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Going for growth in St Andrews

This weekend, the G20 finance ministers meet in St Andrews in Scotland. This is the final time they will meet this year after a packed and productive 2009 schedule and it is the last meeting with the UK in the Chair of the G20. Although St Andrews is the home of golf, delegates would have little time to play even without the programme of meetings: by this time of year the Old Course is down to fewer than nine hours of daylight, getting dark by 4.30pm.

But even as the days draw in and we reach the end of the year, the momentum of the G20 must be maintained. As Ive written before, international meetings are the culmination of a long process of preparation. And they also provide a powerful deadline for civil servants to get things done. The prospect of your ultimate boss sitting down with other world leaders tends to focus the mind.

Following the successful Summit in Pittsburgh in September, leaders will not again meet until June 2010 in Ontario, Canada. It would be tempting, therefore, to take it easy for a few months. However, the last twelve months have shown the importance of countries working together. To secure economic recovery recovery, we need to ensure a smooth transition from stimulus and to put in place a framework for long-term, sustainable growth.

In St Andrews, we hope that Finance Ministers will agree the details for the Framework for Sustainable Growth. This will provide a more co-operative approach to governing the international economy, recognising that economies are now highly interdependent. This process is based on countries assessing each others policies and then agreeing where changes to these plans are needed to achieve balanced growth.

Pittsburgh also confirmed the G20 as the premier forum for international economic discussions. So this relatively new grouping is clearly in for the long haul. Hopefully, amidst the dark of the Scottish winter, the finance ministers can prepare for an economic dawn in 2010 and beyond.

Celebrating transatlantic business

Last night I spoke at the Transatlantic Business Awards dinner in New York, which celebrates the very best of British-American business connections. One the highlights of this year's dinner was sharing a platform with Ambassador Louis Susman, my American counterpart in London.

I was pleased to be asked to announce this year's American winner of the Transatlantic Business Award, Tom Glocer, CEO of ThomsonReuters. Tom has created a really remarkable company that represents one of the worlds leading sources of intelligent information for businesses. The UK award went to Peter Sands of Standard Chartered plc and was presented by Ambassador Susman.

Last night was not just about recognizing Tom, Peter and the other winners achievements, but celebrating the British-American business relationship in its broadest sense. British companies are the largest foreign investors in the US. The US is the No. 1 investor in the UK. In the last fiscal year alone, there were 621 new American investment projects in the UK, which created nearly 13,000 jobs and amounted to 36% of total inward investment to Britain. Behind these big picture statistics are real jobs and opportunities that are vital parts of both our economies, and I was pleased to meet people representing some of those companies last night.

Many businesses spend a lot of time considering how their strategies should be shaped by the rise of China, India and Brazil. It is certainly true that these new markets merit attention, and their growing clout is important. But so is Europe. The economic relationship between the United States and the European Union remains by far the largest, most complex and most important in the world. The European and American economies are the engines of global growth, together totalling 54% of the worlds GDP. In 2008, EU Foreign Direct Investment stock in the US amounted to $1.43 trillion. By comparison, Indian FDI stock in the US was just $4.5 billion, and Chinese FDI stock was only $1.2 billion. Similarly, US investment in Europe is sixteen times more than in all of the BRIC countries combined. Those facts will change over time, but are going to be with us for the foreseeable future.

These challenging times demand ever stronger international cooperation. One year ago, the worlds largest economies decided to work together, and since then G20 leaders have met three times. The actions our leaders took jointly on financial regulation, fiscal stimulus and other policy areas have prevented another Great Depression. But high rates of unemployment show there is far more Governments need to do to rebuild.

The world economy will not recover unless we remain vigilant about defending free trade. Thankfully, countries have not introduced catastrophic tariffs on a par with Smoot-Hawley. But according to the latest report issued in September, countries have applied a range of trade-restricting measures, which have a trade-chilling effect. Protectionist measures risk slowing economic recovery. We need to face down the protectionists and have the courage to complete the Doha Round of international trade negotiations.

I know that the US and the UK will continue to advocate free trade as one important part of the global recovery. Meeting the businesses last night who operate across the Atlantic in innovative, creative and profitable ways reassured me that the best businesses in both our countries will help drive this recovery.

An economics crisis as well as an economic crisis?

The financial crisis has damaged - perhaps irretrievably - many theories that most economists (including me) thought of as cornerstones of our discipline. Among these has been the idea that markets have an innate tendency to be self-equilibrating and rational.

This leaves us with something of a problem: if markets are prone to herding and momentum, what should be done to control their excesses?Yesterday, I heard Lord Turner of the UK's Financial Services Authority offer some ideas. He was speaking at an event in Washington organised by the National Journal and The Economic Club of America.(Full stream of the talk is available here.)

In a provocative talk, Turner discussed the extent to which the financial crisis was not just a crisis of specific institutions but a crisis of economic theory. Specifically, if we accept that deeper and more liquid markets are not always a good thing - because of the volatility they produce, for instance - then we must then answer not only the question of how big they should be, but also how government policy should go about controlling them.

The good news is that economics already has some good explanations for these effects, albeit ones that have been sidelined in recent years.

John Maynard Keynes was talking about investors' "animal spirits" over 70 years ago in his General Theory of Employment, Interest and Money. Although the term featured heavily in my first year undergraduate course in macroeconomics, by the time I reached graduate school, it had been subsumed by neat mathematical models based on representative rational agents.

The term has been resurrected in the last year and is the title of a recent book by Robert Shiller and George Akerlof. The new(ish) field of behavioural economics is also starting to provide the intellectual underpinnings of a new theory of how markets behave. My hope is that it will help governments design better policy too.

Washington Post climate change panel

I have been asked to contribute opinions to a series of questions on the Washington Post's website about climate change. You can find my first answer here, explaining why the UK believes nuclear power should be part of the energy mix in order to meet the twin challenges of energy security and climate change.

Why Doha. Why Now.

After nearly five years working on the latest round of WTO negotiations the Doha Development Agenda - I thought I had seen every possible typo connected with the Qatari capital. Not so. A recent email produced the most amusing so far: the Dodo Round. Some would argue that is an apt description. They'd argue that Doha is a negotiation that has failed to get off the ground or evolve since its launch in 2001 to address todays problems and is heading for extinction. Some see Doha destined to become a historical curio like the famous flightless bird of Mauritius the only multilateral trade round since the launch of the GATT in 1948 to fail to conclude.

But the Dodo is making a comeback. Pressure is building for a meeting of Ministers in Geneva within the next two weeks, designed to agree a deal on agriculture and industrial goods. The reaction on the Hill and in the DC trade community? Yeah right. But Washington has consistently been down on the Doha Round. In July before the last Doha Ministerial meeting, few in Washington gave the meeting any chance of success, at the same time as the European Commissions chief agriculture negotiator was buying a box of cigars to share around in Geneva in anticipation of an agreement. The result? A tantalizing near-miss in Geneva - and shock in Washington that a deal had so nearly been done.

July now seems a lifetime away. We have been through a financial and economic maelstrom. The Dow at the end of July stood at 11,500. It is now at 8,500. Since then Leaders at both the G20 and APEC summits have put their weight behind a Doha deal this year. The political wind is now behind the negotiation. This has elicited warnings to the US Administration both from business groups and Congress to hold firm and press other countries harder. So it is worth recalling five reasons why we all need this deal and need it now.

First. A deal will give a boost to the global economy during difficult times measured in hundreds of billions of dollars. Pascal Lamy, the WTO Director-General, argues that the deal on the table is worth considerably more than the Uruguay Round. Yes, its impact could have been bigger and we need to keep pressing for ambition. Yes, its effects wont be instantaneous. But it is well worth having. And systemic arguments for a deal are even stronger than any dollar-and-cent valuation of new market access.

Second, it will bind tariffs at low levels. At the moment there is often a significant gap between bound and applied tariffs. Getting rid of that differential has real value. The provisional result of a study by the International Food Policy Research Institute is that the difference in trade volume between completing a Doha deal and countries putting tariffs back up to bound levels would be $2,110 bn. To put that figure in context, the total US trade volume (imports and exports) last year was $3,100 bn. Binding tariffs is the insurance policy against tariffs sliding back up which is a real risk in todays economic climate.

Third. A deal will cement the status of the WTO. The current financial crisis has underlined the need for effective global governance. The WTO isnt perfect but in many ways it is an exemplar for other international institutions. India and Brazil sit shoulder to shoulder with the EU and US in the inner negotiating groups. Each WTO Member has a real stake. The WTO allows countries to either negotiate or litigate away problems. If the negotiation channel fails, how viable is the WTO?

Fourth. If not now, when? Why are the chances of a deal any better in, say, two years time? The word from Geneva is that we have got about as far as we can get at a technical level. What are left are the big political calls. International deals get done because of political attention and leadership. We have it now.

Fifth. What happens if we dont do a deal? A proliferation of free trade agreements. The worst distortions in the global trading system, such as agricultural subsidies, wont be touched. And the poorest counties for whom this round was started pay the price.

Trade at the London Summit

One of the headline aims for the London Summit on 2 April is to put the world on track for sustainable growth. Central to this aim will be reiterating the importance of open markets to the economic recovery (a point made by the Prime Minister in his address to Congress last week) and addressing the threat of protectionism.

The communique from the G20 Summit in Washington contained useful standstill language on protectionist measures, with leaders agreeing to 'refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing WTO inconsistent measures to stimulate exports.' Most G20 countries have kept to the spirit of the pledge. Uri Dadush at the Carnegie Endowment for International Peace has this week made a number of policy recommendations for trade at the coming Summit.

There has been some interesting debate about what constitutes protectionism, as this voxeu piece looking at 'murky protectionism' highlights. Many governments have taken necessary and unprecedented domestic action to stimulate their economies. However the impact of this patchwork of bailouts and stimulus packages on international trade flows is not always clear. There is a clear onus on governments to bear in mind the dangers of behind-the-border protectionism.

The London Summit will be looking for a recommitment to keep away from the edge of the protectionist abyss and to ensure that effective monitoring mechanisms are put in place. For a thought-provoking piece on the role that the US Administration could play on trade at the London Summit, see this article in the Wall Street Journal.

For those in Washington, Dominick Chilcott, Deputy Head of Mission at the British Embassy, will be speaking at a roundtable hosted by the German Marshall Fund at 12.30 on Friday 13th March on the topic of 'The London Summit and the Fight against Protectionism'. Please contact Mark Allegrini on mallegrini@gmfus.org if you would like to attend - though beware that space is limited.

March Madness

As March Madness reaches its crescendo, I have been trying to work out why college sports are so popular here. The only student sporting event that gets any major media attention is the annual Oxford and Cambridge Boat Race, which was held last Sunday. By contrast, US college basketball and football gets wall-to-wall TV coverage. The best explanation I've heard is that professional basketball and football only took off in post-war America, allowing the college games to build a following that they have kept. Had the Football League not been formed in 1888, British workplaces could now be filled with team brackets ahead of the university football cup.

It is interesting what sports can tell you about a country. I have been intrigued by the contrast between the Premiership (the top football league in England) and the NFL - and what it might say about attitudes to competition and foreign investment. These are not the things that you capture in the classic measures such as the World Bank's Doing Business report.

You might reasonably expect the NFL to epitomise testosterone-fuelled competition. But it feels like 1950s dirigism next to the Premiership's Gilded Age capitalism. For one thing, there is promotion and relegation between leagues in the UK: come in the bottom three and you go down a league. If you have a bad season in the NFL you live to fight another season.

Another difference is that different teams win the Super Bowl. Unfettered capitalism leads to monopoly, yes? Only three teams have won the Premiership since 1995. In the past three seasons (and probably this season) the same four teams in the Premiership finished in the first four positions. There is remarkably little criticism about this. In the NFL the worst teams get to pick the best college players. There's none of that redistribution in the Premiership.

And where does the money come from? Of the top four Premiership teams, Americans majority own Liverpool and Manchester United, a Russian owns Chelsea, with a US-Russian bidding war rumoured for Arsenal. This state of affairs is not universally popular. But it's hard to envisage foreign ownership of the biggest NFL franchises in the first place.

Life can mirror sport. The success of the City of London since the Big Bang has been characterised as the Wimbledon effect: great tournament, few great domestic players. You see the same approach in Sunday's Boat Race. Undergraduates and postgraduates competed freely for places in the crews. The closest US equivalents - the Harvard-Yale race or the Eastern Sprints - are restricted to undergraduates. The result is an Oxford crew with an average age of 25 and five Olympians on board racing a Cambridge crew with an average age of 24. But it makes for great, multinational crews, from which the relatively few British participants that make the grade consistently step up to the very successful British Olympic rowing programme. And, having the same two crews each year, it also makes for easier bracket predictions.

Quite

My flippant comment on the financial crisis is that it has reinforced for me the different uses of the word 'quite' in American English and British English. Let me explain.

My dictionary provides two meanings of 'quite' that are essentially mutually incompatible. A first meaning is 'completely, fully, entirely'. This is the almost universal American usage and it is in this sense that people have been describing the financial crisis as 'quite worrying'. 'Quite worrying' is interchangeable with 'very worrying'.

But in British usage, 'quite', when used as an adverb or adjective, adopts a second, different meaning: 'somewhat, moderately, fairly'. 'Quite worrying' is less worrying than 'worrying', which is less worrying than 'very worrying'. So natural British responses to the statement that the financial crisis is 'quite worrying' are that the spokesman (a) is badly underestimating how bad the situation is or (b) has a dry sense of humour or (c) is deliberately using the power of understatement.

This paper asks why the markets reacted so strongly to Greenspan's comments about 'irrational exuberance' in 1996 but didn't move when Bernanke said in testimony to Congress in 2006 that he was 'quite concerned about the intermediate to long-term federal budget outlook'. The answer may be global misunderstanding of what 'quite' meant. My experience is that when you work in an environment with both British and American employees, it's best to steer clear of the phrase 'quite good' altogether.

Santa, Elves and Comparative Advantage

One of the great things about autumn in the US as a parent of young children is the steady flow of diversions. October is all about the lead up to Halloween. November is all about Thanksgiving. December is all about the holidays. So, as we approach the end of November, the kids' questions about Santa Claus are just round the corner.

As everyone knows, Santa Claus has helpful elves that make all the presents for all the children around the world, for Santa to distribute on one frantic chimney-to-chimney delivery. This raises several problems, including why a number of the presents my children will receive will have 'Made in USA' or 'Made in China' printed on them. I think I have the answer to this particular problem: it's comparative advantage.

I have no doubt that Santa's elves could make anything and I assume that they could make it all better and cheaper than anyone else. They have absolute advantage in producing all goods. But does it follow that it makes sense for them to produce all the presents that Santa will give out? In a word, no.

The elves will be much better at making some things than anybody else (let's say wooden trains), but they will be only a little better than other people at producing other things (let's say board games and chocolate). The elves have a comparative advantage in producing wooden trains. If they specialise in producing wooden trains, they can trade the excess production - which everyone else will value highly because they can't do it as well - for lots of board games and chocolate that they can make better, but only a little better, than other producers. Specialisation in goods where they have comparative advantage will be far more efficient. It will take the elves less time to put together the full order list for Santa, allowing them more time to enjoy the Northern Lights. And it will provide an explanation for why the chocolate in the stocking will have 'Made in the USA' printed on it.

It may sound inconsequential but it is a powerful - and comforting - real-world conclusion. Is China going to end up manufacturing everything? No. Is Brazil going to dominate global markets for all agricultural produce? No.

Comparative advantage was first set out by Robert Torrens in an essay on the Corn Laws in 1815. It concluded that Britain - at the time the emerging 'workshop of the world' - should buy wheat from Poland, even if a bushel could be produced cheaper in Britain than Poland. David Ricardo then took the plaudits for comparative advantage in his Principles of Political Economy in 1817. For a good contemporary exploration of comparative advantage, see Tim Harford's fun Undercover Economist.

Trade The Day After Tomorrow

As trailed in my last posting, here is the link to Demetrios Marantis's comments to Monday's conference in London at the start of World Trade Week UK. It has a particular emphasis on making trade work for Least Developed Countries. You can also view Lord Mandelson's opening speech, which includes the launch of a new Global Trade Alert designed to help with the monitoring of government responses to the recession. There will be a launch of the Global Trade Alert in Washington at the German Marshall Fund toward the end of the month.

Separately our Ambassador appeared on the Fox Business Network this morning in a discussion on protectionism (prompting my discovery at 7 am that the Fox Business Network does not feature among the more than 300 channels that Verizon pipes into my home). Sometimes you don't know what you're missing.

I liked the op-ed from the President of the Federated Farmers in New Zealand which appeared in the Wall Street Journal earlier this week putting the spotlight on the reintroduction on dairy export subsidies in the US. Of course the EU has, equally regrettably, done something similar. All of which underlines the value of eliminating agricultural export subsidies as part of an overall Doha deal, as agreed at the WTO Ministerial meeting in Hong Kong in December 2005. I remember how the EU offer to get rid of export subsidies was talked down at the time as the EU getting maximum value for a diminishing negotiating asset, on the basis that the subsidies were being phased out anyway. The last year has reminded us that trade policy is not a simple (if slow) teleology towards a tariff-free and subsidy-free world and that there is real value in binding in disciplines, whether on subsidies or tariffs, at the WTO.

On the same theme, the Foresight Horizon Scanning Centre in the UK's Government Office of Science has produced a paper setting out four scenarios for world trade between now and 2020. It looks at trade within the broader context of differing degrees of resource abundance and differing degrees of international co-ordination over the next decade. We have been thinking up movie title alternatives for the four scenarios. The two dystopian ones are relatively easy: 'Fragile Alliances' reads like Bladerunner (Traderunner?), 'Deglobalisation' is 1984. The remaining two are harder. The whole concept of the 'Global Citizen' has a Star Trek feel it to. The response to the 2015 climate disaster in the 'Global Innovation' scenario perhaps makes it The Day After Tomorrow.

Reform the WTO?

Sitting through speeches at trade association dinners is not normally a highlight of the job. I tend to find myself absorbed with the calculation of whether I have taken onboard enough coffee to stay awake but not so much that I will be consigned to hours at home reading whatever comes to hand before I can get to sleep. But Bruce Stokes speaking at the Coalition of Service Industries dinner last week was an honourable exception. One of the issues he touched on briefly was WTO reform. Bruce thought that we are likely to have a de facto pause on trade in the US in the coming years, which should allow us all to think big thoughts on the future of the WTO.

Having a WTO that works well is important - but I have heard little discussion on it recently, despite the travails of the Doha negotiations. It's probably wrong to think about WTO reform in isolation. Gordon Brown gave an interesting speech at the Kennedy School of Government earlier in the year, looking at the need for reform of the international institutions to meet the challenges of the twenty-first century. What the IMF does will have important knock-on effects for the WTO - multilateral disciplines on currency exchange rates disciplines, for example, would reduce a number of pressures on the trading system. And then there's addressing climate change, which has to be an imperative for all the international institutions but raises a number of thorny trade questions.

Bruce floated the idea that we should reconsider the Most Favoured Nation provision (a cornerstone of the WTO, under which all countries benefit when another country reduces its tariffs). It feels like there is growing support in Washington - partly as a reaction to seven years of Doha negotiations - for creating a two-track system in the WTO, to allow plurilateral agreements among those prepared to liberalise deeply. A Cordell Hull Institute group looking at the world trading system seemed to be leaning this way at a seminar in April.

A two-track system feels to me like the end to multilateral trade rounds. At the moment that may seem a good idea to those who have spent the last seven years of their professional lives on Doha. But from a historical perspective it potentially slays the goose that has laid the golden egg.

For those interested, the German Marshall Fund is hosting a lunchtime session on WTO reform at lunchtime on Friday, featuring Debra Steger from the University of Ottawa and a former senior negotiator for Canada at the WTO. There will be a couple of sessions on the future of the WTO at the WTO Public Forum in Geneva this week.

Deglobalisation

Gordon Brown's speech on the global economy yesterday contained a very interesting section on the dangers of deglobilisation (it starts at 11.30 on the video clip, if you don't want to watch the whole thing).

The traditional worry is that during tough economic times trade and investment barriers are put up - this was what the G20 leaders sought to address through a standstill clause in the G20 Washington Summit communiqu in November. The WTO has been collecting data in the interim looking at recent instances of countries raising barriers: the 'periodic reports on global trade trends' referred to by Pascal Lamy during a speech at the Department of International Development last week. The hope is that scrutiny and some powerful arguments about the negative economic and public policy impacts of traditional protectionist measures will stop them in their tracks.

A different, and more subtle, threat is of government and corporate behaviours that, taken together, have the potential to balkanize the global economy. The most stark example is in capital markets, where financial markets (often nudged this way by politicians) have retrenched to the familiarity of their home markets. In the most globilised of sectors, countries' borders matter again. Similarly, as governments put in place fiscal stimulus packages and intervene to support individual sectors, the focus will inevitably be on the domestic market. Unfortunately you can easily imagine the net effect being the partial fragmentation of the global economy without governments touching tariffs on foreign investment rules. Food for thought in the snowfields of Davos and during the run-up to the London G20 Summit in April.

World Trade Week UK

This week sees the inaugural World Trade Week UK, which aims to highlight the importance of global trade in creating jobs and growth during these difficult economic times. Its an idea that draws heavily on FDRs 1933 initiative to designate the third week of May as National Foreign Trade Week, following up on the promise in his Inaugural Address to spare no effort to restore world trade by international economic readjustment. Actually it is surprising to look at the full text of FDRs language on international trade in the Inaugural Address, where he sees international trade relations as secondary to national economic recovery - as if the two are somehow separate challenges.

In advance of World Trade Week UK our Ambassador, Nigel Sheinwald, gave a major speech on trade in Baltimore last week. The speech underlines our on-going concerns about the risks of the global economy being compartmentalised into national boxes. To take one example, we have been hearing from a number of British companies worried about how the Buy American provisions in the fiscal stimulus are being applied. Under the terms of the Congressional legislation, British companies and goods should not be affected by Buy American in most states because the UK has signed the Government Procurement Agreement. However it seems that many local decision-makers think that they heard Congress say Buy American. Period. As the speech sets out, we have no Buy British equivalent in government procurement rules in the UK and American companies get a substantial portion of government contracts.

There will be a major international conference on trade in London this week, featuring, among others, Paul Krugman, Jagdish Bhagwati, Lord Mandelson and EU Trade Commissioner Cathy Ashton. Friday afternoon we taped an address by Deputy USTR Demetrios Marantis to the conference.

It will then be interesting to see the USs trade data for April which comes out on Tuesday. There were some signs of recovering transatlantic trade volumes in the March data - though the only press angle seemed to be the on-going obsession with the size of the trade deficit. Lets hope for some more green shoots.

Carbon of Origin

Peter Mandelson made a short speech on trade and climate change in Oslo recently that is well worth a read. A couple of things sprang to mind for me.

In the first paragraph of the speech there's an (unconscious?) echo of one of Adam Smith's best quotes. Mandelson said: "A tomato grown and shipped to Europe from Senegal produces less carbon than a tomato grown in an artificially-heated greenhouse in Europe". Compare that to Smith in the Wealth of Nations: "By means of glasses, hotbeds and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about 30 times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of Claret and Burgundy in Scotland?" In defence of the carbon footprint of 18th century Scottish glasshouses, they were probably only solar powered.

It must be the case that a positive trade policy, based on liberalising markets for low carbon technologies, can help in addressing climate change. A negative trade policy designed to punish international free riders is more problematic. There is rightly a lot of interest in the idea of border adjustment measures, not least because the US Congress currently seems so set on the idea. Setting aside the issue of how compatible border adjustments would be with WTO rules (see a debate here if you're interested), any adjustment mechanism would be very difficult - and consequently costly - to operate. In practical terms, with the globalisation of supply chains and individual products now containing parts sourced from many countries, such measures would be a nightmare to implement. They are also likely to produce incentives to game the system. If you thought preferential rules of origin were complex, just you wait until carbon of origin.

It also feels like using a sledgehammer to crack a nut. It may be axiomatic for some people that US cap and trade legislation without border protection would lead to whole swathes of US industry being wiped out by (especially Chinese) competition. But this hasn't been the experience in the EU under the Emissions Trading Scheme. And the evidence is that cap and trade legislation would have a strictly limited impact in the US too. That's not to belittle the impact on a couple of sectors - but there must be better ways to deal with the problem than overarching border defence. Some free permits perhaps?

My personal nightmare is that if we fail to complete the Doha Round in the near future, one tricky multilateral negotiation cross-fertilises with another tricky multilateral negotiation in the shape of the post-2012 climate change framework. That way madness lies.

The Pineapple Strike

Happy New Year. I hope that anyone lucky enough to be in Italy over the holiday period was not badly affected by the Pineapple Strike. In case you missed it, the Italian Agriculture Minister Luca Zaia announced the Strike at a news conference on 16 December. In place of pineapples he encouraged Italians to purchase fruits produced in Italy, together with the traditional Italian Christmas products of zampone (pig's trotter stuffed with pork meat) and cotechino (pork sausage). I have an Italian friend who loves Hawaiian pizza. I couldn't help thinking of the mental anguish that the Strike would cause this Italian patriot and pineapple lover.

Having done my first blog post on the subject of consumer patriotism, it feels nostalgic to return to the same topic to kick off 2009. Minister Zaia's laid out three reasons for seasonal Italian consumer patriotism. First, pineapples are a 'symbol of everything that is not Italian'. Second, foreign producers of pineapples may use carcinogenic insecticides. Third, he was concerned about the environmental impact of shipping pineapples over long distances.

From a consumer's point of view, trade is at heart about introducing variety. In essence it is all about buying symbols of other countries. I like to buy seasonal fruits and I am a sucker for farmers' markers - but a holiday period consuming only British fruit would be a drab affair. From my point of view, being able to buy a ripe pineapple at any time of the year is one of the luxuries that quick transport and international trade offers. And it is often developing countries that are in the best position to provide these out-of-season luxuries. Italian pineapple imports were worth 73 million in 2007. Two of the biggest exporters of pineapples are Cote D'Ivoire and The Philippines. So long as the producers there are producing safe products, I don't think that we should be discouraging consumption of their pineapples.

Plus these luxuries needn't be viewed as guilty pleasures, even taking into account the fact that they are often transported over large distances. Calculating the carbon footprint of a product is far more complicated than simply looking at the 'food miles' that a product has travelled. A study by Lincoln University looked at the carbon footprint of producing and transporting New Zealand lamb versus Welsh lamb. I don't agree with all the findings of the study - but it illustrates that how far a product has been transported often has much less impact on its overall carbon footprint than how it was produced. In fact, whether you drove or walked to the store to buy your pineapple may turn out to be a bigger factor in its overall carbon footprint than how far it travelled to the store.

Counterfeits and crack pipes

I am just back from a study tour looking at the enforcement of intellectual property rights (IPR) in LA. This was a mix of the old (a bust on a stall in Santee Alley selling fake Chanel bags) and the new (talking to the studios about how they plan to compete with peer-to-peer file sharing).

I'm not sure if it was because the tour was organised by the French Embassy but fake Chanel bags ended up being a theme of the trip. We witnessed boxes of Chanel fakes (including some baseball caps whose bad taste would cause heart attacks at Chanel Design Central) being opened by Customs and Border Protection agents at the LA-Long Beach port complex. The scale of the challenge they face is immense - the port handles 5 million containers annually, which represent 45% of the US total and are worth $350 billion in two-way trade flows. To put that figure in context, it is roughly the same as total EU imports of goods into the US last year. Roughly $70 million of counterfeit merchandise was intercepted at the port last year. The most seized item? Shoes from China.

Two other themes were the diversification of counterfeited goods and the increasing participation of organised crime. The attractions of counterfeiting are that margins can be big and the punishment tends to be probation rather than jail time (I suppose reflecting a misguided societal view that IPR infringement is a victimless crime). It's an issue that we're taking very seriously in the UK. To take one example, our Fake Free London initiative aims for London to be free of counterfeits by the 2012 Olympics. But of all the items on display in LA, the one that caught my eye was not a straight counterfeit at all: a (working) branded hi-liter pen concealing a crack pipe.

The IPR challenge to the entertainment industry is well documented. The Motion Picture Association reckon that piracy led to a $18 billion of lost revenue for the industry in 2005. This is about much more than dodgy DVDs (though, incidently, the MPA reckon that it takes pirates about 13 hours from infringement to having mass-produced counterfeit DVDs on sale). Fast, cheap broadband access is one of the great benefits of our age - but also a real headache for the studios. They are looking to work with ISPs to address endemic peer-to-peer file sharing. The agreement between rights-holders and ISPs brokered by the UK government earlier this year is one promising approach - we are currently consulting on legislative options to address illicit P2P file sharing as well. The studios are also looking to compete with pirates in the content market, through products such as high quality video on demand. As a technology late-adopter, video on demand will be relevant for me in about 2015.

Cycling to Africa

This posting is a little different from my others - but I only really have one thing on my mind at the moment.

Trade routes have always exchanged more than goods. You visit Venice and see the architectural influences of the east. There are also serendipitous effects from trade. For example all modern varieties of apples can be traced back to one region of Kazakhstan, through which the Silk Route ran. Seeds from apples stuffed in pockets or left in manure slowly spread the fruit to Europe. There is an excellent chapter on this in Roger Deakin's seductively mellow book Wildwood.

But trade also has less benign effects. The Black Death in fourteenth century Europe, which killed up to 60% of the population, was brought in along the caravan routes from Asia. And within Africa over the past generation HIV/AIDS spread down trade corridors, with devastating impacts on communities.

On Saturday morning, Simon Shercliff, a friend and fellow Embassy blogger, started a 1,000 mile bike ride from Washington to Africa ... Africa, Indiana, that is ... to raise money for a community in Southern Tanzania badly hit by HIV/AIDS. We have set up a website, which provides lots more information about the ride and our charity, Orphans In The Wild. We'll be doing a daily blog of our experiences as we cross Virginia, West Virginia and Kentucky, where I will be able to report on the effectiveness of Assos Chamois Cream.

Trade at the G20 Summit

As we all wrestle with policy responses to the financial crisis, one of the dangers is that failings in financial regulation are somehow seen as repudiating the economic and philosophical bases of Anglo-Saxon capitalism. But we need to be careful. How to regulate structured financial products - which, at least in their recent scope, are a new phenomenon - is a very different question from whether to keep borders open to international trade. The latter is an old debate and one that free traders feel that they have won twice before - first in the UK in the 1840s and second after the second world war. Comparisons between the current times and the Great Depression are already starting to feel hackneyed. But it is worth remembering how border restrictions ushered in by the Smoot-Hawley Tariff Act of 1930 stemmed trade flows and deepened the recession. US exports plummeted from $5bn in 1929 to $1.6bn in 1933.

I spoke with someone from the WTO Secretariat recently about my concerns of brand contamination between the financial crisis and trade liberalisation. His view was that, since its inception, the GATT / WTO has been about setting parameters for international trade, with many painful negotiations over the appropriate rules of the multilateral trade road, rather than letting unregulated markets rip.

Trade is not going to be at the forefront of this week's G20 Summit in Washington. But it will be on the agenda. And rightly so, given the importance of maintaining open markets in propelling us out of the economic downturn. Leaders can send a strong signal - to a sceptical world and to their own sceptical bureaucracies - about the importance of locking in a deal on the Doha Development Agenda this year. Some doubt how much good another exhortation on Doha can do. However, we were tantalisingly close to a deal in July and one thing that the intervening period has impressed on me is the value of tariffs being bound in Geneva. Reducing the level of bound tariffs has real value that we overlooked when the economic going was good. It is our insurance policy against protectionism. Senator Reed Smoot and Representative Willis Hawley didn't have the restraint of the WTO.

Moral markets

It is a fairly reliable rule of thumb that a financial crisis will be blamed on greed. But the enormity of the current challenges has led some people to signpost this as the high-water mark of this particular tide of globalization (see Irwin Stelzer's argument) that the era of free trade has ended) and question the future of capitalism itself.

President Sarkozy's recent speech on the financial crisis has received a fair amount of interest. It did not feel to me like the broadside against capitalism that some have portrayed it, although there was some therapeutic knocking down of straw-men: 'the idea of the all-powerful market which wasn't to be impeded by any rules or political intervention was a mad one'. It would indeed be a mad idea, which is why we have lots of rules (including a legal code) and regulations (even if they didn't work very well in some cases) to channel markets. The part that has received most attention was President Sarkozy's assertion that 'if we want to rebuild a viable financial system, raising the moral standards of financial capitalism is a priority'.

The idea of moralising the market is an idea as old as the hills, of course. During a crisis it is a natural step on from talking about regulation (which, let's face it, is pretty dull). Regulation changes the duties and incentives faced by a company. At its purist, moralisation aims to change the motivations of the people working in the company. But it hasn't been very successful.

Defenders of free markets argue that moralisation isn't necessary and could do harm. Adam Smith famously said that 'it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest'. But Smith was by no means the first in the game. Perhaps the most notorious rebuke of moralizers was written by Bernard Mandeville, a Dutchman living in London during the birth of modern finance. His Fable of the Bees, written to rile the self-explanatory Society for the Reformation of Manners, argued that it was private vice itself that led to public economic benefits. A libertine kept an array of tailors and innkeepers in business in a way that a church-going spinster did not. You can draw a straight line from Mandeville to Gordon Gekko. Greed is good.

The interesting middle ground is moralizing the mission of the company. Free marketers argue that profits are a company's good works for society and companies trying to deliver public interests will be distracted from their core business. But there is mounting evidence that consumer dollars are interested in the social responsibility footprint of individual companies. So far this - to borrow shamelessly from Google's logo - seems primarily to be on the basis that a company should do no evil. So multinationals have queued up to manufacture in Cambodia because of the ILO's excellent Better Factory Cambodia initiative. If it says 'Made in Cambodia' on the label, you can be fairly certain as a consumer there was no child labour involved. The Kimberley Process, established in 2003 and covering 99% of rough diamond trade, is another good example: you don't want a conflict diamond to be forever. The next step up the ethics chain is to buy from a company because it does good. Consumers may start to reward more systematically companies that get out ahead on addressing climate change, for example.

Going back to Sarkozy's aim of raising moral standards in financial capitalism, I wonder whether corporate social responsibility has had less bottom-line traction among financial services companies than in other sectors of the economy. There have been a few virtue funds launched (though also some counter-veiling vice funds). Some entities run ethical investment policies. But they feel like a vanishingly small minority. In policy terms, the proxy we seem to have hit on for raising moral standards in banks is to oversee executive remuneration.

Glass three quarters full or one quarter empty?

There is a great article by Richard Baldwin looking at the debate over the offshoring of services jobs. The article looks at the other side of Alan Blinder's estimate that 30 to 40 million American services jobs will become offshoreable as new technology makes possible international trade in services that were previously firmly located in one place.

The one take-away that has stuck with me from Blinder's widely-read Foreign Affairs article from 2006 is that if you want to avoid international trade, consider a career as a personal trainer. Baldwin points out that the US is rather good at providing services and runs a significant trade surplus - and that the opening up of service sectors to international competition actually offers mutually-enhancing opportunities. It's an argument that our Ambassador's recent trade speech in Baltimore concluded with.

Our new website

As the most tech-savvy political operation most of us have seen takes up the reins of government in Washington, there is rightly a lot of interest in how the Obama Administration will use the internet. FDR was the first American President to use the radio effectively. JFK was the first to appreciate the power of TV. Will BHO be the first to really harness the internet as a tool of government? The potential is enormous, of course. And it goes well beyond sending emails and posting clips on YouTube. The internet is a two-way, indeed multi-way, technology, which could theoretically take us back towards a more direct form of democracy by allowing debate and conversations across any size of political unit. Will we witness a re-birth of democracy in a virtual Athens? What chance wiki-style policy making? But first will be the collision with government IT systems and security requirements - for example, see the claims that President Obama's blackberry could be hacked. And I say this from the perspective of someone who uses Windows 98 at work.

Anyway, we can be sure that there will be some excellent websites, judging from the revamped White House site. We wanted to do our bit as well, so we have launched a section on trade and globalisation on the ukinusa website. It is still early days, but our ambition is to create something that will be more than just a portal for dull government documents. We'd like it to be a useful resource and an interesting, thought-provoking read. An Aide for Trade if you will. So please have a look around and let me know what you think.

Consumer Patriotism

On a recent trip to the local bike shop I overheard another customer deliberating between two bikes - a Cannondale and another make. Now the British government doesn't endorse any particular bike brand. But I do. I love Cannondales and own two. But they're definitely pricey, as the customer in the bike shop discovered. The Cannondale was about $100 more expensive than the other, equivalent bike and he quite naturally asked why it cost more. The assistant's answer was that it was because Cannondales are made in the USA (in Pennsylania) while the other make was made in Taiwan. This isn't the reason I buy them but it got me wondering about the premium that home producers can charge over competitors from abroad for similar goods. And whether you could put together a league table comparing the different level of premium that home producers could charge in different countries.

The economist's answer is that you should just buy the best goods at the best price. End of story. That will force the competition to catch-up or get out of the business, raising standards across the board. But emotion seems to pull the other way. This phenomenon has been given the rather grand title of consumer patriotism.

A 2007 Zogby poll found that one in three Americans would be willing to pay four times as much for American-made toys over foreign substitutes (which in effect means Chinese goods, as China has over 90% of the global market in toys). Paying four times as much sounds absurd. But if true, MBA graduates must be flooding into toy manufacturing. Japanese consumers have also, famously, been willing to pay a substantial premium for Japanese rice - though in that case supposedly because of a superior level of stickiness. (Consumer patriotism - if only I had known the phrase - also dictated the choice of our family car. My father bought a succession of unreliable estate cars made by British Leyland. It didn't save British Leyland.) One of the least effective consumer patriotism initiatives was - or so I recall from law school - a Buy Irish campaign that was brought to the European Court of Justice for being in contravention of Article 85 of the EC Treaty (one of the EU's competition articles, now changed to Article 81) because it discriminated between producers in the EU. One defence put forward was the fact that sales of Irish goods had actually dropped during the campaign. So my initial international consumer patriotism league table runs: USA, Japan, UK, Ireland.

Anyway, the customer in the bike shop decided not to buy the Cannondale.

American attitudes to trade

I have been looking at the recent Gallup poll on trade. The interesting story to write on US public attitudes to trade is that support is falling off a cliff and the US is about to pull up the gangplank to global trade. So the Gallup headline - 'Americans more negative than positive about foreign trade' - writes itself. But I have a couple of observations on the data which do not fit well within the narrative of a calamitous and unprecedented collapse in US support for trade: first, this year's figures (47% seeing trade as an opportunity, 44% as a threat) are almost exactly the same as in President Clinton's first year (46% and 44% respectively); second, support for trade improved significantly between 2007 and 2008, from negative 11 to negative 3. As an aside, it is also worth noting the exquisite mercantilist framing of the question: 'do you see foreign trade more ... as an opportunity for economic growth through increased American exports or a threat to the economy from foreign imports'. Under this formulation, bananas and coffee beans - both barely produced in the US - are somehow an economic threat. The logical conclusion of the question is that the best thing for the US is to export as much as possible and import nothing, which is a self-evident nonsense.

But it is notable how international trade, which is seen as being at the centre of 'Anglo-Saxon capitalism', has so little support in the US compared to other countries. The US public is consistently among the most suspicious of the effects of trade. See, for example, page 19 of the Pew Global Attitudes survey from last June, where US support for trade stood at 55%, compared to 79% in France (a country which is often rolled out as being instinctively anti-trade). Quite why US support for international trade is so low is a puzzle. Has America, which maintained high tariffs throughout the nineteenth century, retained a Hamiltonian appreciation for the benefits of protection - in which case, why have other countries which followed a similar developmental pattern not? Has trade had more baleful impacts on the US economy than on others - in which case, why has this effect been felt most keenly in the US, with a ratio of trade volume to GDP much lower than most other developed countries? Is free trade tainted by being a relatively partisan issue in Washington - in which case, why is there so little distance between the views of those polled who identify themselves as Democrat or Republican? Do supporters of international trade talk the wrong language - in which case, how has the dialogue been so different in other countries? Is it because employers provide many benefits provided by the state in other countries, making the loss of a job more traumatic - in which case, why is it international trade, which is estimated to cause under 5% of American job losses (and create many more), that bears so much of the criticism? I think this is a fascinating topic.

Professor Doug Irwin notes that before the second world war most self-respecting US Congressmen prefaced comments on international trade with the proviso 'I'm not a free trader but ...' and that this switched during the 1950s to 'I'm not a protectionist but ...'. I think and hope that we are some way from the first proviso coming back into fashion (though the last few months have shaken the firmness of my conviction on that). In that regard the Gallup poll is relatively reassuring.

Afghanistan/Pakistan views from beyond the beltway

Last week I had an excellent few days in both New York and Boston talking to various scholars, think tankers and interested parties on Afghanistan and Pakistan policy. As expected, people were pretty opinionated over the current Obama review process. Whilst there were inevitably criticisms from some over western policy , I got the impression that nearly everyone there felt that the main media debate over the last few weeks on whether to accept McChrystals suggested approach or not was not really the core issue at stake.

Many of my contacts said we should get back to basics: start with the big questions such as what are our objectives, and then work back from there, walking through a clear, consistent process with full explanation along the way. We shouldn't invent, they said, artificial criteria of success or failure or find ourselves trying to implement plans that required unsustainable levels of effort. To be fair, I don't think that either the UK or US government would disagree with this approach, and this is what both governments have in fact tried to do.

A lot of the noise around the discussion of "nation-building" in Afghanistan has become divorced from what we are trying to achieve. Put simply, we want to get the Afghan people to a stage where they are able to design and maintain their own way of life which is robust enough to repel the likes of Al Qaida from taking root there ever again (and from such a foothold in Afghanistan, then to attack us). Similar objectives exist for Pakistan. Ultimately, this means a long-term relationship between our countries and the people of both Afghanistan and Pakistan built and sustained by mutual trust. That is why the Kerry-Lugar bill is so important it sets the foundation for just such a relationship between Pakistan and the US. We want to reassure the Afghan people too that our commitment there will be long term, although of course not demonstrated by thousands of troops for the long term.

So my big takeaway from these recent conversations outside the beltway was the need for us policy-makers to take a step back every now and then, raise our heads above the day-to-day grind, and keep our eyes fixed firmly on exactly what it is we want to achieve. Long term relationships are not single aiming points against which we can measure success or failure. But ultimately, I was persuaded, it is them which will keep us all safe from attack.

The Perils of Four Degrees

Today in London, our Secretaries for Foreign Affairs and Climate, David and Ed Miliband, published the latest findings from the UK's foremost climate change science research institution - the Meteorological Office's Hadley Centre. Their conclusions are sobering, and come less than 50 days before the world's governments meet in Copenhagen, Denmark, for the United Nations climate change negotiations.

The scientists as the Hadley Centre have produced a map detailing the impact across the world of a global temperature rise of 4 degrees centigrade (7 degrees Fahrenheit). This risk is real. Respected scientists, using the best available scientific and climate data, are now concluding that, if emissions continue to rise, we could see this kind of dangerous global increase in temperatures within our lifetimes.

The map makes clear that not all countries would be affected in the same way by such a rise. The land will heat up more quickly than the sea, and areas of higher latitude, particularly the Arctic, will have much larger temperature increases. The impacts for the human race are shocking and profound. The map flags only a small selection of these, but they include severe effects on water availability, food production, and rising sea levels.

The US does not escape these. Tropical storms and hurricanes could become more frequent and intense, putting America's coastal populations at greater risk of disaster. In the interior, the risks of major forest fires will increase, whilst agricultural production decreases. And major US cities such as New York, Washington DC, and Chicago could experience an increase in their hottest days of the year by as much as 18-22F, affecting more than 30 million Americans.

This is not apocalyptic scaremongering: these are the best assessments by leading British scientists based on the most recent research. So we need to listen, and act.

This is no longer just an environmental issue: it's geo-political. Profound changes like these risk creating a more unstable and divided world, with intensified competition for dwindling resources, and all the implications for global security that flow from that.

The British government is committed to avoiding this 4c degree rise. We need to minimise the risks of these catastrophic developments by making sure that we ensure global temperatures don't rise by more than 2c degrees. And that's why an international agreement at Copenhagen this December is so important - for all our future security and prosperity.

African Women and the Changing Global Outlook

On Friday May 8, The British Embassy will host the second Women's Empowerment in Africa conference in partnership with the National Geographic Society at their headquarters in Washington. The conference will examine how the global economic downturn impacts women's empowerment in Africa.

There's no question that the economic downturn will have a significant impact on women. For example, in some African countries there has been a fall in foreign direct investment, remittances, commodity prices and a continuing rise in food prices.

Panelists at this Friday's conference will try to anticipate what affect this economic hardship will have on the Millennium Development Goals. The MDGs represent a fresh desire to provide education and career opportunities to women in impoverished countries.

Unfortunately, education and jobs - which are normally at a premium for women in many parts of the world - are even more restricted given the current economic environment.

Conference participants include Baroness Amos, Former Leader of the House of Lords, Melanne Verveer, Ambassador at Large for Global Women's Issues, State Department, Mr. Dominick Chilcott Deputy Head of Mission, British Embassy, Washington, Ms. Sheila Johnson, CARE Ambassador and Philanthropist and Ambassador Amina Salum Ali, African Union Ambassador to Washington. The sold out conference has received an overwhelming level of support from a range of sponsors including, the National Geographic Society, VOA, The Diaspora report, AllAfrica.com, Council on Foreign Relations, League of Black Women, Africare, The Washington Informer, TransAfrica Forum, Georgetown University, Howard University and Vibrant design group.

I am personally looking forward to hearing some great dialogue and debate between such a varied group of panelists. You can follow the conference no matter where you are in the world by checking out the Embassy's Twitter feed on Friday.

The personal side to MDGs in Africa

As part of Blog Action Day 2008, I want to share a personal encounter I had with poverty earlier this year.

In April, I had a rather unique opportunity to visit Africa for the first time at the the invitation of Africare, one of the most respected NGOs in the US. The trip gave me a chance to see how a major US operation works on the African continent as globally we look to stay on course to meet the Millenium Development Goals (MDGs) by 2015. Moreover, the trip drove home the magnitude of the task ahead of us to eradicate poverty in Africa.

It's one thing to be engaged in public diplomacy on development in Africa sitting at your desk in Washington, DC, but quite another to see poverty in person. It really grabbed my heart to see such destitution up close. I remember picking up one little boy and smelling the urine on him. It was his normality. How can that be right?

No one thing sticks in my mind more than seeing young kids so disenfranchised from their childhood because of circumstance. To see a young child carrying heavy water containers along the roadside (in most cases with no shoes on) first thing in the morning is tough to see as a father knowing my own child back in the US safely tucked into bed with not a decision to make in his day. How does the rest of the world really view the continent of Africa, or any developing country for that matter? Maybe we all need to see this reality up close to fully appreciate the need to help.

There is plenty we can do to change to what I've described. But I don't think it's all about donating articles of clothing (yes, it is needed) or money (again needed). It has to be about sustainability and maintenance of appropriate infrastructures left behind by business, NGOs and other organisations. Many corporations build foundations such as roads, however it's the continued maintenance of those motorways that is most needed for economic development.

I do see hope though (it's not all grim, I promise). For example, the $16 billion in country commitments made at the UN General Assembly in New York in September keeps the world on track to meet MDGs in 2015. After my trip, I have a new understanding of why that is so important.

International Women's Day 2009

Today we mark International Women's Day 2009.

Women are the key to the Millennium Development Goals becoming a reality. The world wont achieve the MDGs in 2015 without bringing about gender equality and the empowerment of women.

As Gordon Brown quite rightly pointed out in his speech to the UN in September 2007: "The alleviation of poverty and hunger demand global recognition (of) womens leadership and organizing capacities. Womens work in agriculture and export promotion are key to sustainable development. The road to sustainable development begins with inclusive policy-making."

Most of the poorest people in the world are women and part of what makes them poor is borne solely out of their gender.

Did you know that in rural Africa it's women, not trucks, who carry two-third of all goods? Many women there are forced to stay at home to work during the day - of course, they sacrifice an education and career do be able to do so.

The MDGs represent a fresh desire to provide education and career opportunities to these women. Some women are not allowed to work at all, however. There are also women afflicted with serious health issues who don't have access to proper treatment. So MDGs not only create opportunities, but also work to promote the equal and fair status of women at home, in education, health, politics and work.

Progress for women not only changes their lives but will better the lives of future generations of women. Women must have equal rights to end poverty. Until then, it wont happen.

Discussing aid effectiveness in London

I'm in London accompanied by several delegates from Capitol Hill in Washington for a series of meetings with key UK policy makers to discuss the effectiveness of aid. The US and UK are major contributors of foreign aid. As such, it's important that we regularly sit down and examine how successful our contributions have been and how to better our assistance.

The delegates and I will also attend the International Development and Aid Effectiveness Conference hosted by the Commonwealth Parliamentary Association. The broad aim of the conference is to challenge parliamentarians from across the Commonwealth and the world to hold their respective executives to account for development funds given, received and allocated. Given the current financial climate, I imagine this year's conference will focus mostly on ensuring that allocated aid is actually given.

It's also anticipated that Prime Minister Gordon Brown will attend and give remarks at the opening reception. That's the rumour anyway!

Either way, it should be a very interesting week. I will update you on what comes of it.

Time to recommit

Prime Minister Gordon Brown strongly believes that the global community must work together to make 2008 a turning point in the fight against poverty, and in particular build global momentum. This Thursday he'll be joined in New York by other world leaders including Tanzania's President Kikwete, France's President Sarkozy as well as other notables from around the globe.

The purpose of this high-level event -- called by the UN Secretary-General and the President of the UN General Assembly -- is to focus world commitment to achieving the Millennium Development Goals by 2015 and to set out clear plans and practical steps for real action. Issues such as malaria, education, maternal health and food security will be covered in depth.

For those who aren't familiar, the eight Millennium Development Goals (MDG's) were agreed at the UN Millennium Summit in September 2000. Nearly 190 countries have subsequently signed up to them.

The goal remains quite simple: To eradicate poverty by 2015. Easily said right? The calendar says we are halfway from 2000 to 2015. But the reality is that we're a long way from success. This week is an opportunity to get moving in the right direction once again.

Seeing rising food prices at your local grocery store

Next time you're in your local Giant or Safeway keep this thought in mind:

The rise in prices is not only having an adverse affect on your pocket but also a negative one in achieving the MDGs.

People are getting less nutrition as food prices increase and placing pressure on the budgets of poor households, thereby undermining progress in attempts to half the population who suffer from hunger and extreme poverty. I'm not saying to you have to stop eating to make a difference, but it's worth thinking about how the rise in food prices is affecting others around the world.

A lasting legacy, inspiration and hope - From Dr. King to President-elect Obama

On August 2, 1983, the U.S. House of Representatives approved law to make Martin Luther King Jr.'s birthday a national holiday on the third Monday in January. The U.S. Senate approved the bill, and on November 2, 1983, President Ronald Reagan signed it into law. The first observance of Dr. King's birthday as a legal national holiday was on January 20, 1986.

As we celebrate the birth of Dr. Martin Luther King, Jr. today, we are also on the eve of an unprecedented 4 million people descending into Washington, DC from all parts of the world to witness what many describe as the fulfillment of his dream.

It's quite amazing to think how far the US has come in terms of race relations since the days of the civil rights struggle led by Dr. King. Just think, in August 1963 an interracial crowd of more than 250,000 people attended the March on Washington, during which Dr. King made his famous "I Have a Dream" speech on the steps of the Lincoln Monument. On January 20, 2009, on the opposite end of the National Mall, on the steps of the Capitol, President-elect Obama will be sworn in as the first African American president in US history.

There are many who see Barack Obama's achievements as the fulfillment and legacy of Dr. King's dream. His delivery in his speeches quite prophetic and reminiscent of King himself. It has been recognised globally that President-elect Obama is being judged solely on the content of his character, his wisdom and his brilliance and not on the color of his skin. Could anything be more representative of the fulfillment of Dr. King's dream than that? If Dr. King was here today, he would looking down proud of the fact his dream has been fulfilled - in less than a generation no doubt.

Happy birthday Dr. King.

What is Africa's challenge? Ask Wangari Maathi.

I had the pleasure of sitting down with 2004 Nobel Peace Prize winner Dr. Wangari Maathi yesterday in the lobby of the Marriott hotel in downtown Washington. Believe me, this is rare given her busy schedule!

For those not familiar, Dr. Maathi is the founder of the Green Belt Movement, an environmentalist, a civil society and women's rights activist, and a parliamentarian. I should add that she was the first woman in Sub Saharan Africa to gain A PhD.

Since winning the Nobel Peace Prize, Wangari Maathai has become a spokesperson for a number of important initiatives. Her organisation the Green Belt Movement began by addressing a serious problem with simple solution: getting communities to plant trees as a symbol of their commitment. Since 1977 she has overseen the planting of around 10 million trees on the continent of Africa.

We talked in depth about the Congo Basin project. Dr Maathi told me she was full of praise for Prime Minister Gordon Brown and the British Government for their support of the Congo Basin Project and for recognising the important contribution gained from forests especially the Congo forest. The Prime Minister (then Chancellor of the Exchequer) In 2005 gave a $100 million contribution for a new fund to support conservation of the Congo Basin Forest Ecosystem. This initiative will help to protect the Congo Basin Forest ecosystem spanning ten countries in central Africa.

The Congo Basin Forest Ecosystem in central Africa plays an important role in absorbing CO2, a main greenhouse gas, and provide the world with oxygen.

"The Congo Basin Forest Ecosystem must be protected, because without them not only will the global climate not be stabilised, but the world will suffer, in particular the region of Africa which has few options"

Of course I took this opportunity to tell Dr. Maathi about the British Embassy's work on climate change and the upcoming Women's Empowerment conference at the National Geographic Society which will focus on "Women and the Global Outlook."

On babies and bathwater

As Antonio warns in the Merchant of Venice, the devil can cite Scripture for his purpose. And you can make quite a lot of mischief quoting Shakespeare too. The villain of Othello, Iago, gets many of the best lines in the play as he manipulates events to bring about the heros doom. In one memorable passage, Iago lectures Othello on the importance of reputation:

Good name in man and woman, dear my lord,

Is the immediate jewel of their souls.

Who steals my purse steals trash; 'tis something, nothing;

'Twas mine, 'tis his, and has been slave to thousands;

But he that filches from me my good name

Robs me of that which not enriches him,

And makes me poor indeed.

The global economic crisis has filched many good names (not to mention a fair few purses). Some of this is deserved: the notion that markets are intrinsically self-regulating, for example. As President Barack Obama observed in his recent address to Congress: without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited.

But some reputations need rehabilitating. Open markets have lifted living standards for millions across the world, relieving the burden of crushing poverty. We must not reject them.

Similarly, some people now claim that making things is always better than providing services. This is mistaken both manufacturing and services have their place in todays economies. Within this, financial services have come in for particular flak. But while we may reject some of the worst excesses that preceded the economic crisis, we should also recognise that modern financial services provide powerful tools for allowing firms to raise capital, allow businesses and households to manage risks, and create higher returns for savers.

And, for some, the whole Anglo-Saxon economic model has been tarnished. While some criticisms are justified, many are not and I worry when they are directed particularly at the UK. Correcting some of these misconceptions will be a big project for me and my colleagues at the Washington embassy in the coming months.

Green Shoots?

20 March - Noruz - or the Iranian New Year, was always my favourite time of year in Iran. Sunshine, warmer temperatures, a long holiday and plenty of relaxed socialising with friends, not to mention the fact that it was the only time in the year when Tehran was not masked by a brown, clagging smog - all giving rise to positivity and optimism for the year to come. The Noruz period would see a "Haft Sin" (seven items beginning with the Farsi letter 'S') in every home - one of those items is always a small dish containing with new shoots of grass, wheat or barley, symbolising a fresh start. In the concrete jungle of Tehran, it was always heartening to see those green shoots taking root for a few weeks, even if it sometimes felt as though the dense, brown smog would eventually discolour and smother them.

So for this reason President Obama's Noruz message to the Iranian people resonated loudly with me, as I know it did to many Iranians. Perfectly pitched as it was, though, clearly it will take more than a three minute video address to overcome 30 years of mutual hostility. Karim Sadjadpour set out the context very well here - in particular by explaining that "it takes two to tango". The Iranian regime's first reaction to Obama's message was predictably defensive: it would be hard to imagine otherwise. But let's hope that these green shoots, planted by Obama, will properly take root, and fight their way through the smog which will be belched out by the regime in the coming months.

No short-term fix to Pakistan's problems

The terrible suicide attack at the Marriott Hotel in Islamabad last weekend has caused me to step back and reflect. Like everyone else, I was shocked at its brutality, and send my condolences to all involevd.

Pakistan is precariously poised, no doubt. On the one hand it suffers from instability in its border areas, which we all fear will spread to militancy and terrorism outside Pakistan. On the other its economy badly needs a shot in the arm - essentially a huge and complex package of aid - and its newly elected civilian government needs all the support it can get.

We, the US and others all want to help and support the new government of Pakistan in its tough task ahead; gatherings of foreign ministers in New York this week are bringing coherence to this. But there is tension there: one problem requires the tactics and tools of a hard-core security strategy, complete with military hardware and trainers; the other necessitates long-term political and developmental strategies adressing educational needs and institutional reform. Inevitably the former wins the priority battle when plans for terrorist activity are either uncovered or, much worse, carried out. But both are needed in a sustained manner. We all must keep a sense of perspective, and our eyes fixed on the long-term goal. I thought this editorial in the respected Pakistani newspaper The Dawn helped to remind us of that need.

Looking forward in Afghanistan

Nearly there now - the Afghan Presidential and Provincial Council elections happen on Thursday this week. Plenty has been said and written about them already, so I will not add much more here. Suffice to say that President Obama has often described these elections as "the most important event in Afghanistan this year". They are hugely important, for us all - elections that are perceived by the Afghan people as credible, inclusive and secure will provide momentum to the task that we are all engaged in: helping Afghanistan stand on its own as a self-confident, robust state which can repel the likes of Al Qaida from ever again taking root in their country. In spite of the mood of intimidation which the Taliban are trying desprately to forge (including those two terrible suicide attacks in Kabul over the last couple of days), I hope that the Afghan people will participate wholeheartedly, and with optimism that these elections will help them along their difficult path.

In addressing the ongoing insurgency and forthcoming elections, David Miliband wrote Monday in the Daily Telegraph that "whether military breakthroughs are translated into strategic success depends on politics". Essentially this means that "only legitimate, clean and competent Afghan government, recognising local tribal structures as well as national democratic ones, can provide an alternative focus for loyalty [for the Afghan people]. Effective protection and a better life is the best way to keep the insurgency at bay". And once the elections are over, that "there are three priorities for the new government if it is to defeat the insurgency and build a more stable and prosperous state". These are:

a clear determination to protect the interests of ordinary Afghans - this means better governance.
a strategy to reconcile and reintegrate insurgents prepared to give up violence.
better cooperation with Afghanistan's neighbours, particularly Pakistan.

He concludes that "the next Afghan government has a duty to show its determination to root out corruption, the dedication to build a state that properly protects its people and the vision to build an inclusive political settlement. In that work they deserve strong international support. Britain's job is to be part of that effort".

Readers might like to link through to this new site just published by the British Government's Afghan unit in London. It pulls together all of our relevant material on the forthcoming Afghan elections, plus further links to other interesting articles, including a blog by Lisa Bandari, one of my political officer colleagues out in the British Embassy in Kabul, who has been following the elections build-up closely for several months.

The political elements of our Afghanistan Strategy

While many column inches have been devoted in recent weeks to the actions of the British military in Helmand (including by me last week), yesterday at NATO, our Foreign Secretary, David Miliband, outlined the key political elements of our Afghanistan strategy. After stating clearly that our objective in 2001 - the need to deny Al Qaeda a base from which to launch attacks on the world - still holds true in 2009, the basic thrust of his speech was that we can support the Afghan government in dismantling the insurgency which still threatens to provide that base by using the dual approach of military power and political engagement.

It has long been accepted wisdom that military force alone can not achieve lasting success in a counter-insurgency campaign. The role of military operations, such as those currently being conducted by British troops in Helmand, alongside their US and Afghan counterparts, is to deny insurgents the space to operate. Clearing and holding territory allows the Afghan government to extend its reach, delivering basic governance, justice and development. But whether military gains are translated into strategic success will ultimately depend on whether the insurgency is also undermined by politics.

David Miliband said that the future of Afghanistan must be shaped by three political strategies:

a strategy for dealing with the insurgency through reconciliation and reintegration, leading to an inclusive political settlement in Afghanistan that draws in conservative Pashtun nationalists (providing, of course, they renounce violence and agree to abide by the Afghan political system).
a strategy for reassuring the wider Afghan population that they have a secure future under the legitimate Afghan government - which will depend on credible, clean government at provincial and district level, working with the grain of tribal Afghan society - and that the international community will stand by them as long as our support is needed (which will be long after the last combat troops have left)
a strategy for ensuring that Afghanistan's neighbours (including Iran and Pakistan) accept that Afghanistan's future is to be a secure country in its own right, in which each of its neighbours have a responsible and open stake - a friend to all and a client to none, in other words

He finished by setting out the priorities for the next six months, as seen by the British government: the Afghan presidential elections on 20 August must be credible and inclusive. The winning candidate must not only present a clear manifesto, but move quickly to implement it. The biggest shift in 'burden-sharing' must be towards the Afghan state assuming greater responsibility. In Pakistan, the international community must forge a new, sustained and long-term partnership focused in backing civilian institutions and democratic government.

In other words, politics can and must succeed in Afghanistan.

More troops to Afghanistan?

Since the then candidate Obama (much earlier this year) pledged more US troops to help resolve the worsening security situation in Afghanistan, many people have joined that bandwagon. Sounds reasonable: the way to deal with more violence under any circumstances is often by having a greater security presence, and one thing that everyone can agree on about Afghanistan right now is that the security situation is not good, and trending in the wrong direction. Secretary Gates and others have now outlined US plans for up to three more combat battalions deploying to Afghanistan next year, so the intent (clearly shared by the current Administration - Gates still works for President Bush) is becoming real. There has been plenty of speculation in the international media and blogosphere about the UK sending significantly more troops to Afghanistan as we wind down our presence in Iraq during 2009. For us, this speculation remains just that: no final decisions have been taken on major troop uplifts. But we have, however, deployed 300 troops of the Theatre Reserve to Afghanistan between now and August 2009 (as annoucend by the Prime Minister today).

But my conversations around Washington over the last few weeks on the future of Afghanistan policy have gone much deeper than pure troop numbers. Our militaries, fantastically brave and resilient as they are, can only march forward towards success if they are part of a more comprehensive effort. These extra military deployments are being discussed within that context: more civilians; better targetted and coordinated development projects; and above all an Afghan government leading its people in a credible fashion. No one would claim to have found the silver bullet. But there is a definite consensus emerging on the major principle: Afghanistan cannot be solved by military means alone.

A different way to speak to Muslims

Well, here we are. President Barack Hussein Obama. Like everyone else lucky enough to witness at first hand the inauguration in Washington DC today, I am pretty sure the memories will be with me for life. But aside from the huge crowds, the excited atmosphere, and the massively impressive pomp and ceremony, I thought President Obamas inaugural speech hit some sensitive spots with great dexterity. Not just for Americans who had voted for him, or even for Americans who had not. But for all those out there in the world who might still be wondering in what direction the new President will take his country, he made his intention clear: And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and we are ready to lead once more.

In Iran I am sure his every word will be pored over, by the regime as well as by the general population. Two aspects of his speech sparked my interest in this context. Firstly, according to speechwars.com, this was the first ever US Presidential inaugural address which made direct reference to Muslims: For we know that our patchwork heritage is a strength, not a weakness. We are a nation of Christians and Muslims, Jews and Hindus - and non-believers. We are shaped by every language and culture, drawn from every end of this earth; and because we have tasted the bitter swill of civil war and segregation, and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace. It will be hard for a Friday prayers leader in Tehran to twist that into a direct attack from the Zionist-Christian alliance towards the Islamic world, although I am sure they will try.

The second line held out a conciliatory hand towards the wider Islamic world, using the sort of language that Iran often touts when it feels that the West is being unfair: To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. Then a warning that the ultimate arbiter on the quality of leadership bestowed upon a country is the people of that country themselves: To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West - know that your people will judge you on what you can build, not what you destroy. To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history; but that we will extend a hand if you are willing to unclench your fist. Powerful stuff, and once again, it will be hard for Americas opponents to argue convincingly against that.

Solving the Iran Puzzle. Whose problem is it anyway?

Iran is a complex country. Everyone agrees with that. "We" (which at different times over the last few years has meant the UK, UK/France/Germany, Europe, the E3 plus US, the E3+3 - almost any combination of the membership of the international community) are all worried about the notion of Iran getting a nuclear weapon.

Rightly so - the prospects of yet another broadside being fired into the Non Proliferation Treaty (the only legitimate piece of global architechture out there which has a chance of preventing the spread of nuclear weapons technology); an arms race in the Middle East; and of course President Ahmadinejad's rhetorical blasts at Israel being backed by real weapons, are all highly toxic.

Yesterday I attended a symposium at the US Marine Corps University at Quantico where a wide-ranging presence attempted to address the Iran puzzle. Unsurprisingly there were no silver bullets discovered - if there were any out there, the huge numbers of highly qualified brains who have been thinking about this for years now would have found them. Instead we all concluded that the jigsaw puzzle must be solved by steady, sustained and comprehensive effort, using all the tools available to us. Some of those tools involve pressure, and some engagement. And a key element of the solution is turning the "we" into one team, all pulling in the same direction with both pressure and engagement.

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Afghanistan elections

Guest post by Richard O'Hara. Richard is a Second Secretary, Political, at the British Embassy in Washington, focussing on Afghanistan and Pakistan. He has been in the Foreign and Commonwealth Office since 2004, and was posted to Afghanistan during 2007 and 2008. Most recently, Richard was on secondment to the US Department of State for nine months, working on their Afghanistan Desk.

All Afghan-watchers know that on 20 August, Afghans take to the polls to vote for their next President. On 5 August, British Ambassador to Afghanistan Mark Sedwill gave a briefing to the media about the build up to the elections. The UK, and the wider international community, has been focusing on helping create a level playfield for all the candidates, and assisting the Afghans to ensure that these elections are credible, secure and inclusive. These elections are an opportunity for Afghans to choose their next leadership. They also represent a chance to reflect on the last eight years in Afghanistan, and to look ahead to the future. After the 2004 Presidential elections, then the 2005 Parliamentary and Provincial Council elections, these are the third national-scale elections in Afghanistan since 2001 and, for the first time, the elections will be run by the Afghans themselves.

41 Afghans registered to run in the presidential election and although a few have dropped out along the campaign trail, it remains a packed field. The main figures are well known, but apart from Karzai, Abdullah and Ghani, the others include a healthy and diverse mixture of Members of Parliament, ex-Cabinet Ministers, businessmen and even former members of the Taliban. Campaign rallies have been seen across the country, walls and billboards have been festooned with colourful candidate posters, and many candidates have participated in radio and TV debates.

But conducting these elections will be a challenge. History has shown us that the second set of elections in post-conflict countries are often the most difficult, and violence has increased in Afghanistan since the last elections in 2004 and 2005. Efforts by Afghan and International forces have focused on providing sufficient security to enable as many Afghans as possible to cast their vote. The recent increase in fighting in Helmand has, in great part, been about giving more of the local population the opportunity to access polling stations safely (up to 30% more of the Helmand population are now free from Taliban control than was the case two months ago). Yes these elections will look rather different from what we saw here in 2008, but this is democracy in the Afghan context - and that is something we should all support. No-one can argue against our strong, collective desire to allow ordinary Afghans a say in the way their affairs are run.

We promise to stay, and we promise to go

One small part of President Obama's much-heralded speech in Cairo this week hit squarely the two key planks of both the US and the UK's Afghanistan/Pakistan policy: 1) a promise to bring troops out as soon as we are confident that there is no threat eminating from" violent extremists in Afghanistan and Pakistan determined to kill as many Americans [or Brits] as they possibly can"; and 2) a promise to continue building and strengthening our respective relationships with the Afghanistan and Pakistan governments and people, not least through long-term, non-military assistance programmes.

Obama said: "make no mistake: we do not want to keep our troops in Afghanistan. We seek no military bases there". To the extent that we can work out accurately the motivations of the various parts of the insurgency in Afghanistan, we continually find that straightforward nationalism plays a part (just one part). The stationing of one country's troops on another country's soil has always, and almost universally, generated this characteristic, anywhere in the world. The people of Afghanistan, of whichever ethnic group, are no exception. We need to continue to make clear that we have no designs on any form of long-term, military occupation of these proud people.

But in the same breath, this policy needs to be balanced by another clear message - again President Obama brought it out in his speech. While the US and UK, and all our other allies, want to bring our combat troops home as soon as we can, we also want to emphasise that our governments are setting up a long-term commitment to support Afghanistan and Pakistan, politically and through our respective overseas aid departments. Obama said: "we also know that military power alone is not going to solve the problems in Afghanistan and Pakistan. That is why we plan to invest $1.5 billion each year over the next five years to partner with Pakistanis to build schools and hospitals, roads and businesses, and hundreds of millions to help those who have been displaced". The UK has commited $811 million to Afghanistan over the next four years - this is one our our biggest overseas aid commitments. We need to reinforce the message at every turn that we are not going to cut and run. We will not leave both coutries to whatever fate befalls them, once we decide that the threat to us has subsided.

The importance of Panther's Claw

Much has been said and written about the significant increase in fighting that British troops are currently undergoing in Helmand. We all mourn the losses we have suffered, and applaud the unstinting professionalism and bravery of the units involved. Back home in the UK a loud and fractious political debate has erupted over the provision of equipment to the troops, including the numbers of helicopters. But there has been much less of a focus on what is actually going on, and why.

Put simply, these classic military shaping and clearing operations are happening to allow around 80,000 Afghans to exist free from the shadow of the Taliban as the country prepares to vote in the Presidential elections on 20 August. Why is this so important? Because the more Afghans who can participate in deciding the future of their country, and who genuinely buy-in to the process, the more chance Afghanistan has to gather strength as a country and to resist encroachment by AQ and other militant groups.

As usual when our two militaries deploy together, the British operations are being conducted in close coordination with US forces, who are working to exactly the same agenda elsewhere in Helmand (bigger area, but with a lower density of people than where the British forces are). Crucially, they are also being conducted in partnership with the Afghan Security Forces - they are the ones who need to be seen defending their government and protecting their people.

But given that we are conducting a counter-insurgency campaign within a political strategy, the operations are being conducted along with a comprehensive, civilian-led effort to stabilise and develop (hold and build) the parts of Helmand province which most need it.

We all agree that there is no purely military solution to Afghanistan. What is happening in Helmand right now is a concrete example of the strategy President Obama and Prime Minister Brown have set out. We all want the military operations to take the minimum amount of time and resources possible. But they are an essential part of our agreed approach, which will set the foundations for a long-term, civilian-led aid relationship with Afghanistan.

UK-US on Iran

Today, when they met at the G8 in L'Aquila, our Prime Minister and President Obama discussed, amongst other things, Iran. While the US and UK governments still share great concern over Iran's nuclear programme, that subject obviously topped the billing. But in addition the UK has the immediate problem of dealing with the completely unacceptable behaviour of the Iranian regime in continuing to detain a member of the British Embassy in Tehran on the patently ridiculous charge of conspiring to fuel the violence in the immediate post-election aftermath. We are grateful for the firm solidarity that President Obama expressed with us on the issue.

Pakistan's Friends

Earlier this week in Istanbul, there was a high-level "Friends of Democratic Pakistan" meeting - for the US Ambassador Holbrooke attended, and for us his direct counter-part, Sir Sherard Cowper-Coles led the team. This grouping is now almost a year old - it was inaugurated at the UN General Assembly last year. It's purpose? Pretty much what it says on the tin - Pakistan's friends wanted a forum to discuss and consult with Pakistan how they can help Pakistan to ease its political, economic and security challenges. The (then) new Pakistan government, led by President Zardari, very much welcomed this offer of support, and the Friends grouping took off.

There was plenty to discuss in Istanbul. We have all watched over the last several months as the Pakistan Military and Law Enforcement Agencies have engaged in a vigorous campaign to confront militancy within its own borders. The Pakistan people have supported their authorities and security services in this campaign - a welcome showing of determination from within the population to stamp out these corrosive elements within their own borders. The Government of Pakistan has followed their extensive military operations with equal determination to smooth the difficulties caused by the millions of internally displaced people - more than 1.4 million of them have now returned home. The reconstruction and rehabilitation of the affected areas of Swat and Malakand remain a high priority of the Government of Pakistan - the Friends expressed their strong support in this crucial endeavor.

A wide-ranging list of other priority areas for the Friends to focus on was agreed at the meeting - see the official statement. The next step is a summit-level meeting of the Friends to be held once again in the margins of the UN General Assembly - it will be co-chaired by President Zardari, President Obama and our Prime Minister, Gordon Brown.

Afghanistan and Pakistan - a combined approach

Today, our Prime Minister announced the British strategy for Afghanistan and Pakistan. In truth it was an update to the strategy that he first announced on December 12 2007. The situation has certainly moved on since then; one of the biggest changes has been the new US policy developed by President Obama. So we did need to review where we were going, and make the necessary changes. Those interested in the detail behind the PM's speech can read more in our White Paper which sets out the way forward.

The main themes in our approach should be familiar to people who have watched the policy debate unfold in the US over the last six months or so:

while Afghanistan and Pakistan are very different countries, demanding very different approaches, we do need to ensure coherance and coordination between those approaches;

the cancerous insurgency rife on both sides of the Durand Line can and will only be defeated by a comprehensive approach - with political, military and development strands;

ultimately it is the people and leadership of those two countries who must come out on top - we must therefore help and support both the people and their governing and security institutions to do just that;

concentrating on the central government machinery is not enough - local (district and provincial) structures must also be built up and given the confidence to take ownership of their own futures;

reconciliation, or at the least acknowledging that there will have to be some form of political settlement in the final analysis, is a key part of the approach;

and finally - most importantly - we should all understand that this problem is a shared problem. It is not just a concern of the US, or the UK, or Afghanistan, or Pakistan, or indeed anyone else. It is in the interests of all of us to carve out a pathway to peace in that part of the world, for our own collective interests. So we should act as a team, with all the various players contributing whatever makes most sense to them, whether that is infantry, money, civilian mentors or even favourable commercial terms for Afghanistan's licit agricultural exports

A long-term commitment in Afghanistan

Afghanistan is a long-term challenge. Nobody wants to see it return to the forgotten, unsupported, failed state that it became after Communism collapsed in the 1990s. But there is no quick fix for situations with the massive complexity of modern-day Afghanistan.

History, geography, religion, poverty all play a part. We need to be clear that long-term, sustained effort - both military and non-military - will be needed to keep Afghanistan moving forward.

Having served for a short time in Afghanistan, I am convinced that there is a better future for Afghanistan - but it will come at a price, and only after a long struggle. The two or three generations of educated, middle-class Afghans who fled first the Soviet invasion in the late 1970s, and then the civil war and Taliban era of the 1990s, took with them most of the professional expertise in the country. Most of those who are left, now running the country, have spent a lifetime fighting - it is not surprising that they find it hard to efficiently run the Ministries of Education or Health, or cannot easily construct the necessary financial systems to bring money to the villages where it is really needed.

We and our allies in the international community need to stay there, keeping the violence at bay, and allowing the younger generations to flourish, for Afghanistan to have a chance at something approaching stability. I hope I will have the chance to go back there - firstly to contribute whatever I can to this aim, and secondly to see a beautiful country with a noble and honourable people finally at peace with itself.

UK leads world in climate change initiatives

I want to draw your attention to UK's Energy and Climate Change Secretary Ed Miliband's announcement regarding new climate change policies. Simply put, the UK will commit to cut its emissions 80% by 2050 compared to 1990 levels. The Secretary explicitly rejected the idea that the financial crisis should cause the world to pull back on climate change action, saying that those who advise this "misunderstand the relationship between the economic and environmental tasks we face."

Aside from committing to dramatically cut emissions, Mr. Miliband is also planning to introduce a 'feed-in tariff' for small renewable energy projects. For those not familiar with electricity lingo, feed-in tariffs are used to help renewable sources of electricity overcome the economic hurdles of entering into the competitive, fossil-fuel intensive electricity market. Germany has implemented a similar policy that has sparked a renewed interest in solar power, making German consumers some of the top purchasers of solar panels in the world.

I think this type of bold action sends a strong signal to other countries, particularly industrialised countries, that the UK is serious about its commitment to a low carbon economy. The question is, will others follow?

Being an optimist, I want to believe the answer is yes. There seems to be more and more crucial public support for action. EU environment ministers are so far standing firm on their commitment to a 20 percent reduction by 2020. However, given the current world-wide economic downturn, aggressive climate change policies may fall by the way side to addressing retirement accounts, the stock market, housing and jobs.

Making climate change local

The furor over the financial markets bailout in Washington this week has overshadowed two major developments in an entirely new market for the U.S. Government-sponsored carbon dioxide trading began yesterday in New York as the Regional Greenhouse Gas Initiative got officially underway. On the other side of the country the Western Climate Initiative issued its policy recommendations on Monday after more than a year of negotiations.

These two cap-and-trade schemes include 17 U.S. states and 4 Canadian provinces between them and are an encouraging sign of U.S. action on climate change. Even without an overarching federal regulation, states and major cities are beginning to move forward. This can be seen in higher California standards for vehicles and appliances; a massive wind power project in Texas; a Climate Action Plan for the city of Chicago that aims at a higher percent reduction in emissions by 2020 than the EU-ETS; and citywide green building standards springing up everywhere.

Climate change is the issue that taught environmentalists to love federalism after years of embracing top-down regulation as the only solution. What's happening now with the states isn't enough to solve the problem by itself, but it is encouraging that the enormous energy and passion at the grassroots has found a way to translate into policy.

80% by 2050: an emerging climate consensus?

Last Wednesday the long-awaited UK Climate Change Bill became law of the land, making Britain the first country in the world to adopt binding domestic legislation committing to long-term greenhouse gas emissions reductions. This is a welcome show of leadership to the rest of the world

The bill has an ambitious target of 80% reductions by 2050 from 1990 levels - the strictest in Europe. To prevent emissions reductions from being pushed to the end of that period, the bill includes a carbon budgeting system that caps emissions over five-year periods. There is also a 2012 deadline by which the Government must either include international aviation and shipping emissions in the bill or provide a strong rationale why not.

A less commented-upon aspect of the Climate Change Bill is the power granted to the government to implement emissions caps for non-energy-intensive businesses such as shops and offices. Unlike in the U.S., British government agencies often write up detailed legislative rules even in advance of the enabling legislation. This was the case with the Carbon Reduction Commitment, or CRC. The legislation was drafted following a year-long consultation process with businesses, who were able to have their concerns specifically addressed. For example, a "league table," or competitive ranking, was introduced into the system so that the best-performing businesses will receive additional financial and PR rewards. In fact, representatives from Boots (a pharmacy chain), John Lewis (a department store chain), and the Royal Mail visited Washington in August to express their joy at being regulated - as a result of the large financial savings from energy efficiency that they have already realized.

In another early Christmas gift to climate activists, President-elect Barack Obama recently announced that he would push for the same 80% by 2050 target in the U.S. He also pledged $15 billion per year to "catalyze private sector investment" and said - pointedly - that while his team would not attend the Kyoto negotiations this year, "Once I take office, you can be sure that the United States will once again engage vigorously in these negotiations."

I am thrilled that Obama is making such a bold commitment, so early on. Conventional enviro wisdom has been that climate change will be pushed back on the new administration's agenda in the face of economic headwinds. But the strength of the President-elect's address suggests that climate change may end up being a first 100 days priority after all, especially if Congress can find a way to tie it to a "green jobs" economic recovery package. There are solid arguments that government investment in infrastructure projects can help drive the economy forward in the medium term. I'll be listening to see how well they are made.

High-hanging fruit

Climate wonks like to talk about "ten-dollar bills on the ground" and "low-hanging fruit." We mean that there are so many financial gains to be had from energy efficiency, that a big chunk of the climate problem can be solved without costing a penny. And we've talked about this a lot in the past ten years out of frustration that even the easy part wasn't getting done in the face of a global crisis.

But now - long overdue - developed countries are starting to get serious, and there is a lot of missed opportunity and delay to make up for, fast. The agreement that the EU reached last week on climate change commits Britain - pending a vote next week - to cut its emissions to just over two-thirds of what they were in 1990, with only 12 years to do it.

Compact fluorescent light bulbs and hybrid cars are great. They'll get us part of the way. But to cut emissions by a third, we are going to have to pour money into green energy research, let some inefficient industries shut down, consume less, and yes, start somehow signalling to people the true cost of airplane travel. It doesn't mean a less prosperous economy, but it will mean a different one. We have to start climbing toward that high-hanging fruit, ready or not...

The Embassy's open house

The Embassy opens its doors this Saturday as part of EU Open House day - where the embassies of EU members in Washington, DC welcome the public.

These open houses are about more than seeing embassies. Although we are quite proud of our Embassy, this open house is mostly an opportunity to showcase the UK to the American public.

In keeping with one of the top priorities of the UK government, there will be a green theme to our open house. Visitors will have a chance to tour the Residence Gardens, learn how to green their homes and check out the new electric Mini Cooper. We'll also exchange plastic grocery bags with reusable, environmentally friendly bags.

I hope visitors will leave knowing that the UK is a leader on green action.

But equally I hope that they will enjoy a day of British culture and food. The Washington British School will provide entertainment and there will also be traditional British food and whisky available.

In true British fashion, we'll be doing all this rain or shine.

An Ambassador Calls ...

There are not perhaps too many professions where you get to meet your exact, mirror-image counterpart: but I met mine today. Louis Susman, President Obama's new Ambassador-designate to London (or to the "Court of St. James's", as it is traditionally and properly known) dropped by for my take on life in London and the relationship between the UK and USA.

It was a real pleasure to meet Ambassador-designate Susman again. He has long-standing UK connections, and we met during the Presidential Inauguration celebrations. I have no doubt that he will be a great asset for the United States in London, and a firm advocate of the special relationship between our two countries. He goes to the UK at an important moment for the transatlantic partnership. The international agenda is a crowded one: from Afghanistan to the global economy, from Iran to climate change, we face a raft of truly significant, but never straightforward, challenges. The partnership between the USA and Britain will play a critical role. So he can expect a busy time.

I know from personal experience what a privilege it is to represent your country abroad. It's doubly special to be the British Ambassador to the United States, where historical and contemporary ties have created a real affection for the UK amongst so many Americans. Ambassador-designate Susman will enjoy similar advantages. America has always had a special place in UK hearts, but the excitement generated by the election of President Obama has undoubtedly produced a huge reservoir of goodwill towards the States that will be very obvious to the Ambassador as soon as he steps off the plane.

I wish him the very best of luck.

Economic recovery and the road to Pittsburgh

This week, I've been back in London for a meeting of the Foreign Office's senior leadership. Whilst there I took the chance to see Baroness Shriti Vadera, Minister for Competitiveness and Enterprise, Jon Cunliffe, the Prime Minister's Adviser for International Economics, who also serves as the G20 Sherpa, and sat in on a meeting between Prime Minister Gordon Brown, Chancellor Alistair Darling and US Treasury Secretary Tim Geithner, who has been visiting Europe.

Unsurprisingly, the global economic recession was the number one item for discussion. Even though the immediate threat to the international financial system seems to have receded, the recession is taking its toll around the world. Crucially, the unemployment rate in most countries continues to rise, exacting a real human cost on millions of households.

We're now almost exactly halfway between the G20 Summit that took place in London in April, and the upcoming meeting scheduled for September in Pittsburgh.

We have made some significant progress on the commitments leaders made in London. Here in the US, the Administration won approval from Congress for a big uplift in the IMF's resources. And proposals for reforming financial regulation have moved forward in the UK, the US and in Europe. You can read the proposals published by the UK Chancellor of the Exchequer Alistair Darling, last week here.

But as well as taking stock of progress since London, leaders in Pittsburgh will want to focus on the future. I think a large part of their discussion will look at what kind of an economic recovery we want to see. After this recession has passed, we want to promote growth that is sustainable and balanced, not prone to speculative bubbles and overly reliant on particular sectors or countries. We need to make sure that recovery takes place in the context of the Copenhagen Climate Conference this December, where countries will seek a global agreement to limit greenhouse gas emissions.

Developing that agenda with our US counterparts will be a top priority for the Foreign Office and the embassy over the next couple of months.

The UK Economy: Entrepreneurship & Innovation

When in London earlier this month, I and other senior British Ambassadors met some of the leaders of Britain's manufacturing industry. It was a good opportunity to hear first hand the challenges they were facing. But it also provided a useful reality-check against the ultra-pessimistic stories you sometimes read in the newspapers.

These are difficult times for the global economy. The UK is no different. The world economy is seeing the most difficult economic conditions for generations. What we rarely hear about, though, are the business success stories that are happening every day, drawing on the tradition of entrepreneurship and innovation in the UK.

Take Rolls Royce, who earlier this week announced that they are continuing to invest in the UK's manufacturing and research base at four different sites to produce turbine components and research into greener aircraft engines. It is developments like this that will lead us to recovery. Businesses in the UK and their employees continue to deliver internationally a broad range of high value-added and sophisticated goods and services.

The UK's manufacturing sector is the 6^th largest in the world, contributing $250bn to the UK economy. It is also an area that is evolving into new areas, such as low carbon technologies, and improving its own performance: firms in the UK have increased their productivity through the application of R&D by 50% since 1997, outstripping the gains made elsewhere in the G7.

Internationally mobile companies continue to see the UK as a highly attractive place to invest. We receive more Foreign Direct Investment (FDI) than any other country, apart from the US: in 2006 the UK attracted $40 bn, exceeding France ($25 bn) and Germany ($5bn). American Axle & Manufacturing (AAM) is the world leader in the design, engineering and manufacture of driveline and drivetrain systems for trucks, 4WD vehicles and cars. Global success in this highly competitive field depends on the early adoption of leading edge manufacturing techniques. AAM used the UK Trade & Investment (UKTI) R&D Programme to identify specialist welding techniques developed by a leading UK research centre.

Our UK Trade & Investment team also of course provide a range of services and help to UK companies looking for opportunities abroad. Take Kromek, a venture-backed high technology company, for example. They recently launched in Washington a series of ground-breaking products based upon digital x-ray detection techniques. They are the first in the world to directly identify the composition and presence of threat liquids, reducing the risk, hazard and costs posed to travel.

Clearly the current situation is difficult. But it is equally clear that there are fundamental business strengths in the UK that will help us to recover from today's downturn. I am proud that sustaining and expanding the business and economic links between Britain and America, and nurturing our business partnerships in difficult times, is a central part of my and the Embassy's job here.

Helmand: the UK commitment and the US troop uplift

Prime Minister Gordon Brown has made clear the UK's unwavering commitment to a secure and stable future for Afghanistan. That is therefore a subject on which I and my team in Washington, both diplomatic and military, work extremely closely with the US Administration. As we welcome the large increase of US troops in Helmand, where our troops continue the hard fighting in which they have been engaged for several years now, it is a good time to reflect on what we have achieved so far.

The performance of the 8,300 UK troops (rising to 9,000 for the elections period) currently in Afghanistan has been, and continues to be, impressive and successful. We are by a long way the second largest contributor to the NATO force, after the US. Since 2006, when UK forces first deployed to Helmand, much has changed for the better.

After initially taking the fight to the Taliban around the province, UK forces have established a presence in the five major population centres where 85% of the Helmand population live - training the Afghan National Army and Police and allowing development advisers, including from international organisations like the UN, to work with local Afghan leaders and government representatives. All major towns in Helmand are now under the Afghan Government's control.

The UK's Provincial Reconstruction Team in Lashkar Gah now contains over 80 civilians, working across the full governmental agenda to train and support their Afghan counterparts as they make their democratic writ run across the province.

However, despite this progress, the insurgency remains determined, violent, and resilient in Southern Afghanistan. In its indiscriminate attacks, it continues to present a significant threat to the Afghan population. UK forces in Helmand have seen some of the hardest fighting in the whole country, which is reflected by the numbers of casualties we suffer. 176 British Forces personnel or Ministry of Defence civilians have died while serving in Afghanistan since 2001.

So the large increase of US troops and trainers currently being deployed to Afghanistan is welcome. The majority of these forces will deploy to Southern Afghanistan and will be operating closely with the Canadian, Danish, Dutch, Australian, British, and above all, Afghan troops who are already there.

The deployment presents three opportunities. Firstly, to consolidate the security gains we have made in Southern Afghanistan, allowing the Afghan government to operate for the benefit of the Afghan people. Secondly, to put conditions in place for Afghanistan to hold credible and inclusive presidential elections in August. Thirdly, to provide greater assistance in training the Afghan National Army and Afghan police to provide the security themselves.

The United States is our closest ally. Our relationship is based on shared values, working together to tackle threats to international security, to advance global stability, and encourage freedom and democracy. As a result of the US troop inflow in the South, the British military, our civilian staff, and our allies will be able to do much much more to support the Afghan Government, and deliver a stable and secure Afghanistan that can never again foster a terrorist threat.

The British Defence Secretary, Bob Ainsworth, has today given a speech about the UK's commitment to Afghanistan - it gives a comprehensive assessment of our enduring commitment to Afghanistan, and is worth reading.

It's an exciting time to be in Washington

The embassy hosted a fascinating discussion on US history and its politics with top British historian Simon Schama last night. He's in Washington to promote his four-part documentary "The American Future: A History." His documentary looks at some relevant issues through the lens of US history: jobs and the economy, wars overseas and immigration.

Simon Schama, myself and Thomas Friedman after watching selections from Professor Schama's documentary.

I think this event showcases the diversity of what we do at embassies. They are often thought of as creating political connections between governments. It's important to remember though that embassies build cultural relationships as much as political, defence and economic ones.

We're very busy at this embassy with both political and cultural exchanges. Professor Schama's talk is the first of three events leading up to the inauguration of President Obama on Tuesday. Dr Henry Kissinger will come tonight to give a lecture under the auspices of the Atlantic Council on trans-Atlantic issues under the new Administration. On Saturday, I'm hosting the Illinois delegation to the inauguration.

All three events will bring together people with an interest in the unique UK-US relationship. They will celebrate our cultural, academic and political ties at an exciting and rich moment in America's history and its relationship with its allies around the world.

Countdown to Copenhagen

Last weekend the British Embassy launched our new "100 Voices 100 Days" countdown to Copenhagen on the website. In just three months, world leaders will gather in the Danish capital to try and find agreement on a climate change deal that Ed Miliband, our Secretary for Energy and Climate Change, describes as "ambitious, fair and effective".

Without a deal, the world risks catastrophic climate change, with huge implications for water and food resources, security and our environment. It is a top priority for the British Government. This Embassy, along with the UK's other Embassies across the globe, is working hard in support of it.

In the run up to Copenhagen, there is a huge amount of international activity going on, especially here in the United States. September is going to be an important month. In the next couple of weeks we have the Major Economies Forum in DC, which Ed Miliband will attend, and will help shape the outline of the climate deal that will be negotiated in Denmark. This will be immediately followed in New York by the United Nations' Climate Week and the General Assembly, at which our Prime Minister and Foreign Secretary will discuss these issues with the Secretary General and other leaders. All this just before the G20 meeting in Pittsburgh, where the focus will be on the global economic outlook and a sustainable recovery.

So it's going to be a busy time. As it should be, since time is the one luxury we do not enjoy. Action is needed now.

The United States is central to this whole endeavour. Not just because it has the world's largest economy (with a fifth of the world's global CO2 emissions), but because American engagement is vital to persuading other countries, especially India and China, to act too. So I warmly welcome President Obama's pledge to help lead this global effort. But American attitudes to climate change, and the country's willingness to take the measures necessary to help prevent it, cannot be settled in the White House alone. Congress is clearly vital too. In the coming weeks the Senate will restart the debate on climate and energy legislation. We'll be watching this closely.

But it goes even broader than that. This is a subject for the whole of American society and all age groups. State and local governments, business and unions, think tanks and media, universities, school and individuals will all want to pitch into this debate and help shape a collective resolve.

Our "100 voices" campaign is a small contribution to that, allowing everyone to participate in this debate and share ideas about how we go forward. I encourage you to take a look, offer a comment, and even contribute a video yourself. For all of us who share a deep concern about this grave threat, we need an equally deep commitment to take action.

Iftar at the Embassy

Last night I had the enormous pleasure of hosting an Iftar - the breaking of the daylight fast during the holy month of Ramadan - for over 150 Muslim and non-Muslim guests from US society and government, and fellow Ambassadors from across the world. We were especially lucky to be joined by the UK's most senior Muslim Minister, Sadiq Khan, and a delegation of British Muslims who had travelled out to the States for discussions with American Muslims and colleagues.

Hosting the Iftar was a double first - both for me personally and for the Residence here in Washington DC. It required a few special preparations, including the setting aside of a room for prayer and, with judicious use of a compass, establishing in which direction Mecca lay.

At 7.24pm - as the sun slipped below the Washington horizon - Imam Hendi, from Georgetown University, began the call to prayer for those practising Muslims in attendance. As is traditional, guests were offered dates. And, after prayers and brief welcomes, the Imam blessed the food - a delicious selection of halal meats, flat breads and fruit kebabs. For those observing the daily fast, it was time to share food and conversation with friends and colleagues.

Sadiq Khan addressed our guests on behalf of the UK, commenting on the warmth of feeling that exists between British and American Muslims. His observations on the common bond and character that Americans and Britons share, irrespective of religion, rang very true for me.

Events like this are important. British culture and society are hugely enriched by the contribution that over two million British Muslims make to life in the UK. And it is right that the British Embassy plays its part in helping to showcase that. We're also working to foster more connections between Muslim communities in the UK and the US, strengthening the important people-to-people links between our countries that give life to the special relationship.

As I said to our guests in my welcoming remarks, they were all from different backgrounds and cultures - but we came together that night sharing a common belief - in peace, diversity and tolerance.

Ramadan Mubarak!

British approach to counter terrorism

I had the opportunity on Wednesday to speak to Columbia University's School of International & Public Affairs about the British response to terrorism. Terrorism is a menace which both the UK and US have suffered from and continue to face. People in New York and my hometown of London - as well as many other cities around the world - know this threat well and have experienced terrible loss and tragedy as a result of attacks in recent years.

Attacks in the US, the UK and many other countries across Africa, Europe and Asia have at their root a misguided and extreme interpretation of Islam. In the UK, threats have often come from people who have been brought up in our communities, while in the US, terrorism has been largely an external threat. So although our approaches have involved very substantial co-operation between our law-enforcement and intelligence agencies, we have different areas of emphasis.

In the UK, we have directed a tremendous amount of resources to the pursuit and disruption of terrorist activity. By 2011, the amount of money being invested in this area will have doubled since 2001. This has allowed us to increase the size of the Security Service and the number of police involved in countering violent extremism. As a result, we are regionalising our counter-terrorism effort in a way we never have before with four regional counter-terrorism policing hubs in London, Manchester, Birmingham and Leeds, with a fifth on the way. These units extend our reach and effectiveness in tackling terrorism.

We have convicted more individuals for terrorist offences. Since the beginning of last year, 81 people have been found guilty as a result of 23 operations. Part of this success is due to the strengthening of our counter-terrorism legislation, for example by widening the range of offences.

We work closely with Muslim communities in the UK, the vast majority of whom share our determination to tackle the extremists and their message. It's important to those communities, and to us, that we define the extremists not by their religion, but by their readiness to commit criminal acts of terrible violence. This is what makes them unacceptable in our society, and why there is broad cross-community condemnation of them and their methods.

It is clear that no country can counter these threats alone. The US is Britain's closest partner in the fight against international terrorism. This is perhaps most obvious in Afghanistan where UK and US troops are engaged in the difficult but vital mission of building a secure and stable country that can no longer harbour terrorists or be used as a base from which to plan and launch attacks on our countries. But in so many other parts of the world the close co-operation and sharing of intelligence, expertise, and technical capabilities between the UK and US makes our efforts to combat terrorism much stronger and more effective. Co-ordinating this joint approach is a priority for the British Embassy. It is essential for both our countries' security that our co-operation should continue and grow.

Washington, New York and the Financial Crisis

The global financial crisis has been the number one issue for the Washington Embassy in recent weeks. Its been raised in nearly every meeting I have had, with the Administration, Congress, business leaders, journalists and of course the Presidential campaigns. And its been at the centre of the Presidential debates I was lucky enough to attend the second and third, in Tennessee and in New York.

Our small Embassy economic team, drawn from the UK Treasury, Bank of England and Foreign Office, has never been busier. Throughout the past few weeks there have been constant contacts between our Government, Bank of England and regulatory authorities and their American counterparts, which the Embassy has helped facilitate. Our Prime Minister, Gordon Brown, and the Chancellor of the Exchequer, Alistair Darling, announced a major package of measures to stabilise the banking sector last week. Last weekend, the Chancellor and the Governor of the Bank of England, Mervyn King, both stayed at my Residence while meeting their counterparts at the IMF and World Bank. It was my job and that of my team to explain our approach to our contacts here ahead of those meetings. Last weekends meetings of G7 and G20 Ministers drew on the main elements of the British plan and provided a new level of international coordination on handling the crisis.

This in turn informed the decisions taken at the Euro Group meetings last Sunday and yesterdays European Summit in Brussels. We now have a detailed and clear European position coordinated with the United States and our other major financial partners.

The crisis was the subject on everyones lips at the historic Al Smith dinner in New York yesterday evening at which both Senator McCain and Senator Obama spoke with great wit and dignity. Among those I talked to, there was a welcome recognition of the role played by Gordon Brown and other European leaders, in consultation with the US Administration, in helping to find a way forward.

Gordon Brown has explained the present position in an article in todays Washington Post. This looks beyond the immediate stabilisation of the financial system to the need for major reform of the global financial architecture and a sound new regulatory framework. These will provide the best basis for avoiding a recurrence of the turbulence we have seen over the past year or more. The UK strongly supports the idea of holding a Leaders Summit in the near future to discuss a shared international response to the longer term issues thrown up by this first global financial crisis of the 21^st Century.

I expect this set of issues to remain high on the Embassys agenda in the weeks and months ahead.

Launch of the new all Electric Mini: Mini E

This week sees the launch of the new all electric Mini. I have particular reason to be happy about this, as I was fortunate to drive one on Monday, at an event held jointly with the German Ambassador. I can confirm that it is possible to get a 6 3 Ambassador comfortably into the driving seat of this small but perfectly formed British-German car! The body is built in Cowley, Oxford, with the electric motor and battery shipped from BMW in Germany.

With my first hand experience, I think there are three reasons to celebrate this new twist on a modern icon. With apologies to Jeremy Clarkson

First, the Mini stands for brilliant British design. It also symbolises youth, confidence, excitement and mobility in the widest sense of the word. That was true when I was growing up in the sixties in London and remains true today. For those wondering about performance I can reassure you that the new Mini is quick off the mark and great fun too fully charged it has a range of 120 miles and a top speed of 95mph. The aim of the Mini Es launch by BMW is to gauge whether there is a sufficient US market by leasing 500 Mini Es on a trial basis in New York and Los Angeles.

Secondly, the most significant technical innovation of the all-electric Mini shows that you can have low, or in this case zero carbon, and high growth. Thats good for consumers, good for producers and good for the planet. Low carbon and high growth is of huge importance to the British Government. Last month we hosted a meeting of international experts on electric vehicle technology to get up to 100 innovative low carbon demonstration vehicles on the road by the end of 2010. BMW are also involved.

Thirdly, Im confident that the new Mini E, being launched on the eve of the original Minis 50th anniversary, will also capture peoples imagination and reflect what todays consumers want: great design, innovation, engineering excellence and a high degree of environmental and social responsibility. Id like to think that the Minis creator, Sir Alexander Issigonis would approve too.

My video blog on the London Summit

G20 in Pittsburgh

This week, G20 leaders meet in Pittsburgh, Pennsylvania for their third summit since the global financial and economic crisis erupted last fall.

This will be a different sort of summit from the meeting in London in April. The world economy is showing the first signs of recovery. Although it remains fragile, the crisis atmosphere seems to have abated. But, as my Prime Minister has made very clear, "now is not the time to lose our focus"; nothing can be taken for granted and policymakers must not shirk from the challenges.

So as part of this it will important for leaders to review implementation of the commitments they made in April, including the establishment of the new, more inclusive Financial Stability Board to provide better oversight of financial regulation and supervision and more than $250bn in new bilateral funding for the IMF.

But it will be more than just a stocktaking exercise. President Obama's recent remarks on the forthcoming summit - that "all of us must remember that our work is far from complete" - is a salutary reminder of the profound economic challenges still facing our economies.

There will be much ground to cover but a few key strands are emerging. Can G20 leaders work together towards a new compact for global growth? Can we promote a sustained recovery, including identifying and supporting future sources of growth? How do we best demonstrate that the G20 will continue to take concrete action to mitigate the impact of the crisis on the poorest countries? And how does this process help us to address the acute issue of climate change?

None of these questions is straightforward. But leaders will need to find the answers. I will be in Pittsburgh on Thursday with the Prime Minister; I'll let you know how they all get on.

Plan ahead. It wasn't raining when Noah built the Ark.

The UK sees climate change as a significant environmental, economic, and national security threat. Most people we speak with in the US recognise the environmental and economic argument but the security case for tackling climate change remains a bit out of reach.

Despite this, a very strong case can be made that the impacts of climate change will exacerbate existing weaknesses in states and regions around the world already struggling with water shortages, crop decline, weak governance, or ongoing conflict.

In March of this year, the UK released its first ever National Security Strategy (NSS). In it, climate change was identified as "potentially the greatest challenge to global stability and security, and therefore to national security."

And the UK is not alone in thinking so. The US National Intelligence Council has issued a National Intelligence Assessment (NIA) on climate change. While it has not been released publicly, Dr. Thomas Fingar, Deputy Director of National Intelligence for Analysis and Chairman of the National Intelligence Council, in his testimony before a House Congressional Committee, stated that "global climate change will have wide-ranging implications for US national security interests over the next 20 years."

Addressing the national security implications of climate change is absolutely vital. Ignoring the potential trouble spots undermines the urgency of mitigating greenhouse gas emissions (GHGs) within the next 10-15 years, and avoids facing the inevitable impacts to which we are already exposed.

Funny, you don't sound British

In my job on the Energy and Environment team at the Embassy, I get that a lot. You would be amazed - or perhaps not - at how many people are disappointed when I call on the phone or show up for a meeting and sound, well, like them - an American.

The Foreign Office hires a lot of locally engaged staff, also known as Americans in this case. The intent is to give the UK better insight into the inner workings of the host government and country. I think that's particularly important in Washington given the pivotal partnership between the US and UK on challenges that affect the whole world.

That is especially true when we look at efforts to combat international climate change. We are already witnessing the consequences of climate change and we're likely to see even greater impacts within the next few decades (the rapidly shrinking Arctic is a stark example). The UK recognises the urgency and the important role the US can play in avoiding the dangerous effects of climate change. And that's the reason I work in a place filled with funny accents, including my own. Not because I want to pick up some "cheeky" British terms, but because of their recognition of what climate change means and the high value they place on working with the US to find a global solution to the problem.

Do you own stock in the electric company?

My wife got me to listen to NPR's recent interview with pullitzer prize winner (and Marshall Scholar alum) Tom Friedman. I have rarely heard such a powerful, communicative advocate for policies to stimulate innovation in the energy sector and tackle CO2 emissions. His line on what our parents said when we left the lights on made me wonder if he was in my house 30 years ago.

A feeling of resolve and optimism

And so they came. From farms, villages, towns and cities across the United States to their capital. I met pilgrims from the coast of California, the plains of the mid-west and the shores of New England. They came to Washington to say that they were there. We were there too. On the mall. On this great day. Two people amongst the 2 million listening intently to the new President's words for the world. The day was cold but hearts were warmed.

There has been a celebratory atmosphere in Washington over the past week. Yet there was a solemn dignity around Tuesday's happy crowds. As President Obama said wherever we look there is work to be done. The atmosphere on the Mall seemed to reflect the measured tone of the President's speech. I know that the UK Government will work tirelessly and ever more closely with President Obama's Administration and Congress to ensure that we meet the challenges of our time. The challenges are great but the sense of purpose and possibility evoked today is greater still. I feel confident that increased public and private diplomacy, political will and the will of our peoples will, in time, solve our economic challenges, the threat from climate change and conflict whether in the Middle East or the hills and plains of Afghanistan.

My 14 year old nephew from Chicago asked my wife and I where he could volunteer on Martin Luther King Day (the then President-Elect had called for people to volunteer). There is a sense of an ever growing challenge, resolve and, perhaps as result, optimism amongst the American people.

We left the cold Mall after the speech and walked back to Virginia over a eerily car free highway bridge.

BBC Persian TV

It is great to hear that BBC Persian TV will launch on 14 January.

This has been a long standing British goal, supported by our Government. The intention is to provide ordinary Iranians with accurate, impartial news and information analysis that will help inform them and, over time encourage the natural process of change in Iran.

The BBC Persian Service has long broadcast by radio and enjoys a strong reputation. The Iranian Government have already denounced the service - although this does not stop them investing heavily in foreign langauge broadcasting, both English and Arabic.

The TV channel is part of the BBC's multimedia Persian service.

2,000 Brits and a dog fight Al Qaeda

Some 2,000 British troops and a springer spaniel called Pip have just helped to deliver a hydro-turbine that will provide power to 1.5 million Afghans. The UK has the largest presence in Afghanistan after our US allies - with many of our 8,000 troops fighting in the frontline against Al Qaeda and the Taliban. This website has more on the UK's presence.

Exchange, exchange, exchange

A number of Embassy colleagues attended a workshop at the Brookings Institution over the summer that looked at shared transatlantic policy priorities and public diplomacy. The workshop concluded that there would be most benefit from Europe and the US working together to strengthen the systematic acquisition of political capital and and trust through young leadership programmes, educational and proffesional exchanges and international public events on shared concerns.

Gordon Brown wrote on this theme during his April visit to the US. It would take be some time to record all the misconceptions that I held about the US before I came to live here as a 21 year old junior diplomat. My experiences have convinced me of the value that exchanges can have. This year's class of Marshall Scholars has just headed off to the UK. The British Council network of young leaders, TN2020, is about to have its first summit in Dublin and Belfast. Over the coming months I will be looking for opportunities widen UK and US exchanges - I have been talking to a few think-tanks about how to do this. I would be very interested to hear the views and ideas of readers.

Does a (lack of) public debate influence priorities?

Joshua Keating has posted this on Russian warnings.

The Russians have become increasingly assertive over recent years on a number of fronts.

Remember the Estonian cyber-attack? Tariffs on timber exports? Cold war style flights? We have had the Polish meat stand off, Ukranian gas supplies being off and naked aggression in Georgia. Now they are increasing military links with Venezuela.

One can envisage individual goals for each of these Russian actions. But do readers see all of these activities as part of a larger pattern aimed at a wider objective or piecemeal short-term regional geo-politicing?

Russia has real challenges ahead: a declining population, HIV epidemic, low male life expectancy and falling investor confidence. But the siloviki seem focussed on Russia's borders and beyond. Would a free press and active civil society mean a greater focus on these priorities?

A picture says a thousand words

A follow up to my recent post on the UK-led turbine mission in Afghanistan. Ex-soldier turned journalist and blogger Michael Yon has produced a brilliant blog entry on the recent successful operation. Some of his stunning photography and commentary brings home the difficult mission that coalition troops face over there.

The importance of being credible

A recent FCO publication on public diplomacy included a chapter by USC professor Nick Cull. The chapter suggested seven lessons for public diplomacy practitioners:

1. Public diplomacy begins with listening.

2. Public diplomacy must be connected to policy.

3. Public diplomacy is not a performance for domestic consumption.

4. Effective public diplomacy requires credibility, but that has implications for the bureaucratic structure around the activity.

5. Sometimes the most credible voice in public diplomacy is not one's own.

6. Public diplomacy is not always 'about you'.

7. Public diplomacy is everyone's business.

I see these lessons as sound and sensible. Behaving this way could help us develop better influencing programmes around the world. I would be interested in the thoughts of my readers.

I wonder what the Russians think of Cull's advice. Did anyone notice their recent supplement in The Washington Post? The Weekly Standard Blog covered it.

The Listening Project

The Listening Project is a documentary film that examines what a range of people around the world think of America.

I suspect a similar project on the UK would produce a range of results (I am tempted to conduct one around DC some time soon). The question for diplomats like myself is whether a mixed opinion of my country amongst the public at large overseas makes it more difficult to project soft power. It is tempting to say yes, of course. But the public at large in a number of countries are either disassociated or not interested in all but the most crucial foreign policy decisions. Simon Anholt gave his thoughts in the Foreign Office's recent publication on public diplomacy.

Accountability

The UK Government is drawn from and accountable to Parliament. Weekly Prime Minister's Questions are the clearest example of accountability where the prime minister is asked to respond to tough questions from his fellow Members of Parliament. Each of the major government departments also has its own version of questions such as Foreign Office questions.

I am currently reading Guardian commentary of David Miliband's joint appearance with John Hutton in front of a joint session of the House of Commons Defence and Foreign Affairs Committees.

Google, the Queen and profile

It has been reported that The Queen will visit Google's UK headquarters next month.

It is tempting to write a long post about misconceptions and stereotyping of the UK as some sort of heritage park. Suffice to say that this story covers two key selling points for the UK: (i) how web savvy and innovation oriented us Brits now are and (ii) how the UK is Europe's number one destination for inward investment; businessmen are not generally known for making decisions on the basis of heritage. Great to see that Google have staff in the UK. David Miliband has frequently spoken of how he sees the UK acting as a global hub.

I would love to hear the perceptions that our readers have of the UK, its policies and how they see our role in the 21st century.

Footie, 15 years and cultural convergence

I arrived back in Washington with my family last October after a 15 year gap. The US and the DC region have changed in immeasurable ways since the early nineties. Many of our previous cultural references are now invalid. Seinfeld was THE comedy when we left, everyone knew what you were referring to when you mentioned "The Soup Nazi". Downtown DC was still recovering from the riots in the late 60s - there is now a vibrant, thriving downtown area around the Verizon center. Northern Virginia was pretty homogenous - it is now a lot more diverse and interesting. Perhaps more importantly to me though - you can now get footie (soccer) on cable TV.

I am an avant Liverpool fan. If I was living at home I would have a season pass like my brother. I read fansites and forums such as The Rattle every day.

This weekend we play that lot from Manchester in England's biggest domestic soccer game. Fox Soccer Channel tells me their audience for British Football is continually growing - so much so that they are soon to be listed on the Nielsen ratings. This brings up the question of cultural convergence. Is the UK becoming more like the US (as many academic, I suppose pundits, say) and the US a little bit more like the UK? It's a difficult question for me to answer. My family is trans-atlantic in nature. I am equally at home at a baseball game over here as I am at a footie (soccer) game in the UK. Has our partially shared culture, sporting or otherwise impacted US and UK values? I grew up watching the A Team and Charlie's Angels in the UK - my predecessors' were do doubt partially moulded by Hemingway and Arthur Miller, their US counterparts by Olivier's Henry V. Can we measure the relationship between the degree of convergence in values and maybe policy against cultural penetration? Will our unique relationship with the US deepen if Liverpool put four past that lot tomorrow?

Credibility and the World Service

The BBC world service attracts a weekly global audience of 233 million people. Thirteen million unique users visit its website every week. Its budget is about $470 million a year.

The World Service has garnered a global reputation as THE source of news. From Mandela on Robben Island to the 16 million who listen to its Arabic service today, the world's public have heard unbiased news from impeccable sources. Credibility is the one of the key reasons for the World Service's reputation remaining impeccable.

The British Government does not commission stories or sway the BBC's line. Governments of different political stripes have, from time to time, found themselves on the wrong side of the World Service's independent reporting. This independence and reporting of the facts has ensured continued credibility for the organisation. Public Affairs Officers or Diplomats like myself can no more tell the World Service what to report than we could tell Al Jazeera to spike a story on civilian casualties. The Arab "street" or Soweto slums have become more and more media savvy. It would be a waste of money for the UK to pay for and serve up lukewarm propaganda.

It is always interesting to compare and contrast how different governments go about their business. The UK devotes significant resource to both the BBC World Service (which is managerially and editorially independent) and British Council (which is operationally independent from government).

There is a wide ranging debate underway in Washington on how the US Government should go about influencing overseas. There seems to be a wide range of suggested approaches. Some in Congress had expressed concern about the reporting of Voice of America. Some seem to want more independent public diplomacy initiatives, others do not. The Department of Defence recently signed a $300 million a year contract for the production of supportive media in Iraq. What do readers think that the UK and US can learn from each other approach and ideas?

London's diversity and public diplomacy

I am visiting London this week for some developmental training. I have attended both the Foreign Office's Deputy Heads of Mission course, ran by Ashridge, and the Crisis Leadership Course ran by our impressive consular crisis team. Any readers interested in a career in the Foreign Office should know that we run a first class set of developmental programmes and courses.

London's cosmopolitan nature is striking whenever I return. Only New York comes close to London in its claim to be the world's city. A 2006 survey found that 18% of Londoners use a language other than English in their home. This suggests to me that many Londoners maintain close ties to their home countries. As a public diplomacy practitioner, I wonder if this represents a communication opportunity. Are the ties that Londoners, or New Yorkers for that matter, have with other countries the type that allow influence at home? I understand that the Smith-Mundt Act prevents the US from undertaking this type of activity at domestically. But do readers see a benefit in engaging local communities with close ties to other countries?

By the way, I would not agree with the definition of public diplomacy given in the Wikipedia entry on Smith-Mundt.

One year on

I cant quite believe that the bankruptcy of Lehman Brothers occurred a year ago. On Monday 15 September 2008, I started a report with the sentence: The financial landscape has changed over a tumultuous weekend. On reflection, that sentence was both an understatement and incomplete.

It was an understatement as it failed to capture the effects of the then-incipient panic rippling through financial markets and into the real economy. The consequences for jobs and growth were much worse that almost anyone anticipated.

But, although the financial landscape was quickly reshaped by the events of a year ago, the long-term changes have still to be worked out.

Many of those long-term changes will come in the form of new rules for financial institutions. On Monday, President Barack Obama spoke in New York of the need to establish the ground rules and level playing field that helps to make those markets more vibrant.

Work is moving ahead on establishing those rules. As important contributions to the debate, Id highlight the work of the Group of 30, the De Larosire report (pdf) and the Turner Review. And now organisations like the Financial Stability Board and governments in the UK and US are now publishing specific proposals.

The work on reforming financial regulation is, by its nature, technical. Few get excited over the rules for tier 1 capital or the details of the resolution regime for systemically important institutions. But the rules are important and we have seen over the last year the disaster than can ensue when they do not work. As President Obama said on Monday:

"One year ago, we saw in stark relief how markets can err; how a lack of common-sense rules can lead to excess and abuse; how close we can come to the brink. One year later, it is incumbent on us to put in place those reforms that will prevent this kind of crisis from ever happening again; that reflect the painful but important lessons we've learned; and that will help us move from a period of recklessness and crisis to one of responsibility and prosperity. That is what we must do. And I'm confident that is what we will do."

The fiscal challenge

Over the last two years fiscal policy has made a comeback. The depth and severity of the recession meant both fiscal and monetary policy had to work in tandem to stimulate demand. Fiscal measures in the US, the UK and around the world have helped to cushion the shock to the global economy, and may have prevented the worst recession since the Second World War from turning into another Great Depression.

But while large fiscal deficits can be necessary in the short-run, they cannot persist in the long-term.

On Tuesday, the British Chancellor Alistair Darling gave the Callaghan lecture, which reaffirmed the UK governments commitment to fiscal discipline:

"That is why, at the G20 meeting last weekend, countries agreed that once recovery is firmly established, we must all rebuild our fiscal strength. Cutting support now, as some are demanding, would run the real risk of choking off the recovery even before it started, and prolonging the global downturn.

But in the medium-term we need to live within our means, not to do so would be equally irresponsible and damage our countrys future. The Prime Minister and I will never risk the fiscal sustainability of our economy. It is why in the Pre-Budget Report, and then in this years Budget, I set out plans to half the deficit over four years once the recession is over and we will not shy away from these plans. "

Both Standard & Poors and Moodys maintain AAA credit ratings for the UK. And today Moodys reaffirmed that it did not anticipate downgrading the UKs rating.

For the moment, the focus is on helping economic recovery and that means not withdrawing stimulus prematurely. But, in the longer-term, delivering fiscal consolidation will be essential.

92 Actions

The G20 Finance Ministers and Central Bank Governors met over the weekend in London. Their full communiqu (pdf) is on the G20 website. As a veteran reader of these communiqus, I was delighted to see that they managed to squeeze everything onto one side of paper.

It is customary after a meeting for the media to focus on which countries got most of what they wanted in the communiqu. But, as Ive written before, no matter how high the level, a meeting is just a meeting. They only have consequences if people go away and put whats been agreed into action. This is precisely what my colleagues in HM Treasury, at other finance ministries, at the IMF and at the Financial Stability Board have been doing.

That's why I was pleased - despite my preference for one-pagers - to see a twenty-three page annex (large pdf) on progress since the Washington and London Summits. The annex illustrates how the international community is progressing against the objectives it set for itself. For instance, they promised in Action 41:

"Establishment of the remaining supervisory colleges for significant cross-border firms by June 2009".

And the conclusion:

"Supervisory colleges have now been established for more than thirty large complex financial institutions identified by the FSF as needing college arrangements".

It may be technical, but the list of achievements ranges widely, from tax havens to credit rating agencies to restoring lending .

The G20 is not only about the big declaration following a meeting. It is about relentless follow-up. Those 92 Actions on which the G20 is making progress show that international co-operation can really deliver results.

The conclusions of the weekend's meeting now go forward to the Pittsburgh Summit in late September.

G20 finance ministers

With August already drawing to a close, the G20 finance ministers meeting is less than two weeks away. It will be held in London on 4-5 September with the Chancellor of the Exchequer, Alistair Darling, chairing the event. Over the summer, Ive been asked several times about how finance ministers meetings interact with the G20 Summit process. Heres my best shot at how its going to work.

First, some background. G20 finance ministers have met since 1999 during the Asian crisis and have a well-established process. The chairmanship rotates annually South Africa chaired in 2007, Brazil in 2008, the UK in 2009 and South Korea will take over in 2010.

The practice of the G20 meeting at the heads of government level only started in Washington last year, and continued in London in April. The next Summit will be in Pittsburgh on 24 and 25 September. Each time, the hosts have chaired the meeting. Unlike in (say) the G8, there is no well established rotational order among members. So far, decisions about who would host have been made by agreement among the participants.

So, the London finance ministers meeting will be chaired by us (the Brits) and the Pittsburgh Summit will be chaired by President Obama.

The work the finance ministers do will obviously be crucial preparation for the Summit itself. We expect them to agree the key economic and financial inputs for the Summit. And they were also tasked by the heads in London with delivering many of the things agreed there, such as reform of international financial institutions and the international financial system.

Following the finance ministers meeting, the process will be handed over to the heads sherpas to prepare the final agenda for Pittsburgh.

Looking back at London

When world leaders gathered in April at the G20 Summit in London they delivered a lot. The BBC's headline ran "G20 leaders seal $1tn global deal". But a lot of what was agreed had to be put into action. With the follow-up Pittsburgh Summit looming in my calendar for the end of September, I've dug out the Leaders' Communiqu to check how the commitments they made are shaping up.

It looks pretty good.

First, the Financial Stability Board - an expanded version of the Financial Stability Forum - has been set up and held its first meeting on 26-27 June in Basel, Switzerland (pdf). That Board, plus action at the national level, is helping to reform financial regulation.

There has been more than $250bn in new bilateral funding for the IMF, and a $250bn allocation of Special Drawing Rights has been agreed in principle. And there is increased assistance for low income countries via the IMF and the multilateral development banks. Work is going ahead on establishing $500bn in New Arrangements to Borrow from the IMF. With the Administration's strong support, Congress recently approved the US's contribution.

In addition there has been $250bn in trade finance from the World Bank and Export Credit Agencies, including the establishment of a new Global Trade Liquidity Pool to help developing and emerging markets.

The challenge for Pittsburgh will be to maintain the momentum. With the global economy now apparently emerging from the worst of the financial crisis, there is a risk that we forget about the need to learn the necessary lessons. And even if the recession is ending, sustained recovery is still not assured. The UK will be looking to talk to our international partners at Pittsburgh about the actions still required to support balanced global economic growth for the future.

Leading by example

Foreign policy and economics are linked. The biggest countries have more resources to pursue their foreign policy goals. In the past foreign acquisitions or colonisation were seen as a way to achieve economic dominance. But the two are often treated separately.

The recent financial crisis and subsequent global economic recession has shown that they cannot be. The Council on Foreign Relations recently put together a multimedia show that explores what they call "geoeconomics" - defined as anything that touches on both the economy and geopolitics. It's well worth watching in full.

As the CFR notes, one of the possible casualties of the crisis is the dominance of the open market model exemplified by the UK and the US. The risk is that countries around the world see the crisis as a signal that this economic model is not going to deliver for their citizens and they retreat from some of the reforms that have been so successful in driving global development.

Clearly, there are many lessons to be learned from the crisis - from financial regulation to the renewed use of fiscal policy. But it would be dangerous if they included wholesale retreat from global economic openness as well.

Speedy policy

Lord Mandelson's been in New York, talking at the Council on Foreign Relations about handling the crisis. For some reason, his full remarks aren't on up on the web yet, but the highlights are here. He makes an interesting point about handling crises:

The political dilemma for us is that we need high level meetings and action, which generate big expectations which, in turn, trigger disappointment and market reaction when immediate results are not produced.

I was chatting with a friend about this dilemma the other day. On the one hand, we want to deliver concrete results - the need is too urgent. But on the other, we have to recognise that it's only going to be the start of a lengthy process of recovery. Politics and the news move very fast. But the economy is slower to react. President Obama recognises this too:

I also think that the American people understand we won't get everything done overnight. The US government and the US. economy are enormous ocean liners, they're not speedboats.

We just have to hope that, by leaning on the tiller hard, the turn will come sooner.

New Opportunities

It's easy to be afraid of the phenomenon called globalisation. One downside of interconnectedness can be seen right now. The world economy is going through arguably the first financial crisis of the new global age.

But along with the challenges, come new opportunities. The UK government is trying to help British people and businesses take advantage of them. It's just published a new paper called "New Opportunities" that brings together many of these policies:

Taken together, these changes will create immense opportunities for business growth and individual success. The Government is determined to work with UK businesses so that our country can benefit strongly from this changing economy, creating more and better jobs for all.

The report is a hefty 108 pages and I've not read the whole thing yet. By way of a change on this blog, I'll be writing about the different ideas in the chapters as I read through them. (As well as keeping you up to date on my peripheral brushes with Obama's hot dog eating, of course.)

I'd also be interested to hear your views. Are there real new opportunities in this new world? Or is this just making the best of a bad situation?

Making Government Work Better

I spent Wednesday morning in a committee room on Capitol Hill, listening to the confirmation hearing for Peter Orszag - Obama's nominee to head the Office of Management and Budget. In the embassy, we're proud to say that Peter's PhD is from the London School of Economics, which he obtained partially through a Marshall Scholarship.

Although the Office of Management and Budget sounds like an obscure bit of government machinery, it plays a big role in helping the federal government work better. It seems like Peter's team is going to be doing some exciting things with the appointment of Nancy Killefer as Chief Performance Officer and Cass Sunstein (who has pioneered thinking on how you can use new behavioural economics to help government help people make better choices through "nudges") as head of the Office of Information and Regulatory Affairs.

I'm looking forward to them working with the Prime Minister's Delivery Unit in London to share experiences and new ideas.

And, of course, I wish Peter all the best in his new job.

How Will the Recession Affect Clean Technology?

The Freakonomics blog's Steve Dubner asks experts how will the recession will affect clean technology? John Whitehead of Appalachian State University identifies a crucial switching point that has now dropped away from our immediate grasp:

During the summer of 2008, we were oh-so-achingly close to what economists call the Hotelling switch point. ...[T]he switch point occurs when rising nonrenewable energy prices meet falling renewable energy prices and energy users switch from dirty nonrenewable energy (ie, oil, coal) to cleaner renewable energy (ie,wind, solar).

But Ethan Zindler of New Energy Finance is optimistic for the long-run:

The fundamentals that spurred its growth originally haven't disappeared. Yes, oil has fallen since a year ago, but it is still high by historic standards. Furthermore, climate change concerns have not diminished and the president-elect has signaled he plans to engage fully on the issue.... Then there is the issue of energy security, which got plenty of traction during the recent presidential campaign.... Finally, there is growing hope that the clean-energy sector can be a driver of economic development by providing so-called "green collar" jobs.

I think it's sadly true that the economic downturn has made taking some of the tough but necessary long-term policies (like putting a price on carbon) more difficult to achieve politically. But the prospect of greening the recovery (to use the current jargon) is an opportunity amid the gloom. Immediate investment in energy efficiency makes sense in the short-term (it creates jobs), medium-term (it saves money for businesses and consumers) and long-term (it reduces our dependence on fossil fuels). There're very few policies that can offer that.

Support for lending

More about this soon, but, for those with questions, here are the links to the UK's announcements on financial intervention to support lending in the economy:

Inauguration Day

I went to the National Mall on Tuesday, where I watched President Barack Obama's Inauguration.

It was freezing outside, so I dug out my ski clothes. My wife did the same, although her twenty-week pregnancy meant that she couldn't quite fasten her trousers. We had debated whether or not to go given the expected crowds and cold weather. But we decided that we couldn't pass up the opportunity. This was an event our as-yet unborn son should go to.

We live near the centre of DC so walked. Even though we set off before nine o'clock, with the ceremony not due to start until eleven thirty, the streets were full. As we got closer, it reminded me of the way that the crowds build around a football stadium before a big game.

By the time we arrived at the Mall, it was already packed as far as the Washington Monument - two miles from the Capitol itself. We couldn't see the building, let alone the President and the Chief Justice, so we watched on a large screen. There were people to the horizon. I've never seen so many human beings in one place.

Around me people were crying as Obama took the Oath of Office and then spoke.

It was a privilege to attend such a moment.

Fixing Financial Regulation

One of the few things that almost everyone agrees about at the moment is that financial regulation needs to be overhauled. Important products have gone unregulated, and risks unmonitored. Filling in those gaps is crucial to preventing a future crisis and restoring confidence in the system. As the Chair of the House Financial Services Committee Barney Frank said recently, people are "not going to go back into the water until we tell them we've killed most of the sharks."

Of course, agreeing that something must be done is not the same as agreeing on what must be done. There are bound to be differences of opinion about the right policy detail - both inside countries and between them. But I feel that we're all now pointing in more or less the same direction. You can see that in the G20 Finance Ministers' Communiqu following their recent meeting in the UK (paragraphs 6-7 if you want the detail).

Treasury Secretary Geithner was on the Hill today, launching the Administration's plans for overhauling the American system of financial regulation. The proposals are pretty similar to those outlined in Financial Services Authority Chairman Adair Turner's Review for the British government. And that review was close to the Group of Thirty Report published in January.

The next step for the UK is a White Paper on financial regulation - to be published around the time of the next Budget at the end of April. That paper will build on the outcome of the Summit being held in London next week as well as the Turner Review.Financial regulation is a technical field - so this is not something that will be solved tomorrow. So while the sharks in the financial water are not yet dead, hunting season is officially open.

A global grand bargain?

Today, we published a report called the Road to the London Summit - The plan for recovery.

It's worth reading for a few reasons. First, it lays out what I'd call the UK government's narrative of what happened and why - what the triggers were and how a financial crisis was transmitted into the real economy. Second, it explains what the UK government has done in response to the financial crisis and economic downturn. And finally, it talks about what the UK wants to achieve with out partners at the London Summit on 2 April.

The very final page is called "The Global Deal". This is a single cut- out-and-keep outline of the shape of a possible grand bargain - action to stimulate global demand, renounce protectionism, reform financial regulation, reform the IMF and give it more resources, support lending, create an international early warning system, and honour development aid commitments.

What do you think? Is this achievable? Too much? Too little? You can join the debate here.

Deglobalisation 2

The Prime Minister spoke at the Foreign Press Association about the global economy earlier this week. In his speech, he talks about what's wrong in the global economy and what the upcoming G20 London Summit must do to fix it.

Here's a link to the transcript, and you can watch it here:

One of most interesting things he talks about is "deglobalisation". My colleague Oliver Griffiths wrote about this yesterday. Economists have spent a lot of the last year warning of the perils of protectionism. The Smoot-Hawley Tariff Act prolonged the Great Depression. And it seems that political leaders have (more or less) taken this lesson on board.

But a retreat from the world can take many forms: it doesn't just have to mean jacking up tariffs. Borders can be closed to capital, people and companies as well as to goods and services. That's part of why the upcoming Summit is so important. Leaders must make the positive case for globalisation. And ensure that the world has the right co-ordination mechanisms and regulations to deal with it.

Green Global Recovery

I've highlighted the Prime Minister's enthusiasm for a green global recovery. Trevor Houser at Peterson has been writing about what the best way to spend government money in order to "green" a recovery:

In a study from the Peterson Institute for International Economics, I propose a framework for evaluating both the economic and environmental effectiveness of green stimulus plans.

Economically, it is a question of speed and scope; how quickly and how broadly the money is put to work. Environmentally, it is about strategic design.

He reckons the easiest projects to get underway quickly - and that would have the most economic and environmental impact - are in energy efficiency.

Judging from progress made so far, many G-20 countries will have included programs similar to those described above in their stimulus plans by the time their leaders arrive in London for the April 2 summit. Taken together, these programs will help lay the groundwork for a more concerted international effort to address climate change.

The cumulative emission reductions resulting from green stimulus efforts directly will be modest, but highlighting a common commitment to emerge from our current economic morass on a more environmentally sustainable footing will help build confidence ahead of what promise to be challenging climate negotiations later this year.

He's right, of course. Investment in energy efficiency is no substitute for a comprehensive replacement to the Kyoto Treaty. But by setting the mood, it may help difficult negotiations become a bit easier.

Summers on Fiscal Stimulus

The soon-to-be Director of the National Economic Council, Larry Summers, wrote about fiscal stimulus in the Washington Post this week:

In this crisis, doing too little poses a greater threat than doing too much. Any sound economic strategy in the current context must be directed at both creating the jobs that Americans need and doing the work that our economy requires. Any plan geared toward only one of these objectives would be dangerously deficient. Failure to create enough jobs in the short term would put the prospect of recovery at risk. Failure to start undertaking necessary long-term investments would endanger the foundation of our recovery and, ultimately, our children's prosperity.

Summers was among the first to call for a fiscal stimulus - around this time last year. His mantra then was that stimulus should be "timely, targeted and temporary". He now wants one that's "sizeable, sustained and speedy". His reasons are very similar to those in the recent UK government paper "Managing the Global Economy Through Turbulent Times".

A Healthy Constitution

There are a few enduring American views of Britain, many of them based around our enduring institutions. The three most famous are the monarchy, the BBC and the National Health Service. And seen from this republican land of cable and private healthcare, they do seem distinctively different and somehow difficult to explain.

Our royals, TV and hospitals have shown themselves capable of reinventing themselves for a changing country. None more so than the NHS. Founded after the Second World War, it is enduringly popular despite its flaws. In the last few years, on the back of huge investment, it has changed almost beyond recognition. Hospitals are rarely the tatty run down places they used to be. And high quality care is now the standard not the exception.

But the underlying ideals of the service haven't changed. And the government's had a stab at putting those ideals down on paper in an NHS Constitution. While the drafting may lack a certain Jeffersonian lan, it's pretty clear. The purpose of the NHS:

The NHS belongs to the people.

It is there to improve our health and well-being, supporting us to keep mentally and physically well, to get better when we are ill and, when we cannot fully recover, to stay as well as we can to the end of our lives. It works at the limits of science - bringing the highest levels of human knowledge and skill to save lives and improve health. It touches our lives at times of basic human need, when care and compassion are what matter most.

Some of the core principles:

-The NHS provides a comprehensive service, available to all

-Access to NHS services is based on clinical need, not an individual's ability to pay

In the future, I'll point people who ask what the NHS is about to its Constitution. And apologies for the dreadful pun in the title of this post.

Better government

One of the more interesting parts of my job is the opportunity to help British and American policy makers work with each other. This is not just about co-operation with the US Federal Administration. The US system has been described as a vast natural experiment in government. With fifty state governments (plus DC and six territories), hundreds of cities (often headed by powerful mayors), and 3,077 counties, there are countless opportunities for innovative forms of government and public services.

Our network of posts around the US regularly hosts visits from British ministers and officials who want to study the best the US can offer. For example, in Washington, the District government faces a number of difficult urban problems - such as violent crime and a failing education system. But the young mayor, Adrian Fenty, has made significant progress in starting to fix some of these issues through new policies and ways of governing. We can and should and have tried to learn from what he's doing.

To take a different recent example, some of my colleagues (not me) last week organised a visit by British education minister Ed Balls. He looked at some of the innovative steps taken in New York City to improve school standards. As reported in the UK's Daily Telegraph, he is now thinking about how to apply some of those lessons in the UK. Obviously, the US experience is different from that in the UK. Many of the policies will apply only when changed for a British context. But by working with the best and the brightest US policy makers and thinkers, we can help the British government improve its public services - and at the same time strengthen and broaden our relationship with the United States in all its variety.

Helping small businesses

One of the recurring themes of the financial crisis has been the role of small and medium sized businesses. With credit drying up, businesses that are otherwise healthy have found themselves unable to access to working capital to meet payroll and other routine expenses. This creates a vicious cycle in the economy which must be broken for recovery to take hold.

On both sides of the Atlantic a lot of attention has been focused on banks. They have benefited from government bailouts and many feel they should respond by providing lending. The British government today launched a new scheme to try to get working capital into companies. The idea is that the government part-guarantees pools of loans:

The Government will provide banks with guarantees covering 50 per cent of the risk on existing and new working capital portfolios worth up to 20bn. The guarantee will secure up to 20bn of working capital credit lines for companies - ensuring they are safe from reduction or withdrawal. In addition, the guarantee will free up capital which the banks must use for new lending as a condition of this scheme. This is lending that would otherwise not have been provided.

In the US too, Congress is considering what kind of measures it can take to help out small businesses. Government can do its part in the meantime, but recovery - when it comes - will be driven by entrepreneurs and small businesses.

Climate Change Economics

Over the two years since the publication of the Stern Review on the Economics of Climate Change, there's been a flowering of work on the subject.

A welcome addition is this site from the Center for Environmental Policy and Management of the University of Louisville:

Our objective is to offer access to the best available objective analysis of the options facing the United States, fifty individual states and the US territories as we address the carbon intensity of our economy. As more and more Americans are realizing, our nation faces a growing double threat posed by both climate changes in our local communities and the rapidly increasing costs of fossil fuels. Climate Change Economics will equip policymakers and researchers at every level of government with a clearinghouse of resources and tools to tackle these challenges comprehensively.

The database collects both technical publications and more accessible articles for general readers. With climate change now viewed as much as an economic problem (what are the costs and benefits of taking action? how can we do it most efficiently?) as a scientific one (is it happening?), the best public policy will come from better and broader understanding provided by sites like this.

Opportunities for Adults

I wrote last week about the new UK government paper on "New Opportunities". Its aim is to join up all the different bits of government that prepare today's workforce (from better childcare to apprenticeships).

One of the most interesting new slants is the emphasis on helping those who are already in the workforce. The paper notes that:

The majority of the people who will make up the workforce at the start of the decade after next, are already over 25. If we are to seize the new opportunities afforded by an increasingly global economy and make the most of the potential in our country, it is vital that we also focus are opportunities for lifelong learning available to those in work, but also supporting those who are currently outside the workforce to develop skills, increase their aspirations and become more valuable to potential employers. Those who enter the labour market with low skills have fewer job opportunities and more limited progression prospects. Evidence shows they are also less likely to receive in-work training, further compounding their disadvantage, and more likely to face periods of worklessness.

Adults are harder to reach. The joy of regular school is that you have a captive audience. Adult education is more difficult as you have to convince free agents that signing up is worthwhile. For example, as a sixth former (high school senior), I signed up for a typing course at my local college. I was the only one under 40 and the only male. (And it was one of best things I ever did. I can still type like lightning.) The women on the course were mostly stay-at-home mothers returning to work. When they completed the course, they could walk into jobs as secretaries.

Typing skills are still important. But the traditional secretary has become a personal assistant - expected to do a bewildering variety of things. Adult education must teach the skills to do those tasks if it's to help people get into the labour market.

The paper was published along with case study web videos (I'm impressed). Here's a short clip about the difference adult education can make:

Low Carbon Recovery

Gordon Brown's been in Davos. Much interesting on the UK's approach to the recession is on the Number 10 website.

Some of his views on a low carbon recovery:

We find ourselves today in difficult and sober circumstances. And in these testing economic times, some say the pledges we have made on climate change will be too hard, too costly, too demanding.

I disagree. For, as Nick Stern and Al Gore have warned us, the costs of unchecked climate change are far, far higher than the costs of combating it. If we do not reduce our emissions from their present path - by at least half, globally, by 2050, with a peak in 2020 - we will bring upon ourselves a human and economic catastrophe that will make todays crisis look small. And it will be the poorest and the most vulnerable who will suffer first and greatest.

So we cannot afford to relegate climate change to the international pending tray because of our current economic difficulties. Instead, we must use the imperative of building a low carbon economy as a route to creating jobs and growth, the path that will see us through the current downturn.

And already, together, we have begun the long walk down that road. In the European Unions economic recovery plan, in President Obamas green jobs package, in the stimulus packages of China, Japan, Australia, South Korea, France, Germany, Spain and Denmark, and in my own governments forthcoming green industrial strategy, the contours of a resilient low carbon recovery are becoming clear.

It won't be easy. Spending money fast is the most important priority as that will create jobs immediately. Spending money well is trickier. But as I've said before, we can make the most of a bad situation and use it as an opportunity. Investing in new technology and energy efficiency will help ease the inevitable costs of transferring to a low-carbon economy.

Hot Dogs with the President-elect

On Friday night, I stopped at Ben's Chili Bowl, a U Street diner I love for their chili half-smokes (DC's answer to the hot dog - bigger and covered in chili sauce). The next day, Barack Obama also paid a visit in the company of DC's mayor Adrian Fenty. I was pleased to see that he ordered the same thing as me.

I mention this, not to impress you with the high class of my dining (the half-smoke goes for $4.95 plus tax), but because Obama is very obviously now in DC. Along with the President-elect's dining choices, the press has covered his daughters' first day at their new school and the continuing speculation over the Obamas' choice of "first pet" (apparently they've
got it down to either a labradoodle or a Portuguese water dog).

The town is poised for Inauguration Day on the 20th. If the estimates of attendees are right, the number of people assembled on the National Mall will be the largest ever gathering in the Western Hemisphere. Even before the ceremony of the Inauguration, the Obama transition team is moving to win support for its proposed economic stimulus package. In the past week Obama made his first major speech since the election and has met Congressmen from both parties. And Christina Romer, the Chair-designate for the Council of Economic Advisers, and Jared Bernstein, the chief economist for the Office of the Vice President-elect, have already released a detailed report on the plans.

It feels like Washington has just taken a collective intake of breath as it waits to see what the new President will do. Only a week until we find out.

London Summit

After Edmund Hillary and Tenzing Norgay had stood on the top of Everest for a few minutes, I wonder if their joy at their achievement was tempered by the need to get back to base camp in one piece.

The London Summit has finished, but although Summits are the highest point, the treks between them are just as arduous. The few months between the Washington Summit and London have seen seemingly endless preparations for the meeting by my colleagues in the British and American governments - and by governments around the world. Congratulations to them all for pulling it off.

But, having reached the Summit, the journey is far from over. The communiqu over which so much effort has been spent is only useful if we can translate its aspirations into action.

So, for today, let's celebrate the achievement of the Summit. Tomorrow the hard work starts again.

Free education

I wanted to bring to your attention a rather great new site called Academic Earth. It aggregates lectures from various universities (Harvard, Berkeley, Princeton, Stanford, MIT, Yale - you may have heard of them).

They're pretty good quality (I mean the production values are pretty good; the academic quality is excellent) and you can watch them online or download them for your iPod.

I recommend starting with these lectures on the financial crisis.

London (G20) Summit

I promised to let you know when the London Summit's website was live. Well you can now find it at www.londonsummit.gov.uk.

You should also check out www.g20.org, which has more technical information on the working groups that doing the heavy lifting of the work following the Washington Summit in November.

There are four working groups, each co-chaired by representatives from a developed and an emerging economy. They are looking at:

Enhancing sound regulation and strengthening transparency
Reinforcing international co-operation and promoting integrity in financial markets
Reforming the IMF
The World Bank and other multilateral development banks