Dutch Disease DA - d284f45nftegze.cloudfront.netd284f45nftegze.cloudfront.net/nyeakley/Dutch Disease D… · Web viewThe term “Dutch disease” refers to the effect of either

CORNISH TSDC DUTCH DISEASE

Dutch Disease DA

Don’t catch ‘The Disease’! 1


Explanation Dutch Disease is not a contagious disease such as AIDS or Ebola. It deals with economics.http://dspace.cigilibrary.org/jspui/bitstream/123456789/13395/1/The%20Macro%20Economic%20Impact%20of%20Remittances%20in%20Latin%20America%20Dutch%20Disease%20or%20Latin%20Cure.pdf?1

The term “Dutch disease” refers to the effect of either an unexpected find of new wealth (say a new oil deposit) or an increase in its value. As a consequence, the supply of foreign exchange would tend to increase, possibly on a permanent basis, and this would result in an appreciation of the currency (nominal or real) and/or a deterioration of the balance of trade, excluding the subject of the gain (say oil or copper). Because of the additional flows resulting from this event, the value of other export receipts may decline and that of imports increase. This phenomenon originating in the Netherlands in the 1970s in relation with new gas findings is well documented in the economic literature, and is being extended conceptually to remittances. An increase in remittances, relative to the size of the economy, could be expected to result in appreciation or strengthening of the currency in the receiving country, as suggested in chart 1 and illustrated in charts 8 and 9. For the seven countries in the study, and for El Salvador, respectively, where remittances have a heavier weight than in other countries. The latter charts show that there is a strong correlation between remittances per capita (in the receiving country) and the real exchange rate over time, with a clear appreciation of the currency.



1NC <Insert Country specific Uniqueness>

And, Capital inflow in Latin America could harm the development of the industrial sector and employment level and negatively affect long-run growth, ie “dutch disease”Frenkel and Rapetti 12[Roberto Frenkel, Principal Research Associate at CEDES and Professor at University of Buenos Aires, Argentina, and Martin Rapetti, Associate Researcher at CEDES and researcher at IIEP, University of Buenos Aires, Argentina; 2012; World Economic Review; External Fragility or Deindustrialization: What is the Main threat to Latin American Countries in the 2010s?; pdf; AC]

We find this view problematic for several reasons. First, it is not clear that capital inflows represent an increase of the recipient country’s wealth in foreign currency, as in the standard case of Dutch Disease. Capital inflows can be a source of finance for a current account deficit – which would imply an increase in net foreign debt – or an exchange of foreign for domestic assets – without altering the net international investment position. A green field foreign investment certainly represents an increase in the capital stock of the recipient country, but it is typically made with the expectation that the discount value of future dividends will be higher than the original investment. Second, it is impossible from the viewpoint of a policy-maker to know ex-ante whether a wave of capital inflows represents a transitory or permanent phenomenon. Third, it is equally uncertain whether the labor displaced from the industrial and services sectors resulting from the appreciation of the RER [real exchange rate] will be absorbed by other sectors . There is, on the other hand, a much higher degree of certainty regarding the effects of a transitory but sustained RER appreciation on industrial employment and output. Transitory but lasting RER appreciations have typically led to the destruction of firms and employment, human and organizational capital, vertical and horizontal linkages and access to foreign markets. These outcomes have been formalized (Krugman 1987 and, Ros and Skott 1998) and documented empirically (Sachs and Werner 2001). Moreover, there are several examples in Latin American economic history of sustained RER appreciation leading to deindustrialization. These are, for instance, the experiences of Argentina and Chile between late 1970s and early 1980s and that of Argentina during the 1990s9. We also find problematic the view that Dutch Disease and RER appreciations do not have effects on long-run growth. Economic development is associated with the expansion of modern tradable activities (ie. manufactures and services intensive in knowledge). The expansion of these activities generates a variety of positive externalities – learning-by-doing, network externalities and technological spillovers – that tend to accelerate economic growth. They also increase the net supply of foreign currency and thus reduce the possibility of stop-and-go dynamics or excessive foreign debt accumulation and crises that hamper long-run growth. For these reasons, a competitive RER provides an environment conductive to economic development by stimulating investment in tradable activities. A recent body of econometric research has found a robust association between growth acceleration and competitive RERs10. Moreover, this relationship has been observed in several episodes in the economic history of Latin America: the most successful cases of sustained growth accelerations have occurred when governments oriented their macroeconomic policy to sustain competitive and stable RERs that protected industrial activities and promoted non-traditional exports Frenkel and Rapetti 2012). Consequently, current capital inflows to Latin America – even if they do not represent a threat in terms of external vulnerability and crisis – could excessively appreciate the RER, harm the development of the industrial sector and its employment level and negatively affect long-run growth. Given current conditions and our expectation about their continuation, we believe that RER levels that guarantee external sustainability in Latin American countries are more appreciated (ie. lower) than those required to promote economic development. Macroeconomic policy should care about not only the RER level that guarantees external sustainability, but also the one that promotes the expansion of modern tradable activities, employment and economic development11


CORNISH TSDC DUTCH DISEASENext, Dutch Disease destroys economies – decreases profit from exports, hurts the crucial manufacturing sector, and decreases employmentBerry 08[Albert Berry, March 2008; Dutch Disease: A Threat to Latin America’s Current Growth Spurt; Focal Point; http://www.economics.utoronto.ca/gindart/Dutch%20Disease2%20-%20W2010.pdf; accessed 8 April 2013; AC]

One of the great questions now surrounding Latin America’s medium-term economic future is whether a continued boom in fossil fuels and other commodities will bring with it some of the undesirable effects associated with “Dutch disease”, a problem named for the negative after-effects of a gas export boom experienced by the Netherlands in the 1970s. The most obvious of the worrisome effects of such booms is that they discourage the production of other “tradables”– a category made up of the goods and services that can be traded internationally (in contrast to “nontradables” that cannot, such as construction and personal services). Tradables are mainly agricultural products, minerals and manufactures, together with certain services. When a country exports more oil (or gets a higher price for the oil it exports) this raises the country’s foreign exchange earnings and makes it less important to export other goods and services in order to be able to import items not easily produced at home. The mechanism whereby the boom discourages production of other tradables is, in most countries, the exchange rate . An export boom appreciates the country’s exchange rate, which in turn makes it less profitable to export other items and cheaper to bring in “importables.” Why should the discouragement of the production of other tradables be a source of concern? This depends partly on whether retaining strength in some of the discouraged sectors matters to the country’s successful growth in the future. There are two main mechanisms through which it might. The first is related to the possible volatility of export revenues. Suppose that the current commodities boom lasts another decade, not too long but long enough to weaken some other tradables sectors. Then, when the commodity boom is over and the countries once again need those other sectors, their capacity has been diminished, the resources have shifted elsewhere and it may be difficult and costly, if possible at all, to restore them to their former productive levels. This may be called the “instability” cost of Dutch disease. A different sort of damage is done if one or more of the sectors that shrink have a special role in the overall growth process. Many economists feel that manufacturing sectors, (or some key types of manufacturing such as the production of capital goods) play that role because their presence helps to increase productivity in other sectors (i.e., produces “externalities” in economic jargon). When they shrink, whether permanently or temporarily, the economy’s future growth potential is impaired. Historically, employment and the weight of manufacturing in Latin America’s output rose over most of the 20th century, especially during its high-growth third quarter, and had reached around 25 per cent and 16 per cent respectively by 1980. But since then, these figures have plunged to about 18 per cent and under 12 per cent, respectively. Dutch disease can also hurt overall employment and income distribution when, as is often the case, the production of the booming exportable creates very few jobs and the sectors that shrink, or whose growth is discouraged by the boom, are more labour intensive. Thus oil, gas and coal production creates virtually no jobs but their export discourages agriculture and manufacturing, sectors that create many jobs. So the net effect on the demand for labour can be negative even as total GDP is rising. In concrete terms this “employment problem” manifests itself in some combination of higher unemployment and underemployment, lower wages, and a large informal sector of micro enterprises and the self-employed. Latin America is famous for its level of income inequality and the large share of people engaged in low productivity, informal sector jobs.


CORNISH TSDC DUTCH DISEASEFurthermore, Latin America economy key to the US economyZedillo et al 08 Commission Co-Chair for the Brookings Institute Report on the Partnership for the Americas and former President of Mexico [Ernesto Zedillo, Thomas R. Pickering, etc, Rethinking U.S.–Latin American Relations A Hemispheric Partnership for a Turbulent World. Report of the Partnership for the Americas Commission, The Brookings Institution, November 2008, http://www.brookings.edu/~/media/Research/Files/Reports/2008/11/24%20latin%20america%20partnership/1124_latin_america_partnership.PDF]

As the crisis unfolds, Latin America remains important to the United States in at least two respects. If the LAC region grows at rates of more than 3 percent a year—as the International Monetary Fund currently projects—even in a weak global economy, its countries will play a valuable role as buyers of U.S. goods and services, helping the U.S. economy export its way out of the crisis. Conversely, if the region’s economy deteriorates further, the problems associated with poverty, crime, inequality, and migration may worsen and could potentially spill across borders. For the United States, coping with the hemispheric impact of the financial crisis will be a major policy challenge with economic as well as political and security implications.

And Finally, Economic decline risks multiple global nuclear warsO’Hanlon 12 Kenneth G. Lieberthal, Director of the John L. Thornton China Center and Senior Fellow in Foreign Policy and Global Economy and

Development at the Brookings Institution, former Professor at the University of Michigan [“The Real National Security Threat: America's Debt,” Los Angeles Times, July 10th, http://www.brookings.edu/research/opinions/2012/07/10-economy-foreign-policy-lieberthal-ohanlon]

Alas, globalization and automation trends of the last generation have increasingly called the American dream into question for the working classes. Another decade of underinvestment in what is required to remedy this situation will make an isolationist or populist president far more likely because much of the country will question whether an internationalist role makes sense for America — especially if it costs us well over half a trillion dollars in defense spending annually yet seems correlated with more job losses. Lastly, American economic weakness undercuts U.S. leadership abroad. Other countries sense our weakness and wonder about our purported decline. If this perception becomes more widespread, and the case that we are in decline becomes more persuasive, countries will begin to take actions that reflect their skepticism about America's future. Allies and friends will doubt our commitment and may pursue nuclear weapons for their own security, for example; adversaries will sense opportunity and be less restrained in throwing around their weight in their own neighborhoods. The crucial Persian Gulf and Western Pacific regions will likely become less stable. Major war will become more likely. When running for president last time, Obama eloquently articulated big foreign policy visions: healing America's breach with the Muslim world, controlling global climate change, dramatically curbing global poverty through development aid, moving toward a world free of nuclear weapons. These were, and remain, worthy if elusive goals. However, for Obama or his successor, there is now a much more urgent big-picture issue: restoring U.S. economic strength. Nothing else is really possible if that fundamental prerequisite to effective foreign policy is not reestablished.


http://www.brookings.edu/research/opinions/2012/07/10-economy-foreign-policy-lieberthal-ohanlon

http://www.brookings.edu/~/media/Research/Files/Reports/2008/11/24%20latin%20america%20partnership/1124_latin_america_partnership.PDF

http://www.brookings.edu/~/media/Research/Files/Reports/2008/11/24%20latin%20america%20partnership/1124_latin_america_partnership.PDF


Links



Generic Increased capital in Latin America leads to “Dutch Disease”Burin 12[Gabriel Burin, October 25, 2012; Latin America: the risks of being too attractive; Macroscope; Reuters; http://blogs.reuters.com/macroscope/2012/10/25/latin-america-the-risks-of-being-too-attractive/; accessed 8 April 2013; AC]

Ironically, an increase of capital inflows to Latin America in the last few years due to unappealing ultralow yields in industrialized countries and the region’s relative economic success is posing a threat for development, according to a recent paper that provides wider background to BRIC criticism of the latest U.S. Federal Reserve´s quantitative easing. The article, written by Argentine economists Roberto Frenkel and Martin Rapetti for the World Economic Review – an international journal of heterodox economics – warns about the possibility of a Latin American variant of the so-called “Dutch Disease”. This is a situation where a country suddenly finds a new source of wealth that makes its currency more expensive, hurting local exports and causing traumatic de-industrialization. “Our concern is that massive capital inflows to Latin America may have pernicious effects via an excessive appreciation of the real exchange rates, which could lead to a contraction in output and employment in tradable activities with negative effects on long-run growth”, says the paper. Real exchange rates in Latin America are now stronger than those required to promote economic development, reducing corporate earnings in export-oriented sectors intensive in labor, say the authors, adding: “There are in fact some hints indicating that tradable profit squeeze is negatively affecting the performance of manufacturing activities in Latin America”.



Aid Aid to countries crushes the manufacturing sector, causing Dutch DiseaseRajan and Subramanian 09[Raghuram G. Rajan and Arvind Subramanian; Aid, Dutch Disease, and Manufacturing Growth; December 2009; Center for global development; http://www.cgdev.org/sites/default/files/1423404_file_Rajan_Subramanian_FINAL.pdf; accessed 21 March 2013; AC]

Taken together, our results suggest there may indeed be an adverse impact of aid on the relative growth of exportable sectors, and that the channel through which these effects are felt is the exchange rate overvaluation induced by aid. Despite the fact that for many aid-receiving countries, the manufacturing sector might be less important currently than agriculture, it is worth remembering that that was also true for many of the fast-growing countries when they first embarked upon development. Manufacturing exports provided the vehicle for their growth take-off, so any adverse effects on such exports should prima facie be a cause for concern about the effects of aid on growth. The message from our work is that countries should avoid creating the conditions that generate uncompetitive exchange rates. To the extent that aid inflows are responsible, it 19 - would suggest a focus on the part of both donors and recipients on tailoring aid flows to the absorptive capacity for aid in the economy.



Free Trade Free Trade with the US in Latin America causes Dutch Disease – empirically provenDolan 12[Ed Dolan, August 10, 2012; Will the Dutch Disease Kill hopes raised by Colombia’s Free Trade Agreement; Economonitor; http://www.economonitor.com/dolanecon/2012/08/10/will-the-dutch-disease-kill-hopes-raised-by-colombias-free-trade-agreement/; accessed 10 April 2013; AC]

Now, the negatives. Over the six years since the CPTA [United States-Colombia Trade Promotion Agreement] was first signed, Colombia’s currency has appreciated steadily. The first chart below shows nominal appreciation of the peso relative to U.S. dollar. The second shows the peso’s real effective exchange rate. (The REER is a weighted average of exchange rates with all trading partners, corrected for differences in inflation.) Both measures show a steady loss of competitive position for Colombia’s manufacturing and agricultural exporters. There is no secret about where the upward pressure on the peso is coming from. As the next chart shows, Colombia has rapidly become a major oil exporter. It is now the third-largest producer in Latin America, with output equal to a third of Mexico’s and two-fifths of Venezuela’s. Oil exports are giving Colombia a classic case of the Dutch disease. That affliction gets its name from the experience of The Netherlands, whose exchange rate rapidly appreciated when it first began producing natural gas from the North Sea. The appreciation, in turn, undermined the competitiveness of its traditional manufacturing and farm exports. Resource-based export earnings are all well and good, but extractive industries, especially oil, employ relatively few people per dollar of value added. By making it hard for non-exractive sectors to compete, a rising exchange rate can block the spread of prosperity to the population at large. For example, the Fashionista report cited above estimates that Colombia’s textile manufacturers already must pay a minimum wage 70 percent higher than China’s. That puts the jobs of textile workers, farm workers, and others at risk as oil exports grow.



Internal Links Latin America is too dependent on commodities. An increase in commodity exports drives the “Dutch Disease”, which makes the rest of the economy less competitive.The Economist 10[The Economist; September 9, 2010; It’s only Natural; From the Print edition; http://www.economist.com/node/16964094; accessed 8 April 8, 2013; AC]

Latin America is uncomfortably dependent on commodities. In the past decade they accounted for 52% of the region's exports, according to the World Bank. That is down from 86% in the 1970s, but over the same period the figure in East Asia and the Pacific fell from 94% to 30%. Chile, Peru and

Venezuela still rely on raw materials for more than three-quarters of their total exports. In all, as the World Bank notes in a report published this month, more than 90% of Latin Americans live in countries that are net exporters of commodities, the exceptions being in Central America and the

Caribbean. Governments have also become more reliant on raw materials for their tax revenues (see chart 1). There is nothing wrong with producing raw materials. The rise in world prices for Latin America's commodities, and the related increase in their output, may have accounted for between one-third and half of the region's growth over the past decade. And thanks to Asia's economic vigour, commodity prices fell only briefly during the recession and remain at historically high levels. Over the past decade a region that has habitually suffered from balance-of-payments troubles has benefited from the foreign exchange that commodities bring in. This bonanza seems to refute the thesis put forward by Raúl Prebisch, the founding director of ECLAC, that the price of

commodities is bound to decline in relation to the price of manufactured goods. Even so, relying on raw materials carries a series of risks. One is volatility: their prices are more variable than those of manufactures. Second, many economists worry about “Dutch disease”, a term coined by this newspaper in 1977 to describe the impact of a North Sea gas bonanza on the economy of the Netherlands. This malady involves commodity exports driving up the value of the currency, making other parts of the economy less competitive, leading to a current-account deficit and even greater dependence on commodities. This matters all the more because mining and hydrocarbons are capital-intensive businesses, generating relatively few jobs. The commodity boom, together with capital inflows attracted by better economic prospects, has already pushed up the value of some of the region's currencies. For

example, São Paulo seems extraordinarily expensive to any visitor. The strength of the Brazilian currency, the real, worries officials and industrialists. A third concern is that many non-agricultural commodities are not renewable (although high prices encourage new discoveries), so governments should invest the tax revenues they generate in infrastructure and training to diversify the economy. Producing commodities may also involve local environmental damage. In parts of Latin America mines and oilfields are in areas inhabited by people of indigenous descent and have caused cultural clashes.

An inflow of revenue to a developing country kills their manufacturing sector and puts the economy into a recession – this is empirically proven in both Venezuela and MexicoHilaire and Doucet 04[Natalie Hilarie and Professor Joseph Doucet; December 2004; Dutch Disease, Oil and Developing Countries; http://www.business.ualberta.ca/Centres/CABREE/Energy/~/media/business/Centres/CABREE/Documents/Energy/Oil/DutchDiseaseOilAndDevelopingCountries.ashx; accessed 12 April 2013; AC]

This is the question faced by all developing countries, the reason that they flounder is because there are no viable industries. What is remarkable is that even the inflow of large amounts of revenue without initial debt does not alleviate this problem . The transitional effects that Dutch Disease describes led to structural problems that through mismanagement sent Mexico and Venezuela into recession. The question of what proper management would be is difficult to answer. Perhaps another look at the premise of Dutch Disease will shed light on a viable, long-term solution. The inflow of revenue to a developing country causes the already precarious position of that country’s traded manufacturing sector to be challenged by cheaper imports. The loss in employment of the people of this nation due to the loss of competitiveness of their industry causes a decrease in human capital. Economic theory postulates two solutions; one that is feared overly inflationary and another that can be challenging. According to Ebrahem-Zadeh the answer is to store the revenue from oil and 6 disperse it slowly like the Saudis have done. However this is preventative and not proactive. In the cases explored in this paper it has been shown that government policy to protect home industry eventually fails when the money needed for this measure runs out. Also shown, in the case of Saudi Arabia, is the fact that it is difficult to develop new industries in a country through the government. Developing countries are lacking in the resources needed to develop those industries and it is obviously very difficult to apply money correctly to develop other revenue generating industry. In most cases the reason an industry has not yet developed on its own is because the conditions for development of industry are already not profitable. It therefore makes little sense for a government to spend all of its money on developing those not profitable industries since in the long run no profit will emerge.



Impacts



Economy Dutch Disease destroys economiesFrenkel and Rapetti 2011[Roberto Frenkel, Principal Research Associate at CEDES and Professor at University of Buenos Aires and Martin Rapetti, Associate Researcher at CEDES and researcher at IIEP, University of Buenos Aires; originally published in 2011; External Fragility or Deindustrialization: What is the main threat to Latin American Countries in the 2010s; http://wejdiscussion.worldeconomicsassociation.org/wp-content/uploads/Frenkel-Rapetti-WEJ-submission-Dec-2011-Final-1.pdf; accessed 21 June 2013; AC]

We find this view problematic for several reasons. First, it is not clear that capital inflows represent an increase of the recipient country’s wealth in foreign currency, as in the standard case of Dutch Disease. Capital inflows can be a source of finance for a current account deficit —which would imply an increase in net foreign debt— or an exchange of foreign for domestic assets —without altering the net international investment position. A green field foreign investment certainly represents an increase in the capital stock of the recipient country, but it is typically made with the expectation that the discount value of future dividends will be higher than the original investment. Second, it is impossible from the viewpoint of a policy-maker to know ex-ante whether a wave of capital inflows represent a transitorily or permanent phenomenon. Third, it is equally uncertain whether the labor displaced from the industrial and services sectors resulting from the appreciation of the RER will later be absorbed by other sectors. There is, on the contrary, a much higher degree of certainty regarding the effects of a transitory but sustained RER appreciation on industrial employment and output. Sustained RER appreciations have typically led to the destruction of firms and employment, human and organizational capital, vertical and horizontal linkages and access to foreign markets. These outcomes have been formalized (Krugman, 1987 and, Ros and Skott, 1998) and documented empirically (Sachs y Werner, 2001). Moreover, there are several examples in Latin American economic history of sustained RER appreciation leading to de-industrialization. These are, for instance, the experiences of Argentina and Chile between late 1970s and early 1980s and that of Argentina during the 1990s.We also find problematic the view that Dutch Disease and RER appreciations do not have effects on long-run growth. Economic development is associated with the expansion of modern tradable activities (i.e., manufactures and services intensive in knowledge). The expansion of these activities generates a variety of positive externalities —learning-by-doing, network externalities and technological spillovers—that tend to accelerate economic growth. They also increase the net supply of foreign currency and thus reduce the possibility of stop-and-go dynamics or excessive foreign debt accumulation and crises that hamper long-run growth. For these reasons, a competitive RER provide a conductive environment to economic development by stimulating investment in tradable activities. A recent body of econometric research has found a robust association between growth acceleration and competitive RERs.7Moreover, this relationship has been observed in several experiences in the economic history of Latin America: the most successful cases of sustained growth accelerations have occurred when governments oriented their macroeconomic policy to sustain competitive and stable RERs that protect industrial activities and promote nontraditional exports (Frenkel and Rapetti, 2012). Consequently, current capital inflows to Latin America —even if they do not represent a threat in terms of external vulnerability and crisis— could excessively appreciate the RER, harm the development of the industrial sector and its employment level and negatively affect long-run growth. Given current conditions and our expectation about their continuation, we believe that RER levels that guarantee external sustainability in Latin American countries are more appreciated (i.e., lower) than those required to promote economic development. Macroeconomic policy should care about not only the RER level that guarantees external sustainability, but also the one that promotes the expansion of modern tradable activities, employment and economic development.8



Venezuela Venezuela is uniquely at risk for Dutch DiseaseBerry 08[Albert Berry, March 2008; Dutch Disease: A Threat to Latin America’s Current Growth Spurt; Focal Point; http://www.economics.utoronto.ca/gindart/Dutch%20Disease2%20-%20W2010.pdf; accessed 8 April 2013; AC]

Dutch disease constitutes at least some degree of threat in Venezuela, Bolivia, Ecuador, Mexico, Colombia and Brazil. The threat is currently greatest in Venezuela and Bolivia. In fact, Venezuela’s stagnation in the wake of the previous oil price hikes of the 1970s qualifies it as a classic victim of this disease: slow growth as manufacturing and agriculture are hamstrung by the appreciated exchange rate; low employment creation in productive sectors; and the resulting high levels of “informalization” and inequality. Bolivia’s level of inequality still shows Dutch disease’s impact on tin from earlier times. Mexico (now) and Brazil (when its oil becomes a major export) are less likely to suffer ill effects from energy exports because they are bigger, more diversified countries, and probably also because their decision-makers will have a better handle on how to deal with the problem.



Mexico



1NC Uniqueness Mexico’s manufacturing sector is improving and vital to the Mexican economy – it accounts for 80 percent of exportsKamil and Zook 13[Herman Kamil Senior Economist and Jeremy Zook, research assistant in the IMF’s Western Hemisphere Department, March 2013; Finance and Development, Vol 50, No 1, The Comeback; http://www.imf.org/external/pubs/ft/fandd/2013/03/kamil.htm#author; accessed 21 March 2013; AC]

Mexico’s rebound has been driven primarily by exports of electronics, telecommunications, and transportation equipment. Since 2005, Mexico’s share of U.S. imports of transportation and communications products increased steadily to 18 percent, accounting for 76 percent of total Mexican manufacturing exports in the first half of 2012. But starting in 2009, most manufacturing sectors—20 of the 26 manufacturing import categories—showed gains, jointly accounting for 80 percent of total Mexican exports. Only a handful of industries lost market share, including electrical equipment (still a major sector, accounting for 14 percent of Mexican exports) and apparel. The automotive sector has contributed the most to the increase in aggregate market share, explaining half of the rise between 2005 and 2012. Mexico’s market share in U.S. imports of autos, auto parts, and accessories (excluding trucks) increased almost 9 percentage points over this period, particularly since 2009. Mexico accounts for a fifth of the total U.S. imports of autos and auto parts—the second-biggest foreign supplier of auto-related products to the United States, close behind Canada. The automotive sector accounts for one-quarter of all Mexican manufacturing exports to the United States. This large increase in production capacity and exports has been underpinned by a continued flow of foreign direct investment into the sector—mostly from the United States, but recently also from Japan and Germany. Chart 2 shows the changes in Mexico’s market share of U.S. imports against those of China in each of the 26 manufacturing sectors, for the periods 2005–07 and 2010–12. We excluded 2008 and 2009 because the global economic crisis distorted trade worldwide. In each panel, the upper left quadrant (red bubbles) represents sectors in which China’s market share increased while Mexico’s fell; the lower right quadrant (green bubbles) plots sectors (if any) in which Mexico’s share increased and China’s fell. The other two quadrants depict sectors in which the shares for both countries either fell or increased simultaneously. The size of the bubbles is proportional to each sector’s contribution to the overall change in market share in each period. During 2005–07 (top panel) there was no sector in which Mexico’s share increased and China’s simultaneously decreased. In fact, Mexico was losing share in several sectors in which China was gaining participation. In contrast, during 2010–12 (bottom panel) there are several sectors in which Mexico’s share increased while China’s fell. In addition, the number and relative importance of sectors in which China’s share went up and Mexico’s declined in the most recent period. We calculated the fraction of Mexico’s increase in market share that can be associated with China’s reduction, controlling for changes in the shares of the other competitors (based on a methodology developed by Jorge Chami Batista, 2008). During 2010–12, 40 percent of Mexico’s dollar gains in the sectors in which it increased market share can be attributed to China’s loss of share—some of which could reflect China’s shift to exports of a different set of goods. Mexico’s largest gains over China in market share were in a diverse range of goods—including electrical machinery and building materials.



Specific Mexico Link Foreign Direct Investment in Mexico hurts manufacturing employmentPeters 08[Enrique Dussel Peters; The Impact of Foreign Direct Investment in Mexico; April 2008; Working Group on the Development and Environment of the Americas; Discussion Paper number 11; http://ase.tufts.edu/gdae/Pubs/rp/DP11Dussel%20PetersApr08.pdf; accessed 21 March 2013; AC]

2. The executed FDI in manufacturing has substantially increased as a percentage of gross fixed capital formation, from 90.07% in 1994 to 160% in 2003. This trend is much more dramatic for the ten and twenty most important industries, for which the equivalent figure was over 300% in 11 2002 and 2003. In other words, in manufacturing and particularly in the most important industries FDI has been much more important than domestic investment. 3. FDI as share of total output (by value) decreased over the period, both for the manufacturing sector as a whole and for the ten and twenty most important industries: For the latter it declined from 9.69% in 1994 to 7.41% in 2003. 4. As manufacturing employment has declined since 2000, total FDI per employee has increased from less than $10,000 in the mid 1990s to more than $13,000 for the twenty most important industries. The differences between manufacturing as a whole and the ten and twenty most important industries are significant (see Graph 4). Job creation was negative for manufacturing as a whole, the ten and twenty most important industries, and the remaining manufacturing industries. Employment in manufacturing, and particularly in the ten and twenty most important industries, increased until 1999, but has declined since 2000. The share of the ten and twenty most important classes in total manufacturing employment has been quite steady, with the twenty most important industries averaging 23.66% of total manufacturing employment for 1994-2003.

The Mexican Economy is entirely dependent on the United States. US policies will either save or destroy Mexico – empirically provenCypher 10[James Martin Cypher, July 27, 2010; Mexico’s Economic Collapse; North American Congress on Latin America; https://nacla.org/news/mexico%E2%80%99s-economic-collapse; accessed 21 June 2013; AC]

The year 2009 was arguably the worst year of economic downturn in Mexico since the onset of the Great Depression of the 1930s. The downturn came with great forewarning, had anyone in the political and economic elite been willing to take a serious look. As the core of Mexico’s economy was collapsing at a frightening pace in late 2008, Secretary of the Treasury Agustín Carstens, Mexico’s top economic policy maker at the time, tried to laugh it off, unforgettably terming the downturn a “little cough.” Then in January 2009 came the illustrious World Economic Forum in Davos, Switzerland, where President Felipe Calderón assured one and all that Mexico had “one of the best teams of economic advisers in the world.” All this was occurring at the very moment when the most trite cliché about Mexico and the United States had never been more true: When Uncle Sam sneezes, Mexico gets pneumonia. In this case, however, it appeared that Tío Sam had a very serious disease and that Mexico was sliding toward its deathbed. In the end, U.S. GDP slumped in 2009 by 2.4% (on an annual average basis), while Mexico’s fell by an estimated 6.5% (in inflation-adjusted terms).1 When Calderón asserts, as he often does, that the crisis was caused by “external” forces and factors, he is dead wrong: As the great recession of 2009 showed so clearly, Mexico has become an appendage of the U.S. economy. This state of profound economic dependency was consciously constructed by the Mexican business elite, which—through the workings of the powerful Business Coordinating Council (CCE)—orchestrated the details of Mexico’s asymmetrical economic integration with U.S. capital through the NAFTA negotiations of the early 1990s. The old idea of the “external” and the “internal” makes no sense when we analyze the new relation of dependency that Mexico chose because of its faith in neoliberal salvation by way of a so-called free trade agreement. In reality the mumbo jumbo about increasing trade was really a smokescreen to open up Mexico as completely as possible to U.S. foreign investment.



Uniqueness Extensions Mexico’s Oil production is decliningHargreaves 12[Steve Hargreaves, August 17, 2012; Mexico’s Big Oil Problem; CNN Money; http://money.cnn.com/2012/08/17/news/economy/mexico-oil/index.html; accessed 21 March 2013; AC]

In 2008, the country's production peaked at 3.2 million barrels a day, according to the U.S. Energy Information Administration. Last year, it didn't even produce 3 million a day. The reason: aging oil fields and years of underinvestment. Industry experts say Mexico could revive production if it allowed more investment from international oil companies. But under current policy, EIA says Mexico will have to start importing oil by 2020. For the United States, the decline in Mexico's oil industry means it will likely be buying more oil from Canada and Saudi Arabia, the No. 1 and No. 2 sources of U.S. oil imports. Mexico is now third. And because oil is a global market, any drop in production one place could mean higher prices worldwide. The loss of Mexico's current exports of about 1 million barrels a day would be greater than the amount lost due to sanctions on Iran -- albeit over a longer time period. Many experts blame the structure of Mexico's oil industry for the decline.



Mexico Impacts Economic growth key to stop the cartelsBarnes ’11 (Joe, Bonner Means Baker Fellow at the Baker Institute, “Oil and U.S.-Mexico Bilateral Relations”, James A. Baker Institute for Public Policy at Rice University, April 2011)

In summary, the slow decline of Mexican oil production, in and of itself, is unlikely to have a dramatic impact on international petroleum markets or prompt any dramatic response from the United States. There is ,

however, one set of circumstances which this decline would capture Washington’s attention. That is the extent to which it contributes to significant instability in Mexico . There is already a short- to medium-term risk of substantial instability in Mexico. As noted, the country is enduring extremely high levels of drug-related violence. Even if the Mexican government eventually succeeds in its efforts to suppress this violence, the process is likely to be expensive, bloody, and corrosive in terms of human rights. A period of feeble economic growth, combined with a fiscal crisis associated with a drop in revenues from Pemex, could create a “perfect storm” south of the border. If this were to occur, Washington would have no choice but to respond. In the longer-term, the United States has a clear interest in robust economic growth and fiscal sustainability in Mexico.34 There is at least one major example of the U.S. coming to Mexico’s aid in an economic emergency. In 1994, the United States extended US$20 billion in loan guarantees to Mexico when the peso collapsed, in large part to make U.S. creditors whole.35 Not least, a healthy Mexican economy

would reduce the flow of illegal immigration to the United States. To the extent that prospects for such growth and sustainability are enhanced by reform of Pemex, the United States should be supportive. It might be best, in terms of U.S. economic and commercial interests, were

Pemex to be fully privatized, but even partial reforms would be welcome. Not all national oil companies are created equal: Pemex’s development into something like Norway’s Statol would mark an important improvement.36

Mexican economic decline causes a flood of refugees, resulting in terrorism.Brown ‘9 (Michael Brown, Undersecretary of Emergency Preparedness and Response in the Department of Homeland Security, “Border Control: Collapse of Mexico Is A Homeland Security & National Security Issue,” 1/14/2009, http://michaelbrowntoday.com/journal/2009/1/15/border-control-collapse-of-mexico-is-a-homeland-security-nat.html)

By failing to secure the borders and control immigration, we have opened ourselves up to a frightening scenario. The United States could face a flood of refugees from Mexico if it were to collapse, overwhelming state and local governments along the U.S.-Mexico border. During a time of economic duress, the costs would be overwhelming and would simply add to the already burgeoning costs at the federal level . Immigration and border control never was nor should it ever be about racism. Immigration and border control are national security and homeland security issues. Sleeper cells from numerous terrorist groups could, and probably already have, infiltrated the United States, just laying in wait to attack at an appropriately vulnerable time .


CORNISH TSDC DUTCH DISEASEDrug cartel instability leads to WMD terrorism on the U.S.Associated Press ‘8 (US Officials Fear Terrorist Links With Drug Lords, http://abcnews.go.com/US/wireStory?id=5986948)

There is real danger that Islamic extremist groups such as al-Qaida and Hezbollah could form alliances with wealthy and powerful Latin American drug lords to launch new terrorist attacks, U.S. officials said Wednesday. Extremist group operatives have already been identified in several Latin American countries, mostly involved in fundraising and finding logistical support. But Charles Allen, chief of intelligence analysis at the Homeland Security Department, said they could use well-established smuggling routes and drug profits to bring people or even weapons of mass destruction to the U.S. "The presence of these people in the region leaves open the possibility that they will attempt to attack the United States," said Allen, a veteran CIA analyst. "The threats in this hemisphere are real. We cannot ignore them."


CORNISH TSDC DUTCH DISEASEThat causes extinctionAyson 10 - Professor of Strategic Studies and Director of the Centre for Strategic Studies: New Zealand at the Victoria University of Wellington (Robert, July. “After a Terrorist Nuclear Attack: Envisaging Catalytic Effects.” Studies in Conflict & Terrorism, Vol. 33, Issue 7. InformaWorld.)

But these two nuclear worlds—a non-state actor nuclear attack and a catastrophic interstate nuclear exchange—are not necessarily separable. It is just possible that

some sort of terrorist attack, and especially an act of nuclear terrorism, could precipitate a chain of events leading to a massive exchange of nuclear weapons between two or more of the states that possess them. In this context, today’s and tomorrow’s terrorist groups might assume the place allotted during the early Cold War years to new state possessors of small nuclear arsenals who were

seen as raising the risks of a catalytic nuclear war between the superpowers started by third parties . These risks were considered in the late 1950s and early 1960s as concerns grew about nuclear proliferation, the so-called n+1 problem. It may require a considerable amount of imagination to depict an especially plausible situation where an act of nuclear terrorism could lead to such a massive inter-state nuclear war. For example, in the event of a terrorist nuclear attack on the United States, it might well be wondered just how Russia and/or China could plausibly be brought into the picture, not least because they seem unlikely to be fingered as the most obvious state sponsors or encouragers of terrorist groups. They would seem far too responsible to be involved in supporting that sort of terrorist behavior that could just as easily threaten them as well. Some possibilities, however remote, do suggest themselves. For example, how might the United States react if it was thought or discovered that the fissile material used in the act of nuclear terrorism had come from Russian stocks,40 and if for some reason Moscow denied any responsibility for nuclear laxity? The correct attribution of that nuclear material to a particular country might not be a case of science fiction given the observation by Michael May et al. that while the debris resulting from a nuclear explosion would be “spread over a wide area in tiny fragments, its radioactivity makes it detectable, identifiable and collectable, and a wealth of information can be obtained from its analysis: the efficiency of the explosion, the materials used and, most important … some indication of where the nuclear material came from.”41 Alternatively, if the act of nuclear terrorism came as a complete surprise, and American officials refused to believe that a terrorist group was fully responsible (or responsible at all) suspicion would shift immediately to state possessors. Ruling out Western ally countries like the United Kingdom and France, and probably Israel and India as well, authorities in Washington would be left with a

very short list consisting of North Korea, perhaps Iran if its program continues, and possibly Pakistan. But at what stage would Russia and China be definitely ruled out in this high stakes game of nuclear Cluedo? In particular, if the act of nuclear terrorism occurred against a backdrop of existing tension in Washington’s relations with Russia and/or China, and at a time when threats had already been traded

between these major powers, would officials and political leaders not be tempted to assume the worst ? Of course, the chances of this occurring would only seem to increase if the United States was already involved in some sort of limited armed conflict with Russia and/or China, or if they were confronting each other from a distance in a proxy war, as unlikely as these developments may seem at the present time. The reverse might well apply too: should a nuclear terrorist attack occur in Russia or China during a period of heightened tension or even limited conflict with the United States, could Moscow and Beijing resist

the pressures that might rise domestically to consider the United States as a possible perpetrator or encourager of the attack? Washington’s early response to a terrorist nuclear attack on its own soil might also raise the possibility of an unwanted (and nuclear aided)

confrontation with Russia and/or China. For example, in the noise and confusion during the immediate aftermath of the terrorist nuclear attack, the U.S. president might be expected to place the country’s armed forces, including its nuclear arsenal, on a higher stage of alert. In such a tense environment, when careful planning runs up against the friction of reality, it is just possible that Moscow and/or China might mistakenly read this as a sign of U.S. intentions to use force (and possibly nuclear force) against them. In that situation, the

temptations to preempt such actions might grow, although it must be admitted that any preemption would probably still meet with a devastating response. As part of its initial response to the act of nuclear terrorism (as discussed earlier) Washington might decide to order a significant conventional (or nuclear) retaliatory or disarming attack against the leadership of the terrorist group and/or states seen to support that group. Depending on the identity and especially the location of these targets, Russia and/or China might interpret such action as being far too close for their comfort, and potentially as an infringement on their spheres of influence and even on their sovereignty. One far-fetched but perhaps not impossible scenario might stem from a judgment in Washington that some of the main aiders and abetters of the terrorist action resided somewhere such as Chechnya, perhaps in connection with what Allison claims is the “Chechen insurgents’ … long-standing interest in all things nuclear.”42 American pressure on that part of the world would almost certainly raise alarms in Moscow that might require a degree of advanced consultation from Washington that the latter found itself unable or unwilling to provide. There is also the question of how other nuclear-armed states respond to the act of nuclear terrorism on another member of that special club. It could reasonably be expected that following a nuclear terrorist attack on the United States, bothRussia and China would extend immediate sympathy and support to Washington and would work alongside the United States in the Security Council. But there is just a chance, albeit a slim one, where the support of Russia and/or China is less automatic in some cases than in others. For example, what would happen if the United States wished to discuss its right to retaliate against groups based in their territory? If, for some reason, Washington found the responses of Russia and China deeply underwhelming, (neither “for us or against us”) might it also suspect that they secretly were in cahoots with the group, increasing (again perhaps ever so slightly) the chances of a major exchange. If the terrorist group had some connections to groups in Russia and China, or existed in areas of the world over which Russia and China held sway, and if Washington felt that Moscow or Beijing were placing a curiously modest level of pressure on them, what conclusions might it then draw about their culpability


CORNISH TSDC DUTCH DISEASEUS-Mexican border terrorism results in bioterror attacks.Timmerman ’10 (Ken Timmerman, Newsmax correspondent, “FBI Director Mueller: Al-Qaida Still Wants Nuclear Bomb,” 3/18/2010, http://newsmax.com/Newsfront/mueller-fbi-alqaida-nuclear/2010/03/18/id/353169)

FBI Director Robert Mueller warned Congress on Wednesday of ongoing al-Qaida efforts to acquire weapons of mass destruction to attack the United States . “Al-Qaida remains committed to its goal of conducting attacks inside the United States,” Mueller told a House appropriations subcommittee. “Further, al-Qaida’s continued efforts to access chemical, biological, radiological, or nuclear material pose a serious threat to the United States .” To accomplish its goals of new attacks on the American homeland, al-Qaida “seeks to infiltrate overseas operatives who have no known nexus to terrorism into the United States using both legal and illegal methods of entry,” Mueller said. In February, Sheikh Abdullah al-Nasifi, a known al-Qaida recruiter in Kuwait, boasted on al Jazeera television that Mexico’s border with the United States was the ideal infiltration point for terrorists seeking to attack America. “Four pounds of anthrax – in a suitcase this big – carried by a fighter through tunnels from Mexico into the U.S., are guaranteed to kill 330,000 Americans within a single hour if it is properly spread in population centers there,” al-Nasifi said.

Bioterrorism causes ExtinctionSteinbruner ’97 – Brookings senior fellow and chair in international security(John D. Steinbruner, Brookings senior fellow and chair in international security, vice chair of the committee on international security and arms control of the National Academy of Sciences, Winter 1997, Foreign Policy, “Biological weapons: a plague upon all houses,” n109 p85(12), infotrac)

Although human pathogens are often lumped with nuclear explosives and lethal chemicals as potential weapons of mass destruction, there is an obvious, fundamentally important difference: Pathogens are alive, weapons are not. Nuclear and chemical weapons do not reproduce themselves and do not independently engage in adaptive behavior; pathogens do both of these things. That deceptively simple observation has immense implications. The use of a manufactured weapon is a singular event. Most of the damage occurs immediately. The aftereffects, whatever they may be, decay rapidly over time and distance in a reasonably predictable manner. Even before a nuclear warhead is detonated, for instance, it is possible to estimate the extent of the subsequent damage and the likely level of radioactive fallout. Such predictability is an essential component for tactical military planning. The use of a pathogen, by contrast, is an extended process whose scope and timing cannot be precisely controlled. For most potential biological agents, the predominant drawback is that they would not act swiftly or decisively enough to be an effective weapon. But for a few pathogens - ones most likely to have a decisive effect and therefore the ones most likely to be contemplated for deliberately hostile use - the risk runs in the other direction. A lethal pathogen that could efficiently spread from one victim to another would be capable of initiating an intensifying cascade of disease that might ultimately threaten the entire world population . The 1918 influenza epidemic demonstrated the potential for a global contagion of this sort but not necessarily its outer limit.


CORNISH TSDC DUTCH DISEASEDrug cartels instability will spill over throughout Latin AmericaBonner ’10 (Robert C., senior principal of the Sentinel HS Group, former administrator of the U.S. Drug Enforcement Administration, “The New Cocaine Cowboys”, Foreign Affairs, July/August 2010, http://www.foreignaffairs.com/articles/66472/robert-c-bonner/the-new-cocaine-cowboys)

The recent headlines from Mexico are disturbing: U.S. consular official gunned down in broad daylight; Rancher murdered by Mexican

drug smuggler; Bomb tossed at U.S. consulate in Nuevo Laredo. This wave of violence is eerily reminiscent of the carnage that plagued Colombia 20 years ago, and it is getting Washington's attention. Mexico is in the throes of a battle against powerful drug cartels, the outcome of which will determine who controls the country's law enforcement, judicial, and political

institutions. It will decide whether the state will destroy the cartels and put an end to the culture of impunity they have created. Mexico could become a first-world country one day, but it will never achieve that status until it breaks the grip these criminal organizations have over all levels of government and strengthens its law enforcement and judicial institutions . It cannot do one without doing the other. Destroying the drug cartels is not an impossible task. Two decades ago, Colombia was faced with a similar -- and in many ways more daunting -- struggle. In the early 1990s, many Colombians, including police officers, judges, presidential candidates, and journalists, were assassinated by the most powerful and fearsome drug-trafficking organizations the world has ever seen: the Cali and Medellín cartels. Yet within a decade, the Colombian government defeated them, with Washington's

help. The United States played a vital role in supporting the Colombian government, and it should do the same for Mexico. The stakes in Mexico are high. If the cartels win, these criminal enterprises will continue to operate outside the state and the rule of law, undermining Mexico's democracy. The outcome matters for the United States as well -- if the drug cartels succeed, the United States will share a 2,000-mile border with a narcostate controlled by powerful transnational drug cartels that threaten the stability of Central and South America.

That causes nuclear war and extinctionManwaring 05 – adjunct professor of international politics at Dickinson(Max G., Retired U.S. Army colonel, Venezuela’s Hugo Chávez, Bolivarian Socialism, and Asymmetric Warfare, October 2005, pg. PUB628.pdf)

President Chávez also understands that the process leading to state failure is the most dangerous long-term security challenge facing the global community today. The argument in general is that failing and failed state status is the breeding ground for instability, criminality, insurgency, regional conflict, and terrorism. These conditions breed massive humanitarian disasters and major refugee flows. They can host “evil” networks of all kinds, whether they involve criminal business enterprise, narco-trafficking, or some form of ideological crusade such as Bolivarianismo. More specifically, these conditions spawn all kinds of things people in general do not like such as murder, kidnapping, corruption, intimidation, and destruction of infrastructure. These means of coercion and persuasion can spawn further human rights violations, torture, poverty, starvation, disease, the recruitment and use of child soldiers, trafficking in women and body parts, trafficking and proliferation of conventional weapons systems and WMD, genocide, ethnic cleansing, warlordism, and criminal anarchy. At the same time, these actions are usually unconfined and spill over into regional syndromes of poverty, destabilization, and conflict.62 Peru’s Sendero Luminoso calls violent and destructive activities that facilitate the processes of state failure “armed

propaganda.” Drug cartels operating throughout the Andean Ridge of South America and elsewhere call these activities “business incentives.” Chávez considers these actions to be steps that must be taken to bring about the political conditions necessary to

establish Latin American socialism for the 21st century.63 Thus, in addition to helping to provide wider latitude to further their tactical and operational objectives, state and nonstate actors’ strategic efforts are aimed at progressively lessening a targeted regime’s credibility and capability in terms of its ability and willingness to govern and develop its national territory and society. Chávez’s intent is to focus his primary attack politically and psychologically on selected Latin American governments’ ability and right to govern. In that context, he understands that popular perceptions of corruption, disenfranchisement, poverty, and lack of upward mobility limit the right and the ability of a given regime to conduct the business of the state. Until a given populace generally perceives that its government is dealing with these and other basic issues of political, economic, and social injustice fairly and effectively, instability and the threat of subverting or destroying such a government are real.64 But failing and failed states simply do not go away. Virtually anyone can take advantage of such an unstable situation. The tendency is that the best motivated and best armed organization on the scene will control that instability. As a consequence, failing and failed states become dysfunctional states, rogue states, criminal states, narco-states, or new people’s democracies. In connection with the creation of new people’s democracies, one can rest assured that Chávez and his Bolivarian populist allies will be available to provide money, arms, and leadership at any given opportunity. And, of course, the longer dysfunctional, rogue, criminal, and narco-states and people’s democracies persist, the more they and their associated problems endanger global security, peace, and prosperity.65



Cuba



1NC Uniqueness The Cuban economy is on a razor’s edge – they are becoming reliant on a non-tradable good, the beginnings of Dutch diseaseOrro 09[Robert Orro; 2009; Cuba in Transition – Petrolism in Cuba and Implications of US investment in the Cuban Oil Sector; ASCE; http://www.ascecuba.org/publications/proceedings/volume19/pdfs/orro.pdf; accessed 21 March 2013; AC]

Economic support from Venezuela has emboldened the Cuban government to fight back any seeds of capitalism on the island. The closing of small joint ventures, the artificial overvaluation of the Cuban Convertible Peso, the reduction of self-employment permits, and more militarization of the economy define the nature of this recent episode of petrolism in Cuba. The extreme reliance upon medical services has introduced a new distortion in the Cuban economy. Even some Cuban economists within the island have expressed their concern on this issue. In spite of the merits of Cuban physicians, only a political ally as Venezuela can pay so lavishly for their services. Cuban economists are fully aware of the big risks this policy entails. They know the economy is walking on a razor’s edge, given the fragile conditions of the external sector. During the Soviet era, Cuba relied on sugar, a tradable good, but now the island depends of a kind of service that is a far cry from being tradable in the world market. Moreover, the Cuban economy is now afflicted by a Dutch disease, since Venezuela’s generosity is nothing more than the result of an abundance of petrodollars.



Uniqueness Extensions Cuba’s economy is weak now, but it hasn’t collapsedFeinberg 12[Richard E. Feinberg; December 2012; The New Cuban Economy, What roles for Foreign Investment?; Latin American Initiative, Brookings Institute; http://www.brookings.edu/~/media/research/files/papers/2012/12/cuba%20economy%20feinberg/cuba%20economy%20feinberg%209.pdf; accessed 21 March 2013; AC]

By several key indicators, the Cuban economy is seriously underperforming: The Cuban economy has increasingly become a low-productivity service economy. Industrial production is stalled at less than 50 percent of its pre-1989 levels. Agricultural output, despite some gains, remains insufficient to feed the population and hefty imports of food staples bite off a big share of foreign exchange earnings. By 2010, agricultural output had recovered from mid-decade droughts and hurricanes but only to regain 2000 levels Merchandise exports, reported at $4.6 billion in 2010, were less than 10 percent of national output, reflecting the low international competitiveness of much of Cuba’s industry and agriculture. The weak export performance opens a gaping merchandise trade deficit that Cuba struggles to finance, often by accumulating payments arrears that irritate its international partners and undermine its credit ratings. Cuba has managed to narrow its bulging foreign exchange shortfall thanks only to the largesse of Venezuela, which barters its oil for Cuban medical personnel on terms highly favorable to Cuba . Especially debilitating, national savings and investment rates are very low at around 10 percent of GDP, half of the Latin American average, and even further below the strong Asian investment rates. This results in the ongoing de-capitalization of some sectors and relegating Cuba to a low-growth trap. From 1996 to 2008, the ratio of gross capital formation to GDP averaged about 12 .5 percent, startlingly low by international standards . In a survey of 157 countries, Cuba’s investment rate was consistently below the lowest 10th percentile during the period from 1990 to 2008



Impact Extensions Cuban instability results in Latin American instability, terrorism, democratic backsliding, and distracts the US from critical hotspots including Africa, the Caucus, and North Korea Gorrell 5 (Tim, Lieutenant Colonel, “CUBA: THE NEXT UNANTICIPATED ANTICIPATED STRATEGIC CRISIS?” 3/18, http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA433074)

Regardless of the succession, under the current U.S. policy, Cuba’s problems of a post Castro transformation only worsen. In addition to Cubans on the island, there will be those in exile who will return claiming authority. And there are remnants of the dissident community within Cuba who will attempt to exercise similar authority. A power vacuum or absence of order will create the conditions for instability and civil war . Whether Raul or another successor from within the current government can hold power is debatable. However, that individual will nonetheless extend the current policies for an indefinite period, which will only compound the Cuban situation. When Cuba finally collapses anarchy is a strong possibility if the U.S. maintains the “wait and see” approach. The U.S. then must deal with an unstable country 90 miles off its coast. In the midst of this chaos, thousands will flee the island. During the Mariel boatlift in 1980 125,000

fled the island.26 Many were criminals; this time the number could be several hundred thousand flee ing to the U.S., creating a refugee crisis. ¶ Equally important, by adhering to a negative containment policy, the U.S. may be creating its next series of transnational criminal problems. Cuba is along the axis of the drug-trafficking flow into the U.S. from Columbia. The Castro government as a matter of policy does

not support the drug trade. In fact, Cuba’s actions have shown that its stance on drugs is more than hollow rhetoric as indicated by its increasing seizure of drugs – 7.5 tons in 1995, 8.8 tons in 1999, and 13 tons in 2000.27 While there may be individuals within the

government and outside who engage in drug trafficking and a percentage of drugs entering the U.S. may pass through Cuba, the Cuban government is not the path of least resistance for the flow of drugs. If there were no Cuban restraints, the flow of drugs to the U.S. could be greatly facilitated by a Cuba base of operation and accelerate considerably. ¶ In the midst of an unstable Cuba, the opportunity for radical fundamentalist groups to operate in the region increases. If these groups can export terrorist activity from Cuba to the U.S. or throughout the hemisphere then the war against this extremism gets more complicated . Such activity could increase direct attacks and disrupt the economies, threatening the stability of the fragile democracies that are budding throughout the region. In light of a failed state in the region, the U.S. may be forced to deploy military forces to Cuba, creating the conditions for another insurgency . The ramifications of this action could very well fuel greater anti-American sentiment throughout the Americas. A proactive policy now can mitigate these potential future problems.¶ U.S. domestic political support is also turning against the current negative policy. The Cuban American population in the U.S. totals 1,241,685 or 3.5% of the population.28 Most of these exiles reside in Florida; their influence has been a factor in determining the margin of victory in the past two presidential elections. But this election strategy may be flawed, because recent polls of Cuban Americans reflect a decline for President Bush based on his policy crackdown. There is a clear softening in the Cuban-American community with regard to sanctions. Younger Cuban Americans do not necessarily subscribe to the hard-line approach. These changes signal an opportunity for a new approach to U.S.-Cuban relations. (Table 1)¶ The time has come to look realistically at the Cuban issue. Castro will rule until he dies. The only

issue is what happens then? The U.S. can little afford to be distracted by a failed state 90 miles off its coast. The administration, given the present state of world affairs, does not have the luxury or the resources to pursue the traditional American model of crisis management. The President and other government and military leaders have warned that the GWOT will be long and protracted. These warnings were sounded when the administration did not anticipate operations in Iraq consuming so many military, diplomatic and economic resources.

There is justifiable concern that Africa and the Caucasus region are potential hot spots for terrorist activity , so these areas should be

secure. North Korea will continue to be an unpredictable crisis in waiting. We also cannot ignore China . What if China resorts to aggression to resolve the Taiwan situation? Will the U.S. go to war over Taiwan? Additionally, Iran could conceivably be the next target for U.S. pre-emptive action. These are known and potential situations that could easily require all or many of the elements of national power to resolve. In view of such global

issues, can the U.S. afford to sustain the status quo and simply let the Cuban situation play out? The U.S. is at a crossroads: should the policies of the past 40 years remain in effect with vigor? Or should the U.S. pursue a new approach to Cuba in an effort to facilitate a manageable transition to post-Castro Cuba?


CORNISH TSDC DUTCH DISEASECaribbean instability causes bioterrorism and LNG explosionsBryan 1 (Anthony T., Director of the Caribbean Program – North/South Center, and Stephen E. Flynn, Senior Fellow – Council on Foreign Relations, “Terrorism, Porous Borders, and Homeland Security: The Case for U.S.-Caribbean Cooperation”, 10-21, http://www.cfr.org/publication/4844/terrorism_porous_borders_and _homeland_ security.html)

Terrorist acts can take place anywhere. The Caribbean is no exception. Already the linkages between drug trafficking and terrorism are clear in

countries like Colombia and Peru, and such connections have similar potential in the Caribbean. The security of major industrial complexes in some Caribbean countries is vital. Petroleum refineries and major industrial estates in Trinidad, which host more than 100 companies that produce the majority of the world’s methanol, ammonium sulphate, and 40 percent of U.S. imports of liquefied natural gas (LNG), are vulnerable targets. Unfortunately, as experience has shown in Africa, the Middle East, and Latin America, terrorists are likely to strike at U.S. and European interests in Caribbean countries. Security issues become even more critical when one considers the possible use of Caribbean countries by terrorists as bases from which to attack the United States. An airliner hijacked after departure from an airport in the northern Caribbean or the Bahamas can be flying over South Florida in less than an hour. Terrorists can sabotage or seize control of a cruise ship after the vessel leaves a Caribbean port. Moreover, terrorists with false passports and visas issued in the Caribbean may be able to move easily through passport controls in Canada or the United States. (To help counter this possibility, some countries

have suspended "economic citizenship" programs to ensure that known terrorists have not been inadvertently granted such citizenship.) Again, Caribbean countries are as vulnerable as anywhere else to the clandestine manufacture and deployment of biological weapons within national borders.

LNG tanker explosions cause catastrophic damage – outweighs nuclear warLovin 1 (Amory B., Chief Scientist of the Rocky Mountain Institute, and L. Hunter Lovin, President – National Capitalism and Co-Founder – Rocky Mountain Institute, “Brittle Power: Energy Strategy for National Security”, http://verdilivorno.it/doc_gnl/198204_Brittle_Power_intro_GNL_note.pdf)

About nine percent of such a tankerload of LNG will probably, if spilled onto water, boil to gas in about five minutes. 3 (It does not matter how cold the water is; it will be at least two hundred twenty-eight Fahrenheit degrees hot- ter than the LNG, which it will therefore cause to boil violently.) The resulting gas, however, will be so cold that it will still be denser than air. It will therefore flow in a cloud or plume along the surface until it reaches an ignition source. Such a plume might extend at least three miles downwind from a large tanker spill within ten to twenty minutes. 4 It might ultimately reach much farther—perhaps six to twelve miles. 5 If not ignited, the gas is asphyxiating. If ignited, it will burn to completion with a turbulent diffusion flame reminiscent of the 1937 Hindenberg disaster but about a hundred times as big . Such a fireball would burn everything within it, and by its radiant heat

would cause third-degree burns and start fires a mile or two away. 6 An LNG fireball can blow through a city, creating “a very large number of ignitions and explosions across a wide area. No present or foreseeable equipment can put out a very large [LNG]... fire.” 7 The energy content of a single standard LNG tanker (one hundred twenty-five thousand cubic meters) is equivalent to seven-tenths of a megaton of TNT, or about fifty-five Hiroshima bombs.

Bioterrorism results in extinctionSandberg et al 8 – Research Fellow at the Future of Humanity Institute at Oxford University. PhD in computation neuroscience, Stockholm—AND—Jason G. Matheny—PhD candidate in Health Policy and Management at Johns Hopkins. special consultant to the Center for Biosecurity at the University of Pittsburgh—AND—Milan M. Ćirković—senior research associate at the Astronomical Observatory of Belgrade. Assistant professor of physics at the University of Novi Sad. (Anders, How can we reduce the risk of human extinction?, 9 September 2008, http://www.thebulletin.org/web-edition/features/how-can-we-reduce-the-risk-of-human-extinction)

The risks from anthropogenic hazards appear at present larger than those from natural ones. Although great progress has been made in reducing the number of nuclear weapons in the world, humanity is still threatened by the possibility of a global thermonuclear war and a resulting nuclear winter. We may face even greater risks from emerging technologies. Advances in synthetic biology might make it possible to engineer pathogens capable of extinction-level pandemics. The knowledge, equipment, and materials needed to engineer pathogens are more accessible than those needed to build nuclear weapons. And unlike other weapons, pathogens are self-replicating, allowing a small arsenal to become exponentially destructive. Pathogens have been implicated in the extinctions of many wild species. Although most pandemics "fade out" by reducing the density of susceptible populations, pathogens with wide host ranges in multiple species can reach even isolated individuals. The intentional or unintentional

release of engineered pathogens with high transmissibility, latency, and lethality might be capable of causing human extinction . While

such an event seems unlikely today, the likelihood may increase as biotechnologies continue to improve at a rate rivaling Moore's Law.



Affirmative



No Impacts - Economy There will be no economic crisis in Latin AmericaFrenkel and Rapetti 2011[Roberto Frenkel, Principal Research Associate at CEDES and Professor at University of Buenos Aires and Martin Rapetti, Associate Researcher at CEDES and researcher at IIEP, University of Buenos Aires; originally published in 2011; External Fragility or Deindustrialization: What is the main threat to Latin American Countries in the 2010s; http://wejdiscussion.worldeconomicsassociation.org/wp-content/uploads/Frenkel-Rapetti-WEJ-submission-Dec-2011-Final-1.pdf; accessed 21 June 2013; AC]

There is another important element making the threat of crises even less likely. Because of the reduction of foreign debts during the 2000s, the weight of interest payments in the factor income account of the balance of payments has reduced significantly. In contrast to the previous 30 years of financial globalization, current account deficits in most Latin American countries are now largely influenced by dividend payments of foreign direct investment (FDI). This represents an important change. Interest payments have to be paid in foreign currency —typically US dollars— and since they are contractual obligations, they constitute a source of foreign currency outflow that is delinked from the business cycle. On the contrary, FDI dividends are largely obtained in domestic currency —making their value in foreign currency depend on the exchange rate— and are very correlated to the business cycle. This implies that in the case of a capital inflow deceleration or reversal, the magnitude of FDI dividend payments tends to contract due to both the depreciation of the domestic currency and the deceleration or contraction of domestic economic activity. Furthermore, a significant portion of FDI dividends are normally re-invested in the recipient economy —being registered in the balance of payments as a new inflow of capital— without even going through the foreign exchange market. This implies that part of factor income account deficits has a relatively automatic source of funding. Finally, in cases of severe scarcity of foreign exchange, authorities can impose transitory restrictions on the remittance of FDI dividends to alleviate the excess demand for foreign exchange. For these reasons, the external fragility associated with actual current account deficits in most Latin American countries is substantially lower than that in the crisis experiences in the past.


CORNISH TSDC DUTCH DISEASEDutch Disease does not harm the economy – no sufficient evidenceMagud and Sosa 10[Nicolas Magud and Sebastian Sosa; December 2010; IMF; when and why worry about Real Exchange Rate Appreciation; http://iepecdg.com.br/uploads/artigos/1012wp10271.pdf; accessed 21 June 2013; AC]

Concerns about sustained adverse growth effects of real appreciation have been explored for many years , going back at least to the “Dutch disease” literature of the early 1980s. The debate continues today, including with a related recent literature that proposes further links from the real exchange rate to growth—but is still far from resolved. While the logic of some of the theoretical arguments for this link is clearly established, these arguments lean heavily on special assumptions about the nature of economic growth. And the evidence seems insufficient: to date, while there are a few exceptions, empirical studies of Dutch disease have focused mainly on how shocks that cause real appreciation may affect the level of traded goods production—rather than on whether this sector has a special role in economic growth, or on whether it is permanently damaged by temporary episodes of real appreciation . Moreover, while the literature on real exchange rate and growth suggests that an overvalued exchange rate hinders growth, DD is in principle an equilibrium phenomenon reflecting changes in fundamentals, and not necessarily implying an overvaluation. Our survey shows that on the one hand, DD does exist—as the real exchange rate appreciates, there is factor reallocation, and production switches away from manufacturing. On the other hand, exchange rate volatility hampers economic growth. Misalignment of the real exchange rate from its fundamental value also lowers growth. Overvaluations (however defined) are always negative for economic growth, while the evidence on undervaluation is inconclusive. Should policymakers worry about real exchange rate appreciation? Should they act to prevent an appreciation and potential DD symptoms? As discussed in this paper, the evidence on the impact of DD effects on growth is mainly inconclusive. Moreover, it is worth noting that shocks that cause DD—large capital inflows, export price booms, etc.—are usually associated with periods of economic bonanza. DD effects are an unintended consequence of foreign exchange abundance, but these negative effects would not necessarily offset the beneficial effects of the inflow. The challenge for policymakers is to adequately manage the boom and the risks they come with. Therefore, the optimal policy response would consist of taking advantage of the boom, while at the same time dealing with the undesired consequences that it may cause. When thinking about “what to do” about DD, policymakers should beware—in responding to the effects of the disease—of killing the goose that laid the golden egg.


CORNISH TSDC DUTCH DISEASEEconomic downturn is good for health – empirically proven in CubaSchiffman 13[Richard Schiffman, April 18, 2013; How Cuba’s health improved when their economy collapsed; The Atlantic; http://www.theatlantic.com/health/archive/2013/04/how-cubans-health-improved-when-their-economy-collapsed/275080/; accessed 21 June 2013; AC]

The economic meltdown should logically have been a public health disaster. But a new study conducted jointly by university researchers in Spain, Cuba, and the U.S. and published in the latest issue of BMJ says that the health of Cubans actually improved dramatically during the years of austerity. These surprising findings are based on nationwide statistics from the Cuban Ministry of Public Health, together with surveys conducted with about 6,000 participants in the city of Cienfuegos, on the southern coast of Cuba, between 1991 and 2011. The data showed that, during the period of the economic crisis, deaths from cardiovascular disease and adult-onset type 2 diabetes fell by a third and a half, respectively. Strokes declined more modestly, and overall mortality rates went down. This "abrupt downward trend" in illness does not appear to be because of Cuba's barefoot doctors and vaunted public health system, which is rated amongst the best in Latin America. The researchers say that it has more to do with simple weight loss. Cubans, who were walking and bicycling more after their public transportation system collapsed, and eating less (energy intake plunged from about 3,000 calories per day to anywhere between 1,400 and 2,400, and protein consumption dropped by 40 percent). They lost an average of 12 pounds. It wasn't only the amount of food that Cubans ate that changed, but also what they ate. They became virtual vegans overnight, as meat and dairy products all but vanished from the marketplace. People were forced to depend on what they could grow, catch, and pick for themselves-- including lots of high-fiber fresh produce, and fruits, added to the increasingly hard-to-come-by staples of beans, corn, and rice. Moreover, with petroleum and petroleum-based agro-chemicals unavailable, Cuba "went green," becoming the first nation to successfully experiment on a large scale with low-input sustainable agriculture techniques. Farmers returned to the machetes and oxen-drawn plows of their ancestors, and hundreds of urban community gardens (the latest rage in America's cities) flourished. "If we hadn't gone organic, we'd have starved!" said Miguel Salcines Lopez in the journal Southern Spaces. Salcines is an agricultural scientist who founded "Vívero Alamar," one of Cuba's best known organopónicos, or urban farms, in vacant lots in Havana. During the special period, expensive habits like smoking and most likely also alcohol consumption were reduced, albeit briefly. This enforced fitness regime lasted only until the Cuban economy began to recover in the second half of the 1990s. At that point, physical activity levels began to fall off, and calorie intake surged. Eventually people in Cuba were eating even more than they had before the crash. The researchers report that "by 2011, the Cuban population has regained enough weight to almost triple the obesity rates of 1995."



Venezuela Venezuela is already a victim of Dutch DiseaseTulchin 13[Dr. Joseph Tulchin, Geopolitical Information Service Expert; The Dangers of ‘Dutch Disease’ in Latin America; http://www.geopolitical-info.com/en/economics/the-dangers-of-dutch-disease-in-latin-america; accessed 21 June 2013; AC]

Venezuela is almost totally reliant on just one commodity – oil. Revenues from the sale of oil by its national petroleum company, PDVSA, account for 80 per cent of the nation’s gross domestic product (GDP). In the last decade, the average annual windfall has been 30 per cent of GDP. The wealth accumulated over a decade amounted to 320 per cent of GDP. Oil price legacy The price of oil is arguably the critical variable which determines the stability of the Venezuelan state, its economy and social cohesion. As the price of oil went up in 2010-2011, the government took an increasing portion of the windfall to use for social policies that amounted to buying votes for Mr Chavez. As the price of oil leveled off in 2012-2013 to around US$90 per barrel, the windfall has shrunk and the newly-elected government of President Maduro has had less to spend. Even since his narrow election victory on April 14, 2013, crime has increased and there have been numerous social protests. The government is also having to renegotiate the generous deals on oil it had offered friendly governments, such as Nicaragua and Cuba. But Mr Maduro has other problems. Hugo Chavez drained off the income of PDVSA and did not invest in the industry. Deferred maintenance has shut down the country’s only refinery. Oil production has fallen and the government has been forced to import refined oil. Government handicap There has also been little domestic investment in consumer goods which has led to increasing imports and rising inflation. As the windfall decreases, the Venezuelan government will have less to spend on vote-catching social policies, opposition is likely to become bolder, and the competition within the governing party, the PSUV (The United Socialist Party of Venezuela), is expected to tear at Mr Maduro’s ability to govern. In Venezuela’s case, the state received the windfall directly, but other countries in Latin America are also vulnerable, even when the commodity is primarily in the hands of private investors.

Venezuela is an extreme example of Dutch DiseaseGrisanti 11[Alejandro Grisanti; spring 2011; Americas Quarterly; Venezuela’s oil Tale; http://www.americasquarterly.org/node/2436; accessed 22 June 2013; AC]

President Chávez’ economic policies over the past 12 years have amplified the natural resource curse: low growth, high volatility, Dutch Disease, accusations of fiscal greed and corruption, inequality and poverty, and weak institutions. Since 1998, and despite the oil windfall, Venezuela has grown on average 2.3 percent per year. In contrast, the seven largest Latin American countries grew on average by 3.2 percent. Within this period, Venezuela experienced five years of negative growth with an average contraction of 5.6 percent and seven years of positive growth with an average expansion of 8.4 percent. Venezuela is an extreme example of Dutch Disease: in nominal terms, oil exports have grown 410 percent since 1998, while imports have grown 130 percent. But in real terms, exports have fallen 40 percent, with imports more than doubling. At the same time, Venezuela’s institutional development lags behind its Latin American peers. Using the World Bank Governance Indicators for 2009, Venezuela’s percentile rank for control of corruption is 8 percent; the regional average is 47 percent. Similar selective comparisons are as follows: rule of law (3 percent Venezuela, vs. 43 percent regional); quality of regulation (4 percent vs. 45 percent); government effectiveness (19 percent vs. 50 percent); political stability (11 percent vs. 38 percent); and accountability (26 percent vs. 49 percent).



Mexico There is already Dutch Disease in MexicoKilment 11[Alexander Kilment; February 7, 2011; Latin America Feels first chills of Dutch disease; FT Tilt; http://tilt.ft.com/#!posts/2011-02/12286/latin-america-feels-first-chills-of-dutch-disease-report-says; accessed 22 June 2013; AC]

Dutch disease in Latin America? Analysts Guillermo Mondino and Marcelo Salomon at Barclays Capital think so. Rising commodities prices and strengthening currencies are beginning to hollow out manufacturing in some of the region's largest economies, they wrote in a report. The bank sees two other early symptoms of "Dutch disease" in Brazil, Chile, Colombia and Mexico: a) consumption is galloping ahead of output growth and b) labor resources are being reallocated towards services and away from industry. All of this points to precisely the spectre of deindustrialization that has haunted Latin American policymakers in recent months, prompting the region's central banks to put the brakes on currency appreciation (while also in many cases hamstringing these efforts by simultaneously hiking interest rates to curb inflation.)

Manufacturing is not good for the quality of life – especially in Mexico. Shamout 12[Omar Shamout; October 10, 2012; Mexican Economic Growth Doesn’t help workers; http://www.neontommy.com/news/2012/10/mexican-economic-growth-doesn-t-help-workers; accessed 22 June 2013; AC]

While Mexican government officials continue to enjoy the low unemployment numbers in their country, experts in both the U.S. and Mexico say the manufacturing boom has done little to boost the quality of life for the country’s unskilled laborers. Rodolfo Cruz-Piñeiro, a professor and researcher in population studies at El Colegio de la Frontera Norte in Tijuana, says that while new manufacturing plants are sprouting up frequently in the northern border region, that trend hasn’t translated to higher wages. “The quality of life in general is not so good,” Cruz-Piñeiro said. “The improvement for the workers is very marginal when compared to the macro-economic indicators. In terms of wages per hour … it hasn’t improved.” That wage stagnation has helped the country attract business away from China. Between 2009 and 2011, Chinese labor costs rose by about 30 percent, while in Mexico the hourly wage dropped by a small margin over the past year. Since 2005, wages have only risen by a yearly average of 0.4 percent when adjusted for inflation. While the current rate of around $2.50 per hour is roughly 25 cents more per hour than in China, it likely won’t stay that way for long. Erik Lee, the associate director of the North American Center for Transborder Studies at Arizona State University, says Chinese wage inflation, combined with rising oil and shipping costs, has prompted many multinational corporations to choose Mexico.



Econ Defense Economic interdependence prevents warsZenko, Fellow in the Center for Preventive Action at the Council on Foreign Relations, and Cohen, Fellow at the Century Foundation, 12[Micah and Michael, “Clear and Present Safety: The United States is More Secure Than Washington Thinks,” Foreign Affairs, Vol. 91, Iss. 2, Mar/Apr 2012]

Economic bonds among states are also accelerating, even in the face of a sustained global economic downturn. Today, 153 countries belong to the World Trade Organization and are bound by its dispute-resolution mechanisms. Thanks to lowered trade barriers, exports now make up more than 30 percent of gross world product, a proportion that has tripled in the

past 40 years. The United States has seen its exports to the world's fastest-growing economies increase by approximately 500 percent over the past decade. Currency flows have exploded as well, with $4 trillion moving around the world in foreign exchange markets every day. Remittances, an essential instrument for reducing poverty in developing countries, have more than tripled in the past decade, to more than $440 billion each year. Partly as a result of these trends, poverty is on the decline: in 1981, half the people living in the developing world survived on less than $1.25 a day; today, that figure is about one-sixth. Like democratization, economic development occasionally brings with it significant costs. In particular, economic

liberalization can strain the social safety net that supports a society's most vulnerable populations and can exacerbate inequalities. Still, from the perspective of the United States, increasing economic interdependence is a net positive because trade and foreign direct investment between countries generally correlate with long-term economic growth and a reduced likelihood of war.

US and global economy is resilientBehravesh, chief global economist and executive vice president for Global Insight, 6 (Nariman, most accurate economist tracked by USA Today and, Newsweek, “The Great Shock Absorber; Good macroeconomic policies and improved microeconomic flexibility have strengthened the global economy's 'immune system.'” 10-15-2006, www.newsweek.com/id/47483)

The U.S. and global economies were able to withstand three body blows in 2005--one of the worst tsunamis on record (which struck at the very end of 2004), one of the worst hurricanes on record and the highest energy prices after Hurricane Katrina--without missing a beat. This resilience was especially remarkable in the case of the United States, which since 2000 has been able to shrug off the biggest stock-market drop since the 1930s, a major terrorist attack, corporate scandals and war. Does this mean that recessions are a relic of the past? No, but

recent events do suggest that the global economy's "immune system" is now strong enough to absorb shocks that 25 years ago would probably have triggered a downturn. In fact, over the past two decades, recessions have not disappeared, but have

become considerably milder in many parts of the world. What explains this enhanced recession resistance? The answer: a combination of good macroeconomic policies and improved microeconomic flexibility . Since the mid-1980s, central banks worldwide have had great success in taming inflation. This has meant that long-term interest rates are at levels not seen in more than 40 years. A low-inflation and low-interest-rate environment is especially conducive to sustained, robust growth. Moreover, central bankers have avoided some of the policy mistakes of the earlier oil shocks (in the mid-1970s and early 1980s), during which they typically did too much too late, and exacerbated the ensuing recessions. Even more important,

in recent years the Fed has been particularly adept at crisis management, aggressively cutting interest rates in response to stock-market crashes, terrorist attacks and weakness in the economy . The benign inflationary picture has also benefited from increasing competitive pressures, both worldwide (thanks to globalization and the rise of Asia as a manufacturing juggernaut) and domestically (thanks to technology and deregulation). Since the late 1970s, the United States, the United Kingdom and a handful of other countries have been especially aggressive in deregulating their financial and industrial sectors. This has greatly increased the flexibility of their economies and reduced their vulnerability to inflationary shocks. Looking ahead, what all this means is that a global or U.S. recession will likely be avoided in 2006, and probably in 2007 as well. Whether the current expansion will be able to break the record set in the 1990s for longevity will depend on the ability of central banks to keep the inflation dragon at bay and to

avoid policy mistakes. The prospects look good. Inflation is likely to remain a low-level threat for some time, and Ben Bernanke, the incoming chairman of the

Federal Reserve Board, spent much of his academic career studying the past mistakes of the Fed and has vowed not to repeat them. At the same time, no single shock will likely be big enough to derail the expansion . What if oil prices rise to $80 or $90 a barrel? Most estimates suggest that growth would be cut by about 1 percent--not good, but no recession. What if U.S. house prices fall by 5 percent in 2006 (an extreme assumption, given that house prices haven't fallen nationally in any given year during the past four decades)? Economic growth would

slow by about 0.5 percent to 1 percent. What about another terrorist attack? Here the scenarios can be pretty scary, but an attack on the order of 9/11 or the Madrid or London bombings would probably have an even smaller impact on overall GDP growth.

Economic decline doesn’t cause warFerguson, Professor of History, 6(Niall, Professor of History – Harvard University, Foreign Affairs, 85(5), September / October, Lexis)



Nor can economic crises explain the bloodshed. What may be the most familiar causal chain in modern historiography links the Great Depression to the rise of fascism and the outbreak of World War II. But that simple story leaves too much out. Nazi Germany started the war in Europe only after its economy had recovered. Not all the countries affected by the Great Depression were taken over by fascist regimes, nor did all such regimes start wars of aggression. In fact, no general relationship between economics and conflict is discernible for the century as a whole. Some wars came after periods of growth, others were the causes rather than the consequences of economic catastrophe, and some severe economic crises were not followed by wars.



Terrorism Defense No existential threat from terrorism – emotional fears exacerbate threatMueller and Stewart 10 [John Mueller is a professor of political science at Ohio State University. Mark G. Stewart is a professor of civil engineering and director of the Centre for Infrastructure Performance and Reliability at the University of Newcastle in Australia. They wrote the book Terror, Security, and Money: Balancing the Risks, and Costs of Homeland Security. “Hardly Existential: Thinking Rationally About Terrorism” http://www.foreignaffairs.com/articles/66186/john-mueller-and-mark-g-stewart/hardly-existential?page=3#, 4-2-2010]

Over the last several decades, academics, policymakers, and regulators worldwide have developed risk-assessment techniques to evaluate hazards to human life, such as pesticide use, pollution, and nuclear power plants. In the process, they have reached a substantial consensus about which risks are acceptable and

which are unacceptable. When these techniques are applied to terrorism, it becomes clear that terrorism is far from an existential threat. Instead, it presents an acceptable risk, one so low that spending to further reduce its likelihood or consequences is scarcely justified. An unacceptable risk is often called de manifestis, meaning of obvious or evident concern -- a risk so high that no "reasonable person" would deem it acceptable. A widely cited de manifestis risk assessment comes from a 1980 United States Supreme Court decision regarding workers' risk from inhaling gasoline vapors. It concluded that an annual fatality risk -- the chance per year that a worker would die of inhalation -- of 1 in 40,000 is unacceptable. This is in line with standard practice in the regulatory world. Typically, risks considered unacceptable are those found likely to kill more than 1 in 10,000 or 1 in 100,000 per year. At the other end of the spectrum are risks that are considered acceptable, and there is a fair degree of agreement about that area of risk as well. For example, after extensive research and public consultation, the United States Nuclear Regulatory Commission decided in 1986 that the fatality risk posed by accidents at nuclear power plants should not exceed 1 in 2 million per year and 1 in 500,000 per year from nuclear power plant operations. The governments of Australia, Japan, and the United Kingdom have come up with similar numbers for assessing hazards. So did a review of 132 U.S. federal government regulatory decisions dealing with public exposure to environmental carcinogens, which found that regulatory action always occurred if the individual annual fatality risk exceeded 1 in 700,000. Impressively, the study found a great deal of consistency among a wide range of federal agencies about what is considered an acceptable level of risk. Vastly more lives could have been saved if counterterrorism funds had instead been spent on combating hazards that present unacceptable risks. There is a general agreement about risk, then, in the established regulatory practices of several developed countries: risks are deemed unacceptable if the annual fatality risk is higher than 1 in 10,000 or perhaps higher than 1 in 100,000 and acceptable if the figure is lower than 1 in 1 million or 1 in 2 million. Between these two ranges is an area in which risk might be considered "tolerable." These established considerations are designed to provide a viable, if somewhat rough, guideline for public policy. In all cases, measures and regulations intended to reduce risk must satisfy essential cost-benefit considerations. Clearly, hazards that fall in the unacceptable range should command the most attention and resources. Those in the tolerable range may also warrant consideration -- but since they are less urgent, they should be combated with relatively inexpensive measures. Those hazards in the acceptable range are of little, or even negligible, concern, so precautions to reduce their risks even further would scarcely be worth pursuing unless they are remarkably inexpensive. If the U.S. Department of Homeland Security wants to apply a risk-based approach to decision-making, as it frequently claims it does, these risk-acceptance criteria seem to be most appropriate. To this end, the table below lists the annual fatality risks for a wide variety of these dangers, including

terrorism. As can be seen, annual terrorism fatality risks, particularly for areas outside of war zones, are less than one in one million and therefore generally lie within the range regulators deem safe or acceptable, requiring no further regulations, particularly those likely to be expensive. They are similar to the risks of using home appliances (200 deaths per year in the United States) or of commercial aviation (103 deaths per year). Compared with dying

at the hands of a terrorist, Americans are twice as likely to perish in a natural disaster and nearly a thousand times more likely to be

killed in some type of accident. The same general conclusion holds when the full damage inflicted by terrorists -- not only the loss of life

but direct and indirect economic costs -- is aggregated. As a hazard, terrorism, at least outside of war zones, does not inflict enough damage to justify substantially increasing expenditures to deal with it. Because they are so blatantly

intentional, deaths resulting from terrorism do, of course, arouse special emotions. And they often have wide political ramifications, as citizens demand that politicians "do something." Many people therefore consider them more significant and more painful to endure than deaths by other causes. But quite a few dangers, particularly ones concerning pollution and nuclear power plants, also stir considerable political and emotional feelings, and these have been taken into account by regulators when devising their assessments of risk acceptability. Moreover, the table also includes another kind of hazard that

arouses strong emotions and is intentional -- homicide -- and its frequency generally registers, unlike terrorism, in the unacceptable category. In order to deal with the emotional and political aspects of terrorism, a study recently conducted for the U.S. Department of Homeland Security suggested that lives lost to terrorism should be considered twice as valued as those lost to other hazards. That is, $1 billion spent on saving one hundred deaths from terrorism might be considered equivalent to $1 billion spent on saving two hundred deaths from other dangers. But

even with that generous (and perhaps morally questionable) bias, or even with still more generous ones, counterterrorism expenditures fail a standard cost-benefit assessment.


http://www.foreignaffairs.com/articles/66186/john-mueller-and-mark-g-stewart/hardly-existential?page=3

http://www.foreignaffairs.com/articles/66186/john-mueller-and-mark-g-stewart/hardly-existential?page=3

CORNISH TSDC DUTCH DISEASETerrorists can’t get nuclear weapons – too many obstacles and squo solves securityLinzer 4 [Dafna Linzer is a Washington Post Staff Writer “Nuclear Capabilities May Elude Terrorists, Experts Say” http://www.washingtonpost.com/wp-dyn/articles/A32285-2004Dec28.html, 12-29-2004] Lin

Despite the obvious gravity of the threat, however, counterterrorism and nuclear experts in and out of government say they consider the danger more distant than immediate. They point to enormous technical and logistical obstacles confronting would-be nuclear terrorists, and to the fact that neither al Qaeda nor any other group has come close to demonstrating the means to overcome them. While the dangers certainly are real, there is considerable disagreement among security experts

about the probabilities for "catastrophic terrorism." In the case of nuclear and biological weapons, the subjects of articles today and tomorrow, there are technical and scientific hurdles that have proved daunting, even for nations with sizable budgets and state-of-the-art facilities. Chemical weapons, which will be explored in an article Friday, would be somewhat easier to devise or obtain, but also far less likely to yield huge numbers of casualties. A radiological device would have similar limitations for terrorists. So difficult are the challenges that senior officials on President Bush's national security team believe al Qaeda has shifted its attention to other efforts, at least for now. "I would say that from the perspective of terrorism, the overwhelming bulk of the evidence we have is that their efforts are focused on biological and chemical" weapons, said John R. Bolton, undersecretary of state for arms control and international security. "Not to say there aren't any dealings with radiological materials, but the technology for bio and chem is comparatively so much easier that that's

where their efforts are concentrating." Still, the sheer magnitude of the danger posed by a nuclear weapon in terrorist hands -- and classified intelligence

assessments that deem such a scenario plausible -- has spurred intelligence and military operations to combat a threat once

dismissed as all but nonexistent. The effort includes billions of dollars spent on attempts to secure borders, retrain weapons scientists in other countries and lock up dangerous materials and stockpiles.

They can't stop terrorism - only solving for the motivations is effectiveSinger 01 (P.W., American political scientist, an international relations scholar and a preeminent specialist on 21st century warfare, currently a Senior Fellow at the Brookings Institution, where he is Director of the 21st Century Defense Initiative. Brookings Institute Analysis Paper #14 – November 2001. “PAKISTAN’S MADRASSAHS: ENSURING A SYSTEM OF EDUCATION NOT JIHAD” http://www.911investigations.net/IMG/pdf/doc-311.pdf) Cass

While the religious schools are a matter for internal Pakistani policy, America does have¶ a vested interest in ensuring both that Pakistan is able to fulfill its obligations in the¶ education sphere and that terrorist training schools are closed. To succeed in countering¶ the negative influence of those Madrassahs, which have been hijacked by extremists, the¶ US must provide dedicated aid to education reform efforts, and also explore the¶ possibility of a broadened program designed to combat the culture of violence. This will¶ include providing both increased cultural contacts and economic hope. Efforts to combat¶ terrorism will not be successful unless they also deal with the underlying institutions that¶ support the threat.



Turn FDI does not have negative effects on growth, actually it is especially important in developing countries to ensure high growth ratesTintin 12[Cem Tintin, PhD candidate in Economics, institute for European studies; August 2012; Does Foreign Direct Investment Spur Economic Growth and Development? A comparative study; ETSG.org; http://www.etsg.org/ETSG2012/Programme/Papers/73.pdf; accessed 22 June 2013; AC]

In sum, our study showed that FDI and better institutional quality spurs economic growth and development in all country groups. Unlike some scholars claimed (e.g. Herzer et al., 2008), we did not find any remarkable negative effect of FDI on growth and development. The possible implications of our findings are as follows: the major implication of the finding “FDI spurs growth and development” is that: countries should follow pro-FDI policies. Especially, our results would encourage policy makers to remove and re-adjust the existing restrictive FDI policies. As shown in the study, all countries even the least developed countries enjoy the beneficiary effects of FDI both on growth and development. The positive role of economic freedoms on growth and development would motivate policy-makers to attach a special importance to the upgrading the quality of institutions (e.g. economic freedoms) of host countries. Especially for developing countries, the sustainability of FDI inflows has a particular importance for ensuring high economic growth rates (UNCTAD, 2010). Our results support this view of UNCTAD (2010) in a way that we showed developing countries benefit more from FDI (in terms of growth and development) than developed and the least developed countries. Therefore, developing countries should attach a special importance to the sustainability of FDI by providing a pro-FDI economic and politic environment.

FDI increases economic growth in developing countriesTintin 12[Cem Tintin, PhD candidate in Economics, institute for European studies; August 2012; Does Foreign Direct Investment Spur Economic Growth and Development? A comparative study; ETSG.org; http://www.etsg.org/ETSG2012/Programme/Papers/73.pdf; accessed 22 June 2013; AC]

In a nutshell, we found that FDI makes a positive and meaningful effect on per capita income in all four groups. Nevertheless, the biggest positive effect of FDI arises in developing c ountries. It might be explained with the relative backwardness of developing countries in terms of per capita income (aghion and Howitt, 2009). Interestingly, the least developed countries have the smallest contemporaneous FDI coefficient which implies that FDI increases their per capita income relatively less than developed and developing countries. It can be partly explained with the low levels of FDI in the least developed countries and poor infrastructure that might limit spillover effects stemming from FDI (OECD, 2002, p. 10; Tekin, 2012).
