-Caveat Lector-

from:
http://www.aci.net/kalliste/
<A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A>
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Bananas and Drugs

Caribbean Community Threatens to Pull Out of Drug Treaty

The U.S. is punishing Europe for not punishing Caribbean bananas


Caribbean countries are threatening to renege on a treaty with the US to
fight drug trafficking in retaliation for Washington's stance in its
"banana war" with the European Union. The US moved to impose trade
penalties on the EU last week, accusing it of failing to comply with a
World Trade Organisation ruling that its banana import policies favoured
Caribbean growers at the expense of Latin American producers.


The Caribbean Community (Caricom), a 15-member regional trade group,
said at the weekend that its members were reconsidering the drug control
pact and would also not honour several economic pacts because of
Washington's decision to impose sanctions on European imports.


The Caribbean move came as the EU prepared to seek support today from
the 134 countries of the WTO at a meeting in Geneva.


Caricom said that, by imposing sanctions on EU exports, the US had
"undermined the essence" of agreements between Caribbean leaders and
President Bill Clinton two years ago on trade and security.


"The US has taken action not only to damage our bananas but to penalise
Europe for not taking action to damage our bananas," said Edwin
Carrington, Caricom's secretary general. "In the light of that, we have
to review the agreement we have."


Under a controversial treaty with the US, reluctantly signed by several
Caribbean governments, US law enforcement agencies are allowed to pursue
suspected drug traffickers into the countries' territorial waters and
air space.


The Caribbean stance will be formally put to Madeleine Albright, US
secretary of state, when she meets Caribbean Community foreign ministers
in Washington next month.


The UK has also been forcefully pressing the case for Caribbean
economies. On Saturday, Robin Cook, the UK foreign secretary, urged Ms
Albright to end the damaging dispute. In a statement released by the
Foreign Office, he said: "The damage to our trade could be real."


The British prime minister, Tony Blair, is expected to hold further
talks with Mr Clinton in an attempt to reach a settlement in the banana
dispute.


Mr Blair's spokesman said he was well aware that Washington was under
political pressure to apply sanctions to the EU. "We will see if there
is anything we can do to help the US administration overcome these
political issues," he said.


However, Mr Blair has already made it clear to Mr Clinton that
Washington must lift the sanctions immediately.


The UK government holds out little hope of the specially convened
meeting of the WTO in Geneva resolving the stalemate today.


The EU asked for the urgent meeting of the WTO's general council after
Washington last week told importers of EU products ranging from Scottish
cashmere sweaters to Italian pecorino cheese to post a bond of 100 per
cent of the goods' value.


The general council cannot force the US to back down but the EU hopes
WTO members will condemn Washington's action. The EU also launched a
formal WTO complaint against the US.

The Financial Times, March 8, 1999


Assassination Politics

CIA Plotted Saddam Coup, but White House Pulled Out

Then FBI arrested 5-man CIA team

THE CIA mounted a coup operation against Saddam Hussein in 1995, even
setting March 4 as the date. But the plan was ditched at the last minute
when the White House withdrew support.
Details published in Le Journal du Dimanche in Paris follow disclosures
that the CIA infiltrated teams of United Nations weapons inspectors in
Iraq, among them nine officials, who were part of an attack being
mounted from Jordan in June, 1996. This went awry after Saddam
infiltrated a group of Kurdish dissidents on whom the agency was
relying. Dozens were executed.

The French newspaper said a five-man CIA team was put in place for the
earlier attempt. When it was called off they were arrested by the FBI
and charged with attempted murder. Gilles Delafon, a Middle Eastern
affairs specialist, said charges were dropped in 1996 and the five were
decorated for their work, but "the affair seriously shook CIA morale".

The CIA, respecting an order dating from the presidency of Gerald Ford
banning assassinations, planned a coup in which the Iraqi leader would
have been overthrown and replaced by five Iraqi generals. The strategy
was drawn up with the help of Gen Wafic al-Samarai, an Iraqi officer who
defected.

The plan involved an uprising by Kurds in the north of Iraq, while
military opponents of Saddam attacked the barracks where he had his
residence. But on the eve of the attack, the CIA team received a message
from Tony Lake, President Clinton's national security adviser, telling
them the White House did not back it.

The London Telegraph, March 8, 1999


Financial Markets in Japan

Future of Japanese Bond Market Depends on Trust Fund Bureau

When you are strapped for cash, sell, sell!


Until recently, Japan's secretive Trust Fund Bureau only attracted
attention from financial boffins. This spring, though, it is enjoying an
unwelcome burst of market fame.


For in recent months the TFB has delivered two shocks to the bond
markets: in December it announced it would stop its monthly �200bn
($1.62bn) purchases of Japanese government bonds because of a funding
squeeze; then last month it suddenly announced that it would buy �400bn
of bonds in February and March.


And as investors reel from these U-turns, the crucial question now is
whether the TFB is about to deliver a third shock - and not only stop
its JGB purchases after March, but actually sell some of its existing
�84,000bn holdings of JGBs?


The Ministry of Finance, which effectively manages the Bureau's affairs,
insists that the answer is "no". For although it is undecided whether
JGB purchases will continue after April, Ministry officials argue that
"the market rumours about us selling JGBs are absolutely not true".


These statements have done little to reassure nervous investors,
however. For the funding squeeze that the Bureau revealed in December
looks set to intensify in the coming years. And with this, the
temptation for the Bureau to sell its JGBs will grow.


As Yoichi Tazawa, head of fixed income research at Nomura says: "There
is a growing perception in the markets that the Bureau may start to sell
JGBs soon."


The issue is particularly un-nerving for investors because it is
difficult to judge just how much of a "squeeze" the Bureau actually
faces. This is partly because of a lack of information. The government
publishes few timely details of the Bureau's financial operations.


Meanwhile, Western investment banks have not delved too deeply because
the postal savings system, which provides most of the Bureau's funds, is
also a key client for investment banks. "If we offend the Post Office,
our fixed income business would suffer," admits one analyst.


But the other problem is that the funding squeeze now essentially
depends on the volatile political climate and, above all, on the fate of
the national postal savings system.


In fiscal 1998 this postal savings system provided some �239,000bn of
the Bureau's �418,000bn funds, with most of the remainder coming from
the employee pension system. But around �100,000bn of these postal
savings funds are now locked up in 10-year time deposits that mature in
2000 and 2001.


Since these deposits were taken out at high interest rates, it is
presumed that most of these funds will be removed. The postal savings
system, for example, guesses that about �50,000bn, or half the funds,
could disappear.


However, the scale of any withdrawal could depend on whether the
government maintains its safety net for the banking sector beyond 2001,
and the overall interest rate environment at the time.


Thus far, these pressures have not directly reduced the Bureau's funds.
Indeed, the Bureau actually expects the size of the postal savings
system to increase, not decrease in fiscal 1999, as nervous savers keep
withdrawing money from banks.


As December's "shock" decision shows, however, the pressures on the
Bureau are now mounting for two reasons. First, the Bureau is now trying
to take pre-emptive steps to prepare for 2001, by shuffling its
portfolio away from long-term JGBs into more liquid instruments.


Second, the Bureau's funds for JGB investment are being reduced because
politicians are demanding the Bureau spend more on politically sensitive
projects, such as loans to cash-strapped local governments and
government banks.


Overall spending on the Fiscal and Investment Loan Programme, which
manages such spending, is projected to rise 7.3 per cent in fiscal 1999,
compared with a projected 6.8 per cent drop in the original 1998 budget.


Meanwhile, emergency loans to cash-strapped local governments are
projected to rise by around �8,000bn in fiscal 1999 to �30,000bn,
further squeezing Bureau funds. Such expenditure could, in theory, be
halted if the government suddenly decided it wanted to free up more
funds to support the bond markets. Indeed, the scale of Bureau funds is
such that spending a billion more on bonds each month is not an onerous
task.


The cash to fund the �400bn JGB purchases in February and March, for
example, is coming from a "surprise" surplus of several trillion yen
that emerged last year in the state mortgage system. This surplus
apparently appeared because lenders rushed to repay fixed-rate loans
last year as interest rates fell.


This financial juggling should avert serious pressure at the Bureau in
fiscal 1999 - meaning it can almost certainly avoid any bond sales for
the moment if it truly wishes. But this uncertain, opaque system does
not create the type of safety net that could instil market confidence.


The Bureau, in other words, may be able to avoid delivering a "third
shock" this spring but the threat of a shock looks set to haunt the bond
markets for the foreseeable future.

The Financial Times, March 8, 1999
-----
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris

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