Lauderdale, FL— Latin America and Caribbean.  Tellabs employs about 3,700 people,  about 1,100 of which   are based outside the United States. I’m kind of surprised the past CEO Krish Prabhu, an Indian, didn’t pursue this strategy.  I also had to mention this article because an analyst with Robert W. Baird & Co. named Ken Muth, (no relation) commented on the hire in the article as well.